Monthly Archives: October 2018

Hiding in Plain Sight: How the Federal Elections Commission Can Use Existing Disclosures To Detect Campaign Finance Fraud

Posted on by
7

Last August, U.S. Congressman Duncan Hunter was indicted for misuse of campaign funds for personal benefit. The Justice Department alleges that Hunter conspired with his wife, whom he appointed campaign manager, to steal from his campaign to support their lavish lifestyle: the campaign spent $15,000 on airline tickets and hotel rooms for Hunter’s children and relatives, a $14,000 Thanksgiving trip to Italy, and for other expenses like $700 for seven adult and five children’s tickets to see “How the Grinch Stole Christmas.”

Though Representative Hunter’s conduct is only now being investigated, the allegations of improper spending go back to 2009, and many of the expenses now under scrutiny were detailed in his campaign’s filings with the Federal Election Commission (FEC). FEC filings are public records, readily available and searchable (via simple keyword searches on the FEC’s webpage) to anyone interested in looking. For example, Representative Hunter is a “vaping” enthusiast (even smoking his e-cigarette in Congress). Using the FEC’s webpage and a simple search for the words “cigar,” “smoke,” and “tobacco,” I found that Representative Hunter’s  2015-16 campaign expenditures include hundreds of dollars of spending at a cigar lounge, smoke shop, and tobacco company in his home district. Similar search results through the FEC website show all sorts of eyebrow-raising transactions.

So why weren’t the problems detected earlier? The problem, in cases like this, is not that the FEC doesn’t have enough information to identify suspicious activity—it’s that it has too much information. The FEC has massive amounts of data, making the detection of fraud a needle-in-the-haystack problem. The FEC relies largely on complaints and referrals to guide its enforcement process, with the result that enforcement remains anemic.  In 2017, for example, the FEC levied administrative fines in 215 matters totaling under $2 million, despite having data on 23.4 million line-item disbursements and 34.5 million individual contributions, not even counting electioneering communication transactions and the massive data on political action committees (PACs).

Waiting for referrals, or screening data by hand, is not an effective way for the FEC’s roughly 300 employees to detect corruption or fraud in campaign finance. There are no silver-bullet solutions; fraud detection is a fundamentally difficult, especially when fraudsters take steps to cover their tracks. But there are some steps the FEC can take to better monitor fraudulent expenditures to identify suspicious cases early on:

Continue reading →

Guest Post: Toward Global Standards for Defense Sector Governance

Posted on by
5

Amira El-Sayed, Program Manager for Transparency International’s Responsible Defence Governance program, contributes today’s guest post:

The governance of military power presents one of the great global challenges of our age. The defense sector is large, powerful, and secretive, and for those reasons especially vulnerable to corruption. In many countries, small groups of elites divert defense resources for personal enrichment, which can create risks to a state’s stability and security. Perhaps ever more troubling, in many countries powerful militaries run vast and secretive business empires exempt from oversight. Some of these businesses, such as resource extraction, are nominally legal, but militaries are often enmeshed with illegal activities like the trafficking of drugs, arms, and people. This too threatens state security, in at least two ways. First, poorly governed, corrupt militaries may be unable to respond effectively to genuine national security threats. Second, when the military uses its power to secure economic advantages for elites, this may contribute to the public resentment and frustration that can fuel violent extremist movements.

Improving governance in the defense sector is especially challenging. Defense sectors have historically hidden behind an “exceptional” status that has been used to stymie governance reform, with “national security” invoked as a sweeping justification to evade legitimate scrutiny from independent institutions and experts, such as auditors, anticorruption institutions, and civil society organizations. And this is not just an issue in authoritarian states: even in democracies, militaries are often exempted from meaningful oversight by parliamentary committees, judiciaries, audit offices, and anticorruption bodies, even as oversight by those bodies expands in other areas. While the need for secrecy may well be more pressing with respect to certain aspects of military and defense policy, the exemption of the defense sector from meaningful scrutiny is often overbroad, unjustified, and used to mask corruption, misuse of resources, and incompetence.

So how do you address one of the most complex challenges in governance, in a sector that has been exceptionally secretive, opaque, and impenetrable? Some of the work has to be done at the national level in individual countries, tailored to the each country’s specific circumstances. (There are many examples of such work by Transparency International (TI) and other civil society organizations. For instance, in Ukraine TI worked to establish high-level defense anticorruption committee called NAKO, and in Nigeria TI worked with the Air Force to take examine its governance structures and anticorruption systems.) But what about global standards, along the lines of what has been developed in other areas, like human rights and labor? Here there appears to be a significant gap. True, some security-related instruments do provide some principles for state/military behavior in specific areas, such as the OCSE Code of Conduct, UN Arms Trade Treaty, the NATO Building Integrity Programme, and the Tshwane Principles. And some of the general anticorruption or governance-related instruments, such as the UN Convention Against Corruption and Open Government Partnership, have some limited applications to the defense sector. But none of these instruments offers a comprehensive global approach to defense governance.

To fill this gap, TI is launching an initiative to formulate, formalize, and promote a set of global principles that underpin responsible, accountable governance of military power—principles that would embrace the idea that the military must be accountable to the people and that would, if followed, improve domestic governance of the defense sector. That is, TI is working with national governments, other civil society organizations, and the international community to develop Global Standards for Responsible Defense Governance, embodied in a Declaration on the Responsible Governance of Military Power. Continue reading →

How We Did It: the U.S. Congress’ Exposure of the Grand Scale of Global Corruption

Posted on by
6

 Over the past two decades the U.S. Senate Permanent Subcommittee on Investigations has laid bare how Gabonese President Omar Bongo, Chilean dictator Augusto Pinochet, Equatorial Guinean President Teodoro Obiang, and a gaggle of friends and relatives of the leaders of Mexico, Pakistan, Nigeria, Angola, Saudi Arabia, and other countries conspired with large, prestigious banks to hide the enormous sums they stole from their nation’s citizens.  Financial Exposure, the new book by subcommittee investigator and later staff director Elise Bean, recounts how Democrats and Republicans united not only to document egregious cases of grand corruption but to enact legislation making banks’ complicity in future cases a crime.

Americans depressed by the rancorous polarization now gripping Congress will find her book a welcome reminder that Democrats and Republicans can work together to advance the public interest.  Scandals involving money laundering by banks in other nations, most recently Denmark’s Danske Bank and Latvian bank ABLV, should prompt non-Americans to send their parliamentarians a copy of Ms Bean’s book.  Below Ms. Bean offers a few morsels from the book to whet readers’ appetites.    

There isn’t room here to recount all the subcommittee’s anti-corruption investigations, but a few examples will illustrate what they showed and what results they produced.

Citibank Private Bank.  Corruption was the subject of a key investigation by the subcommittee in 1999, which was led by then subcommittee chair Republican Senator Susan Collins of Maine. Rumors were flying then that the United States had become the preferred banker for corrupt foreign officials around the world. Working with Democratic Senator Carl Levin of Michigan (my boss), the subcommittee elected to zero in on so-called “private banks,” banking units that opened accounts only for wealthy individuals with at least $1 million in deposits.

The inquiry ended up detailing four accountholders at Citibank Private Bank: Raul Salinas, brother to the then president of Mexico; Omar Bongo, then president of Gabon; Asif Ali Zardari, then known for his marriage to Benazir Bhutto, former prime minister of Pakistan; and the sons of Sani Abacha, recently deceased president of Nigeria.  Senate hearings exposed how Citibank had not only accepted tens of millions of suspect dollars from the accountholders, but also created offshore shell companies to hide their identities, helped them secretly move millions of dollars around the globe, and continued servicing them even after learning of corruption allegations. Continue reading →

Some Things Are More Important Than Corruption (Brazilian Elections Edition)

Posted on by
22

In the anticorruption community, it is fairly common to puzzle over—and bemoan—the fact that voters in many democracies seem to support candidates that are known or reputed to be corrupt. “Why,” we often ask, “do voters often elect or re-elect corrupt politicians, despite the fact that voters claim to despise corruption?” One of the common answers that we give to this question (an answer supported by some empirical research) is that even though voters dislike corruption, they care more about other things, and are often willing to overlook serious allegations of impropriety if a candidate or party is attractive for other reasons. We often make this observation ruefully, sometimes accompanied with the explicit or implicit wish that voters would make anticorruption a higher priority when casting their votes.

We should be careful what we wish for. Continue reading →

Lessons from the Trump Administration’s Conflicts of Interest

Posted on by
6

In May 2017, this blog began tracking corruption and conflicts of interest in the Trump Administration, in order to identify and document the myriad ways that the President, his family, and his closest advisors may “use the presidency to advance their personal financial interests.” This includes payments directly from the U.S. government to the Trump Organization (e.g. the Secret Service renting out space in the Trump Tower); use of the presidency to promote Trump brands (e.g. numerous Republican re-election campaigns held in Trump owned businesses); regulatory and policy decisions that benefit the Trump family and close advisors (e.g. the General Services Administration approving a lease for the Trump International Hotel); and private and foreign interests dealing with Trump businesses (e.g. Trump hotel, resort, and other development projects around the world). Keeping track of all these various conflict and corruption risks is important at a time when the news of yesterday gets drowned out and forgotten amid the drama of today.

After working for over a year as one of several contributors to this tracking project, I think that there are also some broader lessons and themes that have emerged from these efforts, which are worth highlighting:

Continue reading →

Guest Post: Is an International Anti-Corruption Court a Dream or a Distraction?

Posted on by
5

My Harvard Law School colleague Professor Alex Whiting, who previously served in the Office of the Prosecutor at the International Criminal Court, as a Senior Trial Attorney at the International Criminal Tribunal for the Former Yugoslavia, and as a US federal prosecutor, contributes today’s guest post:

Since 2014, US Judge Mark Wolf has been vigorously advocating the creation of an International Anti-Corruption Court (IACC), modeled on the International Criminal Court (ICC), to combat grand corruption around the world. Some, including writers on this blog, have expressed skepticism, and have criticized Judge Wolf and other IACC supporters for not offering sufficient detail on how an IACC would work or how, as a political matter, it could be created. This past summer, in an article published in Daedalus, Judge Wolf laid out a more detailed case for the IACC. He again invoked the ICC as the model—both for how such a court could be created and how it would operate.

It is an enticing vision, to be sure: international prosecutors swooping in to collar high-level corrupt actors, further spurring on national leaders to clean up their own houses. It’s all the more enticing given that, as Judge Wolf persuasively argues, national governments have failed to adequately address grand corruption in their own jurisdictions, with significant adverse consequences for international security and prosperity. But the ICC experience suggests the limits rather than the promise of an IACC. Indeed, the ICC’s history demonstrates why it is so hard to see a feasible political path forward to creating an IACC. More fundamentally, an IACC would require a radical re-conceptualization of the ICC model, one that states have never shown a willingness to embrace. Continue reading →

Kleptocracy and Neoliberal Shock Therapy – Talented Researchers Wanted

Posted on by
Reply

Professor Kristian Lasslett of the University of Ulster in Belfast, Northern Ireland, posts this announcement about funding opportunities for doctoral candidates.

A kleptocracy is a state where government institutions have been captured and then employed to rig the national political-economy. Rigging the national economy allows the benefits from the revenues generated by the state’s many estuaries of activity to be politically choreographed, leading to a centralisation of wealth and an increase in inequality. It also allows revenues to be channelled from one sector of the economy to another through various rackets. It could be that public revenues are systematically pilfered, or profits from those sectors in the economy not controlled by members of the kleptocratic regime are squeezed so that those sectors under the command of kleptocrats can earn artificially inflated revenues. Kleptocratic regimes also see public and private assets alienated through means that allow kleptocrats to obtain fixed and circulating capital at a discounted price or permit the kleptocrats to offload the assets at an artificial premium.

What happens to a kleptocratic regime when it is subjected to neoliberal shock therapy? Does it allow state-organised criminal rackets to become legitimate?  Does it lead to a steady erosion of kleptocracy? Does it produce a new elite that sits alongside an old kleptocratic guard? Or does it intensify the kleptocratic dynamic thus creating a worst of all possible situations scenario?

Ulster University is currently advertising a generously funded doctoral research post to test a series of hypotheses emerging from regions where kleptocracy and shock therapy overlap.  Continue reading →

The Lula Opinions (Trial Court Verdict and Summary of Appeals Court Affirmance), Now Available in English Translation

Posted on by
6

The conviction and imprisonment of former Brazilian President (and current would-be presidential candidate) Luiz Inácio Lula da Silva (known as Lula) is among of the most consequential and polarizing outcomes of a corruption investigation in recent memory. The case that led to Lula’s conviction (one of several that were pending against him) did not necessarily involve the biggest or most important allegations, but it was the one that was brought first, presumably because this was the case where the prosecutors felt they had all the evidence they needed to proceed, though critics insist that the case was rushed through on skimpy evidence in order to disable Lula from seeking the presidency in this month’s election.

I only know a bit about the specifics of the case, which involved a beachfront apartment than a construction company had allegedly promised to Lula in return for helping the company secure contracts with Brazil’s state-owned oil company. (Lula, for his part, claims that he was never promised the apartment and the only evidence otherwise is unreliable testimony from one of the company’s executives, who offered the testimony in exchange for a reduced sentence as part of a plea bargain.) But I’ve been repeatedly told by passionate, seemingly well-informed Brazilians on both sides of this debate that the judicial opinions in this case—the original trial court verdict and the appellate court affirmance—demonstrate that their side of the argument is clearly correct:

  • On the one hand, I’ve been told by several of Lula’s strong supporters that the charges against him are bogus and the conviction is improper. “Just read the judicial opinions from the trial court and the appeals court,” one of them told me last spring, “and it will be obvious that they make no sense, and that there was no real legal or factual basis for the conviction.” (I’m paraphrasing, but only slightly.)
  • On the other hand, I’ve been told by supporters of the prosecution in this case that Lula’s conviction was the right legal result, and that the attacks on the verdict (and the associated attacks on the prosecutors and judges) are politically-motivated obfuscation. “Just read the judicial opinions from the trial court and the appeals court,” several people with this view have emphasized, “and it will be obvious that the law and the evidence amply supported the verdict.”

Since smart, well-informed advocates on both sides have told me I should read the opinions, that seemed like a sensible thing to do. Until recently, though, this would not have been possible, as the opinions were (to my knowledge) only available in Portuguese, which I do not read. But I was recently informed that the trial court opinion, as well as an official summary of the appeals court opinion, are now available online in English translation! I haven’t had a chance to read them yet (the trial court opinion is 185 pages long; the summary of the appellate court ruling is a more succinct six pages); I may post again after I’ve done so if I feel like I’ve got anything useful to say. For now, it occurs to me that there might be other non-Portuguese speakers out there who are following developments in Brazil and would like to read these opinions for themselves, so I’m posting the links:

  • The trial court verdict is here.
  • A summary of the appellate court ruling is here. (I’m still hoping to find and post an English translation of the full appeals court ruling.)

Hopefully this will be helpful to others who are trying to work through what they think about the accusations and counter-accusations swirling around this high-profile case. Again, there’s only so much an outsider can learn from the text of court opinions, especially without knowing more about the surrounding context and the details of Brazilian law, but I figure this will at least be helpful.

[NOTE: The original version of this post erroneously characterized the appeals court document linked to above as the full appeals court ruling. That was incorrect; the online document is an English translation of the summary of the appeals court ruling. The text of the post–as well as its title–have been changed to correct this mistake.]

Tracking Corruption and Conflicts of Interest in the Trump Administration–October 2018 Update

Posted on by
2

Since May 2017, GAB has been tracking credible allegations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests, and providing monthly updates on media reports of such issues. After a lapse of a few months during this past summer, we’re again updating the tracker on a monthly basis. The October 2018 update is now available here. Notable additions since the previous update include:

  • Reports that Trump’s Bedminster Golf Club offered discounts to President Trump’s White House staff on branded golf club merchandise, apparently to encourage White House staff to wear Bedminster apparel as a way of promoting the resort and the brand.
  • Reports that President Trump has been personally involved in plans regarding the construction of a new FBI headquarters, including suspicions that President Trump may have interceded to ensure that the new headquarters would be built at the same location as the current headquarters, across the street from the Trump International Hotel, rather than at a larger and more secure location in the suburbs, because the Trump hotel benefits financially from its proximity to FBI headquarters.
  • Reports that administration officials with financial or processional ties to the steel industry have been exercising their influence to deny tariff exclusions to companies applying for such exclusions under Trump’s new steel tariffs.

As always, we note that while we try to include only those allegations that appear credible, we acknowledge that many of the allegations that we discuss are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.