Monthly Archives: April 2022

How the U.S. Supreme Court Might Undermine Longstanding Safeguards Against Pay-to-Play Corruption

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A campaign finance case currently pending before the U.S. Supreme Court, Federal Election Commission (FEC) vs. Cruz, could have serious implications for corruption in the United States. The essential facts of the case are these: Just a day before Senator Ted Cruz’s narrow victory in the 2018 Senate election, Cruz personally lent $260,000 to his campaign. Under federal campaign finance law, contributions to a candidate’s campaign that come in after the election has already occurred can be used to repay up to $250,000 in personal loans a candidate has made to their own campaigns, but no more. Therefore, Cruz’s campaign reimbursed him only $250,000, not the full $260,000. Cruz challenged the cap on reimbursing a candidate’s personal loans from post-campaign donations as an unconstitutional limit on political speech in violation of the First Amendment of the U.S. Constitution.

If Cruz wins—and he very well might—the result could be a substantial increase in bribery of U.S. elected officials. As many commentators have noted (see here, here and here), allowing a victorious candidate to have their loans repaid by private interests is a recipe for quid pro quo corruption. After all, this money goes into an elected official’s pocket, and the fact that the contributions are made after an election increases the likelihood that a post-election donor knows that the recipient will be in a position to do him official favors. But the risks that this case poses to anticorruption law go beyond the particular activity at issue in the case itself. There is a very real risk that the Supreme Court will use this case to further limit the sorts of interests that can justify campaign finance restrictions of any sort, thereby jeopardizing seemingly well-established and recognized limitations on political spending that have long been justified on the grounds that they prevent corruption and its appearance.

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Guest Post: Fighting Corruption Through Social Audits in India: How Far Can Voice Get Without Teeth?

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Today’s Guest Post is from Suchi Pande, Scholar in Residence at American University’s Accountability Research Center and Center Founder and Director AU Professor Jonathan Fox.

India’s National Rural Employment Guarantee became a lifeline for migrant labor arbitrarily expelled from cities and left stranded and broke due to COVID-19 lockdowns. One of the largest employment safety net program in the world, it comes with a mandate for state governments to carry out “social audits,” a procedure empowering its beneficiaries to monitor leakages and the denial of rights resulting from the arbitrary exercise of power across India’s 600,000 villages. In short, to spotlight corruption.

How? With a social audit, program beneficiaries publicly scrutinize its implementation and government actors must respond to shortcomings in officially convened public forums and redress grievances. The audits date to a 2005 law driven by a combination of a grassroots advocacy campaign and a reform-minded government.  Social audits can engage populations directly in the fight against corruption where:

  1. the audit reveals corruption in some form, such as the leakage (embezzlement) of program funds, demands for bribes to release the funds, or the outright denial of participants rights to the funds;
  2. those conducting the audit have the capacity to communicate their findings clearly and understandably to the affected individuals or group;
  3. those affected are informed of the findings and understand the violation of the law or policy that led to the losses; and
  4. a third party — government agency or civil society group — convenes a public forum where government officials and elected representatives discuss the audit findings in an atmosphere free from reprisal, where the affected persons can participate and vouch for the accuracy of findings.
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New Podcast, Featuring Gary Kalman

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A new episode of KickBack: The Global Anticorruption Podcast is now available. As our regular listeners are aware, for the last couple of months we have featured a series of special episodes focusing on how corruption issues relate to Russia’s war on Ukraine. While the war goes on, and we hope to continue to feature experts who can focus on that topic, this week we return to, for lack of a better term, our “regularly scheduled programming,” with an interview with Gary Kalman, the Director of Transparency International’s United States office. Gary has appeared on our podcast twice before (in February 2020 and February 2021), so this interview, which was conducted this past February, can be seen as the continuation of what has become an annual tradition. As in our previous conversations, we focus on anticorruption developments in the United States. More specifically, we discuss ongoing rulemaking proceedings to implement the Corporate Transparency Act, the significance and potential impact of the Biden Administration’s Countering Corruption strategy document, the impact of the December 2021 Summit for Democracy on global anticorruption efforts, proposals for new US anticorruption legislation (such as the proposed ENABLERS Act and Foreign Extortion Prevention Act), and, going forward, what Gary believes are the most important challenges and agenda items for Transparency International’s US office.

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 Interdisciplinary Corruption Research Network (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.

Guest Post: How the Next Guatemalan AG Can Restore Hope in the Fight Against Impunity

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Today’s guest post is from a Guatemalan official who, due to the sensitivity of his/her government position, prefers to remain anonymous:

In Guatemala, the Attorney General plays a central role in the efforts to counter corruption. Guatemala’s 1993 constitutional reforms put the AG in sole control over the Public Ministry, the nation’s principal law enforcement institution. These constitutional reforms also gave the AG substantial autonomy: The Public Ministry is ensured financial and administrative independence, and the AG has control over the Public Ministry’s personnel and policies. Although the President has the power to appoint the AG, the President must choose a candidate from a shortlist of six candidates chosen by a Nominating Commission composed of the President of the Supreme Court, the Deans of the Guatemalan Law Schools, and two representatives of the Guatemalan Bar Association; this process is designed to produce qualified candidates for the Office and reduce the President’s ability to select a loyalist crony. Additionally, the AG serves a fixed four-year term in office and cannot be removed before the expiration of that term unless a court has determined that the AG has engaged in criminal wrongdoing.

The AG’s power and independence can help in the fight against high-level corruption by powerful political figures, as was demonstrated by the Public Ministry’s investigation into graft allegations against then-President Otto Perez Molina and Vice President Roxana Baldetti—an investigation which ultimately led to their resignation, prosecution, and incarceration (While this investigation was prompted and supported by the then-operative International Commission Against Impunity in Guatemala, known for its Spanish acronym CICIG, CICIG lacked unilateral prosecutorial authority, and the AG’s decision to pursue cases against the most powerful elected officials in the country was crucial.) Unfortunately, while the AG’s power and independence enables the AG to be an agent of positive change in the fight against impunity, those same factors mean that the AG can also be an obstacle to change. Guatemala has learned this the hard way under the current AG, Consuelo Porras.

When Porras took office in 2018, many people, both inside and outside Guatemala, believed that the country was reaching a turning point in its fight against corruption and impunity, and expectations were high. But her time at the Public Ministry has been a disappointment. Many regard her tenure as head of the Public Ministry as one the reasons why Guatemala’s anticorruption movement has faltered; overall, she seems to favor maintaining economic and political status quo, and a return to “business-as-usual.” Not only has she failed to provide bold leadership in the Public Ministry, but her policies have undermined the independence and effectiveness of Guatemalan law enforcement authorities. Worse still, there are allegations that she is personally involved in wrongdoing—and these allegations are credible enough that the U.S. government placed her on the “Undemocratic and Corrupt Actors” list and revoked her visa.

Guatemala’s recent experience raises important questions about the costs and benefits of giving one unelected official so much power over criminal law enforcement. But while it might be wise to examine the constitutional and statutory provisions regarding the AG’s powers at some point, right now Guatemala faces a much more pressing issue: the selection of a new AG. Porras’s tenure is coming to an end, and the selection process is underway; the President will appoint a new AG next month. Whoever the President selects will play a crucial role in determining whether Guatemala’s stalled anticorruption efforts can get back on track.

Whoever the new AG might be, there are three things that he or she can and should do to restore hope in Guatemala’s fight against corruption and impunity: Continue reading →

Argentinian Judicial Reform: A Wolf in Sheep’s Clothing

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On February 1, 2022, several thousand demonstrators marched on the streets of Buenos Aires to demand judicial reforms. The march was supported by Kirchnerist groups (so-called because of their support for former Presidents Néstor Kirchner and Cristina Fernández de Kirchner) and by President Alberto Fernández, a Kirchner ally who has been pushing for judicial reforms since his inauguration in 2019. Frustrations with Argentinian courts, however, transcend partisan divides. Polls indicate that about 70% of Argentinian adults believe the judiciary is corrupt, which is not very surprising given the recent string of high-profile judicial corruption scandals. Just last year, Judge Walter Bento was indicted and charged with running a large-scale corruption network. Likewise, in 2019, Judge Raúl Reynoso was sentenced to 13 years in prison for bribery and narcotrafficking. Judge Carlos Soto Dávila was similarly indicted in 2019 for accepting bribes in drug trafficking cases. Not only is there extensive evidence of judicial corruption, the Argentinian judiciary seems entirely ineffective at holding Argentina’s notoriously corrupt political class accountable: appallingly, only 1% of all corruption cases in Argentina ever result in an actual sentence.

In light of the Argentinian judiciary’s clear corruption and legitimacy problems, judicial reform seems like a step in the right direction. However, President Fernández’s plans for transforming Argentina’s judiciary, which he rearticulated this March, may actually worsen corruption rather than rectify it.

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How the U.S. Should Tackle Money Laundering in the Real Estate Sector

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It is no secret that foreign kleptocrats and other crooks like to stash their illicit cash in U.S. real estate (see here, here, here and here).  A recent report from Global Financial Integrity (GFI) found that more than US$2.3 billion were laundered through U.S. real estate in the last five years, and half of the reported cases of real estate money laundering (REML) involved so-called politically exposed persons (mainly current or former government officials or their close relatives and associates). The large majority of these cases used a trust, shell company, or other legal entity to attempt to mask the true owner of the property.

Shockingly, the U.S. remains the only G7 country that does not impose anti-money laundering (AML) laws and regulations on real estate professionals. But there are encouraging signs that the U.S. is finally poised to make progress on this issue. With the backing of the Biden Administration, the U.S. Treasury Department’s Financial Criminal Enforcement Network (FinCEN) has published an advance notice of proposed rulemaking (ANPRM) that proposes a number of measures and floats different options for tightening AML controls in the real estate sector. The U.S. is thus approaching a critical juncture: the question no longer seems to be whether Treasury will take more aggressive and comprehensive action to address REML; the question is how it will do so. And on that crucial question, I offer three recommendations for what Treasury should—and should not—do when it finalizes its new REML rules:

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Guest Announcement: Invitation to Join the Symposium on Supranational Responses to Corruption

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Today’s guest post is from Alexandra Manea, Legal Counsel at the World Bank’s Office of Suspension and Debarment, and Jamieson Smith, the World Bank’s Chief Suspension and Debarment Officer.

Across the world, states play a fundamental role in shaping and enforcing the global anticorruption framework and agenda. But what happens when a state is unable to effectively counter corruption within its borders for various reasons? Are there supranational anticorruption mechanisms and remedies that could supplement the state’s response?

Experience shows that over the past two decades both public and private actors have developed supranational tools to tackle the “demand” and “supply” sides of corruption. A few examples include the sanctions systems of certain multilateral development banks, including the World Bank Group, which endeavor to protect development-intended funds from corruption by blacklisting corrupt contractors; the recently established European Public Prosecutor Office, designed to protect the European Union’s finances against corruption by prosecuting corrupt behaviors across EU member states; the exclusion mechanism of the Norwegian Government Pension Fund, the largest sovereign wealth fund with investments in over 9000 companies worldwide, that may divest from companies that engaged in corruption; and international corporations that have implemented robust integrity compliance programs across their affiliates at nationals levels.

To study these and other examples and to devise new opportunities for supranational remedies against corruption, a call for papers was launched last year, and was also published on this blog. We received hundreds of paper proposals from academics and practitioners from across numerous sectors and regions. The selected papers make up a rich agenda for our upcoming symposium, bringing together scholars and professionals from the private sector, international organizations, government, and civil society.  With this background, on behalf of the World Bank’s Office of Suspension and Debarment, the OECD’s Anti-Corruption Division, and the American Society of International Law’s Anti-Corruption Law Interest Group, we would like to invite all GAB followers to join the symposium on Supranational Responses to Corruption, on April 28-29, 2022. The event will be held in a hybrid format with about 30 presenters on site in Vienna, Austria, and hopefully with many of you attending online.

The main objective of the symposium is to study and reflect upon current and prospective anti-corruption efforts that transcend national boundaries or governments. The symposium will take stock of the current supranational anti-corruption mechanisms and standards, assess how to facilitate a multilateral understanding of these efforts, and discuss whether, to what extent, and how supranational anti-corruption institutions can move towards creating regional and/or transnational anti-corruption ecosystems that can effectively combat corruption irrespective of the actions, or lack thereof, of a specific state.

This symposium has been organized with the support of multiple organizations and professionals and we would like to thank them all for their valuable efforts in making this event possible. The International Anti-Corruption Academy, the World Economic Forum – Partnering Against Corruption Initiative, the Austrian Federal Ministry for European and International Affairs, and the OPEC Fund for International Development (event host in Vienna) provided important support.  Special thanks to GAB’s very own Matthew Stephenson, who generously helped us from the early stages through today, with sharpening the symposium’s focus, tailoring the agenda, and giving us the opportunity to invite GAB’s specialized audience to the symposium.

The full agenda is available here. You can register for April 28 here and for April 29 here. We hope to have many of you join the discussions!

Some Things Are More Important Than Money: The Nature of Bribery and the U.S. College Admissions Scandal

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For the last two months, it’s been difficult for me to think or post about anything other than Russia’s war against Ukraine—and how this crisis might relate, directly or indirectly, to issues of corruption. But for today, I’m going to write about something a bit closer to (my) home, and substantially lower-stakes: the U.S. college admissions scandal, often known as the “Varsity Blues” scandal, after the code name that U.S. prosecutors assigned to the investigation. A quick refresher: a number of affluent parents arranged for their children to be picked by colleges coaches as athletic recruits, even though these teenagers were not in fact gifted athletes, and in some cases did not even play the sports for which they were recruited; this virtually guaranteed that the children would be admitted to the colleges in question, because those colleges had the practice of giving the coaches substantial discretion in choosing a certain number of recruits each year. (There were other aspects of the fraud, including in some cases cheating on the admissions tests, but the fake athletic recruiting gambit was the heart of the scheme.) The coaches participated in this fraudulent activity because the parents bribed them, via the middleman at the center of the scandal (and the purported “charitable foundations” that he controlled). In some cases, the parents paid monetary bribes directly to the coaches. But in some cases, the parents also—or in addition—made substantial donations to the university’s athletic program or the individual team, in exchange for the coach falsely asserting that their child should be recruited as an athlete.

That last, rather unusual aspect of the scheme—that the payments sometimes went to the university’s athletic program, rather than into the coach’s pocket—gives rise to a question that some of the Varsity Blues defendants have been urging in court: Can a payment count as a bribe (in the legal or moral sense) if it goes to the university? Obviously, this is not an issue in those cases where the prosecution has proven that money or other things of value were offered directly to the coach. But what about those cases that involve donations to the university’s teams or athletic program? Some of the Varsity Blues defendants insist that these donations cannot be bribes—even if we stipulate that the purpose of the donation was to induce the coach to falsely claim that an applicant should be recruited as an athlete, and that the coach did so as part of an explicit quid pro quo. The reason, proponents of this argument insist, is that if the purported “victim” of the alleged bribery (here the university) is also the recipient of the payment, then the payment cannot not a bribe.

This is wrong. Indeed, it is nonsense, and that fact that at least some judges have been entertaining this as a serious objection to some of the Varsity Blues charges reveals a deep conceptual confusion about the nature of bribery and why it is wrongful. Continue reading →

The Anti-Anticorruption Origins of the American Revolution

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The story of the American Revolutionary War is one that many of our readers – certainly our American readers – know well. According to the conventional narrative, at least as conveyed in U.S. high schools, the British crown’s unfair taxes, punitive laws, and general disregard for the Thirteen Colonies led to protest, massacre, and revolution. There is, however, another perspective from which the story could be told, in which the British were not engaged in arbitrarily denying colonial rights, but were instead embarking an on anticorruption crackdown that went horribly awry.

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How the Corporate Transparency Act Can Shine Light on Dark Money in U.S. Elections

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Last year, in an effort to prevent the abuse of anonymous companies by malign actors, the U.S. Congress passed the Corporate Transparency Act (CTA). The CTA requires certain legal entities, like corporations and limited liability companies (LLCs), to provide information about their beneficial owners—that is, the people who actually own or control the entity—in order to make it more difficult to operate anonymous shell companies for criminal purposes. Pursuant to the CTA, beneficial ownership information must be submitted to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and maintained in a centralized database.

Much of the fight for beneficial ownership transparency was spearheaded by anticorruption advocates, who emphasized the ways in which foreign kleptocrats and other corrupt officials use anonymous companies to hide their stolen wealth. But the CTA’s beneficial ownership transparency measures will be helpful in fighting another kind of corruption, one closer to home: the corrupting influence that so-called dark money—spending by undisclosed donors to influence election outcomes—has on the integrity of U.S. elections and American political sovereignty.

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