Yearly Archives: 2020

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

Posted on by
2

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

Posted on by
2

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

Posted on by
2

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

Posted on by
Reply

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

Posted on by
2

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

Posted on by
7

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 →

Guest Post: Pushing for Anticorruption through the G20 Civil Society Engagement Process

Posted on by
2

Today’s guest post is from Blair Glencorse, the Executive Director of the Accountability Lab. 

As many readers of this blog know, the annual G20 meeting has a variety of associated processes, including a forum for engagement with global civil society known as the C20. This is an opportunity for civil society organizations (CSOs)—including grassroots groups, rights-focused organizations, and other activists—to feed policy recommendations directly to the most powerful governments in the world. This process has not been without challenges, especially when the G20 meeting is held in a country that is not exactly friendly to civil society activism (including Russia in 2013, China in 2016 and this year in Saudi Arabia). More generally, promises have not always matched realities, and governments have not always lived up to their commitments. Nevertheless, the C20 remains an important mechanism for ensuring that diverse, citizen-oriented voices from civil society are heard as part of G20 decision-making.

The C20 has a number of working groups, including an Anti-Corruption Working Group (ACWG), which I am co-leading this year with Dr. Saleh Al-Sheniefi. Our mandate is to prepare “comprehensive recommendations for consideration by leaders on how the G20 could continue to make practical and valuable contributions to international efforts to combat corruption.” The ACWG has active participation from civil society members from more than 50 countries, and—after consulting with other G20 engagement groups and consulted with numerous external experts—we have drafted a 3-page policy paper which will be sent to the parallel G20 Anti-Corruption Working Group in mid-May. The paper is open for comments for the next several weeks; and we would welcome any and all ideas from this blog’s readership.

While there are obviously many aspects of the corruption problem and its potential solutions that we could have addressed, we chose to focus on what we understand to be the G20’s main anticorruption priorities. (Our thinking is that, while getting the G20 to listen and live up to its commitments is always challenging at best, the odds are better if civil society’s recommendations align with the G20’s own sense of its top priorities in this area.) In particular, our policy paper focuses on the following items: Continue reading →

The Murky Business of Asset Recovery for Hire UPDATE

Posted on by
4

Premium Times and Finance Uncovered offered yesterday a glimpse of the lucrative business of asset recovery for hire.  A story posted on the websites of both the Nigerian paper and the London NGO (here and here) reports that the Nigerian government has hired Johnson & Johnson, a small Lagos-based law firm, to recover as much as several hundred of millions of dollars stolen from it through corrupt oil deals.  In return the firm will be paid five percent of whatever is recovered.  Johnson & Johnson, which apparently “won” the contract through an unsolicited proposal, has partnered with an investor who will pick up the firm’s cost to recover the money in return for a 300 percent return on its investment.  UPDATE: The Premium Times reports a coalition of civil society groups has asked Nigeria’s justice minister, Abubakar Malami, to release details of the agreement with Johnson & Johnson.

The Johnson & Johnson deal is not the first time the Nigerian government has turned to a private firm to recover stolen assets.  To recoup what General Sani Abacha stole while head of state in the nineteen nineties, it hired Geneva lawyer Enrico Monfrini. His take of the recovery was only four percent, not Johnson & Johnson’s five, but he still came out rather well.  For the 3,000 hours per year he told Swiss journalist Sylvain Besson he and his colleagues put in to recover $600 million of Abacha funds, which works out to roughly one lawyer working full-time and one-half time each year, his firm was paid $24 million (4% x $600 million).

Ever since UNCAC put the recovery of stolen assets on the international agenda, private contractors have been lining up to help developing country governments recover assets.  While there have been some successes, they have, as the Abacha case shows, come at a very high price.  Are they worth what the governments are being charged?  Are there better, cheaper alternatives? Continue reading →

Anticorruption Bibliography–April 2020 Update

Posted on by
Reply

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.

The U.S. Should Enact the Rodchenkov Anti-Doping Act

Posted on by
3

As I have previously discussed on this blog, corruption is sports is a serious and systemic issue. I recommended that the World Anti-Doping Agency (WADA) ban Russia from the 2020 Tokyo Olympics, and WADA did indeed decide to ban Russia from global sports for four years in the aftermath of Russia’s years-long state-sponsored doping program. The 2020 Olympics was postponed due to the coronavirus, and other major sports events will not be taking place for the foreseeable future, but once it is safe to hold these events again—indeed, before then—the work to combat corruption in sports must continue. Russia appealed WADA’s decision, and thus far the ban is the only consequence facing Russia and the state officials who engineered the doping program. It is unclear whether the ban will be enough for Russia to learn its lesson, or enough to deter other countries from trying to get away with similar ploys.

Fortunately, the United States has the opportunity to become a leader in fighting this kind of corruption in sports. Last fall, the U.S. House of Representatives passed the Rodchenkov Anti-Doping Act of 2019, named for Dr. Grigory Rodchenkov, the whistleblower who revealed the Russian state-sponsored doping scheme and who has been the target of Russian retaliation ever since. This bill would make it a crime for “any person, other than an athlete, to knowingly carry into effect, attempt to carry into effect, or conspire with any other person to carry into effect a scheme in commerce to influence by use of a prohibited substance or prohibited method any major international sports competition” in which U.S. athletes compete; the bill also permits U.S. citizens to pursue monetary compensation for deceptive competition and provides protections for whistleblowers. The bill, now pending in the U.S. Senate, has received bipartisan support, as well as the endorsement of the U.S. Anti-Doping Agency.

WADA, on the other hand, has raised concerns about the bill, especially the proposed law’s allegedly impermissible extraterritorial reach. This objection is unpersuasive, for several reasons:

Continue reading →