The Scourge of Inexorable Corruption 1.1

You can read the previous post in this multi-post commentary here.

Case Study in Corruption: Realitatea-Catavencu defrauds the Romanian People

The present anti-corruption investigation of the Romanian Press agency, Realitatea-Catavencu, is an interesting example of how difficult it is to overcome corruption.

Realitatea-Catavencu is a major media group in Romania that includes television, radio, print and new media networks including The Money Channel, Academia Catavencu and Realitatea TV (one of the leading news channels in Romania). This group is currently being investigated for tax-evasion practices on a sophisticated level. In lieu of a complete salary payment that is commensurate with the duties and responsibilities of a position at Realitatea-Catavencu, employees receive part of their salary in the form of compensation for intellectual property contributions.

In other words, Realitatea-Catavencu paid employees the minimum salary as salary and additional amounts of a negotiated salary through compensation for intellectual property. Realitatea-Catavencu used this scheme to evade the higher taxes on officially registered salaries. Salary taxes and various mandatory contributions can reflect up to 100% of a net salary, whereas taxes for compensation for intellectual property is about 16% .

Realitatea-Catavencu’s fraud is evidenced in the failure of administrators and managers to meet various requirements of the tax law. Among the requirements for issuing compensation for intellectual property is the registration by accountants of a description of the properties which were compensated. In fact, the media group does not have a long, laundry list of intellectual property descriptions for each employee that received intellectual property compensation.

If Realitatea-Catavencu could fabricate a mountain of lists before the end of the hearings, it would be amusing to learn how they describe the intellectual property contributions of cleaning personnel, secretaries, receptionists, sales persons, etc. I would like to imagine that David Letterman would have a lot of fun coming up with a top ten list of short descriptions. <grin>

On the other hand, it is presumed that every online and print media group in Romania uses the same scheme. Hence, there were no cameras or journalists in front of the Anti-Corruption Court when former/current employees of Realitatea-Catavencu were called in for questioning. How do I know all of this? I live next door to the court.

Complicity is pervasive.

Some might be tempted to applaud Realitatea-Catavencu’s cunning. It’s kinda cute. No?

No.

When you consider the bigger picture of Romania’s troubles (pitiful monetary reserve, junkie-like dependence on IMF loans, soaring national debt, and failure to provide adequate government services, etc.), you easily understand how the funds needed to get Romania out of the red (and out of a third world dilemma) is the same money that is defrauded by schemes just like those perpetrated by Realitatea-Catavencu and others.

Realitatea-Catavencu (and countless other organizations) did not simply defraud the Romanian tax authorities. Realitatea-Catavencu and its employees have defrauded the Romanian people. The result: people are starving to death, people are freezing to death, the sick are not getting medical care, the educational system is in ruin, etc.

You can read the next post in this multi-post commentary here. Or start at the beginning.

Stan Faryna
23 February 2011
Bucharest, Romania

If you’d like to connect with me, follow @Faryna and tweet me up on Twitter: http://www.twitter.com/faryna

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About Stan Faryna

Mr. Faryna is the founder and co-founder of several technology, design and communication companies in the United States and Europe including Faryna & Associates, Inc., Halo Interactive, and others.

Stan Faryna served as a Global Voices author and translator. Global Voices is a non-profit global citizens’ media project founded at Harvard Law School’s Berkman Center for Internet and Society, a research think-tank focused on the Internet’s impact on society.

His political, scholarly, social and technical opinions have appeared in The Chicago Defender, Jurnalul National, The Washington Times, Sagar, Saptamana Financiara, Social Justice Review, and other publications.

Mr. Faryna also served as editor-in-chief of Black and Right (Praeger Press, 1996), a landmark collection of socio-political essays by important American thinkers including U.S. Supreme Court Justice Clarence Thomas.

Copyright

Copyright 1996 to 2012 by Stan Faryna.

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