Brazil’s Supreme Court May Have Ended the Lava Jato Operation as We Know It

This past March, Brazil’s Supreme Court (the Supremo Tribunal Federal, or STF) issued an opinion that is considered one of the most significant defeats yet to the anticorruption effort known as the Car Wash (or Lava Jato) operation (see here and here). The case involved allegations that the former mayor of Rio de Janeiro and his campaign manager received roughly USD 4 million from the construction firm Odebrecht that was used for a campaign slush fund, in exchange for business advantages in connection with certain construction projects. The particular legal claim on which the defendants prevailed concerned not a substantive issue, but rather a jurisdictional question: whether the case was brought in the wrong court. In Brazil, the ordinary federal courts adjudicate ordinary federal crimes, but there are also special electoral courts that handle violations—including criminal violations—of Brazil’s Electoral Code. The use of slush funds, though not expressly listed as one of the actions criminalized under the Electoral Code, could be prosecuted under the Electoral Code’s prohibition on false statements, because doing what the former mayor allegedly did would entail failure to report funds used in an election campaign. Such charges would ordinarily be heard by the specialized electoral courts. But taking illegal contributions to a campaign slush fund in exchange for political favors could also be charged as bribery (or associated crimes like money laundering) under Brazil’s Criminal Code—crimes that would typically be adjudicated by the regular federal courts. Given that the same wrongful transaction might entail violations of both the Electoral Code and the Criminal Code, which court (or courts) should hear the case?

This is the question that the STF had to resolve, and it had, roughly speaking, three options. First, the STF could have ruled that the whole case (both the electoral crimes and the ordinary crimes) should be heard by an ordinary court. The second option would be to require that the special electoral court adjudicate the whole criminal case, including the ordinary criminal charges. Third, the STF could have held that the case should be split, with an electoral court dealing with the alleged violations of the Electoral Code and an ordinary court handling all the other charges. In a 6-5 decision, the STF went with the second option, holding that whenever an ordinary crime is committed in connection with an electoral crime, the whole criminal case must be decided by an electoral court.

This is hugely significant for the Lava Jato operation, because many of the cases the operation has uncovered involve potential violations of the Electoral Code, in the form of illegal or undisclosed campaign contributions made in exchange for political favors. (The newspaper Folha de Sao Paulo estimates  that almost 30% of Lava Jato’s rulings touch discussions of illegal campaign finance.) But although some cases related to Lava Jato have gone to the electoral courts, most of the cases, including all of the main criminal cases, have been prosecuted in the ordinary courts. Federal prosecutors, especially the Lava Jato task force, are very concerned about the STF’s decision and have criticized it as a significant blow to Brazil’s anticorruption efforts.

They are right to be worried. Although some have maintained that there is no serious cause for concern, in fact the STF’s decision poses a very serious problem, for several reasons.

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At Last: An UNCAC Handbook

Thanks to Oxford University Press that gaping hole in every anticorruption practitioner’s library has now been filled. With the publication of The United Nations Convention Against Corruption: A Commentary, those looking for authoritative guidance on UNCAC no longer need to sort through the voluminous literature the convention has spawned: UNODC guides, StAR publications, academic commentary, and international and municipal court decisions.  Editors Cecily Rose, Michael Kubiciel, and Oliver Landwehr have, with help from 35 other experts on international law and corruption, done the work for them.  In one volume they summarize the law and learning on each of the convention’s 71 articles.

The Commentary is much more than a digest of UNCAC’s voluminous source materials, however. Continue reading

New Podcast Episode, Featuring Robtel Neejai Pailey

A new episode of KickBack: The Global Anticorruption Podcast is now available. This week’s episode features an interview with Robtel Neejai Pailey, a Liberian academic, activist, and author who has worked on a variety of issues related to corruption and integrity, including through the use of theater, radio, music and other media.

You can find this episode, along with links to previous podcast episodes, at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

A Cultural Defense to Bribery? The Solomon Islands’ Approach

Gift-giving usually has positive connotations as an expression of love, respect, friendship, gratitude, or celebration. However, when the recipient is a public official, there is always the concern that the “gift” is nothing but a thinly-veiled bribe. For this reason, countries around the world have placed restrictions on the character and value of gifts that public officials are allowed to accept. But in societies where giving gifts – including, perhaps especially, to powerful or influential figures – is an important part of the culture, treating all (sufficiently large) gifts as unlawful bribes is more than usually challenging. Indeed, a recurring question for anticorruption reformers is whether or how anti-bribery law should make allowances for local cultural norms and practices, especially those related to gift-giving. This question – often framed as one of “cultural relativism” – frequently comes up in the context of developing countries (such as Indonesia or various Pacific islands), though it is not exclusive to such countries (see, for example, discussion of this same issue in South Korea).

One country that has recently faced the challenge of regulating cultural gift-giving to and by public officials is the Solomon Islands – a small state in the Pacific Ocean consisting of over nine hundred islands, a population of about 600,000, and a rich and fascinating history. For years, the Solomon Islands has been dealing with pervasive corruption at all levels of government, most notably in natural resources management, which has had disastrous ramifications for the country’s economic development (see here, here, and here). Like other Pacific islands, the Solomon Islands is home to a practice of traditional gift-giving to and by public officials, which in many other jurisdictions could be viewed as legally problematic. According to a local custom (as explained in an official government document), public officials, as members of their community, are “expected to contribute to community events such as weddings, funerals, feasts or church gatherings” and are “obligated to reciprocate with gifts if and when they visit communities and are presented with gifts.”

In July 2018, as part of a comprehensive national anticorruption scheme, the Solomon Islands’ Parliament enacted the much anticipated Anti-Corruption Act (ACA). The ACA is especially notable, and unusual, in its approach towards customary gifts and bribery. Instead of capping the monetary value or limiting the type of gifts which public officials are allowed to accept, the ACA introduced a new cultural defense to the offence of bribery of public officials. According to this defense, a public official who accepts or solicits something of value, as well as the individual who offers or gives it, is not guilty of bribery if the defendants can prove that their respective acts were conducted: (1) “in accordance with custom,” (2) “openly, in the course of a traditional exchange of gifts,” and (3) “for the benefit of a community or group of people and not for an individual.” According to Prime Minister Rick Houenipwela, the ACA’s cultural defense is required as part of the government’s obligation “to respect our customs and traditional cultures” as “a multi-ethnic post conflict country.” However, the cultural defense has been criticized by many, including the Parliament’s Bills and Legislation Committee (see here and here) and Transparency Solomon Islands, which referred to this defense as “a good example of bad law.”

In this post, I do not attempt to answer the question whether the Solomon Islands’ customary gift giving should be criminalized. I do wish to argue, however, that even if we assume that local gift-giving customs are worth protecting, the ACA’s cultural defense to bribery in its current form is highly susceptible to misuse and may undermine the government’s anticorruption efforts. Both the Solomon Islands and other jurisdictions that might be considering a similar cultural defense should take heed of four significant problems with the defense as currently written: Continue reading

Why (and How) the US Should Use “Sanctions Money” to Help Victims of Corruption 

Individually-targeted sanctions pursuant to the 2016 Global Magnitsky Act (GMA) have been used to hold individuals responsible for acts of grand corruption and human rights abuse in places like Russia and the DRC (explained here and here). Yet more can and should be done to compensate the victims of those same crimes. Advocates should push the US to use the compensatory mechanisms of other US sanctions regimes to strengthen the power of the GMA to compensate victims.

GMA sanctions, like other individually-targeted sanctions, are administered by a division of the US Treasury Department called the Office of Foreign Assets Control (OFAC). When an individual is placed on the US sanctions list—known as the “specially designated nationals” (SDN) list)—that individual’s US assets are frozen in an interest-bearing account until either the individual is removed from the SDN list or the assets are seized. In the interim, any US-dollar denominated transaction with those accounts is blocked. Moreover, any person subject to US jurisdiction who does business with any individual on the SDN list can be hit with a steep civil fines for every transaction with the blocked assets, which can cumulatively run into the millions, sometimes billions, of dollars.

Those two pots of money—the frozen assets of the individuals on the SDN list, and the fines imposed on those who violate the sanctions imposed on those SDNs—could and should be used to compensate the individuals victimized by the corruption or other wrongful conduct of those SDNs. Here’s how these approaches might work in the US context, given precedent of other sanctions regimes:

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Tracking Corruption and Conflicts of Interest in the Trump Administration–April 2019 Update

Since May 2017, GAB has been tracking credible allegations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests, and providing monthly updates on media reports of such issues. The April 2019 update is now available here. A couple of the more notable new developments in this update:

  • Ballard Partners, a lobbying firm with close ties to the Trump administration, is apparently explicitly directing the firm’s clients to book rooms and hold events at the Trump International Hotel in Washington, DC, as a way to influence the administration
  • The Trump Hotel is selling merchandise with images of the White House, in an apparent attempt to further marketize/monetize President Trump’s official position.

As always, we note that while we try to include only those allegations that appear credible, we acknowledge that many of the allegations that we discuss are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.

G7 Hypocrisy on Illicit Enrichment Crimes

Last month, I saw a news report about the international reaction to the Ukrainian Constitutional Court’s decision striking down Ukraine’s criminal offense of “illicit enrichment” as unconstitutional. For those unfamiliar with this topic, the crime of “illicit enrichment” makes it a criminal offense for a public official to realize a significant increase in his or her assets that the public official cannot reasonably explain. The crime of illicit enrichment is related to, but distinct from, civil asset forfeiture systems under which the government may seize—as presumptively the proceeds of unlawful activity—assets that the owner cannot reasonably explain. The main difference is that a civil forfeiture order results in the loss of assets, while a criminal offense can result in fines or incarceration, as well as the other collateral consequences of a criminal conviction. Some anticorruption activists support the criminalization of illicit enrichment on the grounds that it is often difficult or impossible to prove the underlying corruption offenses, but a substantial unexplained increase in a public official’s wealth is sufficient to prove that the official is corrupt. Critics warn that criminalizing illicit enrichment is incompatible with traditional notions of the presumption of innocence. (The UN Convention Against Corruption (UNCAC), perhaps unsurprisingly, fudges the issue, with UNCAC Article 20 calling on States Parties to “consider” adopting an illicit enrichment offense, “[s]ubject to [that country’s] constitution and the fundamental principles of its legal system.”)

In its decision last February 26, Ukraine’s Constitutional Court went with the critics, holding that the criminalization of illicit enrichment a criminal offense was an unconstitutional infringement on the presumption of innocence. This decision met with swift condemnation from the G7, which issued a joint statement with the World Bank declaring that the “recent elimination of the illicit enrichment offence from [Ukraine’s] criminal code is a serious setback in the fight against corruption” that has “weakened the impact of the whole anti-corruption architecture.” Illicit enrichment, the G7 and World Bank admonished, “is not a new offence. In 2010 there were more than 40 countries that criminalized illicit enrichment,” and “[c]ourts around the world have recognized that the criminalization of illicit enrichment is a powerful tool in the fight against corruption, while at the same time respecting fundamental human rights and constitutional principles such as [the] presumption of innocence[.]” The G7-World Bank joint statement closed by calling on Ukrainian authorities to “reinstat[e] criminal liability for illicit enrichment in line with UN, OECD, and [European Court of Human Rights] principles.”

Now, as a policy matter, I tend to agree with the G7-World Bank position here. I think that appropriately tailored and cabined illicit enrichment offenses can be useful tools, and (as others have also pointed out), it’s not true that such offenses have any inherent conflict with the presumption of innocence. Nonetheless, I found the letter an exercise in outrageous, condescending hypocrisy, one that the G7 countries in particular should be ashamed to have written. Continue reading