Standard & Poor's feels Justice's lash, but can the law ever conquer greed?

The DOJ is making headlines with high-profile suits against Wall Street firms, but singling out a few won't fix systemic wrongdoing

• 
• • Heidi Moore
  • guardian.co.uk, Tuesday 5 February 2013 21.16 GMT

Standard & Poor's faces a Department of Justice lawsuit alleging the firm succumbed to conflicts of interest in their ratings for banks of mortgage-backed securities. Photograph: Stan Honda/AFP/Getty Images

 

In politics, public humiliation can often be a useful motivator. Take the Department of Justice, which was hauled over the coals in a recent PBS Frontline documentary on its lack of vigor in Wall Street prosecutions. The DOJ has been on a rampage lately.

The DOJ has been reportedly planning to file charges against the Royal Bank of Scotland, and last night, it filed an actual lawsuit against Standard & Poor's for misrating mortgage bonds before the financial crisis.

The Department of Justice is also getting creative and taking a novel tack. Standard & Poor's and other ratings firms have long maintained that their ratings, which were opinions, were protected under freedom of speech; in essence, you can't kill the messenger. This has proven a bulletproof defense for years.

The DOJ, in its lawsuit, counters that S&P acted as a double agent by allegedly violating its own standards. Ratings firms are paid by banks to rate products created by banks – an obvious conflict of interest in many cases. Standard & Poor's, like other firms, promised objectivity.

Thus the DOJ has alleged that S&P, while purporting to provide objectivity, was working on behalf of banks that needed good ratings for bad mortgage securities. To support this allegation, the DOJ quotes several emails that show S&P fretting over losing business to Moody's.

DOJ v Wall Street: from zero to hero

This rampage is great … directionally. The DOJ generally has to go crawling to Wall Street, tentatively striking deals that won't hurt financial reputations too badly and the bottom line hardly at all.

So, who doesn't love a major character finally overcoming its low self-esteem and owning its power?
In movie terms, this is the equivalent of the nerdy librarian who doffs her glasses and shakes out her hair, at which someone must yell, "Why, Miss Jones, you are magnificent!" It is Beyonce, pointedly filing her nails in the video for "Irreplaceable", squaring her shoulders and declaring, "You must not know about me. You got me twisted." It is Patrick Dempsey growing from spindly tween idol into a silvery heartthrob.


Considering that the DOJ is trying to regain its swagger, it seems churlish to object that it still may not be thinking big enough. And yet …

The DOJ's approach is great, in theory. It's good for a prosecutor's reputation to rake one firm over the coals and humiliate it publicly. But the truth is, the effect is limited. Other firms, rather than looking at the embarrassed firm and thinking, chastened, "there but for the grace of God go I," instead think, "God, glad I'm not like that poor sucker who got caught for doing what everyone does."
The DOJ is the greatest prosecutorial force in the country. It has subpoena power – excellent for commandeering embarrassing financial documents – and just enough resources and publicity power to really strike fear into Wall Street wrongdoers. The SEC is too underfunded; the CFTC has a shorter reach. The DOJ is, in short, the only entity in the country with any hope of accomplishing anything in the way of white-collar law enforcement.

Why 'making an example' doesn't work


There is some method to striking fear into the hearts of villains. For one thing, villains always believe they are exceptional. This is the case on Wall Street as well. Anyone who does anything dodgy involving money is usually pretty self-aware. He never deludes himself into thinking, "Oh, I am not doing anything wrong." He thinks, instead, "The authorities will never be smart enough to catch me."
This is why singling out RBS, or UBS, or S&P, will never have the fearsome deterrent effect that the DOJ really wants. In fact, by going after the firms piecemeal, the DOJ may actually be encouraging future wrongdoers rather than turning them away from crime.

You see, the DOJ is going after one or two firms for actions that were widespread across the industry. Fixing interest rates was the work of thousands of people. It's safe to say that S&P was not the only ratings firm that fretted that it would lose fees if it started downgrading bonds. In fact, S&P, according to the emails provided by the DOJ, frequently worried that it was not keeping up with Moody's.

This is a familiar pattern in Wall Street cases: Merrill Lynch, for instance, packaged all those bad mortgage securities partly because it was trying to outdo the profits of Goldman Sachs.

Wall Street's culture of rule-breaking

The dirty secret of Wall Street is that it delights in evading rules – not just for profit, but also for sport. To keep its skills sharp. The finance industry is full of clever people who love nothing more than finding loopholes to subvert authority, whether of government or of their own head of trading. The reason Wall Street leaders are always yelling about the necessity of teamwork is because acting mostly in one's individual self-interest – and the interest of one's bonus payment – is almost always the rule.

So, yes, this sudden burst of enthusiasm from the DOJ is a great development. There's no question that it's good, for most of the populace, to see one of America's great prosecutorial forces finally pull its act together on one of the defining scandals of our age: the greed – and sometimes fraud – that turned the housing crash into a financial crisis.

Yes, it's late – in fact, it pushes the traditional statute of limitations on such cases – but at least, some of the gears are finally moving. "Wisdom too often never comes, and so one ought not to reject it merely because it comes late," the supreme court Justice Felix Frankfurter once said, and he could have been talking about all these delayed actions.

It's also always fun to participate in the ritual of reading the hilariously self-incriminating internal emails that the DOJ captured. One of the best includes an S&P analyst sarcastically commenting that, after the crisis, the firm looked like something out of the 1980s hapless Wall Street comedy Trading Places:

"You should see how it is here. It's like a friggin trading floor. 'Downgrade, Mortimer, downgrade!'"

Bond ratings now less relevant

Wall Street, of course, didn't need to see these emails to see which way the wind was blowing with the ratings firms. Most banks and trading floors stopped depending on official bond ratings ages ago, even though all the ratings firms retain excellent records on corporate and municipal bonds (in fact, anything that is not mortgage-related).

BlackRock, one of the favorite bond managers of the federal government, has boasted for years that it does its own analysis on potential defaults rather than rely on ratings firms. (BlackRock's founder, Larry Fink, was not coincidentally one of the creators of the mortgage-backed security.) Official ratings are often only a technical requirement, but rarely do many banks or investors rely on them any more – the same way those banks don't rely on the Libor interest rate any more.

Which is why the DOJ should cast its net wider. Ultimately, the DOJ lawsuit against S&P may make a splash, but it probably won't be a deterrent. The only thing that will do that is banks and investors forcing ratings firms to behave differently.

That's easy in times of calm, like now, but much harder in bubble times, when greed rules.

Understanding Germany and its Mittelstand ethos

Germany is right: there is no right to profit, but the right to work is essential

The strength of Germany lies in its medium-sized manufacturing firms, whose ethos includes being socially useful

• 
• • John Studzinski
  • The Guardian, Wednesday 6 February 2013

'The objective of every German business leader is to earn trust – from employees, customers, suppliers and society as a whole.' illustration by Belle Mellor

 

People talk too much about the economy and not enough about jobs. When economists, academics and bankers are allowed to lead the debate, the essential human element goes missing. This is neither healthy nor practical.

Unemployment should be our prime concern. Spain, with youth joblessness close to 50%, is in the gravest crisis, but there is hardly a government on the planet that is not wondering what it can do to guide school-leavers into work, exploit the skills of older workers, and avoid the apathy and alienation of the jobless, which undermines not just the economy but also the social fabric.

There may be no definitive answer but, over the past half-century, Germany has come closest to finding it. Its postwar economic miracle was impressive, but its more recent ability to ride out recessions and absorb the costs of reunification is, perhaps, even more remarkable. Germany was not immune to the economic crisis of 2008-9, but the jobless rate rose more slowly than elsewhere in Europe. Although in recent months it has edged up towards 6.9%, it remains well below the euro area's 11.7% average. Germany's resilience springs from the strength of its medium-sized, often family-owned manufacturing companies, collectively known as the Mittelstand, which account for 60% of the workforce and 52% of Germany's GDP. So what can we learn from the Germans?
The enduring success of the Mittelstand has been well documented but rarely emulated. The standard excuse is that it is rooted in German history and culture and therefore unexportable. At a time when so much business is conducted on a global scale, via globally accessible media, this excuse is wearing thin.

Let me highlight some of the features unique to the Mittelstand model that I believe everyone should learn from – and imitate if they can. The first is what we might call the Mittelstand ethos – that business is a constructive enterprise that aims to be socially useful. Making a profit is not an end in itself: job creation, client satisfaction and product excellence are just as fundamental. Taking on debt is treated with suspicion. The objective of every business leader is to earn trust – from employees, customers, suppliers and society as a whole. This ethos chimes with the values of prudence and responsibility with which every schoolteacher hopes to imbue their pupils. Consequently, about half of all German high-school students move on to train in a trade. Business and education are natural bedfellows.

The second essential feature of the Mittelstand model is the collaborative spirit that generally exists between employer and employees. This can be dated back to the welfare state that Chancellor Otto von Bismarck established in the late 19th century to head off what he saw as the menace of socialism. Its modern-day equivalent is the system of works councils, which ensures that employees' interests are safeguarded, whether or not they belong to a trade union. German workers expect their employers to keep training them, enhancing their skills. In the post-reunification recession, it seemed only natural to German workers to offer flexibility on wages and hours in return for greater job security. More recently the government protected jobs by subsidising companies that cut hours rather than staff.

A third feature of the Mittelstand model is the determination of German companies to build for the long term. To this end, they tend to keep core functions such as engineering and project management in-house, while outsourcing production whenever this proves more efficient. Mittelstand companies are overwhelmingly privately owned, and thus largely free of pressure to provide shareholder returns. This makes them readier to innovate, and invest a larger proportion of their revenues in R&D. There are Mittelstand companies that file more patents in a year than do some entire European countries. It is one of the underlying reasons for their exporting success, even when their goods seem expensive.
Finally, German companies work closely with their suppliers. This has proved especially valuable in developing Sino-German trade. Unlike most of their international competitors, they are happy to take suppliers' representatives on trade missions. The result is that they can guarantee swift and sure supplies of components and other products. Chinese customers are not the only ones willing to pay extra for this kind of service excellence.

Of course, there are other factors that lie behind the success of the Mittelstand and of the German economy as a whole. Both the economy and political system are highly decentralised, with the result that local banks, businesses, entrepreneurs and politicians know and understand each other, making everyday co-operation easier – while, at the national level, Germany's leaders rarely miss an opportunity to promote their country's industry abroad.

Nonetheless, there is much that non-Germans could learn from. To close the gap between education and business, companies should take a greater interest in their local schools and colleges. If you haven't got spare cash for sponsoring gyms or computer equipment, go and talk to sixth-formers or degree students about what you do. Find out what graduates aspire to. It will help you to work out how to attract the next generation.

If you want to get more out of your employees and suppliers, consult them; invite them into your confidence. Don't complain: "We're not like the Germans. It won't work here." Think of a different way. Try harder.

The same applies to governments. Let me mention one simple legislative option. In German law, the owner of a family business who passes it on to the next generation can avoid paying inheritance tax if, during their tenure, they have increased employment and thereby benefited the economy. What better signal could a government give than by favouring those who create employment?

There is no question in my mind about which is the single most important feature of the Mittelstand model – its underlying ethos, which is based not on dry economic theory, but on everyday, practical humanity. The notion that business should be socially useful may have sprung from Germany's postwar conscience, but it has resonance now, when so many of our citizens are still suffering from the aftermath of the credit crunch and the failures of leadership it exposed.

There is no right to make a profit, and profit has no intrinsic value. But there is a right to work, and it is fundamental to human dignity. Without an opportunity to contribute with our hands or brains, we have no stake in society and our governments lack true legitimacy. There can be no more urgent challenge for our leaders. The title of the next G8 summit should be a four-letter word that everyone understands – jobs.

A detailed interview with Imran Khan. Excellent!

Interview with Imran Khan Part 1

Interview with Imran Khan Part 2

Why the intellectual is on the run

Thanks to manufactured debates on TV, there is no time for irony and nuance nor are we able to distinguish between a charlatan and an academician

Harish Khare in The Hindu

Now that the Supreme Court has provided some sort of relief against harassment to Professor Ashis Nandy, it has become incumbent upon all liberal voices to ponder over the processes and arguments that combined to ensure that an eminent scholar had to slink out of Jaipur in the middle of the night because of his so-called controversial observations at a platform that was supposed to be a celebration of ideas and imagination. Sensitive souls are quite understandably dismayed; others have deplored the creeping culture of intolerance. Some see the great sociologist as a victim of overzealousness of identity politics. All this breast-beating is fine, but we do need to ask ourselves as to what illiberal impulses and habits are curdling up the intellectual’s space. We need to try to recognise how and why Professor Nandy’s nuanced observations on a complex social problem became “controversial.” Who deemed those remarks to be “controversial?” And, these questions cannot be answered without pointing out to the larger context of the current protocol of public discourse — as also to note, regretfully, that the likes of Mr. Nandy have themselves unwittingly countenanced these illiberal manners.

After all, this is not the first time — nor will it be the last — that a sentence in a complex argument has been picked up to be thrashed out into a controversy . This is now the only way we seem able to talk and argue among ourselves. And we take pride in this descent into unreasonableness. We are now fully addicted to the new culture of controversy-manufacturing. We have gloriously succumbed to the intoxicating notion that a controversy a day keeps the republic safe and sound from the corrupt and corrosive “system.”

This happens every night. Ten or 15 words are taken out of a 3,000-word essay or speech and made the basis of accusation and denunciation, as part of our right to debate. We insistently perform these rituals of denunciation and accusation as affirmation of our democratic entitlement. Every night someone must be made to burn in the Fourth Circle of Hell. In our nightly dance of aggression and snapping, touted as the finest expression of civil society and its autonomy from the ugly state and its uglier political minions, we turn our back on irony, nuance and complexity and, instead, opt for angry bashing, respecting neither office nor reputation. We are no longer able to distinguish between a charlatan and an academician. A Mr. Nandy must be subjected to the same treatment as a Suresh Kalmadi.

 

Nandy, a collateral victim

Mr. Nandy’s discomfort is only a minor manifestation of this cultivated bullishness. And let it be said that there is nothing personal against him. He is simply a collateral victim of the new narrative genre in which a “controversy” is to be contrived as a ‘grab-the-eyeballs’ game, a game which is played out cynically and conceitedly for its own sake, with no particular regard for any democratic fairness or intellectual integrity. By now the narrative technique is very well-defined: a “story” will not go off the air till an “apology” has been extracted on camera and an “impact” is then flaunted. In this controversy-stoking culture of bogus democratic ‘debate’, Mr. Nandy just happened to be around on a slow day. Indeed it would be instructive to find out how certain individuals were instigated to invoke the law against Mr. Nandy. Perhaps the Jamia Teachers’ Solidarity Association needs to be applauded for having the courage to call the Nandy controversy an instance of “media violence.”

At any given time, it is the task of the intellectual to steer a society and a nation away from moral uncertainties and cultural anxieties; it is his mandate to discipline the mob, moderate its passions, disabuse it of its prejudices, instil reasonableness, argue for sobriety and inject enlightenment. It is not the intellectual’s job to give in to the mob’s clamouring.

 

‘Middle class fundamentalism’

But, unfortunately, that is what our self-designated intellectuals have reduced themselves to doing: getting overawed by television studio warriors, allowing them to set the tone and tenor of dialogue. There is now a new kind of fundamentalism — that of what is touted as the “media-enabled middle class.” For this class of society, the heroes and villains are well defined. Hence, the idea of debate is not to promote understanding nor to seek middle ground nor to reason together, but to bludgeon the reluctant into conformity. Mary McCarthy had once observed that “to be continually on the attack is to run the risk of monotony … and a greater risk is that of mechanical intolerance.”

When intellectuals and academicians like Ashis Nandy allow themselves to be recruited to these “debates,” even if they are seen to be articulating a dissenting point of view, their very presence and participation lends credibility to the kangaroo courts of intimidation.

 

Manipulated voices

The so-called debate is controlled and manipulated and manufactured by voices and groups without any democratic credentials or public accountability. It would require an extraordinary leap of faith to forget that powerful corporate interests have captured the sites of freedom of speech and expressions; it would be a great public betrayal to trust them as the sole custodians of abiding democratic values and sentiments or promoters of public interest.

Intellectuals have connived with a culture of intolerance, accusation and controversy-stoking that creates hysteria as an extreme form of conformity. Every night with metronomic regularity our discourse-overlords slap people with parking tickets.

And a controversy itself becomes a rationale for political response. Let us recall how L.K. Advani was hounded out of the BJP leadership portals because a “controversy” was created over his Jinnah speech. And, that “controversy” was manufactured even before the text of the former deputy prime minister’s Karachi remarks were available in India. Nor should we forget how Jaswant Singh’s book on Jinnah was banned by the Gujarat Chief Minister, Narendra Modi, even before it was published because our newly designated national saviour had anticipated that a “controversy” would get created.

The Nandy ordeal should also caution against the current itch to demand “stringent” laws as a magical solution to all our complex social and political ills like corruption. It would be sobering to keep in mind that Mr. Nandy has been sought to be prosecuted under a stringent law based on the formula of instant complaint, instant cognisance and instant arrest. Mr. Nandy is lucky enough to have respected scholars give him certificates of good conduct, testify that he is not a “casteist” and that he is not against “reservation.” Lesser intellectuals may not be that fortunate. We must learn to be a little wary of our own good intentions and guard against righteous preachers.

If we insist on manufacturing controversy every day, all in the name of giving vent to “anger”, it is only a matter of time before some sections of society will be upset, angry and resort to violence. If we find nothing wrong in manufacturing hysteria against Pakistan, or making wild allegations against this or that public functionary, how can we object to some group accusing Mr. Nandy of bias? When we do not invoke our power of disapproval over Sushma Swaraj’s chillingly brutal demand for “10 heads” of Pakistani soldiers, who will listen to us when we seek to disapprove Mayawati’s demand for action against Mr. Nandy?

Just as the Delhi gang rape forced us to question and contest the traditional complacency and conventions, the Ashis Nandy business will be worth the trouble if it helps us wise up to the danger of culture of bullishness and accusation. Unless we set out to reclaim the idea of civilised dialogue, the intellectuals will continue to find themselves on the run.

 

(Harish Khare is a veteran commentator and political analyst, and former media adviser to Prime Minister Manmohan Singh)

Match Fixing in Football and in the UK too?

Fifa wants tough sentences for criminals who are caught match fixing

• Governing body's security head says sentences 'too weak'
• More than 700 suspect football fixtures under investigation

• David Conn
• The Guardian, Monday 4 February 2013 19.51 GMT

Fifa has called for longer prison sentences for criminals involved in match-fixing after the EU intelligence-sharing agency Europol said more than 700 matches worldwide are suspected of having been manipulated.

Ralf Mutschke, Fifa's head of security and a former Interpol official, said: "Match-fixing and match-manipulation is a global problem and is not going to go away tomorrow." He argued that although "a member of the football family" can be given a life ban by Fifa, "for people outside of football, the custodial sentences are too weak, and offer little to deter someone from getting involved in match-fixing".

An unidentified European Champions League tie played in England "within the last three to four years" is one of the matches under investigation (Editor's note -Danish newspaper Ekstra Bladet reported it was Liverpool’s 1-0 win over the Hungarian team Debrecen in the 2009 Champions League group stage), Rob Wainwright, the director of Europol, said. While the "focus" of the investigation is not on England, Wainwright said: "Given the scale of corruption involved, it would be naive and complacent to think that the criminal conspiracy does not affect the English game."

The Football Association said that while it takes "matters of integrity in football extremely seriously", Europol had not informed the FA of its suspicions about the Champions League tie.

"The FA [is] not aware of any credible reports into suspicious Champions League fixtures in England, nor has any information been shared with us," an FA spokesman said.

More than 380 football matches in Europe are under investigation for match-fixing, Europol said, including top-flight domestic league matches and qualifiers in the European Championship and World Cup. In addition, some 300 matches in Africa, Asia, South and Central America are suspected of having been fixed by "an extensive criminal network".

Europol said 425 people from more than 15 countries are suspected of being involved in attempts to fix the 380 matches played at different levels of professional football across Europe. Those under suspicion include players, match officials, club staff and "serious criminals". Europol calculated that more than €8m (£6.8m) in betting profits had been corruptly made, with in excess of €2m in "corrupt payments" made to football people.

"This is a sad day for European football and more evidence of the corrupting influence in society of organised crime," Wainwright said. "This is match-fixing on a scale we've not seen before, involving hundreds of criminals and corrupted officials and players, affecting hundreds of professional matches and generating very large amounts of illicit profits. It is the work of a sophisticated international organised crime syndicate based in Asia and working with criminal facilitators around Europe."

Some of the cases have been prosecuted, while others remain the subject of continued investigation. Following an investigation by prosecutors in Bochum, Germany, 14 people were convicted of match-fixing, and received prison sentences totalling 39 years. Andreas Bachmann, of the Bochum prosecution service, said that 20 further arrest warrants have been issued, along with 86 search warrants for premises in the UK, Germany, Switzerland and Austria. He said the €2m Europol has calculated to have been paid in bribes should be assumed to be "only the tip of the iceberg".

Laszlo Angeli, from the central investigative chief prosecutor's office in Hungary, referred to a friendly between Argentina and Bolivia as one of the matches under suspicion.
Europol has had an investigation team, codenamed operation Veto, running since July 2011 to share information among EU countries, and is co-operating with Interpol for the matches under suspicion outside Europe. The agency alleges that the betting gangs are based in Asia – the Bochum investigation found the operation was run from Singapore – and associates were required to bribe the football people involved.

Investigations are also ongoing into alleged laundering of the proceeds in tax havens. "All those responsible for running football should heed the warnings," Wainwright said.

Fifa said that it is committed to tackling match-fixing, and aside from calling for tougher penalties also urged stronger co-operation between sporting bodies and law enforcement agencies.

Wainwright said he will be providing Michel Platini, the Uefa president, with details of the investigation, although Europol did not identify the allegedly suspicious Champions League tie, or any other match or person subject to investigation.

"Uefa is already co-operating with the authorities on these serious matters as part of its zero tolerance policy towards match-fixing," Uefa said.

-------

'Match-fixing is reality' says Burkina Faso coach banned in Belgium

Paul Put claims practice has always existed in football after Europol announces up to 380 matches are under suspicion

• 
• • Jonathan Wilson in Nelspruit
  • The Guardian, Tuesday 5 February 2013 18.21 GMT

Paul Put, Burkina Faso's head coach, served a three-year ban in Belgium after being found guilty of fixing two matches. Photograph: Armando Franca/AP

 

For Paul Put, the Belgian coach of Burkina Faso, the statement from Europol that it had found evidence that as many as 380 matches in Europe had been fixed came as no great surprise. He is one of the very few coaches to have been banned for fixing games, serving a three-year ban in Belgium that expired in 2011 after being found guilty of fixing two matches while manager of Lierse.

He remains adamant he was just a scapegoat and that the practice is widespread. "Match-fixing has always existed in football," Put says. "If you look at cycling, at Lance Armstrong, it's always him who is pointed at but everybody was taking drugs. It's not that I've been doing match-fixing, not at all, but it has been declared in the media like this. I also played football and I saw a lot of things. I don't think you can change it. It's unfortunate but I think in every sport you have to face those things. That is reality but what can you do about that?"

The Armstrong defence is unlikely to win Put much sympathy and it is not entirely clear whether he considers himself innocent of the charges or whether he simply regards it as unfair that he was punished when so many others who are allegedly guilty have not been.

"I accepted the ban because Fifa said I could work, so I didn't make any trouble in Belgium," he says.
Does he, then, view himself as a scapegoat? "Yes," the 56-year-old says. "It's the same like Lance Armstrong. It's the same. Everybody is pointing at Lance but without this he is the biggest champion. I don't think this is right. You have to see what's going on in football. There are a lot of big international players who are involved in match-fixing. I think it was worse in the past and these teams have survived."

What is known is that Lierse twice unexpectedly fielded reserve teams in Belgian top-flight league matches in 2005, seemingly as part of a match-fixing ring allegedly organised by the Chinese businessman Ye Zheyun. An international arrest warrant was issued against Ye in 2006 but he returned to China and denies all charges.

Lierse were the only club sanctioned and Put the only individual. Forty people, including Put, have been charged and face a criminal trial but that is unlikely to come to court for at least another two years.

"The suspension was a decision of the federation," Put says. "You always have to make an example for the whole world. We were all surprised because they took only one.

"You know there are more than 40 people. The whole of Belgian football was sick at that time. I was threatened by the mafia. My child was not safe. They threatened me with weapons and things like that. It's not nice to talk about these things but this is the reality."

So is he saying he was forced to fix games? "I was forced but 'fixing games' are big words," he says. "The team at that moment had nothing. It was in a very bad condition. There was no hope, no money, nothing.

"They made up a crazy story about match-fixing but other teams did the same. You have to see a lot of things and how it came about. It was not by our will. I am not a manager – just a coach.
"This is not a decision of a coach and a player. It is a whole team. If you want to fix a game you don't need 12 players. If you want to fix a game you can do it with one. That's what I don't understand – people didn't speak of the reality."

As the scandal broke, Put left Belgium and became the coach of Gambia, where he had significant success, taking them to a record high of 65 in the Fifa rankings. His achievements with Burkina Faso are even greater.

Apart from 1998 when they hosted the tournament, the Stallions had never progressed beyond the group stage of the Africa Cup of Nations but on Wednesday they face Ghana in the semi-finals, having gone 367 minutes in the tournament without conceding a goal.

Put regards their progress as some kind of redemption. "I have been working very hard," he says. "It was a very hard time for me and my family and my friends.

"If they point at you and you are the only one, it is hard. I've been fighting, fighting, working, working, day and night, and at least I now I have satisfaction."

He knows the route back to Belgium is probably closed forever, but Put dreams of better things. "My challenge," he says, "is to go to a big country with a big team and prove myself." What he has done with Burkina Faso will not clear his name but it may help people forget his past.

Welfare fraud is a drop in the ocean compared to tax avoidance

As Joanne Gibbons' case shows, benefit underpayments save us more than 'cheats' cost us. We need to target the real villains

• 
• • James Ball
  • guardian.co.uk, Sunday 3 February 2013 12.06 GMT

Had Gibbons claimed the benefits to which she was entitled she could have collected double her 'fraudulent' claims. Photograph: Peter Macdiarmid/Getty Images

 

Joanne Gibbons was sentenced to community service for claiming income support while holding down two paid jobs. Through accumulated payments of £66-a-week, the court heard, she collected £3,140 to which she wasn't entitled.

Predictably, the Daily Mail is outraged. But here's the strange twist: had Gibbons claimed the benefits to which she was actually entitled, she could have collected £130 a week through family tax credits and child benefit. In total, Gibbons' fraudulent claims cost the taxpayer around £3,100 less than claiming what she was actually entitled to.

It's the reaction to Gibbons' claims which are particularly noteworthy. Matthew Sinclair, chief executive of the Taxpayers' Alliance – an organisation rarely troubled by wealthy people's tax avoidance – tells the Mail:

"It beggars belief that somebody going to the lengths of making fraudulent claims would have actually received more in benefits had they been honest.

"It just goes to show that the current system is broken and doesn't provide the right incentives for claimants to go back to work."

This quote suggests Sinclair is perhaps even less numerate than the "benefits cheat" he's deriding. Gibbons was entitled to £130 a week in legitimate benefits, while working on two low-income jobs. This total was higher than the £66 a week out-of-work benefit she was improperly claiming (though some of the £130 a week could be claimed in or out of work).

In what sense is a system which tops up low wages a disincentive to work? Sinclair appears lost in lazy rhetoric – an all-too-common failing when it comes to chastising the millions of families, most of whom with at least one adult in work, who rely on the benefit system.

The British public believe benefit fraud is a big problem. A recent poll by the TUC showed people believe 27% of the welfare budget is fraudulently claimed.

The reality is very different. Last year, 0.7% of total benefit expenditure was overpaid due to fraud, according to the DWP's official estimates. This totalled £1.2bn over the year. Nor is fraud getting worse – even against a background of benefit cuts and long-term unemployment fraud made up a smaller share of the welfare bill last year than it did in 2010/11 or 2009/10.

Indeed, welfare fraud is smaller than accidental overpayments due to error, which totalled £2.2bn (£1.4bn of which due to official error). It's also smaller than the amount of money underpaid to those entitled to it: £1.3bn.

In other words, if we wiped out benefit fraud tomorrow – but also eliminated the errors that deprive people of money to which they are entitled – the welfare bill would grow, not shrink.

In the context of the UK's £700bn public spending, and £150bn+ welfare bill (of which pensions and in-work benefits make up the substantial majority), benefit fraud is a relatively small revenue loss. But how does it compare to another textbook villain: tax avoidance?

Put simply, it is comparatively tiny. HMRC consistently estimates the UK's tax gap – the gap between what HMRC thinks it should receive versus what it actually gets – at more than £30bn per year. Others estimate this is far, far higher.

Of this, even conservative estimates suggest around a sixth – £5bn a year – is lost through tax avoidance, tricks to reduce tax bills which fall within the letter (if not spirit) of the law, but often fall outside what's regarded as acceptable by the public. A further sixth, at least, is estimated to be due to wholesale tax evasion: simply illegally not paying the tax that's owed.

These conservative estimates alone outweigh benefit fraud by a factor of eight, but this time not done in tens (or at most hundreds) of pounds per week by people struggling to get by; but rather by people who could afford to pay more, but prefer not to.

Benefit underpayments save us more money than benefit fraud costs us. By the most conservative estimates, tax avoidance and tax evasion outweighs benefit fraud eightfold. But the constant target of argument – "scroungers", "benefit cheats", and more, isn't the well-heeled middle classes who knock a little off their tax return, or the high-rollers with elaborate offshore schemes.

Instead, it's those at the bottom of society – for the government, perhaps, it makes it easier to sell the public swingeing cuts to the safety net that millions of families, both in and out of work, rely on to get by. For the Mail, it's easier to sell papers by buying into the easy preconceptions of their readers than bothering to challenge them.

Unfortunately, all too often, that's a view the Labour party – and others on the left – seem all too happy to go along with. If we must have national villains, surely we can do better than these?

The truth about Mahatma Gandhi: he was a wily operator, not India’s smiling saint

Patrick French in The Telegraph

The Indian nationalist leader had an eccentric attitude to sleeping habits, food and sexuality. However, his more controversial ideas have been written out of history

This week, the National Archives here in New Delhi released a set of letters between Mohandas Karamchand Gandhi and a close friend from his South African days, Hermann Kallenbach, a German Jewish architect. Cue a set of ludicrous “Gay Gandhi” headlines across the world, wondering whether the fact the Mahatma signed some letters “Sinly yours” might be a clue (seemingly unaware that “sinly” was once a common contraction of “sincerely”).

The origin of this rumour was a mischievous book review two years ago written by the historian Andrew Roberts, which speculated about the relationship between the men. On the basis of the written evidence, it seems unlikely that their friendship in the years leading up to the First World War was physical.

Gandhi is one of the best-documented figures of the pre-electronic age. He has innumerable biographies. If he managed to be gay without anyone noticing until now, it was a remarkable feat. The official record of his sayings and writings runs to more than 90 volumes, and reveals that his last words before being assassinated in 1948 were not an invocation to God, as is commonly reported, but the more prosaic: “It irks me if I am late for prayers even by a minute.”

That Gandhi had an eccentric attitude to sleeping habits, food and sexuality, regarding celibacy as the only way for a man to avoid draining his “vital fluid”, is well known. Indeed, he spoke about it at length during his sermons, once linking a “nocturnal emission” of his own to the problems in Indian society.

According to Jawaharlal Nehru, independent India’s first prime minister, Mahatma Gandhi’s pronouncements on sex were “abnormal and unnatural” and “can only lead to frustration, inhibition, neurosis, and all manner of physical and nervous ills… I do not know why he is so obsessed by this problem of sex”. 

Although some of Gandhi’s unconventional ideas were rooted in ancient Hindu philosophy, he was more tellingly a figure of the late Victorian age, both in his puritanism and in his kooky theories about health, diet and communal living. Like other epic figures from the not too distant past, such as Leo Tolstoy and Queen Victoria, he is increasingly perceived in ways that would have surprised his contemporaries. Certainly no contemporary Indian politician would dare to speak about him in the frank tone that his ally Nehru did.

Gandhi has become, in India and around the globe, a simplified version of what he was: a smiling saint who wore a white loincloth and John Lennon spectacles, who ate little and succeeded in bringing down the greatest empire the world has ever known through non-violent civil disobedience. President Obama, who kept a portrait of Gandhi hanging on the wall of his Senate office, likes to cite him.

An important origin of the myth was Richard Attenborough’s 1982 film Gandhi. Take the episode when the newly arrived Gandhi is ejected from a first-class railway carriage at Pietermaritzburg after a white passenger objects to sharing space with a “coolie” (an Indian indentured laborer). In fact, Gandhi’s demand to be allowed to travel first-class was accepted by the railway company. Rather than marking the start of a campaign against racial oppression, as legend has it, this episode was the start of a campaign to extend racial segregation in South Africa. Gandhi was adamant that “respectable Indians” should not be obliged to use the same facilities as “raw Kaffirs”. He petitioned the authorities in the port city of Durban, where he practised law, to end the indignity of making Indians use the same entrance to the post office as blacks, and counted it a victory when three doors were introduced: one for Europeans, one for Asiatics and one for Natives.

Gandhi’s genuine achievement as a political leader in India was to create a new form of protest, a mass public assertion which could, in the right circumstances, change history. It depended ultimately on a responsive government. He figured, from what he knew of British democracy, that the House of Commons would only be willing to suppress uprisings to a limited degree before conceding. If he had faced a different opponent, he would have had a different fate. When the former Viceroy of India, Lord Halifax, saw Adolf Hitler in 1938, the Führer suggested that he have Gandhi shot; and that if nationalist protests continued, members of the Indian National Congress should be killed in increments of 200.

For other Indian leaders who opposed Gandhi, he could be a fiendish opponent. His claim to represent “in his person” all the oppressed castes of India outraged the Dalit leader Dr BR Ambedkar. Gandhi even told him that they were not permitted to join his association to abolish untouchability. “You owe nothing to the debtors, and therefore, so far as this board is concerned, the initiative has to come from the debtors.” Who could argue with Gandhi the lawyer? The whole object of this proposal, Ambedkar responded angrily, “is to create a slave mentality among the Untouchables towards their Hindu masters”.

Although Gandhi may have looked like a saint, in an outfit designed to represent the poor of rural India, he was above all a wily operator and tactician. Having lived in Britain and South Africa, he was familiar with the system that he was attempting to subvert. He knew how to undermine the British, when to press an advantage and when to withdraw. Little wonder that one British provincial governor described Mr Gandhi as being as “cunning as a cartload of monkeys”.