Should We Lament Trump’s Nixing Greater Transparency in Oil and Gas?

President Trump’s February 14 approval of the Joint Resolution repealing the rule that American companies disclose publicly all payments to governments for extracting oil and gas from their lands has provoked much lamenting.  The lamenters see it as a major setback to the fight against corruption, taking it as a given that greater transparency in the oil and gas industry leads to less corruption.

Rather than assuming that this is true, I decided to look at the evidence. The best place I could find to look was the Extractive Industries Transparency Initiative.  The 49 governments who along with their civil society groups and private sectors have committed to EITI regularly publish two things: 1) all significant (“material”) oil, gas, and mining payments made by companies, whether state-owned or privately-held, to the government and 2) all material revenues the government receives from these companies.  EITI requires that this information be widely distributed in an accessible, comprehensive and understandable manner, and indeed EITI requires more than simple transparency.  The total amount companies report paying and the total government says it receives must be reconciled annually by an independent administrator which must then report any discrepancies.  No better a formula for ensuring that transparency leads to less corruption would seem on offer.

So what effect has EITI had in the decade plus it has been in operation?  Does the transparency engendered by the EITI actually result in better governance and development outcomes in EITI compliant countries? How well do EITI countries perform, or improve over time, compared to other countries on selected political and economic indicators?

As luck would have it, these are precisely the questions Professors Benjamin Sovacool, Götz Walter, Thijs Van De Graaf, and Nathan Andrews address in a 2016 article in World Development.  Their answers should bring cheer to those lamenting repeal of the U.S. rule.  Continue reading

Trump Official: Fighting Foreign Bribery “Solemn Duty” of Justice Department “Regardless of Party Affiliation”

The Trump Administration official with immediate responsibility for overseeing enforcement of the Foreign Corrupt Practices Act suggested yesterday there would be little change in the act’s enforcement under the new administration.  Trevor N. McFadden, newly-installed as Deputy Assistant Attorney General in the Criminal Division of the Department of Justice, told a Washington audience that while it would be “hard to predict exactly” how enforcement will evolve, “some common themes are clear.”  The three he identified:

1)  FCPA enforcement will continue to be a priority.  “The FCPA has been and remains an important tool in this country’s fight against corruption.”  McFadden underlined that at his confirmation hearing incoming Attorney General Jeff Sessions “explicitly noted his commitment to enforcing the FCPA, and to prosecuting fraud and corruption more generally.”  McFadden went on to stress that “The fight against official corruption is a solemn duty of the Justice Department, emphasizing that “each generation of Department leaders and line prosecutors takes up this mantel from their predecessors, regardless of party affiliation.”

2)  Prosecution of individuals remains a priority.  In a September 2015 Memo to Justice Department prosecutors, “Individual Accountability for Corporate Wrongdoing,” then Obama Administration Deputy Attorney General Sally Yates stressed the importance of prosecuting individual corporate executives and employees for corporate crimes. In his remarks McFadden not only seconded this effort but suggested that the growing cooperation between the Department and foreign law enforcement authorities would lead to its expansion. “The Criminal Division will continue to prioritize prosecutions of individuals who have willfully and corruptly violated the FCPA. … Indeed, our partnerships with foreign authorities are increasingly allowing us to ensure that even individuals living abroad are held accountable for their actions.”

3) Cooperating defendants will be rewarded.  Seconding a long-standing DoJ policy, the newly appointed Deputy Assistant Attorney General said a corporation’s voluntary disclosure of violations coupled with its cooperation and remedial efforts will remain an important factor when making charging decisions.  “These principles continue to guide our prosecutorial discretion determinations, and they further our ultimate goal of compliance with the law.”

McFadden spoke to a group of lawyers, accountants, and others involved in counseling corporations on FCPA issues at a conference organized by Global Investigations Review, perhaps the leading global news service on the enforcement of corporate criminal law.  Previously a partner at a major American law firm, McFadden brings a background both in public service, as an aide to the Deputy Attorney General in the George W. Bush Administration, and in private practice where he specialized in FCPA compliance work.  From all accounts a mainstream Republican who could well have been appointed to the same position by any Republican president, McFadden’s remarks strongly suggest that whatever changes the Trump Administration may have in store elsewhere, it will not back off vigorous enforcement of the FCPA. The full text of his remarks are here.

Civil Society on Returning Stolen Assets to Highly Corrupt Governments

 

The return of the proceeds of corruption to the victim country is a “fundamental principle” of the United Nations Convention Against Corruption.  How that return is to be realized, however, remains subject to dispute, particularly when the victim country’s government is highly corrupt.  Should governments where the stolen assets are discovered send them back no matter how corrupt the victim country’s government is?  Wouldn’t the return to a highly corrupt government frustrate the Convention’s most basic purpose — the prevention of corruption.

How to resolve this tension has been the subject of vigorous debate on this blog (hereherehereherehere and here).  Now some 50 members of the UNCAC Coalition’s Civil Society Working Group on Accountable Asset Return, from both countries where stolen assets have been found and those where return has been requested or realized, have weighed in.  In a February 14 letter to an UNCAC conference on asset recovery (addis-ababa-conf-agenda-february-2017-updated-02-02-2017), they write that where the victim country’s government is highly corrupt, it should be bypassed: “returning and receiving countries should in consultation with a broad spectrum of relevant experts and non-state actors find alternative means of managing the stolen assets” (emphasis in original).  The letter offers powerful arguments in support of its position.  The full text and the list of signers follows.  Continue reading

Good News in the Anticorruption War

I had planned to write a reply, and partial rebuttal, to last week’s posts by Matthew and Travis on ethics, corruption, and Donald Trump.  The more I tried to come up with something to say, however, the more depressed I grew.  Instead, as a tonic — for this writer and perhaps others born or living in Trumplandia — what follows is instead good news on the global anticorruption front –

Laos: Shedding Fancy Government Vehicles that Smack of Corruption.  A December decree orders all government officials to trade their government-bought Mercedes, BMWs, Lexus, and other high-end vehicles for more modest means of transport.  Prime Minister Thongloun Sisoulith and President Bounnhang Vorachit have both returned their BMW 7 Series and now drive Toyota Camry 2.5 cars instead. Other ministry and party officials must follow suit. (Details here.)

The Netherlands: Civil Society Attacks Money Launderers.  SMX Collective, a grassroots organization of Dutch and Mexican activists, academics, artists, journalists, curators and researchers concerned about the extreme impunity and violence suffered by Mexican people, has filed a complaint with the Dutch Public Prosecutor demanding the Dutch Bank Rabobank be charged with money laundering for its role in aiding Mexican drug cartels.  Vigorous pursuit of banks and other intermediaries for facilitating corrupt activities is urgently required, and Dutch civil society’s complaint is a welcome sign and an example others should copy.  For an English language summary of the complaint, click on “Continue Reading” at the bottom of the page.

France & Peru: Former Heads of State in Anticorruption Dock.  Prosecutors are pursuing charges against former French President Nicolas Sarkozy for campaign finance violations (NYT account here; Le Monde here) and former Peruvian President Alejandro Toledo for accepting a bribe (AP/NYT here; El Comercio here).  Neither case seems political.  Both have been brought by career law enforcement authorities who have no apparent ax, political or otherwise to grind.  The two may ultimately be found innocent by their nations’ courts, but the fact that high office in the two countries does not automatically carry with it immunity from prosecution for corruption crimes has to be considered very good news.

All three stories lifted my spirits.  I trust it will help other readers recognize that despite the fact President Trump is unlikely to fall over corruption claims (nicely explained by New Yorker writer James Surowieki here), the war against corruption is proceeding apace.

Summary in English of SMX complaint:  Continue reading

Building a Cadre of Procurement Professionals

Government purchases of goods, services, and public works constitute anywhere from 15 percent to as much as 40 percent of total public spending, and thus any government committed to fighting corruption should make procurement a priority. Corruption sneaks into public procurement in many ways in the long and often complex chain of events in the process: from identifying a need to designing the specifications for meeting the need to the award of a contract and the delivery of the final product.  While stepping up procurement audits and investigations can weed procurement out of corruption, far better is to keep it from infecting the process in the first place.

For that a government needs a cadre of well-trained public procurement professionals dedicated to ensuring their country receives the best value for every dollar it spends building roads or acquiring high tech communications equipment or simply buying pencils and papers for schools. Procurement professionals must be knowledgeable about law, finance, engineering, project management, economics, and of course corruption, and while some of that learning can be picked up through intensive on-the-job training programs, building a first-rate, technically sophisticated cadre of procurement specialists takes more than putting those with a generalist degree through a few o-j-t courses.  It requires, as Francis Fukuyama explains in discussing how the public services of Japan, Germany, and the United Kingdom’s public services were built, university courses that teach prospective public servants basic analytic skills and tools, knowledge that simply cannot be mastered in a week or even several week intensive training course.

For the United Nations Office on Drugs and Crime I have been asked to suggest what a curriculum leading to an undergraduate degree in public procurement might look like.  In “Building Sustainable Capacity in Public Procurement,” Peter Trepte of Nottingham University’s Public Procurement Research Group explains that teaching public servants what the procurement law is and how to comply with it is not enough.  To conduct fair, effective, and efficient procurements requires an interdisciplinary course of study that trains students in how to identify procurement needs, plan procurement activities, assess market conditions, manage relations with bidders and contractors, and administer contracts.

Below is my effort to follow Professor Trepte’s advice.   Comments are most welcome. Continue reading

The Purity Potlatch and Conflict of Interest Revisited

A potlatch is a competition once found among tribes in the American Northwest.  Contestants took turns destroying things of value to them to demonstrate their wealth and status in the community, and overtime the combat escalated until eventually the only way to win was to reduce oneself to material ruin.  In a 1964 essay Stanford Law School Dean Bayless Manning, a member of the President’s Advisory Panel on Ethics and Conflicts of Interest in Government, compared the then current race in Washington, D.C., to condemn conflicts of interest to a potlatch – with similar unfortunate consequences.  Given the conflict of interest mania now gripping Washington, D.C., the time seems right to resurrect Dean Manning’s largely forgotten classic on the perils of ethics overstretch.  “The Purity Potlatch: An Essay on Conflicts of Interest, American Government, and Moral Escalation” appeared in volume 24 of the Federal Bar Journal. Available nowhere online, excerpts follow. The emphasis are as in the original:

“Something dramatic has happened of late to the subject of conflicts of interest.  This formerly obscure topic has become front page news and Big Politics. . . .

“The significant feature of these nation-rocking exposes is that, so far as is known from the record, none of the men involved actually did anything demonstrably injurious to the public treasury or the public interest.  None figured in an alleged Teapot Dome or anything resembling it.  The charge was only that the combination of their economics circumstances and their offices did not look just right.  The worst allegation that could be made against them was that they held an economic interest or received gifts that might, upon a certain set of assumptions about the conduct of their office and about human nature generally, tempt them in the future to act contrarily to the public interest in certain limited situations. Continue reading