Author Archives: Matthew Stephenson

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About Matthew Stephenson

Professor of Law, Harvard Law School

Revolving Doors and Corruption

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I recently came across a couple of interesting blog posts about corruption and the “revolving door” in the U.S. government (the cycling of individuals from the private sector to government and back again—often as representatives of the same industries they used to regulate while in government).

First, last month Chandu Krishnan (who served as Executive Director of Transparency International UK from 2004-2012) published an insightful post on the Safra Center’s blog, noting how the revolving door—and in particular the promise of lucrative post-government employment—may lead government officials to make laws that reflect the preferences of “industry lobbies” rather than the “will of the people.” Mr. Krishnan adds his voice to the chorus of calls for reform; in particular, he recommends lengthening the legally-required “cooling off” period (during which former government officials are prohibited from lobbying) from one to three years (or longer for positions involving especially high risk, such as procurement).

Around the same time, Mike Koehler, who runs the FCPA Professor Blog, posted a comment on Charles Duross’s recent departure from his position as head of the DOJ’s FCPA enforcement division to take up a position at the law firm Morrison & Foerster. In this post, Professor Koehler reiterated his earlier calls for extending and expanding the “cooling off” period, so that former government FCPA lawyers could not provide any FCPA defense or compliance services for five years after leaving government service.

What struck me about reading these two posts in rapid succession was the fact that although Mr. Krishnan and Prof. Koehler seem in agreement on the problem and the solution, in fact their hypotheses about the effect of the revolving door on government officials’ incentives are not only different, but polar opposites. Mr. Krishnan worries that the prospect of future employment at private sector firms will cause government officials to go too easy on those firms—leading to overly passive or timid enforcement of U.S. law. (He views this as a kind of “institutional corruption.”) Prof. Koehler worries that the prospect of future private sector employment causes government officials to be too aggressive in their enforcement of the law—creating or augmenting the demand for the defense & compliance services these ex-government officials then provide.

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Updated Anticorruption Bibliography

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Yet another update of my ever-expanding bibliography on corruption and anticorruption is now available from my website, and a direct link to the pdf is here. I’m always looking for new sources to add, so if you have suggestions for additions, please send them using the Contact page.

Do Anticorruption Blogs Matter? Alexei Navalny’s Example

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Some blogs, including this one, are devoted to analysis and discussion of anticorruption policy issues.  But a number of anticorruption bloggers are more like investigative journalists—finding and exposing instances of (alleged or apparent) corruption. Do these blogs make a difference?

This question is related to the more general question of whether the modern communications revolution—particularly the spread of internet access—will be helpful in fighting corruption. There’s reason for optimism: there’s already lots of evidence that the spread of traditional media (newspaper and radio) were crucial in the fight against corruption in the 20th century, and the internet (along with other communications technologies, like mobile phones) lowers the cost of both disseminating and accessing information about corrupt activities. In addition to individual anticorruption bloggers and websites, platforms like I Paid a Bribe and Bribespot are emerging that may enable much larger numbers of people to disseminate information. These new technologies have gotten a lot of press, but do they make a big difference?

There’s surprisingly little systematic evidence on the impact of internet on corruption, but a recent paper on the Russian anticorruption blogger (and opposition figure) Alexei Nevalny, co-authored by Ruben Enikolopov, Maria Petrova, and Konstantin Sonin, suggests that this sort of anticorruption blogging may have a real impact. Nevalny is a well-known (and controversial) figure in Russia, and he got a lot of international press last month for his exposé on corruption in the Sochi Winter Olympics. But he got his start blogging about corruption in Russian state-owned companies. And, according to Enikolopov, Petrova, and Sonin, Navalny’s posts made a difference: when he posted about a company on his anticorruption blog, that company’s value took a significant hit. What can we learn from this? Continue reading →

Event Announcement: IBA Mexico City Conference, May 12-13

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For readers who might be interested, the International Bar Association‘s Anti-Corruption Committee (of which I am a new but enthusiastic member) is co-sponsoring a conference on “The Fight Against Corruption in Latin America: Implications for Lawyers” in Mexico City on April 12-13.  Looks like a terrific program, particularly for practitioners dealing with corruption risk management in the Latin American region. You can find out more information about the conference here.

Do Companies Benefit from Self-Disclosing FCPA Violations?

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At last Month’s Chatham House conference on Combating Global Corruption, much of the discussion focused on how to create incentives for corporations to uncover and voluntarily disclose violations of foreign anti-bribery laws like the U.S. Foreign Corrupt Practices Act (FCPA). This is important, because as I noted in last week’s post, most FCPA violations are revealed because of self-disclosures, rather than government or media investigation. During the conversation, a distinguished lawyer (whom I cannot identify by name, because of the Chatham House Rule) made the following argument: Although the U.S. Department of Justice claims to give corporations credit for self-disclosure of FCPA violations, “a careful examination of the evidence reveals” that self-disclosure does not result (on average) in any reduction in penalties.

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Expansion of the OECD Anti-Bribery Convention: A Skeptical View

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The OECD Anti-Bribery Convention (the unwieldy official name of which is the “OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions”) has proven to be a surprisingly successful international agreement—far more effective than the various regional anticorruption instruments or the U.N. Convention Against Corruption (UNCAC), and indeed far more effective than even the OECD Convention’s proponents had predicted. Of course, it’s hard to know how much one can credit the OECD Convention for changes in anticorruption laws and enforcement patterns, but lots of well-informed people believe it has had a big effect, primarily because of its rigorous peer review system. In contrast to other, weaker review systems associated with UNCAC and some of the regional conventions, members of the OECD Convention must submit to a quite extensive and intrusive form of peer review, in successive phases, and cannot veto or prevent disclosure of the resulting reports. The reports are often quite harsh, even scathing, and the political embarrassment associated with a bad review can shame governments and mobilize public opinion.

Given that the OECD Convention has been so successful, should it be expanded to include more countries? After all, membership in the Convention is not limited to the OECD , and indeed several non-OECD countries (Argentina, Brazil, Bulgaria, Columbia, Russia, and South Africa) are already parties. The OECD’s leadership seems to think the answer is a clear yes. At a recent Chatham House conference on “Combating Global Corruption” (which I was fortunate enough to attend), Ángel Gurría, the OECD Secretary-General, declared that it was “imperative that all G20 countries become Parties to the OECD Anti-Bribery convention,” and specifically noted the importance of bringing China, India, Indonesia, and Saudi Arabia on board.

I’m sympathetic to the general idea, and would certainly like to live in a world where all countries accepted—and respected—the commitments embodied in the OECD Convention. But rapid expansion of the Convention has important drawbacks that deserve more attention than they seem to be getting. So at the risk of being the skunk at the garden party, let me lay out the case for skepticism about rapid expansion of the OECD Anti-Bribery Convention.

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Does the Social Value of Corruption Indicators Depend Solely on Their Accuracy?

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We’ve had a series of posts this week (from Michael, Rick, and Addar) about the vexed question of how to measure corruption–including controversies over whether the popular perception-based measures, like Transparency International’s Corruption Perceptions Index (CPI), do so accurately enough to be useful proxies.

But in addition to that discussion — and picking up on something Rick touched on in the latter half of his post — I think it may be worth raising the questions whether: (1) something like the CPI might have desirable effects even if the CPI score is not a particularly good indicator of true corruption, and (2) whether the CPI might have bad effects even if it’s actually quite an accurate measure. To be clear, my very strong predispositions are that we should try to produce and publicize accurate measures of corruption. But it’s at least worth thinking about the possibility that the social value of an indicator may not depend entirely on the accuracy of that indicator–and about what implications might follow from that observation. Continue reading →

What’s Left Out of “Left Out of the Bargain”

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A couple months back I finally had a chance to read the Stolen Assets Recovery Initiative (StAR)’s latest report, Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery. It’s a very useful report (though a lot of the preliminary material is pretty dull, but fortunately fairly skimmable). The key descriptive finding is that “significant monetary sanctions have been imposed [in foreign bribery cases] with hardly any of the respective assets being returned to the countries whose officials have allegedly been bribed.” The overall tenor of the report is that this is a problem. Although the report uses careful, measured language, I interpreted it as as a call for more aggressive action to force companies that admit to foreign bribery to pay significant fines, penalties, or other damages to the countries in which the bribery took place (either to those countries’ governments, or to NGOs or special funds). The report discusses, and seems to endorse, a range of related measures designed to further this overarching goal.

I’m sympathetic with StAR’s objectives, and with the idea that more can and should be done to help the victims of corruption. But the Left out of the Bargain report suffers from a number of serious flaws—chief among them the failure to give more than cursory attention to the possible adverse incentive effects of promoting duplicative enforcement or substantial redistribution of settlement proceeds. Continue reading →

Are the Thai Anticorruption Agency’s Charges against the PM Politically Rash or Politically Shrewd?

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In my last post, I discussed the recent charges brought by Thailand’s National Anti-Corruption Committee (NACC) against the current Prime Minister, Yingluck Shinawatra, for failing to prevent corruption in the Thai government’s controversial (and recently discontinued) rice purchasing program. There are a few respects in which this case raises important questions not just for Thailand, but for anticorruption enforcement more generally. One, which I discussed last time, is the fact that the NACC has charged the Prime Minister not with engaging in corruption, but with (criminally) failing to prevent corruption. Another concerns how the NACC is managing – or failing to manage – the delicate and difficult politics of bringing charges against a sitting Prime Minister in the midst of ongoing political turmoil, in which the Prime Minister and her party remain very popular with much of the nation — and would almost certainly would have won the election that opposition protesters effectively blocked. My educated guess is that if you were to ask members of the NACC how the political situation affected their decision-making, they would say that it had no effect at all – they simply followed the evidence where it took them, without fear or favor. This is what anticorruption enforcement officials always say, at least publicly. I suspect they may actually believe it, and perhaps it’s (sometimes) true. But anticorruption enforcers operating in politically difficult environments often do, and often should, think carefully and strategically about the constraints and opportunities those environments create – Gabriel Kuris’s studies of the Indonesian KPK (here and here) provide nice evidence of that.

So, was the NACC’s decision to bring these charges against the Prime Minister at this moment a politically rash decision, or a politically shrewd one? It’s easier to make the case for “rash”, but at the risk of revealing my ignorance of Thai politics (or my ignorance more generally), I’m going to make a tentative case for “shrewd”. Continue reading →

When Should Government Officials Be Criminally Liable for Failure to Prevent Corruption? Reflections on Thailand, and Beyond

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Three weeks ago, Thailand’s National Anti-Corruption Commission (NACC) recommended charging the sitting Prime Minister, Yingluck Shinawatra, with violating Section 157 of the Thai Criminal Code, one of Thailand’s key anticorruption laws. The corruption allegations concerned malfeasance in the Thai government’s controversial rice-purchasing program. There is much to be said about the NACC’s action and the underlying allegations, as well as how this will play out in the roiling cauldron of contemporary Thai politics. But perhaps the most striking thing about the charges, with the greatest potential significance outside of Thailand, is that the NACC did not allege that Prime Minister Yingluck herself committed any corrupt act, or even that she oversaw or directed or approved of any corrupt act. Rather, the NACC’s criminal complaint alleges that Prime Minister Yingluck knew about the alleged corruption in the rice-buying program and failed to stop it. This is possible because Section 157 applies to any official who “wrongfully exercises or does not exercise any of his functions to the injury of any person” (emphasis added). The NACC seems to read the prohibition on wrongful failure to exercise official functions quite broadly, so that it extends not only to an official who corruptly fails to take action (such as a health inspector or customs officer who looks the other way in exchange for a bribe), but also to an official who fails to take action to prevent corruption in the programs that official supervises.

That theory of criminal liability, applied in this context, is bold, and perhaps unprecedented. Of course, in private organizations, many legal systems may impose civil liability on corporate officers and directors who knew (or should have known) about corrupt activities by the corporation and failed to take appropriate remedial measures. But I can’t think of another instance in which an anticorruption enforcement agency has brought criminal charges against a senior government official (let alone a sitting head of government) for that official’s failure to stop corruption in a government program.

So what should we think about this? Is the expansive theory of liability under Section 157—as interpreted by the NACC—something that other countries should emulate? The short answer is that I’m not sure, but I have a few preliminary thoughts.

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