Monthly Archives: February 2023

New Podcast Episode, Featuring Cecilia Müller Torbrand

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In latest episode, host Liz David-Barrett interviews Cecilia Müller Torbrand, the CEO of the Maritime Anti-Corruption Network (MACN), a network of shipping businesses that has been working to address corruption risks in the maritime industry. Ms. Müller Torbrand explains how MACN has succeeded in framing its messaging around trade and commerce to engage government and the private sector in anticorruption work, and she also discusses how MACN has compiled extensive data on corruption incidents and risks in the sector, and how the organization uses that data to push for change. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

The Hidden System of Legal Kickbacks Shaping the U.S. Prescription Drug Market

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In the United States, as in most other countries, it is illegal for pharmaceutical companies to bribe doctors or hospitals to prescribe their products. Those who get caught engaging in this sort of corruption can suffer severe penalties. For example, in 2020, the pharmaceutical giant Novartis agreed to pay the U.S. government almost $700 million to settle a case involving allegations that the company had violated the federal Anti-Kickback statute by offering “cash payments, recreational outings, lavish meals, and expensive alcohol” to doctors to induce them to prescribe Novartis drugs. Yet when pharmaceutical companies offer financial inducements worth billions of dollars to Pharmacy Benefit Managers (PBMs)—not the meager thousands spent on doctors—to promote use of their drugs, the conduct is entirely legal.

What, you may ask, are PBMs? Good question. Most laypeople outside the health care field are unfamiliar with PBMs, and may not even know they exist. But PBM’s play a crucial, if underappreciated and extremely complex role in determining prescription drug prices and insurance coverage decisions. Simplifying somewhat, PBMs’ primary function is to manage insurance companies’ prescription drug plans, a role that includes, among other things, negotiating with drug companies to determine which drugs insurance will cover, and which will be favored. Given that just three PBMs control over 80% of the prescription drug market, PBMs can have an enormous effect on pharmaceutical sales, as drugs that lack insurance coverage are significantly less attractive to consumers than those with coverage. Additionally, PBMs also reimburse pharmacies on behalf of insurance providers for the costs of filling beneficiaries’ prescriptions.

In short, PBMs, which stand in between many of the transactions in the pharmaceutical supply chain, play a major role determining the prices paid by insurers, pharmacies, and patients for prescription drugs. And although kickbacks to doctors, hospitals, insurance companies, and other actors in the system are strictly prohibited, drug companies can and do take advantage PBMs’ complex payment structures to discreetly offer financial inducements in order to gain PBMs’ favor during insurance coverage determinations. There are two main ways in which this de facto bribery occurs: Continue reading →

FinCEN’s Beneficial Ownership Proposal: Invitation to Evasion

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GAB welcomes this guest post by Gary Kalman, Executive Director of Transparency International U.S.

The Financial Crimes Enforcement Network (“FinCEN”), the bureau charged with implementing our nation’s anti-money laundering laws, is underfunded. They do not have enough staff and significant staff turnover has left the bureau with less institutional knowledge and memory. On top of this, the agency has an Acting rather than permanent Director, undercutting its leaders’ ability to set a clear vision and direction for the bureau.

None of that, however, can explain the agency’s remarkable lapse in judgement in publishing  this proposal to collect beneficial ownership information from U.S. companies.

Let me explain.

Continue reading →

Nearly 20 Years in Legal Limbo: Egypt’s Illicit Gains Framework

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Criminal laws against “illicit enrichment” or “unexplained wealth” are among the more potent tools in the anticorruption toolbox. Though details vary across countries, typically an illicit enrichment law criminalizes a public official’s failure to provide a legitimate explanation for their possession of assets in excess of their lawful sources of income. The advantage, from an anticorruption perspective, of criminalizing illicit enrichment is the alleviation of the burden on the prosecution to gather evidence sufficient to prove bribery or embezzlement, which can often be difficult or impossible. Corruption can be inferred, the logic goes, from the government official’s possession of unusual and unexplained wealth. A further advantage is the law’s ability to capture instances of “influence peddling,” where a public official’s conduct might not have violated the specific laws on bribery and embezzlement, but still involves exploitation of authority to obtain gratuitous favors or preferential treatment that may show up in the form of unexplained wealth. 

Illicit enrichment laws, however, have proved controversial because they seem to shift the burden of proof from the prosecution to the defendant, thus violating the bedrock principle of the presumption of innocence. Many experts disagree with this criticism, and constitutional courts in many countries have rejected it. However, some governments, and some constitutional courts, continue to maintain that illicit enrichment laws are incompatible with constitutional guarantees related to the presumption of innocence.

Reasonable people can disagree about whether illicit enrichment laws in any given country are constitutional, but one would think that the issue would be settled one way or the other. In Egypt, however, this constitutional controversy has led to a bizarre legal limbo that has persisted for nearly two decades. Continue reading →

Why We Should be Afraid – Very Afraid – of Corruption in the Reconstruction of Ukraine

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Today’s Guest Post is from Donald Bowser. Don has worked on governance and anticorruption programs for over two decades for various donor organizations. In July he founded Support to Ukrainian Recovery Initiative, an NGO focused on implementing early recovery and stabilization projects in formerly occupied communities across Ukraine.

In “Why We Shouldn’t Be Overly Concerned About Corruption in the Reconstruction of Ukraine,” her January 9 post on GAB, Catherine Katz makes three points to back up her claim:

  1. First, the baseline level of corruption in pre-invasion Ukraine was likely overstated.
  2. Second, not only do measures like the CPI tend to overstate the baseline level of corruption in Ukraine, but they do not adequately reflect the significant strides Ukraine has made with its more recent anticorruption efforts, including several that have taken place since Russia’s February 2022 invasion.
  3. Third, backsliding on Ukraine’s recent anticorruption progress is unlikely—and further progress is expected—given Ukraine’s long-term interest in joining the EU and continuing need to receive support from the international community.

Like Katz, I hope the war ends in a Ukrainian victory soon and that the international community commits the resources required to help Ukraine repair the damage Russia has wreaked on the country’s infrastructure. But as the title of my post asserts, I sharply disagree with her about the spectre of corruption during reconstruction. Indeed, I think the international community should be very afraid of how it might compromise reconstruction and should begin immediately to take measures to combat it.  

Continue reading →

New Podcast Episode, Featuring Luís de Sousa

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In latest episode, host Robert Barrington interviews Luís de Sousa, who serves as the the Deputy Director of the Institute of Social Sciences (ICS) at the University of Lisbon, as well as Professor of Anticorruption Practice at University of Sussex’s Centre for the Study of Corruption. The wide-ranging interview covers a variety of topics, including the reasons that some anticorruption agencies have been more successful than others, concerns about the politicization of anticorruption measures, the role that external international actors can play in the reform process, and the importance of pursuing anticorruption at the municipal/local level. The discussion covers examples from around the world, and focuses in depth on Professor de Sousa’s home country of Portugal. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

The Fishrot Files: Clean Countries and Fishy Business

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The Nordic countries are often seen as world leaders when it comes to anticorruption, ranking at the top of Transparency International’s Corruption Perceptions Index (CPI). Yet critics have pointed out that while the Nordic countries have a sterling reputation for suppressing corruption at home, they have a much spottier record when it comes to dealing with exported corruption. This has been the case in Sweden and Denmark, and most recently, in Iceland, which has been widely criticized for its handling of the country’s first high-profile foreign bribery scandal.

The case in question was first exposed in November 2019 when three media outlets published joint investigative findings alleging that an Icelandic fishing company had paid millions of dollars in bribes to Namibian officials in order to gain access to the country’s valuable fishing zones (see here, here, and here). The reporting relied on thousands of leaked documents, which were dubbed the “Fishrot Files,” as well as first-hand testimony provided by a whistleblower, a former manager of the company’s operations in Namibia who admitted that he himself had played a role in bribing Namibian officials.

Though the scandal triggered public protests by Icelandic citizens, senior government officials in Iceland have sought to shift the blame to Namibia’s “weak” and “corrupt government.” Yet whatever governance weaknesses in Namibia may have contributed to the wrongdoing in the first place, it is notable that Namibian authorities moved swiftly to prosecute officials implicated in the scandal, including two high-level government ministers. These ministers were forced to resign and were subsequently arrested; they and eight other defendants now face charges of corruption, fraud, money laundering and tax evasion. In contrast, Icelandic authorities have yet to make any arrests or issue indictments in the case, more than three years after the initial revelations. To date, the executives implicated in the scandal have escaped official sanctions and have remained in their roles at the company.

In this instance, then, we see something rather unusual in foreign bribery cases: A strong response by a demand-side country in the global South (in this case Namibia), and a weak response by the supply-side country. Better understanding Namibia’s unusually strong response to the scandal is important in its own right, but for now, let’s focus on the question of why Iceland—which was one of the first signatories to the OECD Anti-Bribery Convention in 1998 and has readily available the legal framework necessary to handle the matter adequately—has been so ineffective in enforcing its laws against foreign bribery offences. Consider several possible explanations: Continue reading →

UNODC Statistical Framework to Measure Corruption: Comments Requested

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Within the global anticorruption community, no topic has generated as much discussion as the measurement issue. Start with the most basic of questions. Is there an agreed upon definition of corruption? Get by the heated objections to claim there is none, and next consider: are there ways to measure something that by its nature is clandestine? Take for granted clever social scientists can, then ask if these measures are comparable. Across time? Different nations?

The methodological and epistemological debates over such questions have raged in the academy for millennia. But as corruption has gained ever more salience as a policy issue, the debate has ranged far beyond the academy. Just ask any political leader forced to explain to citizens why his or her country scored poorly on some corruption-rating scale.

The United Nations Office on Drugs and Crime has now brought needed clarity to the debate. At the request of the 189 state parties to the U.N. Convention Against Corruption, it has published the first draft of a comprehensive statistical framework to measure corruption (here) with a form for providing comments (here).

Bearing in mind my bias, I contributed (very slightly and with more comments promised), I think the draft is a first class piece of work.  Two of many reasons why.

Continue reading →

The FDA Drug Approval Process Has Problems—But It Is Not Corrupt

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Is the US drug approval process corrupt? Many critics say that it is, leveling the charged rhetoric of corruption at the Food and Drug Administration (FDA) (see, for example, here, here, and here). Yet there have been few, if any, credible allegations of illegal bribery or the exchange of quid pro quo benefits in relation to FDA drug approvals. Rather, when critics speak of “corruption” at the FDA, they are alluding to a perhaps all-too-cozy relationship between the FDA and the pharmaceutical companies it regulates. That is indeed a source of concern: Big business likely has too much sway in Washington, D.C. on a whole range of issues, and the FDA is not immune to the powerful influence of powerful lobbies like Big Pharma. Yet the casual deployment of the rhetoric of “corruption” in this context, though offering attractive click-bait, is both misleading and potentially counterproductive. Continue reading →

Guest Post: ChatGPT in Anticorruption Research–You Cannot Make This Up!

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Today’s guest post is from Dieter Zinnbauer of the Copenhagen Business School’s Sustainability Center:

Jim Anderson over at the World Bank blog and Matthew Stephenson on this blog kicked of an interesting discussion about how the new era of artificial intelligence—particularly the natural language chat-bots like OpenAI’s revolutionary ChatGPT—will affect the anticorruption field. As Matthew suggested, the ability of ChatGPT to generate plausible-sounding (if a bit bland) summaries and speeches on corruption-related topics should inspire all of us real humans to aim to do more creative and original—and less bot-like—writing and speaking on anticorruption topics. And both Jim and Matthew suggested that in this field, as in many others, ChatGPT can also be a valuable aid for researchers and advocates, performing in seconds research and drafting work that might take a human being several hours.

Yet while ChatGPT may be able to assist in some tasks, we shouldn’t get too excited about it just yet, especially when it comes to research. Some of its limits as a research tool are already well known and widely discussed. But I wanted to call attention to another problem, based on a couple of recent experiences I had trying to use ChatGPT as a research aid. Continue reading →