That Corruption Infects the Italian Judiciary Is Now Undeniable

In March 2021, a Milan trial court acquitted Italian oil giant ENI, its partner Royal Dutch Shell, and numerous individuals of bribing Nigerian President Goodluck Jonathan and pals to secure the rights to the lucrative offshore oil field denominated OPL-245. The evidence of bribery was overwhelming, including internal Shell e-mails describing the scheme and the testimony of an ENI official confirming his bosses were fully aware of it. Suspicions that someone had “gotten” to the judges immediately arose stoked by revelations of close ties between the presiding judge and ENI’s senior counsel.

Any doubt that the verdict was tainted was put to rest when the court published its opinion justifying it. As the attached analysis by the British, Italian, and Nigerian NGOs that have pushed the case shows, the court’s “reasoning” was laughable. Two examples of many. The court wrote off the then oil minister’s sale of OPL-245 rights to a company he secretly owned as a trifle because neither he nor the government officials bribed to approve the sale objected. Equally ridiculous, the court found that a Shell briefing note reporting that part of the bribe would be in the form of political contributions simply recounted a rumor then circulating.

Between the strength of the evidence the prosecution presented and the court’s flimsy if not bizarre reasoning dismissing it, the expectation was that the acquittal would easily and quickly be overturned on appeal. That hope is not to be however.  Last week the Italian prosecutors assigned to handle the appeal announced they were withdrawing it. 

Thus ENI, Shell, and the 13 individuals named as accomplices in the payment of a $1.1 billion bribe stand exonerated. And it now clear that the rot in the Italian judiciary reaches into its once revered prosecution service.

Nor is the damage from the rot limited to Italy. Thanks to the doctrine of ne bis in idem (double jeopardy in American law), a Dutch investigation of Shell’s role had to be dropped (here).  

The last hope for justice now lies with the Nigerian judiciary. Ne bid in idem only bars EU countries from pursuing a case. A Nigerian investigation of the companies and their accomplices is underway. It is critical it continue and that the international anticorruption community do all it can to support it given what has happened in Italy.

Moreover, as this blog has urged, it is critical too that the OECD hold Italy to account for its failure to live up to its obligations to sanction Italian companies that bribe foreign officials. The ENI-Shell case must be an outlier not a precedent.

Money for Something: Do Remittances Have an Anticorruption Effect?

Remittances—the money or goods that migrants send home to support their families and friends—have become increasingly important in developing countries. In nations like Haiti, Honduras, and Tajikistan, remittances account for more than 20% of their respective GDPs. Interestingly, many of these top recipient countries also rank among the most corrupt in the world, at least according to Transparency International’s Corruption Perceptions Index. While that correlation does not by itself establish causation, it does invite the question of whether large flows of remittances have any meaningful impact on corruption within the recipient country.

Surprisingly, this question has been “virtually ignored” in academic literature. Only a few studies investigate the connection between remittances and corruption, and the handful of papers on this topic come to quite different conclusions.

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Corrupt State Officials and Companies Are Razing Malaysia’s Ancient Forests. Here’s How to Stop Them.

Malaysia is home to two of the world’s oldest rainforests. Dating back 130 million years, the Taman Negara and Borneo Lowland forests are older than even the Amazon and the Congo Basin. As of 2016, Malaysia had 19.3 mega-hectares of forested land, which is close to 60% of the country’s total land area. But these forests are under the constant threat of their destruction by private commercial exploiters that engage in logging and development. Already in various parts of Peninsular Malaysia and Borneo Island, forests have been transferred to private ownership and used to develop palm oil and rubber plantations, durian farms, and mines. Once-serene forests are now plagued by mudslides and logjams, their biodiversity has suffered, and the indigenous communities that used to cultivate the forests have been displaced.

The reckless exploitation of Malaysia’s forests has many causes, including poorly-designed conservation regulations. But corruption is one of the most important root causes of unchecked and unsustainable deforestation. Such corruption comes in two main forms:

  • The first is the corrupt award of land titles and logging concessions to cronies, or in exchange for bribes. This sort of corruption is epitomized by the sale of the Sarawak State’s land and forests bordering the Mulu UNESCO World Heritage site.  by to cronies and family. In 2013, several NGOs reported that the powerful Chief Minister Abdul Taib Mahmud had arranged for the state to sell these lands to his cronies and family members at cut-rate prices, after a non-transparent process with no formal tendering. The new (crony) owners planned to raze the forests to develop palm oil plantations. To the frustration of anticorruption activists and lawyers, the Malaysian Anti-Corruption Commission (MACC) found no grounds to charge Taib Mahmud for abuse of power, due to insufficient evidence of his specific personal involvement in the sale decision.
  • Second, when commercial exploiters want to log in areas where they do not have a concession, they have been known to bribe local officials to overlook these illegal logging activities. To take just one example, in 2017 the authorities prosecuted corrupt forestry officials for taking kickbacks of RM340,000 (about US$76,800) from a logging company over several months. The only thing unusual about this case is that it was uncovered and prosecuted. Bribery of local government officials and law enforcement officers is widespread in Malaysia, and typically goes undetected. In the forestry context, the costs of such corruption are massive: The Deputy Natural Resources and Environment Minister reported in 2017 that the losses from illegal logging in Peninsular Malaysia amounted to RM15.2 million (about US$3.5 million).

To curtail the rampant destruction of Malaysia’s vital and irreplaceable forest resources, the government needs to do more to combat both these forms of corruption.

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

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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Who You Gonna Call? The Hunt for Ghost Employees in the Philippines

In the Philippines, as in many other countries, ghost employee fraud is a perennial public corruption problem. Ghost employees are people who are listed on an organization’s payroll but who do not actually work there. (In some cases the ghost employees are entirely fictitious; in other cases, they are real people who do not work at the organization but are included on the payroll—sometimes with their knowledge, and sometimes without.) The corrupt managers of agencies or departments will falsify payroll records to authorize the issuance of paychecks to the ghost employees, while these managers and their accomplices pocket the money that is supposed to pay the ghost employees’ salaries. The scale of ghost employee fraud can be staggering. In the Philippines, senior government officials—particularly at the local level—have used such schemes to siphon millions of pesos from government institutions. Indeed, back in 2016, when current President Rodrigo Duterte was the mayor of Davao, he was credibly accused of pocketing around ₱708 million through the hiring of 11,000 ghost employees. This is just one out of many cases of ghost employee fraud haunting the country (see, for example, here, here, and here). Despite the scope and scale of the problem, the Philippine government has taken no proactive steps to address it. This must change. Though the problem is serious and widespread, there are a number of things the government could do:

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USAID’s New Dekleptification Guide

The U.S. Agency for International Development has just published a draft of what it calls a Dekleptification Guide. “Dekleptification,” the authors explain, is the process by which citizens kick kleptocrats out of power and ensure they stay out. The guide discusses a range of projects the agency could fund to support anti-kleptocrat movements, consolidate post-kleptocratic, democratic orders, and prevent kleptocrats from returning to office.

The agency seeks comments on the feasibility and appropriateness of the projects suggested, whether there are others it has overlooked, and generally whether its analysis and approach to dekleptification meshes with experience to date.  

USAID is one of the largest and most influential providers of foreign assistance — thanks not only to the size of its programs but to the quality of analysis that underpins them. The guide will almost surely have an impact far beyond coining a term to organize thinking about how to end kleptocracy. Members of the anticorruption community should therefore take up the agency’s request for comments.

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Security Sector Reform in West Africa Must Include Anticorruption Measures

West Africa is beset by internal and external security crises. In addition to burgeoning levels of violence linked to Islamist extremism throughout the Sahel, there has been a string of military coups d’êtat in Burkina Faso, Mali, and Guinea, as well as failed coup attempts in Niger and Guinea-Bissau. The persistence of violence, instability, and military coups throughout the region has intensified calls for comprehensive security sector reform (SSR) throughout the region. (The term SSR, in this context, includes reforms to the policies, structures, and capacities of institutions and groups engaged in the security sector—defined broadly to include defense forces, law enforcement, corrections, intelligence services, border management, and customs agents, as well as certain non-state actors such as private security services—in order to make them more effective, efficient, and responsive to democratic control.) Indeed, many believe that a multilateral, region-wide initiative on SSR is essential during this tense political moment in West Africa.

It was therefore encouraging when, last November, the Economic Community of West African States (ECOWAS) met to announce its commitment to a new Policy Framework for Security Sector Reform and Governance (SSRG). Unfortunately, this Framework is deficient in a number of serious ways. One of the most significant problems is that the Framework focuses too narrowly on things like “resource mobilization and financing” and “professionalization and modernization” of the security sector, while paying insufficient attention to the central role of corruption in the security sector as a key impediment to genuine SSR. As a result, the Framework fails to clearly establish anticorruption as a core principle and a key element of SSR programming, and lacks sufficient guidance to member states on how to mitigate corruption risks in the security sector.

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That corruption in the security sector undermines national security and political stability is well established, both in general and in West Africa specifically. For one thing, corruption in the security sector hollows out defense and security forces, rendering them less effective, less professional, and less well-equipped. Corruption therefore can enable armed groups to gain power and influence—particularly in neglected and under-policed rural areas. Furthermore, when citizens experience or perceive corruption in a country’s security services, this can generate greater resentment and distrust of the central government, which in turn can undermine the state’s legitimacy and the ability of the security services to work effectively with the civilian population.

Yet as Transparency International (TI) correctly observed, SSR initiatives in West Africa—including the ECOWAS Framework—have neglected anticorruption in favor of more technical “train-and-equip” approaches to reform. Especially after the wave of military coups and coup attempts among ECOWAS member states since 2020, it is clear that this approach is insufficient. ECOWAS can and should revise the Framework to include provisions that require member states to implement strong anticorruption measures into their national SSRG programs. Three such revisions are particularly important: Continue reading

Trump’s Attempted Coup Explained

That Donald Trump egregiously abused his power as president in the closing days of his term in office there is now no doubt. Pressuring and threatening election officials and inciting a mob to storm the U.S. Capitol make out abuses that rival if they do not exceed those of America’s most corrupt leaders.

Thanks to the testimony of former Trump officials before the House committee investigating the Capitol riot, we now know the abuses were part of the most serious crime ever attempted against the government of the United States of America and its people: a plot to install Trump as president on January 20, 2021, despite that fact he had lost the election. Trump and accomplices attempted a coup d’état that only just failed.

Americans and democracy’s friends everywhere may find it hard to accept that American democracy narrowly survived a coup d’état. Coups happen in poorer countries with weak governments, not in one of the wealthiest nations in the world with a democracy that has weathered civil war and countless violent demonstrations. But the details that have been exposed, most recently the dramatic, chilling testimony of former White House aide Cassidy Hutchinson, make it clear there is simply no other term that fits.

For those who have not followed the House committee’s work, or who may have but still resist labelling the actions of Trump and accomplices a coup, its broad outlines are described below.

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Why and How Malaysia Must Radically Reform Its Anticorruption Institutions

Back in mid-2018, Malaysia looked like it might have finally reached a turning point in its fight against corruption, following the country’s first democratic transfer of power. The winning parties in 2018 promised significant anticorruption reforms, including swift action to respond to the 1MDB scandal that had led to the ruling government’s defeat. Unfortunately, the hoped-for clean-up of Malaysian politics has not occurred. Part of this is due to the fact that, since the 2018 elections, Malaysia has been embroiled in seemingly unending political turmoil, with two governing coalitions collapsing in fairly rapid succession as a result of shifting party alliances. But part of the problem concerns longstanding problems with Malaysia’s main anti-graft body, the Malaysian Anti-Corruption Commission (MACC).

The MACC was created by statute in 2009 as an “independent” body. But like far too many anticorruption agencies around the world, in practice the MACC suffers from a lack of genuine independence from the executive branch. This leads to the public perception, and possibly the reality, of improper political bias. (Indeed, the MACC’s lack of true independence may explain its slack response when investigative journalists and opposition politicians first raised concerns about the 1MDB fund.) Even if Malaysia’s politics stabilizes, it will not be possible for the country to make genuine progress against corruption without reforming the MACC’s structure in order to ensure that it is truly independent of the executive, and seen to be so.

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Corruption in Emergency Procurement: Lessons Learned in the Philippines

As numerous observers have noted, in far too many countries the response to the COVID-19 pandemic has been hampered by widespread corruption, particularly in government procurement of medical supplies and other equipment (see, for example, here and here). As the pandemic finally recedes, it is useful to take stock of lessons learned and to implement reforms to emergency procurement procedures that will help mitigate these problems in future emergency situations.

One country where it is particularly important to address emergency procurement deficiencies exposed by COVID is the Philippines, which was mired in corruption scandals from the earliest days of the pandemic. Perhaps the highest profile COVID-19 procurement scandal—though hardly the only one—is the so-called Pharmally scandal. Over 2020-2021, the government of the Philippines entered into a string of multi-billion peso contracts with a company called Pharmally Pharmaceuticals, despite the fact that Pharmally is a small firm that was incorporated only in 2019 and lacked the funds, experience, and credibility to handle major government contracts. It was later revealed that Pharmally has direct ties with Chinese businessman Michael Yang, a close friend and former advisor of President Rodrigo Duterte. While direct corruption in this case has not yet been proven, the circumstances are extremely suspicious. And this is just one high-profile example of questionable COVID-related procurement deals. Speaking more generally, it is quite likely that widespread corruption contributed to the Philippines’ abysmal COVID-19 response (see, for example, here and here). Before the next crisis hits, it is essential that the Philippines learn how to better insulate its emergency procurement system from corruption risks. This is not to say that the procurement rules that apply in ordinary situations—including the usual transparency and integrity safeguards—must apply with full force during emergencies. In states of emergency, acting quickly can make the difference between life and death, and so it is reasonable to alter or relax public procurement rules to some extent, even if this raises the risks of corruption and other problems. But it is possible to design procurement systems so as to limit the ability of corrupt actors to take advantage of emergency procurement rules to enrich themselves. In the Philippines, the experience with corruption during the COVID-19 pandemic suggests the following reforms—influenced by international best practices but tailored to the Philippines’ particular context—to clean up the country’s flawed emergency procurement system:

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