Author Archives: Richard Messick

Social Distancing Reduces Corruption Too

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Together with a trio of Chinese scholars, Boston University Professor Raymond Fisman offers the latest evidence on the value of social distancing. Their research, in the July issue of the American Economic Journal: Applied Economics (here, prepublication version here), is the first rigorous, quantitative test of a result suggested by case studies of small countries (Guatemala), small towns (Fall River, Massachusetts), and small professional circles (Chicago judges). The greater the distance between those who enforce the anticorruption laws and those likely to violate them, the more likely it is the laws will be enforced.

“Social distance” to public health authorities means the actual physical space that individuals should maintain between on another (six feet for Americans, two meters for everyone else) to prevent the spread of Covid-19. Applied to the findings of Fisman and colleagues and the case studies, it means more than how far apart investigators, prosecutors, auditors, and others responsible for enforcing anticorruption laws stand physically from those whom they police. It means too the absence of school and neighborhood ties, different circles of friends, and the lack of other relationships that would make an individual hesitant to question another’s conduct let alone investigate or arrest them. In short, when evaluating social distance in the anticorruption world, “social” comes with a capital S.

Consider what Professors Fisman and his colleagues Professors Chu, Tan, and Wang found in their study of Chinese auditors.

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What the Odebrecht Case Teaches

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The anticorruption community owes the American Economic Association and Nicolás Campos, Eduardo Engel, Ronald D. Fischer, and Alexander Galetovic a debt of gratitude. The AEA for publishing their article “The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case” and making it available free to non-members (here). The four Chilean scholars for showing how much can be learned when a command of the literature on corruption is coupled with a careful, painstaking study of a single case.

In 2016, the Brazilian engineering and construction company Odebrecht admitted in a settlement with American, Brazilian, and Swiss authorities (here) to bribing 600 officials in 12 states either to secure contracts to build roads, powerplants, and other large infrastructure projects or to agree to raise the contract price during construction of the project. Information the authors pieced together from the settlement documents show the company grossed $3.3 billion in profits from paying $788 million in bribes.  These numbers confirm the obvious: the returns from infrastructure corruption are enormous, and significant resources should be devoted to preventing it.

Digging deeper into the massive amount of paper the several prosecutions of Odebrecht and its executives have generated, the authors report other findings that are not so obvious.

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Time for the U.K. to Match U.S. Ambitions in the Fight Against Corruption

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GAB is pleased to welcome this guest post by Susannah Fitzgerald, Network Co-Ordinator of the UK Anti-Corruption Coalition, which brings together the UK’s leading anti-corruption organisations to tackle corruption in the UK and the UK’s role in facilitating corruption abroad.

President Biden’s June 3 commitment “to prevent and combat corruption at home and abroad” is welcome news to corruption fighters around the globe. Five years ago, then U.K. Prime Minster David Cameron outlined similar ambitions at the International Anti-Corruption Summit in London. Yet, despite a promising start in the years after the Summit, the U.K. anti-corruption agenda now looks alarmingly close to stalling.

It is time reinvigorate that agenda, and not only for the sake of British citizens. Like the United States, the United Kingdom is an important financial center, and the measures it takes to curb corruption, fight money laundering, and ease the return of stolen assets will benefit populations around the world.

Here is what the UK has done so far do to tackle corruption, why it matters, and what more the Coalition believes it needs to do.

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President Biden: Fighting Corruption Core U.S. National Security Interest

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Last Thursday President Biden officially declared what corruption fighter have long known:

“Corruption corrodes public trust; hobbles effective governance; distorts markets and equitable access to services; undercuts development efforts; contributes to national fragility, extremism, and migration; and provides authoritarian leaders a means to undermine democracies worldwide.  When leaders steal from their nations’ citizens or oligarchs flout the rule of law, economic growth slows, inequality widens, and trust in government plummets.”

Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest

Biden then did what no corruption fighter could. He issued a National Security Memorandum making “countering corruption . . . a core United States national security interest.”   To that end he pledged “to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities.”

The Biden memo directs the most senior member of his government to develop a presidential strategy to fight corruption both within the United States and abroad that targets precisely the issues the global anticorruption community, including this Blog, have identified as critical. They are measures to: combat illicit financial flows; increase asset recovery efforts and the return of stolen assets to victim states; target grand corruption by leaders of foreign states; strengthen civil society, the media, and other agents of accountability; incorporate anticorruption measures into foreign assistance programs; pressure international agencies and organizations to focus on the demand side of bribery; and enhance U.S. assistance to foreign law enforcement agencies investigating and prosecuting corruption.

That the Biden memo reads like the anticorruption community’s wish list should come as no surprise. Before taking up his post as Biden’s National Security Adviser, Jake Sullivan was a member of the community in good standing (some of his writings on corruption here, here, and here), and in his first interview after being named the president’s top adviser on foreign policy he said his goal was “to rally our allies to combat corruption and kleptocracy, and to hold systems of authoritarian capitalism accountable for greater transparency and participation in a rules-based system.”

The headline on a column on the prospects for success of the Biden initiative by the Washington Post’s leading foreign affairs commentator captures what I suspect are GAB readers’ sentiments: “Biden’s anti-corruption plan appears to have some teeth. Here’s hoping they bite.”

Streaming Now: Compensating Corruption Victims

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Click here to join a discussion on compensating victims of corruption starting now (10:00 am U.S. East Coast time). One of the several events held as part of the UN General Assembly’s Special Session on Corruption, it is sponsored by Civil Society Legislative Advocacy Centre (CISLAC). the Asset Recovery Subcommittee of the International Bar Association, Transparency International, and World Bank-UNODC StAR initiative.  Speakers are yours truly along with –

  • Mr. Stephen Baker, English barrister and Jersey advocate, Asset Recovery Subcommittee of the International Bar Association
  • Mr. Auwal Musa Rafsanjani, Executive Director, Civil Society Legislative Advocacy Centre (CISLAC)
  • Ms. Sankhitha Gunaratne, Deputy Executive Director, Transparency International Sri Lanka

The event moderator is Mr. Emile van der Does de Willebois, Coordinator, StAR Initiative.

You are asked when joining the event to use the following format for your name: Country (Or: Organization)_First name_Last name.

Social Damages for Corruption: Examples Please

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Faithful readers know that for a StAR/UNODC project I am searching for cases where corruption victims were compensated for their losses.  One area where I desperately need assistance is in locating awards for social damages. 

Recovery for social damage was pioneered by Costa Rican jurists.  Article 38 of the Costa Rican penal code gives the Procuraduría General de la República the power to recover damages for acts that affect diffuse or collective interests. Termed “social damages,” the PGR web site lists five corruption cases where over $41 million in social damages have been collected.  The cases have generated learned commentary both in Costa Rica (examples here and here) and in other Latin American states (here and here). Likely because I read Spanish poorly and slowly, beyond the Costa Rican ones, I can find no case where social damages for corruption have been awarded.  Help from readers with examples or leads on where I might find examples is solicited.

For the uninitiated, social damages are compensation paid to redress harm to the welfare of a community. A community’s welfare is the combination of economic and non-economic conditions that together produce a sense of satisfaction, happiness, health, and so forth. To me, it seems to parallel Amartya Sen’s argument that GDP alone is not a sufficient measure of a nation’s well-being though I have yet to see the link made.

Thanks again to readers who responded to my earlier queries.  As with those, submissions in any language Google Translate reads welcome.

Will Mongolia’s Presidential Election Put Batbold and Foreign Ownership of the Oyu Tolgoi Mine at Risk?

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U. Khürelsükh is the odds-on favorite to win Mongolia’s June 9 Presidential election after an irregular ruling by the Supreme Court denied incumbent President K. Battulga his constitutional right to run for re-election.  Initial predictions were that the election of Khürelsükh, the former Prime Minister and current chair of the Mongolian People’s Party (MPP), would end the investigation into whether corruption infected the deal Mongolia struck with foreign investors on the Oyu Tolgoi mining project, Mongolia’s ticket to economic prosperity. 

The reasoning was that any investigation would implicate former MPP Prime Minister S. Batbold and other senior MPP members.  As this blog has reported (here, here, and here), the evidence of Batbold’s corrupt dealings with the foreign investors in the project, Australian mining giant Rio Tinto and controversial U.S.-Canadian entrepreneur Robert Friedland, seems strong and Batbold’s denials unconvincing.  But the expectation was that the MPP, the lineal descendant of the Marxist-Leninist party that ran the country when it was an appendage of the Soviet Union, still observed the principle of “democratic centralism.” Or as Benjamin Franklin put the principle more colorfully when signing one the foundational documents of true democracy, “We must all hang together, or, most assuredly, we shall all hang separately.”  

The assumption that MPP members would hang together is now at risk thanks to what Khürelsükh said last week on Mongolian TV9’s interview program.

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Johnston and Fritzen: The Conundrum of Corruption

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Michael Johnston had done it again.  A — if not the — dean of corruption studies has a new book out.  This one a collaboration with a real dean, Scott Fritzen, professor at the University of Oklahoma and dean of its College of International Studies. The two’s The Conundrum of Corruption: Reform for Social Justice, just published in an affordable paperback edition from Routledge, is an invaluable guide to the latest learning on corruption, chronicling the rise of the international anticorruption movement, what has been learned, and what those lessons say about how to carry the fight against corruption forward.

But warning. Readers looking for an inventory of “best practices,” anticorruption “toolkits,” flashy technological innovations, and game-changing carrots and sticks will be disappointed.  Not a one is to be found.  Instead, Johnston and Fritzen explain why practitioners’ two decade plus search for such “silver bullets” has fallen flat and what corruption should concentrate on instead.

Some highlights. The role of cross-national measures of corruption like Transparency International’s Corruption Perceptions Index and whether they have outlived their usefulness. The value of principal-agent analysis and how it can be misused. What civil society can do.

Among those for whom the book is a must read are members of what the authors term the “anticorruption industry.” (Those in development agencies, international organizations, foundations, and academia know who you are.) And those who uttered the phrase “political will.” No one should ever, ever again use it until they have read what the authors say about this much abused and misunderstood term.

Those engaged in the fight against corruption, those teaching the next generation of corruption fighters, or those simply looking for an authoritative guide to the issue will want to make room on their shelf for what is sure to become a classic work on the subject.

Guest Post: Adverse Selection – Civil Society Support for Honest Judges and Prosecutors in Guatemala, Honduras, and El Salvador

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Corruption in Guatemala, Honduras, and El Salvador continues unabated. Proof can be found at the U.S.-Mexican border. Guatemalans, Hondurans, and Salvadorians remain willing to risk the treacherous journey to the border and the uncertainties of a U.S. asylum application to escape corruption’s daily hardships.

Critical to taming that corruption, and the flow of refugees it produces, are honest, courageous prosecutors and judges willing to pursue corruption cases no matter who is implicated. In all three countries, a new generation of professionals is coming forward to take on this challenge, but corrupt elites are at work blocking their appointment.  Fortunately, civil society organizations across the region are engaged in countering these efforts, pushing their governments and citizens to see that honourable men and women take the bench or join the public prosecutor’s office and that those who aren’t don’t.

In this guest post, Kristen Sample reviews what civil society in the three nations has accomplished, what more it can do, and how the international community can help.  Now Governance Director at the National Democratic Institute, Kristen has worked on political integrity and civil society strengthening programs in Guatemala, Peru, and Bolivia for more than 15 years. The research behind the post was conducted for Open Society Foundations and the Washington Office on Latin America with support from the National Democratic Institute and the Due Process of Law Foundation.

On January 26, Mynor Moto was elected by the Guatemalan Congress to fill a vacancy on the Constitutional Court despite being under investigation by an elite unit in the public prosecutor’s office.  Civil society was emphatic in its criticism of Moto and the selection process. The new U.S. Administration weighed in as well, asserting that Moto’s presence on the court “threatens the rule of law…and debilitates the integrity of the court.” 

Moto’s swearing in was blocked and is now on hold indefinitely thanks to a February 1 arrest warrant prosecutors issued. He has chosen to flee rather than contest the charges.

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Recovering Damages for Corruption — Bribery Victims

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There is no longer any doubt that corruption does enormous harm – to individuals, businesses, governments, and whole societies.  Nor is there any dispute that those harmed should have a right to recover damages for their injuries.  In drafting the UN Convention Against Corruption, governments agreed quickly and without dissent upon what is now article 35. It requires parties to ensure their domestic law permit any person or entity harmed by corruption to “initiate legal proceedings against those responsible for the damage to obtain compensation.”

Yet what evidence there is shows article 35’s promise remains largely unfulfilled.

For the UN Office on Drugs and Crime and the StAR Initiative, I am examining just how far there is to go for that promise to be met. With their resources and the help of the International Bar Association, I have reviewed the case law in close to one-third of the 187 UNCAC states parties.  The most common victim recovery cases I find are those where a government agency or state-owned corporation has recovered damages when an employee took a bribe. In a few, courts have also awarded damages to third-parties harmed by the bribery. There are in addition a miscellany of actions I am still digesting covering actions by the competitors of a bribe-payer, consumers, and NGOs.

Below are the bribery victim cases I have located to date. A second post will review the other cases. Reader contributions and comments warmly solicited.

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