Monthly Archives: March 2014

What’s Left Out of “Left Out of the Bargain”

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A couple months back I finally had a chance to read the Stolen Assets Recovery Initiative (StAR)’s latest report, Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery. It’s a very useful report (though a lot of the preliminary material is pretty dull, but fortunately fairly skimmable). The key descriptive finding is that “significant monetary sanctions have been imposed [in foreign bribery cases] with hardly any of the respective assets being returned to the countries whose officials have allegedly been bribed.” The overall tenor of the report is that this is a problem. Although the report uses careful, measured language, I interpreted it as as a call for more aggressive action to force companies that admit to foreign bribery to pay significant fines, penalties, or other damages to the countries in which the bribery took place (either to those countries’ governments, or to NGOs or special funds). The report discusses, and seems to endorse, a range of related measures designed to further this overarching goal.

I’m sympathetic with StAR’s objectives, and with the idea that more can and should be done to help the victims of corruption. But the Left out of the Bargain report suffers from a number of serious flaws—chief among them the failure to give more than cursory attention to the possible adverse incentive effects of promoting duplicative enforcement or substantial redistribution of settlement proceeds. Continue reading →

Transparency International’s Muddled Use of “Corruption,” and Why It Matters

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What corruption means informs what and how anticorruption reformers reform.

Unfortunately, Transparency International’s Corruption Perceptions Index (CPI) dodges this important issue by averaging together the responses from polls employing competing definitions of “corruption.”  This is a problem because different types of corruption have different causes, have different effects, and require different types of remedies. Transparency International should disaggregate its index of perceived “corruption” into two distinct indices: one for perceptions of illegal corruption, and one for primarily legal (but distrust-generating) conduct, which could fairly be characterized as institutional corruption.  This change would make the CPI more precise, better educating the press, public, and policymakers who rely on it. Continue reading →

Would the US Really Benefit from More Corruption? A Comment on Rauch

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Jonathan Rauch’s recent Atlantic piece has a provocative title: “The Case for Corruption.”  Extending an argument about the unintended effects of international efforts to combat corruption to the domestic sphere, Rauch asserts that “in most political systems, the right amount of corruption is greater than zero. Leaders need to be able to reward followers and punish turncoats and free agents.”  According to Rauch, the U.S. political system used to give party leaders several tools to enforce discipline: pork-barrel spending, earmarks, campaign contributions, committee assignments, and endorsements.  The problem, he says, is that these mechanisms have become too weak–that we do not have enough of the “honest graft” famously celebrated by the Tammany Hall politician George Washington Plunkitt.

Rauch makes a valuable point that pork barrel spending (including earmarks), though unseemly, might serve a useful function in facilitating deals.  But does this mean that some amount of “corruption” can be good, as his title implies?  Maybe not–it depends on your definition of corruption, and Rauch is using a very expansive, and perhaps misleading one.  Rauch also urges us to change current regulations to empower party leaders, and is persuasive–to an extent.   Continue reading →

Are the Thai Anticorruption Agency’s Charges against the PM Politically Rash or Politically Shrewd?

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In my last post, I discussed the recent charges brought by Thailand’s National Anti-Corruption Committee (NACC) against the current Prime Minister, Yingluck Shinawatra, for failing to prevent corruption in the Thai government’s controversial (and recently discontinued) rice purchasing program. There are a few respects in which this case raises important questions not just for Thailand, but for anticorruption enforcement more generally. One, which I discussed last time, is the fact that the NACC has charged the Prime Minister not with engaging in corruption, but with (criminally) failing to prevent corruption. Another concerns how the NACC is managing – or failing to manage – the delicate and difficult politics of bringing charges against a sitting Prime Minister in the midst of ongoing political turmoil, in which the Prime Minister and her party remain very popular with much of the nation — and would almost certainly would have won the election that opposition protesters effectively blocked. My educated guess is that if you were to ask members of the NACC how the political situation affected their decision-making, they would say that it had no effect at all – they simply followed the evidence where it took them, without fear or favor. This is what anticorruption enforcement officials always say, at least publicly. I suspect they may actually believe it, and perhaps it’s (sometimes) true. But anticorruption enforcers operating in politically difficult environments often do, and often should, think carefully and strategically about the constraints and opportunities those environments create – Gabriel Kuris’s studies of the Indonesian KPK (here and here) provide nice evidence of that.

So, was the NACC’s decision to bring these charges against the Prime Minister at this moment a politically rash decision, or a politically shrewd one? It’s easier to make the case for “rash”, but at the risk of revealing my ignorance of Thai politics (or my ignorance more generally), I’m going to make a tentative case for “shrewd”. Continue reading →

Bright Line Rules: A Way to Reduce Politicized Enforcement?

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Yesterday Matthew discussed the wisdom of the Thai anticorruption agency’s recommendation that Thai Prime Minister Yingluck Shinawatra be charged with failing to prevent corruption.  The case would be brought under Article 157 of the Thai Criminal Code, a broadly worded law providing that a public official commits a crime if someone is injured as a result of the official’s failure to exercise his or her duties.

Statutes with such a broad sweep are a standard response to corruption in many countries, enacted out of a fear that a clever criminal can find a way around tightly drawn provisions of law.  Indeed, countries as diverse as Tanzania, South Korea, Indonesia, and Vietnam have all enacted broadly drawn laws that criminalize the “abuse of public office for private gain.”  However, such laws vest enormous discretion in the hands of law enforcement.  A critical–and often overlooked issue–is whether law enforcers should enjoy such discretion. Continue reading →

When Should Government Officials Be Criminally Liable for Failure to Prevent Corruption? Reflections on Thailand, and Beyond

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Three weeks ago, Thailand’s National Anti-Corruption Commission (NACC) recommended charging the sitting Prime Minister, Yingluck Shinawatra, with violating Section 157 of the Thai Criminal Code, one of Thailand’s key anticorruption laws. The corruption allegations concerned malfeasance in the Thai government’s controversial rice-purchasing program. There is much to be said about the NACC’s action and the underlying allegations, as well as how this will play out in the roiling cauldron of contemporary Thai politics. But perhaps the most striking thing about the charges, with the greatest potential significance outside of Thailand, is that the NACC did not allege that Prime Minister Yingluck herself committed any corrupt act, or even that she oversaw or directed or approved of any corrupt act. Rather, the NACC’s criminal complaint alleges that Prime Minister Yingluck knew about the alleged corruption in the rice-buying program and failed to stop it. This is possible because Section 157 applies to any official who “wrongfully exercises or does not exercise any of his functions to the injury of any person” (emphasis added). The NACC seems to read the prohibition on wrongful failure to exercise official functions quite broadly, so that it extends not only to an official who corruptly fails to take action (such as a health inspector or customs officer who looks the other way in exchange for a bribe), but also to an official who fails to take action to prevent corruption in the programs that official supervises.

That theory of criminal liability, applied in this context, is bold, and perhaps unprecedented. Of course, in private organizations, many legal systems may impose civil liability on corporate officers and directors who knew (or should have known) about corrupt activities by the corporation and failed to take appropriate remedial measures. But I can’t think of another instance in which an anticorruption enforcement agency has brought criminal charges against a senior government official (let alone a sitting head of government) for that official’s failure to stop corruption in a government program.

So what should we think about this? Is the expansive theory of liability under Section 157—as interpreted by the NACC—something that other countries should emulate? The short answer is that I’m not sure, but I have a few preliminary thoughts.

Continue reading →

US Moves to Freeze and Seize Nigerian Dictator Abacha’s Assets–But Who Will Get the Money?

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Last week, the U.S. Department of Justice (DOJ) announced that it had frozen about $458 million in corruption proceeds that former Nigerian dictator Sani Abacha and his conspirators allegedly embezzled from Nigeria’s central bank, laundered through U.S. financial institutions, and deposited in bank accounts around the world. The freeze is a first step in the DOJ’s largest-ever forfeiture action under its recent Kleptocracy Asset Recovery Initiative (KARI).  There is much to say about this development, but the question that most immediately comes to my mind (and likely many Nigerians’ minds) is: What will the DOJ do with all this money? Continue reading →

Guest Post: Gender Equality in Parliaments and Political Corruption

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Priya Sood, Program Advisor at the Global Organization of Parliamentarians Against Corruption (GOPAC) contributes this guest post, in honor of International Women’s Day (March 8):

Does the extra X chromosome make political leaders less likely to bribe, pilfer, and lie? Are women across the board less corrupt?  According to recent research by GOPAC’s Women in Parliament Network, the reality is far more nuanced.

GOPAC conducted research based on a ten-year analysis of trends in the proportion of women elected to national parliaments as correlated to trends in national corruption levels. Surprisingly, the findings showed no general worldwide correlation between changes in parliamentary gender balance and changes in political corruption.  However, when GOPAC examined countries which have traditionally been strongholds of parliamentary democracy, the picture changed. In countries with reasonably robust democratic systems that enforce their anticorruption laws–but only in those countries–an increase in the number of women in parliament will tend to reduce corruption.

In addition to that general finding, GOPAC’s research on legislative gender equality and corruption also suggests a number of potential reforms that would help further both gender equality and anticorruption:

  • Legislation to mandate parliamentary oversight of government use and management of state financial instruments
  • Rules within political parties that commit a party to fielding a minimum number of candidates of each gender in general elections
  • Increasing female political leaders’ capacity and understanding of financial oversight mechanisms

For a more evidence that the women’s political participation tends to reduce corruption in strong democracies, but not elsewhere, see recent research by Justin Esarey and Gina Chirillo.

Updated Anticorruption Bibliography

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An updated version of my ever-expanding bibliography on corruption and anticorruption is now available from my website, and a direct link to the pdf is here. I’m always looking for new sources to add, so if you have suggestions for additions, please send them using the Contact page.

When Transparency Makes Corruption Worse: Cartels in Public Procurement

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Yesterday Matthew commended the work of Mihály Fazekas, István János Tóth, and their colleagues to those concerned with corruption in public procurement.  I second that recommendation.  In their July 2013, slyly-named “Corruption Manual for Beginners”, the authors describe better than anyone yet how a government buyer can connive to steer a contract to a particular seller — from skewing the contract specifications so that only the favored firm can meet them, to failing to notify others about the procurement, to disqualifying on specious grounds firms that submit bids lower than the favored firm’s bid.

Yet despite the value of the contribution, the authors have not (yet) provided a similarly penetrating analysis of another form of public procurement corruption: that which results not from a conspiracy between a government buyer and one seller but that between the buyer and a group of sellers organized into an industry cartel.  Judging from the results of investigations in settings as different as the American states, the Netherlands, the Philippines, Nepal, France, Columbia, Uganda, Slovakia, and India, this type of corruption maybe be at least as common as the single seller form.  Costly too.  More than half the time, the price a buyer pays in a cartelized market is 25 percent or more higher than what it would have been had there been no collusion among the sellers.

The distinction between these two types of collusion–one involving a single favored seller, the other involving a cartel of sellers–is important, because the appropriate policy response is quite different. When the procurement process is corrupted by a cartel, the standard prescription for combating corruption–transparency–is not only ineffective but self-defeating.  Continue reading →