Monthly Archives: October 2014

Yet Another Misguided Proposal to Solve Corruption with an International Convention

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Entrenched corruption is a frustrating problem, so it’s tempting to invent a new international regime that can take bold action against it without relying on or being encumbered by corrupt or incompetent domestic law enforcement. An article published last week in Foreign Affairs by Alexander Lebedev and Vladislav Inozemtsev, succumbs to that temptation by proposing a “universal anticorruption convention” as a solution to grand, systemic corruption (as distinct from low-level bribery). In broad terms, Lebedev and Vladislav envision a convention that would “clearly define the crime of corruption, codify the principles of good governance,” and “establish a supranational governing body, dedicated investigative and police forces, and a specialized court,” with signatories agreeing to “allow[] international investigators to act freely on [their] territory, and permit[] international prosecution of [their] citizens for corruption crimes.”

The article is short on details about these proposed institutions; the bulk of the article is devoted instead to the proposed convention’s enforcement mechanism. And there the proposal is quite radical: Signatories would be required to “radically curb their financial ties” with non-members, to “identify all assets controlled on their territories by the subjects of nonmember states (both individuals and companies)”–regardless of whether the assets are the proceeds of corruption–and, by an agreed deadline, to “monetize[e] and repatriate[e]” all of these assets. Under the convention, citizens of non-member states could not “open[] accounts in member countries’ banks, establish[] companies on their territories, [or] acquir[e] local real estate.” And member states would also be required to bar immigration from non-member states (at least of “young, independent people”), because the “freedom to leave” a corrupt state reduces the pressure to change from within.

I agree with Lebedev and Inozemtsev that grand corruption is a serious problem, and I commend them on their willingness to explore radical new solutions. But their proposal is absurd. I can’t imagine any state signing on to it, and I don’t think any state should. Their proposal would not only be ineffective. Its implementation would be catastrophic.  Continue reading →

Guest Post: The Other Face of Vulture Funds–Digging in the Right Pockets

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Ignacio A. Boulin Victoria and Enrique Cadenas, the co-directors of the Center for Law and Development at Universidad Austral in Buenos Aires, Argentina, contribute the following guest post:

It looks like a boxing fight. On the one side, the so-called “Vulture Funds” (mainly the US hedge fund NML Capital, CEO’d by the famous—or infamous—Paul Singer) threaten to inflict serious damage over a whole country’s economy. On the other, Argentina’s government, headed by President Cristina Fernandez de Kirchner, whose administration—like that of her predecessor and husband, Nestor Kirchner—has been dogged by serious allegations of corruption, and whose vice president is currently being prosecuted for corrupt practices. Both parties have made remarkable efforts to win the media battle through propaganda and lobbying, with President Kirchner accusing the Vulture Funds of being “economic terrorists,” and the Vulture Funds denouncing Argentina as “a model of unsoundness” that “refus[es] to pay its debts.” Whatever the international perception, the conflict with the Vulture Funds seems to be helping President Kirchner, whose standing in national polls has been rising during the standoff.

But—though this may sound perverse to many Argentine citizens—from an unconventional perspective it’s possible that the attack of the Vulture Funds may produce, at the end of the day, good consequences for Argentina. The reason has to do with how the Vulture Funds’ attack may expose pervasive high-level corruption, and deprive some corrupt leaders of the proceeds of that corruption. Continue reading →

Reflections on the Anticorruption Movement

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The World Bank’s Integrity Vice-Presidency is celebrating its 15th anniversary.  It recently asked a number of individuals for their thoughts on the anticorruption movement over the past 15 years.  INT’s questions and my replies below.  Continue reading →

Corruption and the Revolving Door: Recent Discussions and Further Reflections

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So-called “revolving doors” between government and the private sector raise the specter of potential corruption (if not in the strict legal sense, then in the broader sense), and some anticorruption advocates have called for much more aggressive restrictions on former government officials’ ability to work for the sectors they used to regulate. (See, for example, here, here, and here.) Though the concerns are legitimate, I argued in a post a little while back that the issue is much more complex: many of the concerns about the harms of the revolving door may be overblown, and revolving doors might in some cases have beneficial effects.

I thought I’d revisit the issue in light of two very interesting recent contributions on this topic: a blog post last week by Transparency International Programme Manager Dieter Zinnbauer on the pros and cons of the revolving door (along with a companion post on measurement issues), and an article by Wharton School Professor David Zaring. Mr. Zinnbauer concludes that the weight of the evidence suggests that the revolving door is indeed a serious problem, and that for the most part the costs outweigh the benefits; Professor Zaring reaches more or less the opposite conclusion.

Although I think the first half of Mr. Zinnbauer’s post is an excellent, succinct, evenhanded summary of the main issues, I respectfully disagree with the inferences that he draws from the existing evidence. That’s not to say that his conclusions are wrong, or that revolving doors are nothing to worry about. But when Mr. Zinnbauer says that “a much larger body of new evidence comes down quite distinctively on the negative impact of the revolving door,” I think he’s overstating his case. Here’s why: Continue reading →

Corruption in Crisis Situations: Why Should We Care? What Can We Do?

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A Deloitte audit published a few weeks ago revealed that the Assistance Coordination Unit (ACU), the aid management branch of the Syrian National Coalition (SNC), could not account for $1 million in expenditures in 2013. The misappropriation of $1 million, out of $60 million in total spending, may not seem like a lot, but it could be a warning sign about just how much of the $3.1 billion in Syria relief coordinated by the UN in 2013 actually reached its intended targets, and how much was lost to corruption. This concern — which applies not only to Syria, but to humanitarian aid in other conflict zones like Iraq, Somalia, and Afghanistan — is closely related to the issue Rick’s earlier post raised about the scandal of corruption in development aid, which should not be written off simply as “leakage,” but which can undermine rather than promote development. A parallel argument applies to corruption in humanitarian assistance to conflict zones: it undermines security. Indeed, although corruption in aid destined for insecure areas raises similar problems to corruption in development aid more generally, there are three factors that make corruption in conflict zones a particularly challenging and high-stakes concern. Continue reading →

Bringing Down the House?: Legislative and Political Limits on Anticorruption Efforts in South Africa

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A swimming pool. A cattle corral. An amphitheater. These are the sorts of ostensible “security upgrades” at Nkandla, the home of South African president Jacob Zuma, which filled the Public Protector’s report on the misuse of state funds.  As Eden pointed out in a previous post, these salacious details spread through the South African media like a firestorm, leading to calls for President Zuma to resign—or at least pay back the money—and adding to the growing reputation of Thuli Madonsela, South Africa’s “Public Protector“, an ombudsman-like position constitutionally charged with investigating improper government conduct.

Madonsela, who helped draft South Africa’s current constitution, was unanimously nominated by a National Assembly committee and appointed by President Zuma in 2009.  Though as Public Protector she is unaffiliated with any political party, she was previously a member of the African National Congress, the party that has dominated South African politics since the end of apartheid.  Her persistence in fighting corruption, though, seems to have come as a surprise to her former compatriots, who have resorted to personal attacks; the deputy defense minister, for example, recently accused her of being a CIA spy.  In a country which has been repeatedly criticized for inadequately addressing corruption, Madonsela’s investigations into cabinet officials and the police commissioner have provided one of the few signs of accountability.  Her report on the expenditures at Nkandla, which calls for President Zuma to make a partial repayment, is her highest-profile work thus far.

However, despite all the praise directed towards Madonsela—like inclusion in Time’s “100 Most Influential People” of 2014—the furor around “Nkandlagate” has revealed several severe limitations on the office of the Public Protector. Continue reading →

Guest Post: The Double Jeopardy Bar Should Not Apply When Acquittals Are Tainted By Corruption

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Federico Morgenstern (fedemorg@gmail.com), Prosecretario in the Federal Criminal Chamber of Appeals in Buenos Aires, Argentina, contributes the following guest post:

All around the world, a culture of impunity impedes the effective criminal prosecution of corruption cases, particularly of senior government officials and their close associates. Due to the interference of power political actors, judges and prosecutors often do not pursue these cases promptly or properly. Although there has been some attention – including on this blog – to concerns about prosecutors dropping or shelving cases, there is a closely related problem that is even more difficult, and that has received much less attention: fraudulently obtained acquittals, or contaminated absolutions.

Unfortunately, corruption cases in which powerful politicians are acquitted without a real and thorough investigation by independent prosecutors and judges are very common. And these corrupt acquittals are even more pernicious than prosecutorial decisions to shelve an investigation because the double jeopardy rule (also known as cosa juzgada or ne bis in idem) forbids the government to try the same defendant again on the same (or similar) charges following an acquittal. Thus, even following a change of government—which might lead prosecutors and judges to “strategically defect” against the corrupt old regime, or might simply produce a new set of the prosecutors and judges who are more willing to go after corrupt former officials—a prior acquittal would shield those corrupt actors from having to answer for their crimes.

Somewhat surprisingly, both the legal academy and the anticorruption community have largely ignored the double jeopardy doctrine’s implications for anticorruption efforts. But, as Guillermo Orce and I argue in our recent book, Cosa Juzgada Fraudulenta. Dos Ensayos Sobre la Llamada Cosa Juzgada Irrita (Abeledo-Perrot), there are compelling arguments for limiting the scope of the double jeopardy principle, in particular by allowing—under certain circumstances—the reopening of “contaminated” acquittals (cosa juzgada fraudulenta or cosa juzgada irrita): cases in which an acquittal is tainted by fraud, political interference, or clear disregard for the evidence. The core of the argument is as follows: Continue reading →

Why Firms Contracting With Developing Nations Should be Required to Disclose Evidence of Corruption

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An earlier post urged developing states to require firms doing business with them to have procedures in place to prevent their employees and agents from bribing government officers, making false claims, or committing other corrupt or fraudulent acts during the execution of a government contract.  Mandating that government contractors institute anticorruption compliance programs is an American innovation that works reasonably well there and is spreading to other nations.  Here I advocate a second American effort to curb corruption in government contracting that has not worked well in the United States but can in developing states.

Continue reading →

UN, Heal Thyself: The UN’s Embarrassing Failure to Protect Whistleblowers

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The United Nations has positioned itself as one of the leading global voices against corruption, principally through the UN Convention Against Corruption (UNCAC). Among the many vital topics covered by UNCAC is the protection of whistleblowers. UNCAC Article 33 provides:

Each State Party shall consider incorporating into its domestic legal system appropriate measures to provide protection against any unjustified treatment for any person who reports in good faith and on reasonable grounds to the competent authorities any facts concerning offences established in accordance with this Convention.

Though this provision is framed in non-mandatory terms, the UN and associated advocacy bodies clearly treat whistleblower protection as critical, both for countries and for the private businesses that the UN has pushed to join the UN Global Compact.

But what about the United Nations itself? Secretary General Ban-Ki Moon has declared that the UN has “developed a strict system of internal controls” and that the UN will “continue to remain vigilant and work hard to set an example.” And the UN’s Ethics Office promises to “protect[] staff from being punished for reporting misconduct or for cooperating with an official audit or investigation.” Providing protection to staff, the Ethics Office explains, “strengthens accountability and maintains the integrity of [the UN’s] operations and programmes.”

Sounds good.  But the actual UN practice is much more troubling–indeed, it should be downright embarrassing.  This was driven home most clearly in a decision that the United Nations Appeals Tribunal handed down this past September concerning the whistleblower James Wasserstrom, but the issue goes beyond any one individual case to the entire UN system–or lack thereof–for protecting internal whistleblowers from retaliation. I’m frankly surprised that this issue hasn’t gotten more press in the anticorruption community. Continue reading →

Controlling Corruption in Afghan Aid as the U.S. Withdraws

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Foreign aid has flooded into Afghanistan over the past decade and a half, including over $104 billion in US aid dollars alone; indeed foreign aid currently comprises 60% of Afghanistan’s budget expenditures. But despite—or perhaps because of—these immense expenditures, corruption still plagues the Afghan government and economy (Afghanistan ranks 175/177 on Transparency International’s Corruption Perception Index)–and this greatly concerns the Afghan people. Since 2008, the American effort to address corruption in Afghanistan has been overseen by the Special Inspector General for Afghanistan Reconstruction (SIGAR). SIGAR, currently headed by attorney John Sopko, conducts audits and investigations, and issues recommendations and reports to reduce fraud, waste, and inefficiency. SIGAR’s unique approach—centralized, independent oversight over all agencies involved in Afghan reconstruction—has yielded tangible benefits, including saving almost half a billion dollars through a single audit. Reform efforts by the United States and the international community have improved Afghan legal structures, including by crafting comprehensive anticorruption laws and strategies, though serious problems remain.

Yet maintaining accountability and oversight over foreign aid will be even more challenging as U.S. troops leave. In SIGAR’s most recent quarterly report, Sopko points out that “[l]arge areas of the country . . . will soon be off limits to U.S. personnel due to base closures and troop withdrawals.” Nonetheless, the U.S. will continue providing external financial assistance as Afghanistan even as America’s footprint shrinks, and the United States will continue to foot the bill for much of Afghanistan’s public sector even as the US withdraws all but 9,800 troops by December 2014. What can American policymakers to do address the problem of corruption in development aid to Afghanistan during and after the withdrawal?

At first blush, perhaps not much. The US has struggled to stem misallocation of American funds previously, and its levers will weaken as its presence diminishes. Nevertheless, the US will retain significant influence in the near future, and there are a number of concrete steps the US can and should take to limit the extent of corruption in US development aid to Afghanistan, and to support anticorruption efforts in Afghanistan more generally: Continue reading →