She's making a list, he's checking it twice
By Nick Malkoutzis
At this time of year, lists are usually a cause for celebration but this festive season there was no Santa Claus bearing gifts for ex-Finance Minister Giorgos Papaconstantinou, PASOK and Greece’s political establishment as a whole. In fact, following revelations that the Lagarde list of Greek depositors at HSBC’s Geneva branch was doctored, all of the above will feel as if the Grinch has come along to steal Christmas, which came early thanks to the disbursement of new EU-IMF bailout funding on December 14.
The seriousness of the accusations against Papaconstantinou cannot be underplayed. In late 2010, when he was finance minister, he was given a CD by his French counterpart Christine Lagarde containing the names of more than 2,000 Greeks with Swiss bank accounts. Papaconstantinou was part of a government, led by George Papandreou, which had promised to clamp down on tax evasion. There is no evidence to suggest that all or any of the Greeks on the Lagarde list are tax evaders but under Papaconstantinou’s watch, authorities in Athens treated the data they had been given as if it was useless or even dangerous.
The so-called Lagarde list was just one piece to the jigsaw created by Herve Falciani, who worked at HSBC’s IT department between 2006 and 2007, when he stole the details of thousands of customers. In 2009, Swiss authorities asked for Falciani’s arrest, suspecting that he was trying to sell the data he had hacked. In a search of the computer technician’s home on the French Riviera, local authorities found details of about 100,000 accounts on his computer. Rather than hand them over to Swiss officials, the French decided to use the information to track tax evaders. They shared the relevant information with other European Union countries, which used it to varying effect. France reportedly collected 1.2 billion euros in unpaid taxes from some 4,000 depositors, Italy gathered just 570 million euros, Spain is said to have raked in 6 billion and the UK has sought private settlements with about 6,000 people.
In each country the process was more or less the same: authorities announced they had the information and gave account holders who had something to hide an opportunity to come forward and pay their taxes. In Greece, the authorities who had the information acted as if they had something to hide.
Papaconstantinou is alleged to have never officially logged the receipt of the CD from Lagarde and to have only asked the Financial Crimes Squad (SDOE) to conduct a preliminary investigation into a tiny sample of the names on the list rather than a full probe. Now, he stands accused of deleting three accounts, belonging to two of his cousins and their husbands, from the list before it was passed on to authorities.
Papaconstantinou insists that he asked for a full investigation and that he had no knowledge his relatives – the two daughters of late foreign minister and New Democracy MP Michalis Papaconstantinou - were on the list. He is also adamant that he did not play any part in the alleged doctoring of the list. Despite the understandable public anger at the latest developments, which compound the impression that a select, rich and privileged few are escaping the impact of the crisis entirely, it’s in the interest of justice and the proper functioning of Greece’s institutions, that the ex-minister should be taken at face value and given a chance to defend himself.
A thorough investigation is needed not just because there may be more to the latest allegations than meets the eye but because the lack of respect for proper procedures and the undermining of Greece’s institutions is one of the main reasons we are where we are, not only in terms of the Lagarde list but as a country. That’s why it’s hard to see this affair ending just with a verdict – be it from a parliamentary inquiry or a courtroom – on whether Papaconstantinou obstructed an investigation into possible tax evasion.
The role of SDOE and two of its chiefs – Yiannis Kapeleris and Yiannis Diotis – will also have to be scrutinized, as will that of PASOK leaders Evangelos Venizelos, who succeeded Papaconstantinou at the Finance Ministry. So far, Venizelos’s explanations about why there was no proper use of the Lagarde list during his watch have been less than satisfactory. A statement issued by PASOK on Friday insists that the revelations about the missing accounts clear Venizelos of any suspicion of wrongdoing. It even asked for his critics, mainly those in SYRIZA, to apologize for casting aspersions about his integrity.
Yet, Venizelos also has serious questions to answer. For instance, why did he accept SDOE’s supposed argument that the list could not be used because it was obtained illegally, when other countries had managed to utilize it without such obstacles? Also, how did the list, originally on a CD, end up in his drawer on a memory stick several months after he left office, at a time when none of the other officials knew what had happened to it? Why did Venizelos’s ultimate successor at the Finance Ministry, Yannis Stournaras, know nothing about the list until late September, when Papaconstantinou publicly admitted he did not know what happened to it?
It is clear that, in the best case scenario, there has been a total breakdown in Greece’s institutions. The list should have been a matter for the country’s tax authorities to investigate, with the relevant finance minister checking the job was being done. Instead, we ended up with a game of pass the parcel.
The value of the Lagarde list in financial terms is not a game changer given that the total deposits amount to less than 2 billion euros. However, its value in terms of providing a moment for Greece’s political system to start correcting some of its fathomless problems and winning back the public’s trust is priceless.
Despite its continuing weaknesses, the establishment has shown some signs that it is willing to reform and instill fairness in society. While the HSBC issue has rumbled on, Finance Ministry officials searched the details of 54,000 Greeks who transferred money abroad over the last couple of years. Letters were sent to 15,000 of these people, who authorities believe could not justify their wealth based on tax records. The government hopes to recover 2.5 billion euros in taxes from this process.
This will not be enough, though. An increasingly distrusting public will want to see heads roll, which is why the political reverberations from this affair are likely to be felt deeply. If the coalition government attempts to preside over a process that simply leads to Papaconstantinou being hung out to dry, skepticism and anger among voters will only mount. Trying to continue with the fiscal consolidation program in these circumstances will be very difficult for the tripartite administration, whose parliamentary resources are limited, as are its reserves of support in society.
Alternatively, a much more thorough investigation will lead to more officials being implicated and more doubts being raised about the country’s political elite. PASOK, in particular, will come under severe scrutiny. Heading towards a party congress in February, Venizelos will be in an extremely weak position if his actions come under examination. In these circumstances, the Socialists’ continued presence in the government and even their existence as a party cannot be taken for granted.
The infighting at PASOK reached new levels on Friday, when Venizelos ousted his former cabinet colleague Papaconstantinou within hours of the financial prosecutors sending to Parliament the results of their probe into the latest version of the Lagarde list obtained from French authorities last week. In its statement, PASOK essentially accepted the suggestion that Papaconstantinou had tampered with the list, which he was accused of handling “in the worst possible way”.
Papaconstantinou, one of a dwindling number of Papandreou aides left in PASOK, hit back by indirectly suggesting Venizelos had a motive to incriminate his predecessor at the finance ministry and to block any investigation into the content of the Lagarde list.
As this Machiavellian exchange goes on, SYRIZA is moving in for the jugular. It senses that PASOK could be on its last legs and that a decisive blow against the beleaguered Socialists could deliver it a surge of support large enough to unseat the current government and make the leftists the next party of power.
SYRIZA, though, may not have to do very much to turn public opinion. A discredited political establishment could be irreparably damaged if Greeks begin to ask questions about Papaconstantinou and Venizelos based on their recent behavior as well as anything uncovered by the investigation to come. People might wonder, for instance, about the competence of these two men, who were at the forefront of negotiating with Greece’s lenders over the country’s two bailouts, deciding which policies should be implemented and understanding the consequences of their decisions for the economy and the Greek people. Greeks might ask themselves if they sent naughty boys to do the job of serious men. This realization might prove the most devastating gift of this festive list.
[Kathimerini English Edition]