Will the Swiss Condone Torture in the Rush to Return Assets to Uzbekistan?

Allegations of torture have dogged the planned return of stolen assets from Switzerland to Uzbekistan for years (here). In a recent interview, a cellmate of one of the alleged torture victims has given the claims new life.  And should give Swiss citizens and their government pause before proceeding with any return.

The assets to be returned are the several hundred million dollars in bribes paid to Gulnara Karimova for the grant of mobile phone licenses in Uzbekistan, something within her power as daughter of the country’s then president.  She stashed most of the money in Switzerland, and when the scheme was exposed, Swiss prosecutors promptly opened a money laundering case against Gulnara and her accomplices. From the outset, the Swiss government made it clear that, if and when defendants were found guilty, the laundered funds would be returned to Uzbekistan.

A breakthrough came in 2018 when Gayane Avakyan, one of Gulnara’s accomplices, signed a Swiss Summary Penalty Order confessing to her role in the money laundering scheme and giving up any claim to the laundered funds.  The order was signed while she was serving time in an Uzbekistan prison, and because of multiple, credible reports that torture is commonly practiced in Uzbek prisons, questions were immediately raised about whether torture or the threat of torture was used to get Avakyan to sign.  A prison cellmate now says she was in fact subjected to a particularly harsh form of torture while incarcerated. Continue reading

Aggressive Criminal Law Enforcement Is Insufficient to Combat Systemic Corruption. But That Doesn’t Mean It’s Not Necessary.

This will be a super-short blog post that makes a super-short point. Here goes:

Let me start by stating the following proposition: Effective enforcement of anticorruption rules, including criminal law enforcement, against individual wrongdoers is necessary but not sufficient to combat systemic corruption.

Both parts of that proposition are important, and I believe correct:

  • Punishing individual wrongdoers is necessary to combat systemic corruption because without individual accountability, it’s not possible to deter those who might be tempted to abuse their entrusted power for private gain, and the absence of individual accountability will likely perpetuate the belief that powerful elites are above the law, feeding the sense of hopelessness or resignation or cynicism that contributes to the vicious cycle that perpetuates systemic corruption.
  • Punishing individual wrongdoers is not sufficient to combat systemic corruption because widespread corruption is generally the product of systems, institutions, and cultures that create the incentives and opportunities to behave corruptly, and without addressing these root causes of corruption, even the most aggressive anticorruption enforcement efforts will be ineffective.

I don’t think either of those claims should be controversial. But I’ve noticed that in debates over anticorruption efforts in various countries, people sometimes commit the logical fallacy—usually by implication rather than expressly—of treating the second claim (that criminal law enforcement is not sufficient to combat systemic corruption) as if it negated the first claim (that criminal law enforcement is necessary to combat systemic corruption). The argument is usually phrased something like this: “Country X is cracking down on corruption and aggressively enforcing its anticorruption laws and putting people in jail. But this is a mistake, because combating systemic corruption actually requires broad-based institutional reforms. The focus should therefore be on institutional reform, not on aggressive criminal law enforcement.”

I agree that criminal prosecutions alone can’t solve the corruption problem, and recent history is littered with examples of anticorruption “crackdowns” that failed to produce lasting change. And there’s certainly an important question as to where the emphasis should be—it’s entirely possible that in many countries there’s too much focus on criminal prosecutions and too little attention to other types of reform. But it’s not an either/or tradeoff, and it troubles me that the (correct) observation that criminal prosecutions are insufficient is so often deployed rhetorically to imply that aggressive criminal law enforcement is not necessary or appropriate. (I noted something like this argument in a previous exchange concerning Ukraine, and more recently encountered it in a discussion of the Car Wash Operation in Brazil, but I’ve heard basically the same line in conversations about many other countries.) Recognizing the importance of structural reform shouldn’t obscure the fact that effective enforcement of anticorruption laws, and the imposition of individual accountability, is also a vital part of the anticorruption agenda. After all, while there are plenty of punishment-focused anticorruption crackdowns that failed to produce systemic change, I can’t think of any successful efforts to get rampant corruption under control that didn’t involve a hefty dose of aggressive enforcement of the laws against corruption, including prosecution and punishment.

The Alleged Police Misconduct in the Netanyahu Corruption Investigations Illustrates Why Police Should Err on the Side of Caution

In corruption investigations, witness testimony is often crucial. After all, corrupt acts usually take place in secret, and the parties involved rarely leave behind records documenting their illegal deeds. It should therefore come as no surprise that an essential part of the corruption investigations into Israeli Prime Minister Benjamin Netanyahu has been the law enforcement authorities’ attempt to obtain incriminating testimony from those with (allegedly) first-hand knowledge of the corrupt actions, and to turn some of them into “state’s witnesses” (defined by Israeli law as “an accomplice who testifies on behalf of the prosecution after a benefit has been given or promised [to] him [or her],” usually in the form of immunity from prosecution or other alleviations). These efforts have met with some success (see here, here, and here).

However, according to Israeli news outlets whose reporters have gotten access to leaked police transcripts, the Netanyahu investigators may have gone too far. These transcripts suggest that police investigators tried to convince two key witnesses, who themselves were suspected of involvement in the corrupt schemes, to replace their defense attorneys – apparently because these defense attorneys had been advising their clients not to sign a state’s witness agreement (see here and here). (In Israel, defense attorneys are not present in the interrogation room, as suspects do not have a right to have their lawyers present during an interrogation.) One of the witnesses did indeed hire a new attorney and signed a state’s witness agreement, though we can’t be sure if the police investigators’ “suggestion” that he do so was the reason. If the police did pressure these suspects to fire their lawyers, it would be illegal, as Israel’s Supreme Court has held that police may not attempt to interfere with a suspect’s relationship with, or trust in, her attorney. In addition, the transcripts suggest that the police may have illegitimately pressured one of the witnesses during his arrest, threatening that lack of cooperation might result in negative consequences to him and others, and employing highly controversial interrogation tactics (see herehere, and here). At this stage, we do not yet know for sure what actually transpired, and Israel’s Attorney General has ordered that the claims of police misconduct be investigated.

The leaked transcripts and the allegations of severe police misconduct have generally been greeted with wide public criticism that transcended political boundaries. Prime Minister Netanyahu’s supporters and party members, including the Minister of Justice, have (unsurprisingly) been most critical, arguing that the police’s actions offer more proof of Netanyahu’s “persecution” by law enforcement authorities, a claim that has been promoted by Netanyahu almost since the beginning of his investigations (see here and here). Putting that harsh (and unproven) last claim to one side, it’s definitely the case that police investigators have been zealous in their pursuit of Netanyahu and his alleged co-conspirators, and the police may have been, at the very least, pushing the boundaries of what the law allows. This, in my view, is a mistake. To be clear, I do not mean to argue simply that the police should not break the law. That is true, but not many people would claim that the police should disregard the law when fighting corruption. But there’s another view out there, espoused by a considerable number of “tough on corruption” proponents, that law enforcement authorities should “push the envelope” as much as possible, doing everything they can even if their actions are sometimes to be deemed illegal by courts. According to this view, there is no place for softness in the interrogation room, and the police sometimes need to be willing to operate right at the edge of what the law will permit. It is this attitude that I want to argue against.

And this is not only because we should care about the rights of suspects and the fairness of criminal investigations. Indeed, “tough on corruption” proponents ought to worry the most about forms of police aggressiveness that come close to, and may cross, the line into police misconduct. In the Netanyahu case, to stick with that example, the police investigators’ alleged overreach may also prove to be counterproductive to anticorruption efforts, not only putting the investigation in jeopardy but producing long-term adverse consequences for effective anticorruption law enforcement. From the perspective of anticorruption policy, there are a few practical reasons why the police, while investigating allegations of corruption, should fully respect the rights of witnesses, and err on the side of caution: Continue reading

Israeli Prime Minister Benjamin Netanyahu’s Flawed and Irrelevant Defense to Bribery Allegations

After three years of investigations, it’s likely that Benjamin Netanyahu will soon become Israel’s first sitting prime minister to be indicted. The indictment, which has already been published by the Attorney General though not yet submitted to the court, accuses Netanyahu of several crimes of corruption. One of the most serious allegations (commonly referred to as “Case 4000”) is that when Netanyahu served as both Prime Minister and the Minister of Communications, he took steps to promote a deregulation of the telecom sector that would greatly benefit Shaul Elovitch, the controlling shareholder of Bezeq, one of Israel’s largest telecom firms. In particular, Netanyahu is alleged to have pushed for a decision allowing Bezeq to merge with another Israeli telecom giant. In return, Netanyahu allegedly received favorable media coverage from a news company controlled by Mr. Elovitch during two general elections.

Netanyahu has yet to submit a formal statement of defense to the charges, but given his countless press releases and interviews, it’s easy to predict what he will say. In particular, Netanyahu and his spokespersons have repeatedly argued that “decisions Netanyahu made regarding the telecom giant when he was communications minister were reasonable, had the support of the ministry’s professionals and were approved by the legal gatekeepers” (emphasis added). It’s not clear at this stage whether it is in fact true that the professionals in the Ministry of Communications also supported the merger. But suppose it were true. Why would it matter? Why would this be a defense to the bribery charges? Netanyahu and his supporters have remained vague, perhaps intentionally so, on this point. But there seem to be three possible arguments that he might advance as to why the Ministry professional staff’s (alleged) agreement with his position supplies a defense to the bribery allegation. None of these arguments has merit, and the court should dismiss all of them.

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Essential Reading for Enforcers: The EIB Fraud Investigation Unit and CPS Inspectorate Reports

Enforcing the anticorruption laws is the backbone of the fight against corruption, and improving enforcement agencies’ performance is thus critical.  Two recent reports, one by the European Investment Bank’s Fraud Investigation Unit and a second by the Inspectorate of the United Kingdom’s Crown Prosecution Service, offer a wealth of data, analysis, and tips from which all enforcement agencies can profit.  Highlights from each below.

Fraud Investigations Activity Report 2018.  This latest report of the EIB’s Fraud Investigations Unit documents the Unit’s fight against fraud and corruption in projects funded by the lending arm of the European Union, the world’s largest development finance agency. Compliance and investigative personnel in other bilateral and multilateral financial institutions will find much useful data for benchmarking their performance against the EIB unit. Case studies of different fraud and corruption schemes it has uncovered will help investigators in other institutions spot similar types of wrongdoing.

Most interesting to this reader was the description of the Proactive Integrity Reviews (PIRs) the Fraud Investigation Unit conducts.  All active operations in the Bank’s portfolio are scored each year against 30 risk factors to identify corruption and fraud vulnerabilities, and a PIR conducted on two or three of the operations most at risk.  Of the 27 projects subjected to a PIR, the unit found five, almost 20 percent, where funds have been misused.

Would a similar intensive review of a small number of World Bank, Asian, Inter-American, or African Development Bank produce similar numbers?  Will the new United States International Development Finance Corporation follow the EIB’s lead and institute a similar review?

Case Progression in the Serious Fraud Office. The Serious Fraud Office is the United Kingdom’s version of an anticorruption agency, with investigators, accountants, IT specialists, and prosecutors who work in teams to investigate complex fraud and corruption cases.  Case progression is the U.K. term to describe the time it takes for a team to reach a conclusion about a case, from opening an investigation to a decision either to file a criminal charge or to drop the matter altogether. The Crown Prosecution Service Inspectorate recently examined the procedures the SFO uses to ensure cases move through the system in a timely manner.  Other anticorruption agencies wanting to improve their performance will find a wealth of useful information and practical tips. Some of the key observations:

* Recognize that in a lengthy case there will be staff turnover. Maintain a key documents folder for those joining the team so they can get up to speed quickly.

* A unit with the technical skill to decrypt and download data kept on cell phones, computers, and other electronic devices is essential.  But realize that decryption can take enormous time.  Don’t overload the unit by seizing equipment of only secondary or passing interest.

* Periodic review of the progress of each case is essential to ensure deadlines for achieving key objectives or stages in the case are set, and met, and unfruitful lines of investigation abandoned. The SFO exercises oversight in several ways.  How each one works and suggestions for improving each will be of value to any anticorruption enforcement authority.

* The average number of days from the acceptance of a case to charging has been reduced from 41 months to 38 months, or 7.5%.

Italy’s Statute-of-Limitations Reforms: A Helpful But Incomplete Step Toward Ending Impunity

In 2015, a Naples court found former Italian Prime Minister Silvio Berlusconi guilty of paying a senator €3 million to support Berlusconi’s Forza Italia party and sentenced him to three years in prison for this crime. Berlusconi did not serve a day. Under Italian law, defendants are typically entitled to two appeals, which must be resolved before the defendants begin serving their sentences (with a handful of exceptions). Moreover, the statute of limitations clock keeps ticking while these appeals are in process. In Berlusconi’s case, the statute of limitations ran out before his case made its way through Italy’s glacial judicial system—where criminal trials can last an average of four to five years in the court of first instance alone, and the appeals can add an extra three years to the process. This was not the first time Berlusconi had benefitted from Italy’s slow judicial proceedings (see here and here). Nor was he the first politician to do so. In 2004, former Prime Minister Giulio Andreotti famously escaped punishment for mafia association in part due to the statute of limitations.

Corrupt politicians and other white-collar criminals got off scot-free in these and other cases due to the combination of three factors noted above. The first is the extremely slow pace of Italian criminal proceedings. The second is the rule that defendants do not have to begin serving their prison terms until their appeals have been exhausted. And the third concerns the rule that the statute of limitations clock begins when a crime is committed and continues to run for the duration of a defendant’s investigation, trial, and appeal, with no option of suspension. The rationale for this approach to the statute of limitations has traditionally been that the prosecution should not be able to hold a defendant in legal limbo while the case wormed its way slowly through the courts. In practice, however, this system often served to guarantee impunity for corrupt politicians and other wealthy defendants who could afford the high-priced lawyers that would drag out the legal proceedings just long enough to ensure their clients could never be imprisoned.

Furthermore, under the traditional Italian system of calculating the statute of limitations, the clock starts ticking at the moment the crime is first committed, rather than from when the crime is completed. (These are generally the same time for simple crimes like homicide or robbery, but for complex white-collar schemes, such as a bid-rigging conspiracy, there may be a long gap between the moment the crime starts and the time when it ends.) This rule makes prosecuting corruption and other complex financial crimes even more difficult, because such crimes are hard to detect and the investigations often take considerable time. So, what seem to be technical rules of criminal procedure—rules that, in the abstract, might be defended as protecting private citizens from prosecutorial overreach—in practice helped to perpetuate the system of impunity for Italian officials and businesspeople that fuels Italy’s already extraordinarily high levels of perceived corruption.

But there are hopeful signs that Italy may finally be addressing these problems. In December 2018, the Italian Parliament adopted a new anticorruption law, popularly referred to as Spazzacorrotti (“Bribe Destroyer”). (For English-language analyses, see here and here.) That new law, which will be fully implemented in 2020, contains a number of important provisions, including increased penalties for corruption and incentives for voluntary self-disclosure and cooperation. Crucially, the new legislation also amends Italy’s statute of limitations law: Continue reading

In Pressuring Ukraine To Open Criminal Investigations, Trump’s Associates May Have Committed Many Crimes. But Violating the Foreign Corrupt Practices Act Probably Wasn’t One of Them.

Right now, the biggest corruption story in the U.S., and probably the world, concerns efforts by President Trump and his associates, both inside and outside the U.S. government, threaten to withhold U.S. military aid from Ukraine in order to pressure the Ukrainian government into opening investigations that would help Trump politically. It’s clear at this point, except perhaps to the most rabid partisans, that there was indeed a “quid pro quo,” and the discussion has now turned to the question whether, with respect to President Trump specifically, he should be impeached for his conduct related to this episode (the issue that Rick focused on in yesterday’s post), and, with respect to whether Trump, his private lawyer Rudy Giuliani, or anyone else committed any crimes.

On that second question, commentators have suggested a whole range of criminal laws that some or all of the parties involved might have broken, including:

  • The section of the campaign finance laws that prohibits the “solicit[ation” from a foreign national of a “contribution or donation” to an election campaign of any “thing of value”;
  • The federal anti-bribery statute’s prohibition on any federal public official “directly or indirectly, corruptly demand[ing or] seek[ing] … anything of value personally or for any other person or entity, in return for being influenced in the performance of any official act”;
  • The anti-extortion provision of the Hobbs Act, which prohibits “the obtaining of property for another … under color of official right” (as well as the attempt or conspiracy to do so);
  • The wire fraud statute, which prohibits the devising of any “scheme or artifice to defraud” that involves use of any interstate (or international) wire communication (such as a phone call), where the term “scheme or artifice to defraud” is specifically defined elsewhere in the statute as including a scheme “to deprive another of the intangible right of honest services.” (This may seem a bit opaque to readers unfamiliar with this corner of U.S. law, but in a nutshell, so-called “honest services fraud” is a theory that when a public official, or some other person in a position of trust, engages in a corrupt scheme to, say, solicit bribes, that individual defrauds her principals by depriving them of her honest services. For an explanation of how this could apply to Trump in the Ukraine case, see here.)
  • In the case of Mr. Giuliani and other parties who do not work for the U.S. government, the Logan Act, which prohibits private citizens from corresponding with any foreign government or foreign government official “with the intent to influence the measures or conduct of any foreign government …. in relation to any disputes or controversies with the United States.”
  • Various provisions of Ukrainian law.

In addition to all of these possibilities, which strike me as at least facially plausible given the evidence that has come to light so far, some commentators have suggested that President Trump’s associates, such as Mr. Giuliani, may have violated the Foreign Corrupt Practices Act (FCPA) (see here and here). This argument hasn’t gotten much traction, in my view for good reason. Even for someone like me, who generally has a more expansive view of the FCPA than do some other commentators, it’s hard to see how the evidence we have so far would suggest a plausible FCPA violation. There are two main reasons for this: Continue reading