Profiting off death: The shady dealings used by governments and criminals alike to make big bucks during coronavirus

Across the world, as public officials and companies rush to respond to the coronavirus pandemic, investigators and good-government advocates are detecting a surge in abuse of public funds, ranging from irregularities to nepotism in the awarding of contracts and old-fashioned graft by corrupt networks.

The abuse of public funds is widespread, in both developing countries and the West, within established democracies and authoritarian regimes. Predators range from nefarious state organisations to traditional criminal networks. They grab food shipments dedicated for relief to those impoverished by the pandemic. They jack up prices for medical supplies. They direct contracts to friends and relatives.

Already officials have been caught up in schemes. In Zimbabwe, the health minister has been charged with shady dealings in a $20m purchase of coronavirus equipment. In Ecuador, a former president has been arrested on charges of pilfering a local hospital for medical equipment. And in the United States, a cabinet official has been redirecting relief funds for public schools grappling with the aftermath of the pandemic to her own pet projects.

“Opportunities for corruption happen when decision making is happening fast and in the dark,” says Maximilian Heywood, of Transparency International, an anti-corruption advocacy group. “During a crisis you can make a decision with not enough checks and ideally when no one knows about it.”

In a survey of hundreds of anti-corruption professionals in 58 countries, four out of five described corruption in the procurement of personal protective equipment (PPE) and nearly 60 per cent reported embezzlement of healthcare funds associated with coronavirus.

Taking advantage of a global pandemic afflicting rich and poor across the world may seem exceptionally depraved. Many large firms, resigned to massive losses in the wake of the economic fallout of the pandemic, have shifted gears from making profits to providing public services in efforts to do good, keep up employee morale and spruce up their public images.

"This is a kind of a war situation; it became clear that respirators are the weapon of choice in this war," says Hakan Bulgurlu, CEO of Turkish appliance giant Arçelik, which worked with a consortium of Turkish businesses led by the government to redeploy its supply lines, engineers and labourers to produce 250 respirators a day for distribution to hospitals grappling with Covid-19 around the world.

But from Iran to the United States, from Pakistan to Kenya, private-sector grifters and government officials have also been scheming to steer contracts their way and hide paper trails. Criminal law experts warn that crime networks such as the Italian mafia are poised to use bribery and intimidation of officials to commandeer healthcare contracts, just as they do during ordinary times.

“There are these long-established networks for whom access to public-sector funds is almost their business model,” said Mr Heywood. “These additional Covid funds are just expanding their market.”

Experts warn that corruption and perceived abuse of public funds during a health crisis can be especially damaging, fostering suspicions that could discourage people from following officially promulgated public health guidelines.

Perceived corruption damaged efforts to fight the Ebola pandemic in west Africa. The International Federation of the Red Cross estimates that at least $6m in funds to help fight the disease disappeared between 2014 and 2016 as a result of corruption.

“A lot of people because of the high level of mistrust started turning away from the government and seeking help elsewhere, and people refused to heed the cautionary advice,” said Oheneba Boateng, a researcher at the Global Public Policy Institute in Berlin.

Perceptions of corruption and lack of transparency are so severe in Afghanistan, activists are demanding that the International Monetary Fund deny the Kabul government $220m in emergency coronavirus funds for fear officials would squander or steal the money.

Such mistrust also persists in Western countries. A group of US lawmakers this month introduced a law that would tighten oversight in the awarding of coronavirus-related funds by the administration of Donald Trump, whose administration has been accused of steering coronavirus contracts to associates of the president’s son-in-law, Jared Kushner.

But experts caution that the coronavirus pandemic and ensuing lockdowns have obscured many of the shady deals and abuses of public funds taking place. In some cases, including India, governments are using pandemic lockdowns as an excuse to silence news outlets attempting to report on pandemic-related coronavirus irregularities.

“Bad decisions are being made, corners are being cut and regulations are being loosened,” Heather Marquette, a scholar specialising in the aid industry at the University of Birmingham, told Global Initiative, an anti-corruption group. “Large contracts are being given out without competitive tenders or normal due-diligence checks. All of these create opportunities for corruption to thrive.”

Across the world, numerous allegations have already surfaced.

In one case, documents obtained by an Iranian exile news outlet and shared with The Independent purported to show how Iran regime figures intervened in the procurement of medical supplies to steered South Korean contracts for Covid-19 test-kits through shell companies towards conservative foundations controlled by cronies, pocketing profits of 140 per cent on the resale of the kits to hospitals.

“The Korean company was surprised to see how the regime’s institutions are fighting over financial gain instead of focusing on the coronavirus crisis,” Sadeq Saba, a journalist for the London-based news outlet Iran International said in an announcement.

The international wheeling and dealing to obtain medical protective equipment has created vast opportunities for graft and price gouging. Zimbabwe’s government this month was accused of awarding a no-bid contract worth $20m for drugs, PPE and Covid-19 test kits to a Hungarian company that didn’t exist until two months ago.

The case came to light after Hungarian authorities flagged a suspicious $2m deposit in the company’s accounts. On Saturday, the country’s health minister Obadiah Moyo was hauled into court over the case but released on bail.

“Even in a country like Zimbabwe where no one has any doubt that our government is very corrupt there’s this callousness towards people’s lives,” said Wadzanai Motsi, a Zimbabwean good government advocate. “For some, Covid is an opportunity to profit off death.”

In Brazil, among the countries hit hardest worldwide by the coronavirus, prosecutors are investigating scores of corruption cases, including one in which officials allegedly paid $100 million in public funds to obtain ventilators crucial for treating the most Covid-19 cases at 10 times the market price.

Earlier this month in Ecuador, former president Abdalá Bucaram was arrested as part of an investigation into alleged pilfering of coronavirus test kits and personal protective equipment from public hospitals.

In Slovenia, a deal to hand €26m medical procurement contracts to a gambling oligarch with no healthcare experience has enraged the public, prompting protests and investigations.

Anti-corruption advocates have identified potential abuses in the procurement of coronavirus equipment in Bangladesh, Bosnia, Philippines and India, where an official of prime minister Narendra Modi’s ruling party was caught on tape allegedly discussing taking a bribe in the awarding of a contract for coronavirus supplies.

The pandemic has caused governments across worldwide to shift into panic mode, releasing billions in funds to help treat the sickness and alleviate the ensuing economic fallout.

That has created an opportunity for unscrupulous officials to fund pet projects. US secretary of education Betsy DeVos was caught using $530m in funds allocated for public education relief for grants to parents who want to send their kids to private religious schools and tutors as well as to private Christian higher-education institutions, including one accused of being a cult.

In South Africa, officials of the ruling African National Congress have been accused of grabbing food handouts allocated to the poor suffering the economic fallout of the pandemic to reward supporters and make profits. Officials “are also alleged to be practising nepotism and unfair discrimination when distributing food parcels and other Covid-19 related essentials,” opposition politician Jerry Matebesi was quoted as saying.

Transparency International has argued for greater scrutiny of international aid deals. One proposal is real-time online disclosure of news about requests for proposals and awarding of contracts as a way to combat entrenched interests that systematically abuse public funds.

“You have this tense pressure to respond to the needs of the population,” said Mr Heywood. “What we’ve been saying from the beginning is that it is possible to be fast and transparent at the same time.