The Russian Judiciary

For more than 15 years, many specialists on the Russian “legal system” have been writing about widespread political abuse of the courts by the ruling Russian political elite in order to increase their own power and for financial gain. Unfortunately, this problem extends to the Russian Procuracy and other state bodies charged with enforcing the “law” in the country.

Yet most Russian officials and business persons, foreign judges, and other promoters of increased trade and investment in Russia have largely downplayed this. The Kremlin prefers to spend large sums of money on public diplomacy rather than addressing the problem.

Now that former German Minister of Justice Sabine Leuthheusser-Schnarrenberger has issued a Report on this phenomenon and IKEA announced that it is ending any further investment (at least in the near-term) due to corruption in the country, the situation is being widely covered by the mass media.

Why is it that many foreign government officials (including judges) and others only now are acting upon what has been common knowledge for quite some time?

Did it take the world economic crisis to bring candor to the forefront? Could concerns about legal or political survival play a role? Bravo to the NGO and the many brave individuals in the press who have been willing to speak the truth.

Will there ever be any accountability for the officials in international organizations governmental “aid” bodies who funded judicial “reform” in Russia with minimal positive results? Should the numerous consultants and lawyers who profited but not fully informing their clients of the genuine risks of doing business in Russia think of making restitution?

Why have so few paid attention to Dmitrii Kozak’s inability in introduce political reform in Russia, much less the comments of its President Dmitrii Medvedev? The number of questions is indeed quite large.

Ultimately, the bulk of the Russian people are the ultimate victims of the situation. Apart from the denial of their constitutional rights, their government is not providing most of them with decent public schools, environmental protection, housing and quality health care due to a lack of funds (and will to do so).

I doubt that hosting the Winter Olympics in Sochi will provide much solace to them.

Iran and Belarus: Each Voting Situation is Sui Generis

Persons interested in gaining greater insight into whether there was election fraud in the recent Iranian voting process should read a recent Chatham House (Royal Institute for International Affairs) Report available at

http://www.chathamhouse.org.uk/files/14234_iranelection0609.pdf

Iranians appearing on television saying they were acting due the encouragement of Voice of America and BBC is a good illustration, assuming that they are not supporters of the existing system, of what people might do if they feel that their families will be harmed if they do not cooperate.

The West has learned a lot about the consequences of giving people hoping for political reform false hopes since Hungary 1956.

One might wonder what Iranian President Mahmoud Ahmadi-Nejad and Belarusian President Aleksandr Lukashenka might have discussed during their reciprocal visits in recent years.  Conceivably, Mr. Ahmadi-Nejad might have solicited advice about how best to achieve “electoral” victory, for example how to tally millions of votes in a matter of hours.

In comparison to his counterpart, Mr. Lukashenka enjoys two key advantages: (i) his principal political opponents seem to lack deep roots in Belarusian society, and hence behave more akin to dissidents, and (ii) Belarus ranks low on most countries’ foreign policy agenda.  For Mr. Ahmadi-Nejad this is not the case.

Former Iran Premier Mir-Hossein Moussavi is an experienced, credible national leader with considerable support among the frustrated Iranian mass, which have been experiencing a decline in its living standards; and while sharing Belarus’ status as a pariah state, Iran’s nuclear program is of great concern to world leaders.

Elections do not a democracy make — often they are merely mechanisms for creating the illusion of legitimacy when none exists.  As it has been said, what is important about elections is not how people vote, but how the ballots are counted.

Iranian students have a tradition in toppling regimes that are not responsive to the people’s needs.  It should come as no surprise that both the Chinese and Russian leadership believe the election outcome is already a settled matter.

Domestic Changes in Israel and the Arab States May be The Key to A Solution to the Mid-East Conflict

President Obama’s speech in Cairo struck the right tone.  Of course, words are one thing, actions on the Arab states, Israel and the U.S. are another.  Unfortunately, he stayed clear of how Israel was being unfairly scapegoated by certain Arab states for their domestic problems.  While many Israelis did not like Mr. Obama’s words of tough love, Israel has many friends in the Obama administration, Rahm Emanuel being the first to come to mind and he is not a naive optimistic.

Throughout history 2-5% of a given population has made life worse for the remainder.  Sometimes, these groups have extremist views when compared with that of the population at large.  Often their leaders have had troubled childhoods and a level of grandiosity that might lead psychiatrists to designate them as “psychopaths” (e.g. Genghis Khan, Adolph Hitler, Saddam Hussein, Joseph Stalin, etc.).

The influence of many of these small, extremist, non-representative groups has had (and will continue to have) immense economic and political ramifications.  Just think of the long-term consequences of the terrorist attack on the World Trade Center and the Pentagon on 9/11 and the U.S.-led invasion of Iraq.

The overwhelming majority of people want fairly modest things for themselves and their families: food, clothing, housing, access to medical care, education for their children, steady work, the ability to save for the purchase of certain material possessions, physical security and a sense of dignity in their lives.

Unfortunately, the aforementioned extremists often makes this impossible by exploiting economic, ethnic, national and religious tensions.  As a result, an intractable cycle of violence can result that in many cases can only be solved in the short-term by violence, although on occasion peaceful dispute resolution can be successful.

Ironically, it is often the cases that people, who share the greatest in common – after all, Bosniaks, Croats and Serbs were for many years engaged in a bloody war following the break-up of former Yugoslavia.  This may be because of historical events — a people may lack a sense of identity and thus make the “other” their scapegoat/enemy.

U.S. President Barak Obama has called on Israeli Prime Minister Netanyahu to halt the building of new settlements on the West Bank in the hope of creating an environment that might facilitate settlement negotiations.  In the absence of tangible progress towards peace (or more realistically a permanent absence of conflict), the most extremist and confrontational elements of Israeli and Palestinian society, the more moderate political figures appear impotent.

While truth is not arrived at by a majority vote, perhaps Prime Minister Netanyahu should call for an Israeli national referendum on the building of new settlements on the West Bank for a limited period (say 3 years – to overlap with Mr. Obama’s first term of office).

In addition, the referendum should raise two other issues: requiring political parties to receive at least 10% of the parliamentary vote to obtain seats in the Knesset or alternatively, the establishment of election districts for each Knesset member.  The effect of either alternative will reduce the influence of extremists in Israel that can hold parliamentary coalitions hostage to positions not held by the overwhelming share of the country’s population.

This minimum threshold concept is not without precedent.  Some countries use such systems to keep fringe parties out of parliament – Germany immediately comes to mind.  The result can be a ruling government capable of addressing the challenging the country.

Many Israelis view Iran’s development of nuclear weapons to represent an “existential threat.”  Within the Middle East, fear of Iran is not a characteristic solely of Israel.  Iran has the largest population in the region, is increasingly playing a role in the Shiite-dominated portion of Iraq, and is the first oil producing country likely to exhaust its oil reserves.  The Emirates, Iraq, Kuwait, Saudi Arabia and others are well aware of this situation.

Prime Minister Netanyahu need not dismantle existing settlements.  Nor should be be required to make tangible concessions that might threaten Israeli security for mere words.  Nonetheless, he can help create an environment where negotiations could have a chance.  The Palestinian Authority (but not) Hamas should be accepted as negotiation partners by his Government.  The Arab States should declare their willingness to recognize Israel’s right to exist within secure borders, full-diplomatic relations and the development of trade relations.  If any real progress is made in the near-term, Arab extremists will be undermined.

Former Prime Minister Ariel Sharon recognized that the present situation could not continue indefinitely.  Israel faces a demographic nightmare.  Its incursions into Gaza and Lebanon illustrated the limits of the use of force for achieving Israel’s objectives.  The late Yitzhak Rabin understood that one has to accept risks in the hope to obtain peace.  He, like the late Jordanian King Abdullah I, both paid with their lives for recognizing the need to reach some form of accommodation.

For Prime Minister Netanyahu freezing new settlements on the West Bank would not endanger Israel’s security.  Failing to do will damage Israeli national security and the world economy.  Only a psychopath would choose to do so — a diagnosis that does not fit him.

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Waiting for the Other Shoe To Fall?

According to its website, the Carlyle Group has approximately $100 billion dollars under its management (see http://www.carlyle.com/Company/item1677.html). It proclaims that it has “480 investment professionals working in offices in 20 countries. These individuals collaborate across geography, sharing industry knowledge and insight to source, research and consummate investments in Carlyle’s focus industries” (see http://www.carlyle.com/Team/Alphabetically/item7697.html).

It is hard enough for parents to remember their children’s weekend schedules (acting class, fencing, religious school) — if you also have to recall the names of their teachers, friends, etc., one faces a very challenging task.  Today, when children are home, they can usually be found stationed at their PCs.  In addition to completing their homework, they are instant messaging their friends and sending out e-mails.

I presume that it is considerably harder managing the activities of nearly 500 individuals located in 20 countries managing $100 billion dollars.  Each employee will at a minimum have to comply with the laws and ethical rules of the countries in which they work.  To complicate matters. not all these professionals have the same native language and many work in different time zones.  Given all these complexities, why should anyone be held responsible?

So how should one process that that at the conclusion of alleged corruption at one of the biggest public pension funds in N.Y., the Carlyle Group “agreed” to pay $20 million dollars as a penalty and adopt a Code of Conduct that would, inter alia, ban outside agents from soliciting public pension funds and prohibit asset managers from doing business with pension funds for two years after contributing to the campaigns of officials who can influence such funds.  This Code of Conduct is apparently the first for private equity firms that cover political donations.  It is not clear if this is the final chapter of a 2-year investigation of alleged kickbacks to secure over $120 billion from New York State’s Common Retirement Fund.

To most people $20 million is a large sum of money.  To the Carlyle Group, it probably represents a fraction of the cost of the lawyers and other professionals it hired to conduct an internal investigation of its apparent wrongful conduct.  I imagine that the Carlyle Group probably spends at least this amount on travel in a given month.  What explains what seems to be either a mere cost of doing business or a slap on the wrist?

I would think that most investment professionals in today’s environment would be scrupulous in complying with their employer’s code of conduct.  The failure to do so could not merely result in civil or criminal liability, it could cost the individual or the Carlyle Group many times the cost of the $20 paid to the State of New York.  What explains this outcome?  There can be many explanations.

1) The Carlyle Group has joined the category of entities that are too big to fail.

2) The Carlyle Group has cultivated numerous prominent individuals and government officials who have no real desire to punish it.

3) More bad news about a major economic actor and another story of large-scale greed could have a harmful effect on the economy.

4) Various governmental entities don’t want to admit how badly regulated the economy has become.

According to the Center for Media and Democracy, “[t]he collection of influential characters who now work, have worked, or have invested in the group . . . include John Major, former British Prime Minister; Fidel Ramos, former Philippines President; Park Tae Joon, former South Korean Prime Minister; Saudi Prince Al-Walid; Colin Powell, former Secretary of State; James Baker III, former Secretary of State; Caspar Weinberger, former Defense Secretary; Richard Darman, former White House Budget Director; the billionaire George Soros, and even some bin Laden family members. You can add Alice Albright, daughter of Madeleine Albright, former Secretary of State; Arthur Lewitt, former SEC head; William Kennard, former head of the FCC, to this list. Finally, add in the Europeans: Karl Otto Poehl, former Bundesbank president; the now-deceased Henri Martre, who was president of Aerospatiale; and Etienne Davignon, former president of the Belgian Generale Holding Company” (see http://www.sourcewatch.org/index.php?title=Carlyle_Group)

Why do most states have investment boards managing pension funds, while in New York all responsibility in this area belonged to the State’s Comptroller?  New York’s Comptroller from 2003-6 was Alan Hevesi who has not be charged with any wrongdoing in this case (though he entered a plea bargain in an unrelated matter).  Do we have the legislators and journalists who know what questions should be asked?  Are they capable of determining whether the answers they receive are truthful?