Author Archives: Richard Messick

Public Disclosure of Beneficial Ownership: Do the Naysayers Have a Point?

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Readers are no doubt celebrating the British House of Commons approval May 1 of legislation making it harder for corrupt officials to hide money offshore.  The new law requires that, starting 2021, the British Virgin Islands and the Cayman Islands along with other U.K. overseas territories must publicly disclose the actual person or persons – the “beneficial owners” – of companies organized under their laws.  Some half of the companies identified in the Panama Papers were organized in the British Virgin Islands, and estimates are that between 2007 and 2016 over $90 billion surreptitiously left Russia via British overseas territories.  Somewhere among the billions that mobsters, drug traffickers, and tax evaders are hiding in British overseas territory corporations are likely billions in monies stolen through corruption.  Forcing the corporations to reveal who is behind them will make recovering the monies that much easier.

No reform, no matter how powerful the arguments in support, is without its doubters.  Given the hefty fees banks, lawyers, accountants, and secrecy accomplices of all kinds earn helping hide money, it is no wonder the beneficial ownership legislation has attracted its share of naysayers.  The most thoughtful, and certainly the one who can turn the cleverest phrase, is BVI solicitor Martin Kenney. On Monday on the FCPA blog, he castigated “the NGO ‘transparency’ brigade.” It had “once again raised its guns and placed its cross-hairs over its preferred target: the offshore service providers in the British Overseas Territories.” And thanks to the Commons vote, the brigade can now mount its most wanted “trophy,” the BVI, on its wall.

Laying aside his colorful rhetoric, Kenney has a point.  Actually two.    Continue reading →

An Amazing Database: DIGIWHIST Strikes Again

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DIGIWHIST has struck again.  It has just released the latest version of its extraordinary data set covering political financing, disclosure of officials’ finances, conflict of interest, right to information, and public procurement in 34 European states plus the European Union.  With the laws on each subject along with an assessment of how thoroughly they address area, it is a real treat.

At least for the kind of people who read GAB (that means you, dear reader).

The database is part of an EU-funded digital whistleblowing project (DIGIWHIST).  The project’s aim is to improve trust in governments and the efficiency of public spending across Europe by providing civil society, investigative journalists, and civil servants with the information and tools they need to both increase transparency in public spending and enhance the accountability of public officials.  For those working in developing states, it is an invaluable resource, showing how different developed countries and those making the transition to a market economy deal with critical issues involving public integrity and transparency.  Thanks to the EU for supporting such a great project and congratulations to those whose hard work produced such a useful resource.

CliffsNotes for Implementing an Income and Asset Disclosure System for Public Servants

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CliffsNotes are what American students pressed for time turn to at exam time.  Rather than reading the whole of Macbeth or the Iliad or sweating through their entire Physics text, students can breeze through the 20-page or so CliffsNotes on the topic, learning enough to at least pass the test.  Lawmakers are often in the same position during a session of parliament as these students are on the eve of an exam.  They must grasp enough of a subject to write legislation guiding how policy should be implemented but do not have the time to delve deeply into the subject matter.

One topic where this is the case is legislation introducing or revising a policy requiring public servants to disclose information about their personal finances.  Thanks to StAR,  the Council of Europe, the OECD, and indeed this writer and this blog (sample here and here), a diligent lawmaker could spend weeks if not months perusing volumes on how to create and operate a system for administering a personal financial disclosure law.  But like the student who would very much like to read all of Macbeth but has two other tests in the next three days, the legislator’s time is short and the demands on it high.

Hence, a need for a CliffsNotes on financial disclosure systems.  Continue reading →

What Chinese Cuisine and Deferred Prosecution Agreements Have in Common

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As Kees noted Monday, the use of American-style deferred prosecution agreements (DPAs) to resolve corporate corruption cases short of trial is on the rise.  The United Kingdom, France, Argentina, and most recently Singapore now permit prosecutors to suspend or even drop altogether the prosecution of a firm for a corruption offense in return for the accused firm paying a fine, adopting measures to prevent future offenses, and cooperating with ongoing investigations.  Australia and Canada are on the verge of approving DPAs, and influential voices in India and Indonesia are urging their adoption too.

Apostles say DPAs allow governments to realize the benefits of a criminal conviction without the need for a lengthy, expensive, arduous trial against a well-funded corporate defendant where defeat is always a risk.  Former U.K. Attorney General Lord Peter Goldsmith told a New Delhi audience last October that once India begins using DPAS, companies would start coming forward and admit wrongdoing.  During the recent debate in Singapore one commentator observed that DPAs “provide an incentive to corporate entities to confront criminal conduct within their ranks,” and a group of Indonesian professors claim DPAs will be particularly valuable in their country.   In Indonesia, conviction of a corporation provides no assurance the defendant will not commit the same offense again while, they write, a DPA does.

DPA evangelists are about to learn what DPAs have in common with Chinese cuisine.  The first-time visitor to China soon discovers that Chinese food in China is unlike Chinese food at home.  Beef broccoli tastes much different outside China than in. Connoisseurs of DPAs will shortly find that what American prosecutors are able to cook up looks much different when prepared abroad.     Continue reading →

The Trump Administration’s Ethical Conduct: An Appreciation

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Whatever else one might say about corruption and the Trump Administration, it has been a godsend for those who teach ethics and integrity courses.  Recent, real-world examples can spice up otherwise dry, abstract presentations while helping drive home key points, and Trump officials’ habit of skating at the edge of permissible conduct never fails to provide headline grabbing fodder for classroom discussion.  The most recent debt of gratitude ethics instructors owe the Trump Administration arises from the Environmental Protection Agency chief’s choice of a D.C. landlord.  In one fell swoop agency head Scott Pruitt’s actions illustrate the finer points of not one but two key ethical norms, the receipt of gifts and the duty to appear impartial.

The story begins with Pruitt’s decision after appointment as chief regulator of American environmental protection laws to not move to Washington, D.C. but instead to rent a place just for the nights spent in the nation’s capital.  He found the spare bedroom in a two-bedroom apartment located in a tony part of town whose owners agreed to rent the extra bedroom for $50 for each night Pruitt spent in Washington.

Real estate agents told the New York Times that Pruitt got quite a bargain: $50 a night was less than one would expect to pay on the open market.  Pruitt’s ethical travails begin here. Continue reading →

Report on the OECD’s 6th Global Anti-Corruption and Integrity Forum

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For the sixth year running the Organization for Economic and Cooperation is hosting a two-day conference on ethics and corruption.  This year’s theme is how corruption has eroded trust in government and is helping advance what Secretary General Gurria termed in his opening remarks the three destructive “isms” haunting the world today: populism, nationalism, and protectionism.

The organization’s members are 35 of the world’ s richest nations (all save Russia and the PRC), and despite extraordinary levels of wealth by any historical measure, and recent upbeat economic news, citizens across the 35 have soured on their governments.  Trust in government across the 35 is at a record low while cynicism and distrust in elected leaders is at an all-time high, and though the Secretary General put much of the blame for the current funk on the 2008 economic crisis and the still uneven and unbalanced recovery, corruption, he stressed, has done its part.  Revelations of wrong-doing at the highest levels of government coupled with the petty corruption that frustrates the delivery of basic government services has only deepened citizens’ suspicions in their government.  If OECD member states are to win back citizens’ confidence, and avoid those destructive “isms,” they cannot, he argued, ignore the corruption question.

For those unable to fund a trip to Paris or with a sponsor or client willing to foot the bill, the conference home page with the agenda is here.  Four things I found useful on day one: Continue reading →

Protecting the Rights of Countries Victimized by Corruption: the Swiss Approach

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One topic on the agenda at next week’s OECD Integrity Forum is “Settling Foreign Bribery Cases with Non-Trial Resolutions.”  As explained here, a principal reason for a session on settlements is the concern that developing countries are losing out on them.  When the bribe-taker is a developing country official and the bribe-payer employed by a transnational corporation, the case is most often resolved through a settlement in the country where the corporation is headquartered.  And the developing nation’s interests are often ignored.

A notorious example is the bribery of Nigerian officials by the American company Halliburton.  The company settled the case with U.S. authorities for $559 million; years later it settled with Nigeria for $35 million, just over six percent of what the U.S. extracted.  Yet which country suffered the most from the bribery?  And which one is more pressed for resources?

Countries with civil law legal systems offer a solution that common law nations would well advised to consider: allow the victim government to participate as a party to the criminal proceeding with the right to file a claim for damages and indeed to help in gathering evidence for the prosecution.  Swiss law provides one example employed by several countries which have been victimized by corruption.    Continue reading →

Conference on Human Rights and Asset Recovery

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The Open Society Foundations hosts a conference this Friday, March 16, at its Washington office on the human rights issues raised when stolen assets are returned.  During the morning session new strategies for addressing corruption before UN treaty bodies and the complementarity of international laws on human rights and criminal justice governing asset recovery will be discussed.  In the afternoon, speakers will examine the role of asset-holding states and international organizations in ensuring accountability in asset recovery and return and civil society’s role. Previously unpublicized information on the return of stolen assets to Kazakhstan will be reviewed for the lessons it offers.

Click here for more on the agenda and a list of speakers.  Those wishing to attend should RSVP to Joshua Russell.

Two Essential Volumes on Corruption

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The study of corruption and what to do about it is no longer an academic or policy-studies backwater.  Matthew’s bibliography of corruption-related publications now lists over 6,000 books, articles, and reports and, as his regular updates show (thank you Matthew), the list continues to grow at the rate of some 50 plus per month.  That is the good news.  It is also of the course the bad news.  Few practitioners, and I suspect even academics, can claim to have absorbed the learning in the 6,000 current documents let alone keep up with the outpouring of new works.

For those who can’t , I recommend two recent books: Dan Hough’s Analysing Corruption and Alina Mungui-Pippidi and Michael Johnston’s Transitions to Good Governance: Creating Virtuous Circles of Anti-Corruption.  Both do an excellent job of synthesizing and extending recent scholarship on corruption issues, and both do so in a sophisticated but accessible manner.  Both have the added virtue of being available in reasonably priced paperback editions. Continue reading →

Asset Recovery and Fair Trials: The European Court of Human Rights Jurisprudence

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Article 54 of the UN Convention Against Corruption requires state parties to have procedures “to give effect to an order of confiscation issued by a court of another State Party.”  Once a party receives a request to return assets backed by a confiscation order issued by a court in the requesting state, the process is simple.  The requested party brings the order before a domestic court, and the court orders the assets forfeited.  The requested state then hands over the money, securities, title to the property, or whatever is required to transfer the assets from their current owner to the requesting state.

What if the asset’s owner contests the transfer, however?  What if the owner asserts the court proceedings that led to the confiscation order issuing in the requesting state were not fair?  Does the requested state have an obligation to entertain the complaint? Continue reading →