Two weeks ago I wrote about the growing disparity between transnational prosecutions for paying bribes and those for receiving bribes. The number of cases where OECD countries have prosecuted their nationals or firms subject to their jurisdiction for bribing developing country officials has been growing steadily, but there are disappointingly few cases where a developing state has gone after its nationals for accepting bribes. Last week I suggested one way to increase the number of cases against bribe-taking officials is to publicize whenever a firm or individual has been convicted of paying a bribe in a developing state. For every payer, there is a taker, and if the details of the case are widely publicized, my contention was that civil society, the media, and the political opposition would then press the authorities to prosecute the taker.
The World Bank has tried something similar when an investigation reveals corruption in one of its projects, and the experience suggests that, though not a silver bullet, the effort is worthwhile.
The Bank makes loans to developing states to finance projects, and if the Bank finds fraud or corruption has tainted one of these projects, it can sanction the staff members involved and bar any contractor implicated from bidding on future Bank contracts. But this is all it can do. As an international organization it has no power to bring criminal charges, nor does it have any authority to penalize the borrowing country officials who took bribes or otherwise participated in the wrongdoing.
To bolster its limited sanctioning power, the Bank has since the early 2000s referred its investigative findings to those countries with jurisdiction over the wrongdoers — nations where the contractors were located or where bribe takers resided. At first these referrals were confidential. Reading between the lines of the early reports of the Integrity Vice Presidency (the unit in the World Bank responsible for the investigations and referrals), one gets the distinct impression that the referrals went into a black hole.
Things began to change in 2008 when in the annual report for that year the Integrity Vice Presidency publicized the referral program. At first it simply stated how many referrals it had made the previous year and noted when a country had opened investigations. The 2009 report thus states that nine referrals had been made in 2008 and that the Philippines and the Indian state of Orissa were following up on referrals. In its 2011 report the Integrity VP, while noting follow up actions taken by a handful of states, acknowledged that “the hoped-for vigorous, global response [to its referrals] from national authorities has not been consistent.”
To prompt action the unit began publishing a chart showing, for each referral, the country to which it had been made, the date, and its status — investigation opened, entity or individual sanctioned, or more commonly, “no action taken.” The 2012 and 2013 reports continue to publicize what steps, if any, countries are taking in response to a referral, and the publicity seems to have had some salutary effects. The 2013 report states that in the previous year ten referrals had led to investigations by domestic authorities, the most yet.
One should not overstate the positive effects of this program. But one should not understate them either. The simple act of publicizing referrals seems to be having a modest but meaningful effect on developing countries’ investigations of their own officials. This suggests that greater publicity (even without a lot of detail that could be used in an investigation) may help pressure some governments to take action.
GAB | The Global Anticorruption Blog 
This post makes me hopeful because the described approach respects the sovereignty of the host state while still exerting some external pressure on it, a tough balance to achieve. I wonder if the US could do/does something similar with its foreign aid programs?
It would be interesting to see which countries have opened up investigations after referrals have been made, and whether these are disproportionately developed or developing countries. If I recall correctly from my time interning at INT, the majority of referrals at the time were made in developed countries. If investigations still take place disproportionately in developed countries, could this limit the involvement of firms from developed countries while not having a similar impact on firms from developing countries? What would the implications of this dynamic be for corruption in procurement?
It would also be interesting to see the result of the investigations that were opened. Were charges dropped or were individuals/firms convicted?
I had a similar question. You’ve got a couple of interesting individual cases where developing countries responded to referrals, but I was wondering what the overall patterns looked like.
I’m also not sure why these referrals prompt more action than, say, DOJ settlements in FCPA cases. Is it that the WB referrals are more specific? That there’s more information about them? That the stakes are lower, because the officials involved tend to be more low-level? That the Bank itself has more influence (such that countries are worried that if they don’t act in response to referrals, it would implicate their ability to get WB assistance in the future)?
The points you raise in this post highlight some interesting considerations for anti-corruption enforcement. Last year, I worked with a group on a white paper project on expanding access to remedies for corruption under the FCPA, a question that the group considered again and again related to the goals of enforcement: compensation, deterrence, or both? If we assume that the main goal is deterrence, is it more effective to target the supply or demand of corruption?
In this post and your previous post, you highlight the discrepancy between targeting the supply and demand for corruption hence the value of the World Bank’s referral program. If anti-corruption enforcement is limited, do you think it is worth prioritizing those that supply the bribes? Have there been any studies showing the efficacy of targeting bribe suppliers vs. bribe receivers?
I would be curious to know the answers to these questions as well–questions which seem to me to be rather answerable with regard to this brand-new H-P FCPA settlement. Paraphrasing the FCPA Professor (link at bottom), this latest FCPA enforcement action holds H-P accountable for conduct that occurred between 7 and 14 years ago in Russia, Poland, and Mexico.
I assume that the deterrent effect is working as hoped with H-P and its subsidiaries–the total cost of this settlement to the company is $108m. Still, I noticed that the court documents do not name the H-P executives (five in total), keeping them anonymous. I wonder if they ever faced prosecution… and, accordingly, if they are deterred. A cynic would look at this deal and say “The DOJ got lazy and just nailed H-P for a fat fine instead of going after these individuals.”
Leaving that issue aside, though, and back to Mr. Messick’s idea: what, if anything, happened to the bribe-TAKERS? The documents also do not name or otherwise identify the public officials that accepted the bags of cash, slush fund trips to Vegas, etc. It might be worthwhile to look into what happened to these public officials… if they were sacked or prosecuted or were forced to disgorge their ill-gotten gains, it would be in the local press, right? Shouldn’t be too hard to put two and two together, because the officials’ actual agencies are named.
I like this World Bank idea, and I agree with the top poster that this strategy has the nice effect of respecting local sovereignty while putting some pressure on the local government to appear clean. Perhaps, as Professor Stephenson mentioned in Mr. Messick’s last post, Transparency International could present information gleaned from U.S. court documents like these in the same way that the World Bank presents it–neutrally, in graphs, without excessive finger pointing.
http://www.fcpaprofessor.com/category/h-p
It would be interesting if for every report of corruption, a non-profit in the country of bribery made a FOIA-equivalent request to uncover information. Many countries do not have a FOIA-like provision, but some do. In India, the Right to Information Act has been used to expose financial irregularities.
The referrals to Orissa resulted in no charges or other actions against the individuals and companies referred. In fact, individuals and companies identified by INT in its published report of corruption in the health sector in Orissa in 2008 apparently moved on to bigger things, and were among some of the first parties arrested by the Indian CBI in connection with staggering corruption uncovered in the India National Rural Health Mission project, which started after the referrals to Orissa were reportedly made.