Monitoring Work of the [Latvian] Corruption Prevention and Combating Bureau: A Research Study of Performance of the Corruption Prevention and Combating Bureau in 2008 and 1st half

7/30/2019 Monitoring Work of the [Latvian] Corruption Prevention and Combating Bureau: A Research Study of Performance

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MONITORING THE WORKOF THE CORRUPTION

PREVENTION AND COMBATING BUREAU

A research study of the performance of the Corruption Prevention and

Combating Bureau 2008 and 1st half of 2009


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Tis publication has been prepared in the ramework o the project Strengthening Prevention oCorruption and Minimizing Corruption Costs to Societ y through Monitoring and Supporting Inde-pendence o Corruption Prevention and Combating Bureau.

Tis publication summarizes the reports o the project Strengthening Prevention o Corruptionand Minimizing Corruption Costs to Societ y through Monitoring and Supporting Independence o

Corruption Prevention and Combating Bureau.

Tis project has been unded with support rom the European Commission. Tis publication reectsthe views only o the author, and the Commission cannot be held responsible or any use which maybe made o the inormation contained therein.

With the support o the Prevention o and Fight against Crime Programme o the European Union

Prevention of and Fight against Crime 2007With nancial support from the Prevention of and Fight against Crime ProgrammeEuropean Commission - Directorate-General Justice, Freedom and Security

Te project has been nancially supported by Soros Foundation Latvia.

Te project has been supported by a grant rom Iceland, Liechtenstein and Norway through the EEAFinancial Mechanism and the Norwegian Financial Mechanism and by the Latvian state through theSociety Integration Foundation.

ABLE OF CONENS

Summary o ndings ..................................................................................................................5

1. General overview & preconditions or eectiveperormance o KNAB .........................................................................................................7

1.1. Introduction .......................................................................................................................................71.2. KNAB directors and the procedure or their appointment .......................................................71.3. Organizational structure & resources o KNAB ........................................................................131.4. Organization o work and work ethics ........................................................................................171.5. Independence o KNAB .................................................................................................................19

- Legal ramework and international recommendations .......................................................... 10- Political preconditions ..................................................................................................................20

1.6. Legal ramework & its eect on the perormance o KNAB ...................................................221.7. Flexibility and innovation in the work o KNAB ......................................................................231.8. Inter-institutional and international cooperation .......................................................................25

2. ransparency, public participation & trust .........................................................................28

2.1. Promoting public participation ..................................................................................................... 282.2. ransparency and accountability ................................................................................................... 302.3. KNABS public image and public trust ......................................................................................... 32

3. Perormance o KNAB in preventing corruption ...............................................................34

3.1. Planning and achievement o goals, objectives and projectedperormance results ........................................................................................................................34

3.2. Guidance in corruption prevention or state and municipal institutions ..............................413.3. Awareness-raising activities ............................................................................................................43

4. Perormance o KNAB in combating corruption ..............................................................49

4.1. Investigation o criminal oences ..................................................................................................494.2. Administrative oences ...................................................................................................................52

5. Perormance o KNAB in controlling nancing o political parties and electioncampaigning ..........................................................................................................................57

5.1. Controlling nancing o political parties and pre-election campaigning ..............................57

5.2. Legal initiatives proposed by knab or improving the legal regulation o party nancingand pre-election campaigning ...................................................................................................... 61

Monitoring summary sheet .....................................................................................................64

Recommendations .................................................................................................................... 66

Annex 1 organizational setup o KNAB ............................................................................... 68

Annex 2 budget o KNAB, 2008 and 2009 ............................................................................69

Annex 3 Progress o legal Initiatives in the area o political party nancing andpre-election campaigning .........................................................................................................70

Annex 4 Highlights o 2008 and the 1st hal o 2009 .........................................................71

Project methodology .................................................................................................................73


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List o abbreviations

AVC - Administrative Violations Code o the Republic o LatviaAPL - Administrative Procedure Law o the Republic o Latv ia

GRECO - Council o Europes Group o States against Corruption

KNAB - Corruption Prevention and C ombating Bureau

LVL - lat (Latvian national currency)

SRS - State Revenue Service

SASL - State Administration Structure Law

SUMMARY OF FINDINGS

Public trust in KNAB is still relatively high, and generally the positive public attitude to-wards the work o KNAB is on the increase.

KNAB enjoys a high level o awareness o its work, with public awareness at 90%.

KNAB is generally succeeding in ighting administrative corruption, but it needs tostrengthen its capacity or ighting high-level political corruption, which can be attainedonly through complex measures - legal initiatives, urther improvement o control andinvestigative activities, ensuring development o proessional skills among its employeesand seeking innovative methods or tackling increasingly complex legal oences.

In the view o the general public the potential o KNAB as a specialized anti-corruptionagency should be ocused on ighting high-level political corruption. However, by the au-thority set by the current legal ramework, KNAB is dealing with corruption at dierentlevels, both high-level political corruption, but also administrative, petty corruption.

he work o KNAB is substantially aected by the many deiciencies in the laws thatregulate dierent aspects o KNABs scope o work. Within its scope o responsibility,KNAB has made eorts to improve the legal ramework related to combating corruption.However, due to political reasons it has not always been successul. Several o the initia-tives proposed by KNAB have not transormed themselves into concrete amendments olaws or legal initiatives. he eectiveness o KNAB is thus obstructed by deliberately or anunintentionally incoherent or incomplete regulatory ramework, which legalizes or ailsto prevent condemnable actions. In uture KNAB should be proactive in proposing legalinitiatives and inorming the public about the political obstacles it meets in the process,so as to garner political support or its initiatives.

he status o KNAB under the supervision o the Cabinet o Ministers makes it vulner-able to attempts to inluence its work, especially by the Prime Minister, who as head othe Cabinet o Ministers holds supervisory powers. he Prime Ministers rights in thisregard, as shown by concrete previous practices, can be widely interpreted. his can havean intimidating eect on the management o KNAB and create unwanted precedents,especially i the holder o the Prime Ministers oice is disposed to interere in the worko KNAB. Other vulnerabilities include the necessity to receive approval o the annualbudget, as well as the procedure or appointment and dismissal o KNABs director.

During the monitoring period it became clear that in addition to having substantial ad-ministrative skills, the Director o KNAB should also be an opinion leader who would in-

terpret complex situations that require assessment rom an anti-corruption perspective insociety, where values o honesty and public good have not ully taken root. By analyzingconcrete corruption situations, KNABs Director should propose models o conduct thatwould create awareness among the public o the intent and spirit o the law and proes-sional and ethical conduct.

here is a substantive level o proessionalism rested in the management o KNAB. heupper management positions are occupied by well-qualiied experts with extensive pro-essional experience in the areas o KNABs work.

he small and originally cohesive team o KNAB has grown substantially. Due to thedrawn out uncertainties about KNABs leadership and comparatively requent changesin the leadership styles, a level o atigue is noticeable among KNAB employees. Due tothese actors, as well as the speciic nature o KNABs work, which includes a high stresslevel, eorts must be made to improve internal communication among the employees andalso with their superiors. Due to the budget cuts that have been induced by the economiccrisis, KNAB has reached a critical margin o remuneration levels and may start losingqualiied specialists.


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Due to the lack o resources KNAB is not able to ensure development o the proessionalskills o its employees. KNAB works with investigation o oences involving complexinancial operations, types o crimes in which there is no previous long-term investiga-tion experience. hereore, measures to develop and improve the qualiication o thoseemployees who need specialized knowledge must be taken to improve their competenceby, i necessary, involving domestic and oreign experts. Funding rom the EU and otherinancial sources should be sought or this. his would also enable KNAB to become moreinnovative in its work, as this is o crucial importance or its ability to perorm its unc-tions well.

During the monitoring period, it became apparent that KNAB employees do not alwaysshare the same understanding o the institutions priorities. his signals that the internalcommunication as well as goal setting and strategic planning within KNAB should beimproved.

KNAB should be a role model or other public institutions and agencies in preventingcorruption risks. Nonetheless, KNAB has ailed to establish a consistent, air and transpar-

ent recruitment system or its employees and, as a result, various methods not governedby any internal regulations o KNAB are applied in recruitment.

he internal regulations o KNAB do not ully cover whistle-blowing within KNAB. Moredetailed procedures in this regard within KNAB as well as protection mechanisms orwhistle-blowers should be established in the internal regulations o KNAB.

he Law on the Corruption Prevention and Combating Bureau oresees an internal co-ordination and control mechanism through KNABs Council. he Council consists othe Director o KNAB, the Deputy director(s) and the heads o divisions. However, thismechanism does not unction in practice, and C ouncil meetings are not convened. husthe potential o the Council as a prime decision-making platorm is limited.

On the whole, KNAB works in accordance with the perormance indicators set in its ownstrategy, at times even exceeding them. Nonetheless, the perormance indicators are notalways adequately set. In this process timelines or reviewing cases, actors such as theactual capacity o employees, diversity o cases, time required or collecting inormationrom abroad, etc., are not ully actored in.

In political party inancing control, the projected perormance indicator is very general, isnot in line with the actual perormance and requires updating. In KNABs strategy no per-ormance indicators have been deined or controlling pre-election campaigning, whichis a key area o responsibility o KNAB, especially ater the existing legal ramework has

been improved to give KNAB greater authority in this area.he perormance indicators o KNAB in the area o policy planning as well as indicatorsthat over the years have proved inadequate should be reviewed to ensure a realistic, notonly ormal, planning and perormance evaluation system. As or now, the perormanceindicators o KNAB are being projected mainly based on the intuition o the heads ostructural units by assessing the perormance and trends o the previous year as opposedto systemic assessment and research.

KNAB is consistently and mostly successully working on the implementation o interna-tional recommendations. International cooperation is developed within the available re-sources. In the last ew years many employees have been involved in international projectsas consultants. his has had a positive eect on KNAB.

Cooperation between KNAB and other institutions is generally assessed positively. Yet,the issue regarding the division o responsibilities between KNAB and State ax Oice inthe area o reviewing declarations o public oicials is still unresolved. Both institutionshave been let to seek compromises on their own in this matter. Unortunately, so ar there

have been hardly any signs o political will and capacity to s olve this outstanding matteror to promote eective review o declarations o public oicials by making the necessarylegal amendments.

Public opinion polls showed negative results in the perormance o KNAB in promotingpublic participation. According to the responses o the public, only ew people wouldreport to KNAB when personally witnessing corruption. KNAB is not putting enough e-ort in raising the awareness o the public about positive models o conduct. Public com-munication should be more practical, giving advice related to speciic ty pical corruptionsituations and explaining possible orms o cooperation with KNAB. KNABs responsesto the letters o citizens who allege corrupt practices are written in a bureaucratic style,by no means encouraging urther civil activity in preventing corruption. Also the roleo the Public Advisory Council established under KNAB is obscure and inconsistent inpractice.

Recent cuts in KNABs budget are proportional to those made by other public institutions,yet the critical margin in terms o salaries has been reached. No urther cuts should be

made to avoid major perormance setbacks and an eventual ailure to justiy the rationaleo KNABs establishment.

1. GENERAL OVERVIEW & PRECONDIIONS FOR EFFECIVEPERFORMANCE OF KNAB

1.1. Introduction

Te Corruption Prevention and Combating Bureau (hereinaer - KNAB) is part o the stateadministration and is under the supervision o the Cabinet o Ministers, responsible or per-orming unctions dened in the Law on KNAB - to prevent and ght corruption and controlcompliance o political parties with party nancing regulations. KNAB also has investigativepowers.

KNAB was ofcially established on 1 May 2002 when the Law on KNAB came into orce.On 10 October 2002 the rst Director o KNAB was appointed. As o 1 February 2003 KNAB isresponsible or perorming the unctions dened in the Law on KNAB. Control o pre-electioncampaigning was delegated to KNAB in July 2009.

Te World Bank appears to have been the rst international institution to suggest the estab-lishment o KNAB as a multiunctional institution in early 2000. Te impetus or this idea was

given by studies made by the World Bank on so-called state capture, in which Latvia rankedhighly. Te Latvian non-governmental sector and leading anti-corruption experts actively advo-cated or the establishment o such an institution in Latvia, and this as well as certain externalactors (membership in NAO and the EU) all contributed to the establishment o KNAB.

1.2. KNAB directors and the procedure or their appointment

Te Law on KNAB states that KNAB is managed by a Director. Te Director is appointed ora term o ve years by the parliament, upon recommendation by the Cabinet o Ministers. Tedismissal procedure is similar.


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According to the existing law, an open competition may be announced by the Cabinet oMinisters or the position o Director.

Tese mandatory requirements or candidates or the post o Director o KNAB are similarto those applicable to all civil servants and judiciary ofcials. Te only proessionally specic re-quirement is to have accumulated the work experience required or the position. Tis require-ment, however, is very general and it largely depends on the Cabinet o Ministers interpretationo sufcient experience, as the Cabinet recommends candidates or appointment by the parlia-ment.

o date KNAB has had three directors: Guntis Rutkis, Aleksejs Loskutovs and NormundsVilntis (the current Director).

A person who meets the ollowing criteria may apply or the position o

Director o KNAB:1) is a citizen o Latvia;

2) is uent in Latvian and at least two other oreign languages;

3) has obtained higher education and accumulated the work experience required orthe position;

4) has not reached retirement age;

5) has not been punished or a criminal oence (regardless i the criminal record hasbeen deleted or expunged);

6) has not been convicted o a criminal oence;

7) has not been held criminally liable, except or a case when a person has been heldcriminally liable, but the criminal proceedings had been terminated on a vindica-tory basis;

8) is not and has not been a sta employee or a reelance employee o the Ministry oDeence o the USSR; State Security Committee o the USSR or Latvian SSR; or thestate security service, intelligence or counterintelligence service o any state otherthan the Member States o the European Union or North Atlantic reaty Organisa-tion, or an agent, resident or sae-house keeper;

9) is not and has not been a member o an organization prohibited by law or by court

adjudication; and10) complies with the requirements o this Law to receive special permission or access

to state secrets.1

Overview o the appointment o directors o KNAB between 2002 and 2008

Year Method o recruitment

Number ocandidates

Candidatesnominated bythe EvaluationCommittee

Cabinetaccept

Saeimaaccept

Who/whenwas appointedas Director oKNAB

2002. Opencompetition

8 Visvaldis PutisRaimonds Mrnieks

No N/a


17 Didzis mitiAldis Lieljuksis

No N/a


18 Jnis JonssGuntis Rutkis

YesYes

NoYes

Guntis Rutkis10.10.2002.


57 Juta Stre Yes No, not evenaer beingrepeatedly

nominated

Prime MinisterE.Repe appointsJ.Stre Acting

Director2004. Open

competition20 Juta Stre

Aleksejs LoskutovsNoYes

Yes AleksejsLoskutovs27.05.2004.

2008.2009.

Call orapplicationsannounced

17 No committee wasormed; candidateswere evaluated bythe Cabinet and theNational SecurityCouncil.Normunds VilntisArtrs Zvejsalnieks

YesNo

Yes NormundsVilntis12.03.2009.

As per this table, the appointment o KNAB directors since its establishment has been a mat-ter o ongoing political bargaining. So ar ve open competitions have been held and the proce-dure or a competition o some sort has been organized. In the case o the appointment o thecurrent Director, no evaluation committee was ormed. Instead, the Cabinet o Ministers itseldid the assessment o candidates.

In total, 137 candidates have applied in all competitions. In three cases candidates nominatedby the evaluation committees have been rejected by the Cabinet o Ministers; in two cases can-

didates nominated by the Cabinet o Ministers have been rejected by the parliament.Te rst two directors o KNAB le the ofce or dierent reasons: Guntis Rutkis le because

o health concerns, while Mr. Aleksejs Loskutovs was dismissed rom ofce by the Saeima.

Appointment o the current Director o KNAB

Te appointment procedure o the current Director was very dierent rom the other recruitmentprocedures. On 21 October 2008 the Cabinet o Ministers adopted an instruction Procedure orNominating Candidates or Appointment o the Director o the Corruption Prevention andCombating Bureau. Contrary to the usual procedure, the dra instruction was not reviewedby the meeting o the State Secretaries, the body o the highest level public administrators oall ministries. Furthermore, three dierent dras o the instruction were in circulation, andeventually the dra proposed by the Prime Minister Ivars Godmanis during the meeting o theCabinet o Ministers was adopted.

2 Te Law on Corruption Prevention and Combating Bureau//Latvijas Vstnesis, Nr. 65 (2640), 30.04.2002., Section 4.


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he Cabinet sets the deadline or submission o candidates applications.

he State Chancellery registers applications and evaluates the candidates compli-ance with the mandatory requirements deined in the Law on KNAB.

he State Chancellery requests the candidates to submit written records o candi-dates experience in investigative and operational work; experience as a head (dep-uty head) o an institution or other managerial position; and a good reputation (bysubmitting written reerences rom previous employers).

he Prime Minister requests the Prosecutor General, the Director o the Constitu-tion Protection Bureau and the Chie Justice o the Supreme Court to provide within10 days their opinion on a candidate who meets the mandatory requirements de-ined in Section 4, Part two o the Law on KNAB.

Upon receiving these opinions and no later than within 7 days ater the deadlineor providing opinions, the Prime Minister presents the collected inormation to theCabinet.

he Prime Minister invites the candidates to a Cabinet Meeting to present their vi-sion on preventing and combating corruption and to answer questions o the mem-bers o the Cabinet.

Following the candidates presentations the Cabinet decides the shortlisted candi-dates who, based on a request by the Prime Minister, will be evaluated during ameeting o the National Security Council.

Ater hearing the position o the members o the National Security Council thePrime Minister proposes one candidate or eventual nomination to the Saeima.

Council is given in the Law on National Security. Public bodies are not entitled to expand theirarea o responsibility at their own discretion.

Te role o the National Security Council also causes additional threats or the t ransparencyand impartiality o the evaluation process:

A majority o the National Security Council are representatives o the coalition parties2 ,whose violations o party nancing regulations can be or are potentially being investigated byKNAB, thus resulting in a conict o interest;

Meetings o the National Security Council are traditionally closed sessions. Consequently,there are hardly any possibilities or the public to hear the argumentation used in these meet-ings.

Tere is no objective reason why candidates should undergo evaluation by the National Se-curity Council, especially considering that by the Law on KNAB, the Director o KNAB mustcomply with the legal requirements to receive special permission or access to state secrets.Hence, the potential threats to the national security that the Director o KNAB could potentially

pose would be assessed during the procedure or granting the special permission that is a man-datory, standard procedure beore s/he take ofce.

According to the instruction, aer hearing the position o the members o National SecurityCouncil, the Prime Minister nominates only one candidate or approval by the Cabinet.

For example, during the last appointment procedure o the KNAB Director, the nominationo candidates was conducted by the Prime Minister, who at the time was the co-chairman o theparty which was a subject o an ongoing KNAB investigation concerning violations o the per-missible limits or pre-election campaign spending.3

Procedural risks:

he Cabinet o Ministers motivation or selecting a certain candidate rom all applicantsis not known (unless the Cabinet meeting is organized as an evaluation committee meet-ing using evaluation scores to compare the candidates);

he traditionally closed session o the National Security Council, ollowing which thePrime Minister would select only one o the candidates originally shortlisted by the C abi-net.

he instruction does not ensure equal rights or all candidates throughout the evaluationprocess, as the Prosecutor General, Chie Justice o the Supreme Court, Director o theConstitution Protection Bureau and members o the National Security Council are a ll reeto improvise in ormulating their opinions (incl. how many or which o the candidates get

invited, what and how it is evaluated, etc.);he short-listing o candidates is restrictive and there may be unclear potential additionalrequirements. According to Clause 4.1 o the instruction, records testiying to candidatesexperience in investigative and operational work are required. However, there are no re-quirements regarding understanding o issues related to corruption prevention and com-bating).

Te adopted instruction lays down the ollowing appointment procedure:

Tis instruction ails to ensure recruitment o the KNAB director based on candidates pro-essional competency as opposed to political loyalty; it also ails to ensure transparency andequal rights or all candidates throughout the evaluation process. Te above risks arise rom theollowing aspects concerning the existing legal regulation:

Te involvement o the Prosecutor General, Chie Justice o the Supreme Court and Directoro the Constitution Protection Bureau in selecting the Director o KNAB is a ormality no indi-cation on what aspects and how these ofcials should evaluate the candidates and what the legalconsequences o their opinion would be is mentioned. It is also unclear based on what criteriathese ofcials should ormulate their opinion and how they are to obtain inormation on candi-dates whether by reviewing their applications, publicly available inormation or by calling inthe candidates or an interview (the candidates, however, are not obliged to come).

It is not clear what the content o these opinions should be whether the above ofcialsshould state who, in their opinion, are the best candidates or the post o the Director o KNAB,or whether they should assess the candidates compliance rom a legal or national security per-spective.

As a result, an illusion o an objective eva luation procedure is created by apparent selectiono the opinions o independent ofcials, which, in act, do not have any legal consequences andare not likely to be comprehensive.

Evaluation o candidates in a meeting o the National Security Council is not within theresponsibility o the National Security Council. A detailed denition o the authority o the

2 During the time period when this study was under w ay (end o 2009, beginning o 2010).

3 Te permissible limit was exceeded by 422 226 lats (840 000 USD); the donation made by the association Pa saulei was ruled asunlawul; in total, the party LPP had to repay 528 870 (1 000 000 USD) lats to the state. Newspaper Diena, 08.12.2008.

Te existing procedure or the appointment o the Director o KNAB creates the illusion oan objective evaluation procedure by appearing to use the opinions o various high-levelofcials rom the courts and prosecutors ofce. Tese, in act, do not have any legal conse-quences and are hardly comprehensive.


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Te last appointment procedure or the Director o KNAB was conducted as ollows: rst, acall or candidates applications was announced. When 5 applications had already been received,the application deadline was extended. Te Cabinet met with seven o the candidates 4; out othese, two were shortlisted or evaluation by the National Security Council, namely, Artrs Zve-

jsalnieks and Normunds Vilntis. Te National Security Council voted in avour o Mr. Vilntis.5

On 17 February 2009 the Cabinet o Ministers voted in avour o Mr. Vilntis and nominatedhim or approval by the parliament. On 12 March 2009 Mr. Normunds Vilntis was appointedDirector o KNAB.

Removal rom oce o the previous Director o KNAB, Mr. Loskutovs

During the monitored period, in 2008 the relations between the Director o KNAB A.Loskutovsand then-Prime Minister Mr. Aigars Kalvtis became increasingly strained.

During his term as Prime Minister, Mr. Kalvtis initiated three disciplinary investigationsagainst Mr. Loskutovs and one decree on disciplinary penalty. Te conict was related to thereinstatement at work o the Head o Investigation Division o KNAB, who had been demoted

due to misconduct in one o the ongoing investigations. Aer receiving a complaint rom thedemoted KNAB employee, the Prime Minister, claiming his power as Supervisor o KNAB, an-nulled the decision o Mr. Loskutovs and ordered the reinstatement o the demoted employeeto ofce. It was widely believed that the Prime Minister was seeking ormal violations in theperormance o the KNAB Director so as to saeguard an employee who was the key personin some investigations and who could potentially leak sensitive inormation about the ongoinginvestigation to powerul interests, which might be aected by such.

Tese conicts culminated on 18 June 2008 when the Cabinet o Ministers o Prime Minis-ter Kalvtis held an emergency session and decided to propose to the parliament a dismissal oA.Loskutovs rom ofce.6 Tis decision was publicly explained by the report o the State AuditOfce, which had audited KNABs work in 2006 and ound ongoing procedural shortcomings inthe accounting and utilization o operational unds.

4 Juta Stre, Aivars rumnieks, Artrs Zvejsalnieks, Raimonds Avdejevs, Normunds Vilntis, Armands Stumbergs,Raimonds Rublovskis

5 News agency LEA, 10.02.2009.6 News agency LEA, Te Cabinet recommends the Saeima dismiss A.Loskutovs rom ofce, June 18th, 2008.

In response, around 5000 people turned out to protest against this decision by the Cabinet oMinisters in a rally in the vicinity o the parliament, and the parliament took a decision to returnthe dra decree to the Cabinet or urther review. In November Mr. Loskutovs was reinstated inthe ofce as Director o KNAB.

In the spring 2008 the disappearance o 135 500 lats (almost 200 000 EUR) rom KNAB wasannounced (see Annex 4) by Mr. Loskutovs.

Te Cabinet ormed a special committee to assess Mr. Loskutovs conduct, and the committeeconcluded that A.Loskutovs had neglected the irregularities identied by the State Audit Ofceand the risks related to protection o classied inormation in KNAB by repeatedly postpon-ing the internal audit at this division. Te committee stated in its report that Mr. Loskutovs hadailed to establish a comprehensive and eective system o internal control in regard to account-ing and sae-keeping o cash expropriated as part o criminal investigations normally stored atthe Division or Protection o Classied Inormation. As a result, a substantial sum o money(some 200 000 EUR) disappeared rom KNAB. A special prosecutors task orce was ormed toinvestigate this matter.

Te special committee was chaired by Prosecutor General Jnis Maiztis; other members in-cluded Director o the Constitution Protection Bureau Jnis Kaoci, Head o Security PoliceJnis Reiniks, Head o the Saeima National Security Committee Dzintars Jaundeikars (partyLPP/LC) and Minister o Deence Vinets Veldre (party P). Aer hearing the committees report,the Cabinet voted in avour o recommending that parliament dismiss A.Loskutovs rom ofce.On 29 June 2008 parliament voted on the dismissal o A.Loskutovs rom the post o Director oKNAB. Fiy-two members o parliament voted in avour, and 40 voted against the dismissal oMr. Loskutovs rom ofce.7

1.3. Organizational structure & resources o KNAB

Organizational structure and human resourcesTe organiz+ational structure o KNAB has been modelled to accommodate or the specic

unctions o KNAB.

Preventing and combating corruption have been the two main unctional areas o KNABsince 2004.

According to the law, holding public ofcials administratively liable and imposing penaltiesor administrative oences in the area o corruption prevention is dened as a corruption-com-bating unction. However, according to the organizational structure o KNAB, the Division oControl o Public Ofcials Activities, which registers administrative oences, is subordinated tothe Deputy Director o KNAB responsible or corruption prevention.

Over the course o time the structure o KNAB has undergone several changes. Since 2004KNAB has undergone a gradual expansion, which, as will be discussed in the upcoming sections,contributed to improved perormance in a range o issues.

Te case o A.Loskutovs proved that candidates approved by the Cabinet o Ministers andthe parliament as a result o political bargaining can, in act, turn out to have a strong visiono the priorities in combating corruption and resist political pressures in carrying out t heirresponsibilities. However, they may still lack some important skills required to ensure theeective work o KNAB, in this case, a lack o skills or properly managing a major publicadministration body.

7 News agency LEA, Te Saeima dismisses A.Loskutovs rom the post o Director o KNAB, June 29th, 2008.


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In 2008 the structure o KNAB underwent several major changes. When the economic re-cession hit the country in 2008, a series o changes took place in the second hal o 2008 whencuts in the number o employees and budget took place. By 31 December 2008 KNAB had 154employees, as opposed to 162 earlier in the year. It was noted by the Deputy Director o KNAB,Mr. Vilks, that this reduction in the number o employees did not have a serious impact on thework o KNAB.

Tis table illustrates the dynamics o the number o KNAB employees rom 2004 - 2009.

In light o general cuts in public spending, as o 1 July 2009 the structure o KNAB was radi-cally transormed: 18 divisions were reorganized and consolidated into 10 divisions (see the or-ganizational charts o KNAB in Annex 1).

In December 2009 KNAB had 147 employees. Te organizational set-up o KNAB is asollows:

Higher Management (Director, 2 Deputy Directors) - 3 (2%)

Employees directly subordinated to the Director o KNAB (audit, classiied registry, pub-lic relations, international cooperation) - 6 (4%)

Administrative Division - 19 (13%)

Data Storage & Inormation Analysis Division - 10 (6%)

Te structural changes o KNAB by reducing the number o divisions is a positive de-velopment. Te current setup allows the saving o resources at the expense o a reducednumber o management positions. Tis has reduced the ragmentation o the organization

and consolidated support unctions; it also reects more precisely the dierent unctionso KNAB.

Financial Division - 5 (3%)

Internal Security Division - 6 (4%)

Division o Criminal Intelligence Process - 22 (15%)

Investigations Division - 20 (13%)

Division o Intelligence Support - 18 (12%)

Division o Control o Public Oicials Activities - 18 (12%)

Division o Control o Political Parties Financing - 11 (8%)

Corruption Prevention Division - 9 (6%)

In total, around 20% o employees provide support unctions. Tis is similar to, or example,the State Audit Ofce, which has a similar percentage o support personnel, i.e. 20%8.

Judging by the proportional division and unctions delegated to the structural units, theorganizational setup can be urther optimized, especially in regard to the Data Storage & Inor-mation Analysis Division, the unctions o which partially overlap with those o the CorruptionPrevention Division and partially involve technical tasks related to the administration o inor-mation systems, soware provision, and hardware maintenance. Its personnel accounts or 6%o total KNAB sta, which is one person more than the Corruption Prevention Division. Tisdivision has a pivotal role in planning KNABs policy and draing legal initiatives as well as themethodical work with state and municipal institutions, and is the central platorm o the worko KNAB in the area o corruption prevention.

It should also be reassessed i a medium-size institution really needs ve employees in theFinancial Division and six in the Internal Control Division, which are relatively high numbers inproportion to the divisions responsible or ensuring the main statutory unctions o KNAB.

Specialization and proessional development o knab personnel

Employees o KNAB who are responsible or ensuring the main statutory unctions o KNABare specialized in the ollowing areas depending on the specic nature o their work:

Working with administrative oences,

Policy planning and awareness raising,

Investigation o criminal oences.

Specialization is generally bas ed on their education, previous proessional experience and thespecic unctions delegated to the respective employees o KNAB.

Judging by the interviews, employees are largely uninterested in rotation rom one positionto another within KNAB, mainly due to a rather high work specialization. Nevertheless, as ar aspracticable, employees who are proessionally t or dierent positions should be encouraged totake up such rotation, as such rotation usually helps against routine and has a positive impact ondealing with proessional issues. It also gives a resh perspective and does not require extensivetime and training input.

8 Data on the budget expenditures o the State Audit.-http://www.lrvk.gov.lv/upload/par_budzetu_majaslapai_15072009_31Jul09.pd

%ZOBNJDTPGUIFOVNCFSPG,/"#TUBVOJUT


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Overall, KNABs sta is proessional; the top-level positions are occupied by qualied exper tswith extensive proessional experience in the respective areas. However, proessional develop-ment opportunities are a precondition to urther improve the agencys perormance, strengthentheir work and methods and gain new insights into the issues they work with.

KNAB employees have limited opportunities or raising their qualication. Due to limitednancial resources KNAB has little possibilities to nance training o its sta. During the inter-views conducted, only one case o paid training was mentioned. In addition, no systemic proes-sional development strategies have been put in place by KNAB.

In an eort to ensure proessional development, KNAB is try ing to make use o dierent o-rums meetings, discussions, and seminars with representatives rom other public institutions.

International projects and cooperation is another way o raising the personnels qualications.However, cuts in unding have aected the possibilities o KNAB to participate in such events, asit has been repeatedly noted during the interviews, as has the notion that, as a consequence, it isbecoming increasingly difcult to ollow international developments in the sphere o specializedanti-corruption agencies. Tis is a negative trend as continuous access to inormation regardingthe latest trends in the area o corruption prevention and combating, its methods and tools, legalinitiatives, enorcement, etc., are necessary to ensure institutional development and innovationamong KNABs sta. Maintaining close contacts with oreign counterparts is an important actoror KNABs work. Exchange o experience on an international level is helpul also or reducingthe risk o atigue and getting a new perspective on ones day-to-day work.

Financial resources

In 2009, as a consequence o the economic recession, the budget o KNAB was reduced belowthe 2004 level, despite having 19 additional employees. Compared to 2008, in 2009 the budgetwas cut by 30% (see a comparison o the budgets o KNAB or 2008 and 2009 in Annex 2). How-ever, the budget cuts o KNAB are proportional to those o other public institutions.

Institution Budgetary cut in 2009Ombudsmans Ofce 31%Ministry o the Interior 25%Police 28%State Audit Ofce 31%KNAB 30%

KNAB should put in place a human resources development system or improving its per-sonnels qualications and specialization. Te lack o resources can be compensated orby raising unds rom EU and other nancial aid instruments, as well as by using oreignexpert consultations in the ramework o international cooperation incentives, which doesnot always require substantial unds.

Te approved nancing allocated to KNAB rom the state budget and the actual budget spendingin 2003 2009 (in Latvian lats):

Year Approved Actual spending 2003. 1 666 802 1 666 8002004. 2 904 135 1 758 3402005. 2 521 686 2 423 0322006. 3 201 562 3 165 7762007. 3 580 670 3 580 6702008. 3 650 108 3 650 1082009. 2 574 468 2 092 635

Te nancial results o previous budget years show that in 2004 - 2006 the actual budgetspending o KNAB was less than initially estimated and approved in the state budget. In 2007and 2008 the actual spending was in line with the estimated budget, which is a sign o a balancedbudget planning and utilization procedure.

However, in 2009 the proportion o actual spending was declining again. According to theinormation provided in the inormational report o KNAB, 32 000 lats (some 45 000 EUR) hadremained unused at the end o 2009. In accordance with regulations this has to be returned tothe state budget; another 380 000 lats were not spent due to the structural reorms undertakenby KNAB and the restrictions imposed by the Cabinet o Ministers.9

Comparison with other public institutions o comparable size and unctions:

KNAB State AuditOfce

OmbudsmansOfce

Annual budget or 2009 (EUR) 3 677 811 4 745 455 1 292 047Number o employees 147 163 51Estimated total budget or salaries(EUR)

2 104 531 2 724 518 758 607

Salaries per employee budget (EUR) 14 317 16 714 14 874

As per the above, despite the act that KNAB needs as a minimum personnel as qualied asthe State Audit Ofce and the Ombudsman to perorm its unctions, it has less unding per staunit.

1.4. Organization o work and work ethics

Organization o work in KNAB

Te research has revealed several drawbacks in work organization that require improve-ments.

Employees are not always ully aware o the division o responsibilities among KNABS struc-tural units (e.g., between the C orruption Prevention Division and Data Storage & InormationAnalysis Division; between the Corruption Prevention Division and Public Relations).

KNAB is not using the mechanism stipulated in the Law on KNAB to call meetings o theCouncil o KNAB. By law, the Board consists o the Director o KNAB, their deputies and Headso Divisions. Te Councils tasks include reviewing o the priorities and dra budget o KNAB,dra cooperation agreements between KNAB and relevant oreign counterparts and other is-sues within the responsibility o KNAB as proposed by the Director or other members o theCouncil.

9 Inormational report on the perormance o KNAB rom July1st December 31st, 2009 // http://www.knab.gov.lv/uploads/ree/zinojumi/knabzino_080210.pd


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No regular meetings o the heads o sub-divisions are held to discuss general work-relatedissues, except occasional meetings on specic subjects. As a result, employees have little knowl-edge o the work o other units. During interviews, it was on occasion ound that even heads osub-divisions were not always inormed about the status o legal initiatives that are within theirresponsibility, because their direct manager or the Director o KNAB is responsible overall orurther advancement o these projects and no eedback is provided on a regular basis. Te blocksresponsible or corruption prevention and combating corruption are seen as working more inparallel rather than by closely interacting with each other.

Due to requent sta turnover, employees sometimes do not even know each other. No strat-egy or strengthening internal communication within KNAB has been developed.

Despite the above, the interviewed employees were mainly positive about cooperation be-tween structural units. A positive example, the cooperation between the Division o Control oPolitical Parties Financing and divisions responsible or combating corruption was mentionedduring the interviews. Te Head o the Corruption Prevention Division acknowledged that asar as she was concerned, cooperation was good w ith all other structural units o KNAB, that any

inormation requests, requests or assistance in providing clarications or support or gatheringstatistical data are duly met.

KNAB uses activity plans to acilitate planning and the organization process o its work.However, timely approval o an activity plan or the second part o 2009 was not possible due tothe need to adjust to the budget cuts.

Generally KNAB works towards setting priorities o its work. However, its priorities that areset on the level o the top management are not always sufciently specic, and the heads o indi-vidual divisions do not oen have the overall picture. KNAB employees do not always have thesame understanding o priorities as the management o KNAB, which is likely due to insufcientcommunication in the area o setting priorities.

Te internal anti-corruption plan o KNAB or 2007-2010 (adopted on April 23rd, 2007) israther general and contains only a ew sections where measures other than those arising romthe law are included. According to inormation provided by KNAB, a new anti-corruption planis being drawn up to reect the structural changes o July 2009.

Te internal reporting systems vary among dierent structural units (discussions, writtenreports). Not all the employees use the LOUS NOE system, which could in act be used as aneective tool or internal registry and control as well as an inormational resource or planningKNABs urther development.

Work ethics

KNABs Code o Ethics was adopted in April 2009. Tis was with the aim o establishingprinciples o proessional ethics and conduct or the employees o KNAB and to provide guid-ance or dealing with cases o potential conict o interest. Ethical principles to be observed byKNAB employees include integrity, accountability, impartiality and independence. An EthicsCommittee has been established within KNAB to ensure that the principles dened in the Codeo Ethics are met.

Generally eedback on the role o the Ethics Committee was positive. Te top-level employ-ees acknowledged that the Committee was unctioning eectively and there had been cases thathad to be dealt with by the Committee.

Although the introduction o the Code o Ethics in KNAB is a positive development, neitherthe Code o Ethics, nor any other internal acts regulate a whistle-blowing system within KNAB.Despite the act that KNAB has draed a concept note on the Legal Regulation or Prevent-ing Conicts o Interest by Public Ofcials, which proposes protection mechanisms or whis-tle-blowers reporting on wrongdoing committed by other public ofcials and which has been

adopted by the Cabinet o Ministers, no detailed regulation regarding whistle-blowing has beenintroduced in KNAB itsel.

According to KNABs Code o Ethics, employees who have inormation or who have them-selves witnessed any wrongdoing by another employee should report this to their superv isors orthe Internal Security Division.

At the same time, whistle-blowing has not been dened as an ethical obligation, and noregulation or guidance is given as regards the next steps to be taken and ensuring the protectiono whistle-blowers. Te Deputy Director o KNAB, Mr. Vilks, admits that or the time being noprocedure has been put in place or regulating whistle-blowing. It should be done in accordancewith the concept approved by the Cabinet o Ministers on strengthening the regulation regard-ing prevention o conicts o interest, as it has a clause recommending public institutions to in-corporate in their Codes o Ethics an obligation or public ofcials to report conicts o interestand other corrupt practices.

1.5. Independence o KNAB

Legal ramework and international recommendations

Te law on KNAB stipulates that KNAB is an independent public administration institutionunder the supervision o the Cabinet o Ministers.

On 23 April 2 2003 the Cabinet o Ministers o then-Prime Minister E.Repe adopted a deci-sion on changing the subordination o KNAB, which was previously under the supervision othe Ministry o Justice. KNAB was placed under the direct supervision o the Prime Minister,entitling the Cabinet and the Prime Minister to execute supervisory unctions.

By law, the Prime Minister has the right to examine decisions taken by lower institutions orofcials and to revoke unlawul decisions, as well as to issue an order to t ake a decision in caseo unlawul ailure to act.

As noted in the concept note draed by KNAB concerning the status o KNAB, KNAB inter-prets the legal provisions as giving the right to the Prime Minister to take over a KNAB matteror case. Tese provisions regarding taking over the authority in exceptional cases are not veryspecic, and they could possibly be used to take over any matter in the responsibility o KNAB.Such rights regarding KNAB cannot be considered as an appropriate supervisory instrument;on the contrary, they are a threat to the independence o KNAB. Te application o these super-vision provisions in regard to KNAB is disputable. It can aect the decision-making autonomyo the Director o KNAB and pose risks when the authority o the Prime Minister as the mainsupervisory body is questioned.

Te Cabinet o Ministers and also the Prime Minister have a major impact a lso on the pro-cedure o appointment and dismissal o the Director o KNAB. However, the decree o theormer Prime Minister A.Kalvtis on the disciplinary punishment o the ormer Director oKNAB A.Loskutovs and the subsequent court ruling marked the limits o the Prime Ministersauthority. In a ruling on 19 S eptember 2009, in response to the case led by the previous head oKNAB, Mr. Loskutovs, the court ruled that the Law on KNAB does not stipulate the right o thesupervisory body o KNAB to impose disciplinary sanctions upon the Director o KNAB. Nor

KNAB has introduced mechanisms or dealing with ethical problems involving its employ-ees; however, detailed regulation is required in regard to whistle-blowing when encounter-ing wrongdoing within KNAB. KNAB is planning to update its internal regulations to coverthis outstanding issue.


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can the Prime Minister issue any other unavourable administrative act regarding the work othe KNAB Director outside the Prime Ministers legally prescribed authority.

In addition, the work and the capacity o KNAB can a lso be indirectly inuenced through thestate budget draing process by inadequately cutting the institutions overall budget or specicbudget items. So ar such orm o attempted inuence upon KNAB has not been observed.

During the interviews with the management and employees o KNAB, in regard to the inde-pendence o KNAB both the positive and negative aspects o the existing legal regulations werementioned. Positive examples include the existence o a legal orm or communication (Ms.Stre) and better cooperation in the budget planning process when preparing documentationor review by the Cabinet o Ministers (Mr. Vilntis). As a negative actor, the Prime Ministerspersonal inuence on the procedure or appointment (see Section 1.2, above) and dismissal othe Director o KNAB, arising rom the existing legal regulation, was pointed out.

An argument against a change in KNABs legal status, both political and legal, is derived romthe notion o the Latvian Constitution that the administrative institutions o the State shall beunder the authority o the Cabinet. However, the Constitutional Court has come up with a di-erent interpretation o this constitutional norm. It has ruled that in a democratic, rule-o-lawstate, powers are separated in a manner that makes it possible to achieve the intended goals othe separation o power. Te need to achieve these goals may in certa in cases justiy deviationsrom ormal enorcement o the principle o separation o power. Hence, the ConstitutionalCourt has acknowledged that the Constitution does not require all public administration bodiesto be under the authority o the Cabinet o Ministers. Following and elaborating this, consti-tutional experts have derived that the Latvian legal system does not exclude the possibility ogranting the status o an independent institution under parliamentary supervision to KNAB.

Te Evaluation Report o Latvia on the ransparency o Part y nancing, prepared as part othe third evaluation round by the Group o States against Corruption (GRECO) and adopted atits 39th plenary session on 10 October 2008, stated that there is a necessity to ensure a balancebetween independence and accountability within KNAB.

One o the recommendations given to Latvia is to strengthen KNABs independence includ-ing, by reviewing o its status, the procedure or appointing/dismissing the Director and draingits budget. GRECO advises revising the current appointment and dismissal procedure as soonas possible to avoid making the impression that it is a political appointment, which is crucial orthe publics trust in the impartiality o KNAB. Tis would acilitate KNABs capacity to exerciseits unctions in an independent and impartial manner. Furthermore, the GRECO report recom-mends ensuring an independent mechanism or controlling the compliance with party nancingregulations. Te group o experts have concluded that in light o the existing legal provisions,

KNABs status puts it in an awkward position o having to supervise its supervisors.

Political preconditions

Te independence o KNAB tends to become the subject o heated debate in Latvia in thesituations o attempted to inuence on the Director o KNAB and the work o KNAB.

Not all political parties and their leaders have publicly declared their ofcial position on thequestion o KNABs independence. Tereore, as part o this study, ransparency InternationalLatvia - Delna asked political parties represented in the parliament to express their opinionsabout KNABs work and its status.

Alliance For Fatherland and Freedom10

KNABsindependence

Supports the notion o Article 58 o the Constitution that publicadministration bodies shall be under the authority o the Cabinet.

Positive aspects Te number and substance o the cases resulting rom the criminalproceedings initiated by KNAB.

Negative aspects Frequent neglect o the presumption o innocence, especially in the publicdomain by releasing operational, investigative inormation to the public.

Civic Union 11

KNABsindependence

Te independence o KNAB could be stipulated in the Constitution, as inthe case o t he State Audit Ofce. Due to its specic and politically sensitiveareas o work, KNAB will always have a risk o being subject to political

pressures. Its status as an independent institution would minimize therisks o direct political inuence. However, i the current status o KNAB ispreserved, the Law on KNAB should be amended to improve the procedureor the selection o KNABs Director.

Positive aspects KNAB has succeeded in gaining trust in society. Owing to KNAB, society isincreasingly less tolerant towards corruption and is more aware o the manyorms and negative consequences o corruption. KNAB has been activelyworking on a range o important legal incentives. In particular, the concepto unding political parties rom the state budget should be noted, as well asthe set o laws regulating pre-election campaigning. KNAB has acilitatedestablishing a system or controlling party nancing. Important landmarksin the ght against corruption has been the bribery scandal during themayoral elections in Jrmala, the digital television case and arrests o highofcials o Rga City Council, which all demonstrate remarkable success inKNABs work.

Negative aspects Insufcient strength in bringing legal changes. KNAB should be more activein initiating amendments to laws and other regulations. KNAB needs toreorm unnecessary internal bureaucracy and to bring in structural changesto its internal operation. Tese would allow KNAB to lessen resources indealing with minor corruption cases. Problems in internal administrativecontrol have damaged the reputation o KNAB.

Latvian Social Democratic Labour Party12

KNABs

independence

KNAB is an investigative institution with operational powers, also working

in the area o administrative law. It is certainly a public administrationbody. According to the classical principles o separation o powers, thereis no reason why KNAB should be controlled by either the judiciary orlegislature.

Positive aspects Positive aspects include public trust and KNABs ability to show the generalpublic that corruption is b eing combated.

Negative aspects Negative aspects include excessive politicization that is not appropriate oran investigatory and operational institution. Te administrative setup oKNAB needs improvement, and, like other public bodies, it used to havean oversized administration. KNAB should expand its activities outsidethe capital, since until now most activities have been ocused on Riga andnearby areas.

International recommendations suggest that measures should be taken to strengthen theindependence o KNAB and that KNAB should nd the right balance between institutionalindependence and accountability, which, on the whole, corresponds to the principles o t heLatvian constitutional setup.

10 Letter No. 15, dated 02.04.2009, o the alliance For Fatherland and Freedom to I Latvia - Delna.11 Letter No.3-2-44/09, dated 15.04.2009, o the Civic Union to I Latvia - Delna.12 Letter No.114/2.1, dated 09.04.2009, o LSDSP to I Latvia - Delna.


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Mr. Juris Dalbi, Head o the Deence, Interior and Anti-corruption Committee o the Sae-ima (Peoples party) has admitted that aer seven years o work KNAB as an institution hasreached maturity, and an assessment can be made on what has been accomplished within thecurrent status. J.Dalbi agreed that no political orce should be able to use KNAB to exercise itsown inuence. However, he did not see any need or changing the status o KNAB and believesthat the current model or appointing the Director o KNAB, including the involvement o theNational Security Council in the eva luation, was eective.

Ainars Latkovskis, Secretary o the Deence, Interior and Anti-corruption Committee o theSaeima (New Era), admitted that or New Era the issue o the independence o KNAB is nota priority given the current economic situation, but in his personal view the independence oKNAB should be strengthened. According to A.Latkovskis the main ailures o KNAB have beenineective control o the conscated cash and weak internal control mechanisms (not concern-ing operational investigations).

Generally, it can be concluded that, indeed, there have been attempts to inuence KNAB po-litically, including various ambiguous situations o pressure throughout the existence o KNAB.

For instance, disclosure o inormation about the meeting between the ex-Director o KNAB Mr.Loskutovs and the Mayor o Ventspils (Latvias oil transit port) prior to Mr. Loskutovs appoint-ment

1.6. Legal ramework & its eect on the perormance o KNAB

Tere is overall notable progress in improving the legal provisions o both the control oparty nancing and pre-election campaigning, as well a s a range o other issues. However, legalloopholes, including statutes and mechanisms the legal and logical rationale o which is ques-tionable, are still clearly evident. Tis is one o the main actors creating a avourable environ-ment or corruption in Latvia. Statutes allowing ofcials to make decisions without any speciccriteria, and ambiguous and contradictory statutes are only some o the legal loopholes acili-tating corruption. For example, the absence o a regulation that would require an overall assetdeclaration by all citizens renders the control o potentially illegal enrichment by public ofcialsunworkable. Similarly, serious deciencies can be noted in the laws that govern leasing o stateand municipal property and establishing state and municipal enterprises are evident.

Within its scope o responsibility, KNAB has come up with incentives or solving some othese legal deciencies vital or ghting corruption, but has not always succeeded.

Some o the initiatives proposed by KNAB, which have not yet been adopted as laws:

1.7. Flexibility and innovation in the work o KNAB

KNAB has launched a number o initiatives, but due to insufcient capacity it has not beenable to expand them on a wider scale.

wo concrete examples include:

Working with state and municipal institutions in assessing risks o corruption,

Expanding corruption prevention and combating eorts outside o Riga.

Zero declarations overall dec-laration o assets by all citizens

Without the zero declarations, eective control o public o-cials is not possible. Properties and money can suddenly sur-ace in the possession o civil servants riends, relatives, andacquaintances. Oen generous donors and lenders turn up. Insuch cases it is practically impossible, given the presumption oinnocence, to prove that an oence has been committed.

Financing o political partiesrom the state budget.

Party nancing rom the state budget would decrease illegallobbying o business and private interests. With state nancing,parties would become stronger and more independent romsponsors. Tis would allow them to act more reely in the inter-est o the general public and according to their programmes andpromises given to the voters.

Introduction o criminal liabilityor breaking the law in cases re-lated to party nancing.

Introduction o criminal liability or major violations o partynancing regulations would ensure adequate punishment rela-tive to the gravity o the committed oence.

Amendments to the law onKNAB

Aimed at changing the status o KNAB and strengthening itsinstitutional immunity against political pressures

Delineation o the auditing unc-tion o the public ofcials assetdeclarations between KNAB andthe State ax Ofce.

Current regulatory gaps lead to low efciency in controllingpublic ofcials asset declarations.

Amendments to the law that reg-ulates the terms and conditionsor leasing state and municipalproperty

Te current legal regulation does not ensure a cost-efcient andtransparent procedure or leasing out state and municipal prop-erty.

Te work o KNAB is aected by deciencies and loopholes in existing laws. Oen, aeran extensive investigation, KNAB is orced to conclude that due to legal loopholes it is notpossible to impose legal liability or severe wrongdoing that is ethically condemnable andin some cases has caused great harm.


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Nevertheless, there are some areas where KNAB has succeeded in improving legal regula-tions. o name one, the recommendations o GRECO regarding the need to improve the legalregulation o commercial corruption, bribery, bribe-taking, and accepting o unlawul benetshave been implemented almost ully with the adoption o respective amendments to the Crimi-nal Law on November 19th, 2009.14

Another positive aspect is the exibility o KNAB in cooperation with other investigativeauthorities in cases that are not the direct responsibility o KNAB. One example is cooperationwith the Economic Police Department in cases involving commercial corruption. Tere havealso been eorts to reach a compromise with the State Revenue Service regarding the auditingo declarations o public ofcials (see Section 6.2 below).

1.8. Inter-institutional and international cooperation

Inter-institutional cooperation and coordination

State ax Ofce

In its work KNAB on a regular basis cooperates with the State Police, State ax Service, StateAudit Ofce and other institutions. Te Director o KNAB has repeatedly made public com-ments about the need to strengthen inter-institutional cooperation, especially with the State axOfce.

Judging by interviews and observations, cooperation with the State ax Ofce is obviouslyproblematic, especially in the area o auditing the declarations o public ofcials. Te prob-

lem stems rom gaps in the legal ramework regarding the division o responsibilities betweenKNAB and the State ax Ofce in the area o veriy ing the truthulness o the asset declarationso state ofcials, as the current legal ramework does not stipulate specically which o the twoinstitutions is responsible or veriying the truthulness o declarations. By law, KNAB controlsthe implementation o the Law on Prevention o Conict o Interest in the work o Public O-cials. In addition, in accordance with the law on Prevention o Conict o Interest in Actions oPublic Ofcials, KNAB has a duty to veriy whether the declarations contain inormation that isindicative o violation o the restrictions specied in this Law. In sum, KNAB has the authorityto hold public ofcials administratively, criminally and civilly liable or violating restrictions andprohibitions applicable to public ofcials and ailure to comply with the obligations stipulatedby law.

13 News agency LEA, 19.01.2010.

Due to the lack o resources, especially in 2008 and 2009, KNAB has not been able to ndand implement new methodologies and innovative approaches or preventing and combatingcorruption.

Although KNAB uses international experience in the area o p olicy planning and draing le-gal initiatives, and has developed cooperation with oreign institutions in the area o corruptionprevention, more exchange o experience in the a rea o combating corruption about the practiceand methods o law enorcement would be useul to increase the eectiveness o its work.

Some new incentives have been brought up by the new Director o KNAB. Aer N.Vilntiswas appointed Director o KNAB, more ocus is now laid on civil liability in the context o anti-corruption eorts. He has spoken about strengthening civil liability or material damages causedto the state stemming rom oenses that all short o being criminal violations. Te Directoro KNAB has pointed out that this practice was not really unctioning in Latvia yet, but thatKNAB was determined to introduce it. Experts, however, are divided in their comments aboutthis proposal, stressing that even in civil proceedings, the accused persons guilt must be provedto recover damages, which may be difcult in many cases.

In addition, the Director o KNAB has also commented that in terms o potential and techni-cal resources, the other side has made remarkable progress. Te way illegal deals and especiallyso-called white collar crimes are elaborated have become much more complicated and so-phisticated. In addition, the criminals can get recommendations and advice on how to act moresaely and eectively rom detectives, qualied lawyers, and even rom ormer employees o lawenorcement bodies who know well the methods o operational work.13

When analysing the response o KNAB to existing systemic problems that acilitate corrup-tion, it becomes clear that despite the awareness o at least some o the legal gaps contributing tocorruption, KNAB does not take a sufciently active stance about needed legislative changes.

Tis leads to a situation in which KNABs initiatives and opinions are oen neglected. Giventhat a large part o society associates most matters related to corruption with KNAB and restsa lot o hopes in this institution, KNAB is not eective enough in advocating changes that areimportant or its anti-corruption work.

During interviews with experts rom NGOs, dierent views were expressed regarding theeectiveness o KNAB in responding to identied legal gaps. It was suggested that there is a cor-relation between the speed o how promptly certain KNABs initiatives are undertaken and theactivity that KNAB has displayed in reaching certain outcomes. Others, however, comment thatKNAB is passive in advocating or its legal initiatives.

o ensure innovation and exible response to changing situations, knowledge and experi-ence alone are not enough, as initiatives stimulating new ideas are needed as well. Visitsto share experience by employees o KNAB and other mechanisms or stimulating proes-sional inspiration should be used to promote an innovative approach in preventing andcombating corruption. As a result, new measures and tools could b e identied and imple-

mented that would not require substantial unding.

KNAB should be more vocal in inorming the public about deciencies in statutes and aboutproblems in their enorcement. Since many legislative initiatives put orward by KNAB arecomplex and aect certain interests, there is a need to garner support rom other state in-stitutions and also promote public pressure t hat would acilitate bringing these statutes intoorce.

14 See amendments to the Criminal law//Latvijas Vstnesis, No.193(4179), 09.12.2009.

Although the speed and eectiveness o KNAB with anti-corruption issue advocacy is oeninsufcient, its work in implementing international recommendations includes some suc-cesses.


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I in the course o this verication KNAB nds untruthul inormation that has been pro-vided in the declaration o a public ofcial, this inormation is orwarded to the State ax Ofce.Despite the act that the State ax Ofce is authorized to impose administrative penalties ormaking alse statements, the laws governing these institutions do not precisely speciy which othem is responsible or veriying the truthulness o declarations. Tus neither one is willing totake the responsibility. Tis has led to conict situations that have also been interpreted by someas continued revenge seeking ongoing between the two organizations.

In accordance with the Law on Prevention o Conict o Interest in Actions o Public O-cials, only public ofcials working in state security authorities shall submit declarations to thedirector o the Constitution Protection Bureau, but the Director o KNAB shall submit his or herdeclaration to the Prime Minister or his or her authorized person.

State Audit Ofce

KNAB mostly cooperates with the State Audit Ofce when carr ying out inspections or inves-tigations in response to the inormation received rom them. However, as employees o KNABhave pointed out, the State Audit Ofce oen ormulates and analyzes inormation in such man-ner that it cannot be used or initiating criminal proceedings. KNAB and the State Audit Ofcehave conicting views regarding the role o anti-corruption plans within state institutions.

An exchange between the leadership o KNAB and the Auditor General erupted ollowingthe release o inormation that despite the economic crisis, employees o KNAB had receivedgi vouchers. During their audit, ofcers o the State Audit Ofce had ound that KNAB had notcomplied with the governments decree imposing spending limits or state administration bodiesat the end o 2008 (when the economic crisis began) and prohibiting bonuses.

o circumvent this order, KNAB conducted some purchases that had initially been scheduledor December by making advance payments already in November, and instead o bonuses, gisvouchers, which had already been purchased in November, were distributed among the employ-ees.

Mr. Vilks, Deputy Director o KNAB, the Acting Director at the time, pointed out that theclaim made by the State Audit Ofce that gi vouchers were distributed in December was nottrue, as the decree on awarding them was adopted on 11 November, two weeks beore the gov-ernments decree on spending limits. Also, the awarding o gi vouchers to employees was donein November, except or one employee, who was on sick leave and had received the gi card inDecember. KNAB claimed that the date when the last gi card was received had been quoted inthe documents. KNABs position was that it had not violated the governments decree on spend-ing limits. Mr. Vilks claimed that it was not an eort to deliberately circumvent the governments

decree and that it had been an annual practice to award such gi vouchers.15

Prosecutors ofces

Cooperation between KNAB and prosecutors, in turn, has been assessed positively. Judgingby interviews with employees o KNAB and the supervising prosecutor Mr. Adlers, work is donewithin the ramework o the law and cooperation is generally good. Te Head o one o theKNAB divisions noted that on numerous occasions KNAB had turned or help to the prosecu-tors ofce requesting the use o the prosecutors operational capacity to intervene, or example,in the case o attempted illegal construction in Riga City and acquisition o a land plot in Jur-mala. Tus thanks to this cooperation, the wrongdoing was prevented beore it occurred.

Inter-institutional cooperation and coordination o activities is also acilitated by policy plan-ning documents, where or each task the responsible institutions are indicated.

15 See Leitns I., Saultis A. Vilks: No circumventing the governments decree on cutting spending at the end o the year. Diena,13.05.2009.- http://www.diena.lv/lat/politics/hot/knab-decembri-darbiniekiem-davanu-kartes-izterejusi-20-000-latu

International cooperation

KNAB is involved in international cooperation with an aim to implement the recommenda-tions o GRECO, in the ramework o dierent projects and by using the experience o othercountries in the area o corruption prevention.

Regarding oreign nancial aid, the EU PHARE project Development and Strengthening o

the Corruption Prevention and Combating Bureau (1.5 million EUR), implemented in 2005 2006, was a major activity. Te goals o the project included strengthening the institutionaland operational capacity o KNAB, and it acilitated introduction to an integrated inormationsystem. In the 2nd hal o 2006 KNAB was implementing a technical assistance project o OLAFworth 32 000 EUR.

Another major project was the World Bank project Strengthening the capacity o institutionsin charge o ghting corruption, which KNAB was implementing in 2004 - 2007. Te WorldBank had awarded 165 000 EUR as project unding. Te goal o the project was to strengthen thecapacity o KNAB in the area o corruption prevention by engaging non-governmental organi-zations in the ght against corruption and by supporting the Anti-corruption Committee o theparliament (now the Deence, Interior and Anti-corruption Committee). In the ramework othis project, with the help o experts the current situation in Latvia was analyzed, the experienceo other countries was studied and, as a result, recommendations were made regarding necessaryimprovements in several major areas, including:

Lobbying;

Code o Ethics or MPs;

Internal anti-corruption measures in state administration institutions;

Preventing corruption in public procurement;

Declarations o Public Oicials and general income declarations;

Funding o pre-election campaigning.16

Since 2007 there, however, have not been any other major projects.

KNAB also works to provide advice to other countries (or example, to Azerbaijan). In the 1sthal o 2009, as part o an incentive aimed at sharing knowledge and expertise with Latvias de-velopment cooperation countries and countries to which the EU Neighbourhood policy applies,KNAB received oreign visitors interested in Latvias experience in preventing and combatingcorruption, including rom Macedonia, Georgia and Armenia. In December 2009 an interna-tional project Strengthening the Capacity o National Fund Recovery Units was approved. Inthe 1st hal o 2009 KNAB took par t in 26 cross-border working groups and meetings.

Although there have been disagreements between KNAB and the State ax Ofce, andKNAB and the State Audit Ofce, on the whole, in the course o research KNAB has beenound to be a cooperation-oriented institution, which, regardless o occasional disagree-ments, acknowledges the role o inter-institutional cooperation and is ready to compromiseeven in cases o disagreements. KNAB is also proactive in strengthening cooperation i itcan improve the efciency o preventing and combating corruption.

16 http://www.knab.gov.lv/lv/prevention/international/aid/


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KNAB has become a designated national contact point o the network against corruption oEU Member States. A decision o the Council o the European Union on setting up a contact-point network against corruption was taken in the end o 2008, thus recognizing the importanceo enhancing international cooperation in the ght against corruption at the EU level.

According to the EU Council Decision, the task o the network is to acilitate the establish-ment and active maintenance o contacts between authorities and agencies o the EU MemberStates mandated to prevent and combat corruption. In order to improve cooperation on anti-corruption issues among EU Member States, this network will serve as a orum o inormationexchange throughout the EU on eective measures and experience in the prevention and com-bating o corruption.17

KNAB makes use o international contacts and exchange o experience not only by partici-pating in international projects and events, but also in everyday work. Last year in-depth studieso the experience o other countries were undertaken as part o implementing the recommen-dations o GRECO by studying the possibilities o ghting corruption in the private sector andregarding the status o KNAB.

2. RANSPARENCY, PUBLIC PARICIPAION & RUS

2.1. Promoting public participation

Public trust and participation are key prerequisites or the eective perormance o KNAB. Ithe public does not turn to KNAB to report on cases o corruption that they observe or encoun-ter, the work o KNAB in combating corruption cannot be successul.

KNAB is promoting public participation in preventing and combating corruption by using avariety o instruments, including the ollowing:

Free Hotline 80002070 or reporting committed or initiated corrupt oences or con-licts o interest involving public oicials. (It is also possible to send a report by e-mail orto visit KNAB in person.)

Public Advisory Council.

Foreign Advisory Panel.

Consultations with civil society.

Activities involving youth.

Although dierent orms o communication and public participation are available, duringthe regional seminars organized by I Latvia - Delna, participants criticized the way KNABaddresses the public. It was deemed to lack encouragement o public participation. KNAB wasalso characterized as being too ormal and not addressing real problems in an understandable,easy to understand manner. It has been noted that KNAB should ocus more on analysing possi-ble corruption situations and advising models o conduct and good practice when encounteringcorruption or in situations where a person risks becoming a w rongdoer.

Te Public Advisory Council o KNAB is a body that has been established to ensure publicparticipation in the development and enorcement o national anti-corruption policy and rais-ing public awareness.

17 Inormational report On the Perormance o the Corruption Prevention and Combating Bureau rom January 1st till June30th, 2009

Te Council has the ollowing tasks:

o strengthen links between KNAB and the public;

o identiy the main issues in particular areas and to give recommendations to KNAB;

o take part in the development and enorcement o anti-corruption policy and nationalstrategy by providing advice and recommendations to KNAB;

o inorm about the recommendations adopted by the Council:

o submit a report to KNAB on the Councils perormance on an annual basis.

According to the Councils regulations, its goal is to ensure participation o public in the dra-ing and enorcement o national anti-corruption policy and raising public awareness. Hence,the main objective o the Council is to ensure public participation, not explicitly to strengthenKNAB through consultations with representatives o the public.

Employees o KNAB described the Council as a communication channel mostly notable orbringing together opinion leaders. It was assessed as a useul tool or communicating and testingvarious incentives proposed by KNAB.

However, representatives o the NGO sector who were interviewed were rather critical aboutthe Councils role, arguing that it had not produced any visible results and that there was littleeedback rom it. Te Council meetings are usually just a chat about topics proposed by eitherKNAB or the Head o the Council. Te degree o participation varies among the dierent mem-bers o the Council some engage only minimally. Tere was also a view that it was not cleari the C ouncil had any specic purpose at all. In this regard, it is important to note that KNABdenes the strategic role o the Councils work and clearly species it when deciding on theCouncils composition as well as in the communication with the members o the Council.

Te Foreign Advisory Panel was ormed soon aer KNAB was established; it unctions as aorum or representatives o oreign embassies, representations and international organizationsin Latvia. Meetings o the Foreign Advisory Panel are held roughly on a semi-annual basis. Dur-ing these meetings KNAB inorms oreign embassies, representations and international organi-zations about its activities and addresses the members o the Panel regarding possible supportand cooperation in the area o preventing and combating corruption.

Consultations with civil society are done in the ollowing 3 main orms:

hrough the Public Advisory Council;

As part o the review procedure o drat documents, incentives, etc. (NGOs provide theiropinion either on their own initiative or ollowing a request by KNAB);

During events/discussions;

When cooperating in the process o advancing legal initiatives.18

During interviews with KNAB employees, as a negative aspect regarding the cooperationwith NGOs, it was mentioned that NGOs, with ew exceptions, do not usually take specic andclear positions that could be directly implemented in KNABs work.

Tere are only two NGOs that actively and continuously engage in the activities o KNAB,namely, the Centre or Public Policy PROVIDUS and ransparency International Latvia - Del-na. In addition, several other organizations on a regular basis take part and express their opinionon current developments in the meetings o the Public Advisory Council o KNAB.

18 http://www.knab.gov.lv/lv/knab/advisory/ap/


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Te activities o KNAB to involve the youth is seen as an accomplishment; in addition toawareness-raising incentives, young people are encouraged to actively engage in preventing cor-ruption by receiving inormation about possible ways to do so.

However, in a public opinion poll specially conducted or this research, the work o KNAB inthe area o public participation scored the 2nd worst result compared to other areas o activitywith 39.1% o the respondents expressing a negative opinion, which is clearly an indication thatKNAB should strengthen its activities in regard to promoting public participation.

2.2. ransparency and accountability

Te work o KNAB in the area o corruption prevention is highly transparent on a regularbasis press releases are circulated, inormation is published on its website, and interviews are giv-en. Also the corruption combating eorts undertaken by KNAB get more media coverage com-pared to other law enorcement bodies. Yet KNABs publicity at times gets a negative response.For example, Mr. Dalbi, the Head o the Deence, Interior and Anti-corruption Committee othe Saeima (Peoples Party) argued that excessive publicity has been one o the problems withKNAB in the past, neglecting the principle o presumption o innocence, i.e. the act that theperson is not guilty until convicted has been neglected.

In act, the Auditor General has also said that excessive publicity o KNABs work, especiallybeore the person in question has been convicted, was not a p ositive eature. However, the opin-ion o Mr. Latkovskis, Secretary o the Deence, Interior and Anti-corruption Committee o theSaeima (New Era), was that more transparency would not harm KNAB.

Several NGO experts have stressed that KNAB should keep the public inormed about itsactivities. One o the most commonly used publicity tools o KNAB is press releases about itswork. In 2009 KNAB issued 91 press releases19, as compared to 59 in 2008 and 65 in 200720. Pressreleases issued by KNAB are widely republished in the most popular Internet sites, such as www.

del.lv, www.apollo.lv, www.tvnet.lv, www.diena.lv, etc.opics covered in press releases NumberAwareness-raising activities and anti-corruption campaigns 19Combating corruption 27Policy planning & legal initiatives 12Meetings and visits 18Control o political party nancing, pre-election campaigning 5Conicts o interest 1Other 9

Extensive media coverage is usually given to announcements related to the ght against cor-ruption (initiating criminal proceedings, criminal prosecution, etc.), control o party undingand inormation related to the appointment o the Director o KNAB, as well a s any public com-

19 According to the inormation published in KNABs website.20 Public Report 2008, KNAB - http://www.knab.gov.lv/lv/knab/review/report/

ments made by the Director. Also various events organized by KNAB, such as conerences anddiscussions, get extensive V coverage. However, important legal initiatives proposed by KNABtend to get much less V coverage.

Te appointment o the new Director o KNAB, N.Vilntis, was wid

Documents

Monitoring Work of the [Latvian] Corruption Prevention and Combating Bureau: A Research Study of Performance of the Corruption Prevention and Combating Bureau in 2008 and 1st half