Italy's Operation Clean Hands travels to Korea

Over a decade ago Operation Clean Hands produced a political earthquake in Italy. Now a similar operation is in full swing in Korea

By Lee Chang-sup
Business Editor of The Korea Times

Perhaps the best available exposition of the Italian Clean Hands phenomenon is provided by Domenico Pacitti in his latest interview to the international human rights journal JUST Response (www.justresponse.net) titled "Di Pietro, Corruption and Clean Hands".

Professor Pacitti, a British academic who has taught at the University of Pisa for almost 20 years, is widely considered to be one of the world's leading experts on Italian corruption.

Pacitti explains how Antonio Di Pietro, the former Milan magistrate, became an overnight national hero in Italy in the early 1990s for bringing corruption charges against some of the country's top politicians.

Di Pietro's Clean Hands initiative, says Pacitti, basically revealed that Italy's political parties were being illegally financed by industry and that it was only the tip of an enormous iceberg of political corruption.

Although Di Pietro's initiative eventually failed to improve the transparency and accountability of civil servants, it proved to be a groundbreaking approach, which Korea is copying a decade later.

As the JUST Response interview reported, the operation was carried out by a group of Milan magistrates headed by Francesco Saverio Borrelli but the most prominent member of the team was Di Pietro. A total of 4,472 Italian businessmen, politicians and others were investigated and 1,188 people, mainly politicians and business administrators, suddenly faced an array of corruption charges. Twelve businesspeople involved committed suicide as the top 20 Italian companies were probed.

According to Dongbu Securities, between June and September of 1992 when the investigation was in full swing, the Italian stock index fell by 25 percent. In the second half of 1992, the Italian economy noticeably contracted. But from 1993, the Italian stock market and the economy entered a recovery stage. When Fiat and Olivetti were confirmed to have bribed politicians in July 1992 and May 1993, the Italian stock index fell by 10-25 percent again.

Pacitti explains, "Di Pietro became an overnight national hero but predictably his success was short-lived. Clean Hands had taken politicians by surprise but they soon got their act together and closed ranks. By 1995 there was strong cross-party political agreement that Clean Hands would just have to stop before everyone ended up in prison and it did. The tables were turned on Di Pietro and 27 criminal charges were raised against him.''

Pacitti, who met Di Pietro and interviewed him at length, adds that Di Pietro had always insisted that he resigned on his own initiative in order to face charges honorably. He was, in fact, eventually acquitted on all of them, after which he decided to enter politics.

Political Motivation

According to the JUST Response interview, "Italians were disappointed and they suspected that this had been Di Pietro's intention all along and that Clean Hands had been politically rather than judicially motivated. Di Pietro began to be perceived as having betrayed his mission. This was very seriously aggravated by the systematically adverse media portrayal of both Clean Hands and Di Pietro himself. He went on to found his own Italy of Values movement, but Italians had largely abandoned him.''

In Korea, the Clean Hands drive is in full swing. Even before the President Roh Moo-hyun's administration was launched late last year, the prosecution had combed every irregularity imaginable at the nation's third largest conglomerate SK. Its de facto owner Chey Tae-won was released after serving brief jail terms. Its chairman Son Kil-seung was publicly humiliated for giving an astronomical amount of money to politicians. He resigned from the chairmanship of the Federation of Korean Industries.

Now other tycoons are being probed. Kumho group chairman Park Sam-ku was interrogated and more CEOs, including LG Group chairman Koo Bon-moo, face interrogation or trial. The prosecution has raided the offices of LG Home Shopping, Samsung Electro-Mechanics and Dongyang Electric to investigate allegations of illegal donations to politicians.

Deputy Prime Minister and Finance-Economy Minister Kim Jin-pyo echoed the concerns of tycoons. Kim has repeatedly said that an early conclusion of the corporate probe must be made to protect the economy, which what IMF describes is in an early and fragile recovery stage.

Acting FKI chairman Kang Shin-ho met the nation's top prosecutor and leaders of the political parties for an early settlement of the issue.

Their logic is a prolonged probe would discourage CEOs from devoting their energy to investing more, tarnish the international image of Korean companies, make local firms pay higher premiums in raising capital overseas.

But President Roh and the prosecution appear not to buy the logic. Outwardly, they sympathized with the view that the probe should not spoil the economy. Roh appears to strongly believe that a four-year Clean Hands initiative did not spoil the Italian economy. He believes that the prosecution is doing its job well.

Although the president said he has no power to influence the prosecution's probe,few believe it could conduct the large-scale investigation without the tacit approval of President Roh. Roh believes that the Clean Hands campaign must continue until collusive ties between business and politics are severed.

This is also necessary, President Roh believes, to ensure that the economy is put on a strong and solid growth drive in the future. In a nutshell, the Roh administration believes long-term benefits outweigh short-term costs.

This view has frustrated tycoons and other corporate CEOs. They do not know to what extent and in what direction the probe will continue. CEOs are afraid whether the Roh administration's ultimate objective is to disband the family-oriented chaebol. CEOs also complain that the probe is unfair as LG Group chairman Koo faces interrogation but such tycoons as Samsung's Lee Kun-hee and Hyundai Motor's Chung Mong-koo are free from the probe, at least at this stage.

Business leaders also complain that donors of political funds are victimized while recipients were largely ignored.

Tycoons do not expect the probe to discourage politicians from soliciting funds in the future. They already complained that the probe has already shaken their business as many of them were forced to reschedule their capital-raising plan overseas. Many CEOs said they are now preoccupied more with charting a survival strategy next year, not with the business investment plan.

Note: This article was published by JUST Response on January 25 2004 following Lee Chang-sup's kind invitation in Clean Hands compliments from Korea Times. It previously appeared in the Korea Times as "Corruption and Clean Hands".

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