About Matthew Stephenson

Professor of Law, Harvard Law School

Populist Plutocrats Conference–Reminder

This is just a quick reminder, for those who are interested, that the Harvard Law School conference on “Populist Plutocrats: Lessons from Around the World” (co-sponsored by the University of Chicago’s Stigler Center) is happening tomorrow, September 23, starting at 9 am (Eastern Time). The full conference agenda and speaker list is here, and for convenience I’ll also include it in this post after the break. If you’re interested in the event but can’t make it in person, you can catch the live stream here. The event will also be video-recorded, and I plan to post links to some of the videos (along with some commentary) over the next couple of weeks.

Also, in case any of you would like a bit more background, this morning the Harvard Gazette ran a short interview with me about the conference and what motivated me to organize it. (Spoiler: The main motivation rhymes with “Ronald Grump.”)

Here’s the full program and speaker list: Continue reading

In Bribery Experience Surveys, Should You Control for Contact?

Perception-based corruption indicators, though still the most widely-used and widely-discussed measures of corruption at the country level, get a lot of criticism (some of it misguided, but much of it fair). The main alternative measures of corruption include experience surveys, which ask a representative random sample of firms or citizens about their experience with bribery. Corruption experience surveys are neither new nor rare, but they’re getting more attention these days as researchers and advocates look for more “objective” ways of assessing corruption levels and monitoring progress. Indeed, although some early discussions of measurement of progress toward the Sustainable Development Goals (SDGs) anticorruption target (Target 16.5) suggested—much to my chagrin—that changes in Transparency International’s Corruption Perceptions Index (CPI) score would be the main measure of progress, more recent discussions appear to indicate that in fact progress toward Goal Target 16.5 will be assessed using experience surveys (see here and here).

Of course, corruption experience surveys have their own problems. Most obviously, they typically only measure a fairly narrow form of corruption (usually petty bribery). Also, there’s always the risk that respondents won’t answer truthfully. There’s actually been quite a bit of interesting recent research on that latter concern, which Rick discussed a while back and that I might post about more at some point. But for now, I want to put that problem aside to focus on a different challenge for bribery experience surveys: When presenting or interpreting the results of those surveys, should one control for the amount of contact the respondents have with government officials? Or should one focus on overall rates of bribery, without regard for whether or how frequently respondents interacted with the government?

To make this a bit more concrete, imagine two towns, A and B, each with 1,000 inhabitants. Suppose we survey every resident of both towns and we ask them two questions: First, within the past 12 months, have you had any contact with a government official? Second, if the answer to the first question was yes, did the government official demand a bribe? In Town A, 200 of the residents had contact with a government official, and of these 200, 100 of them reported that the government official they encountered solicited a bribe. In Town B, 800 residents had contact with a government official, and of these 800, 200 reported that the official solicited a bribe. If we don’t control for contact, we would say that bribery experience rates are twice as high in Town B (20%) as in Town A (10%). If we do control for contact, we would say that bribery experience rates were twice as high in Town A (50%) as in Town B (25%). In which town is bribery a bigger problem? In which one are the public officials more corrupt?

The answer is not at all obvious; both controlling for contact and not controlling for contact have potentially significant problems: Continue reading

Declinations-with-Disgorgement in FCPA Cases Don’t Worry Me: Here’s Why

Among those who follow Foreign Corrupt Practices Act (FCPA) enforcement practices, there’s been a spate of commentary on a few recent cases in which the Department of Justice (DOJ) has resolved FCPA cases with a formal decision not to prosecute (a “declination”) that includes, as one of the reasons for (and conditions of) the declination, the target company’s agreement to disgorge to the U.S. Treasury the profits associated with the (allegedly) unlawful conduct. Disgorgement is a civil remedy rather than a criminal penalty (as the U.S. Supreme Court recently emphasized); it is often employed by the Securities and Exchange Commission (SEC), which has civil FCPA enforcement authority over issuers on U.S. exchanges. Until recently, however, the DOJ – which has civil FCPA enforcement authority with respect to non-issuers, and criminal enforcement authority in all FCPA matters – had not sought disgorgement very often, and the recent “declination-with-disgorgement” resolutions appear to be something new, at least in the FCPA context.

Not everyone is happy with this development. Last week, for example, Professor Karen Woody posted an interesting commentary over at the FCPA Blog (based on a longer academic paper) on why the emergence of declinations-with-disgorgement in FCPA cases is an “alarming” development that makes her “queasy.” Professor Woody is an astute and knowledgeable FCPA commentator, and I’m hesitant to disagree with her—especially since I’m not really an FCPA specialist in the way that she is—but I’m having trouble working up a comparable level of alarm. Indeed, my knee-jerk reaction is to view the declination-with-disgorgement as a useful mechanism, one that would often be the most appropriate one to employ to resolve FCPA violations by a company that is not subject to SEC jurisdiction, and eliminating this mechanism might force the DOJ to employ a worse alternative.

Let me start by laying out the affirmative case for declinations-with-disgorgement, and then I’ll turn to Professor Woody’s concerns. Continue reading

Upcoming Conference on “Populist Plutocrats: Lessons from Around the World” (Sept. 23, Harvard Law School)

On Saturday, September 23rd, Harvard Law School, in collaboration with the University of Chicago’s Stigler Center, will host a one-day conference entitled “Populist Plutocrats: Lessons from Around the World.” The conference will focus on an important and dangerous phenomenon: political leaders who successfully exploit anti-elite sentiment in order to achieve power, but who, once in office, seem primarily interested in enriching themselves, along with a relatively small circle of family members and cronies. Many Americans might find that this description accurately captures President Trump, who campaigned as a populist, but who is governing as more as a “crony capitalist” plutocrat—or, some would allege, as a quasi-kleptocrat.

Americans seeking to understand the challenges our country is now facing might do well to look abroad. After all, while Trump’s leveraging of the power of the presidency for personal enrichment—enabled by anti-elite sentiment among his supporters—may well be unprecedented in modern U.S. history, it is not, alas, unprecedented in the modern world. Indeed, while every country’s experience is different, and we must always be careful not to overstate the parallels, many other democracies have had leaders who could be described as populist plutocrats, or even populist kleptocrats, in something like the Trump mold. While such resemblances have occasionally been noted (see, for example, here, here, here, and here), but there has not yet been much of a sustained attempt to understand populist plutocracy/kleptocracy and closely related phenomena in comparative perspective. The September 23 conference will seek to initiate more sustained exploration of these issues, and will also provide an opportunity for experts from other parts of the world–who have more experience with political leaders who combine populist rhetoric with self-interested profiteering and cronyism–to offer a distinct perspective on the challenges the United States is currently facing.

The conference will feature the following panels: Continue reading

Tracking Corruption and Conflicts of Interest in the Trump Administration–September 2017 Update

Last May, we launched our project to track credible allegations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests.Just as President Trump’s son Eric will be providing President Trump with “quarterly” updates on the Trump Organization’s business affairs, we will do our best to provide readers with regular updates on credible allegations of presidential profiteering. Our September update is now available here.

Although there was much in the news this past month about troubling reports that Donald Trump’s business organization was pursuing plans to develop a Moscow hotel while he was running for president (which we don’t include in our tracker because it seems to pertain exclusively to pre-election activity), there were relatively few new developments this month. We will continue to monitor and report on allegations that Trump, or his family and close associates, are seeking to profit from the presidency.

As we are always careful to note, while we try to sift through the media reports to include only those allegations that appear credible, we acknowledge that many of the allegations discussed are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.

Guest Post: If You Were a G20 Leader for a Day…

Maggie Murphy, Senior Global Advocacy Manager for Transparency International, contributes today's guest post:

Remember the big headline from the recent G20 Summit in Hamburg, about what leaders are going to do to tackle corruption head-on?
No, we don’t either. Corruption remains a bit of an afterthought in G20 thinking on progressing the G20’s objective of “strong, sustainable, balanced and inclusive growth” (page 14 of the most recent Communiqué), despite the almost plaintive opening line in the current G20 Anti-Corruption Action Plan that “[r]educing corruption remains a top priority for the G20.”
Corruption should be preoccupying for G20 leaders. In the last 12 months alone, the presidents of G20 members South Korea and Brazil have been impeached (and Brazil’s current president is also facing corruption allegations) and the former Argentinian president was indicted for corruption.
Despite the lack of public emphasis on fighting corruption, the G20 does have well-functioning G20 Anti-Corruption Working Group (ACWG). The ACWG meets three times a year, works to biennial Action Plans, and advises G20 leaders on where to channel their energy in tackling corruption. The ACWG touches on a wide range of topics, from asset recovery, to open data, to the illegal trade in wildlife. The ACWG adopts principles, issues individual country guides, conducts self-assessments, and develops good practice, research, and toolkits on certain issues. The 60 documents the group has developed since 2010 can be found on a helpful but hidden website compiled by the German Ministry of Justice.
But we don’t hear much about the ACWG's work, even less its impact. Clearly it needs a shake-up.
As new G20 host, Argentina should lead the development and adoption of a new biennial Anti-Corruption Action Plan. But that would be simply more of the same. Is it time for the G20 ACWG to have a rethink? Continue reading

Guest Post: UK Bribery Prosecutions and the Rule of Law

Mat Tromme, Project Lead & Senior Research Fellow at the Bingham Centre for the Rule of Law, contribute today's guest post, which is based on discussions at a recent Bingham Center-Duke Law School FCPA Roundtable:

In the latest sign that the UK’s Serious Fraud Office (SFO) it is flexing its prosecutorial muscle, the SFO recently opened a case against British American Tobacco, and in June convicted four senior executives from Barclays Bank for conspiracy to commit fraud. This adds to the SFO’s growing list of "successes," such as cases against the ICBC Standard Bank, Tesco, and Rolls Royce. It also raises some important questions (which aren't new), on the one hand about the means used to prosecute bribery, and on the other about the extent to which ongoing economic considerations such as Brexit might put an end to what appears to be good momentum.

Despite the SFO's "wins," some critics are disappointed with the Rolls Royce deferred prosecution agreement (DPA) and questioned whether the SFO is sufficiently aggressive in prosecuting corruption. This view follows concerns that the Rolls Royce case failed to meet the interests of justice and illustrates how big companies are let off the hook where the prosecution of bribery is concerned. Such concerns echo criticisms that DPAs in the United States, which pioneered their use, undermine the rule of law by letting individuals avoid prosecution, and by allowing this area of law to develop outside of the public eye and with very little judicial oversight. This leaves the lasting impression of a two-tiered criminal system by promoting a “too big to jail” culture. DPAs, it is also been argued, undermine both the deterrent effect of the law and incentives to self-report. Continue reading