Monthly Archives: May 2020

Guest Post: What the U.S. Congress Must Do To Ensure Adequate Oversight of COVID-19 Relief Spending

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Today’s guest post is by Shruti Shah, the President and CEO of the Coalition for Integrity, a civil society advocacy organization focused on corruption in the United States.

We are facing an unprecedented crisis, and governments around the world have responded with unprecedented actions. In the United States, Congress has responded to the economic disruption caused by the COVID-19 crisis with the $2 trillion CARES Act and the subsequent $484 billion replenishment; still more legislation, allocating even more money for crisis response, is under discussion. When this much money is in play, oversight and fraud prevention are essential. There are already reports of PPP loans meant for small businesses going to larger companies, scammers targeting small business owners, stimulus checks being sent to deceased people, and several other COVID 19 scams. But the current safeguards for preventing fraud, corruption, and abuse in COVID-19 relief spending are woefully insufficient. As negotiations over further relief packages continue, those in Congress who care about government integrity—and the effectiveness of these trillion-dollar programs in achieving their objectives—should insist on correcting these deficiencies. In particular, here are five crucial steps that Congress can and should take to ensure that COVID-19 relief spending helps its intended beneficiaries rather than lining the pockets of grifters and grafters: Continue reading →

Law Profs: Stop the Overheated Rhetoric About Bridgegate

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As Matthew explained yesterday, last Thursday the Supreme Court ruled that a political dirty trick, generating a traffic jam for a town’s residents after their mayor refused to support the reelection of the state’s governor, while an abuse of power, does not constitute fraud under federal criminal law. The Court’s unanimous decision in “Bridgegate,” so named because the traffic jam was created by closing two of the three lanes residents use to drive across the George Washington Bridge, was authored by former Harvard Law School Dean and Obama Solicitor General Justice Elena Kagan.  That the decision was unanimous and written by a member of the Court’s liberal wing are two of several clues in the Court’s opinion showing it is no part of a Trump-inspired plot to legalize public corruption. Washington Post readers, however, could be forgiven for thinking otherwise. For Michigan Law School Professor Leah Litman wrote in the paper’s March 10 edition that the Court’s decision is the latest in “a string of failed corruption cases” that has made it “almost impossible to put a crooked politician in jail.”

This is plain nonsense. Continue reading →

The U.S. Supreme Court’s Opinion in the “Bridgegate” Case: Some Quick Reactions

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While I’m still finding it a bit difficult to think or write about anything other than the coronavirus pandemic, there have nevertheless been some other newsworthy corruption-related developments in recent weeks. One of them—perhaps, I admit, or more interest to our U.S. readers than to others—was the U.S. Supreme Court’s decision last week in United States v. Kelly, which overturned the federal criminal convictions of two close associates of former New Jersey Governor Chris Christie for their role in a scandal known as “Bridgegate.” Back in 2013, when then-Governor Christie (a Republican) was seeking re-election, he sought to bolster his candidacy by securing the endorsements of several Democratic mayors of New Jersey cities. When the mayor of the city of Fort Lee declined to endorse Governor Christie, several of Christie’s allies who worked for the Port Authority of New York and New Jersey (the entity that regulates transportation in the busy New York-New Jersey region) retaliated against the mayor by deliberately closing lanes on the busy George Washington Bridge, creating major traffic jams in Fort Lee for several days. They justified the closures with a “traffic study,” but this, the evidence adduced at trial clearly showed, was an utterly dishonest pretext for an act of political retribution. Nobody seriously contests that what these Port Authority officials (who were fired after the scandal was exposed) did was a corrupt abuse of power. But was it also a federal crime? U.S. federal prosecutors argued that it was, and convinced a jury to convict, but the Supreme Court unanimously disagreed and reversed the conviction.

There’s already been quite a bit of commentary on the Kelly decision. A number of critics argue that Kelly, together with several previous Supreme Court decisions, “opens the door to a distressing form of government corruption,” and has made federal prosecution of corruption “nearly impossible.” Other commentators asserted that not only did the Court reach the correct legal conclusion, but in fact the law properly does not criminalize the conduct of the officials in this case—because doing so, according to these commentators, would have sweeping and undesirable consequences, criminalizing a wide swath of garden-variety political conduct (such as using government power to benefit supporters and/or lying about the true motivations behind regulatory actions).

I should confess right now that I haven’t followed the legal arguments in this case very closely, nor am I an expert in the specific statutes at issue. With that important caveat, my own assessment is somewhere in the middle:

  • I think that, given the wording of the relevant statutes and prior Supreme Court precedent, the Court’s decision in Kelly is probably correct, and certainly defensible.
  • I don’t think the decision breaks that much new ground or makes it substantially harder for federal prosecutors to go after other forms of corruption, such as “garden variety” bribery or embezzlement.
  • That said, the decision does highlight an important gap in the coverage of existing federal anticorruption laws, and I tend to think that the sort of behavior at issue in this case—behavior that, in the Supreme Court’s words, amounted to “corruption [and] abuse of power”—can and should be criminalized (under federal as well as state law). Such criminalization, if accomplished through a sufficiently well-tailored statute, would not criminalize “ordinary politics,” at least not the sort of ordinary politics we ought to tolerate.

Let me elaborate a bit on each of these points: Continue reading →

Dissolving Congress to Combat Corruption: Why a Short-Term Anticorruption Victory in Peru Isn’t Worth the Long-Term Cost

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The “Car Wash” corruption scandal that started in Brazil has extended into surrounding Latin American countries, including Peru. All of Peru’s living presidents have been implicated in the scandal, with two currently awaiting trial on corruption charges, one in California fighting extradition, and one who ended his own life just as police entered his home to arrest him. The corruption scandal has also implicated members of Congress, including the head of Peru’s largest opposition party, Keiko Fujimori (daughter of the infamous former president Alberto Fujimori). To make matters worse, investigators have also uncovered an unrelated bribes-for-verdicts corruption scandal in the judiciary.

Peru’s current president, former Vice President Martin Vizcarra, assumed the presidency after his predecessor resigned over corruption allegations. Backed by overwhelming popular support in a national anticorruption referendum, President Vizcarra spent most of 2019 pushing an ambitious anticorruption agenda. His proposed reforms included a new law that bars members of Congress from seeking immediate reelection after one five-year term, transferring the power to lift a Member of Congress’s legislative immunity from Congress to the Supreme Court, and changing the system for appointing judges and prosecutors. On all of these proposals, Congress (controlled by an opposition party) has dragged its feet, likely for self-serving reasons. While Congress eventually passed some of these reforms, including the ban on re-election, the judicial anticorruption bill stalled. After several attempts to pass the bill, on September 30, 2019, Vizcarra took the drastic step of dissolving Congress—a move supported by 84% of Peruvians. Vizcarra issued a decree for a snap legislative election, which took place on January 26, 2020, and in which Peruvians elected a new Congress to finish the current constitutional term ending in 2021. Given the ongoing pandemic, this new Congress has, understandably, yet to fully address Vizcarra’s remaining anticorruption agenda.

It is often said that fighting entrenched corruption involves disrupting the political status quo. President Vizcarra’s decision to dissolve Congress was certainly disruptive—but not in a way that anticorruption advocates should celebrate. Whatever its short-term payoffs, this decision threatens to undermine Peru’s institutional checks and balances, leaving the country more vulnerable to corrupt actors in the long term.

Continue reading →

Heightened Transparency of Stock Trading by Public Officials Could Help Convey Reliable Information in Crises that the Public Deserves to Know

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On February 7, 2020, there were 34,876 confirmed cases of Covid-19 worldwide, but none in the United States. On that day, Fox News published a reassuring opinion piece co-authored by Republican Senator Richard Burr, arguing that the US is prepared to face any outbreak. Around February 13, a couple of days before the first confirmed cases in the US were discovered and before the stock markets began to plunge, Burr sold hundreds of thousands of dollars’ worth of stocks, many of which were in the hotel industry. Senator Burr’s stock sale was not public at the time; the sales were first reported by ProPublica only a month later.

We do not yet know whether Senator Burr’s decision to dump his stocks was based on confidential government information to which he had special access. On the one hand, new information on the Covid-19 pandemic was coming out every day, and perhaps Senator Burr was simply one of many investors who changed their minds regarding the outbreak and were lucky to exit the market in time. On the other hand, Senator Burr is the Chair of the Senate Intelligence Committee, which was receiving regular briefings on the coronavirus situation, so the suspicions towards him are understandable. (It also didn’t help matters that a few weeks after the publication of his op-ed Senator Burr told wealthy donors in a closed-door meeting that the Covid-19 outbreak “is probably more akin to the 1918 pandemic,” but never revised his previous public reassurances.) Whether justifiably or not, Senator Burr was harshly criticized (including on this blog), with many calling for his resignation, and he has been sued for insider trading by a shareholder of one of the companies whose stocks he dumped. In addition to the criticism leveled at Senator Burr, several commentaries, including Cristina’s post on this blog, have argued that this incident demonstrates the need to amend the 2012 STOCK Act to impose stricter limitations on the freedom of senior US government officials, including Members of Congress, to trade in stocks.

My perspective is somewhat different. While I acknowledge the legitimate concerns that motivated calls to strengthen prohibitions on stock trading by government officials, in my view regulation should be more focused on ensuring the transparency of those trades, rather than on further limiting or blocking stock trading.

Continue reading →

Guest Post: COVID-19 and Corruption–Two Risks and One Opportunity

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Today’s guest post is from Peter Glover, Program officer for the Center for International Private Enterprise’s Anti-Corruption and Governance Center.

The immediate consequences of COVID-19 are visible and visceral for everybody, even as some feel the effects more than others. In addition to reshaping everyday life, COVID-19 will also transform global governance—including with respect to corruption and related issues. In this post I want to emphasize three ways that the COVID-19 pandemic will interact with corruption: Continue reading →

New Podcast, Featuring Samuel Power

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my collaborator Christopher Starke interviews Samuel Power, a Lecturer in Corruption Analysis at the University of Sussex, about his research on the relationship between political party financing and corruption. The conversation focuses on his comparative research on political funding in Denmark and the United Kingdom, as well as several related topics, including the corruption risks associated with social media  and also touches on his more recent work on social media advertising by political parties.

You can find links to this episode on various platforms here. You can also find both this episode and an archive of prior 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.

Is the Vatican Finally Getting Serious About Cleaning Up Its Finances? The Appointment of an Antimafia Magistrate Is A Promising Sign

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Questions about Vatican finances have dogged the Church for decades. In 2012, leaked documents revealed allegations of extensive cronyism and money laundering; these documents suggested, for example, that the Church’s main charitable mission, Peter’s Pence, was being used to fund the lavish lifestyle of some members of the clergy. Though Pope Benedict XVI had attempted to institute financial auditing procedures, his efforts proved insufficient, and the scandal was widely seen as part of the reason for his controversial decision to resign the papacy. Unfortunately, the scandals have continued under Pope Francis. In 2015, the Church purchased a bankrupt Italian hospital in part with money borrowed illicitly from a publicly funded Italian hospital; the transaction, arranged off-the-books, was partly coordinated by a Swiss bank with a reputation for money laundering. In 2019, it was revealed that the Vatican had invested roughly $200 million, at least in part from Peter’s Pence, in luxury real estate in London. The purchase was partially financed through a since-discredited Swiss bank, and the loans were not properly recorded in the Vatican’s internal records. It was also revealed that the Vatican was investing millions of dollars through the Centurion Global Fund, which is connected to the same Swiss bank that ran the London purchase, as well as to a pair of banks that have been linked to a Venezuelan bribery and money-laundering scandal. While it is possible that some or all of these transactions may prove to have been the product of poor financial decision-making rather than corruption, these and other incidents have called into question the Church’s management of its finances as well as the integrity of its internal watchdog mechanisms

Pope Francis, who ascended to the papacy with promises of reform, has publicly acknowledged that there is corruption within Vatican finances and has pursued measures to restore confidence in the Church’s financial management. However, many of his attempts to institute more rigorous reforms have been frustrated by internal Vatican power struggles. For instance, in 2016 the powerful Archbishop Giovanni Becciu unilaterally stopped a scheduled audit of Vatican finances, and in 2017 the Vatican’s auditor-general was forced out of office, allegedly after finding evidence of financial irregularities. But in late 2019, Pope Francis stepped up his efforts to crack down on malfeasance and get the Vatican’s financial house in order. Francis took a particularly high-profile step in October 2019, when he appointed one of Italy’s leading antimafia magistrates, Giuseppe Pignatone (who retired from the Italian judiciary in May 2019), as head of the Vatican’s criminal tribunal, which is tasked with investigating corruption and fraud, among other crimes. Although some have portrayed Pignatone’s appointment as a sign of desperation by a Pope who cannot control his own bureaucracy, this choice was in fact a wise move by Francis to consolidate his reformist agenda. Pignatone’s former position as one of Italy’s most prestigious antimafia magistrates means that he is particularly well-placed to address Vatican corruption, for three reasons. Continue reading →

The Resignation of Brazilian Justice Minister Sérgio Moro: Reflections on How Key Players Should Handle This Political Crisis

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If a global pandemic and a mounting economic crisis weren’t enough, Brazil now faces a political crisis. Last Friday (April 24), Sérgio Moro, the former judge in the Car Wash anticorruption operation who had become Minister of Justice in the administration of far-right President Jair Bolsonaro, resigned his ministerial post and accused President Bolsonaro of multiple improprieties having to do with apparent interference with ongoing federal criminal investigations. In particular, Moro stated that Bolsonaro fired the head of the Federal Police, Maurício Valexio, without Moro’s necessary approval (and, indeed, had forged Moro’s electronic signature on the dismissal papers), because—according to Moro—Bolsonaro “was concerned about investigations underway in the Federal Supreme Court,” which many interpreted as an allusion to ongoing investigations into corruption allegations against President Bolsonaro’s sons. This was not the first time President Bolsonaro had meddled in the  Ministry of Justice—notwithstanding his promise that Moro would have full autonomy—but the firing of Valexio seems to have been the final straw for Moro. In his resignation speech, Moro emphasized his reluctance to resign in the midst of a public health crisis, but declared that Bolsonaro’s actions were beyond the pale. “I could not,” Moro explained, “set aside my commitment to the rule of law.”

It’s hard to exaggerate the significance of Moro’s resignation for Brazilian politics, and for the future of Brazil’s fight against systemic corruption. The resignation of a senior minister on grounds of alleged presidential interference in an investigation would be an enormous scandal under any circumstances, but to appreciate the significance of Moro’s resignation from the Bolsonaro government, one must know a bit more about the larger context. Moro became a nationally prominent figure due to his role in presiding over some of the most high-profile investigations and trials in the Car Wash anticorruption investigation, including the trial of former President Lula of the left-wing Worker’s Party (the PT); the Car Wash investigation also led to the impeachment and removal of Lula’s successor, Dilma Rousseff, though Judge Moro was not directly involved in that political process. Lula’s conviction meant that he was disqualified from running in the 2019 presidential election, which many observers believe he would have won. Thus, while Judge Moro was heralded as a hero by many Brazilian’s for his role in the Car Wash Operation, others—especially those affiliated with the PT—accused him of political bias against the left.

Lula’s disqualification, and the taint of corruption that attached to the PT due to the Car Wash Operation, created a window of opportunity for Jair Bolsonaro in the 2019 presidential election. Bolsonaro, a far-right politician who had long been considered a marginal figure at best, ran on an anticorruption platform, claiming that only he could clean up the corrupt Brazilian political system. This appeal worked: Many Brazilian voters who did not share Bolsonaro’s radical right-wing ideology nevertheless concluded that they couldn’t stomach another presidency with the “corrupt” PT. After Bolsonaro won the election, he appointed Moro to be his Minister of Justice—a move that many saw as intended to bolster Bolsonaro’s claims to be committed to ushering in a new era of anticorruption reform in Brazil. Bolsonaro made explicit and extravagant promises that Moro—an anticorruption hero in the eyes of most Brazilians, including many skeptical of Bolsonaro himself—would have a free hand to run his Ministry without presidential interference. But Moro’s acceptance of a senior position in the Bolsonaro administration drew criticism from the Brazilian left, a line of criticism that only intensified after a series of media stories last summer that suggested, based on leaked text messages, that while Moro was the presiding Judge in the Car Wash cases he may have inappropriately coordinated with prosecutors or exhibited bias against Lula. While some disputed this interpretation of the text messages, they fed into the narrative that Moro was partisan and Car Wash was a witch hunt. Even some of Moro’s supporters expressed concern about the content of the leaks, and about his acceptance of a position in the Bolsonaro government.

Moro’s resignation is a shocking new twist to this ongoing drama. Until recently, he was condemned by the far-left as Lula’s jailer; now he’s condemned by the far-right as a traitor. With some Brazilians, he’s still a popular anticorruption standard-bearer. It’s understandable that there’s considerable speculation both about Moro’s future and about the immediate ramifications of his dramatic resignation for the Bolsonaro government. There are questions about the longer-term impact of these developments on Brazilian politics and the future of anticorruption reform.

How should the various actors in this drama handle the situation going forward? In the remainder of this post, I advance some tentative advice for three principal players—the Brazilian Congress, the investigative agencies (especially the Federal Police), and Moro himself. How these players handle this volatile situation over the coming weeks and months will have far-reaching implications for Brazilian politics and institutions.

Continue reading →