Liberia Versus Corporation/Monrovia Landlord: Who Benefits From Funds To Be Raised In 2007?

By J. Yanqui Zaza

The Perspective
Atlanta, Georgia
January 10, 2007


Liberians are hoping that President Ellen Johnson Sirleaf Administration’s anti-corruption campaign will not only focus on former and current government officials, but will also focus on protecting millions of dollars to be donated at the 2007 Donor Conference. Preventing white-collar criminals (corporations and NGOs) from siphoning funds raised at the United Nations has now become a losing battle. Many countries including Sierra Leone, Iraq, Afghanistan, Haiti, etc have not benefited from donors' funds.

Sierra Leone, for example, has no tangible results even though donors pledged $800 million dollars in November 2005 in addition to the million of dollars donated in prior years. (Year In Review United Nations Home Page, 2005). An integrated Household Survey (SLIHS) of Sierra Leoneans, conducted from May 2003 to May 2004, stated that more than 70% of the population lives in poverty. (The World Bank, August 2006). In the case of Liberia, corporations and NGOs siphoned a significant portion of the $520 millions of dollars donated to Liberia in 2004.

Ironically, President Sirleaf's supporters, Monrovia landlords, whose siblings or relatives received kickbacks from Bong Mines, LAMCO, Firestone, etc. in exchange for minuscule royalties and taxes, might once again, abet corporations in overcharging their expenses. The issue of Monrovia cutthroat landlords aiding corporation to inflate bids was raised when Liberians complained that landlords evicted poor tenants for the highest bidders (NGOs) during a Town Meeting held by the Interim Government in New York City in 2004. In fairness, rent expenses are just a small part of the bidding scheme. In fact, studies conducted by Bretton Woods concluded that a big portion of the overcharged cost is attributed to fees allocated for consultants, royalties, trademarks, licenses, etc. In one study, an analyst of Bretton Wood criticized the World Bank for aiding its NGO by overcharging its clients for about $9 million dollars more than the amount other non-World Bank NGOs charged.

Predicting whether or not the “Iron Lady” would protect funds donated or allocated for Liberia from profiteers at the United Nations or at the World Bank is anyone’s guess. Currently, she is prosecuting local thieves, but efforts, if any, directed at foreign corporations have shown no results. In addition, foreign corporations are not contributing to meaningful social programs. Firestone, a company established in 1926, instead of being held accountable in Courts of Liberia for underpaying her workers, is now being sued in a Court in the United States. The lawsuit was filed after the Liberian government and management of Firestone reported that they have made progress in improving living conditions for its laborers.

Since 1926, Firestone could have expanded its hydroelectric power to Bassa County and Margibi County or constructed a railroad to be used for business and commercial transport. As regards to the Mitall Steel's agreement, the provisions might sound good. However, enforcing agreements such as the Mitall Steel’s, even in advanced countries, without technicians, equipments, materials and economic and political influence leads to failure. More so, any government such as Liberia that is cash-poor (i.e., lacking economic authority) cannot effectively exercise its legal authority.

On the home front, how effective is the new idea of rightsizing or downsizing as a tool of fighting corruption? Well, the Liberian Petroleum and Refining Corporation, for example, fired hundreds of poor workers, in the name of fighting corruption and waste. However, it spent $550,729.00 ($213,237.00 for sports and $337,492.00 for charity) for non-productive expenditure. (LPRC Financial Reports, Apparently, management feels good spending about one-third of the redundancy cost ($1,535,006.00) on entertainment and charity, rather than retaining parents who would invest a portion of their meager salary on education. It appears that LPRC management's priority of expenditure is in sync with U.S.'s policies on Liberia. For instance, the State Department was quick to invest $200 million to train 3,500 Liberian military personnel, but found it difficult to remit the $50 million dollars the U.S Congress allocated for social programs.

Liberian officials have implemented many blueprints of the World Bank. Yet people perceive them to lack integrity, patriotism and usually seek personal reward at the expense of the country. Some say Liberians are selfish because they have been exposed to an economic system that embraces the idea of individualism and despises the idea of society’s interest. So, having been assimilated into a culture of greed and the habit of allowing profiteers to decide what is good for Liberia, since 1847, it should not be a surprise why Liberians would be less tenacious in analyzing contracts, or unable to reduce inflated amounts buried in convoluted documents?

However, if it is good to follow the blueprint of the World Bank and fire workers, then why can no one enforce the World Bank's Accountability principles in reference to the $520 million dollars? Neither, the past Chair of the Reform Commission, now our current President nor experts of the International community have asked for an accounting of the $520 million.

Inflating expenses, albeit incorrect, which mirrors overcharging bids is not unusual, and the practice is now part of business operations. In fact businesses reduce their tax liabilities by overstating expenses or deducting non-business expenses. Recently, reports stated that corporations and charity institutions have squandered significant portion of the $60 billion dollars appropriated by the U.S. government for reconstruction work in the City of New Orleans, Louisiana. Even the Pentagon, a scrutinized U.S. agency, which was overcharged $600.00 a piece for a toilet seat in the 1980s, has once again been overcharged as much as 20% to 25% for remolding jet fighters, war ships, etc.

Is Wall Street, the capitalist world, immune from the concept of overcharging clients? No, except that analysts call it “soft dollars” and the amounts are excessive. Jenny Anderson, in a NY Times, 1/2/07 article entitled "Banks' leases to Hedge Funds are questioned" explained the concept of inflating cost (soft dollars). He said Hedge Funds, the gambling/speculating industry, overcharges shareholders and remits the excess fees to banks. These banks such as UBS, Swiss banks, Bank of America, J. P. Morgan, in exchange for the huge fees received from Hedge Funds, do not only give low-interest loans, but also provide tips, although illegal, to Hedge Funds. Funds managers then use the low-interest loan along with inside information, to speculate/gamble on the ups and downs of currencies, stocks, derivatives, real estate, etc.

Now, one can surmise that because expenses/costs were inflated, J. P Morgan had money to pay 53 million dollars in bonus to its chief executive in 2006. For the Hedge Funds industry, it financed its 230 million dollar to over 1 billion of dollar compensation paid to Funds managers in 2005 by manipulating CEOs and blackmailing representatives of third world countries.

For now, President Sirleaf is combating petty corruption, but may not have developed any economic principles to tighten loopholes Firestone, Mitall Steel, etc use in overstating expenses. And it might be costly to investigate and revise methods that corporations/NGOs use in inflating expenses such as royalties consulting, rent, etc. Yet, the “Iron Lady” has the tasks to protect funds pledged at the scheduled 2007 Donor Conference. We hope that she and her team of economic advisors would use their influence and international experience and save any new donations from falling prey to profiteers.

Happy Holidays!

© 2007 by The Perspective

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