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Secrecy breeds contamination: the horse meat scandal

What started as the recall of a few dodgy burgers off supermarket shelves in Ireland in January has since become a Europe-wide scandal where the integrity of the food supply chain has been called into question. Consumers want to know how tons of horse meat came to be labelled as beef and then resold across Europe by some of the biggest names in food, including Nestlé and Findus.

The problem is secrecy. Unscrupulous people are able to pass off products that aren’t what they say they are along complex supply chains that use shell companies. In the case of this equine flesh scandal, although the horse meat started its journey labelled as such from a Romanian abattoir, by the time it ended up in France it was transformed into ‘beef’. Its physical journey had taken it across Europe to the Netherlands and then to France. The paperwork, however, had ping-ponged from Romania, to the Netherlands, to Cyprus and – in at least one instance, according to an investigation by the Organized Crime and Corruption Reporting Project – to the well-known secrecy jurisdiction of the British Virgin Islands.

This kind of complexity has become in-built in many industries and supply chains around the world. That’s why there are calls for greater transparency and accountability in all businesses from banking and oil to food production. In the complex, globalised world caveat emptor – or buyer beware – does not work to protect consumers. Rather it enables corruption and dissembling.

The financial crisis hinged on that particular issue when sub-prime mortgages were sold on, sliced and diced, and then repackaged to disguise the toxicity of the loans within. In a sense, the horse meat ‘beef’ lasagne is another example of what can come out of the corporate kitchen.

Seller beware

What we need is a better system to uncover corruption and fraud. Transparency International recently published a report that looked at the prevalence of corruption in Europe and made some startling discoveries. Money, Politics, Power: Corruption Risks in Europe unveils the underlying causes of many of the financial and political scandals that have dogged nearly every European country in recent years.

Of the 25 countries studied, only two (Norway and Sweden) were found to have private sectors that adequately engage with the government and civil society on anti-corruption issues. Meanwhile, across the continent national anti-corruption agencies and law enforcement agencies received poor to middling marks for their own performance on anti-corruption and the promotion of integrity.

Protection for whistleblowers is severely lacking in Europe, compared to the US: the vast majority of countries have failed to introduce dedicated whistleblower protection legislation, in either the public or private sector. Of the 25 countries analysed in our report, only six had dedicated whistleblower legislation – Hungary, the Netherlands, Norway, Romania, Switzerland and the UK. When legislation is in place to protect whistleblowers, employees are more likely to report irregularities, including food fraud.

While food inspectors in Ireland did uncover the fraudulently mislabelled horse meat and alerted authorities in other countries, we don’t yet know how long this practice had been going on, and to what extent certain regulators may have turned a blind eye to the shady dealings of companies. So far at least a dozen countries have been drawn into the scandal.

When it comes to food, there is little or no margin for error. As the investigations proceed, calls for reform should include a push for tighter regulations on food processing, more rigorous inspection regimes to ensure food safety and a re-examination of the role of middlemen and shell companies in food supply chains: in effect we are calling for a transparent and traceable supply chain.

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