To the Secretary

by Mary Thompson-Jones

  In the neighboring Czech Republic,26 Ministry of Defense (MOD) procurements were a mechanism of corruption, with successive governments using contracts “as a way to reward themselves and their political supporters with lucrative business deals, cheap asset sales, and kickbacks . . . Politicians appear able to manipulate the procurement process by utilizing single source tenders, requiring the use of preferred intermediaries, and paying higher prices than other countries for similar items.” 27

  To paraphrase bank robber Willie Sutton, corrupt politicians target the MOD because that’s where the money is. With the second-largest budget in the Czech government, more than a quarter of the MOD’s funds in the late 2000s went to construction and procurement as it upgraded its Soviet-era equipment to meet NATO commitments in Iraq, Afghanistan, and the Balkans. The shopping list expanded alongside the MOD’s addiction to shady deals, from parachutes that didn’t open to secondhand airplanes that kept breaking down. The embassy wrote that the 2008 purchase of 19 IVECO light multi-role vehicles (called Dingo 2s) epitomized the MOD’s procurement problems. Done as a sole-source purchase without a public tender, the Czechs paid $2 million for each vehicle. In contrast, the Norwegians paid only $385,000 for the same vehicle, and the thrifty Belgians paid only $220,000 each.28

  The procurement scandals of the Czech Republic were closely tracked by the embassy in part because of the involvement of American-owned firms. One featured the dramatic arrest and prosecution of a former defense minister, the arrest of the American head of a renowned Czech truck company, and the in-court testimony of a former American ambassador. How did things get so out of hand? Two purchases—one for armored personnel carriers and another for army trucks—illustrate perfectly the endemic corruption.

  The first deal involved a billion-dollar contract between the U.S. General Dynamics’ Austrian subsidiary Steyr and the Czech MOD for armored personnel carriers (APCs). A multi-year trail of venality began openly enough in 2004, when the center-left government approved a plan to replace Soviet-era vehicles with 240 new APCs (called Pandurs). The following year, a tender for 199 vehicles was let, and in 2006 the center-left government awarded the contract to Steyr. (The company’s subsidiary relationship with General Dynamics meant the U.S. embassy could advocate for the company as the only U.S. firm competing among seven others for the tender.) When the center-right party took control of the government in 2007, it repudiated the entire contract. General Dynamics threatened to take the case to international arbitration, and after intense negotiation, the government agreed to buy 107 Pandurs, subject to successful field testing and at a revised cost of $700 million, down from the original $1 billion original deal in 2006. The Czech army took delivery of the first 17 Pandurs in September 2009.29

  The Czech press blew the whistle, charging that 6 percent of the Pandur contract was earmarked for payoffs to both political parties and implicating current and past government ministers. The embassy had reported in March 2009 that a General Dynamics/Steyr representative alleged that then–deputy defense minister Martin Barták had engineered an opportunity for a personal friend of the prime minister to solicit a bribe from Steyr in exchange for getting the contract issues sorted. The embassy felt it was important enough to warrant mention in another cable nearly a year later, noting that “although Embassy Prague is unable to confirm any allegations against Barták, the circumstantial evidence is considerable.” 30

  Barták surfaced frequently in embassy reporting cables. A trained physician, he gravitated to the military and served as deputy defense minister under Vlasta Parkanová from 2006 to 2009, where he was seen as an adept manager, happy to run the day-to-day details for his less-experienced boss. (Parkanová later became a member of the Czech parliament, but in July 2012 the parliament stripped her of her parliamentary immunity to enable her to be prosecuted for corruption in connection with the purchase. She has not yet been charged.) Barták thrived at the ministry and finally got the top job under the caretaker government of Jan Fischer in 2009. A political survivor, he resurfaced in August 2010 for a third act as the deputy finance minister under Miroslav Kalousek.

  The embassy’s reporting was only part of the story. Barták was later accused of bribery in a second deal, worth $150 million, for the purchase of several hundred heavy trucks from Tatra, a Czech company owned at that time by the U.S. firm Terex. Tatra was run by the American CEO Ron Adams, who also served as the president of the American Chamber of Commerce. A key member of the Tatra supervisory board was William Cabaniss, former U.S. ambassador to the Czech Republic from 2004 to 2006. The Tatra truck deal ran into trouble when Praga, one of its suppliers, failed to provide parts for the large military order.

  William Cabaniss created a media sensation in November 2010 when he went public, accusing Barták of soliciting a bribe in February 2008 at the Bull Run Public Shooting Center firing range in Centreville, Virginia. He told the same story in a Czech court on March 17, 2014, asserting that Barták said the problems Tatra was having with Praga could be fixed.31

  “At some point in the conversation, [Barták] said: ‘For a certain amount of money’—I don’t remember the exact amount—‘the problems between Tatra and Praga can be solved.’ I didn’t respond, I thought it was a very unusual and out-of-order conversation for someone at the Defence Ministry, and I walked away and had no further conversation with him.” 32

  Barták, perhaps sensing that the noose was tightening, played hardball. In August 2010, Tatra CEO Ron Adams was briefly arrested by Czech police on charges of bribery—charges allegedly brought by Barták. Adams was later released and charges were dropped.33

  The 2014 trial of Barták brought out other allegations, including offers to arrange personal meetings—for a price—with the then–prime minister. The scandals swirling around him failed to scuttle an earlier Barták visit to the Pentagon for a meeting with Defense Secretary Robert Gates in September 2009. The United States had announced a month earlier that it was unilaterally canceling plans to install a missile defense program in the Czech Republic and Poland. The United States seemed eager, despite its knowledge of the defense procurement scandals, to secure continued Czech military involvement in Afghanistan and elsewhere.

  The years-long scandal ended, at least for Barták, in May 2014 when he was acquitted of all charges. CEO Ron Adams, also acquitted, left Tatra. The company fell into bankruptcy and was sold to Czech investors. The embassy, trying to explain what it acknowledged was “a mind-numbing number of corruption scandals,” despaired of any political consensus on how to end them, saying politicians thought the proposed cures were worse than the disease. Giving the police more power through witness protection programs, the use of undercover agents, and wiretapping were all tactics painted by critics as “a step backward . . . a clear effort to associate [reforms] to the excesses of the former Communist regime,” an objection that might well be true for many other post-Communist countries.34

  ORGANIZED CRIME

  “If it were not part of Italy, Calabria would be a failed state.” 35 Thus began a cable describing the last-place locale of Italy, located on the foot of the Italian boot, a region in thrall to the ’Ndrangheta, Western Europe’s largest and most powerful crime syndicate. The consul general, traveling through the region, described a bleak wasteland in which inhabitants had lost all hope.

  And it seemed true not only for Calabria but for much of southern Italy. The consulate quoted a report from the Roman think tank Censis that called organized crime “a true national emergency” and asserted that 95 percent of the Naples population coexisted with active organized crime gangs, the highest percentage of any province in the country. The results were frequently fatal. Naples’s murder rate was more than thirteen times the national average: 2.6 per 100 residents in Naples, as compared to 0.2 for the country as a whole. Naples also had the highest rates of extortion, arson, and loansharking.36

  The United States has a substantial presence in Italy, with a large embassy in Rome supplemente
d by consulates in Milan, Florence, and Naples. It also has a permanent mission in Vatican City and another to the UN agencies in Rome. There are several military installations, including the Naval Air Station Sigonella in Sicily, and thousands of accompanying family members. In addition, centuries-long immigration patterns have created countless Italo-American familial connections and an American awareness of (and fondness for) Italy that other countries envy. In a remarkable effort, the Naples consulate, covering everything from Naples southward all the way to Sicily, chronicled organized crime’s grip on Italian society. Over and over again, the consulate made connections between organized crime in Italy and security interests in the United States and articulated why the United States should be concerned and involved.

  The Naples consulate described a criminal society with global tentacles. The three main players—Sicily’s Cosa Nostra, Calabria’s ’Ndrangheta, and Campania’s Camorra clans—did business with Chinese, Turkish, and Balkan syndicates. According to a Calabrian-based anti-Mafia prosecutor, “The ’Ndrangheta is far more sophisticated and international than most people believe, maintaining bank accounts in Monte Carlo and Milan, and transporting operatives to Colombia, Spain, Germany, the Balkans, Canada and Australia.” 37 They had ties with Colombia’s FARC (Revolutionary Armed Forces of Colombia), a leftist guerrilla group trading drugs for arms. The Italian parliament’s anti-Mafia committee characterized the ’Ndrangheta as “having an international structure similar to that of Al-Qaeda.” 38 In a public statement, Italy’s national anti-Mafia prosecutor identified links between Islamic militant groups and the Camorra, declaring that the evidence implicated the Camorra in an exchange of weapons for drugs with Islamic terrorist groups.” 39

  FBI statements bolstered that viewpoint, noting numerous instances of “opportunistic interactions” between the Italian mobs and Islamic extremists, all of whom have members and/or affiliates in the United States.40 The post quoted an FBI intelligence assessment that “criminal interaction between Italian organized crime and Islamic extremist groups provides potential terrorists with access to funding and logistical support from criminal organizations with established smuggling routes and an entrenched presence in the United States.” 41

  The consulate described the high costs of organized crime, which deters investment and leaves the formal economy in shambles, with unemployment rates in southern Italy of more than 20 percent and a GDP per capita of only half of the northern Italian regions. Criminal activities lead to higher costs for the government, business owners, and consumers, and it is harder to measure lost opportunities for foreign investment, environmental and health effects, losses due to corruption and inefficiency, and social costs related to higher rates of drug dependency and drug-related crime. Accounting for an estimated 7 percent of Italy’s GDP, organized crime is the single biggest sector of the Italian economy. The three biggest syndicates earned more than €57 billion a year tax-free, an amount that was equal at that time to Slovakia’s GDP.42

  The consulate reported that the syndicates earned this income through protection rackets, drug trafficking, rigging of government contracts, trafficking in persons, loansharking, arms deals, illegal construction, distribution of pirated and counterfeit products, illegal waste disposal, and money laundering for all of the above.

  Not even food is sacred. The post reported that the Camorra ran two thousand illegal bakeries

  using expired flour and ovens which emit toxic fumes (the wood is often old doors covered in paint). Caserta, right in the heart of Italy’s cheese country, has illegal cheese factories which mix buffalo milk with powdered milk from Bolivia, cutting real mozzarella costs by a third; they also use lime [from limestone] to help ricotta keep longer. According to a commander of Naples’ Carabinieri, the most flourishing business is recycling expired products. The Camorra also passed off low quality imports with made-in-Campania labels, from pesticide-laden Moldovan apples to E.coli infested Moroccan industrial salt [as table salt].43

  Even more repugnant is the Mafia’s waste disposal racket. Naples is infamous for its periodic garbage problems, and understanding why citizens would tolerate meter-high stacks of rotting garbage in a metropolitan area dense with more than four million is a lesson in how organized crime can bring a city to its knees.44 The post described how three “lacks” converged: lack of space in local landfills, lack of modern high-capacity incinerators, and lack of political will. “Particularly hard hit by the crisis is suburban Pozzuoli, just west of Naples, where garbage piles stretch as long as 200 meters. At one site, Roma children picked through a five foot high heap; at another, noxious smoke billowed from a massive pile.” 45

  The consulate described how the Mafia became part of the problem decades earlier, when it learned there was money in toxic waste disposal—especially when done illegally. The Camorra earned $6 billion in two years by buying farmland at distressed prices and transforming it into illegal dumping grounds. “The type of garbage dumped includes everything: barrels of paint, printer toner, human skeletons, cloths used for cleaning cow udders, zinc, arsenic, and the residue of industrial chemicals . . . One dump was brimming with hospital waste, including used syringes, thousands of vials of blood samples and a human embryo.” Concerns abound about the garbage’s long-term effects on the underground water supply and aquifers for nearby crops, as well as more direct consequences on public health. The World Health Organization found cancer rates outside Naples were 12 percent higher than the national average.46

  Organized crime has wormed its way into local politics, undermining any hope of a legislative fix. The cost of a vote was a $75 cell phone (to offer proof of a “correctly” marked ballot) until the Italian parliament banned the use of cell phones and cameras in voting booths. Considering that throwing an election in a multiparty system can hang on small percentages, the power of organized crime seems even greater. In interviews with numerous Italian pollsters and political observers, the post learned that the Camorra clan can move 10 percent of the vote in Naples province. The Cosa Nostra controls about 150,000 votes in Sicily, enough to determine whether a party crosses the 8 percent threshold required for a Senate seat. In some areas of Calabria, the ’Ndrangheta controls up to 20 percent of the vote. “By deciding who holds elected office, the mob creates a web of dependencies to ensure election victories for inept politicians that are guaranteed to produce policies favorable to organized crime.” The post continued, “It is clear from our meetings with elected officials in Calabria that they are a step down in quality from those in other parts of Southern Italy; some are so devoid of energy and charisma that it is hard to imagine them mounting—let alone surviving—a real electoral campaign.” 47

  The United States has a further security interest in the region. Calabria is home to Gioia Tauro, Europe’s busiest transshipment port, where Department of Homeland Security employees work as part of the Container Security Initiative. The consulate offered many accounts of corruption at the port and ’Ndrangheta intimidation of both Italians and foreigners in the local communities. “The ’Ndrangheta controls the legal and illegal activities of the port, earning a commission on every container and controlling the hiring of personnel (even the guy who operates the access gate).” 48

  The region hosts only a few American business interests and is losing opportunities for tourism. One cable noted that “the savvy general manager of one of the best hotels in the region has spent two years and over one million euros to obtain authorizations for a five star Marriott resort on the Tyrrhenian coast, but is still waiting for a ministry in Rome to move the necessary paper.” Infrastructure is missing too—the consulate reported in 2009 that the infamous Salerno–Reggio Calabria highway was still a construction mess twenty years after the project began, and the more ambitious Strait of Messina bridge to Sicily had once again been canceled.

  The visiting consul general found the inhabitants enveloped in pessimism, disinterest, and resignation. Asked why the region had not adopted the anti-Mafia
strategy of nearby Sicily, the regional president of Calabria responded, “We are the real island.” Asked why no one had made an effort to contact tour operators who were now bringing cruise ships to Sicily, the president of the province of Reggio Calabria asked, “What’s a tour operator?” 49

  Antonio Lombardo, chief prosecutor of Catanzaro, the regional capital of Calabria, explained that the ’Ndrangheta’s family-based structure and lack of informants makes it nearly impossible to penetrate. Organized crime in Italy is not considered an emergency, he said, but rather “a stable factor in our country. We are accustomed to losing part of our GDP to organized crime and we factor it into our economic planning.” Adding a chilling note to the overwhelming sense of despair, the reporting officer wrote that the provincial president never spoke above a whisper.

  Inevitably, comments from the citizenry led the consul general to broach the idea of complicity. How can organized crime maintain such a chokehold on business and political activities without the compliance of the wider society? One answer described a vicious cycle—in the absence of the state, the Mafia becomes the only alternative for services, employment, and protection. Another important institution, the Catholic Church, has come under criticism for decades, if not centuries, for looking the other way. But there are signs that things are changing. One bishop was under police escort in 2008 for refusing to preside at funerals for mafiosi.

  The consul general interviewed a few brave souls willing to stand up to the ‘Ndrangheta. Calabria’s senior anti-Mafia prosecutor, Nicola Gratteri, under constant police protection, said what made him effective is that he realized he is “not afraid to die.” At the time of the interview, his investigations had led to the capture of one hundred and eighty mafia members, and he had eighty ongoing investigations. A few civil society groups have organized, including Addiopizzo (“Good-bye pizzo,” the Italian word for extortion payments). They put up fliers all over Palermo stating, “An entire people that pays the pizzo is a people without dignity.” Another group, Ammazzateci Tutti (“Kill us all”), is also run by fed-up young people, one of whom told the consul general that the group’s name is a message that expresses both hope and challenge, saying, in effect, “See if you have enough lead to kill us all.” 50