Koskotas scandal

Koskotas scandal (Greek: Σκάνδαλο Κοσκωτά) was a corruption and financial scandal in 1989 Greece centered on George Koskotas, owner of the Bank of Crete and media magnate, implicating the highest-ranking members of the Greek government, including Prime Minister Andreas Papandreou.[1]

Koskotas' alleged that over $200 million from his bank was embezzled with the support of several government ministers; the amount was significant for the relatively small Greek economy, approximately $50 billion in the mid-1980s. In return, Koskotas supported Papandreou's political party (PASOK) through his magazines and newspapers.[2][3] The revelation caused considerable political turmoil, with six ministers resigning in protest.[4] A judicial inquiry revealed additional scandals,[5][6][7] further deepening the public disillusionment with the populist government of Papandreou.

Papandreou lost the June 1989 Greek parliamentary election, owing much to the Koskotas scandal.[8] This led to a collaboration between conservative and communist political parties to form a government and decide on the indictment of Papandreou and eventual trial. This collaboration was novel for Greek society since they were on opposite sides in the Greek civil war, and it was marked as a healing process.[1][9][10] The trial occurred two years later and was broadcast live. Koskotas and Papandreou's ministers were found guilty; one of the ministers had a heart attack on live TV and died a few days later. Papandreou was acquitted by one vote.[11][1][12] The trial is considered one of the most significant trials of modern Greece.[13]

The scandal marked a turning point in Papandreou's populist government, which has controlled the state apparatus since 1981. The year 1989, in which the scandals were revealed out of the Koskotas scandal, is called "dirty 89".[14]

Early investigation

Early in Papandreou's second administration, press reports on PASOK's corruption multiplied, with notable ones being the "Yugoslav corn scandal," the "telephone tapping scandal," and the "public utilities scandal."[15][5] However, Papandreou himself was implicated in the Koskotas scandal, which overshadowed all other PASOK's scandals. George Koskotas was the owner of the Bank of Crete and, in a short amount of time, bought several newspapers, including two of the largest conservative newspapers (Kathimerini and Vradyni), radio stations, and one the top soccer teams, Olympiacos F.C. in the mid-80s.[3][16] Publishers became suspicious of the rapid changes in the media landscape and started investigating where Koskotas was finding all this money. Moreover, it became apparent that Koskotas had help from the PASOK government in overcoming bureaucratic barriers.[3] Soon, a judicial inquiry found that Koskotas embezzled large sums from the bank's clients and illegally used this money to form a mass media empire to support PASOK exclusively.[2][3] The Greek court also restricted Koskotas from leaving Greece. To avoid justice, he left Greece for the United States (with an intermediary stop at Brazil) on 5 November 1988 despite being under strict surveillance by Greek security forces.[17]

Koskotas arrested & revelations

Koskotas was arrested on 24 November 1988 in Massachusetts for unrelated fraud crimes and was jailed in the United States.[18] In December 1988, after the opposition and various respected former ministers called for a clean-up, Papandreou reshuffled the ministers and yielded under pressure to a parliamentary commission inquiry. Demetrios Halikias, the governor of the Bank of Greece, testified to the commission on 7 December 1988 that two senior PASOK ministers had tried to prevent an audit of the Bank of Crete.[7] Resignations followed (Stathis Yiotas, Deputy Defence Minister, and Theodore Karatzas, Finance Under Secretary) upon the revelations during the inquiry that the members of Papandreou's government were profiteering by illegal arms sales to both sides in the Iran–Iraq War and the apartheid state of South Africa.[5][6][7] It also revealed that for the "purchase of the century" (40 American F-16 and 40 French Mirage 2000 aircraft[19]), the Greek state overpaid by as much as 20% above the true cost due to illegal commissions to PASOK members.[20][21]

In March 1989, Time magazine published an article describing in detail the allegations that Koskotas made to US officials.[22] Koskotas alleged that Papandreou and other PASOK high functionaries had ordered state corporations to deposit funds (over US$200 million[i]) with the Bank of Crete, which went missing in the form of bribes and acquisition of mass media companies. Koskotas claimed that on one occasion, he had delivered to Papandreou himself US$600,000 stuffed in a Pampers Diapers box.[23][24] Papandreou denied the story, accused the US of manufacturing this scandal to destroy him,[25] and even sued Time magazine.

Political turmoil

Koskotas's accusations gained international attention. Several months after the arrest of Koskotas, six ministers (including Costas Simitis[26]) resigned in protest of the corruption among the most senior members of PASOK.[4]

There were demands for a vote of no confidence against the government, which Papandreou defeated in December 1988 and another one in March 1989.[27] Still, three members of PASOK voted against the party line, however, Papandreou responded by removing them from PASOK, including Antonis Tritsis who was a founding member of PASOK.[28] Papandreou attacked the judiciary independence by passing a law via emergency procedures, despite massive backlash from lawyers, judges, and clerks, to alter the judicial procedure to avoid or delay the convocation of the Athens Appeals Court, which was responsible for initiating criminal proceedings on financial scandals, like the case of Koskotas.[29]

Political polarization reached a climax five weeks before the scheduled elections of November 1989, when the Greek parliament was about to start deliberations on whether Papandreou and three of his ministers would be indicted. On this day (26 September 1989) and hours before deliberations began, Pavlos Bakoyannis, a prominent conservative member of parliament and the architect of collaboration between the left and right wings for Papandreou's indictment, was shot by 17 November terrorist group outside his office in Athens.[30][31] Both major political parties (New Democracy and PASOK) accused each other for the assassination.[32] A few days later, Papandreou stormed out of Parliament, shouting, "I accuse my accusers", just before the parliamentary vote on his indictment.[30]

Catharsis

Two Greek communist and two conservative politicians (L-R: Leonidas Kyrkos, Charilaos Florakis, Mitsotakis, Konstantinos Stephanopoulos) discuss a time after the Papandreou indictment for the Koskotas scandal. Papandreou called them as the "gang of four."

In the June 1989 elections, PASOK's electoral percentage fell to 38% from 48% in 1981, owing much to the Koskotas scandal.[8] However, Mitsotakis' party got 43%, but it was insufficient to form a government; Papandreou's last-minute change of the electoral vote law required a party to win 50% of the vote to govern alone. Papandreou hoped that while PASOK might come second in electoral votes, it could form a government with the support of the other leftist parties, but he was rejected.[33] Instead, New Democracy (right wing) collaborated with the Synaspismos (radical left), led by Charilaos Florakis, to form a government; while on the opposite ideological sides (as well in the Greek Civil War), both sought a "catharsis," i.e., investigation and trial of PASOK's corruption is completed.[1][9][10] The decision carried additional responsibility because if no charges were brought against Papandreou under the current collaboration between New Democracy and Synaspismos, no future government could do so based on the Greek constitution.[34][35] The participation of Synaspismos party in the government marked the end of the militarized politics of the past since there was no reaction from the military.

Trial

Koskotas was extradited to Greece in 1991 for the trial, and Papandreou's trial began in Athens on 11 March 1991.[1] However, as a former prime minister, he exercised his constitutional right not to attend the trial and proclaimed that the trial was a witch-hunt. In January 1992, the Parliament-appointed tribunal of 13 judges of Supreme Special Court, having heard over 100 witnesses and investigated 50,000 pages of documents over ten months, acquitted Papandreou of the charge of instigating the loss of funds of state companies with a 7–6 vote and a bribery charge of receiving the proceeds of a crime with a vote 10–3.[11][1][12] During the trial, the deputy of the Prime Minister, Agamemnon Koutsogeorgas, who was also accused and a close friend of Papandreou, had a stroke on live television during his sentencing and died a few days afterward. Dimitris Tsovolas, former Minister of Finance, was sentenced to two-and-a-half jail years.[36] Koskotas was tried and sentenced to a 25-year prison term.

When Constantine Karamanlis was asked about the verdict, he commented, "In democracies, prime ministers do not go to prison. They return home." by both reaffirming the court's decision while at the same time admitting the existence of both positive and negative implications for the country.[37] The trial was characterized as the "trial of trials" and the most critical judicial decision in modern Greek history since the Trial of the Six in 1922.[13]

Notes

1. The total amount of money was substantial, approximately 1/280 of the Greek economy, based on Greece's GDP in 1986 of US$56 billion.[38]

Footnotes

1. Koliopoulos & Veremis 2009, p. 170.
2. Bellou, Couloumbis & Kariotis 2003, p. 178.
3. Garrard & Newell 2006, p. 132.
4. Close 2014, p. 158.
5. Allen 1990, p. 114.
6. New York Times & Jun. 1989.
7. Clive 1989, p. 80.
8. Dobratz & Whitfield 1992, pp. 167–180.
9. Close 2014, p. 159.
10. Clogg 2013, p. 197.
11. New York Times & Jan. 1992.
12. Dobratz & Whitfield 1992, p. 173.
13. Jones 2011, p. 229.
14. Kathimerini & Mar. 2003.
15. Garrard & Newell 2006, p. 131.
16. Allen 1990, p. 115.
17. Allen 1990, p. 116.
18. Washington Post & Nov. 1988.
19. New York Times & Mar. 1985.
20. Gov News & Jan. 2024.
21. Clogg 2013, p. 196.
22. Time magazine & Mar. 1989.
23. Los Angeles Times & Apr. 1989.
24. Gallant 2016, pp. 290–291.
25. Gallant 2016, p. 300.
26. Featherstone & Papadimitriou 2015, p. 97.
27. New York Times & Mar. 1989.
28. Dobratz & Whitfield 1992, p. 170.
29. Gunther, Diamandouros & Sotiropoulos 2006, p. 185.
30. Chicago Tribune & Oct. 1989.
31. New York Times & Sep. 1989.
32. Karyotis 2007, pp. 279–280.
33. Clive 1990, pp. 115–116.
34. Pirounakis 1997, p. 256.
35. Sassoon 1997, p. 72.
36. Featherstone & Papadimitriou 2015, pp. 89.
37. Garrard & Newell 2006, pp. 133–134.
38. World Bank, Greece's GDP.

Sources

Books

• Allen, Louis (1990). Political Scandals and Causes Celebres Since 1945. Essex: Longman. ISBN 978-0582030657.
• Bellou, Fotini; Couloumbis, Theodore A.; Kariotis, Theodore C., eds. (2003). Greece in the twentieth century. London & New York: Routledge. ISBN 9780203045893.
• Clogg, Richard (2013). A Concise History of Greece. Cambridge: Cambridge University Press. ISBN 9781107656444.
• Close, David H. (2014). Greece since 1945: Politics, Economy and Society. London & New York: Taylor & Francis. ISBN 9781317880011.
• Featherstone, Kevin; Papadimitriou, Dimitris (2015). Prime Ministers in Greece, The Paradox of Power. Oxford: Oxford University Press. ISBN 978-0198717171.
• Gallant, Thomas W. (2016). Modern Greece: From the war of independence to the present. London: Bloomsbury Publishing. ISBN 9781350014510.
• Garrard, James; Newell, John, eds. (2006). Scandals in past and contemporary politics. Manchester: Manchester University Press. ISBN 9780719065514.
• Gunther, Richard; Diamandouros, Nikiforos; Sotiropoulos, Dimitri, eds. (2006). Democracy and the state in the new southern Europe. Oxford: Oxford University Press. ISBN 9780191513961.
• Jones, Michael J., ed. (2011). Creative Accounting, Fraud and International Accounting Scandals. West Sussex: Wiley. ISBN 9781119978626.
• Koliopoulos, John S.; Veremis, Thanos M. [in Greek] (2009). Modern Greece A History Since 1821. Oxford: Wiley-Blackwell. ISBN 9781444314830.
• Pirounakis, Nicholas (1997). The Greek Economy Past, Present and Future. London: Palgrave Macmillan. ISBN 978-0333654224.
• Sassoon, Donald, ed. (1997). Looking left: European socialism after the Cold War. London: I.B. Taurus. ISBN 1860641792.

Journals

• Clive, Nigel (1989). "Letter from Greece—mid-December 1988". Government and Opposition. 24 (1): 74–80. doi:10.1111/j.1477-7053.1989.tb00108.x. JSTOR 44482421.
• —————— (1990). "The Dilemmas of Democracy in Greece". Government and Opposition. 25 (1): 115–122. doi:10.1111/j.1477-7053.1990.tb00750.x. JSTOR 44482490.
• Dobratz, Betty A.; Whitfield, Stefanie (1992). "Does Scandal Influence Voters' Party Preference? The Case of Greece during the Papandreou Era". European Sociological Review. 8 (2): 167–180. doi:10.1093/oxfordjournals.esr.a036630. JSTOR 522295.
• Karyotis, Georgios (September 2007). "Securitization of Greek Terrorism and Arrest of the 'Revolutionary Organization November 17'". Cooperation and Conflict. 42 (3): 271–293. doi:10.1177/0010836707079932. JSTOR 45084485.

Newspapers & magazines

• "New issues raised for US on Greece". The New York Times. 11 March 1985.
• "Greek banker arrested at Boston airport". Washington Post. 24 November 1988.
• Doyle McManus (16 April 1989). "Koskotas Implicates Premier in Payoffs, Bribery: Ex-Banker's Tale May Be Greek Tragedy". Los Angeles Times.
• "Papandreou Marries 34-Year-Old Mistress". Los Angeles Times. 13 July 1989.
• "Papandreou Survives No-Confidence Motion". The New York Times. 14 March 1989.
• Robert Ajemian (13 March 1989). "Scandals The Looting of Greece". TIME magazine.
• "Grave Scandal for Greece". The New York Times. 18 June 1989.
• Marlise Simons (27 September 1989). "Greek lawmaker is slain in Athens". The New York Times.
• "Papandreou Trial a Modern Drama". Chicago Tribune. 5 October 1989.
• Marlise Simons (17 January 1992). "Greek ex-premier not guilty in bank scandal". The New York Times.
• Dimitris Kapranos (4 March 2003). "Greece's tradition of spectacular trials". Kathimerini.
• Νίκος Μποζιονέλος (31 January 2024). "Η "αγορά του αιώνα": Κατασκοπία και σκάνδαλα για F-16 και Mirage επί εποχής Ανδρέα Παπανδρέου" (in Greek). Gov News.

Web and other sources

• "Greece's GDP over the years". World Bank.

Additional reading

• Stephen Brookes (6 March 1989). "Awash in Scandal, Greece Wrestles its Political Furies". Athens: Insight Magazine.