Should a Kleptocrat Be Able to Bribe Her Way Out of Trouble?

Gulnara Karimova parlayed her position as daughter of Uzbekistan’s first post-Soviet ruler into an international symbol of kleptocracy.  Reviled at home and abroad for vulgar excess, after her father’s death she was sentenced to a long prison term following a sham trial.  But most of the billion or so dollars she stole remains beyond the Uzbek government’s reach, tied up in complex litigation principally in Switzerland.

Now, as she recently revealed, she is in negotiations to hand back most of what she stole – in return for her release from one of Uzbekistan’s notorious prison colonies and the right to hang onto to perhaps as much as a hundred million for herself and the lawyers and fixers negotiating the deal. Uzbek citizens and activists are in arms over this blatant attempt by a posterchild for kleptocracy to bribe her way out of prison.  In an open letter, civil society activists call on the Swiss government, which would have to accede to this unseemly bargain, to repudiate it. They ask too that other government with claims over some of the assets, and thus possibly some say over the deal, to help kill it.

Allowing a kleptocrat to bribe her way out of jail sets a terrible precedent. Is it one the international community wants to see set?  Do Swiss citizens really want their government to be the one setting it? Why is the Swiss government in such a hurry to return dirty money to the Uzbek government?  Particularly in the face of opposition from representatives of the real victims of Karimova’s crimes, the citizens of Uzbekistan.

In their letter, the activists outline an alternative to a hasty return, one that would see Karimova held accountable in a real trial for her crimes and the stolen assets returned in ways that would advance the welfare of all Uzbeks. The English version of the letter here, the Russian one here, and the French one here.

Anticorruption Bibliography–July 2019 Update

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.

Fighting Healthcare Corruption with Smiles and Stickers

Compared to other EU countries, petty bribery in Lithuanian healthcare is quite common (see here and here). Though extortion seems rare, Lithuanians frequently make informal (and illegal) payments to doctors either to get better/faster treatment or as an expression of gratitude. When describing this practice, Lithuanians use the language of “giving a gift” or “giving a little envelope,” euphemisms that imply that these payments have come to be perceived as acceptable expressions of gratitude rather than bribes, despite the fact that the Criminal Code prohibits bribery and the Civil Code prohibits giving doctors any sort of gifts outside their private lives. Though formally bribery, giving money to a doctor in Lithuania seems to have developed a different social meaning—rather than implying that you are a dishonest or corrupt person, giving extra money to your doctor has come to be understood as something that reasonable people do in recognition that doctors work hard, are underpaid, and deserve gratitude. Offering gifts or money to a doctor has also become a way to express how much you care about the health of your loved ones who are unwell. So, in Lithuania, the practice of making illegal payments to doctors seems to have become a “social norm” – a shared understanding that such behavior is permitted or even obligatory. It has become a norm both in the descriptive sense (people make these payments because they think that everyone else does so) and in the injunctive sense (making an extra payment to your doctor is an appropriate expression of gratitude). That doesn’t mean it’s good, or something we should ignore or tolerate. But it’s something we need to take into account when thinking about how to combat this form of corruption.

Once we recognize that petty bribery has become a social norm, we should ask what tools could be used to disrupt that norm. Because the problem is so extensive and multifaceted, many of the solutions will require significant institutional reforms, changes in management style, budget reallocations, and the like. Without minimizing the importance of those more fundamental changes, it’s also possible that seemingly small, inexpensive, and non-coercive interventions might help disrupt this dysfunctional social norm. Back in 2011, when I was working for Transparency International Lithuania (TI Lithuania), we piloted one such initiative in collaboration with the Lithuanian Medical Students Association. Our objective was to disrupt social norms surrounding informal healthcare payments—not through loud or aggressive actions, but with stickers and smiles. Continue reading

I Caught the Sheriff: Why U.S. Anticorruption Officials Should Keep an Eye on Sheriffs

An unusual feature of US law enforcement is the important role of the county sheriff. As of 2013, over 3,000 sheriffs’ offices across 47 U.S. states employed 352,000 people—roughly one-third of the country’s law enforcement personnel. The sheriff’s job varies from state-to-state, but the common denominator is responsibility over county corrections, including the operation of jails and transportation of inmates to and from court. In some states—Massachusetts, for instance—that’s essentially the extent of sheriffs’ duties. In other states, though, sheriffs wield much broader authority. Texas sheriffs, for example, can enforce the state’s criminal laws anywhere in their county, even where municipal police departments have jurisdiction. Most states are somewhere in the middle, tasking sheriffs with general law enforcement duties only in unincorporated parts of the county and sometimes with security for state government buildings, in addition to their correctional responsibilities.

Despite the variety of roles played by sheriffs, many commentators view sheriffs as merely another kind of police. After all, they wear badges, can legally use force, and, in many parts of the country, patrol the beat. But sheriffs are distinct from their police counterparts in significant respects. Most notably, whereas police chiefs are appointed by city officials, sheriffs are popularly elected by the county they serve. And, unlike police departments, which are creatures of state statute, the responsibilities of a county sheriff are often rooted in the state constitution.

These differences render sheriffs more susceptible than police to corruption for three reasons:

Continue reading

New South Wales Anticorruption Commission’s Excellent Guide to Conflict of Interest

Conflict of interest is a critical element of any government ethics program.  It is also perhaps the most difficult to implement.  The challenge comes in determining when friendships, kinship ties, and other personal relationships affect, or appear to affect, a government employee’s duty to put the interest of the public above his personal interest.  Was the contract awarded because the bidder lived in the same neighborhood as the procurement official making the award or because the bidder offered the best value? Was the individual hired because the hiring manager came from the same tribe or because she was the most qualified? Even if there were no actual conflict in the two cases, is there an appearance of one?

Rules that produce sensible answers to such questions are not easy to write, and as I have suggested in earlier posts (here and here), much well-meaning advice on how to do so is either counterproductive or impossible to implement.  A recent publication by the New South Wales Independent Commission Against Corruption is thus a welcome addition to the literature. In 26 clear and crisply written pages, Managing Conflicts of Interest in the NSW Public Sector provides a road-map for writing and enforcing practical, workable conflict of interest rules.

It offers a short, easily understandable definition of conflict of interest followed by a commonsensical approach to applying it.  The touchstone for determining when there is a conflict or an appearance of a conflict” is not the disappointed bidder or applicant or the government’s political opposition.  It is instead a “fair-minded and informed observer,” otherwise known as “a reasonable person.”  How to apply the reasonable person standard and the other standards and rules that make for a sound conflict of interest regime is illustrated throughout with real-world examples.

Written for agencies of Australia’s most populous state, a much broader audience will find the guide a valuable resource.

New Podcast Episode, Featuring Elise Bean

A new episode of KickBack: The Global Anticorruption Podcast is now available. This week’s episode features an interview with Elise Bean, who previously worked for U.S. Senator Carl Levin (D-Mich) as staff director and chief counsel of the Senate’s Permanent Subcommittee on Investigations (PSI), which Senator Levin chaired. In the interview, Ms. Bean (who has also written a book about the Permanent Subcommittee’s work) discuss the role of legislative oversight, and the PSI in particular, in addressing money laundering, corruption, and related matters like financial fraud and tax evasion. Ms. Bean also addresses that various weaknesses and loopholes in current U.S. law on these topics and offers suggestions for reforms.

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.

The Case of the Missing Exports: What Trade Discrepancies Mean for Anticorruption Efforts

In 2017, the Republic of Georgia sent $272 million in exports to its neighbor, Azerbaijan. The same year, Azerbaijan reported receiving $74 million—that’s not a typo—in imports from Georgia. Goods worth $198 million seemingly disappeared before they reached Azerbaijani customs. The gap is a big deal. Azerbaijan taxes imports just above 5% on average (weighted for trade), which means its treasury missed out on collecting roughly $10 million in tariffs—0.1% of all government spending in that year—from just a single trading partner.

Many factors could explain the gap (see, for example, here, here, and here). Shippers might have rerouted goods to other destinations, the two countries’ customs offices might value goods differently, or the customs offices could have erred in reporting results or converting them to dollars. But one reason Azerbaijan’s reported imports are so low—not only here, but systemically across trade partners and years—is corruption and associated tariff evasion. Many traders likely undervalue and/or underreport their imports when going through Azerbaijani customs, and the sheer magnitude of the trade gap suggests the complicity or collusion of the authorities. The corruption involved might be petty (e.g., an importer bribing a customs officer to look the other way, or a customs officer pocketing the tax and leaving it off the books) or grand (e.g., a politician with a side business using her influence to shield imports from inspection; see here). A similar dynamic might also be at work in exporting countries: companies may undervalue exports to limit their income tax liability, possibly paying bribes to avoid audits.

Though Azerbaijan may be an extreme case, it is not unique. Economists have examined these export gaps (sometimes called “mirror statistics”) and have found similar discrepancies in, for example, Hong Kong’s exports to China, China’s exports to the United States, and Cambodia’s imports from all trading partners. Most recently, economists Derek Kellenberg and Arik Levinson compared trade data across almost all countries over an eleven-year time period, finding that “corruption plays an important role in the degree of misreports for both importers and exporters.” For lower-income countries, Professors Kellenberg and Levinson showed a positive relationship between a country’s level of perceived corruption, as measured by Transparency International’s Corruption Perceptions Index (CPI), and its underreporting of imports. The authors also showed a strong positive relationship between perceived corruption and the underreporting of exports across all countries.

Mirror statistics are an imperfect measure of customs corruption, to be sure, but they can serve two useful purposes in fighting this sort of corruption, and anticorruption reformers should pay more attention to this type of data. Continue reading