Monthly Archives: January 2016

A “Paradigm Shift” in Mexican Anticorruption Law?

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Problems of corruption and graft are not new in Mexico. Recently, the Mexican elite political class has been implicated in a series of real estate scandals that reached all the way to President Peña Nieto. Most notably, President Nieto and his wife have been accused of impropriety in their purchase of a 7 million dollar mansion—dubbed by the press “la Casa Blanca” (“the White House”)—from a wealthy government contractor. While not directly related, Nieto’s presidency has also been rocked by protests surrounding the disappearance and presumed death of 43 students in Guerrero. Local officials appear to have been involved in the disappearances, and the official investigation is widely viewed to have been botched.

But in the midst of all this (and arguably because it), Mexico managed to pass one of the most sweeping anticorruption reforms in recent memory. In April and May of last year, the Mexican legislature passed and the state legislatures approved reforms to 14 articles of the Mexican Constitution. Conceived of and spurred on by Mexican civil society groups, these reforms bolstered existing anticorruption institutions and created whole new ones.

The reaction to these reforms has ranged from excitement and enthusiasm, to cautious optimism, to cynical dismissal. (President Nieto, for his part, has hailed them as a “paradigm shift” in the Mexican fight against corruption.) These changes to Mexico’s constitution are only the first step in the country’s much needed systemic reform. Their success will depend substantially on secondary enabling laws to be enacted sometime before June 2016. But it’s worth stopping now to analyze what these reforms get right, and what they fail to address.

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Guest Post: A New Additional Indicator for Measuring Progress Toward SDG 16

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GAB is delighted to welcome back Dieter Zinnbauer, Programme Manager at Transparency International, who contributes the following guest post:

A very interesting discussion has evolved on this blog (see here, here, here, and here), and in the wider world (for example, see here), on about the indicators that should be used to measure progress toward the Sustainable Development Goals (SDGs) goals for improving governance and reducing corruption (Goal 16). There are already some very good suggestions on the table, including the use of Transparency International’s Global Corruption Barometer (GCB) to measure progress toward Target 16.5, on reducing corruption and bribery in all their forms. (TI has used the GCB since 2005 to compile one of the largest data troves on the detailed experience with corruption of households and individuals around the world. Using a GCB-type indicator for the bribery dimension of SDG 16.5 is supported by a wide variety of stakeholders, including the World Bank, UNDP, and Save the Children.)

Yet most of the indicators proposed so far, including the GCB, speak to very specific aspects of corruption (such as bribery) and don’t quite do justice to Goal 16’s broad ambitions and its emphasis on public accountability. So to spice up this stew a bit, let me suggest another possible indicator, one that complement to some of the ideas that are already on the table. My proposed indicator of progress toward SDG 16 is as follows:

What percentage of national-level parliamentarians (and perhaps top level members of the executive) have made assets, income, and interest disclosures (AIIDs) in a format that is publicly accessible online at sufficient level of detail, in timely manner, and in a machine-readable data format.

Using AIID as an additional SDG 16 indicator might at first seem to be a step backwards, since such an indicator measures “outputs” rather than “outcomes.” But let me try to convince you that in fact AIID would be an extremely useful complementary indicator for progress toward SDG 16: Continue reading →

Will Honduras’ MACCIH Become Another CICIG?

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After a several month negotiation with the Organization of American States, the ruling party, the opposition, and civil society, the Government of Honduras agreed to form a new anticorruption body that offers the Central American nation the hope that the endemic corruption blamed for making it one of the poorest, most unequal, and most violent societies in the Western Hemisphere can be brought to heel.  On January 19, Honduran President Juan Orlando Hernández signed an international accord with the OAS establishing the Mission to Support the Fight against Corruption and Impunity in Honduras (known as MACCIH, its initials in Spanish).  MACCIH was inspired by the success of a similar body in neighboring Guatemala, the International Commission Against Impunity (known too by its Spanish initials, CICIG), which, as readers of this blog (here, here, and here) or of a June 2015 Washington Office on Latin America report know, has made significant inroads in taming corruption in that country.

Like CICIG, MACCIH is a hybrid international-domestic agency.  Its staff will be international civil servants paid for, and accountable to, the OAS and immune from Honduran law, yet MACCIH’s staff is tasked with the same mission as Honduran law enforcement agencies, to ferret out corruption in the Honduran body politic.  As with CICIG, in creating MACCIH the hope is to establish an independent, incorruptible body of investigators, prosecutors, and judges able to pursue cases where, thanks to corruption, incompetence, or intimidation, their Honduran counterparts have not.  But important differences between the powers granted MACCIH and those CICIG enjoys make observers wonder whether, as Washington College Professor Christine Wade recently wrote,  MACCIH isn’t a “ruse designed to appease domestic and international critics” of the government.

For MACCIH to be something more than a way to buy time until the furor over the recent corruption scandals that spawned it fades from view, it must overcome three challenges. Continue reading →

More Phony Numbers–This Time on the Anticorruption Impact of Open Data

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OK, I know I’m beating a dead horse. Within the last month I’ve already posted several times (see here, here, and here) about bogus anticorruption statistics, as has Rick. And I promise that after this post, I’ll move on to other topics. But I can’t help commenting on this latest release from Transparency International, criticizing the recent World Economic Forum (WEF) meeting for not explicitly addressing corruption. As its lead example, TI faults the WEF for not addressing issues like open data (and openness more generally). I’m sympathetic to TI’s policy position, but in making the case, TI asserts, “One study suggests that open data could reduce the costs of corruption by about 10 percent.”

I was curious (and, admittedly, skeptical) about yet another seemingly precise estimate of something that’s inherently hard to measure. So I clicked on the link to the “one study” that “suggests” that open data technologies would reduce the costs of corruption by 10%. This “study” is actually a report (really, an advocacy document) from an Australian consulting firm (Lateral Economics), commissioned by a philanthropic fund (the Omidyar Network) that invests in open data initiatives. How does this “study” reach its conclusion that open data could reduce the costs of corruption by 10%? I will now quote in full the entirety of the evidence and analysis supporting that conclusion: Continue reading →

What Does China’s Anticorruption Campaign Mean for Africa?

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In advance of Chinese President Xi Jinping’s attendance at a China-Africa summit in Johannesburg last December, a flurry of news articles in African outlets—especially in Zimbabwe—optimistically highlighted the role China could play in helping African countries curb corruption. As previously discussed on the blog, in the first three years of his tenure, President Xi has made a crusade against corruption an important rhetorical part of his presidency, and backed up those words with actions (though some have questioned his techniques). It’s equally well-established that China has become very involved with Africa.  China increasingly depends on Africa’s mineral resources to feed China’s growing industries, and Chinese businesses see Africa as a potentially lucrative export market. Many African countries seeks partners, like China, that are willing to invest in infrastructure and business development. Though there has been recent pushback to China’s actions, and even a decline in Chinese investment in Africa, President Xi’s $60 billion pledge at the summit indicates China will continue to be an important player in the region for the foreseeable future.

Many commentators hope that the combination of these two factors—China’s anticorruption campaign and its substantial economic engagement with Africa—will give a boost to anticorruption efforts in Africa. Alas, those hopes are overstated.

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Is Corruption an Emerging Cause of Action in Investor-State Arbitration?

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The Trans-Pacific Partnership Agreement (TPP) has attracted unprecedented public interest in investor-state arbitration—also known as investment treaty arbitration, investor-state dispute settlement, or ISDS. Sovereign nations and foreign investors may choose this process as an alternative to ordinary litigation in domestic courts, by submitting their claims before a panel of expert judges applying international law. Though some critics seem to suggest that ISDS imposes a static list of economic rules, arbitration actually applies a complex system of legal principles which balance investor security against the sovereign autonomy of host states. Over time, investor-state arbitration has proven to be an emerging space for enforcing international norms—including transparency and anticorruption. Indeed, the TPP demonstrates this growing influence of anticorruption norms in ISDS. Not only is the TPP the first multilateral trade agreement to explicitly require anticorruption commitments from its members, its ISDS chapter will also commit members to the anticorruption rules emerging in investor-state arbitration.

Since long before the earliest discussions of the TPP, arbitral panels have sometimes used anticorruption norms to interpret treaties and contracts that made no mention of anticorruption or transparency. Indeed, although no previous trade or investment treaty has obligated host states or investors to observe anticorruption standards, ISDS panels have increasingly considered corruption relevant, and even dispositive, in determining liability. This process has enabled the development of what is effectively a common law of anticorruption principles. (Although there is no doctrine of stare decisis in investor-state arbitration, arbitral decisions provide persuasive authority in future disputes, and particular decisions may gain influence and recognition comparable to precedent. An arbitral panel has discretion to consider other public international law authorities, including previous investor-state disputes, international commercial arbitration between two private companies, public international courts, and ad hoc bodies such as the Iran-US Claims Tribunal. All of these systems have helped contribute to the emerging anticorruption norms in ISDS.)

Arbitral panels considering corruption have most often treated it as a “shield”—that is, as a defense against liability. But while recent panels and commentators have questioned the merits of a “corruption defense,” recent cases hint at the emergence of a freestanding cause of action for corruption—as a sword rather than a shield. This potential shift suggests that, in addition to the the TPP’s express transparency and anticorruption terms, the ISDS chapter may offer hidden tools for anticorruption enforcement.

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Guest Post: Time to Go Beyond Anti-Corruption Agencies in Sub-Saharan Africa

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Njoya Tikum, United Nations Development Programme Regional Anti-Corruption Advisor for Africa and Yale University World Fellow, contributes the following guest post:

To achieve the aspiration for an inclusive and sustainable human development in Africa, as articulated in the Africa Union’s (AU) Agenda 2063 and reiterated in the Common Africa position on post 2015, African countries must reconsider their approach to the fight against corruption. In the last 15 years, the international community of anticorruption practitioners and advocates have induced African countries to establish anticorruption laws and bodies. With few exceptions, almost every African country—sometimes of their own volition and at times under immense pressure from international financial institutions—has embarked on wide-ranging reforms aimed at strengthening state accountability and eradicating corruption. However, these interventions have not resulted in any noticeable decline in corruption in most parts of Africa. Indeed, multiple indexes such as Transparency International’s Corruption Perception Index (CPI), the Mo Ibrahim Foundation’s Governance in Africa Report, and the Afrobarometer, indicate that corruption has been on the steady rise in Africa. The critical question, then, is why the legion of interventions aimed at combating corruption have not yielded positive outcomes.

With monumental trust deficit between the state and citizens in Africa, relying on Anti-Corruption Agencies (ACAs) to fight corruption can only yield limited results. For many countries, the establishment of an ACA was just another box to tick in order to get the next round of development assistance; the agencies themselves are mere window dressing, often suffering from institutional weaknesses and a lack of sufficient human and material resources. In several African countries, for example, ACA funding is tied to presidential benevolence instead of allocation through a transparent national budgetary processes. They are staffed by people with no technical expertise, sometimes including retired public servants who have no real zeal to rock the boat. In these countries, the modus operandi is to fight corruption in areas earmarked by the ruling political regime. In some countries, leaders have used the ACAs to further witch-hunts against political opponents.

How does Africa navigate itself out of this quagmire? To win the battle against corruption, Africa must move beyond offices and notepads to pragmatism and action, exploring new and innovative solutions:

  • To begin with, anticorruption strategies must be comprehensive, and must include governance innovations such as open data, transparency and accountability in business, procurement, construction, etc. As part of this comprehensive approach, resources from the national budget must directly be allocated for anticorruption capacity building as part of national development plans (NDPs). As with other parts of NDPs, annual and biannual benchmarks and targets must be established to track the progress of anticorruption initiatives.
  • In addition, African governments can and should make use of new information and communication technologies (ICTs) and citizen social accountability tools. For instance, a number of web based applications have been developed to report instances of corruption in real time, providing an opportunity for cheap, affordable solutions to citizens and quick responses/actions by anti-corruption agencies and integrity institutions. See, for example, the Huduma, Ushahidi in Kenya and Frontline SMS campaigns on drug stock outs in the region.
  • Civil society organisations (CSOs) must play an increased role as the true watchdogs of the people. Given these responsibilities, and the need for CSOs to be autonomous and sensitive to local needs, it is unfortunate that almost 90% of anticorruption CSOs in Sub-Saharan Africa are funded by international donor agencies. The funding strategy must be adjusted, with national governments and other non-state actors taking up more responsibility for supporting anticorruption CSO activities.
  • Speaking of the international community, development partners must switch from playing a hypocritical role where they condemn corruption in the public sector in Africa but do little to stop corruption by private sector groups from their countries. They must embrace a new form of partnership where the private sector, including banks and transnational companies, are held to the same standards as public institutions.

WAGing at Corruption:  A Modest Proposal

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Matthew sparked a lively discussion last week on the use “of widely-repeated . . . statistics” that are in fact “unreliable guesstimates misrepresented as precise calculations—and at worst, completely bogus” in discussions about corruption.  He cited the claims that “$1 trillion in bribes are paid annually” and that “corruption costs the global economy $2.6 trillion per year” as examples.  The former, a wild guesstimate, and the latter not even that are routinely accepted as fact in media accounts and policy notes issued by development agencies and appear even in papers purporting to be serious academic works. I do not link to examples for two reasons.  One, there are so many that I would have to choose which ones to cite, and I don’t want to be accused to playing favorites.  Second, the links would embarrass the guilty by calling them out.  But many readers will know of whom I speak, and those who don’t can easily compile a list of offenders thanks to the magic of internet search engines.

I think Matthew did those concerned about combating corruption a great service by prompting debate about the use of such numbers, and I applaud him and those who replied for moving the discussion forward.  At the same time, I fear Matthew may have inadvertently pushed the discussion off-track with his observation in the opening paragraph that “in the grand scheme of things, made-up statistics and false precision are not that big a deal.”  I say this because, in responding to Matthew’s post, readers focused on a single issue: how much help it can be in discussions about controlling corruption to throw around phony numbers.

If the only question were whether what can fairly be termed a “wild ass guess” about the extent of corruption or some type of corruption or the losses it causes or what-have-you is if it helps advances policies that will help stamp corruption out, then Matthew is right; “made-up statistics and false precision” aren’t a big deal.  But suppose WAGs, by which I include both unsupported guesstimates and bogus numbers, are harmful too?  That not only are they sometimes useful by drawing attention to the issue or prompting action, but that sometimes they retard the cause of combating corruption.  Then what?

Below are two ways corruption WAGs can be harmful and a modest proposal for lessening that harm without calling a complete halt to their use. Continue reading →

More on McDonnell: Can We Please Get the Facts Straight?

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As many GAB readers know, we’ve had quite a number of posts over the last year about the ongoing legal drama surrounding the conviction of former Virginia Governor Bob McDonnell on federal corruption charges (see here, here, here, here, here, here, and here). Last week, the U.S. Supreme Court (to my chagrin) announced that it would hear Governor McDonnell’s appeal; the Court will address only the question of whether the “official action” required for a conviction under the federal anti-bribery statutes “is limited to exercising actual governmental power, threatening to exercise such power, or pressuring others to exercise such power, and whether the jury must be so instructed; or, if not so limited, whether [these statutes] are unconstitutional.”

I don’t want to spend too much time repeating my arguments as to why I think that upholding Governor McDonnell’s conviction is both the legally correct answer under existing U.S. law as it stands, and why a contrary conclusion would be a major setback for efforts to combat high-level bribery, particularly of public officials who can wield considerable influence over official decisions even without exercising the formal powers of their offices (for more on my views, see here, here, and here). Yet I continue to find myself somewhere between baffled and outraged by the mischaracterizations of what the jury and lower courts actually found, with respect to what Governor McDonnell (and his wife) did. To read the Court of Appeals opinion (which the Supreme Court will now review), and the briefs filed on Governor McDonnell’s behalf, and the various op-eds written by his supporters, is to be on two different planets. Continue reading →

Broken System: The Failure to Punish High Level Corruption at the UN

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“Is bribery business as usual at the UN?”

So asked U.S. Attorney Preet Bharara, and with good reason. Notwithstanding the UN’s protestations to the contrary, recent years have seen a succession of UN corruption scandals. Among the most infamous is the Iraqi Oil-for-Food case, in which Saddam Hussein, in collaboration with UN staff members, earned billions of dollars through kickbacks and illegal oil smuggling. Corruption in some UN peacekeeping operations is high, with new corruption cases coming to light on a regular basis. And last October, new charges of corruption were brought against (among others) a former UN General Assembly President and another UN diplomat who allegedly were engaged in an important bribery scheme.

Each time a new corruption case is exposed, the UN’s public reaction is the same: the Secretary-General states that the organization is treating the matter with the utmost seriousness and initiates an internal investigation or audit, while at the same time the organization attempts to “sweep the matter under the rug” by claiming that senior UN officials were unaware of the problem, and that this was an isolated incident involving a few bad apples, not the UN system itself. Yet given the frequency of UN corruption scandals, it is about time that the organization stops pretending that this is just a “few bad apples” problem, and try to understand why it faces these situations with such frequency.

The natural place to start is with the UN’s system for investigating and sanctioning corrupt practices, in particular the Office of Internal Oversight Services (OIOS). OIOS performs internal audits and investigations into reported violations of UN regulations, rules, and administrative issuances, and is also authorized to initiate proactive investigations to assess potential fraud risks in “high-risk areas.” OIOS’s mandate is strictly limited to administrative fact-finding; it does not conduct criminal investigations, and indeed the UN has no criminal jurisdiction over its personnel. But as an employer, the UN can impose disciplinary sanctions in response to wrongdoing or take other administrative measures. In the UN context, these administrative sanctions are particularly important because UN staff members, officials, and diplomats are granted immunity from local prosecutions, and therefore domestic prosecutions in the countries where the corruption took place can be difficult unless these immunities are waived. In such circumstances, a strong internal anticorruption system within the UN itself is even more essential to avoid impunity.

Yet although the OIOS looks good on paper, critics both outside the organization (see, for example, here and here) and inside as well, have said that the OIOS is not doing an adequate job investigating corruption and fraud. There are at least three reasons for this: Continue reading →