Author Archives: Richard Messick

Should a Kleptocrat Be Able to Bribe Her Way Out of Trouble?

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Gulnara Karimova parlayed her position as daughter of Uzbekistan’s first post-Soviet ruler into an international symbol of kleptocracy.  Reviled at home and abroad for vulgar excess, after her father’s death she was sentenced to a long prison term following a sham trial.  But most of the billion or so dollars she stole remains beyond the Uzbek government’s reach, tied up in complex litigation principally in Switzerland.

Now, as she recently revealed, she is in negotiations to hand back most of what she stole – in return for her release from one of Uzbekistan’s notorious prison colonies and the right to hang onto to perhaps as much as a hundred million for herself and the lawyers and fixers negotiating the deal. Uzbek citizens and activists are in arms over this blatant attempt by a posterchild for kleptocracy to bribe her way out of prison.  In an open letter, civil society activists call on the Swiss government, which would have to accede to this unseemly bargain, to repudiate it. They ask too that other government with claims over some of the assets, and thus possibly some say over the deal, to help kill it.

Allowing a kleptocrat to bribe her way out of jail sets a terrible precedent. Is it one the international community wants to see set?  Do Swiss citizens really want their government to be the one setting it? Why is the Swiss government in such a hurry to return dirty money to the Uzbek government?  Particularly in the face of opposition from representatives of the real victims of Karimova’s crimes, the citizens of Uzbekistan.

In their letter, the activists outline an alternative to a hasty return, one that would see Karimova held accountable in a real trial for her crimes and the stolen assets returned in ways that would advance the welfare of all Uzbeks. The English version of the letter here, the Russian one here, and the French one here.

New South Wales Anticorruption Commission’s Excellent Guide to Conflict of Interest

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Conflict of interest is a critical element of any government ethics program.  It is also perhaps the most difficult to implement.  The challenge comes in determining when friendships, kinship ties, and other personal relationships affect, or appear to affect, a government employee’s duty to put the interest of the public above his personal interest.  Was the contract awarded because the bidder lived in the same neighborhood as the procurement official making the award or because the bidder offered the best value? Was the individual hired because the hiring manager came from the same tribe or because she was the most qualified? Even if there were no actual conflict in the two cases, is there an appearance of one?

Rules that produce sensible answers to such questions are not easy to write, and as I have suggested in earlier posts (here and here), much well-meaning advice on how to do so is either counterproductive or impossible to implement.  A recent publication by the New South Wales Independent Commission Against Corruption is thus a welcome addition to the literature. In 26 clear and crisply written pages, Managing Conflicts of Interest in the NSW Public Sector provides a road-map for writing and enforcing practical, workable conflict of interest rules.

It offers a short, easily understandable definition of conflict of interest followed by a commonsensical approach to applying it.  The touchstone for determining when there is a conflict or an appearance of a conflict” is not the disappointed bidder or applicant or the government’s political opposition.  It is instead a “fair-minded and informed observer,” otherwise known as “a reasonable person.”  How to apply the reasonable person standard and the other standards and rules that make for a sound conflict of interest regime is illustrated throughout with real-world examples.

Written for agencies of Australia’s most populous state, a much broader audience will find the guide a valuable resource.

The European Union Elections and the Future of European Anticorruption Policy

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GAB is pleased to welcome back Professor Alina Mungiu-Pippidi, chair of the European Research Centre for Anticorruption and State-Building at the Hertie School of Governance in Berlin. Her many publications include the Cambridge University Press volume A Quest for Good Governance: How Societies Build Control of Corruption and most recently “Romania’s Italian-Style Anticorruption Populism,” in the July 2018 issue of the Journal of Democracy.

Do Europeans care about corruption?  If the results of the May election to the European Parliament are any guide, they do.  Turnout to fill its 751 seats was the highest since the first election in 1979, and polling data shows corruption was a top concern of many voters. A YouGov poll found corruption and migration were what troubled voters the most, and earlier research had shown that respondents’ perceptions of how member governments handled corruption to be a good predictor of their trust of both national-level and European-wide institutions. Party leaders apparently believed these polls. The heads of the major ones all issued pre-election statements denouncing corruption and backing open government (a surprise given their foot-dragging on a parliamentary ethics code and reluctance to commit to greater transparency in the operation of the parliament itself).

Can Brussels solve what voters believe is the problem of corruption in Europe? This very large question can be unpacked into three more manageable ones:

Is Europe in fact as corrupt as Europeans think it is?  Are their perceptions of corruption matched by reality?

Do the results of the May elections indeed reflect a demand for stronger anticorruption policies and better governance?

If Europeans are indeed demanding better governed, less corrupt polities, can the EU’s limited anticorruption instruments satisfy the voters demand? Continue reading →

No More Mozambiques! No More Hidden Debts!

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Surely the most egregious corruption offense of the decade is Mozambique’s “hidden debt” scandal.  According to a January U.S. indictment, executives of the Lebanese shipbuilding company Privinvest and Swiss banking giant Credit Suisse paid senior Mozambican officials tens of millions of dollars to approve loans to finance a coastal protection service, a tuna fishing fleet, and a shipyard to maintain the vessels.  The scam produced little more than a cluster of overpriced boats rusting in the Maputo harbor while saddling the citizens of one of the world’s poorest countries with billions in debts they cannot repay.

The key to the scam was the debts were incurred without the executive telling auditors, the parliament, or citizens.  As Mozambique’s Constitutional Court recently affirmed,  Mozambique law requires the disclosure and parliamentary approval of government debt.  Part of the bribe allegedly went to ensuring then Minister of Finance Manuel Chang and his accomplices would keep the debts secret. It will take years to repair the damage done by these hidden debts.  Full recovery may never be realized.

One scandal is enough.  The international community must make ending “irresponsible lending” a priority.  At a July conference the Open Society Initiative for Southern Africa held in Johannesburg, I was on a panel that discussed what can be done to end hidden debts.  While the other members, all from borrowing countries, offered measures borrowers could take, I advanced five that financial regulators in the countries where private lenders are located should take.  Largely stolen from a paper by Tim Jones of Debt Jubilee Campaign and a forthcoming Illinois Law Journal article co-authored by Fordham Law Professor Susan Block-Lieb and University of North Carolina Law Professor W. Mark C. Weidemaier, they follow.  Comments welcome. Continue reading →

Returning Stolen Assets to Kazakhstan: Did the World Bank Flub It?

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In 2012, Kazakhstan and Switzerland agreed to return $48.8 million that Switzerland had confiscated in a money-laundering case involving Kazakh nationals. This is the second time Switzerland has returned stolen assets to Kazakhstan. In the first, out of a fear the funds might be stolen again, the two had created an independent foundation with stringent oversight mechanisms to administer the money (details here).  This time the two decided to rely on the World Bank alone to see that returned funds were not misused.

One of the projects being funded is a $12 million grant program to instill a public service ethic in the nation’s youth, and a consortium of Kazakh NGOs has been selected to manage it. Although the consortium only recently began making grants, questions about the integrity of the grant-making process are already being raised.  In February, the Corruption and Human Rights Initiative identified several apparent irregularities. Among them: 1) The consortium’s lead NGO is headed by Dariga Nazerbayev, at the time of the award to the consortium she was the daughter of the country’s president and is now Speaker of the Kazakh Senate; 2) The youth wing of the ruling party was awarded a grant for “awareness-raising activities among vulnerable youth groups” across the country in seeming violation of the ban in the World Bank’s charter on political activities; 3) numerous grants have been awarded for an amount just under that which would trigger World Bank review; and 4) program managers have coached grant applicants on how to circumvent Bank procurement rules.

A full report on the irregularities is here. At the request of the Swiss government, the World Bank is said to be investigating.

 

Beneficial Ownership Registry Coming to the United States?

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This may be the year the United States finally requires disclosure of who owns American corporations.  By a 43-16 vote, the House Financial Services Committee recommended on June 11 that the full House of Representatives approve legislation creating a beneficial ownership registry accessible to federal and state law enforcement agencies and presumably to foreign law enforcement authorities through a valid mutual legal assistance request.  At the same time, a bipartisan group of Senators, including two conservative Republicans who back President Trump, is proposing similar legislation in the Senate.

The American legislative process is an arduous one.  The Financial Services Committee’s proposed bill must be passed by the House of Representatives; an identical bill approved by the Senate, and President Trump must then sign it. Long-time supporters of a registry cite two reasons for optimism a bill will pass this year. One, 10 Republican members of the Financial Services Committee voted for the bill and others may support it when the House considers it, and second, the Senate bill has the support of Republican Senators close to President Trump.

Key provisions of the committee-approved bill: Continue reading →

Who Owns a Bribe? And Why It Matters

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A public servant who accepts a bribe can do with it as he or she pleases. Put it in a bank, sell it, give it away, or even bet it at the roulette table.  What if the bribe-taker is caught, though, and government wants to recover the bribe?  Does it matter what the bribe-taker did with it? It does, and greatly, especially for large bribes stashed in another country — precisely the cases the U.N. Convention Against Corruption addresses.

Article 57(3) of the convention requires the state where the proceeds of a bribe are discovered to return them to the state seeking them if the requesting state “reasonably establishes its prior ownership” of the bribe. If the recipient stashed the bribe in Singapore, the United Kingdom, or another common law country, the requesting state is in luck. If, on the other hand, it was squirreled away in a civil country, the requesting state is likely not so lucky.  It all depends upon the quirky national laws governing who owns the proceeds of a bribe. Continue reading →

Corruption Damages: Options UNCAC Offers Mozambique to Recover “Hidden Debt” Losses

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Mozambique continues to suffer from the “hidden debt” scandal, loans a U.S. indictment alleges employees of Credit Suisse, Lebanese shipbuilder Privinvest, and others foisted off on it for dodgy projects through bribery.  Damages include not only the several billion dollars that, thanks to accrued interest and penalties, the government now owes on the original loans of $2.2 billion, but the enormous harm caused by a halt in donors’ disbursements and the resulting slowdown in growth when the scandal was revealed. The whole sorry affair could cost the people of Mozambique upwards of $10 billion, a staggering sum for a country with a total GDP in 2017 of little more than $12 billion. 

Fortunately, Mozambique does not have to absorb the loss. As party to the United Nations Convention Against Corruption, the government can directly recover much if not all of it through article 53.  Article 53(a) requires the other 185 Convention parties to grant it the right to file a civil action to recover property acquired through the offences defined in the Convention.  Article 53(b) directs the other 185 to establish procedures permitting their courts “to order those who have committed offences [established in accordance with the Convention] to pay compensation or damage” to another party injured by the offence.  

Based on the allegations in the U.S. indictment, Mozambique could likely initiate or prompt proceedings to recover assets or recover damages in at least six nations, all parties to UNCAC: France, Lebanon, the Netherlands, Switzerland, the United Kingdom, and the United States. Indeed, thanks to a precedent setting decision by its highest court, Mozambique civil society might itself be able to recover damages in a French case independent of any action by the Mozambican government.  

These options were discussed at a May 14 conference sponsored by the Centro de Integridade Pública.  They are elaborated on in this follow up paper I prepared for CIP after the conference.   

Mozambique’s Hidden Debt Scandal: Noose Tightening Around Credit Suisse and Privinvest?

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Mozambique has sustained enormous damage thanks to the “hidden debt” scandal.  The 2016 revelation the government had guaranteed $2.2 billion in loans for projects of little or no value led donors to freeze disbursements, slamming the brakes on the economy and leaving many stuck in poverty.

Press accounts and indictments issued in Mozambique and the United States blame the scandal on Jean Boustani, an executive with Privinest, a Middle Eastern shipbuilding firm; three now ex-employees of Swiss banking giant Credit Suisse; and Mozambican officials Boustani and the bankers allegedly bribed. Privinvest has denied involvement in the scheme as has Boustani. Credit Suisse claims the employees evaded its elaborate controls meant to keep it from becoming enmeshed in such schemes.

Thanks to a surprise development Monday, Privinvest and Credit Suisse may find it harder to continue ducking responsibility for the corrupt, fraudulent scheme and the massive harm it inflicted on Mozambique.  Continue reading →

In Memoriam: Dimitri Vlassis (1959 – 2019)

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The international fight against corruption lost one of its most steadfast and determined warriors with the passing in early April of Dimitri Vlassis, Chief of the Corruption and Economic Crime Branch of UNODC’s Division of Treaty Affairs.  Many in governments, international organizations, and civil society who, over the last two decades, enlisted in the fight against corruption will immediately recognize the loss. They will have fought in the trenches with Dimitri at some point during these years in the long-struggle to draft, ratify, and implement the UN Convention Against Corruption.  For recent recruits, who had yet to meet or hear of him, it is sufficient to say that he served as Secretary of the Ad Hoc Committee on the Negotiation of a Convention Against Corruption during the last, critical phase of the negotiations and was, at his passing, Secretary of the Conference of the States Parties to the Convention.

UNCAC represents the collective efforts of many of the world’s citizens, and a monument to their efforts would credit hundreds if not thousands.  But surely at or near the top Dimitri’s name would feature prominently. The true measure of his contribution to global welfare, however, is the continuing difference UNCAC is making to the lives of people everywhere.  For this we can all say, as UNODC Yuri Fedotov did in his note of condolence, “Thank you, Dimitri.”

I know all those in the global anticorruption community will join in expressing their condolences to Dimitri’s widow and two children.  With permission, Director Fedotov’s condolence note is below. Continue reading →