US embassy cable - 04FRANKFURT2923

UNCLAS SECTION 01 OF 02 FRANKFURT 002923 
 
SIPDIS 
 
DEPARTMENT FOR EUR/AGS AND EB/OIC 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, PGOV, PINR, GM 
SUBJECT: Leading Frankfurt Prosecutor says Germany has a 
Long Way to Go in Anti-Corruption efforts 
 
1. (SBU) SUMMARY: Frankfurt prosecutor Wolfgang 
Schaupensteiner -- Germany's leading expert on corruption -- 
says Germany needs stricter anti-corruption laws and a 
public awareness campaign to help overcome complacency. 
Authorities in Germany have fewer and less effective tools 
to fight corruption (particularly corporate misconduct) than 
their counterparts in the U.S.;  Germany needs U.S.-style 
measures to deal with corporate crimes coupled with enhanced 
internal controls within large companies.  A handful of 
German states maintain procurement blacklists of corrupt 
private companies;  Schaupensteiner stressed the need for an 
EU-wide blacklist of companies convicted of bribery in any 
jurisdiction.  The city of Frankfurt was the first to 
establish an anti-corruption task force.  On two of 
Germany's largest international bribery cases -- involving 
Frankfurt Airport Authority (Fraport) participation in the 
Tashkent and Manila airport projects -- he said that 
prosecutors face uphill battles in collecting evidence 
abroad and in forcing full disclosure by Fraport.  END 
SUMMARY. 
 
2. (U) Corruption is more widespread in Germany than most 
Germans believe, according to Wolfgang Schaupensteiner, the 
head of the Anti-Corruption Department at the Frankfurt 
prosecutor's office.  Schaupensteiner, whom media deem 
Germany's leading expert on corruption, told consulate 
representatives that prosecutors are hampered by scarce 
resources and weak enforcement tools.  Thirty-five of the 
hundred prosecutors in Frankfurt handle commercial crimes, 
but only four of those focus on corruption.  The office has 
no internet connection and as of December 2003, had a 
backlog of 574 cases.  This huge load of pending cases means 
the statute of limitations (typically five years / 
extendable to ten years) may expire in some cases. 
Schaupensteiner noted that Frankfurt prosecutors must divide 
their time between complex commercial bribery cases and 
local corruption cases.  Frankfurt -- although no more 
corrupt than other cities in Germany -- has a higher profile 
on the issue as the first German city to institute an anti- 
corruption unit in 1989 (it currently has three full-time 
staff dealing with corruption). 
 
3. (U) Schaupensteiner praised U.S. law on corporate crimes 
and characterized the German legal framework as inadequate 
to prosecute corporate crimes.  Unlike in the U.S., German 
prosecutors cannot indict companies (only individuals).  In 
contrast to the U.S. Securities and Exchange Commission 
(SEC), German stock market authorities have no mechanism to 
punish criminal misconduct by companies listed on German 
exchanges.  Schaupensteiner said the German government and 
the EU should create blacklists (Korruptionskataster) of 
companies involved in corruption at any level.  Six German 
states (including Hesse) have such blacklists, but a 
government bill which passed the Bundestag in 2002 failed in 
the conservative-dominated Bundesrat. 
 
4. (SBU) On high-profile international bribery cases, 
Schaupensteiner said that evidence points to Fraport 
misconduct in connection with airport construction projects 
in Tashkent and Manila, but that prosecutors face enormous 
procedural hurdles.  Unlike in the U.S., Schaupensteiner 
cannot force Fraport to disclose all of its files on the 
deals (it can only search for such files and ask specific 
questions).  He noted that in similar U.S. cases (Enron / 
Arthur Andersen), the failure to disclose records is itself 
a criminal offense.  Since Germany and the Philippines have 
no bilateral legal assistance treaty, German prosecutors 
face an additional hurdle in collecting evidence from the 
Philippine side.  Until Germany adopts legal reforms, 
prosecutors will face an uphill battle in such cases. 
Meanwhile, Schaupensteiner hopes political pressure will 
force large companies to improve internal controls.  For 
instance, Deutsche Bahn instituted an anti-corruption 
ombudsman in 2000 (after a corruption scandal in eastern 
Germany) which has investigated dozens of allegations, 
saving the company an estimated ten million euros to date. 
Companies themselves stand to benefit from avoiding 
misconduct and litigation:  Fraport, for instance, lost 350 
million euros on the abandoned Manila Airport project (not 
including legal costs). 
 
5. (U) COMMENT: In media appearances, Schaupensteiner points 
out that Germans condemn corruption in public life but 
assume incorrectly that their country is relatively free of 
the phenomenon.  Many Germans also accept "insider 
influence" as a normal part of doing business.  From a 
prosecutor's viewpoint, he believes simply outlawing 
corruption is not enough:  without effective legal 
procedures and sanctions against corporate misconduct, the 
state is more likely to spend its resources going after 
small fry and punish "petty" corruption while allowing the 
big fish -- in corporate and international commercial 
bribery cases -- to get away.  Germans appear to have little 
sense of urgency on the issue:  with a lack of legislative 
initiative for effective sanctions at the federal and state 
level -- and unwillingness to publicize an embarrassing 
phenomenon -- fighting corruption remains an idea whose time 
has not quite arrived.  END COMMENT. 
 
BODDE