Saturday, December 29, 2007

New Orleans Cracks Down on Corruption

Fed up with crime and political corruption, New Orleans' business leaders in 1952 organized to flush out the twin poisons they believed were harming economic development.

It was a time when illegal gambling and the Carlos Marcello crime family operated openly in a city that was a bustling business hub.

Fast forward 55 years. Gambling is legal and the mob has faded into obscurity. The city's economy is a shadow of its former self, thanks to the 1980s oil bust, an exodus of big businesses and the shattering blow of Hurricane Katrina, which ran off at least 2,000 employers.

As New Orleans' economy struggles to get back on its feet, street crime and political corruption have re-emerged as spoilers. But a wave of recent federal convictions shows New Orleans' most chronic image-killers -- crooked politicians -- are under assault.

For a city trying to convince corporate America to make long-term investments in the city's rebuilding, the crackdown couldn't come at a more important time.

A key player is the Metropolitan Crime Commission, a crime and corruption watchdog, safe house for tipsters and craw in the side of those with political punch and sticky fingers.

''It's pretty tough to be a whistleblower in the state of Louisiana,'' said MCC president Rafael Goyeneche, who has headed the group since 1989. ''Many people won't risk themselves, their families and their business associates if it means putting them in jeopardy by stepping forward. So, we're a conduit of information for those who don't want to be identified.''

The MCC, inspired by the Chicago Crime Commission formed after World War I, is the antithesis of the idea that size equates with effectiveness.

Besides Goyeneche, there is one investigator, a researcher, a community relations person and an office manager. Much of the annual budget of $677,000 is donated by businesses.

The MCC keeps a stealthy but effective profile. Federal officials said it played a key role in bringing down two suburban state judges who took bribes from a bail bondsman. FBI special agent in charge Jim Bernazzani also said the organization helped with a probe of corruption in the Orleans Parish School Board, which resulted in 30 convictions.

U.S. Attorney Jim Letten calls the commission ''an important player'' in law enforcement. ''While they are not a law enforcement agency, per se, they have been instrumental in getting people with information on public corruption to come forward and they've been able to pass on information themselves to investigators,'' Letten said.

Goyeneche, a former New Orleans assistant district attorney, said the commission gets about 100 tips monthly on its local hotline, and another 20 or so on a new statewide corruption line. About 15 to 20 percent provide enough information to warrant consideration. Tips that show particular promise are passed on to law enforcement and prosecutors, often on the federal level where virtually all successful public corruption cases in New Orleans are handled.

For example, in 2005, a woman who alleged she was raped by a deputy city attorney in his private law office -- after being offered help on a municipal charge -- came first to the MCC, expressing doubt that local authorities would do anything. The commission forwarded its investigative report to federal prosecutors, who obtained a civil rights conviction and life prison sentence against the official, Henry Dillon III.

''We don't self-initiate any of our investigations,'' Goyeneche said. ''We have to be told what rock to look under.''

The commission also protects its informants. Goyeneche has been threatened a few times with jail unless he revealed an identity. In the MCC office, there is a photograph of Aaron Kohn, its first head, behind bars in the 1950s for refusing to do so.

The prime methods of corruption against local businesses include pressure to hire politically connected contractors, the hiring of ''ghost employees'' who are nothing more than a paycheck from a business and direct payoff demands from government officials for business or zoning changes.

''There isn't anything new,'' Goyeneche said. ''It's almost like these secrets have been passed down from one generation to another.''

For example, several close associates of former New Orleans Mayor Marc Morial have been convicted in connection with skimming money from an energy-management contract signed by City Hall. Morial has not been accused of wrongdoing.

''These individuals basically leveraged their relationship with the mayor's office and siphoned off hundreds of thousands of dollars through some of subcontractors that were awarded contracts,'' Goyeneche said.

Goyeneche said the business community realizes more than cocktail party talk is needed about corruption. Many business leaders, fed up with public rackets, ''are not only willing to meet with the FBI, in many instances they are willing to wire up and provide the information that the FBI needs,'' he said.

Joe Exnicios, senior vice president at Whitney National Bank and chairman of the MCC board, said he got involved about six years ago because ''the perception that folks have outside of Louisiana and particularly New Orleans have is one I'm not very proud of.''

''Everyone likes to think they are operating on a level playing field,'' Exnicios said. ''If there is any public corruption taking place, or even the belief, it hinders companies from moving in here and companies that are here from expanding.''

Not all of MCC work involves criminal activity. The group also keeps an eye on public ethics and how limited criminal justice resources are being used.

For now, Goyeneche doesn't see a major influx of out-of-state businesses making their way into New Orleans -- partly due to the city's reputation.

But that will change, he predicts, as corrupt activities become more hazardous in New Orleans and local businesses spread the word around the country.