Conflict of Interest & FavoritismThe potentially corrupting influence of an official’s financial or personal interests - a clash between self-interest and public interest
On January 7, 2017, Dominican Republic President Danilo Medina named a civil society commission to investigate construction of the Punta Catalina coal power plant — the same day the director of the plant’s construction firm was questioned in Brazil over its admitted $92 million in bribes paid to Dominican government officials in return for contracts. Punta Catalina — two power plants and a coal receiving terminal in the Dominican Republic — has has been dogged by allegations of a full range of dirty dealing, including lack of transparency, deception, favoritism, overbilling and bribery.
The Dominican government awarded the Punta Catalina coal project contract to Brazilian firm Odebrecht, with financing from Brazil’s BANDES bank, despite Odebrecht’s bid that inflated costs by $1 billion – double that of competing bids — according to the National Committee to Combat Climate Change (CNLCC). And according to news reports, documents emerging from corruption investigations of Odebrecht in Brazil reveal that the company received insider information from the Dominican government and then ran a scheme in which it billed exorbitant wages for workers on the project. Odebrecht is being investigated in Brazil for using mechanisms to overvalue construction projects and also for paying bribes and providing electoral advice in return for contracts, including in the Dominican Republic. Because of the corruption investigations in Brazil, financing from Brazil’s BANDES bank was stopped, prompting the Dominican Republic to turn to public funds, including from the state pension fund, to finance Punta Catalina.
The 355-page State of Capture report from South Africa’s Public Protector reveals details of favorable decisions by state utility Eskom to award huge coal supply contracts to Tegeta Exploration and Resources, a company co-owned by South African President Jacob Zuma’s son, Duduzane, and the Gupta family, close friends of President Zuma. The revelations add new fuel to longstanding suspicion about the role of government leaders and relatives of President Zuma with ties to the coal industry in paving the way for new coal mining and new coal-fired power plants in the face of serious water use, pollution and economic concerns. According to a Circle of Blue investigative report, “the ANC operates an investment arm, called Chancellor House, that owned an investment stake in Hitachi, which won the multi-billion dollar contracts to build the boilers for the two giant and unfinished Medupi and Kusile coal-fired power plants. Chancellor House also has a financial stake in the proposed 1,050-megawatt coal-fired Colenso power plant.”
Indonesian law requires mining companies to set aside funds for land reclamation before extraction begins, but Luthfi Fatah, a resource economist at Indonesia’s Lambung Mangkurat University explains that companies evade reclamation by leaving a small parcel of land unmined in each lease. Then, “when the government asks them to do reclamation, they say, ‘We haven’t finished yet — we still have 10 hectares to be exploited,’” Fatah explains. It’s just one glimpse into coal corruption in Indonesia, where 50-90 million tons of coal is mined and exported illegally each year, shortchanging Indonesians of hundreds of millions in royalty revenues. District-level politicians trade coal concessions for cash or political favors, according to environmental advocates, and some companies hold concessions in protected wild lands like East Kalimantan’s Bukit Soeharto State Forest. Indonesia’s Corruption Eradication Commission (Komisi Pemberantasan Korupsi, KPK) has revoked the licenses of 721 mines in 12 provinces across the country for failing to comply with basic standards, such as royalty payments, forestry permits and environmental commitments.
One result of the endemic corruption are the hundreds of unused water-filled mine pits in East Kalimantan in which 22 children have drowned since 2011. The most recent was 13-year-old Aprilia Wulandari who was found drowned “in a soccer field-sized mine pit on the outskirts of Samarinda,” according to Inside Indonesia. “Aprilia was reportedly playing with friends on her way home from school when she fell into the unmarked pit.”
Australia-headquartered global coal company BHP Billiton was fined $US25 million by the US Securities and Exchange Commission for violating anti-bribery law by paying for luxury hotels, sightseeing trips, and event tickets for government officials and their spouses at the 2008 Olympic Games. According to the SEC, BHP footed the bill for officials who were “”in a position to help the company with its business or regulatory endeavours,” including officials connected with BHP contract negotiations or regulatory dealings to obtain mining rights in Congo, Guinea, Burundi, and the Philippines.