Guest Post: Is UNCAC Article 35 a “Dead Letter” in the United States?

Today’s Guest Post is by Craig R. Arndt, an international lawyer living in Bangkok. In the course of a long career, he advised multinational clients on a range of corruption-related matters and has represented those injured by corruption in actions to recover damages.

The drafters of the United Nations Convention Against Corruption recognized that corruption was a transnational disease. And that accordingly, no country could fight it on its own. Hence, in its very first article the Convention makes it clear that states ratifying it are obliged to “promote, facilitate, and support international cooperation and technical assistance in the prevention of and fight against corruption.”  

Article 35 of the Convention sets forth one of the ways states are required to work together to curb cooperation. It provides that each party must “ensure that entities or persons who have suffered damage as a result of an act of corruption have the right to initiate legal proceedings against those responsible . . . to obtain compensation.”

Rick has documented the sorry state of civil recoveries by bribery victims in transnational cases (here, here, here, here, here, here, here and here). That state is now even sorrier thanks to two recent decisions by American federal courts of appeal. In the words of one commentator, the two “gut” article 35.

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Accountability Key Words

No other word is associated more with fighting corruption than “accountability.”  Google turns up 43 million references to the phrase “accountability corruption references” in less than a second (!). There are 177 articles with the word accountability in the title in the latest version of Matthew’s bibliography.

Thanks to Andreas Schedler, we know accountability is not unidirectional. It can go from down to up, as when voters hold politicians to account, and side-to-side, as when a government audit agency reports on the performance of another government entity. As Dale Brinkerhoff explains, the meaning of accountability ranges from nothing more than having to provide information, as when an agency must fille an annual report on its activities, to a politician or administrator having to explain why something is being done or not done, to the imposition of sanctions on someone or some agency for doing or not doing something.

The failure to curb corruption is almost always attributed to a lack of accountability, and prescriptions for reducing corruption inevitably recommend strengthening accountability. But as Schedler, Brinkerhoff, and many others have shown, “accountability” is really a complex of ideas. And that is before trying to parse what ideas lie behind its rough equivalents in other languages: rendición de cuentas in Spanish; bibinka in Filipino; and tanggung gugat sosial in Bahasa. To name but a few

Thanks to American University’s Accountability Research Center, we now have a guide to the many concepts buried in the English term “accountability” and similar ones in Arabic, Chinese, Hindi, and a half a dozen other major tongues. Its title is Accountability Keywords; it’s a web site with a monograph of the same name and some 40 posts to date that expound on how the term is used in different ways in different circumstances in different places. An invaluable resource for advocates, policymakers, and scholars.    

South African NGO to U.S. Department of Justice: Please Investigate Bain and Company for FCPA Violations

In a Guest Post Monday, Nicole Fritz of South Africa’s Helen Suzman Foundation recounted Boston consulting guru Bain and Company’s role in the massive corruption that infected her country during the reign of its now deposed president Jacob Zuma. Today, she asks the Department of Justice to investigate the Company for “potential breaches of the U.S. Foreign Corrupt Practices Act of 1977.”

As she explains in a letter sent to the head of the FCPA unit, the evidence of violations is “not mere opinion.” Rather, it is drawn

from reports produced by two separate judicial commissions of inquiry, chaired by eminent South African judges: first, the Judicial Commission of Inquiry into State Capture Report (“State Capture Report”); second, the final report of the Commission of Inquiry into Tax Administration and Governance at the South African Revenue Services, colloquially referred to in South Africa as the ‘Nugent Commission Report.’  

The full text of her letter is here.

Guest Post: Will the Biden Administration Help South Africa Escape Capture?

Today’s Guest Post is by Nicole Fritz, a South African public interest lawyer and executive director the Helen Suzman Foundation, a non-partisan think-tank dedicated to promoting liberal, democratic values and human rights in post-apartheid South Africa.

President Biden’s meeting Friday with South African President Cyril Ramaphosa offers a prime opportunity to show the Administration is serious about its new global anticorruption policy. Issued last December, the Administration promises a raft of new initiatives to not only crackdown on corruption at home but to help democratic, reform-minded regimes root out corruption that they cannot do on their own. President Ramaphosa’s government qualifies on all counts. Where it could best use assistance is in unraveling an American company’s role in the efforts of Ramaphosa’s predecessor, Jacob Zuma, to rob the country blind. 

During his nine-year rule, Zuma sought to “capture the state,” to remake South Africa’s fledgling young democratic government into a machine to enrich himself, his family, and his friends. No sooner did he take office in 2009 then he began stacking key government-owned enterprises with cronies and accomplices and purging the public service of professional, independently-minded civil servants.  He was finally forced from office after widespread public protest and coordinated efforts of civil society, those few remaining independent state agencies, and reformers within his own party.

In one of his last desperate bids to quell discontent and remain in office, Zuma established the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector. That Commission has defined the Ramaphosa presidency and the Commission’s several-thousand-page report, completed in June, reveals in astonishing detail just how far Zuma and accomplices extended their reach into the inner-workings of the government in pursuit of personal riches.

An especially damning chapter (here) recounts the role of the Boston management consulting firm Bain & Company in the state capture scheme.

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Sri Lanka Should Cancel Not Renegotiate Corrupt Loans 

It will be years if not decades before the once prospering nation of Sri Lanka recovers from the financial and humanitarian crisis brought on by the fiscal profligacy of the Rajapaksa family. During the 10-year rule presidential rule of Mahindra (2005 -2015), the government began borrowing ever larger sums, principally from China, to build ports, roads, and other infrastructure. Younger brother Gotabaya continued the family tradition when elected president in 2019, borrowing more and more to keep the project pipeline full and the business community happy.

For many projects, the terminus of the pipeline was the Rajapaksa’s home district. A herd of white elephants poured forth: an unused airport (Mattala Rajapaksa International Airport), a deserted cricket stadium (Mahinda Rajapaksa International Cricket Stadium), and a useless international conference center. Whether the loans for these projects were the result of corrupt dealings has been much discussed but never investigated. Same with many other loans taken out during Mahinda and Gotabaya’s reigns.

The Rajapaksa’ reckless borrowing was accompanied by other equally irresponsible fiscal policies: state-owned enterprises that bled resources, a regressive, poorly enforced tax code. Gotabaya’s 2019 cuts in personal and corporate taxation and its almost halving the VAT (from 15% to 8%) put an economy headed over the cliff into overdrive. The inevitable result of borrowing too much and taking too little in: last May the government announced it could not pay its debts, the sovereign equivalent of a corporation or person declaring bankruptcy.

The International Monetary Fund has now come to the rescue, offering to lend the government $2.9 billion while it renegotiates the some $35 billion it owes the Asian Development Bank, China, India, Japan, the World Bank, and private lenders.

But not all Sri Lanka’s debts should be renegotiated. Where a loan was taken out because a government official was bribed, Sri Lanka has a clear right to cancel or rescind it. That right to walk from a loan procured through corruption is recognized under international law (article 8(2) of the Council of Europe’s Civil Law Convention Against Corruption, article 34 of the UN Convention Against Corruption, UNICTRAL Principles of International Contracts 3.3.1) and the domestic laws of most legal systems. Indeed, it is a part of the common law of Sri Lanka (Review Sri Lanka UNCAC Compliance) and article 52 of China’s contract law expressly states “A contract is void [if] 1. either party enters into the contract by means of fraud. . ..”

Sri Lankans will suffer for years for the wrongs done to them by the Rajapaksas and accomplices. They should not have to bear the burden of paying off one single dollar, yuan, rupee, or yen of a loan taken out corruptly. Where there are suspicions that a loan, as those to support the elephant herd in the Rajapaksas’ home district, was tainted with corruption, an investigation should be opened. And during loan renegotiations, Sir Lanka should make it clear that no matter the terms, it reserves the right to cancel or rescind any contract procured through corruption.

State Capture: A “How to” Guide

The Democratic Alliance, South African’s principle opposition party, has brought suit seeking a declaration a policy of the African National Congress, the nation’s ruling party, is “inconsistent with the Constitution. . . and the Public Service Act” and hence invalid.

The policy at issue is the ANC’s Cadre Deployment and Development Policy. It sets out how the party selects who will serve in the national, regional, and local levels of South Africa’s government, either in an elected position or as a member of the career service.  The DA alleges that the effect of the policy is to give the ANC “control over the functioning of critical institutions of government. . . blurr[ing] the lines between the ANC and the State and facili[tating] state capture. . . . .” The case’s founding affidavit, equivalent to a complaint in common law jurisdictions, asserts the policy has “inhibited the ability of the State to function effectively in order to promote the rights in the Bill of Rights [and that it] has eroded South Africa’s democratic founding. . . . “

Evidence developed by the Judicial Commission of Inquiry into Allegations of State Capture, established after ANC leader Jacob Zuma was forced to resign as South African president, is cited throughout the affidavit to show how he and ANC cronies implemented the policy and what its effect has been.* The policy reads as a “how to” manual for capturing the state in a weak or developing democracy. One can only hope this will be how the South Africa’s judges read it as well.

A copy of the policy is here for readers’ information. And more importantly, for those working on prevent state capture elsewhere, to help them thwart similar efforts.

*Earlier today South African Chief Justice Raymond Mnyamezeli Mlungisi “Ray” Zondo, the commission chair, spoke to the failure of the ANC to come to grips with Zuma’s behavior and expressed the fear the state could be re-captured were another Zuma-like figure elected president. Click here to listen to his to warning to South Africans of all parties. Thanks to a South African reader for alerting me to his extraordinary and powerful remarks.

That Corruption Infects the Italian Judiciary Is Now Undeniable

In March 2021, a Milan trial court acquitted Italian oil giant ENI, its partner Royal Dutch Shell, and numerous individuals of bribing Nigerian President Goodluck Jonathan and pals to secure the rights to the lucrative offshore oil field denominated OPL-245. The evidence of bribery was overwhelming, including internal Shell e-mails describing the scheme and the testimony of an ENI official confirming his bosses were fully aware of it. Suspicions that someone had “gotten” to the judges immediately arose stoked by revelations of close ties between the presiding judge and ENI’s senior counsel.

Any doubt that the verdict was tainted was put to rest when the court published its opinion justifying it. As the attached analysis by the British, Italian, and Nigerian NGOs that have pushed the case shows, the court’s “reasoning” was laughable. Two examples of many. The court wrote off the then oil minister’s sale of OPL-245 rights to a company he secretly owned as a trifle because neither he nor the government officials bribed to approve the sale objected. Equally ridiculous, the court found that a Shell briefing note reporting that part of the bribe would be in the form of political contributions simply recounted a rumor then circulating.

Between the strength of the evidence the prosecution presented and the court’s flimsy if not bizarre reasoning dismissing it, the expectation was that the acquittal would easily and quickly be overturned on appeal. That hope is not to be however.  Last week the Italian prosecutors assigned to handle the appeal announced they were withdrawing it. 

Thus ENI, Shell, and the 13 individuals named as accomplices in the payment of a $1.1 billion bribe stand exonerated. And it now clear that the rot in the Italian judiciary reaches into its once revered prosecution service.

Nor is the damage from the rot limited to Italy. Thanks to the doctrine of ne bis in idem (double jeopardy in American law), a Dutch investigation of Shell’s role had to be dropped (here).  

The last hope for justice now lies with the Nigerian judiciary. Ne bid in idem only bars EU countries from pursuing a case. A Nigerian investigation of the companies and their accomplices is underway. It is critical it continue and that the international anticorruption community do all it can to support it given what has happened in Italy.

Moreover, as this blog has urged, it is critical too that the OECD hold Italy to account for its failure to live up to its obligations to sanction Italian companies that bribe foreign officials. The ENI-Shell case must be an outlier not a precedent.

USAID’s New Dekleptification Guide

The U.S. Agency for International Development has just published a draft of what it calls a Dekleptification Guide. “Dekleptification,” the authors explain, is the process by which citizens kick kleptocrats out of power and ensure they stay out. The guide discusses a range of projects the agency could fund to support anti-kleptocrat movements, consolidate post-kleptocratic, democratic orders, and prevent kleptocrats from returning to office.

The agency seeks comments on the feasibility and appropriateness of the projects suggested, whether there are others it has overlooked, and generally whether its analysis and approach to dekleptification meshes with experience to date.  

USAID is one of the largest and most influential providers of foreign assistance — thanks not only to the size of its programs but to the quality of analysis that underpins them. The guide will almost surely have an impact far beyond coining a term to organize thinking about how to end kleptocracy. Members of the anticorruption community should therefore take up the agency’s request for comments.

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Trump’s Attempted Coup Explained

That Donald Trump egregiously abused his power as president in the closing days of his term in office there is now no doubt. Pressuring and threatening election officials and inciting a mob to storm the U.S. Capitol make out abuses that rival if they do not exceed those of America’s most corrupt leaders.

Thanks to the testimony of former Trump officials before the House committee investigating the Capitol riot, we now know the abuses were part of the most serious crime ever attempted against the government of the United States of America and its people: a plot to install Trump as president on January 20, 2021, despite that fact he had lost the election. Trump and accomplices attempted a coup d’état that only just failed.

Americans and democracy’s friends everywhere may find it hard to accept that American democracy narrowly survived a coup d’état. Coups happen in poorer countries with weak governments, not in one of the wealthiest nations in the world with a democracy that has weathered civil war and countless violent demonstrations. But the details that have been exposed, most recently the dramatic, chilling testimony of former White House aide Cassidy Hutchinson, make it clear there is simply no other term that fits.

For those who have not followed the House committee’s work, or who may have but still resist labelling the actions of Trump and accomplices a coup, its broad outlines are described below.

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Hard Truths/Sound Advice: UNDP’s Strategic Programming for Anti-Corruption Agencies

The United Nations Development Programme’s mission is to help poor countries become wealthy. As evidence that corruption is a, if not the, major obstacle blocking the way, the agency has devoted a growing share of its budget to finding ways combat it. Not all its investments have met with success — as its underpaid staff and consultants (compared to other international agencies) would be the first to admit.

One clear success is a little heralded guidance note for anticorruption agencies in Southeast Asia UNDP released in May. The region is beset with corruption problems large and small, and in response governments have established anticorruption agencies.  But TI’s Corruption Perception Index, the World Governance Indicators, and other cross-national measure of corruption have registered little or no improvement in country scores since the agencies came into existence, and disillusionment has taken hold as policymakers and citizens across the region now sharply question the agencies’ worth.  

Strategic Programming for Anti-Corruption Agencies: Regional Guidance Note for ASEAN makes it clear that the problem starts at the top. That agency leaders have let others set the terms for judging their agency’s success. Echoing advice to criminal justice agencies by the closest student of bureaucracy since Weber, the report explains that until anticorruption agencies define success in realistic, measurable, achievable objectives that will make a difference in citizens’ lives, their standing will not improve and continued support will remain at risk.

Along the way the UNDP report doesn’t gloss over the challenges agencies face while offering sound advice on how to overcome them.  Some especially important hard truths and good examples of sound advice –

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