Whatever happened to McCreevy, Verheugen et al?
In 2010 when the Barroso I Commission left office, there was a public outcry when six out of the 13 departing commissioners went almost immediately into the corporate sector or lobby jobs, provoking the risk of possible conflicts of interest. The scandal was so great that 52,000 people signed a petition to Commission President Barroso and the ethical rules for commissioners were subsequently tightened up, although significant loopholes remain.
Now in 2014, CEO has looked again at these six former commissioners to see what lessons can be learnt as the Barroso II Commission prepares to leave office later this year.
Charlie McCreevy was the commissioner for the internal market and in the months after he left the Commission, he became synonymous with the revolving door. His proposal to join the board of the new bank NBNK investments (which aimed to purchase banking assets on sale in the aftermath of the financial crisis) was shocking, considering that McCreevy had been commissioner during a period of intense liberalisation in the financial sector which contributed to the financial bubble, its collapse and the ongoing economic crisis!
Significant controversy arose over this revolving door case, including critical media coverage and NGO complaints. In the end, the Commission threatened to issue a disapproval for the role, leading McCreevy to ultimately withdraw. However, he seemed unabashed by this experience and, once the 12 month period during which he should notify the Commission of new roles (according to the then rules) had passed, McCreevy joined the derivatives trading unit of global investments company BNY Mellon. McCreevy had been responsible for (de-)regulating derivatives markets whilst commissioner. No Commission approval was sought, or required, for this role.
In addition, McCreevy joined the board of Ryanair (which the Commission approved) where he advises on relations with the European Commission, as well as the board of Sentenial (no Commission approval was sought as the role was taken after end of 12 month notification period). Sentenial offers SEPA (Single Euro Payments Area) technology to banks and other companies and according to Sentenial’s website McCreevy played a “pivotal role” in developing the EU’s SEPA regulations whilst commissioner. Both of these roles provoke a strong suspicion of conflicts of interest.
The revolving door moves of McCreevy highlighted the inadequacies of the then code of conduct for commissioners. The 12-month notification period was later extended to 18 months and now includes a ban on lobbying and advocacy roles for the same period, but it seems unlikely that these reforms would have stopped McCreevy’s troubling spins through the revolving door. CEO and other transparency campaigners believe that a three year cooling-off period for lobby jobs or other roles which provoke a possible conflicts of interest (to match the transitional allowance arrangements) is the only way to effectively safeguard the Commission from such scandals in the future.
Günter Verheugen, the former commissioner for enterprise and industry, was another of the controversial revolving door commissioners from Barroso I. Upon leaving the Commission, in April 2010 he founded the European Experience Company (EEC), a consultancy firm together with his former head of cabinet Petra Erler. Verheugen is an (unpaid) managing director of this firm but also holds 50 per cent of the shares.
Verheugen failed to inform the Commission in advance about the setting up of the EEC as he was required to do by the then code of conduct for commissioners. The existence of the EEC was only uncovered by the German weekly newspaper Wirtschaftswoche in August 2010.
When Verheugen finally provided information to the Commission about the EEC, the Commission’s ad hoc ethical committee (to which the Commission can refer revolving door cases for an opinion) did not approve Verheugen’s involvement with the EEC. However their advice to the Commission is non-binding and the Commission ignored it and instead authorised the role.
The EEC was only one of several new roles Verheugen took on when he left the Commission. He is also a senior advisor and vice chairman of Royal Bank of Scotland (RBS) Niederlassung Deutschland; European Affairs adviser for the Federation of German Co-operative Banks (BVR); and a member of lobbying consultancy FleishmanHillard’s international advisory board. For each of these roles, Verheugen informed the Commission that lobbying was not to be part of the role. The Commission conducted little or no investigation into this claim and ‘lobbying’ remains an undefined term in the revised code of conduct. Each of these roles was approved by the Commission.
All in all, the Verheugen case was pretty remarkable. All proposed revolving door moves by commissioners should be assessed by a (fully independent) ethics committee and their findings should be binding; the Commission should not be able to ignore their recommendations on a whim. Lobbying should also be properly defined in the code of conduct (perhaps using the definition of lobbying adopted by the EU's transparency register) and claims of non-lobbying should be fully investigated.
Professor Verheugen has told us:
“I am not involved in lobbying-activities of any kind. The same is true for the European Experience Company, of which I am a shareholder. This company explicitly rules out lobbying as it is stated on its website.”
It seems to CEO that the wording used here is unclear and that it does not rule out advising companies on how to lobby the EU. Verheugen's full response can be read here.
Benita Ferrero-Waldner was the commissioner for external relations and then trade. When she left the Commission on 9 February 2010, she immediately joined the board of Munich Re, the insurance giant, three days later. In fact, Ferrero-Waldner had already started negotiating her future role at Munich Re (and several others besides) while she was still in office as commissioner; her application for authorisation to the Commission was dated 29 October 2009. This application was approved.
In CEO’s view, there can be no excuse for negotiating future roles whilst still in office and this should be banned. Afterall, all ex-commissioners are entitled to between 40 and 65 per cent of their final basic salary for the three years after they have left office and the purpose of this generous allowance is to enable ex-commissioners to not have to seek out immediate new employment, and thus avoid the risk of possible conflicts of interests. Commissioners should also be banned from accepting all roles that could provoke a possible conflict of interest during this period.
Ms Ferrero-Waldner told us:
“Let me say that I have declared all my activities to the Commission in line with the established procedures and that there is no question of any conflict of interest.”
The tale of Joe Borg is a strange one. Borg is the former commissioner for maritime affairs and fisheries and in 2010 he was appointed a part-time special adviser to Fipra, one of Brussels’ biggest lobby firms. Fipra had (and continues to have today) a number of maritime-related clients which contributed to the controversy of Borg's new job. The Commission authorised Dr Borg’s proposed move to Fipra with the condition that he did not provide advice on integrated maritime policy or the common fisheries policy. At the time of his move to Fipra, Joe Borg wrote that he “would be advising clients largely on matters [not] directly linked with my recent mandate at the Commission”.
When contacted by CEO for this article in November 2013, Borg told us that a few months after signing the contract with Fipra,
“I decided to suspend the agreement with FIPRA and FIPRA accepted. To date the agreement with FIPRA is still suspended. I have never received any remuneration or any other form of compensation whatsoever from FIPRA or any of its clients. I have never contacted the Commission on behalf of FIPRA or any of its clients.”
Yet notwithstanding this, on the same day that Borg wrote this email, he was still listed as a special adviser on maritime affairs on Fipra’s website, nearly three years after he had suspended the agreement! The following day, Borg re-emailed CEO to say:
“I would also like to thank you for bringing to my attention the fact that the FIPRA website describes me as ‘special adviser on maritime affairs’. I had been wanting to write to FIPRA to inform them that I would like to bring to an end the agreement between them and me (which, as I told you yesterday, never actually materialized) but I never got down to do so. I have now just emailed FIPRA informing them that I want our agreement to be definitively terminated with immediate effect and that FIPRA removes my name and any reference to me from their website and from anywhere else my name may appear in FIPRA’s records. I have also just informed the European Commission accordingly.”
In CEO’s view, Borg should have been far more vigilant in ensuring that, if he was no longer a special adviser to Fipra, that he was not advertised as such on the Fipra website. After all, for nearly three years, Fipra has benefited from listing Joe Borg as a senior adviser (and on maritime affairs which Borg had specifically assured the Commission that he would not work on), when apparently he was not acting as such. This case illustrates how eager lobby consultancies are to recruit through the revolving door, and how apparently relaxed individuals and the EU institutions within the Brussels bubble are about the appearance of possible conflicts of interest.
Meglena Kuneva was commissioner for consumer protection but in May 2010 she applied for authorisation to join the board of the major French bank BNP Paribas. The approval for this role was handled in a way which implied that the Commission was keener to provide a speedy and positive response to Ms Kuneva rather than to ensure a thorough analysis of the role for possible conflicts of interest. In fact the Commission gave a conditional approval for the role, even whilst still requesting further information about it. When the ad hoc ethical committee later suggested that Kuneva should inform the Commission if she were to join one of the committees set up within the BNP Paribas board so that this could be further evaluated, the Commission ignored this.
Whilst commissioner, Kuneva had worked on a major EU directive on consumer credit loans, intended to boost the cross-border market in retail financial services. Kuneva had also led a crack-down on European banks for their lack of transparency, detrimental to consumers. While banks were not directly under the auspices of Kuneva’s former portfolio, she had considerable and important dealings with the sector, creating a potential conflict of interest when she served on the board of BNP Paribas.
Louis Michel was the commissioner for development and humanitarian aid until July 2009 when he was elected as an MEP. In June 2010, he approached the Commission for authorisation (which was given) to become a board member at Credimo, a Belgian mortgage and life insurance company. He resigned from the Credimo board six months later in January 2011.
The allowance for a Credimo director is €10,000 per annum. Michel has told CEO that the €5000 he earned as a director for six months were paid directly to the Liberal Institute for Training and Cultural (ILFAC) and that he paid tax on this sum of €2500.
Once again, in this case, the transitional allowance failed to do what it was supposed to. The scheme did not prevent Mr Michel from becoming a board member at a major Belgian finance corporation, even though he ultimately accepted no direct remuneration for this role. In CEO’s view, the transitional allowance for three years should match a cooling-off period for three years on lobby jobs (or other jobs which provoke the risk of a conflict of interest) after commissioners have left the Commission.
Barroso II Commission
All in all, the saga of the Barroso I Commission and the revolving door is pretty shocking. Both the rules that were then in place and the transitional allowance failed to do the job of preventing the risk of conflicts of interest from arising when these top EU decision-makers left office and went to work for the private sector. The question now is: what will happen to the Barroso II Commission and the revolving door?
Based on the revised code of conduct for commissioners now in place, CEO believes that the rules remain inadequate and that they need urgent reform before the current crop of commissioners leave office. Early rumours have suggested that as many as half of the current commissioners may leave office. Such reforms should include a three year ban on lobbying which should also be extended to cover all issues for which the Barroso II Commission has collectively been responsible. Any other job which could create a conflict of interest should also be included within this ban. Commissioners should not negotiate new roles while still in office and all revolving door proposals should be assessed by a truly independent ethics committee and their findings should be binding.
In addition, the recommendations made by the ethical committee should be available online. In 2011, Commissioner Šefčovič had promised transparency around revolving door cases, but to this date there is nothing on the Commission website about any of this; the Commission tells us that they will only start disclosing this kind of info when the current commissioners start leaving.
More detail on all of these cases including comments, where provided by the commissioners themselves, can be found at RevolvingDoorWatch.