An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.
Earlier this month the White House sent a letter to Congress pledging a commitment to the “robust and thorough enforcement” of the 2016 Global Magnitsky Act (GMA). The GMA, which grew out of a similar 2012 law that focused only on Russia, allows the executive branch to impose certain sanctions—including visa bans and freezing of U.S. assets—on any foreign citizen who commits gross human rights violations or who retaliates against whistleblowers who expose corruption. After Trump won the election, many feared that his administration would shelve meaningful enforcement of the GMA. (After all, the Obama Administration had also been reluctant to implement the original Magnitsky Act aggressively, and did so only under pressure from Congress.) In light of those low expectations, the White House’s statement was taken by many as an encouraging sign.
But many activists and NGOs fighting corruption, in Putin’s Russia and elsewhere, remain rightly skeptical. After all, Trump’s praise and upbeat rhetoric about corrupt authoritarian leaders—not only Putin, but President Erdogan or Turkey and President Duterte of the Philippines—naturally call into question the Administration’s seriousness about aggressive GMA enforcement. Consider further the fact that, despite the overwhelming evidence coming out of Chechnya that its president Ramzan Kadyrov has authorized massive abuses against the LGBT community and opened what is amounting to prisons for gays, there are no signs that the Trump Administration is considering adding Kadyrov to any open sanctions lists, despite not only recent events, but his long track record of corruption and human rights abuses.
Moreover, the White House’s statement in support of the GMA might be an attempt to create the appearance of taking a firm stand against corruption and human rights abuses, to diminish political momentum for more consequential actions. Specifically in regard to Russia, the latest statement about the GMA should also be understood in the context of the broader scandal regarding the Trump team’s ties to Russia. This scandal has, if anything, intensified anti-Russian sentiment in Congress. Not only have leading Senators and Representatives come out in strong support of sustaining existing sanctions against Russia, but there are now a half-dozen initiatives under consideration in Congress that would both codify and expand these sanctions. In such context, it might actually be useful to Trump (and arguably his Russian friends) to appear to be taking firm measures against Russia and other kleptocrats, while resisting adoption or implementation of more meaningful responses. The recent White House statement pledging robust enforcement of the GMA fits that narrative. After all, rhetoric aside, neither the original Magnitsky Act nor the GMA create more than a small headache for Trump and Russians. Only few really high level names have been sanctioned under those initiatives. Financial sanctions (particularly restrictions on long-term loans) are what matters for the Kremlin most. Indeed, Russian leadership might even be happy to have the Magnitsky laws in place if those restrictions are relaxed.
Those cursed to live in a country where leaders are stealing the nation’s resources wholesale are rarely able to stop them. Calling the police, complaining to the prosecutor, or appealing to the legislature is pointless: in a kleptocracy the thieves control the machinery of the state. Speaking out is futile. Those who do are quickly silenced — imprisoned if they not become the victim of state-sponsored assassination.
So it is particularly welcome to report that the citizens of Venezuela, the latest nation to become victim of massive, “grand” corruption by its leaders, recently hit upon a way to strike back. Even better is how they are doing it: using the social media posts of the kleptocrats’ kids. The Twitter account VVsincensura (“Venezuelans uncensored”) scours the internet collecting posts by the children of Venezuela’s kleptocrats showing them living the high life in Paris, Hong Kong, Sydney, and the like while the nation sinks ever deeper into a state of penury. From videos of the Caracas mayor’s daughter surfing in Australia to pictures of a former state official’s offspring helicoptering around the Middle East, VVsincensura regularly, indeed sometimes hourly, tweets out evidence of how well one’s kids can vacation, dine, and tour when the government picks up the tab. Particularly galling are photos of an ex-Minister of Health’s children sightseeing in China while the country experiences a medical emergency because it has no money to pay for basic medicines and hospital supplies.
Venezuela’s kleptocrats are yelping over the outing of their kids (example here). More significantly, the steady stream of snapshots showing them, drink in hand, languishing by a fancy pool or on white sands beach while the mass of Venezuelans scrounge for life’s basic necessities is starting to have an impact — both in Venezuela and abroad.
Within in Venezuela VVsincensura has stripped the last shred of legitimacy from the thieves ruling the country. Their claim to power is that they speak for Venezuela’s poor. But as more and more pictures of their kids in private jets, on luxurious beaches, or in five star restaurants circulate, that claim has become a dark national joke. It has also pumped new life to Venezuela’s beleaguered domestic opposition. The only thing now keeping the kleptocrats in power is the security forces, and one has to ask how many pictures of generals’ sons and daughters living it up in Madrid, Buenos Aires, and Sao Paulo will it take before front-line soldiers begin deserting en masse.
Outside Venezuela the vulgar display of wealth by kids of kleptocrats has become so revolting that it has begun to spark action. At this writing some 30,000 Australians have signed a petition demanding that their government revoke the student visa of Lucía Rodríguez, daughter of Caracas’ mayor and niece of the Foreign Minister. Rodríguez, ostensibly a student at a pricey Sydney University (tuition $18,000), is shown riding the waves off a Sydney beach in one VVSincensura post and enjoying a lifestyle far removed from that of an ordinary student in others. In the meantime, her father earns less than a $1,000 a year as mayor while preaching the virtues of an austere life to his constituents.
The Australian government should heed its citizens’ plea and send Rodríguez home, and that civil society in other nations hosting the kids of Venezuela’s kleptocrats should file similar petitions. Denying kleptocrats the ability to send their kids abroad would remove one incentive for them to rob their nation blind. More importantly, perhaps if the kids are penned up in Venezuela they will begin to realize just how hard life is for the great majority and how much responsibility their parents bear for making it so. Who knows, a few uncomfortable conversations around the family dinner table might prompt some of the thieves to go straight? For if a parent craves anything, it is their child’s love and respect.
While a single Twitter account might seem a feeble weapon to fight kleptocracy, VVSincensura shows that this is not so. That when aimed at the right target, it can be a powerful weapon for combatting grand corruption. The ostentatious, revolting display of wealth by kleptocrats’ kids VVSincensura features reveals in a dramatic way the evil of grand corruption. It is a tactic deserves widespread emulation — by citizens of other kleptocracies and anticorruption activists everywhere.
Big news in the world of Foreign Corrupt Practices Act Enforcement! According to a report earlier this month in Bloomberg, the U.S. government’s investigation into allegations that Walmart’s subsidiaries abroad (particularly in Mexico, India, Brazil, and China) engaged in extensive bribery of public officials, is about to wrap up! “People familiar with the matter” report that the settlement is nearing finalization, and that Walmart will end up paying penalties that are much smaller than the U.S. government originally sought. All of us FCPA nerds should be on pins and needles awaiting the imminent announcement of the settlement, which should come out any day now…
… or maybe not. Maybe this time the news is for real, and we’re about to see a settlement announcement, in which case there will certainly be something important to write about. But at the moment, what I find more interesting is the succession of stories, spread out over a nearly two-year period, that suggested that a Walmart settlement was just around the corner. To recap:
- In October 2015, the Wall Street Journal reported that, according to unnamed “people familiar with the probe,” the Walmart matter was about to be wrapped up–and the fine was going to be much smaller than originally predicted, because it turned out (according to the WSJ’s sources) that the FCPA violations were not as serious or widespread as had been previously reported.
- Almost exactly one year later, in October 2016, Bloomberg reported (on the basis of conversations with “three people familiar with the matter”) that, contrary to the previous WSJ report, although the US government encountered difficulties making out the FCPA violations in Mexico (not so much because of lack of evidence of misconduct, but rather because the most egregious conduct was outside of the statute of limitations), the government had evidence of misconduct elsewhere, and was seeking a penalty of around $600 million. According to that report, Walmart was still resisting, but the report nonetheless indicated that the administration was “working to wrap up an agreement before a new administration takes over in January .”
- Approximately nine months later, Bloomberg’s latest report states that, “according to people familiar with the matter,” Walmart is preparing to settle the case for $300 million – about half of what the government sought.
Now, though my initial reaction, given this history, is to take reports of imminent settlement with a grain of salt, I hasten to add that none of these reports are inconsistent with each other, or with the claim in the most recent report that a settlement announcement is imminent. Indeed, one could reconstruct roughly the following timeline of events, which I think is probably the best way to understand what’s going on: Continue reading
A friend of mine has been trying to start an artisanal liquor business in a small Latin American country. He learned to ferment fruit, crafted a logo, scrounged for and sanitized several hundred glass bottles, registered his corporation with all the various agencies, and paid all of his initial taxes. After producing his first batch and selling it to a number of small shops, he decided it was time to expand. Unfortunately, when he began to negotiate sales to larger restaurants and grocery stores he ran into a major complication: liquor taxes. The high level of liquor taxation made his business model completely unprofitable. Trying to understand how any other liquor business stayed afloat, he discovered that one liquor manufacturer and importer dominated the market, and didn’t pay any taxes. How? Corruption. In order to stay in business, my friend had a choice: (A) he could stay small, fly under the radar, and avoid paying taxes, or (B) he could navigate the perilous and uncertain process of bribing his way out of paying taxes. He ended up choosing a third option: he closed up shop and went back to his day job.
Ultimately, the fate of one small liquor business is not that important. But my friend’s experience illustrates a much more general phenomenon, one that is likely familiar to readers with experience in countries where corruption is widespread: corruption protects incumbent firms, undermines entrepreneurship, and constrains growth and job creation—particularly by small and medium-sized enterprises (SMEs), which are often the primary drivers of economic growth, employment, and innovation. Corruption can be a critical roadblock to entrepreneurs and small business owners who can’t bribe their way out of regulation. In fact, pervasive corruption can shift business incentives to such a significant extent that it can impact the shape of an economy dramatically. Continue reading
On December 21, 2016, Nigeria’s Federal Ministry of Finance approved a whistleblowing program as part of the Nigerian government’s continued efforts to fight corruption. Key features of the program include the launch of an online portal for submission of tips and the establishment of a reward for “information that directly leads to the voluntary return of stolen or concealed public funds or assets” (the reward is 2.5 to 5% of the amount recovered, with the percentage decreasing as the amounts recovered increases). As over $176 million in stolen funds was recovered within the first two months of the program, the whistleblowing policy appears to be an overnight success story. Nevertheless, although stolen funds are indeed being recovered, the existing policy does not do enough to offset the risks that whistleblowers face when they come forward with information, and this deficiency may limit the long-term effectiveness of the program. In particular, there are three aspects of the program that the government ought to reform in order to encourage individuals to assume the risks associated with becoming a whistleblower, and consequently to ensure the policy’s continued success. Continue reading
GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:
Can the U.S. government prosecute an individual for Foreign Corrupt Practices Act (FCPA) violations if that individual is not a U.S. citizen or resident, and committed no unlawful act in U.S. territory? An important case posing that question is now before a U.S. appeals court. The decision may have important implications on the territorial reach of the FCPA.
The facts and relevant statutory provisions are straightforward, although the analysis is not. The defendant, Lawrence Hoskins, is a British national who at all relevant times was an officer of a British subsidiary of French manufacturing giant Alstom. Alstom and several of its subsidiaries were investigated by the US Department of Justice for alleged illicit payments in Indonesia, and ultimately reached a global corporate settlement that included several corporate guilty pleas and Deferred Prosecution Agreements, pursuant to which the corporate entities paid US fines of over US$750 million. The DOJ also pursued several individuals, including Mr. Hoskins, who was ultimately arrested when he arrived in the United States on vacation. His attorneys moved to dismiss the indictment on the ground that the US prosecutor lacked power to prosecute him. After energetic procedural activity by both sides, the District Court granted his motion in significant part. Unusually, the prosecutor appealed, and oral argument was heard on March 2, 2017.