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“Lessons of the Siemens Case” | Simple as Do-Re-Mi

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Author:  Luis Nassif

The cartel could well be the easiest economic crime there is to discover. –Luis Nassif

Collusion among companies from all over the word is not easy to detect. CADE, responsible for this task, only managed it by offering a plea bargain,” — Geraldo Alckmin

Yes,, but CADE is part of an international network of antitrust bodies which seems to be pretty active.

Also, it seems naive to suggest that Siemens was struck suddenly by a crisis of conscience, like Saul on the road to Tarsus, in order to cleanse its soul. The Swiss, among others, have been breathing down its neck since 2006 or so. Plea bargains are what you take when the alternatives have been exhausted.

The economics journalist — Carta Capital, among others — and social networker Luis Nassif captures perfectly the “really weird” vibrations emitted by the state governor here in São Paulo in response to the public contracting scandal.

It was really weird to watch São Paulo governor Geraldo Alckmin announce that he will sue Siemens for forming a cartel in the São Paulo subway and commuter rail sector.

Siemens has already confessed its guilt and as such has assumed responsibility and will be penalized, no matter what Alckmin does.

What needs explaining is the circulation of bribes among Siemens and state civil servants, the identification of those who ran these schemes, and the investigation needed to punish them.

For the state government to go after the bribe-takers on its own is a politically impossible task,  because that  would entail opening up the books on the system of contributions to the party and to the government.

On the other hand, it would be unfair for São Paulo to be stuck wth a check on which the Brazilian political system as a whole and its various parties also owe something. This is where we begin to perceive the ample and unrestricted hypocrisy of our national politics.

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The first form of hypocrisy is to presuppose that successive state governments of São Paulo were not informed about the cartel formation. We are not talking here about school lunch programs. We are talking about the biggest auctions in the State.

As in all such cases, it is self-evident that the practice was instilled through the payment of bribes that reached the political parties. In São Paulo, it just so happened that the bomb went off in Alckmin’s lap.

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Leaving aside the second form of hypocrisy — supposing that this practice is confined to São Paulo — the episode could turn out to be a turning point for progress in the moralization of the contracting system.

For this to occur, however, a broad consensus will have to be reached among government executives, accounting tribunals, prosecutors, and political parties, mediated by CADE — the agency best suited to identifying cartel formation.

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There is a certain logic to trying to reach this consensus. With the emergence of social networks and the Transparency Law, maintaining such practices will become ever more risky.  This is especially true of the big suppliers who are in the sights of international and supranational agencies.

For that very reason, a consensus will provide a way to establish new practices and, who knows? justify a general amnesty with respect to the pasts of all and sundry.

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The first step will be to stop trying to intimidate the whistleblower with a high and mighty demeanor. In the market the expression “taking your losses” is used in those situations in which the conclusion is inevitable. Stop complaining and accept the fact.

The second step is to demand of CADE and the federal public ministry (MPF) a wide-ranging and professional sweep of all the major public tenders in the transport sector in Brazil, identifying those in which competition was absent.

The plot would be easy to uncover. All you have to do is check the bidding and then compare prices on the products and services acquired by the company that prevailed over the others, which were supposedly outbid by the winner. Also, compare the price with prices internationally.

The cartel could well be the easiest economic crime there is to discover.

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CADE should be the investigating body and political mediator in this process. If we demand technically adequate work from the agency — and it seems to be working well — it would be possible to define a new standard for contracting large public works.

I have blogged CADE before somewhere, let me find it and see if there is anything to be said about its development …