New developments in the trial against an emblematic IMF and WB figure

18 July by Eric Toussaint

In early July 2013, the office of the attorney general of Switzerland (MPC) sought a two-year suspended prison sentence and a 162,000 euro fine (200,000 Swiss francs) |1| against Jacques de Groote, former Executive Director for Belgium of the International Monetary Fund (IMF) and World Bank (WB). The MPC has requested five year prison sentences for each of the five Czech defendants |2| plus fines ranging from €240,000 to €1.2 million (1.5 million Swiss francs). According to different news sources, they are all accused of having misappropriated the assets of the Czech mining company Mosteck Uhelna Spolecnost (MUS) between 1997 and 2003.

During the investigation, the MPC had ordered the seizure of 660 million Swiss francs (€540 million), which had been placed on Swiss bank accounts. These accounts will remain frozen. If the verdict, which should be reached in October 2013, confirms the MPC’s request, more than 425 million Swiss francs (€344 million) should be returned to the victims, says the MPC’s conclusions (149 million Swiss francs to the Czech government, and 276 million Swiss francs to MUS). According to the prosecution, the portion of this money that is not returned to the Czech government or the MUS will be definitively confiscated.

The trial, which opened in May 2013 in Bellinzona (Swiss canton Ticino) concerns one of the most important money laundering cases ever brought before a Swiss court. It is continuing in July 2013 with the speech for the defense. The defendants are pleading not guilty and requesting that the frozen accounts be released.

Meanwhile, the MPC has argued that the defendants took advantage of the privatization of the MUS mine located in the northern part of the country, the coal from which was used to produce 40% of Czech electricity, to illegally enrich themselves through a complex web of international shell corporations.

According to the Czech press agency, CTK, the Czech government was an accomplice in the misappropriation of public goods, selling-off the company’s shares for 20% of their real value. |3| The current neoliberal President of the Czech Republic, Miloš Zeman, was the Prime Minister when the privatization took place, and has always contended that the sale of the MUS mine was in no way harmful to State interests. |4| Consequently, the Czech government never prosecuted those responsible for the fraud. If the Swiss justice system had not acted, the defendants would not have been worried.

Beyond the figure of Jacques de Groote

The World Bank and the IMF launched a major privatization program in the Czech Republic as they did in most of the former Soviet bloc countries when Jacques de Groote was the Executive Director for Belgium (his term ended in 1991 at the WB, and in 1994 at the IMF).

Beyond the specific case of Jacques de Groote and whatever the intentions of the Swiss courts may be, this trial must be the occasion to highlight the extent IMF and WB activities have been detrimental. It seems obvious that the Swiss courts are being careful to not question these institutions, preferring instead to prosecute individuals. That must not, however, prevent us from seeing that beyond these individuals, there is a system and its institutions enabling and encouraging them to act in this way.

It is important to realize that what happened in the Czech Republic when the MUS mine was privatized has occurred many times in recent decades, in former Eastern bloc countries and “developing” countries, as well as today in Greece, Portugal, Cyprus, and elsewhere. In almost every case, local government leaders have been in collusion, enabling a handful of individuals and private companies to gain benefits from these privatizations to the detriment of the common good. These privatizations have also occurred in the most highly industrialized countries such as Germany, France, the United Kingdom, Japan, the United States, and Belgium in which, up until now IMF and World Bank interventions have not been necessary, since the decisions have been made directly by government leaders working hand-in-hand with major corporations.

The active participation of major banks is also necessary for the misappropriation of public funds. In the MUS mine affair, Crédit Suisse (one of the two principal Swiss banks) is involved. However, it has not been directly accused, this should also be highlighted.

The particular case of Jacques de Groote

Without presuming the decision of the Swiss courts, Jacques de Groote has clearly taken an active part in inaugurating privatizations that were detrimental to the populations and very lucrative for a handful of individuals that have enriched themselves at the expense of the people.

If we are to believe the head of the CAASA company, Alain Aboudharam, Jacques de Groote received important payments from this Swiss company for services rendered. This money did not concern the MUS mine, but was related with activities in the Czech Republic. In a letter dated 19 June 2013 addressed to the CADTM, Alain Aboudharam claims to have paid $1.2 million to Jacques de Groote, whilst de Groote was still in office, as Executive Director, at the IMF, during the period 1992 – 1994 |5|.

This is an extract from that letter: “Using his contacts whilst being Executive Director at the IMF up to 1994, he helped me, through my company, to meet Czech business directors. In 1992 I met the president of Skodaexport, a company specializing in industrial projects and infrastructure. My company completed several projects with Skodaexport, two of which were helped by Mr. de Groote’s Czech business relationships. One was the construction and laying of a pipeline in India, between Kandla and Bathinda, fully financed by the government of India, and the other was the renegotiation of the fiscal arrears of Skodaexport with the ministry of finance” |6|. Alain Aboudarham continues by mentioning the amounts concerned: “Mr. de Groote received, on the behalf of my company, consultancy fees amounting to about $1,292,902 for the period 1992 to1994. At the end of 1996 the total amount was $1,611,537. At this moment our professional collaboration ended and no financial ties now exist between us.”
Alain Aboudarham describes how the payments were made:”Mr. de Groot’s fees were usually settled by remittances to different persons, natural or legal entities with whom he had, in the past, contracted debts. In this way, from the end of 1992 up to 31 December 1994, I settled his fees by paying his debts, some of which were due since 1980; to the Banque Belgolaise, the bank Nagelmakers, the Banque de Crédit Hypothécaire in Anvers, amongst others, and to other persons”.

Alain Aboudarham adds that after having put an end to this “professional collaboration” (Mr. Aboudarham’s own words), he maintained personnel relations with Mr. de Groote: “In 1998, I personally and informally lent him money to settle the mortgage on his house in Washington. I continued to help him until the end of 2000. On 31 December 2000, his debt towards me stood at $421,584. Seeking reimbursement was very complicated and, finally, in 2002 when I initiated US legal proceedings, M. de Groote sought the protection of the famous chapter 11 (bankruptcy laws)”.

In the article “An emblematic IMF and World Bank Personality Dragged into Court”, |7| reference was made to judgments by a US court in the case brought by Aboudarham against de Groote. In his letter, Aboudarham seeks to clarify why his claim was rejected |8|: “The reason Mr. de Groote won this case was purely technical. The loans I advanced to Mr. de Groote were personal loans. The promissory notes that he signed recognizing his debt in my favor were in the name of my firm Conseil Alain Aboudarham. I gave them to my firm at the start of the trial. The judge ruled that my firm and myself were not the same entity, and so rejected my plea not on the fact that he was not my debtor, this was confirmed by a popular jury, but on the technical impossibility to use these promissory notes for settlement of the debt”.

Finally, Alain Aboudarham wishes to dissociate the current legal wrangle in Switzerland from the relationship he had with Jacques de Groote: “To this day, in respect of confidentiality and anonymity, I have never refuted the remarks made by Mr. de Groote. If I do so today it is to avoid any confusion that may be made between our professional relationship between 1992 and 1996, the legal process between us from 2002 to 2006 concerning a personal loan that has not been repaid, and that which is currently happening in Bellinzona, where he is in the dock with five other persons accused of money laundering, mismanagement and fraud, and corruption and aggravated money laundering”.

Jacques de Groote as an emblematic figure of the elites who govern the world

Beyond his own eventful personal history, Jacques de Groote symbolizes the profoundly harmful aspects of the policies methodically applied by the World Bank, IMF, and the elites who govern our world solely on the basis of maximizing profits and “consolidating” the system.

Here are the key aspects characterizing these activities. |9Support by the WB and IMF, in complete contradiction with the Charter of the United Nations, for the colonial powers’ plundering of their colonies before independence. De Groote acted for Belgium, which dominated “Belgian” Congo until June 1960, helped to destabilize and overthrow the regime of Patrice Lumumba (Belgium was involved in the assassination of the former Congolese prime minister in January 1961); supported the dictator Mobutu from the 1960s until the beginning of the 1990s, as an official advisor of his government; facilitated WB and IMF support for General Habyarimana’s regime in Rwanda from the 1980s to the beginning of the 1990s, and acted as an advisor for the Rwandan government. We must also remember that these two dictators were guilty of systematic violations of human rights and crimes against humanity. The list goes on, and includes the systematic application of the neoliberal agenda with the widespread implementation of structural adjustment policies, which made it possible for countries to pay back odious and/or illegitimate debt, and to better open up the economies of indebted countries so as to better serve the interests of major private multinational corporations. De Groote participated in these activities as the World Bank Executive Director for Belgium from 1975 and 1991, and for the IMF from 1973 to 1994, unrolling a vast program of privatizations imposed by the IMF and the World Bank, which benefited a handful of individuals and a few major corporations. These privatizations were often linked to various forms of fraud as the Swiss courts have argued in the case of the MUS mine. To all of the above can be added an obvious conflict of interest in the case of Jacques de Groote, because while he was still an Executive Director at the IMF, he received important sums of money in return for his aid to the private sector. It is important to highlight that neither the IMF nor the World Bank have taken disciplinary measures against him for this clear conflict of interest, nor has the Belgian government, which was represented by de Groote in these institutions.

In this revolting affair, greed and the violation of fundamental human rights go hand in hand. The institutions responsible have remained untouchable, and their Directors believe that they are entitled to the privilege of absolute impunity. It is high time to put an end to this abuse! Those who work for the IMF and WB must be liable in a court of law for the acts they commit in completing their functions, and these institutions themselves must render account before the law for the numerous violations of human rights they have committed and continue committing in the North and South.

Translated by Mike Krolikowski and Charles La Via

Footnotes

|1| See http://www.7sur7.be/7s7/fr/1505/Mon…

|2| Marek Cmejla, Jiri Divis, Oldrich Klimecky, Antonin Kolacek, and Petr Kraus.

|3| See http://praguemonitor.com/2013/07/08…

|4| See Anna Kubišta, « Scandale de la privatisation de la société minière de Most : le procès s’ouvre en Suisse » (Scandal of the privatisation of the Most mining company: trial opens in Switzerland), http://www.radio.cz/fr/rubrique/fai… 13 May 2013.

|5| The full case may be consulted at: Conseil Alain Aboudaram, S.A. v. De Groote, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, June 7, 2004, CONSEIL ALAIN ABOUDARAM, S.A., PLAINTIFF, v. JACQUES DE GROOTE, DEFENDANT. http://dc.findacase.com/research/wf…

|6| In another part of his letter A. Aboudarham says: “I would like a ditinction to be made between the society Skodaexport with which I did business at that time and Skoda (manufacturer of automobiles and locomotives etc.) which is today involved in the procedure at Bellinzone, these are, in spite of the similarity in their names, two completely different entities”.

|7| See http://cadtm.org/An-emblematic-IMF-… published on 10 June 2013.

|8| See the appeal judgment: http://law.justia.com/cases/federal…

|9| A detailed presentation of this summary can be found in the aforementioned article “An emblematic IMF and World Bank Personality Dragged Into Court” http://cadtm.org/An-emblematic-IMF-… 10 June 2013.

Eric Toussaint, Senior Lecturer at the University of Liège, is the President of CADTM Belgium (Committee for the Abolition of Third-World Debt), and a member of the Scientific Committee of ATTAC France. He is the author of The World Bank: a never-ending coup d’état. The hidden agenda of the Washington Consensus, VAKIndia, 2007, http://cadtm.org/The-World-Bank-a-n…
He recently co-authored with Damien Millet AAA, Audit, Annulation, Autre politique (Audit, Abolition, Alternative Politics), Le Seuil, Paris, 2012; 65 Questions, 65 Réponses sur la dette, le FMI et la Banque mondiale (65 Questions, 65 Answers on Debt, the IMF, and the World Bank), Liège, 2012 (can be downloaded for free at: http://cadtm.org/65-questions-65-re... ); La dette ou la vie (Debt or Life). Co-edition CADTM-Aden, Liège-Bruxelles, 2011. Recipient of best political science book by the Liège Political Science Book Fair http://www.cadtm.org/Le-CADTM-recoi….
Eric Toussaint is historian and doctor in political science at the universities of Liège and of Paris VIII.

http://cadtm.org/New-developments-in-the-trial

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