How both the EU and Vladimir Putin’s Russia managed to get themselves in a dangerous stalemate, Pt I: ‘Ukraine standing up against the Capo di tutti Capi’

Sometimes the world feels like a train accident: you can see things go wrong from way before, but the people who could and should prevent the accident from happening, are putting one mistake upon another. This describes for me the current situation in Ukraine.

Things started relatively innocent in 2013: the common Ukrainian people, who populated Maidan square during the last few months, had a very honourable and justified desire for a little bit more security, democracy, honesty and genuine economic growth in their home country.  And especially… a lot less corruption. 

In order to achieve this, they wanted their country to enter into an association agreement, which was on offer at the European Union. This agreement promised the hand-over of some subsidies and structure funds and it could eventually lead to a full membership of the pan-European union.

And the Ukrainian people had of course good reasons for protesting: the corrupted gang of thugs around chief thug Victor Fedorovych Yanukovych had systematically robbed the country of its financial resources, leaving the Ukrainian economy in tatters. Yanukovych and his henchmen had stashed their ‘plunder’ in countries like Switzerland and (here we go again…) The Netherlands, under the most favourable fiscal circumstances [The Netherlands is the only tax haven that officially refuses to be called a tax haven - EL].

Until then, everything seemed legitimate about the Ukrainian people’s desire for more democracy and against the ubiquitous corruption in their country.

However, for Russia, the elephant in the room (and consequently the main reason for the current conundrum) was Ukraine’s open flirt with the EU and – in its stern wave – the NATO. 

In the eyes of Vladimir Putin, both (especially the latter) were provocations towards Russia, which were absolutely unacceptable. 

Putin and many Russians still consider the Ukraine, with its vast numbers of ethnic Russians, its famous holiday cities Sevastopol and Odessa and its military bases at the Black Sea, as an undividable part of the former Soviet Union: an independent country in name, but part of the collective Russian memory.

To understand why losing Ukraine to the EU and the NATO would be so unacceptable for Putin, you have to consider this:

Vladimir Putin, is like the ‘Capo di tutti Capi’ of a large, very hierarchical, power-based and perhaps mafia-like organization; in other words, he is the absolute top dog! Someone in charge, who must show strength and decisiveness in all situations and under all circumstances. 

The people under his reign adore him and they are financially and economically very much dependent upon him, as he can make them and break them. That is, until the moment that Putin clearly loses his strenght, power and influence. 

In that case, Putin will be (in)voluntarily succeeded by the next Top Dog, who might seemingly come out of the blue, just like Putin himself did in the nineties. 

And please note that Putin was the successor of two of the most unbeloved Presidents in the history of the Soviet Union and Russia:

• Michail Gorbachev, who lost the Cold War and ‘sold out’ the Soviet Union to the West in the eyes of many Russians;
  
• Ask an average Russian about his / her feelings about Gorbachev and you will be amazed about the sheer hatred and resentment against him.
  
• The hopelessly weak and seemingly permanently drunk Boris Yeltsin, who saved Gorbachevs bacon at the Russian White House, but sold out the Russian state possessions to the ‘Oligarchs’ and other mafia-like people.
  
• He was the president, under whose reign the Russian economy crashed in 1997;
  
• Many, many Russians lost their life savings in that doomed year, as their money was simply embezzled by the banks, where it was deposited. People, among whom my future wife, lost thousands of hard-earned rubles and dollars

When the young, intelligent and tough ex-KGB agent Vladimir Putin came to power as president in Russia, he promised to himself and the Russian people, that he would make them forget his weak predecessors. Instead, he would put Russia back on the world map.

Initially, Putin had a very succesful presidency, in which the battered economy of Russia went through a new period of growth and returned to the centre of the world. This economic boom was fueled with money, earned from the proceedings of the enormous oil (Rosneft) and gas industry (Gazprom).

Putin's good relations with Bundeskanzler Gerhard Schröder in Germany and his vital charisma seemed to promise a new era in the Russian / Western relations. Personally, I was pleasantly surprised how the city of St-Petersburg changed from an old, dirty, dangerous and worn out city in 2002, into the lively heart of North-West Russia in 2005/2006. 

And I hoped that Vladimir Putin could achieve the same things in the rest of Russia, were poverty, nepotism, intimidation and massive corruption were always just around the corner. In other words: in 2005, things seemed to look promising for Russia.

However, in the years of his first two presidential stints, Putin got rid off a few enemies (a.o. the oligarch-turning-political-enemy Michail Khodorkovskiy, who was arrested in 2003) and he started to put his most loyal friends at vital positions in the Russian economy and at the political hotspots. 

By doing so, he effectively diminished contradiction and second opinions upon his decisions. Also he crimped youngsters for taking part in youth movements, which acted for his splendour. 

Putin started to believe in his own divine status, as saviour of Russia: you could call this Kremlin-fever. Putin started to think that Russia’s achievements were solely his achievements and hence, that Russia’s possessions should be his possessions too.

As a consequence, he turned more and more into the now-familiar bully: to his domestic and foreign adversaries and (to a lesser degree) to the ‘weak’ leaders in ever-divided Europe. 

Putin's paradigm became: “If you are my enemy, I will get you and hunt you down! 

If former Soviet states play games with me, I will show them who is boss! 

If people in charge in foreign countries, outside the former Soviet Union, make me angry, they lose the Russian gas! 

If they argue with me and point me at my mistakes, they lose the Russian gas!

Gazprom and I are the same, undividable entity and I can do with it as I please.”

Normally, the designated end of Putin’s presidency in 2008 would have stopped – in a natural way – this dangerous transition in his personality. 

However, Putin changed the Russian constitution, enabling him to become president again after two stints on and one stint off. Subsequently, Putin constructed a shady deal with his loyal ‘straw man’ President Dmitriy Medvedev [now Prime Minister - EL], to fill the void between Putin’s second and third presidency. Thus, he secured his presidency for years and years to come. For him – in his divine status – this seemed the logical thing to do and he knew that many Russians would still support him, in order to praise him for the relative stability that he brought. 

And now Putin is indeed the ‘Capo di tutti Capi’: the man in charge! 

His role in reality is akin to that of Marlon Brando in The Godfather:

• Seemingly understanding, sportsmanlike and perhaps even ‘fatherlike’, when he can be; 
• for instance, while drinking beer with King Willem-Alexander of The Netherlands and praising the Dutch speed skaters in Sochi! 
  
• On the other hand, vigorous and even brutal, when he has to be!

Summarizing: Putin will stay in charge for as long as he wants, when he remains strong and vigourous. 

However, if Putin shows weakness, by letting things slide in Russia, the Ukraine or Georgia, or by blatantly giving in against the EU, then his ‘partners’ – you could also call them potential enemies – will be ready to overthrow his presidency, is my humble opinion.

The pressure that has mounted upon Putin, as a consequence of these preconditions, led to some erratic, political events during the last few years:

• Putin, sitting at his desk in the Kremlin: not listening to his guests, but rather bullying them in his role as Marlon Brando’s Godfather;
  
• When you visit Putin in the Kremlin, you don’t talk to him, but you listen!
  
• Irrespective, whether you are a highly-ranked, foreign guest or not, you have to wait until his holiness has a spare minute for you;
  
• Former chairman of the NATO, Jaap de Hoop Scheffer, said about Vladimir Putin in an interview with a Dutch newspaper a few days ago: “He made me often wait for at least 45 minutes or so. And at the time that I had to make my statement as chairman of the NATO, the Russian television crews demonstratively picked up their camera’s and stuff and went away, in order to show me who’s the boss in Russia”;
   
• Putin, banging the nationalist drum on numerous occasions, thus feeding the pride and patriotism of the impoverished Russian people.
  
• People, who want to look up against their president as a strong and powerful man, rather than a non-corrupted, friendly and honest one;
  
• Putin, putting an innocent and initially non-influential punk band – Pussy Riot – in prison for years, for 'offending him and the Russian Orthodox Church': a genuine non-event turning into world news for years;
  
• Putin, half-dressed on a horse, to show his perfectly fit body and impressive muscles;
  
• Putin, as pilot in a small airplane, showing young geese where to fly to during winter time, as a kind of invincible Captain Russia!
  
• Putin, diving for an antique treasure, in order to show that he is Master of the Seven Seas and puts Johnny Depp and Nicholas Cage to shame;
  
• Putin, allegedly having an affair with a very young athlete in Rhythmic Gymnastics, in order to show to the world, that he is a 100% strong and virile male;
  
• Putin, shocking the western world, but gaining applause at home for his rants against homosexual people, as unnatural ‘child molesters’;
  
• And last, but not least: Putin organizing arguably the most corrupted and expensive Olympic ‘ money laundering orgy’ in history – the Sochi 2014 Winter Olympics –  to show his wealth and power to the world; 

This behaviour, irrespective of how erratic it might seem in western eyes, has kept him firmly in control in the Kremlin. 

And although the group of Russians, who are fed up with him, is growing rapidly, he still keeps the trust of the majority of the Russians: especially in the rural areas of this vast country. 

Western people, who think that Putin stole the various elections over the last decade, are very naive. He didn’t have to steal them in the first place, as he still had the firm support of the majority of the Russians! The fact that he probably rigged some ballots in Moscow, St-Petersburg and elsewhere, was nothing more than fun-and-games for him.

However, during the presidencies of Vladimir Putin, there have been two big, black flies in his soup:

• The expansion drift of the European Union and especially the NATO, which have flirted with Georgia, Ukraine, Moldova and other countries of the former Soviet Union;
  
• Especially the rocket shield against ‘Iran’, that would have to be stationed in Poland and Czechia/Slovakia was a first degree provocation against Russia
  
• Ukraine, where his ‘old friend’  and long-term ally Viktor Yanukovich had been replaced with Viktor Yushchenko and Yulia Tymoshenko: people who belonged to the ethnic Ukrainians and who had a much more hostile stance against Russia. This led to the “Gas Wars” between Ukraine and Russia; 

Nevertheless, since a few years and after Yanukovich came back in charge again as the president of Ukraine, everything seemed fine again between Russia and Ukraine. 

At least, until the EU dropped the bombshell, by offering an association agreement with Ukraine, which might… perhaps… maybe… in due course… eventually… could lead to a membership of the EU, when nothing changed etc.

Although Yanukovich knew very well, who was the man in charge within the territory of the former Soviet Union, he would anyway lend a cautious ear to the EU. He was especially lured by the EU's promises of billions in subsidies and structure funds, in order to help the impoverished Ukrainian economy (and perhaps grab a few bucks himself).

This outraged Putin, who came back with “an offer that Yanukovich couldn’t refuse”: the Customs Union between Russia, Belarus, Kazachstan and… Ukraine. 

The treaty would come together with a fistful of dollars in state support for the Ukraine. Yanukovich knew that he had lost and agreed to sign the Customs Union treaty. And this is when the events on Maidan really started to happen...

When does a healthy interest in protecting your own industry turn into unhealthy nationalism and protectionism? French Minister of Industrial Recovery Arnaud Montebourg skims the edges!

At this moment, it is easy to make fun of France. The country – jokingly, but with a serious undertone, called ‘The Sick Man of Europe’ – has not been doing well during the last decades, from an economic point-of-view.

Generally, France enjoyed too little economic growth since the nineties and – to make things worse – only few of the indispensable economic reforms – according to many – were actually carried through. This has been a consequence of reluctance among French politicians to take decisive measures.

Too often, presidents like Jaques Chirac, Nicolas Sarkozy and François Hollande, as well as their teams of ministers, refused to take the painful, but necessary measures that would modernize the French economy and bring the country back on top of things. They were simply too afraid to mobilize countering forces and alienate large shares of their (sometimes short-tempered) population.

In spite of this reluctance for change among French politicians, the atmosphere in the cities and villages in France has yet been very tense, during the last ten years. This was especially true in the poorer regions and urban areas of this country. 

Everybody probably remembers the very violent clashes between groups of poor, unemployed and deprived youngsters (often descending from (North)African minorities) and the French police, in which total city areas changed into war zones and numerous cars were set on fire. 

These events, for their part, led to (verbally) aggressive counter-reactions from f.i. the rightwing-populist Front National and their unsavoury, but nevertheless charismatic leaders Jean-Marie Le Pen and Marine Le Pen (his daughter). They represented the dissatisfied voices of the poor, white classes in France. In some cases, only a little spark (i.e. a little provocation) was enough to put the fat in the fire again in France.

All in all, France’s reluctance to seriously deploy structural changes in its economy is almost as legendary, as the French workers’ aggressive ways of striking and France’s dependency upon (some might call it ‘addiction to’) European agricultural subsidies.

On the other hand, nobody in Europe should have the foolishness to underestimate French politicians and their ways of reaching their political goals. The French are (in)famous for their extremely fine-tuned diplomatic and political skills and – consequently – for their enormous influence in the heart of the European Union. An influence, which almost seems to outstretch their economic importance for Europe.

How many North-West European leaders have not seen their ‘groundbreaking’ ideas being shipwrecked by a firm ‘Non!’ from the seemingly stubborn French, who always seemed to have the last laugh, when it came to a political shoot-out.

And personally, I especially admire the French for not giving in to the ubiquitous cultural and economic predominance from the Anglo-Saxon countries. Instead, the French stand tall for their own society, culture and heritage. 

Although France has not proved to be immune for the British and American popular culture, the ‘McDonaldization’ of French society and cultural life is far less than in other countries. Irrespective whether you call this a pro or a con; you have to give this to the French. After every holiday in France, I must admit that the French do have a point when it comes to some of their opinions on food, drinks, recreation, culture and(luxurious) consumer products.

Besides that, with f.i. Thomson, Alstom, GdfSuez and Airbus, the French do still have plenty of companies, which are at the cutting edge of technology.

Nevertheless, the French economy is currently in a deep trough, from which it is very hard to come out. Many French small and medium enterprise (SME) companies have already defaulted during the crisis years. Some industrial zones in the heartland of France seem like ghost towns, after the buildings have been abandoned by their owners/occupants. 

Many parts of the earlier mighty, French manufacturing industries have been moved to the Far East and Eastern Europe, where the production costs are much lower than domestically. 

All these notions sounded through in the public outcry of Minister of Industrial Recovery, Arnaud Montebourg, after he ‘discovered’ that the shirts of the French football (i.e. soccer) team for the Brazil 2014 World Championship had been manufactured in Thailand.

The following snippets come from the Dutch Volkskrant:

French football team in blue jerseys from a Thai factory?! Non!

At the World Championship football in Brazil, the French football teams plays in a classic blue jersey with a fashionable white polo collar. From an esthetical point of view, this outfit is undisputed. However, from a political point of view, it isn’t. Minister Arnaud Montebourg of Industrial Recovery is not amused that Nike has produced the jersey in Thailand. “These jerseys could have been produced in France just as easy”, according to Montebourg

The flamboyant minister is on a crusade in order to promote the ‘Made in France’ concept. Every French person should buy as much French products as possible, in order to stop the decay of the domestic industry. For Montebourg, purchasing French-made goods is almost a moral duty. “This is what the French should do in their daily life, within their own means. And the French football association has undoubtedly more than enough means to do so”.

For a year, the journalist Benjamin Carle tried to live according to the commandment of Montebourg. He exclusively used French products, while making a documentary that will be broadcasted on Canal Plus next week. That wasn’t very easy: 

A French jeans was impossible to get. Only 4.5% of Carle's furniture consisted of products, made in France. He had to learn to cook himself, using products that he purchased at the butcher and the greengrocer, as ready-made products were seldomly fully made in France, in the cases that the descent of the food was clear in the first place.

It became also impossible for Carle to move through Paris, using a Vélib (a bike for common usage), as this bike is produced in Hungary. Carle’s conclusion: living ‘the French way’ is time-consuming and expensive.

It is easy to disqualify this gaudy, French attempt towards protectionism and promotion of French goods at the expense of goods from other countries. And from an economic point of view, we should do this indeed, as protectionism has proven to be a flawed strategy on numerous occasions in the past.

Nevertheless, we can make some marginal comments in favor of Montebourg’s statements:

First, although the clothing and sportswear industries have undoubtedly brought prosperity to the low wage countries in Asia and Eastern Europe, there has been a race to the bottom for the lowest production costs. 

Especially among the sports brands Nike, Puma and Adidas, the enormous marketing budgets and skyrocketing sponsoring contracts with the ‘stars’ of sports and leisure must be compensated by reducing the production costs of sportswear to the bare minimum, in order to earn a decent profit.

During the last decade, there have been multiple small and large accidents and incidents within the clothing factories in countries like Vietnam, Cambodia, Bangladesh, India and Pakistan. These incidents have proven beyond a reasonable doubt that the financial well-being, working pleasure and safety of their foreign personnel in these low-wage countries has not the highest priority for the large European and American brands that produce in the Far East or elsewhere.

Second, the extremely low production costs for the world-leading brands, which produce in the Far East, have caused the decay of many formerly successful, local brands. These brands often did produce goods and sportswear of very good and sometimes exceptional quality, but their production costs and – consequently – sales prices were just much too high, while their marketing budgets were only a fraction of the leading brands' budgets.

Fashion brands with a ‘domestic’ look-and-feel – in The Netherlands, these are for instance brands like Gaastra, Mexx, Quick Sportswear and a dozen others – almost all feel forced to produce in the low wage countries. 

This is of course with an exception for… the ultimate luxury brands, like Louis Vuiton, Hermés, Chanel and others. These brands have the luxury of producing uncompromising quality at astonishing prices and they can survive, due to the fact that their clientèle has a nearly unlimited budget and unstoppable consumption power. However, very few brands reached this status in Europe and the United States.

Third, the way in which food and agricultural produce is produced and processed all around the world, has been the 'raison d'etre' for numerous documentaries and scientific investigations: 

• Green beans from Kenia;
• Asparagus from Chile; 
• Prawns that are full of antibiotics and food preservants, from Vietnam; 
• Garlic from China; 
• And especially Dutch grey shrimps, which are peeled in Morocco, only to return to The Netherlands for consumption;

These are some of the blatant excesses in the international food industry. There, the French minister definitely has a point.  

People have got used to eating unripe fruit, which had been picked much too early and had been stored in containers for weeks, and tasteless vegetables that has been imported from around the globe, instead of eating domestic and closely produced vegetables and fruit, within the proper season.

Nevertheless, besides these remarks, this heartfelt plea by minister Montebourg to buy French products, ‘in order to stop the decay of the French industry’ (see red and bold text), seemingly ignores the two elephants in the room:

The circumstance that the French can’t or won’t buy more French-made products, in order to save their own industry, is caused by the fact that French-made products either became too expensive or are not available anymore at all. It is the same as what happened in for instance The Netherlands (Philips), the United Kingdom, Italy and Germany (Braun, Siemens, Bosch).

Loyalty to domestic (or European) brands and to a domestic descent of goods and appliances generally lasts for about 10% price difference at the most (warning: this is my own rule-of-thumb), presuming equal quality. 

If the discount of the foreignly produced good exceeds this 10% in price difference, the people will definitely go for the cheaper brand or the cheaper produced goods. This is – of course – what happened in the past with many household appliances and consumer electronics

Some brands can escape this rule of thumb, due to their exceptional quality and the life expectancy of their goods (f.i. the German brand Miele is one of these exceptions), but most brands simply can’t. Their manufacturers therefore choose the easy way out and also start producing in the Far East or Eastern Europe.

And there is more: especially French politicians have ignored for decades the need to change the French industry and economic landscape and reduce the power of the too mighty French labour unions and representatives of the agricultural industry. 

While this might have been a wise policy to maintain the domestic peace-and-quiet, it has definitely been killing for some important parts of the genuine, French manufacturing industry; especially the ones that produced the French household appliances, consumer electronics and inexpensive consumption goods. And perhaps, even if the French politicians would have acted earlier, it would be questionable whether the French manufacturing industry could have battled the cheap labour and production circumstances in the Far East. His battle has been lost for many European manufacturers...

Nevertheless, also the French agricultural industry is confronted with the fact that many countries can almost do what the French do, and they can do so for a fraction of the price.

Taking this into consideration, it is easy to see that this attempt to save the French industry by Arnaud Montebourg skims the edges of unhealthy nationalism and protectionism: it tries to cover up the problems of the French industries and economy, instead of exposing them and trying to solve them.

Still, there is no reason to be too pessimistic about France, in my opinion. I have no doubt that this stubborn and somewhat eccentric country, with its centuries-old traditions and heritage, still has everything it needs to invent the cutting edge technology of the future. Were it not the French, who invented the Deux Chevaux car and who brought the TGV trains into full development?!

Dutch companies must be cautious not to lose their “spotless reputation”… in The Netherlands and abroad Pt II: SBM, the large Dutch banks and the large accountancy organizations

The Netherlands is renowned for being a relatively uncorrupt country, with its eighth position on the Transparency International list of least corrupt countries. 

Nevertheless, there have been some serious cracks in this reputation lately, due to the fact that a number of Dutch companies have been involved in some serious kinds of fraud, embezzlement and bribery. 

Last week, I started this short series about the 'moral downfall' of some Dutch companies with a few companies that could be called 'serial offenders', as they have been involved in illegal acts on more than one occasion. 

This week, I continue this series with a number of other companies that have been involved in serious wrongdoings: some in the role of actors and some in the role of neglecting controllers.

SBM Offshore

This Dutch company is a large supplier for the (offshore) oil and gas industry when it comes to oil and gas exploration rigs, as well as professional services.

SBM is currently under investigation from Dutch and US prosecutors for, what allegedly is, 'a massive case of bribery' to the tune of $250 million. 

The following (translated) snippets come from the Dutch business magazine Quote:

A former employee of SBM put a massive amount of documentation on the internet, concerning possible fraud cases by employees of SBM Offshore. This documentation disclosed information about bribery of officials in Angola, the West-African country Equatorial Guinea, Brazil, Malaysia, Iraq, Kazakhstan and Italy. Also fragments from transcripts of 'recordings' have been published, which allegedly disclosed that members of the two-tier Board of Directors had known for years that these kinds of wrongdoings took place. The executives of SBM would have purposely tried to cover up these cases. In total, the amount of bribe money paid would be $250 million.

That there has been fraud at SBM is not under dispute. This has been more or less confirmed by SBM itself. At least, one case in a further unspecified country in West-Africa. Earlier today, SBM confirmed - during the presentation of the annual data - that this fraud case has been more extensive than it had been assumed earlier.

The main case, which the former employee encountered, was the bribery of Gabriel Obiang, the second son of the president of Equatorial Guinea. He would have received $7,35 million through a company on the British Virgin Islands. Four other high officials in the West-African country would combinedly have received $1.25 million. SBM's former CEO Tony Mace (in charge from 2008 until 2011) would have been informed about this practice.

In Angola, unknown amounts would have been paid to officals through a Panamese company, during 2005 and 2012. In Brazil, $139 million would have been paid to a Brazilian businessman and his group of companies, of which 2% in bribe money would have been forwarded to employees of Petrobras, the Brazilian oil company. 

Like I already stated in my part upon Ballast Nedam (see the first episode), these payments of bribe money have allegedly been common practice in the construction industry, as well as the offshore industry. According to insiders, it would be virtually impossible to do business with f.i. the Middle-East without paying large sums of bribe money to high and/or influential officials. Also in other countries in Latin America, this is seemingly common practice.

This does not change the fact that corruption, clientelism and bribery are like a cancer that ruins the social structure in such countries: 

• First, high officials and executives in these countries are getting paid at the expense of their - often much poorer - countrymen, who have to foot the increased bills for all large-scale projects and construction works: bribery money is not 'free' money, but money that must be paid for in the end, as the party responsible for the bribe payments must earn back its extra expenses;
  
• Second, not the 'best', the most innovative or the most efficient companies win the tenders for large projects, but the companies that are willing to pay the most bribe money.
  
  This will often lead to inferior quality for the finalized project as a whole and sometimes even to extended loss of life among the involved workers, as companies try to mitigate their extra expenses at the wrong places. Often officials are then paid again to look the other way.

Therefore it would be a good signal when offending companies, like f.i. the aforementioned construction and offshore companies, would be penalized for their wrong behaviour. This means, however, ALL offending companies and not only a few that are in the picture.

The large Dutch banks Rabobank, SNS Reaal and ABN Amro

Irrespective whether it is coincidential or not, three of the four large, Dutch banks have been involved in cases of - what seems to be - considerable fraud and embezzlement during the last two years:

Rabobank

It was a massive shock for the general public, when the people found out that the distinguished Dutch Rabobank, with its agricultural roots and cooperative, less commercially oriented company structure, had been involved in one of the most infamous fraud cases of the last years: the Libor-gate affair.

Summarized, the core of this affair was that the selective group of Libor banks had abused their involvement in setting the most important interest rate in the world: the London Interbank Offered Rate (Libor). 

These banks didn't set the Libor rate, based upon objective measurements of the interest rates that they had to pay on loans themselves. To the contrary, the Libor rates were altered in order to meet their own interests at that very moment, thus setting a higher or lower interest rate at will. 

Here are a few snippets from one of my articles:

Summarizing, this fraud was possible due to the misplaced faith and confidence of dozens of national authorities, supervisors and banks:

• in the honesty of a small group of leading banks and employees, who disgracefully abused this trust;
  
• in a system, solely based upon subjective and manipulatable data. 

In spite of the warnings by the BIS, it took until June 2012 until ‘Libor-gate’ was discovered, due to a criminal investigation by the US Department of Justice and subsequent confessions made by Barclays bank.

These days, the results of the official investigation into Rabobank’s involvement in Libor-gate would be presented to the press and the outside world by the international supervisors and so it happened.

Last week, the Financial Times had already published rumours about the height of the penalty towards the Dutch Rabobank and yesterday these rumours were officially confirmed: the Rabobank received a massive penalty from the international authorities of €774 million, measured in dollars approximately $1.06 billion.

This mega-penalty was the result of the protracted  and relatively widespread involvement of the Rabobank in this fraud.

And to make things worse, only five of the thirty supposed ‘perpetrators’ have been sacked and this event took place WITH payment of a substantial dismissal fee. The other employees, the ones who were neither sacked, nor left voluntarily, are thus still working with the bank.

And none of the supposed perpetrators has received criminal charges yet from the Departments of Justice in the involved countries USA, UK and The Netherlands, or even had to pay back already received bonuses over the years 2009-2012, according to the Volkskrant (see the earlier mentioned link).

At the same time, I wonder why an internal investigation within the Rabobank has to take four years in duration , unless you really DON’T want to find anything at all. This has been a disgraceful, six year long fraud indeed and in my humble opinion, this mega-penalty is justified.

Libor-gate has been a massive blow for the people's trust in the Rabobank: not only the trust of the general public, but also the trust of the independent, local cooperative banks which form the core of the Rabobank. 

Millions in advertising money and prolonged 'blatantly good behaviour' have already been necessary to regain this trust and the bank has still a very long way to go.

ABN Amro

ABN Amro has been involved in the "Vestia case", in which the large Dutch building cooperative Vestia got stuck with billions and billions in worth of interest rate swaps. These were derivatives, which were originally meant to hedge the owner against rising interest rates, but that were used in this case for speculation on an unprecedented scale. 

This massive speculation caused Vestia to lose billions of Euro's when the interest rate remained low for a prolonged amount of time and Vestia had to cover their derivatives portfolio.

The commission fees, which Vestia had paid to ABN Amro for these derivative trades, had allegedly been ten times higher than they would have been under normal circumstances. The majority of these excess commissions had been returned to the insiders in the form of kickbacks.

Here is a snippet from one of my earlier articles in this matter:

“The largest building cooperative in The Netherlands, Vestia, that has a slightly megalomaniac chairman and a ‘masterplan’ for the future, wants to hedge its interest risks by using interest rate swaps.

Instead of just hedging the invested amounts at risk, the cooperative decides to speculate at the interest market, expecting that the official Euribor rates would soon go up again. The cooperative buys interest rate swaps covering an amount of €20 bln, while the intended investment for which the swaps were bought is not higher than €5bln.

Unfortunately, the interest rate in reality drops further, confronting the cooperative with the immediate need to make a deposit of €2.5 bln, while threatening it with exposure to a possible €5+ bln loss on the interest rates”. 

Simple, right?!

So, after a blazing start the Vestia case started to smoulder like a heath fire. Until a few days ago…

The Public Prosecution in The Netherlands orders two arrests: Marcel de Vries (the former treasurer of Vestia) and Arjan Greeven, owner/director at Greeven Holding and Greeven Invest aka Fifa Finance, a brokerage firm. The duo is suspected of fraud, using the unusually high commission fees of the interest swap trade as kickbacks for themselves. And the banks involved with this supposed fraud case? Well, these will have a darn hard time to wash their hands clean of this.

What lends a certain piquancy to this case is the fact that ABN Amro is a stateowned bank and the circumstance that this possible fraud presumably took place during the time that the Dutch state was already a 100% owner of the bank. The circumstances that the bank and its partners offered derivative contracts ‘beyond reasonable amounts’ and supposedly paid commission fees that were ten times higher than usual, make this a very sticky, nasty case for the state-bank.

Partially to my surprise, this Vestia case didn't harm ABN Amro very much eventually, in comparison to the way that Libor-gate hurt the Rabobank. 

Although November and December 2013 showed a small revival for the Vestia case in Het Financieele Dagblad (search for ´Vestia´ on www.fd.nl), this has mostly been under the radar of the other large news media. In other words: this Vestia case is now a wrap and life goes on after it. 

In the months after the Vestia case, it seemed that everybody and their sister (i.e. schools and universities, other building cooperatives and other semi-governmental institutions, and even some small and medium businesses) had been involved in small and large derivatives trades. 

Derivative was THE buzzword in The Netherlands for a few months, but then ´the world´ became other priorities again. 

Nevertheless, the Vestia case has brought massive financial damage to this particular building cooperative and first and foremost to the general public, which had to foot the multi-billion Vestia bill any which way.

SNS Reaal

During the last two weeks I have written a series of extensive articles about the adventures of SNS Reaal's subsidiary SNS Property Finance in Spain. 

Instead of printing a few snips, I gladly advice you to read this whole article series, starting with this one. 

This particular case and the reactions that I received from some people, who had been involved with SNS Property Finance in a different way, cause me to think that this is only the tip of the iceberg and 'the worst has yet to come'. 

The large accountancy firms

In most large Dutch fraud cases of the last decade, there has been a somewhat dubious role for the involved accountancy firms, which did the annual assessments at the companies, suspected of fraud. 

The ´big four´ KPMG, Deloitte, EY (aka Ernst&Young) and PWC all had their share of small and large scandals during the last decade. 

In most cases, it had been 'just' a question of alleged negligence in the annual book assessments at their customers, but in a few cases the accountancy firm even seemed to have played a role in actively covering up the fraudulent acts (see for instance this article).

In contrary to the other companies mentioned in this article series, the big four accountants are multinational firms with only a slight connection to The Netherlands, albeit somewhat stronger in case of KPMG. 

Nevertheless, I mention these firms in this article, as these are involved in the vast majority of the annual book assessments for the top 500 companies in The Netherlands. 

On top of that, their (lack of) activities enabled some of the fraud cases that have been mentioned here or at least didn't do much to stop those. This is a discomforting signal. 

Of course, you could say that there can always be some ´collateral damage´, due to the fact that these companies are involved in so many assessments. 

Nevertheless, in some cases there seems to be an involvement in the actual fraud that goes beyond 'coincidence'.