Hard Times for Corporate Welfare
In recent months, it seems Ex-Im has had to suspend or remove four top officials from their positions due to allegations of bribery, corporate favoritism, and other bureaucratic improprieties. The investigation’s targets include one high level employee by the name of Johnny Gutierrez, from Ex-Im’s short-term trade finance division, who ostensibly accepted “kickback” payments in exchange for helping to authorize financing for a Florida construction equipment company called Impex. According to the report:
Of the four employees, Mr. Gutierrez’s responsibilities were most central to the agency’s core mission of financing exports. Two of the others are being investigated over allegations of improperly awarding contracts to help run the agency; the third is being investigated over allegations of accepting gifts on behalf of a company seeking financing, according to people familiar with the matter. The identities of the three couldn’t be fully corroborated.
The story, which comes at critical moment in Ex-Im’s fight to reauthorize its charter, confirms some of the worst fears of the Bank’s opponents. If Ex-Im’s own Inspector General investigation confirms what a multitude of evidence already suggests, then the charge of corporate cronyism is generous. Ex-Im officials are not only empowered to pick winners and losers based on arbitrary factors, they seem to have no compunction about doing so for the sake of personal gain. This is the culture of corruption Congress encourages when it permits bureaucrats to meddle in the economy with other people’s money.
Moving along the spectrum of this week’s bad news for the Ex-Im Bank, let us turn to some recent reports from abroad. According to BBC News, prosecutors in Brazil have initiated legal action after discovering that Odebrecht, Latin America’s largest construction company, was forcing some 500 employees to work under “slave-like conditions.” The prosecutor’s reports alleged that these employees “were treated as modern slaves” and “were subjected to degrading working conditions incompatible with human dignity, and had their freedom curtailed, being deprived of their right to come and go.”
Why is a criminal and humanitarian offense in Latin America tied to the business of the Ex-Im Bank? Because Ex-Im wanted it that way.
As Vinicio Fonseca, Odebrecht director of Export Finance said in 2011, “The Ex-Im Bank guarantee… allows Odebrecht to tap into a new funding source, which is particularly important in times when the commercial market has contracted.”
Unable to locate private financing for a 44-mile road linking Santo Domingo to other eastern cities, Odebrecht’s domestic counterpart, in Miami, Florida, received a $34.5 million loan guarantee to export goods and services from U.S. suppliers to Autopista del Coral S.A. (a company wholly-owned by Constructora Norberto Odebrecht).
Ex-Im Chairman Fred Hochberg was quick to celebrate their new partnership: “The transaction will also likely lead to follow-on business for U.S. exporters with Odebrecht in Latin America, the Caribbean, and Africa.”
As one Oderbrecht project director for the Autopista construction put it, “Given the fact that U.S. goods would have to be purchased for the project, partnering with U.S. Ex-Im for the export credit has allowed the project to obtain a lower rate than with other means of financing.” Thanks to the swift and precise generosity of Ex-Im, warmly providing its taxpayer-backed charity, Oderbrecht was able to keep overhead low, saving capital it is now free to spend on collaborations with its Cuban military allies or on the recruiting of a new crop of employees in Brazil.
Confronted with mounting Congressional resistance, a preponderance of fiscally devastating findings, and cheap scandal after cheap scandal, one would start to think Ex-Im management might be moved toward some self-evaluation. What is the Bank relying on to come to its rescue?
Asked about the new Majority Leader’s comments, one spokesperson said they were still “optimistic that Congress will do what it has always done and reauthorize the Export-Import Bank.”