This article was published by The McAlvany Intelligence Advisor on Friday, November 27, 2015:
George Washington Plunkitt was a Tammany Hall politician of the first order, serving himself from January 1, 1899 to December 31, 1904 while allegedly serving his constituents in New York’s 17th district. After he left pubic office, journalist William Riordan published Plunkitt’s comments on his years as a politician, Plunkitt of Tammany Hall: A Series of Very Plain Talks on Very Practical Politics. In one of the richer and more memorable entries, Plunkitt tried to discern the difference, as he saw it, between “honest” graft and just plain old thievery, or “dishonest” graft:
Everybody is talkin’ these days about Tammany men growin’ rich on graft, but nobody thinks of drawin’ the distinction between honest graft and dishonest graft. There’s all the difference in the world between the two. Yes, many of our men have grown rich in politics. I have myself. I’ve made a big fortune out of the game, and I’m gettin’ richer every day, but I’ve not gone in for dishonest graft – blackmailin’ gamblers, saloonkeepers, disorderly people, etc. – and neither has any of the men who have made big fortunes in politics.
And then he added this that made him famous then and memorable today:
There’s an honest graft, and I’m an example of how it works. I might sum up the whole thing by sayin‘: “I seen my opportunities and I took ’em.”
Riordan’s book is still available at Amazon, and no doubt members of Brazilian President Dilma Rousseff’s administration and middle-managers at Petrobras, Brazil’s state-owned energy company, have read it and taken it to heart.
One such was Nestor Cervero, a middle-manager at Petrobras. When he learned of the extent to which corrupt politicians had been hand-shaking with employees at Petrobras in exchange for favors, he threatened to blow the whistle on the scam. When the senate leader for Rousseff’s party, Delcidio Amaral of the Workers’ Party, got wind of the threat, he apparently had a conversation with Cervero, offering to pay him to keep his mouth shut. Amaral was fronting for billionaire Andre Esteves and a deal was struck – Cervero saw his opportunity and he took it – hush money to the tune of $13,200 every month.
Now Cervero had a problem: what to do with the money? He couldn’t just deposit it into his checking account. Bank officials would certainly quickly be alerted to deposits greatly exceeding his nominal monthly paycheck. Cervero had to find a way to get the money offshore.
He shortly discovered the currency exchange at a local gas station and car wash: Tower Gas. He began moving his funds offshore and thought he was safe in doing so until a local businessman blew the whistle, calling the police, who investigated. The police discovered a criminal conspiracy involving not one but four gangs of grafters transferring millions offshore. When the press got wind of the scandal, the investigation assumed the name Operation Car Wash.
The investigation spread like ripples in a pond, and began snaring politicians and employees at Petrobras. At least 200 of them are being investigated, with 57 of them already being indicted and 46 being convicted.
Until Wednesday, however, there were relatively few big fish. On Wednesday, investigators made three more arrests: Jose Carlos Bumlai, a “businessman” with intimate connections to Rousseff’s predecessor, Luiz Inacio Lula da Silva (known as “Lula”), whose connections over the eight years of Lula’s presidency helped to make him one of Brazil’s richest citizens.
The other two were Amaral and his financier, Andre Esteves, a billionaire and CEO of a Brazilian financial services firm.
According to Kenneth Rapoza, a Forbes contributor who has been following the widening scandal from the beginning, the investigation hinges on bringing sufficient pressure to bear on the three arrested on Wednesday to persuade them to plea bargain their way out of prison time by spilling the beans on all those working the scam. The strategy has already worked, according to Rapoza:
One name has led to another, which has led to another, which has led to this: some of the closest men to Dilma (Rousseff) and Lula.
[The three arrested on Wednesday] will not want to spend the rest of their lives in jail. They too will sing, sing loud and clear….
If they have anything that implicates Dilma and/or Lula in this mess, it will not only destroy the Workers’ Party – a Christmas wish for the opposition – but it will surely lead to an impeachment [of Rousseff].
The consequences are already being felt. Fitch has threatened to downgrade Brazil’s government debt to junk, while stockholders have seen Petrobras stock lose 84 percent of its value over the last five years, 50 percent just this year (so far).
There were huge public demonstrations in March and April of this year, reflecting anger and frustration as the increasingly obvious corruption was playing out in the press. Citizens were especially upset by Rousseff’s claim of innocence while she was Minister of Energy under Lula for five years, and then chair of Petrobras! Particularly galling was her election campaign promise in 2010 “to supercharge the economy while avoiding the corruption and mismanagement that have plagued other oil-rich countries in the developing world.”
Brazil, it should be no surprise, is not alone. Politicians in the United States have no doubt been reading Plunkitt, seeing their opportunities and taking them. During just the Obama administration, for example, there’s Republican Michael Grimm from New York who pleaded guilty to felony tax evasion through the improper use of campaign funds. There’s Trey Radel, a Republican from Florida, who was convicted of possession of cocaine.
There’s Rick Renzi, a Republican from Arizona, who was found guilty of 17 counts of fraud, conspiracy, extortion, racketeering, money laundering, and making false statements to insurance regulators. There’s Jesse Jackson, Jr., Democrat from Illinois, who pleaded guilty to charges of mail and wire fraud involving some $750,000 of campaign funds. There’s Laura Richardson, a Democrat from California, who was found guilty of using her staff to campaign for her, destroying the evidence and tampering with witness testimony.
And these, remember, are only the ones who have been convicted. There are numerous others in various stages of investigation and, of course, many whose violations and illegal behaviors have yet to be discovered.
It’s what happens when temptation meets opportunity in an immoral and declining culture.
History Matters: George Washington Plunkitt
Bio on George Washington Plunkitt
Amazon.com: Plunkitt of Tammany Hall
Forbes: Will Latest Arrests In Brazil’s Petrobras Scandal Dethrone President?
President of Brazil, Dilma Rousseff
CNN: Protesters in Brazil push to impeach President Dilma Rousseff
Background on Operation Car Wash
Stock price chart for PBR – one year
Stock price chart for PBR – five years
Wall Street Journal: Brazil ‘Carwash’ Shrugs Off Notoriety Tied to Petrobras Scandal
Federal politicians convicted during Obama administration