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EUROPE / An emblematic IMF and World Bank Personality Dragged Into Court: Jacques de Groote faces Swiss justice
Date of publication at Tlaxcala: 03/07/2013
Original: Une figure emblématique du FMI et de la Banque mondiale devant la justice suisse : Jacques de Groote en procès
Translations available: Español  Português/Galego 

An emblematic IMF and World Bank Personality Dragged Into Court: Jacques de Groote faces Swiss justice

Éric Toussaint Ερίκ Τουσέν اِریک توسان

 

Translated by Mike Krolikowski, Christine Pagnoulle, Stéphanie Jacquemont and Charles La Via

Jacques de Groote, ex-Executive Director of the IMF (1973-1994) and the World Bank (1975-1991) for Belgium is under accusation by Swiss justice. According to the Geneva daily Le Temps, he is standing trial in the Swiss town of Bellinzona in Tessin for “aggravated money laundering”, “fraud”, and “securities fraud” |1|. Six Czech citizens (one of whom died in March 2013) are equally accused in the same case.

The affair concerns the fraudulent privatisation of MUS (Mostecká uhelná spolecnost), one of the principal coal mines in the Czech Republic, which took place at the end of the 1990s. “They are accused of taking advantage of the privatisation of this mine in the North of the country – which was the source of 40% of Czech electricity – to make illegal gains via a complex international structure of shell corporations”. |2|

A direct effect of this affair is the freezing, by the Swiss authorities, of 660 million Swiss francs (€540million) in a hundred different bank accounts. The trial, which started on 13 May 2013, follows six years of investigation by three federal prosecutors, who have identified around sixty shell companies, some of which are based in Fribourg, Lichtenstein, and Cyprus.

Jacques de Groote stated, “I have no reason to plead guilty, neither yesterday nor today”. |3| Without presuming what sentence will be pronounced by the Swiss courts during the summer of 2013, it is worth taking a look at the career of Jacques de Groote, who is 86 today. He is an emblematic figure of the IMF and the World Bank, and there is a relationship between his role in these institutions and this affair with Swiss justice.

Jacques de Groote presided over the group of countries represented by Belgium, in the administrative councils of both of these institutions, which held 5% of the voting rights. At that time it was more voting rights than the French, British, Chinese, or Indian share. At the end of his term, the group consisted of Belgium, the Czech Republic, Slovakia, Slovenia, Austria, Luxembourg, Turkey, Belarus, Hungary, and Kazakhstan.

The World Bank and the IMF established the same privatisation process in the Czech Republic that was put into action in most of the other ex Soviet block countries at the time when Jacques de Groote was executive director. A few years after the end of his term he became president of the “Appian Group”, a Swiss company, based in Fribourg, and specialising in investments in the privatised companies of Central and Eastern Europe, and in particular the Czech Republic. |4|

According to the Financial Times, the “Appian Group has come from nowhere to become one of the largest and most powerful financial groups on the Czech business scene.” |5| It employed 15,000 people and owned, in addition to the MUS mine (taken over in 1998), the Skoda engineering group (which was also privatised), and other companies. It received favours from the Czech government, which were openly criticised by competing companies as well as by JP Morgan bank.

Concerning the privatisation of the MUS mine, the Financial Times has suggested that the mine directors and the Appian Group (presided over by Jacques de Groote) used MUS cash reserves to repay the loans taken on to pay for the buy out. |6| What is more, large sums of money were supposedly transferred out of the country. It was later noticed that MUS had been gutted. The 660 millions francs frozen by the Swiss authorities probably are to a large extent made up of this money. According to Le Temps, “At the end of the 1990s, six Czech citizens and a Belgian are supposed to have illegally enriched themselves through this privatisation and the complex financial structure they had developed. The Public Prosecutor of the Confederation (MPC) became interested in this affair as soon as the money used in the operation entered Switzerland.” It is also worth noting that the current MUS Company has also brought accusations in the procedure that began in May 2013. The Czech police have also accused the 6 Czech citizens and Jacques de Groote in this affair. |7|

Who initiated the legal proceedings brought by the Swiss courts against de Groote?

Considering that he had been swindled by Jacques de Groote, Alain Aboudaram, the Director of a Swiss company denounced de Groote and others. In 2004, he handed over a considerable amount of precise information concerning a vast money laundering operation. The extremely interesting aspect of this affair is revealed in several sentences handed down by US courts in a case that opposed Alain Aboudaram and Jacques de Groote. |8| In particular, we learn that Jacques de Groote received compensation from Alain Aboudaram’s company in exchange for his assistance in decreasing the tax liabilities of his company Skodaexport. Alain Aboudaram had direct interests in this company, which obtained a contract to build a pipeline in India from the World Bank, thanks to help from de Groote. |9|

The sentence handed down by the US justice system indicates very clearly that Jacques de Groote received significant remuneration from Alain Aboudaram’s company in exchange for his services, which Jacques de Groote has indeed recognised. According to a dispatch from the Belga news agency on 13 May, 2013: “A significant amount of money was paid to Mr. de Groote. During the trial, Mr. de Groote claimed that he was entitled to nearly $3 million for his services, and that he had already received at least $1 million.” |10| The US courts ultimately dismissed Alain Aboudaram’s case against Jacques de Groote, who avoided being convicted.

Does this make you think of influence peddling? You may be right. Nevertheless, the US courts ruled that de Groote’s activities were not reprehensible. The World Bank found nothing odd at all about his activities either. Of course not! All those speeches about good governance concern leaders of Southern countries, not the (former) Directors of the WB and IMF.

Accusations of conflicts of interest in Jacques de Groote’s “African” past

In December 1990, the Wall Street Journal published the results of a long investigation by its journalists on Jacques de Groote, who was then an Executive Director for the IMF and World Bank. |11| The WSJ considered that de Groote made systematic use of his influence at the IMF and WB to serve the interests of the dictator Mobutu. The journalists argued that there was a conflict of interest: de Groote supposedly gained financial advantages because of his position. The financial daily also asserted that de Groote benefited from his position at the WB and IMF in the case of Rwanda. Here again, the World Bank and the IMF Management felt there was nothing odd to report. This affair received a great deal of attention from the media at that time. Several articles appeared in Le Soir, the most important Belgian daily paper in French, |12| and all in all Jacques de Groote was treated quite well. Le Soir was rather indulgent, not to mention La Libre Belgique, which is owned by his political family (the Catholic Party, which has become the Christian Social Party).

He has many supporters in the establishment, in Belgium and beyond, which has repeatedly enabled him to escape from justice.

Jacques de Groote is a collector of official titles: Grand Officer of the Order of Leopold I (Belgium), Grand Officer of the Order of Orange-Nassau (the Netherlands), Commander of the Order of Merit of Austria, Commander of the Order of Luxembourg, Red Star of Hungary with a Golden palm, and last but not least, Officer of the Order of Zaire, bestowed upon him by the dictator Mobutu himself. |13| From 1980 to 1989, he was a member of the jury of the King Baudouin Foundation, which “fights poverty and underdevelopment.” From 1963 to 1992, de Groote was a professor in the Economics Department at the University of Namur (Belgium). From 1963 to 1973, he was a part-time professor at the Louvain Catholic University. From 1957 to 1960 and 1963 to 1965, he was a lecturer at the Lille Catholic University (France).

What did the Wall Street Journal (WSJ) accuse him of doing?

The WSJ pointed out that de Groote was living the high life, and running up debts ($1 million in 1990 according to the paper), which led him to borrow money from Belgian business magnates in the Congo and Rwanda where the World Bank and the IMF were very active. Interviewed by the WSJ, de Groote denied any conflict of interest, and argued that he had never used his position to obtain personal benefits. Meanwhile, the WSJ argued that General Mobutu’s corrupt regime and other dictators benefited from the generosity of the WB and IMF. It revealed that under Mobutu Zaire ran up a total debt of $1.6 billion vis-à-vis the IMF and WB, while President Mobutu became one of the richest men on the earth. |14| The WSJ goes on to explain that de Groote had been an official and officious advisor to Mobutu’s regime as of 1967. The WSJ asserted that when relations became tense between the IMF, the World Bank, and Mobutu in 1982, de Groote intervened to inform officials in Kinshasa about what the IMF mission expected from them in its upcoming visit. At stake was the disbursement by the IMF of a $246 million loan. The WSJ mentions that rumours were circulating that de Groote had received money from officials of the regime given to them by Mobutu himself. Here again, de Groote denied everything. The WSJ goes on to assert that de Groote had received a loan from baron Jean-Louis van den Brande who had direct interests in Géomines, a Belgian mining company that was active in Rwanda, and had gained advantages from the policy recommended by the World Bank and the IMF to devaluate the Rwandan franc (which had boosted export sales from the mine on foreign markets). According to the WSJ, the loan that was originally $50,000 dollars (of 1990) had tripled to $150,000, because de Groote had not honoured his promise to pay it back. The director of the bank concerned declared to the WSJ that he was afraid of lodging a complaint against de Groote because of the backers he had. The same baron is also supposed to have assisted de Groote in a real estate deal in the United States.

A few days after the articled appeared in the WSJ, Le Soir questioned Groote on this affair:
“According to the WSJ, a Belgian company directed by one of your friends, M. Van den Branden – thanks to whom you obtained a loan -, is supposed to have benefited from this devaluation?
- Any adjustment in the exchange rate has an effect on companies. It’s not my fault if I have a friend who has a mine in Rwanda. And if I asked him to help me obtain this loan, it’s because I wanted to avoid asking the banks myself due to my very close direct relations with them.” |15|
“It’s not my fault if…” There’s no need to comment upon such an answer.

This Wall Street Journal article also points out that as the Belgian Executive Director of the World Bank and IMF he had no responsibility over Zaire and Rwanda, because these countries were not part of the group presided over by the Kingdom of Belgium. Nonetheless, according to the WSJ, de Groote used his influence and gave his advice to the leaders of these two countries, Marshal Mobutu and General Habyarimana. According to the WSJ, de Groote went to visit Mobutu at his home in the south of France in August 1986, and went to see him in March 1987 in order to improve relationships between the IMF and the dictator.

Of course, in the Belgian press, de Groote denied any conflict of interest, and declared that he had not received any money from Mobutu.

Some reflections on de Groote’s action in the Congo and Rwanda

The Wall Street Journal’s investigation raised some interesting questions; however, it is worth taking the analysis further to go beyond the issue of conflict of interest. Jacques de Groote’s personal trajectory is full of shadowy areas: why, then, didn’t the IMF or the World Bank ever take their distance from him? Could it be that he actually acted in accordance with the positions of these two institutions? On two occasions, the CADTM asked the current representative for Belgium at the World Bank, Gino Alzetta, about J. de Groote’s behaviour. The first time was in 2006, when the CADTM learned about the reasons why Alain Aboudaram had filed a complaint against de Groote in the United States. The second time was in May 2013, in reaction to the suit brought by the Swiss prosecutors against de Groote and 6 Czech citizens. In both cases, Gino Alzetta said he could not see anything objectionable in J. de Groote’s behaviour. Nor has Belgium ever taken its distance from de Groote. Isn’t this because he defended some fundamental Belgian interests on the international scene?

To better understand this situation, we must take a closer look at J. de Groote’s biography, and compare it to the events that shook the social and political life in the Congo and Rwanda.

According to his non-official, albeit favourable, online biography, |16| during the first months of 1960 de Groote took part in the Belgo-Congolese Round Table in preparation for the independence of the Congo, which was formalized on 30 June 1960. Mobutu also took part in the opening of this Round Table conference in Brussels. Between April 1960 and May 1963, de Groote was an assistant to the Executive Director for Belgium at the IMF and the World Bank in Washington. Between May 1963 and July 1965, he worked in the international relations department of the National Bank of Belgium. June 1960 to 1965 was a period of political turbulence in the Congo. On June 30, 1960 in Brussels in the presence of king Baudouin and the Belgian government, Patrice Lumumba, then Prime minister of the independent Congo, gave a speech which infuriated the establishment of colonial Belgium. |17| A few months later, Mobutu, who had become Chief of Defence, put Patrice Lumumba in jail. Lumumba was to be assassinated in January 1961 in Katanga province. Mobutu acted in accordance with the interests of Belgium and the United States. On November 24, 1965 Mobutu seized power for good by staging a coup against President Kasavubu. From March 1966 to May 1969, de Groote was an economic adviser to the de facto government of Mobutu, while also working as an adviser for the National Bank of the Congo. He played an active role in the design and implementation of the economic policy of the country as well as in the negotiations taking place between Mobutu, the IMF, the World Bank, and the US government. |18|

The book The World Bank: A Critical Primer originally published in 2006 |19| gives information about the fact that Belgium reached a deal with the World Bank and the Mobutu regime to transfer to the Congo the burden of repaying a debt contracted by Belgium with the World Bank during the 1950s.

What exactly was it? In violation of the right of the peoples to self-determination, the World Bank granted loans to Belgium, France, and the United Kingdom to finance projects in their colonies. |20| As acknowledged by the Bank’s historians: “These loans, which served to alleviate the dollar shortages of the European colonial powers, were largely directed to colonial interests, especially mining, either through direct investments or indirect assistance as in the development of transport infrastructure related to mining.” |21|. These loans helped the colonial powers to increase their domination over the peoples they colonized. They contributed to supplying the colonial metropolises with ores, agriculture products, and fuel. In the case of the Belgian Congo, the millions of dollars that were lent for projects decided by the colonial power were almost entirely spent by the colonial administration of the Congo to buy products exported by Belgium. The Belgian Congo was “granted” loans totalling $120 million (in 3 disbursements), $105.4 million of which were spent in Belgium.. |22| For Patrice Lumumba’s government, it was inconceivable to repay this debt to the World Bank since it had been contracted by Belgium to exploit the Belgian Congo.

Things changed in 1965: following Mobutu’s military coup, the Congo acknowledged it owed money to the World Bank, whereas this debt was in reality owed by Belgium.
International law is clear on this issue. A similar case occurred in the past and was settled in the Treaty of Versailles. After World War I when Poland was reconstituted as an independent State, it was decided that the debts incurred by Germany to colonize the part of Poland it had subjugated would not have to be repaid by the newly independent State. The Treaty of Versailles of June 28, 1919 stated: “that portion of the debt which, in the opinion of the Reparation Commission, is attributable to the measures taken by the German and Prussian Governments for the German colonisation of Poland shall be excluded from the apportionment to be made under Article 254.” |23| . The Treaty stated that the creditors who had lent to Germany for projects in the Polish territory could only claim their dues to this power, and not to Poland. Alexander Nahum Sack, who theorized the concept of odious debt, wrote in his legal treatise in 1927: “When a government incurs debts to subjugate the population of a part of its territory or to colonize it with members of the dominant nationality, etc., these debts are odious to the indigenous population of that part of the territory of the debtor State.” |24| The former applies fully to the loans the Bank extended to Belgium, France, and the UK for the development of their colonies. By transferring to the independent Congo the burden of the debts contracted to colonize it, the World Bank and Belgium thus acted in violation of international law.

As mentioned above, de Groote actively participated in the negotiations that took place at the time of the independence of the Congo; he later advised the government of the dictator Mobutu. The details of his actions remain unknown, but given the responsibilities he took on, he is certainly partly responsible for this affair.

Let us now look at the 1973-1994 period when J. de Groote was Executive Director for Belgium at the IMF.

At the end of the 1970s, Erwin Blumenthal, a senior IMF official, German banker, and former Director of Foreign Affairs at the Bundesbank, made a damning report about Mobutu’s management of Zaire. He warned the foreign creditors that they should not expect repayment as long as Mobutu remained in power.

Between 1965 and 1981, the government of Zaire borrowed about $5 billion from foreign creditors and between 1976 and 1981 part of its external debt was subject to four restructurings by the Paris Club amounting to $2.25 billion. All of this debt falls into the category of odious debt, and is therefore null and void.

The poor economic management and systematic embezzlement by Mobutu of part of the loans did not lead the IMF and World Bank to stop their assistance to Mobutu’s dictatorial regime. Strikingly enough, after the Blumenthal report was handed in, the Bank’s disbursements increased (so did the IMF’s disbursements, but they do not show in the chart below). |25| Clearly the choices made by the World Bank and the IMF are not mainly determined on the basis of sound economic management. Mobutu’s regime remained a strategic ally of the US and other influential powers in the Bretton Woods institutions (e.g. France and Belgium) as long as the Cold War lasted.

Congo-Kinshasa (Zaire under Mobutu): World Bank disbursements

PNG - 11.3 kb

Source: World Bank, Global Development Finance, 2001

From 1989-1991 with the fall of the Berlin Wall, later followed by the crumbling of the Soviet Union, the Western powers began to lose interest in Mobutu’s regime. All the more so that in many African countries (including in Zaire) national conferences were taking place and making democratic claims. The World Bank started lending less before stopping its loans altogether in the mid 1990s.

Under Mobutu’s rule (1965-1997), the IMF and the World Bank were instruments serving the US policy and geostrategy, which rewarded Mobutu for his support in the Cold War.

“In many cases, the loans were used to corrupt governments during the Cold War. The issue was not whether the money was improving a country’s welfare, but whether it was leading to a stable situation, given the geopolitical realities of the world.”

Joseph E. Stiglitz, chief economist of the World Bank from 1997 to 1999, Nobel Laureate in Economics in 2001, on a French television show L’Autre mondialisation (The Other Globalization), on Arte, March 7, 2000

Therefore, the IMF and the WB, where de Groote was a senior official, became complicit in the abuses committed by the Mobutu regime against human, economic, social, and cultural rights inasmuch as they maintained their support for the dictatorial system, which did not at all honour its financial obligations.

“The issue of the moral responsibility of the creditors was particularly apparent in the case of Cold War loans. When the IMF and the World Bank lent money to the Democratic Republic of the Congo’s notorious ruler Mobutu, they knew (or should have known) that most of the money would not go to help that country’s poor people, but rather would be used to enrich Mobutu. It was money paid to ensure that this corrupt leader would keep his country aligned with the West. To many, it doesn’t seem fair for ordinary taxpayers in countries with corrupt governments to have to repay loans that were made to leaders who did not represent them.”

Joseph Stiglitz, Globalization and Its Discontents, 2002

Mobutu and his clan used the State coffers as a steady and plentiful source of personal enrichment through three different kinds of misappropriation: legal, illegal, and mysterious expenditures. The legal ones, such as the presidential endowment was allocated without any control. The illegal expenditures are described in the Blumenthal report (this secret report was made public in 1982), |26| which indicates that it was impossible to control the State’s financial transactions since the presidential office hardly made a distinction between personal expenses and public spending. Erwin Blumenthal identified at least seven bank accounts held abroad that were used to channel money directly to Mobutu’s personal bank accounts or to corrupt political figures. Erwin Blumenthal’s position/message was clear: “The corruptive system in Zaire with all its wicked and ugly manifestations, its mismanagement and fraud will destroy all endeavours of international institutions, of friendly governments and of the commercial banks towards recovery and rehabilitation of Zaire’s economy. Sure, there will be new promises by Mobutu, […] but no (repeat: no) prospect for Zaire’s creditors to get their money back in any foreseeable future.” |27|

Since 1979, the main lenders of Mobutu’s regime, closely connected to the IMF, had known and been aware of these fraudulent practices, and of the risk they were taking by keeping on lending to Mobutu’s regime.

As indicated in this report, the third category of embezzlement consisted of “mysterious expenditures.” One of the State’s largest budget items (accounting for 18% according to a 1989 World Bank study) was the one of “other goods and services”, a hotchpotch with little information on the allocation of the expenditures. According to World Bank experts, most of the money was used for extravagant expenditures as well as to purchase military equipment. This shows that the World Bank was also well aware of the illegal use of the money included in its own loans.

By the mid 1970s, it was clear that the money injected into Zaire in the form of loans or grants was systematically diverted from its initial purpose. The loans and grants were either directly transferred to personal bank accounts held abroad |28| or invested in prestigious, inadequate and/or useless projects that helped many people to get richer, but certainly did not help the sustainable industrialisation of the economy. For instance, according to the Office of ill-gotten gains (Office des biens mal acquis, OBMA), which was created as an outcome of the National Conference, Mobutu supposedly pocketed a 7% commission on the value of the Inga hydroelectric plant. The investigation could not be pursued to its conclusion because of resistance from the official circles. |29|

J. de Groote actively supported Mobutu’s regime and intervened several times to improve the relationships between the IMF, the World Bank, and Mobutu, although he was very well placed to know in detail what Blumenthal denounced in his report. He also knew about the serious violations of human rights committed by the Mobutu regime.

And yet in 1994 at the end of his term, de Groote said he was satisfied with his action vis-à-vis Congo-Kinshasa, while the vast majority of the Congolese people lived in great misery, the suppression and assassinations of opponents were rife, and the economy was devastated.

Jacques de Groote and Rwanda

J. de Groote was also involved in WB and IMF activities in Rwanda.

In the interview already cited, which was published by Le Soir, Béatrice Delvaux asks him: “What about the case of the letter to the Rwandan President Habyarimana, in which you mention and support the IMF’s idea that a devaluation would be necessary?” Jacques de Groote responded: “At the beginning of the 1980s, this country had not given its support to the African Executive Director when the Council was created. He had asked me to represent it. After having been authorised by the different countries I represent, I checked with the IMF and World Bank services for Rwanda. I noticed an anomaly according to which the Rwandan franc was attached to the dollar, which had resulted in a 35% appreciation of their franc, as I explained to the President. I had to draw his attention to these facts since I was supposed to be watching out for his interests. There are very few cases in which the IMF has taken such a clear position.” |30|

In January 1991, the journalist Colette Braeckman published an important article in Le Soir on J. de Groote’s activities in Rwanda. Here is a very enlightening excerpt:
“A major employer in Rwanda, the director of Somirwa [a mining company owned 51% by baron van den Branden’s Géomines entity], M. van den Branden, lobbied President Habyarimana relentlessly so that he would agree to ask for major international loans. […] While the situation was at a stand-off between Rwandan authorities and Somirwa, M. de Groote, who is considered to be an expert, was solicited: he was trusted by the Rwandan authorities, a friend of M. van den Branden, regularly travels to Washington, and boasts about his American connections to anyone willing to listen.

M. de Groote’s verdict is clear: he is recommending a devaluation of the Rwandan franc, and pleading in favour of bailing out the company. In this way, he is following the doctrine of his organisation: M. de Groote is fighting against the overvaluation of the Rwandan franc, and betting on exports from the mining sector. The verdict rendered by the “arbitrator” is therefore favourable to Somirwa, even if it was inspired by standard IMF criteria.

The Wall Street Journal has revealed that at that time M. de Groote borrowed money from Nagelmaekers bank, which is directed by the same M. van den Branden, and that he was living in a house in Georgetown indirectly financed by van den Branden, which the American paper sees as a prime example of ‘conflict of interest’.” |31|

It is crucial to reassess the disastrous actions undertaken by the World Bank and the IMF in Rwanda.

A look back on the 1994 genocide

Starting on 7 April 1994, in less than three months, nearly one million Rwandans – the exact figure has not yet been determined - were exterminated because they were (or supposed to be) Tutsis. Tens of thousands of moderate Hutus were also slaughtered. This was indeed a genocide, that is, the deliberate destruction of an entire community through mass murder in the aim of preventing their biological and social reproduction.

In this context, it is crucial to investigate the role played by international financial institutions. Everything we know makes us to believe that the policies imposed by these institutions, the main financial backers of General Juvénal Habyarimana’s dictatorial regime accelerated the process resulting in the genocide. In general, the negative impact of these policies is not taken into consideration to explain the tragic unfolding of the Rwandan crisis. Only a few authors highlight the responsibilities of the Bretton Woods institutions, |32| which have refused any kind of criticism to this regard.

At the beginning of the 1980s, when the debt crisis exploded in the Third World, Rwanda (like its neighbour Burundi) had very little debt. Whereas elsewhere in the world, the World Bank and IMF were abandoning their go-go loan policy and preaching abstinence, they adopted a different attitude with respect to Rwanda to which they granted major loans. Between 1976 and 1994, there was a twenty-fold increase in Rwanda’s external debt. In 1976, it amounted to $49 million, while in 1994 it was nearly $1 billion. Its debt increased especially as of 1982. Its principal creditors were what we call the IFIs or International Financial Institutions — the World Bank, IMF, and related institutions. The WB and IMF played the most active role in this debt process. In 1995, IFIs held 84% of Rwanda’s external debt.

The dictatorship in place since 1973 was a guarantee that there would be no progressive structural changes in the country. That explains why it was actively supported by Western powers such as Belgium, France, and Switzerland. In addition, it could be a rampart against the countries in the region that were still mulling over thoughts of independence and progressive change (for instance, the Tanzania of the progressive president Julius Nyerere, one of the African leaders in the Non-Aligned Movement).

Throughout the 1980s and up until 1994, Rwanda received many loans, but the dictator Habyarimana embezzled a large portion of them. The loans granted were supposed to be used to integrate Rwanda’s economy more in the world economy by developing its capacities to export coffee, tea, and tin (its three main export products), which was detrimental to its crops cultivated to satisfy local needs. This model worked until the middle of the 1980s, when the price of tin, then that of coffee, and finally tea, collapsed. Rwanda, for which coffee was the main source of hard currency, was hit hard by the breaking up of the coffee cartel at the beginning of the 1990s by the United States.

Using international loans to prepare for the genocide

Only a few weeks before the Patriotic Front of Rwanda launched its offensive in October 1990, the government of Rwanda signed an agreement with the IMF and the WB in Washington to implement structural adjustment measures.

They were implemented in November 1990: the Rwandan currency dropped by 67%. By way of compensation, the IMF granted strong currency loans for quick disbursement so that the country could keep importing goods. The funds loaned artificially balanced the balance of payments. The prices of imported goods skyrocketed: for instance the price of petrol went up by 79%. Selling imported goods on the domestic market made it possible for the government to pay the army’s wages, though the number of soldiers had increased in staggering proportions. The structural adjustment measures included a decrease in public spending, and wages were indeed frozen, and there were massive layoffs in the civil service, but part of the savings was used for the army.

Whereas the prices of imported goods increased, the price at which producers could sell coffee was frozen, as demanded by the IMF. As a result, hundreds of thousands of small coffee producers went bankrupt, |33| together with the more deprived layers of city dwellers they became a permanent supply for Interahamwe and army recruits.

The following measures were among the ones the WB and IMF imposed in Rwanda: an increase in consumption taxes and a decrease in corporate taxes, an increase in direct taxes on low-income families through a reduction of tax breaks for large families, and restrictions on credit facilities given to farmers.

To account for its use of loans from the IMF/WB, Rwanda was allowed to submit old invoices for imported goods. This device made it possible for the government to pay for the massive purchase of weapons intended for the genocide. Military expenses increased three-fold between 1990 and 1992. |34| Over this period, the WB and the IMF sent out several missions of experts who highlighted the positive consequences of the austerity policies enforced by Habyarimana, yet threatened to discontinue payments if military expenses increased further. The Rwandan government then used various devices to conceal military expenses: Lorries bought for the army were accounted for in the budget of the transport ministry, a significant part of the petrol used in the army or militia vehicles was part of the budget for the ministry of health. Eventually the WB and the IMF stopped providing financial support in early 1993, but they did not expose the existence of bank accounts the Rwandan government had in foreign banks with substantial amounts still available to buy more weapons. It can be said that they failed in their duty to control the use of the funds loaned. They should have stopped their loans in early 1992 when they heard that the money was being used to buy weapons. They should have warned the UN at once. As they went on supplying support until 1993, they helped a government that was preparing for genocide. As early as 1991, human rights organisations had tried to draw international attention to the massacres that paved the way for the genocide. The World Bank and the IMF systematically supported a dictatorial regime, with the help of the US, France, and Belgium.

Exacerbated social contradictions

For the genocidal project to be achieved, more than just a government was needed to devise it and acquire the necessary tools, the people also had to be impoverished and driven to a level of desperation at which they were ready to do anything. In this country, 90% of the population lives in the country, and 20% of farm families own an acre or less. From 1982 to 1994, a massive process of impoverishment hit the majority of the farming population, while a few others at the other end of the social spectrum were accumulating a huge amount of wealth. Professor Jef Maton states that in 1982 the richest 10% of the population owned 20% of rural revenues; in 1992 they had grabbed 41%, in 1993 45%, and in early 1994 51%. |35| The disastrous social consequences of the policies enforced by the IMF and the WB combined with the plummeting price of coffee (itself a consequence of policies applied by the Bretton Woods institutions, and the US doing away with the cartel of coffee producers at about the same time) played a key role in the Rwanda crisis. The huge social discontent was channelled by Habyarimana’s regime to carry out the genocide.

Jacques de Groote’s action has to be understood in this general context considering that, as he claimed himself, he had actively supported Habyarimana’s regime (before the genocide).

Now that we have examined the social and historical context in which de Groote’s action in Africa can be understood from the 1960s to the end of his mandate as IMF executive director in 1994, let us turn back to Europe.

The World Bank serving the interests of major Belgian private corporations

The World Bank’s official documents have nothing to say about this subject; however, in some specialised journals written for corporate directors there are precise indications of the advantages offered to private companies by the Bank’s activities. The excerpt from the following speech speaks for itself. It was pronounced in 1986 by Jacques de Groote to a group of Belgian company presidents, and published in the Bulletin de la Fédération des Entreprises de Belgique (Newsletter of the Federation of Belgian Companies): “The advantages that Belgium derives from its participation in the activities of the Group’s institutions– as do all World Bank member countries – can be measured in terms of flow back, that is to say the relationship between, on the one hand, the total amount of disbursements made by the IDA (International Development Association, which is part of the World Bank Group) or the World Bank in favour of a country’s companies, when these companies sign contracts, and, on the other hand, the contributions of this country to the Bank’s capital, as well as to the IDA’s resources. Flow back is thus the relationship between what the companies obtain via the sales of equipment or consulting services and what Belgium provides as a contribution to the IDA’s resources and to the Bank’s capital. The flow back from the World Bank toward industrialised countries is significant, and has continually increased: for all industrialised countries, it has increased from 7 to 10 from the end of 1980 to the end of 1984. In other words, for one dollar put into the system, the industrialised countries got back 7 in 1980 and receive 10.5 today.” |36|

After the end of his mandate at the IMF and World Bank

In his interview with Béatrice Delvaux from Le Soir in March 1994, at the end of his IMF mandate, de Groote congratulates himself on the role he played in the decision made by Belgium to adopt the neoliberal agenda during the 1980s.

Béatrice Delvaux: “You did, however, from Washington play a major role in the orientation of Belgian economic policy. You provided a guarantee from the IMF for the economic shift at the beginning of the 1980s, in close relationship with the ‘Poupehan’ group?” |37| J. de Groote’s response: “Absolutely, and I’m extremely proud of this. I am even extremely satisfied. At that time, we completed studies that enabled the major economic policy options to be defined for Belgium, which were then discussed with Alfons Verplaetse |38| and other figures including Wilfried Martens.” |39|

These statements provide a good illustration of the close relationships between figures like de Groote and the key political leaders in a particular country. De Groote acknowledged moreover that the independence of the Belgian National Bank is only for the form, since Belgian (monetary) policy was defined in a very small circle bringing together in secret key stakeholders ranging from the Prime Minister to the Governor of the National Bank, and including the head of the Christian Unions and representatives of corporate management, all in cahoots with the IMF.

Jacques de Groote and Latin America

In the same interview that appeared in Le Soir at the end of March 1994, de Groote rejoices over the so-called successes of the IMF and World Bank in Latin American, in general, and Mexico, in particular: “There are countless examples of success. The typical case is that of Mexico. In October 1982, this country was in the middle of a serious debt crisis, but the joint action of the IMF and WB enabled it to adapt rapidly, its balance of payments was rebalanced with only a limited and short-term decrease in the income of the Mexican people. Today, capital is flowing back to Mexico, and the World Bank is managing a programme there intended to diversify production.”

The ink on the paper had not yet dried when reality greatly contradicted J. de Groote’s optimistic statements: capital started leaving Mexico massively, and in December 1994 this flight of capital was to cause the “tequila” crisis, which has resulted in the serious and long-term decline of the Mexican economy.

Jacques de Groote and Eastern Europe

During the last years of his mandate at the World Bank and IMF, de Groote was particularly active in putting in place shock doctrine policies in the countries that had just left the Soviet block. This was the case in Czechoslovakia until the creation of the Czech Republic and Slovakia in 1993, both of which were members of the group presided over by Belgium at the IMF and World Bank. The people in Eastern European countries suffered a great deal from the austerity measures and privatisations imposed on their countries by these international institutions. The privatisations enabled an oligarchy of corrupt new rich people to obtain exorbitant power and accumulate outlandish wealth to the detriment of public goods. We might say that Jacques de Groote has come full circle. He is now accused of “aggravated money laundering,” “fraud”, and “securities fraud” in the fraudulent privatisation of the MUS mine in the Czech Republic.

Jacques de Groote and private banks

It has already been mentioned concerning the current legal affair in Switzerland: the Crédit Suisse bank has been directly mentioned by several press agencies for having assisted various companies that are directly linked to the organisers and beneficiaries of the fraudulent privatisation of the MUS mine. We were not able to consult the bill of indictment, and consequently do not know the list of financial companies that are directly involved in the securities fraud, fraud, and money laundering activities.

Without making any assumptions about the role he may have played in this affair, it would perhaps be useful to mention the existence of the CELIFF, a financial company founded in 2001 in the Grand Duchy of Luxembourg by Dexia Asset Management Luxembourg. Its Board of Directors included Jacques de Groote, the President of the APPIAN GROUP, and two Czech citizens prosecuted in 2013 by the Swiss justice. They were Jiri Divis, Vice Chairman of the Board of Directors of APPIAN GROUP EUROPE S.A., and Marek Cmejla, Vice Chairman of the Board of Directors and Deputy Chief Executive Officer of NEWTON HOLDING A.S., living in Prague in the Czech Republic. Other members of the Board include Adrien de Merode, Director of APPIAN GROUP EUROPE. The 4 remaining directors were all from the Dexia Group: 1 from Luxembourg, 1 from Switzerland, and 2 from France. |40|

Conclusion

Beyond the zigzags of his personal trajectory, Jacques de Groote symbolises the profoundly disastrous aspects of the inhumane policies methodically applied by the World Bank, the IMF, and the elites who govern the world with only maximum profit in mind. It is truly revolting to see how greed and the violation of fundamental human rights are so cleverly packaged by them.

 

Footnotes

|1| Valère Gogniat, "La mine tchèque qui met Berne au défi" (The Czech mine that challenges Bern), Le Temps, Geneva, 8 May 2013.

|2| Ibid.

|3| See http://www.lalibre.be/economie/actu... (in French only)

|4| See Financial Times, Robert Anderson, “Appian Group: A secretive power to be reckoned with”, 21 September 2004. See also: http://www.investorvillage.com/mbth.... Appian Group was founded in 1996 by Stephen L. Norris who established the head office in the US tax haven state of Delaware. Appian Group acquired the society MUS in 1998, and Stephen L. Norris conceded the presidency in 1999 to Jacques De Groote who established the society in Fribourg. A few years later, in 2003 – 2004 Appian moved again, helped by Credit Suisse, to another tax haven Guernsey. The author of this article has been doing research on this company since 2005. At that time, Appian group was easily visible on internet. Since this time the references to this group on internet has been carefully erased.

|5| Robert Anderson, “Appian Group: A secretive power to be reckoned with”, Financial Times, 21 September 2004. “Appian Group has come from nowhere to become one of the largest and most powerful financial groups on the Czech business scene.”

|6| This is also suggested in a release by the Czech press agency CTK who summarise as follows, the legal process going on in Switzerland : “The Swiss federal prosecutor’s office, following five years of investigations, says top managers may have syphoned off company cash allowing themselves to take control of MUS while depositing funds in Swiss accounts.” (24/11/2011, http://www.ceskapozice.cz/en/tag/ma... )

|7| See http://praguemonitor.com/2012/06/22..., was still available on 9 June 2013.

|8| See in particular: http://law.justia.com/cases/federal...

|9| “Skodaexport sought financial advice in reducing its tax liability to the Czech government and to obtain a contract through the World Bank to build an oil pipeline in India. Tr. Feb. 24, 2004, at 139-40. Presumably relying on his contacts, de Groote obtained a copy of a relevant study that the World Bank had done in India, explored the status of the project at the World Bank, determined how much money had been earmarked for it, identified SkodaExport’s potential competitors, and introduced Aboudaram to the World Bank official in charge of the project” http://www.dcb.uscourts.gov/pdf_fil...

|10| See excerpt from the judgment: “According to de Groote, he and Aboudaram orally agreed that CAASA would pay de Groote one-third of the fees CAASA earned from SkodaExport, which would amount to almost $3 million. CAASA denied that it had agreed to pay de Groote for his SkodaExport work on a percentage basis and instead insisted that it had already compensated him on flat rate terms for individual services rendered. The parties agree that CAASA did pay de Groote at least $1 million. See Appellant’s Br. 12 n.24; Appellee’s Br. 3.” http://cases.justia.com/us-court-of...

|11| Edward T. Pound, “Cozy Ties: IMF, World Bank Aide Has Dealings Hinting At Conflict of Interest --- Jacques de Groote Counsels Zaire, Got Help of People He Was in Position to Aid --- He Denies Any Improprieties” The Wall Street Journal, 28 December 1990. You must pay to view this article.

|12| See « Le Wall Street Journal parle de conflit d’intérêts. L’administrateur belge du FMI nie » (The Wall Street Journal speaks of a conflict of interest. Belgian IMF Executive Director denies it), Le Soir, 29 December 1990 http://archives.lesoir.be/le-wall-s... Béatrice Delvaux, « Jacques de Groote s’explique » (Jacques de Groote justifies himself), Le Soir, 2 January 1991 http://archives.lesoir.be/jacques-d... Colette Braeckman, « Les opposants zaïrois réclament une enquête » (Zairean opposition demands an investigation), same source, same date. Colette Braeckman, « La Story de l’affaire de Groote : FMI, corruption et conflits d’intérêts » (The Story of the de Groote affair: IMF, corruption, and conflicts of interest), Le Soir, 7 January 1991, http://archives.lesoir.be/la-story-...

|13| Source: Biography: Dr. Jacques De Groote http://www.zoominfo.com/p/Jacques-D...

|14| “The African nation owes the IMF and World Bank more than $1.6 billion, yet President Mobutu has become one of the world’s wealthiest men, reputedly a billionaire.”

|15| Béatrice Delvaux, « Jacques de Groote s’explique » (Jacques de Groote justifies his actions), Le Soir, 2 January 1991 http://archives.lesoir.be/jacques-d...

|16| Source: http://www.zoominfo.com/p/Jacques-D... accessed 9 June 2013

|17| Read his speech: http://www.marxists.org/subject/afr.... See also (in French): http://www.kongo-kinshasa.de/dokume...

|18| See: http://www.zoominfo.com/p/Jacques-D..., accessed 10 June 2013. “From March 1966 to May 1969 Dr. De Groote acted as Economic Advisor to the Republic of Zaire and Advisor to the Governor of the National Bank of Zaire. He was responsible for Zaire’s economic rehabilitation, and for negotiations with the IMF, the World Bank and the U.S. government. The 1967 program resulted in the only period of growth of the Zairian economy since Independence (1968-1971), and is cited by the IMF and World Bank as one of the most successful stabilization efforts ever undertaken under their aegis. During this period Dr. De Groote was also in charge of Zaire’s negotiations for nationalizing and reactivating Gecamines (the former Union Minière).”

|19| Original edition in French: Eric Toussaint, Banque mondiale : le Coup d’État permanent. L’Agenda caché du Consensus de Washington, co-edition CADTM / Syllepse / CETIM, Liège/Paris/Genève, 2006, 310 pages. http://cadtm.org/Banque-mondiale-le...
Editions in English:
-World Bank: a never-ending coup d’Etat, VAK (Mumbai-India), 2007.
-The World Bank: A Critical Primer, Pluto Press, London, Michigan, Toronto, Cape Town.
Editions in Spanish: -Banco mundial: el golpe de estado permanente Editorial Viejo Topo (Barcelona), 2007; Editorial Abya-Yala (Quito), 2007; Editorial del CIM, Caracas, 2007; Editorial Observatorio DESC, La Paz, 2007.
A Japanese edition has just been published.

|20| The colonies concerned by these loans from the World Bank are: for Belgium, the Belgian Congo, Rwanda and Burundi; for the United Kingdom, East Africa (Kenya, Uganda and what would later become Tanzania), Rhodesia (Zimbabwe and Zambia) as well as Nigeria, and the British Guiana in South America; for France, Algeria, Gabon, French West Africa (Mauritania, Senegal, French Sudan- now Mali, Guinea, Ivory Coast, Niger, Upper Volta - now Burkina Faso, and Dahomey - now Benin).

|21| Devesh Kapur, John P. Lewis, Richard Webb, The World Bank, Its First Half Century, 1997, Volume 1, p. 687.

|22| The fact that Belgium was the actual recipient of the loans granted to the Belgian Congo can be deduced from a chart published in the fifteenth World Bank annual report. IBRD (World Bank), Fifteenth Annual Report 1959-1960, Washington DC, p. 12.

|23| Quoted by Alexander Nahum Sack in Les Effets des Transformations des États sur leurs Dettes Publiques et Autres Obligations financières, 1927 Recueil Sirey, Paris, p. 159.

|24| Alexander Nahum Sack, Effects of the transformations of the states in their public debts and other financial obligations, 1927.

|25| The Bank’s historians wrote that in 1982 “Lured by Mobutu’s guile and promise of reform and by pressures from the United States, France, and Belgium, the bank embarked on an ambitious structural adjustment lending program to Zaire” in Devesh Kapur, John P. Lewis, Richard Webb, The World Bank, Its First Half Century, 1997 Volume 1: History, p. 702.

|26| In 1978, the IMF sent Erwin Blumenthal to the Central Bank of Zaire to improve its operations. In July 1979, he resigned after receiving death threats from those close to Mobutu.

|27| Erwin Blumenthal, Zaire: Report on her Financial Credibility, 7 April 1982, typescript, p.19.

|28| Mobutu even managed to intercept money before it actually reached the public coffers, as happened for instance with the $5 million granted by Saudi Arabia in 1977 (Emmanuel Dungia, Mobutu et l’argent du Zaïre (Mobutu and the money of Zaire), 1992, L’Harmattan, p.157).

|29| Steve Askin and Carole Collins, “External Collusion with Kleptocracy: Can Zaïre Recapture its Stolen Wealth?” in African Political Economy, 1993, n° 57, p.77

|30| See http://archives.lesoir.be/jacques-d...

|31| Colette Braeckman, « Affaire de Groote-FMI : la SOMIRWA au Rwanda, un cas éclairant » (The de Groote-IMF affair: the SOMIRWA in Rwanda, an enlightening case), Le Soir, 7 January 1991, http://archives.lesoir.be/affaire-d...

|32| Chossudovsky, Michel et al. 1995. « Rwanda, Somalie, ex Yougoslavie : conflits armés, génocide économique et responsabilités des institutions de Bretton Woods » (Rwand, Somalia, ex-Yugoslavia: armed conflicts, economic genocide, and the responsability of Bretton Woods institutions); Chossudovsky, Michel and Galand, Pierre, « Le Génocide de 1994, L’usage de la dette extérieure du Rwanda (1990-1994). La responsabilité des bailleurs de fonds » (The Genocide of 1994. The use of Rwanda’s external debt (1990-1994). The responsability of financial institutions), Ottawa and Brussels, 1996. See also: Renaud Duterme, Rwanda : une histoire volée (Rwanda, a stolen history), Co-edition Tribord and CADTM, 2013 http://livre.fnac.com/a6103644/Rena...

|33| Maton, Jef. 1994. Développement économique et social au Rwanda entre 1980 et 1993. Le dixième décile en face de l’apocalypse.

|34| Nduhungirehe, Marie-Chantal. 1995. Les Programmes d’ajustement structurel. Spécificité et application au cas du Rwanda.

|35| Maton, Jef. 1994. Ibid.

|36| FEB, 1986, p. 496-497.

|37| The Poupehan group was a lobby made up of the main conservative political leaders in the Belgian Christian Social Party, who played a key role in the neoliberal shift. See http://archives.lesoir.be/les-fanto...

|38| Alfons Verplaetse was the Governor of the National Bank of Belgium, and a member of the Christian Social Party in the Flemish part of the country.

|39| Wilfried Martens, the Christian Social Prime Minister who put in place neoliberal policies in alliance with the Liberal Party.

|40| See: CELIFF MANAGEMENT CORPORATION S.A., Société Anonyme Holding.
Registered office: L-1150 Luxembourg, 283, route d’Arlon. Publised in the Journal Officiel du Grand-Duché de Luxembourg, RECUEIL DES SOCIETES ET ASSOCIATIONS, C — N° 723 5 September 2001 http://www.etat.lu/memorial/2001/C/...

 





Courtesy of CADTM
Source: http://cadtm.org/Une-figure-emblematique-du-FMI-et
Publication date of original article: 10/06/2013
URL of this page : http://www.tlaxcala-int.org/article.asp?reference=10015

 

Tags: Jacques de GrooteBelgiumEuropean UnionEuropeIMFWorld BankCzech RepublicMostecká uhelná spolecnost (MUS)BankstersFraudulent privatizationsSwitzerlandTax havensAppian GroupAfricaRwandaRwandese genocideCongoMobutuEastern Europewhite-collar criminals
 

 
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