Virtual Seminar September 6: Mozambique’s Hidden Debts — Trials of Perpetrators, Lessons Learned

Wednesday, September 6, at 2:30 PM Mozambique time (UTC + 2) members of Mozambican civil society, the media, and GAB staff member (me) will discuss developments in the Mozambican “hidden debt” scandal.

Evidence introduced at the trial of Jean Boustani (here), a senior executive of the Middle East shipbuilding company Privinvest, showed the company bribed Mozambican officials to the tune of $125 million in return for government loan guarantees. The loans went for projects of little or no value. Mozambican citizens are now saddled with repaying billions in principal and interest. A joint study by Mozambique’s Centro de Integridade Pública and Norway’s Chr. Michelsen Institute estimates the scheme may have cost the nation, one of the world’s poorest,. as much as $11 billion, virtually the country’s entire GDP for 2016.

Those responsible for this enormous wrong are slowly being held to account. The Mozambique government is suing some of the perpretrators in a civil action in London, and Manual Chang, Finance Minister at the time the guarantees issued, was recently extradited to the United States to face charges for his role.

A list of speaker and details on logging in on Zoom is here.

Guest Post: Curbing Political Finance Abuse in Moldova

GAB is pleased to welcome this post on political finance in Moldova by the Independent Anti-Corruption Advisory Committee. Established by reformist President Maia Sandu in 2021, the committee reports regularly on Moldova’s progress in curbing corruption and what more needs to be done. Thanks to its members expertise and their independence, its work carries great weight — both within Moldova and the international community.

The most recent report addresses perhaps the most challenging issue any democracy faces: enforcement of the rules governing contributions to and expenditures by political candidates and political parties. A challenge all the greater in Moldova as post-Soviet oligarchs have yet to be fully tamed and Russia continues to pour black money into campaigns to strengthen anti-Ukraine, pro-Russian candidates.

The report is here, the committee’s summary below.

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Ukraine’s Fight Against Corruption: Whistleblowing

Last Friday, July 7, some 50 civil society representatives, media personnel, and government policymakers spent the day discussing the law and practice of whistleblowing in Ukraine. They heard from among others National Anticorruption Prevention Committee (NAPC) officials explain how whistleblowing fit into the government’s anticorruption efforts, Anticorruption court Judge Oleksiy Kravchuk on measures for fostering respect for whistleblowers, and how the law protected Oleh Polishchuk after he blew the whistle on his employer’s corruption.

I spoke at the closing panel with TI Ukraine head Andrii Borovyk and Serhiy Derkach, Deputy Minister for Community, Territories and Infrastructure Development of Ukraine. The English version of the program is here and the slides I spoke from here. Minister Derkach’s closing remarks are below —

“Whistleblowing during the recovery process in Ukraine is even more important. It is not only about corruption but also about the security and efficiency of how funds and resources are used.

“There are three key conditions for whistleblowers to report wrongdoing:

✔️ Official channel for reporting
✔️ Confidence that the reports will be reviewed and the perpetrators brought to justice
✔️ Protection from retaliation by management

“At the Ministry of Renovation, we support a zero-tolerance culture towards corruption and are actively working to implement an effective compliance system.

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Mitigating Corruption Risks in Ukrainian Reconstruction: Princeton University/Kyiv Anticorruption Research and Education Centre’s Joint Program

Princeton University’s Innovations for Successful Societies program and Kyiv’s Anticorruption Research and Education Centre are together helping the Ukrainian government fight corruption during reconstruction. Their first output is a four-day program that began today to share experiences elsewhere in curbing corruption in construction projects. Attending are frontline staff from the Ministry for Communities, Territories and Infrastructure Development, the State Agency for Reconstruction and Development, and other agencies and departments responsible for reconstruction.

Funded by the International Renaissance Foundation and USAID, Deputy Infrastructure Minister Serhiy Derkach opened the program. Princeton Professor Jenifer Widner, head of the Princeton program, Oskana Nesterenko, ACREC Executive Director, and representatives of AID and the Renaissance Foundation also spoke. Hamish Goldie-Scot, CoST Technical Director, and I will lead the discussions. The agenda is here, my opening remarks below.

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How Open Data Will Prevent Corruption in Ukraine Reconstruction

Ukraine is creating the world’s most transparent system for the procurement of public works. To assure citizens and donors that the billions needed to reconstruct the nation’s infrastructure will be wisely and honestly spent, it has developed DREAM, the Digital Restoration EcoSystem for Accountable Management. DREAM will provide citizens, investors, and donors access to microlevel data on every single reconstruction project — from the initial feasibility study through the procurement process to the completion of construction.

Analysis of DREAM data will show when bills of quantity are unbalanced, when bids were likely collusively prepared, and suggest if not reveal other signs of project-level corruption.  Analysis of DREAM data across all procurements will disclose if cost estimates vary too much from the bid price and the final price, suspicious patterns in initial versus actual completion date, variation orders, or subcontracting, and similar indicators of possible weaknesses in the procurement and oversight of projects.

In a talk next week I will recommend the Ukrainian government use DREAM data to conduct the analyses listed below. Surely there are more I am missing. Comments/additions welcome.

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Trump Indictment’s Lesson for Prosecutors Charging Senior Political Figures

At long last federal prosecutors have filed charges against former President Donald Trump for crimes arising from his unlawful possession of classified documents. The charges are contained in what is called an indictment in the United States.

One aspect of the indictment merits the attention of prosecutors everywhere. Or at least for those considering charging senior government officials or ex-officials who, like Trump, can be expected to try to sway public or elite opinion by any means to escape convictions.

The Trump indictment is what American prosecutors call a “speaking indictment.”

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Supreme Court to Congress: Your Fault Corrupt Officials Getting Off

Two recent unanimous Supreme Court decisions overturning federal convictions for blatantly corrupt conduct again emphasize the need for Congressional action. The one case arose from bid rigging on a New York state contract, the second from the acceptance of a $35,000 “fee” by the manager of then Governor Andrew Cuomo’s reelection campaign to “fix” a problem the payor had with a state agency.

In both prosecutors charged defendants under the statute making it a federal crime to use the mail or telephones or other means for communicating across state lines to cheat an individual of money or property.* For, by my count, the fifth time in recent years (here), the Court rejected prosecutors’ efforts to stretch a law originating in claims “eastern city slickers” were using the mail system to swindle naïve Midwesterners to cover state and local corruption.

The Court also again put the blame for allowing corruption to go unpunished on Congress, reiterating that if it wants federal prosecutors to police the conduct of state and local officials, it must write a law that says so in clear and uncertain terms. Congress took a stab at doing so once, making it an offense to deprive citizens of the “honest services” of a public official.  But as the Court held in acquitting the Cuomo aide, legislators forgot the term “clear” in the Court’s injunction, failing to provide any definition of what conduct was honest and what dishonest. The law was thus unconstitutionally vague, for it did not, as all criminal statutes must, give defendants fair notice of the conduct that was unlawful.

Justice Gorsuch summed up the current situation in a concurring opinion in the Cuomo aide case.  Because Congress won’t say with the precision required of all criminal statutes what conduct by state and local officials violates federal law, it: 

“leaves prosecutors and lower courts in a bind. They must continue guessing what kind of fiduciary relationships this Court will find sufficient to give rise to a duty of honest services.” 

Every time a prosecutor and a court guess wrong, as they did in the New York cases, we get a highly publicized acquittal, leaving citizens to wonder why, if their government is serious about curbing corruption, it is letting crooked pols and their pals off the hook. For reasons to obvious to state, this is no time to be undermining citizen confidence in the government’s commitment to fighting corruption. Isn’t it time Congress seriously considered the metes and bounds of federal power to prosecute state and local corruption?

  • *The law is found in title 18 of the United States Code, sections 1343 and 1346. The operative language: “Whoever … devise[s] any scheme… to defraud… for obtaining money or property … causes to be transmitted by means of wire, radio, or television communication …any writings… for the purpose of executing such scheme… shall be … imprisoned not more than 20 years….” In 1988 Congress added “The term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”

Comments on Sri Lanka Proposed Anticorruption Bill

Sri Lanka is known for the quality of its legal scholarship, and the draft anticorruption bill the government gazetted April 6 leaves little doubt the reputation is warranted. It contains many thoughtful, well drafted provisions other nations looking to reform their laws will want to borrow. Too bad for the drafters they can’t copyright their work.

At 162 pages I did not have time to give it the the intensive review the legislature will want to conduct before approving it. But I did find several provisions that I would urge legislators should examine as part of that review —

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The Role of Anticorruption Communications in Sustaining Integrity Reforms

Today’s Guest Post is by Corina Rebegea, governance and anti-corruption advisor with the National Democratic Institute (NDI). Corina oversees programming on transparency, anticorruption and countering kleptocracy and has previously worked on rule of law and justice reform, democratic governance and foreign policy issues, and foreign malign influence.

Moments of democratic opening can be a critical time for anticorruption reforms. In many instances, corruption triggered regime change. In a just released paper for the National Democratic Institute, I examine how to shape a reform message when a sudden shift to democracy opens a window of opportunity.

The paper confirms the important and obvious but often overlooked point that how we talk about corruption plays an important role in democratic transitions. An anticorruption communication campaign can thus inform policy priorities, help mobilize and sustain public opinion, and manage expectations. All are crucial for creating the conditions that make systemic change possible – and durable.

During times of political change, dedicating time to communications, as well as having the right expertise and tools, can be a daunting task. Especially as competing priorities must be addressed in a short period of time. Campaigns can also backfire, as the research summarized in the paper. The campaign can focus too much on the problem, leading to resignation, apathy or even nudging citizens to engage in corruption. Understanding how to effectively communicate anticorruption priorities, reforms and timelines is essential, particularly as there is a risk that forces opposing the democratic opening will retain enough power to derail integrity reforms and cause the window to close.

While more experimentation, research and analysis are needed, the lessons the paper offers are meant to inform the design of campaigns to build public support for integrity reforms, trust, and durable anticorruption outcomes. 

FinCEN’s Beneficial Ownership Proposal: Invitation to Evasion

GAB welcomes this guest post by Gary Kalman, Executive Director of Transparency International U.S.

The Financial Crimes Enforcement Network (“FinCEN”), the bureau charged with implementing our nation’s anti-money laundering laws, is underfunded. They do not have enough staff and significant staff turnover has left the bureau with less institutional knowledge and memory. On top of this, the agency has an Acting rather than permanent Director, undercutting its leaders’ ability to set a clear vision and direction for the bureau.

None of that, however, can explain the agency’s remarkable lapse in judgement in publishing  this proposal to collect beneficial ownership information from U.S. companies.

Let me explain.

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