Author Archives: Zachary Meskell

Explaining (the Lack of) Corruption in the US Federal Judiciary

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The United States judiciary has a history with corruption. Corruption pervaded every aspect of pre-revolution America, from the customs enforcers up to the colonial judges. Corruption in the United States only worsened a century after the Revolution, with politicians during the late 19th century taking “spectacularly handsome bribes from corporations and demand[ing] kickbacks as the helping hand they extended often came with an open palm.” Early twentieth century America, in many ways, had systemic corruption similar to that seen in modern developing countries. Even as recently as the early 2000s, state judges have come under fire for not only individual corruption, but pervasive, systemic corruption rings. Outright bribery is only one problem: state judges have also been known to engage in misappropriation of public resources, nepotism in appointing counsel, and “skimming off the top.”

Yet in spite of the environment around them, the federal judiciary—more or less since day one—has been mostly corruption-free. As Professor Mathew Stephenson observed, even during the quite corrupt nineteenth century, “at least at the federal level, the institutions of justice—courts and prosecutors—seemed relatively clean and basically functional.” If anything, the federal judiciary, and federal prosecutors, have served as a check on corruption at the state and local level, “particularly in the latter half of the twentieth century.” This pattern continues into the present day: Although the federal judiciary comprises 5% of all judges in the United States, they only account for 0.2% of known cases of judicial bribery.

This raises a question: How did the federal judiciary remain relatively free from corruption, especially during the first century of the country’s existence, when corruption pervaded so many aspects of American society, including state and local courts? There are two broad categories of explanation: historical and structural. These are not mutually exclusive alternatives; rather, the historical and structural explanations complement one another.

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The Coal Industry Has No “Final Villain”

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“Manchin’s coal corruption is so much worse than you knew.” So proclaimed the headline of a Rolling Stone article this past January, referring to West Virginia Senator Joe Manchin. In March, the New York Times published a similar article. “At every step of his political career,” the Times reported, “Joe Manchin helped a West Virginia power plant that is the sole customer of his private coal business.” Salon, just a few days later, followed suit, describing Machin’s ties to the coal industry as a “stunning portrait of political corruption.” (See also here, here, here, and here). These stories, understandably, focus on Machin himself—the Rolling Stone article even calls him “the final villain” in the story of corruption it unfolds. And Manchin’s conduct is indeed outrageous: First as Governor and then as a Senator, Manchin lined his pockets off of personal stakes in the coal industry—an industry he used his political power to prop up at every turn—in spite of pollution, climate change, inefficiency, and high costs to his constituents.

Yet the journalistic outrage over Manchin’s unethical (albeit not illegal) behavior may be distracting from the real issue, if not outright misdiagnosing it. Corruption in the coal industry is not the result of individual unscrupulous politicians. The problem is coal itself.

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The Anti-Anticorruption Origins of the American Revolution

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The story of the American Revolutionary War is one that many of our readers – certainly our American readers – know well. According to the conventional narrative, at least as conveyed in U.S. high schools, the British crown’s unfair taxes, punitive laws, and general disregard for the Thirteen Colonies led to protest, massacre, and revolution. There is, however, another perspective from which the story could be told, in which the British were not engaged in arbitrarily denying colonial rights, but were instead embarking an on anticorruption crackdown that went horribly awry.

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The U.S. Could Learn from the U.K. in the Virgin Islands

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Corruption is a perennial problem in the Caribbean. Although many of the Caribbean islands are independent, many others are held by former colonial powers, including the United States and the United Kingdom, which respectively control adjacent island groups known as the U.S. Virgin Islands (USVI) and the British Virgin Islands (BVI). Encouragingly, over the last six years, the UK has undertaken significant efforts to crack down on corruption in the BVI. Disappointingly, the US has yet to follow suit. The US government—and, once appointed, the new US Attorney for the USVI—should follow the UK’s lead and make anticorruption a top priority.

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The Netherlands’ Dutch Caribbean Problem

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The Kingdom of the Netherlands has a corruption problem. Although the country of Netherlands maintains a squeaky-clean image, ranking eighth in the world on Transparency International’s Corruption Perceptions Index (CPI), the Kingdom of the Netherlands is comprised of not only the Netherlands itself, but also three semi-autonomous island countries in the Caribbean. These island countries, along with three territorial islands directly controlled by the Netherlands, collectively form the Dutch Caribbean. And the Dutch Caribbean, unlike the Western European country, has a serious corruption problem, the severity of which is being diluted by the positive perceptions of the Netherlands.

Before addressing corruption in the Dutch Caribbean specifically, it’s worth explaining the Kingdom’s somewhat unusual constituent-country structure. Technically speaking, the Kingdom is composed of four equal autonomous countries: The Netherlands, Aruba, Curacao, and Sint Maarten. The citizens of all four countries are Dutch nationals. Each country has its own constitution and parliament, but the Kingdom is sovereign, retaining responsibility for foreign policy, defense, and other “Kingdom issues,” including oversight of human rights and freedoms within all Kingdom territories. Of the four countries that comprise the Kingdom, the Netherlands is by far the largest, accounting for 98% of both the Kingdom’s land mass and population. And although Aruba, Curacao, and Sint Maarten each have a representative within the Kingdom’s council of ministers, the Netherlands in effect also directly controls the Kingdom, as well as the Caribbean islands of Bonaire, Saba, and Sint Eustatius, which are Dutch territories.

Most international corruption assessments lump the Dutch Caribbean in together with the Netherlands. The CPI, for example, does not include separate evaluations for Aruba, Curacao, or Sint Maarten, nor does the U.S. State Department. The tendency to consider the Dutch Caribbean as part of the Netherlands, and to provide a single report or score for “the Netherlands” as a whole, obscures the fact that the Dutch Caribbean does, in fact, have a very serious corruption problem on each of its constituent islands, as the following brief survey illustrates:

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Keep the Dogmatic Privatization Argument Out of Style

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It used to be trendy to talk about privatization as the solution for corruption. The World Bank, for example, declared back in 1997 that “any reform that increases the competitiveness of the economy will reduce incentives for corrupt behavior. Thus policies that lower controls on foreign trade, remove entry barriers to private industry, and privatize state firms in a way that ensures competition will all support the fight [against corruption].” (See also here, here, and here.) Although this theory declined rapidly after its peak in the 1990s, anticorruption policy ideas, like fashion, seem to be cyclical. Even as the privatization dogma has become démodé in Western anticorruption circles, it has gained new life elsewhere. As “privatization as a solution to corruption” debates reemerge in India and the Philippines, it’s worth reexamining the flaws in such policy proposals that made them fall out of favor twenty years ago.

The logic behind the idea that privatization inherently(or at least usually)decreases corruption is the notion that private shareholders are more interested than government bureaucrats in the efficient usage of whatever resources they control, and are therefore more likely to crack down on corruption. Relatedly, competition in the private market should favor those entities that can provide a service most efficiently—and if graft is inefficient, as many believe, market competition should drive corruption down. On top of this, private organizations also reduce corruption by offering more competitive wages, which means that employees aren’t forced to turn to corrupt means to supplement their incomes.

That’s the theory. The problem is that it isn’t supported by empirical evidence. Starting in the early 2000s and continuing well into the present, scholarship examining the aftermath of the privatization wave of the 1990s has repeatedly found that privatization has been largely unhelpful, and in some cases outright detrimental, to efforts to bring corruption under control (see here, here, here, here, here and here, to cite but a few sources). Why is this? Three main problems stand out:

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Castles of Corruption

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Owning a castle has never been easier. In 2017, Italy’s State Property Agency made international headlines by announcing that the country would be giving away over a hundred castles for free. The only catch? Takers must promise to restore the dilapidated structures and turn them into tourist sites. (The program builds on an existing initiative in which the Agency gives historical federally-owned properties to local authorities for restoration.) At first glance, this program looks like a win for everyone. The Italian federal government no longer has to deal with crumbling historic castles, the properties will be cleaned up and made available to tourists, and lucky entrepreneurs and local governments can reap the profits. Unfortunately, however, there are reasons to worry that this program, like so many other castle restoration initiatives, will end up sapped by corruption, money laundering, collusion, and nepotism.

 Corruption and related malfeasance is quite common in the context of castle ownership and restoration. This is not all that surprising, given that corruption is a perennial issue within the construction industry as a whole. All of the usual problems in that sector—including bribery in the bidding process, collusion to funnel work to friends and family, embezzlement, and the substitution of substandard materials—apply in the specific context of castle restoration. On top of that, real estate has long been a favorite of those involved in money laundering due to the lower scrutiny that real property transactions receive, at least in comparison to stock or other commodities. But in addition to these familiar risk factors, castle restoration projects have several additional distinctive features that make them even more vulnerable to corruption than comparable construction projects and real estate transactions:

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Perishing Under Corruption: A Cautionary Tale from the Dutch East India Company

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A transnational megacorporation that exerts near total monopoly, mints its own currency, fields its own armies, negotiates treaties, and executes convicts. This is not the stuff of dystopic cyberpunk novels, but history books. Founded in 1602, the Vereenigde Oostindische Compagnie (often referred to in English as the Dutch East India Company, but self-styled as the VOC) was the first publicly-traded company, established the first stock exchange, became the first multinational corporation, and boasted the first globally recognizable logo. At the height of its valuation in 1637, the VOC was worth roughly $8.28 trillion in 2021 dollars—more than Apple, Microsoft, Google, Amazon, Facebook, and fifteen more of the world’s most important modern companies combined (or, if you prefer, roughly the GDP of modern Germany, the UK, and France added together). Yet, by the mid-1790s, the VOC was bankrupt. On December 31st, 1799, the Company dissolved entirely. The principal reason for this collapse was no secret: a popular joke at the time said that VOC actually stood for “vergaan onder corruptie” (“perished under corruption”).

How did the world’s wealthiest and most powerful corporation “perish under corruption” in just a handful of decades? And what lessons can be learned from such a failure?

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New Zealand’s Discomfort at the Top of the Corruption Perception Index

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Earlier this year, Transparency International released its annual Corruption Perception Index (CPI) and, once again, New Zealand was ranked as the “least corrupt country in the world” – a title it has held thirteen out of the last fifteen years. It may come as something of a surprise, then, that this news was greeted in New Zealand not so much with celebration as with measured caution. Even the most positive New Zealand news outlets led with caveats that New Zealand still faces corruption risks, including “inadequate protection for whistle-blowers, and no register showing who ultimately controls or benefits from companies registered in this country.” Others skipped the congratulatory headlines entirely, preferring headers such as “Government Warned Not to Ruin Corruption-Free Status.” As one New Zealand newspaper succinctly put it: “New Zealand is the least corrupt country in the world, but when that statement is whispered over here it is almost always followed by a ‘however’.”

This near-ubiquitous grimness of New Zealand’s press with regards to anticorruption measures practically begs the outside observer to ask: Why the doom and gloom? What explains the gap between “all major ranking institutions and indexes” and the perception of New Zealand’s citizenry themselves?

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Let’s Talk About Monaco

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Monaco, the sovereign city-state on France’s Mediterranean coast, is many things. It is the second smallest country in the world, following only Vatican City. It boasts the highest GDP per capita of any country. It is a constitutional monarchy, ruled by the same family for over 700 years. It is known for its opulent casino, expensive real estate, and swaggering F1 drivers.

It is also willfully resistant to the Council of Europe’s anticorruption transparency recommendations – or any transparency measures at all, for that matter.

Perhaps due to its small size, Monaco has flown somewhat under the radar in international corruption monitoring. The city-state doesn’t feature in Transparency International’s annual Corruption Perceptions Index, and TI’s web page for Monaco is quite blank. Despite being an international tax haven and banking center, Monaco is conspicuously missing from both the World Bank’s Doing Business rankings and the Heritage Foundation’s index of economic freedom. It’s not that Monaco is a corruption-free paradise. In the few lists in which it does appear, Monaco does not score particularly well: In the RAND Corporation’s Business Bribery Risk Assessment, for instance, Monaco ranked 72nd out of 192 jurisdictions. And a number of recent corruption scandals have involved Monaco, either directly or indirectly. Last year, for example, two brothers who ran a Monaco-based consultancy called Unaoil pleaded guilty in the United States to charges involving millions of dollars in bribes paid between 1999 and 2016. Corruption alarms were also raised in July 2019, when Monaco’s justice minister abruptly blocked term renewal for a judge leading a corruption inquiry that involved a Russian billionaire, a former Monaco justice minister, senior Monaco police officials, and others. More recently, in late November 2020, former French president Nicholas Sarkozy went on trial for attempting to bribe a French magistrate with a prestigious job in Monaco.

These incidents have largely come to light because of involvement outside of Monaco: international companies, legal battles that cross borders, and foreign politicians. Monaco itself remains something of a black box. As a 2017 report from the Council of Europe’s Group of States Against Corruption (GRECO) noted, there are no records whatsoever of criminal or disciplinary proceedings related to corruption in Monaco’s parliament. This lack of reported cases, GRECO concluded, is likely due not to an absence of corruption, but to a lack of oversight. As the report noted, Monaco has “few mechanisms to ensure satisfactory transparency of parliamentary work and consultations,” and lacks a “code of conduct that would govern, among other things, the acceptance of gifts and other benefits, the management of conflicts of interest, or relations with lobbies and other third parties seeking to influence parliamentary processes and decisions.” The GRECO report further observed that although judicial proceedings are typically public, there is a carve-out for holding court behind closed doors where public proceedings “might cause a scandal or serious inconvenience.” Cases “concerning the internal operation of courts” are also not public. In practice, there is even less transparency than the official policies would indicate, as most criminal cases are in fact dealt with in France, behind closed doors.

Without a code of conduct against corruption-related activities, with no mechanisms to provide oversight, with any corruption scandals that do occur likely to be tried in secret, and with little international attention on the issue beyond infrequent GRECO reports, Monaco can keep its corruption well hidden. Although occasional scandals might pop up around Monaco, the country makes it difficult to know the nature and extent of its corruption.

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