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Watchdog: Global stimulus spending a corruption risk

Pablo Gorondi
AP Writer

Budapest, Hungary — The stimulus money being used to spur the global economy increase the risk of corruption, the head of an international watchdog group said Wednesday.

Huguette Labelle, chairwoman of Transparency International, said the amount of money and the speed with which it was being spent made it easier for graft to flourish.

“There’s so much money being poured into job creation and infrastructure and these are the kind of projects that mostly lend themselves well to bribery,” Labelle said.

“Very often, when there’s so much money, you want to disburse it fast, corners are cut, so there’s a danger and we say please be cautious,” Labelle said during a visit to Budapest.

At the same time, she added, the global economic crisis offered a good opportunity to improve market regulation and highlight the dangers of “state capture” — when individuals, groups or companies get officials to tailor the rules in their favor.

“How long will this lesson be learned is hard to know and that’s the danger — people have short-term memory about these things,” Labelle said.

She also said the crisis could give lawmakers more incentives to pass tighter regulatory laws.

Labelle also highlighted the importance of having highly skilled professionals in charge of audits and regulations, due to the increased sophistication of the markets.

“The definition of corruption is becoming broader,” Labelle said. “Before one was thinking primarily of exchange of money, whereas now increasingly we see how influence peddling can provide private gain for individuals or political parties because it brings more money to their coffers.”

Last month, Prime Minister Gordon Bajnai’s first candidate to become the new economic minister withdrew his nomination after Transparency International pointed out that he had been fined heavily three times by Hungary’s watchdog for cartel activity.

“This was quite a unique case of a local chapter having information that would allow a prime minister to change his original decision,” Labelle said.

The Berlin-based Transparency International was founded in 1993 and has offices in nearly 70 countries around the world.

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