To Advance its Anticorruption Agenda, Brazil Must Reform its Conflict of Interest Laws

In the past five years, Brazil made significant advances in its anticorruption agenda, including both an aggressive effort to prosecute high-level politicians and business executives, and also a series of legislative reforms. But Brazil has not yet done enough to regulate conflicts of interest within the public administration.

One good example of the weakness of current regulation is the controversy involving the appointment of Leticia Catelani—a businesswoman who supported President Bolsonaro’s election campaign—to the Executive Board of Apex, the Brazilian Trade and Investment Promotion Agency. Apex is a state-owned entity in charge of promoting Brazilian exports. Ms. Catelani owns a company with a significant export business, raising concerns that she might use her Apex position to improperly favor her own business. (A group of Apex employees have filed a lawsuit challenging her nomination, and a formal complaint has also been filed with the Ethics Commission of the Presidential Office (CEP) asking for her removal.) Though this is but one recent illustration; the issue is much more general, and indeed it is likely that under the Bolsonaro administration concerns about conflicts of interest will increase.

Unfortunately, the existing mechanisms for controlling conflicts of interests in the federal administration—principally the 2013 Conflicts of Interest Act (COI Act) are inadequate and must be reformed. The COI Act applies to senior officials and ministers of state within the federal government. The Act lists a number of situations that trigger conflict-of-interest concerns, and it also requires public officials to file annual reports about their private assets and activities. The Act empowers the CEP to investigate cases, issue guidelines, clarify doubts, and grant waivers. But the current system is inadequate in several respects, and the overall system for dealing with conflicts of interest is in urgent need of reform. Three points in particular should receive special attention:

Continue reading

Corruption in Mexico under AMLO: Lessons from an Interview With Dr. Jose Ivan Rodriguez-Sanchez

In July 2018, Andres Manuel López Obrador (AMLO) won the Mexican presidential election in a landslide. AMLO campaigned on the promise to transform Mexican society, and his pledge to curb corruption was among the most prominent planks of his platform. Yet although AMLO remains very popular with the Mexican public (his approval rating at his 100-day mark in March 2019 was above 80% in some polls), many Mexican anticorruption experts are less enthusiastic.

I’ve offered my own reasons for skepticism about AMLO’s approach to fighting corruption in prior posts (see here and here), but to try to better understand some of the reasons why Mexican anticorruption specialists are critical of the AMLO administration, I interviewed one of those specialists, Dr. Jose Ivan Rodriguez-Sanchez, a Mexican scholar currently based at the Mexico Center at Rice University’s Baker Institute for Public Policy. Dr. Rodriguez-Sanchez, whose recent publications include Measuring Mexico’s Corruption and Corruption in Mexico, shared his view of the biggest concerns regarding the AMLO administration’s approach to corruption. What follows is my translation from our conversation (which took place in Spanish), with some paraphrasing and condensation for clarity.

Dr. Rodriguez-Sanchez highlighted five criticisms of the AMLO administration’s anticorruption policies: Continue reading

Guest Post: It’s Time for Plan B on Disbursing the Obiang Settlement Money to the People of Equatorial Guinea

Today’s guest post is from the civil society group EG Justice, a civil society organization that promotes the rule of law, transparency, and the protection of human rights in Equatorial Guinea. (For a longer discussion of the issues raised in this blog post, please visit the EG Justice website: www.egjustice.org.)

Last month, Professor Stephenson asked: “Whatever Happened with that Charity the Obiang Settlement Was Supposed to Fund?”  Not coincidentally, thousands of people in Equatorial Guinea have been asking themselves that same question for the last five years, and they have yet to receive a satisfactory answer. We are not entirely surprised by the impasse. When one drives into a cul-de-sac, with clear road signs warning ahead of time that there is no exit, one should only expect to return to the entry point. Likewise, when negotiating with authoritarian kleptocrats who consider themselves above the law and who are accustomed to acting with absolute impunity, it would be naïve to expect them to negotiate fairly.

The settlement between Equatorial Guinea and the U.S. appears to anticipate this impasse, laying out several options. The settlement first lays out what we might call “Plan A”:  Within 180 days, the U.S. authorities and the defendant (Teodorin Nguema Obiang) are to jointly select a charity to receive the funds realized from the sale of Nguema’s seized assets, with that charity to use the funds for the benefit of the citizens of Equatorial Guinea. But in apparent anticipation of the difficulties in reaching such an agreement, the settlement goes on to lay out a “Plan B,” according to which, if the U.S. and Nguema can’t mutually agree on a charity within 180 days of the sale of the assets, a three-member panel is to be convened to receive and disburse the funds—with one member of the panel chosen by the U.S., one by Nguema, and one, the Chair, by mutual agreement. Again anticipating the possibility that the parties will be unable to agree, the settlement has a “Plan C” (or a “Plan B-2”): If the parties can’t agree on a panel Chair, within 220 days after the sale of the property, the court retains the discretion to order the parties to participate in mediation, or the court may simply select a panel Chair directly. Continue reading

In Memoriam: Dimitri Vlassis (1959 – 2019)

The international fight against corruption lost one of its most steadfast and determined warriors with the passing in early April of Dimitri Vlassis, Chief of the Corruption and Economic Crime Branch of UNODC’s Division of Treaty Affairs.  Many in governments, international organizations, and civil society who, over the last two decades, enlisted in the fight against corruption will immediately recognize the loss. They will have fought in the trenches with Dimitri at some point during these years in the long-struggle to draft, ratify, and implement the UN Convention Against Corruption.  For recent recruits, who had yet to meet or hear of him, it is sufficient to say that he served as Secretary of the Ad Hoc Committee on the Negotiation of a Convention Against Corruption during the last, critical phase of the negotiations and was, at his passing, Secretary of the Conference of the States Parties to the Convention.

UNCAC represents the collective efforts of many of the world’s citizens, and a monument to their efforts would credit hundreds if not thousands.  But surely at or near the top Dimitri’s name would feature prominently. The true measure of his contribution to global welfare, however, is the continuing difference UNCAC is making to the lives of people everywhere.  For this we can all say, as UNODC Yuri Fedotov did in his note of condolence, “Thank you, Dimitri.”

I know all those in the global anticorruption community will join in expressing their condolences to Dimitri’s widow and two children.  With permission, Director Fedotov’s condolence note is below. Continue reading

New Podcast Episode, Featuring Bo Rothstein

A new episode of KickBack: The Global Anticorruption Podcast is now available. This week’s episode features an interview with Bo Rothstein, the  August Röhss Professor of Political Science and the co-founder of the Quality of Government Institute at the University of Gothenburg. In the interview, Bo and I discuss a range of topics, including the right way to define corruption (and its opposite), how the field of anticorruption studies has changed in the past 20 years, what we’ve learned about the most effective ways of addressing systemic corruption, and what ought to be at the top of the agenda for future research.

You can find this episode, along with links to previous podcast episodes, at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Providing Reparations to the Victims of Foreign Bribery: What Criteria Are Appropriate?

It is widely agreed that foreign bribery is capable of causing harm to a range of different victims, including the governments whose officials are bribed (the so-called “demand-side countries”), and the citizens of those countries. Yet traditionally, when supply-side countries (those with jurisdiction over the firms that paid bribes abroad) reach settlement agreements with corporate defendants in these cases, the fines and penalties collected—which can sometimes run into the tens or even hundreds of millions of dollars—go to the supply-side government treasuries, a fact that has attracted considerable discussion and criticism.

In recent years, we’ve started to see some changes in the approach taken by supply-side governments on this issue, with the United Kingdom being particularly active. On several notable occasions, the UK’s Serious Fraud Office (SFO) has included in its settlement agreements with corporate defendants specific provisions to remediate the victims of foreign bribery. Importantly, such remediation (not just in the UK case, but more generally) can take two forms, which are often unhelpfully conflated:

  • In some cases, the resolution of a bribery case may include compensation to identifiable victims, if it can be shown that the victims suffered a direct loss, the value of which can be reasonably estimated. The victim might be a foreign government itself. For example, the 2015 deferred prosecution agreement negotiated between the SFO and Standard Bank included a payment to the Tanzanian Government, because in that case an agent of Standard Bank had used money to which the Tanzanian government was entitled in order to pay an illegal bribe. The payment to the Tanzanian government in the settlement agreement was compensation for this loss.
  • In many cases, though, the harm done by foreign corruption is more diffuse, the victims are difficult to identify individually, and the monetary value of the harm inflicted is impossible to calculate. Nonetheless, even though traditional victim compensation is not possible in these cases, it is still possible, and often desirable, for a portion of the fines and penalties collected from the responsible corporation to be directed toward improving the lives and livelihoods of the population victimized by the misconduct—perhaps by making a payment to the government of the demand-side country, possibly earmarked for a specific purpose, or perhaps by donating money to charities, or by purchasing assets that benefit the public, or even by making payments directly to citizens. Though these sorts of payments are also sometimes described as “victim compensation,” I prefer the term reparations, which makes clear that these payments are not “compensation” in the traditional, narrower sense, but rather payments intended for the benefit of a general populace or society at large. An example of this sort of reparations payment can be found in another case involving the SFO and Tanzania, this one the SFO’s 2010 settlement agreement with BAE Systems for illegal commissions that the company had paid to an intermediary in connection with the sale of an aircraft radar system to the Tanzanian government. (Technically, BAE admitted and was penalized for an accounting offense—failing to keep accurate records of the payments—rather than the underlying bribery.) The settlement required BAE systems to pay approximately £30 million for the purpose of buying educational materials in Tanzania. There is no evidence to suggest that BAE System’s misconduct in connection with the radar system sale caused any damage, let alone £30 million worth of damage, to Tanzania’s education system. So this payment was not “victim compensation” in the narrow sense, but rather an effort to offset some of the damage BAE’s wrongful conduct had done at a more general, societal level.

The legal mechanisms for determining compensation awards, though imperfect, are relatively straightforward. Determining an award of reparations is much more complicated, because (almost by definition) it will not be clear exactly who suffered due to the act of foreign bribery, nor how much loss was suffered, nor how that loss should be recouped. (While the United Kingdom does have “compensation principles” in place which are intended to provide a guiding framework for remedial awards in foreign bribery cases, these principles are phrased at too high a level of abstraction to be much use.) One question that will need to be addressed, and the one I want to focus on here, is whether there must be some kind of nexus between the harm caused by a particular act of bribery and the proposed reparations. Of course, as I have explained, reparations are distinct from compensation, and will not require a showing of a quantifiable harm to an identifiable victim. But does the reparations payment need to have any strong connection—in sector, location, or amount—with the harm plausibly caused by the defendant’s act of bribery? Continue reading

The Australian Government Shows Us How Not To Create an Anticorruption Agency

Two recent polls of the Australian public make two things quite clear: the Australian people have little trust in their federal politicians, and they want a federal anticorruption agency to investigate misuse of public office. This is perhaps not surprising given the string of scandals that have come to light in the past few years (see, for example, here, here, and here). And ordinary citizens are not alone: a survey of government workers found that thousands believed they had witnessed acts of corrupt behavior, particularly cronyism and nepotism. And a group of 34 former Australian Judges, including a former Chief Justice of the High Court, have published an open letter to Prime Minister Scott Morrison stating that Australian trust in federal politics is at an all-time low due to perceptions of corruption, and that a federal anticorruption agency is the necessary response. 

It is therefore unsurprising that the proposed creation of a federal anticorruption agency has emerged as a salient issue in the upcoming federal elections, to be held on May 18 (one week from tomorrow). The Morrison government initially dismissed the idea, but in December 2018 changed its tune and announced that, if the Liberal Party (Morrison’s party) wins the election, the government would create a Commonwealth Integrity Commission with two separate divisions: a law enforcement integrity division and a public sector integrity division. The former would have the power to investigate police officers and other law enforcement personnel, while the latter would have the power to investigate politicians.

Unfortunately, while a federal anticorruption agency is an idea whose time has come, the Morrison government’s proposal suffers from four key shortcomings: Continue reading

Guest Post: New OECD Report Highlights the Importance of Non-Trial Resolutions in Foreign Bribery Cases

Today’s guest post is from Senior Legal Analyst Sandrine Hannedouche-Leric, together with Legal Analysts Elisabeth Danon and Brooks Hickman, of the OECD Anti-Corruption Division.

 In December 2016, Brazilian, Swiss, and US authorities announced that the Brazilian construction giant Odebrecht would pay a combined fine of USD 3.5 billion as part of a coordinated resolution of foreign bribery allegations—the largest foreign bribery resolution in history. Like many foreign bribery cases concluded in the last decade, the Odebrecht case was resolved outside a courtroom. In fact, non-trial resolutions, also referred to as settlements, have been the predominant means of enforcing foreign bribery and other related offences since the OECD Anti-Bribery Convention entered into force 20 years ago.

The OECD Working Group on Bribery recently published a report on Resolving Foreign Cases with Non-Trial Resolutions. The report develops a typology of the various non-trial resolution systems used by Parties to the Convention, and sheds light on the operation and effectiveness of these systems. It also looks at the challenges they raise for law enforcement authorities, companies and other stakeholders in the resolution process. The data collected for the Study confirms and quantifies the widely-recognized fact that settlement, rather than trial is the dominant mechanism for resolving foreign bribery cases. The report finds that close to 80% of the almost 900 foreign bribery cases concluded since the OECD Anti-Bribery Convention came into force have been concluded through non-trial resolutions, and among the three most active enforcers of foreign anti-bribery laws—the United States, Germany, and the United Kingdom—this percentage rises to 96%. Non-trial resolutions have been responsible for approximately 95% of the USD 14.9 billion (adjusted to 2018 constant US dollars) collected from legal persons sanctioned to date. Additionally, the report finds that coordinated multi-jurisdictional non-trial resolutions have been on the rise over the past decade. Such coordination, which would not be possible through trial proceedings, has permitted the imposition of the highest global amount of combined financial penalties in foreign bribery cases. Eight of the ten largest foreign bribery enforcement actions involved coordinated or sequential non-trial resolutions involving at least two Parties to the Convention.

The study was launched last month during the OECD Global Anti-Corruption and Integrity Forum, in a panel discussion moderated by the Head of the World Bank’s Integrity Compliance Unit. Building on the Study’s key findings, law enforcement officials from Brazil, France, the United Kingdom and the United States discussed the challenges associated with non-trial resolutions based on their first-hand experience, and explained why the use of these instruments will likely continue to grow in the future. In particular, they discussed how non-trial instruments can help overcome procedural hurdles and fundamental differences between legal systems and cultures, and thus facilitate cross-country coordination in the resolution of foreign bribery cases. (The video of the session is accessible online. See the section “Watch Live” for Room 1 starting at 8:13:00).

Guest Post: Memo to the U.S. — Central America Needs More Anticorruption and Rule of Law Support, Not Less

The Trump Administration recently decided to terminate foreign assistance to Guatemala, Honduras, and El Salvador and to abandon America’ long-standing support for the United Nations/Guatemalan commission fighting corruption in Guatemala. In today’s guest post, retired U.S. Ambassador Stephen G. McFarland explains that corrupt officials and drug lords in the region are conspiring to “capture” these nations’ governments. Their citizens are already fleeing the countries in droves. How much greater will the pressures to migrate be if a coalition of corrupt politicians and narco-trafficantes takes over one of their governments? On national interest as well as humanitarian grounds, the ambassador argues that the United States should not only restore, but increase, support for anticorruption and rule of law programs.  

The April 17 arrest of Guatemalan presidential candidate Mario Estrada and accomplice Juan Pablo Gonzalez on drug trafficking charges has major implications for U.S. policy towards Guatemala and Central America’s “Northern Triangle.”  The U.S. Department of Justice (USDOJ) asserts that in January 2019, Estrada allegedly attempted to obtain Sinaloa cartel support for the assassination of rival presidential candidates in Guatemala’s upcoming June 2019 general elections and for financing his election campaign. In return, he allegedly promised that, if elected, he would give the cartel free reign to use Guatemalan ports and airports to traffic cocaine to the U.S.

If the USDOJ’s allegations are true: Continue reading

Tracking Corruption and Conflicts of Interest in the Trump Administration–May 2019 Update

For the past two years (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. The May 2019 update is now available here. A couple of the more notable new developments in this update:

  • IRS Commissioner Charles Rettig, who is currently fighting at House Committee request for President Trump’s tax returns, owns two Trump-branded properties from which he receives substantial rental income–the value of which is arguably affected by the overall value of the Trump brand.
  • Special Counsel Robert Mueller’s report cites former Trump attorney Michael Cohen’s statement that Trump at several points suggested that his presidential campaign would function as an “infomercial” for Trump-branded properties.
  • New information revealed through a Freedom of Information Act request indicates that since 2017 at least seven foreign governments have rented units at a Trump-managed property in New York (the Trump World Tower).

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.