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Exposing the truth to save taxpayers’ money

An aerial view of a small town in Czech Republic

Ústí nad Labem in Czech Republic, part of the region where whistleblower Leo Steiner reported corruption in the allocation of EU subsidies. Flickr; Martin Grill

Transparency Int'l

For many people, the coronavirus pandemic has highlighted the importance of public services, especially hospitals and schools, and the funding that supports them. Every cent counts. The crisis has also shown that when there is less oversight of how governments spend taxpayers’ money, corruption risks increase.

Whistleblowers have a vital role in protecting public money. When people speak up about abuses of public funds, they can make a real difference to the money governments have to spend – meaning they can provide better services.

Government official Leo Steiner understood this when he spoke out over EU subsidy distribution in the Czech Republic’s north-west region. In 2012, he joined a department responsible for allocating European subsidies, hoping to help fund much-needed public projects such as schools, cultural centres and sports grounds.

But Steiner quickly became suspicious. Subsidies didn’t seem to be going where they were most needed. Affluent areas gained funds for overpriced facilities, while areas needing financial support received nothing.

Speaking up for need over greed

Steiner soon understood why. At a meeting of the funding scheme managing committee, he witnessed members openly allocating billions of Czech Koruna before calls for project applications were issued. Another meeting saw 20 per cent of grants in a project cycle allocated to bribe people over which projects should proceed.

With help from the Czech chapter of Transparency International, Steiner reported the situation to the anti-corruption police and collected documents for their investigation. These showed the pre-selection of projects, falsified inspection reports, a list of politicians’ preferred projects and pressure on external evaluators. Officials were threatened with firing if they didn’t participate in the fraud. Many resigned.

Managers tried to force Steiner to withdraw his claims. He was threatened and left his job, fearing for his life, before filing a criminal complaint alleging manipulation of grant distribution. His testimony helped the police investigation, which found that high-level regional politicians were closely linked to local business. More than two-thirds of the projects begun through the 20 billion Koruna (US$800 million) scheme were questionable.

Since 2013, several high-ranking Czech officials have been convicted of bribery and fraud. In total, almost thirty officials, politicians and businesspeople have been charged with abuse of power, manipulating public procurement, accepting bribes or mismanaging assets. Court cases are ongoing, but the European Commission has already fined the Czech Republic over 2 billion Koruna (US$8 million) for mishandling public funds.

The case has also helped drive reform of the country’s EU funding distribution system. Money is now allocated by a central body, free from undue local influence – so funds can better benefit communities which really need them.

Protecting public budgets from embezzlement

Without proper oversight, the large sums allocated to public budgets can create numerous opportunities for officials to divert funds for their own benefit.

In November 2015, investigating a whistleblower report in Honduras about purchases of medicines at Santa Bárbara Hospital, Transparency International discovered that hospital managers manipulated a tendering process worth over US$100,000. Contrary to regulations, they divided the purchases into smaller lots – avoiding the threshold for strictly regulated open public bidding – then awarded all seven contracts to one firm.

Finding that the other bidding companies weren’t registered, and suspecting they didn’t exist, Transparency International’s chapter in Honduras contacted the national authorities. In 2017, police raided the hospital, seizing documentation and arresting seven directors. Three had signed receipts for the medicines and authorised payment, but the hospital’s inventory showed that the drugs were never delivered – depriving patients of much-needed medication. Two, including the hospital director, have so far been sentenced, each to seven years in prison.

Similarly, whistleblowers in Argentina alleged that senior officials at the National Technological University diverted funds worth 14 million pesos (US$2.7 million) from a government contract to monitor a public works scheme which was intended to help families cope with unemployment. The courts decided in 2019 that the university’s dean and administrator must answer for the funds.

Braving threats to expose corruption

Whistleblowers clearly have a vital role in ensuring taxpayers’ money goes where it should. But reprisals mean their path is often excessively challenging, and that might discourage others from speaking up. For over 20 years, Ana Garrido Ramos worked in Boadilla del Monte town hall, near Madrid. But in 2007, managers began to pressure her to sign illegal contracts, involving kickbacks benefitting politicians. When she refused, they tried to bribe her, without success. She then began to experience serious harassment.

Suspecting widespread wrongdoing in Boadilla, Garrido Ramos researched the problem. She soon discovered a nationwide network of corruption, and in 2009, presented a 300-page dossier to the Anti-Corruption Prosecutor’s Office.

Garrido Ramos had uncovered what became known as the “Gürtel” case, the largest corruption scandal in Spain’s democratic history. It led to the arrest of many senior politicians in the country’s then-ruling Popular Party for receiving bribes, money laundering and tax fraud. In 2018, the scandal forced prime minister Mariano Rajoy to resign and his government fell.

Garrido Ramos testified in court and never waivered in her long campaign against the large-scale illegal use of Spanish taxpayers’ money. But she made great sacrifices, earning enemies and suffering threats and intimidation. She has since campaigned for comprehensive whistleblower protection.

Had she lacked the courage and tenacity to make her case, Spain’s people might still be losing millions of euros to enrich corrupt businessmen and politicians. That’s why it is vital that whistleblowers feel safe enough to speak up about wrongdoing.

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Making everyone feel safe to speak up

Ana Garrido Ramos’s case highlights officials’ unique position to report malpractice occurring behind the scenes. People defrauding public bodies hide their misconduct carefully, meaning whistleblowers are often essential to uncovering the truth. This means public institutions must encourage and protect them.

Employers and regulators need to offer clear, confidential reporting channels and effectively investigate reports. Countries must adopt legislation providing for such mechanisms and ensuring the protection of whistlebowers against retaliation.

To work properly, whistleblowing requires a culture of popular support, so that anyone with knowledge of malpractice feels confident speaking up. The public services we value and need depend on it.

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