UNCAC Does Not Require Sharing of Foreign Bribery Settlement Monies with Host Countries

Maud Perdriel-Vaissiere, the Advisor on Asset Recovery for the UNCAC Coalition (a global civil society network committed to promoting compliance with the UN Convention Against Corruption) recently published a post on the UNCAC Coaltion blog entitled, “Is there an obligation under the UNCAC to share foreign bribery settlement monies with host countries?” Her answer is yes. Indeed, she says that the contrary position is based on a “gross misreading” of UNCAC, that UNCAC’s asset recovery provisions (in Chapter V) apply even to “stolen or embezzled funds over which foreign governments cannot establish prior ownership” (emphasis hers), and that there is “no doubt [that] there is an obligation under the UNCAC [for supply-side enforcers] to share foreign bribery settlement monies with host countries!” (The exclamation mark is hers as well.)

As readers of this blog may be aware, I think this is wrong, based on a sloppy and tendentious misreading of the language of the treaty. Though I’ve written on this before, I think Ms. Perdriel-Vaissiere’s analysis deserves a rebuttal. Continue reading

Guest Post: Compliance Culture in Emerging Markets — Tone at the Top or Tone in the Middle?

Today’s guest post is from Gönenç Gürkaynak, the managing partner and head of the Regulatory and Compliance Department at ELIG, Attorneys-at-Law, a leading law firm in Istanbul:

When listing the fundamental pillars of a compliance program, guidance on the Foreign Corrupt Practices Act and UK Bribery Act both stress the importance of the top-level commitment — “tone at the top” — for creating and maintaining a compliance culture within the company. Because the actions and stances of the board of directors and senior executives reflect and shape the corporate compliance culture, these directors and managers are expected to fulfill leadership roles within scope of the compliance program of the company. But the compliance leadership of the top-level management can be undermined by the reckless actions of the mid-level managers who have the obligation to meet operational targets and deal with the various problems posed in the field. Accordingly, a tone from the top is not enough to create or sustain a compliance program — especially in emerging markets — unless such tone is supplemented by the voice of the mid-level management (“tone in the middle”). Continue reading

Why Didn’t Teachout Win the New York Gubernatorial Primary?

In a recent post, Matthew wrote about the New York gubernatorial Democratic primary between incumbent Andrew Cuomo and self-proclaimed anticorruption candidate Zephyr Teachout. He laid out several reasons why even progressive voters who care about combating corruption could rationally cast a vote for Cuomo over Teachout. Since Matthew’s post, primary polls have closed and, indeed, unofficial results show Cuomo taking the Democratic nomination in a landslide (though not as sweeping a landslide as expected). Matthew’s predictions have been borne out, but as this post will explain, likely for different reasons than those he posited. Continue reading

So Is Corruption the Problem or Not? Moses Naim’s Curious Inconsistency

OK, this may not be the most important thing in the world, but I noticed it and can’t help pointing it out:

Here’s Moses Naim (who humbly describes himself as “an internationally renowned columnist and commentator”) writing in The Atlantic last May about what he sees as the big oversight in Thomas Piketty‘s surprise bestseller on economic inequality, Capital in the Twenty-First Century:

[T]he problem [of inequality] requires a more complete diagnosis [than Piketty provides]. It is not accurate to assert that in countries like Russia, Nigeria, Brazil, and China, the main driver of economic inequality is a rate of return on capital that is larger than the rate of economic growth. A more holistic explanation would need to include the massive fortunes regularly created by corruption and all kinds of illicit activities. In many countries, wealth grows more as a result of thievery and malfeasance than as a consequence of the returns on capital invested by elites….

Corruption-fueled inequality flourishes in societies where there are no incentives, rules, or institutions to hinder corruption. And having honest people in government is good, but not enough. The practices of pilfering public funds or selling government contracts to the highest bidder must be seen as risky, routinely detected, and systematically punished.

Most of the roughly 20 nations from which Piketty forms his analysis classify as high-income countries and rank among the least-corrupt in the world…. Unfortunately, most of humanity lives in countries where … dishonesty is the primary driver of inequality. This point has not attracted as much attention as Piketty’s thesis. But it should.

All well and good. But here are Naim’s thoughts on the global anticorruption movement (from Foreign Policy) in March 2005: Continue reading

The Corruption Conviction of Former Virginia Governor Robert McDonnell

Former Virginia Governor Robert McDonnell and his wife Maureen were found guilty September 4 of accepting thousands of dollars in luxury goods, an expensive vacation, and $120,000 in loans in return for using the powers and perquisites of the governor’s office to promote a local businessman’s products.  Although proving a public servant took a bribe is never easy, the McDonnell conviction shows that it is not impossible.  It also shows what prosecutors can do to ease their task. Continue reading

The Impact of Corruption on Social Mobility

In a post for the Brookings Institution, David Dollar laments China’s problematically low social mobility, and offers three factors preventing China from becoming a true land of opportunity: (1) the hukou residential registration system (which restricts labor mobility); (2) locally-funded education (which disadvantages poorer rural communities); and (3) growing corruption–because, as Dollar argues, it is “easier for elite families to pass on status and income to their children when there aren’t clear rules and fair competition.” . However, although the view that corruption inhibits social mobility is widespread, and Dollar’s point is partly correct, in reality the picture is more complex. Continue reading

Why Rational Anticorruption Voters Might Not Support the Anticorruption Candidate

As some readers of this blog are likely aware, Fordham law professor Zephyr Teachout is challenging the Andrew Cuomo, New York’s incumbent governor, in the state’s Democratic primary, to be held tomorrow. One of her main campaign themes is corruption: Her campaign emphasizes corruption in the Cuomo administration both in the narrow sense of raising concerns about unethical and possibly unlawful conduct in New York state government (as well as Governor Cuomo’s controversial decision to disband the Moreland Commission, which had been looking into these issues), and also “corruption” in the broader sense of excessive influence of wealthy interests and the distorting effect this has on politics. Teachout herself concedes that if she wins it would be the “upset of the century,” and indeed most political prognosticators give her virtually no chance of winning. Why not?

It’s true, of course, that Teachout has no prior experience in electoral politics and is up against a savvy and well-funded incumbent. But there’s a bigger problem for her — and for any insurgent anticorruption candidate or party — that derives from the nature of the U.S. electoral system that Nobel Laureate Roger Myerson identified over two decades ago in a technical game theory paper on how electoral institutions affect the success or failure of insurgent anticorruption candidates. Although Myerson’s analysis does not correspond perfectly to the New York primary (for reasons I will explain in a moment), it is nonetheless enlightening–not only for the challenges faced by Teachout, but for anticorruption parties more generally. Continue reading

The Extractive Industries Transparency Initiative: A Critique and Proposed Reforms

The natural resources sector–particularly extractive industries like mining and petroleum–is famously beset by corruption. In many countries, natural resource extraction is controlled by the wealthy, politically-connected elite, leading to a form of “resource curse” in which the majority of the population does not benefit from natural resource wealth and economic development outside the extractive sector stagnates. One of the most prominent strategies that has emerged in recent years to combat corruption in the extractive sector is a push for greater transparency. While many advocates of this strategy have pushed–with some qualified success–for laws that require greater disclosure by companies and governments, one of the most important pro-transparency initiatives is voluntary: the so-called Extractive Industries Transparency Initiative (EITI).

EITI members include states, companies, civil society groups, and institutional investors. Though membership is voluntary, members must comply with the principles established by the EITI board. Member companies are obligated to disclose the amount they pay for extractive contracts in member countries; EITI also also requires members to disclose revenues generated from the extractive industry and indicate how the revenues contribute to the national budget. Since its inception in 2002, EITI has claimed a number of successes. For example, EITI reports revealed a company owed US $8.3 billion in tax payments to the Nigerian government–more than what the Nigerian federal government spent on education over a period of 3 years.

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Corruption, Cultural Relativism, and Edmund Burke

An occupational hazard of working on corruption and anticorruption is the frequency with which one encounters some version of the claim (in more or less sophisticated forms) that “corruption” is a modern Western concept, and that in traditional/developing/non-Western cultures, behaviors that modern Westerners would see as corrupt (like bribery, nepotism, or diversion of government resources for personal uses) would be seen as somewhere between acceptable and outright legitimate. An even stronger version of this position maintains that when Westerners find themselves operating in one of these “Other” environments, it is entirely acceptable to operate according to “local norms”—that is, to engage in bribery and similar acts.

Now, there’s of course some truth to the claim that the meaning of corruption varies across times and places, but I’ve always thought the claim that corruption was a modern Western notion, with minimal applicability to developing/non-Western societies, was both factually inaccurate and tinged with a bit of cultural condescension masquerading as cultural sensitivity.

I touched on this a bit in post a few months back, focusing on contemporary debates about corruption as an issue in development policy, but I also think it’s useful to consider these debates in historical perspective. On that note, a little while back I came across a terrific article on the intellectual history of these debates.  This article, by Padideh Ala’i at American University’s Washington College of Law, focuses on Edmund Burke’s role as lead prosecutor in the (unsuccessful) effort to impeach Warren Hastings, a former Governor-General of India, for extensive corruption during his tenure.

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Curbing Corrpution in Papua New Guinea: What Australia Can do

A lively discussion is underway on the Development Policy Centre‘s DevPolicy Blog about what Australia can do to help control corruption in Papua New Guinea, the largest recipient of Australian foreign assistance.   It follows a government promise that by July 2015 the government will “detail the measures we [Australia] will adopt to protect Australian Government aid funds and how [Australia] will support our partner country’s anti-corruption efforts.”  What’s made the discussion so lively, as Grant Walton and Stephen Howes explain in the initial post, is the juxtaposition of Foreign Minister Julie Bishop’s recent discussion of the government’s plans to implement the policy with PNG Prime Minister Peter O’Neill’s evasion of arrest for his alleged role in a major corruption scandal and his attempts to dismantle PNG’s anti-corruption taskforce. Continue reading