Category Archives: Commentary

On Conferences, Speaker Time Allocation, and Simple Division (Warning: Trivial, Non-Substantive, and Snarky)

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So I’m very excited to have the opportunity to attend tomorrow’s “Tackling Corruption Together” conference in London (a civil society event to precede the government-organized Anticorruption Summit on Thursday). It looks like a great program, and I’m looking forward to doing some substantive posts on the conference discussion after I return home. And given how grateful I am to be included, I probably shouldn’t say anything critical about the conference program in advance. But I just can’t stop myself from pointing out that for the opening session has allocated a total of 45 minutes total for: a welcome address by the Rt. Hon. Patricia Southland (Secretary-General of the Commonwealth of Nations), a keynote speech by President Muhammadu Buhari of Nigeria, and opening remarks from three additional speakers (Jose Ugaz, Mo Ibrahim, and Jan Coos Gessink). That comes out to nine minutes per speaker, on average (assuming a punctual start, no delays between presentations, and no time allocated for remarks from the session chair, Axel Threlfall). And while perhaps President Buhari will prove unusually succinct, I’ve never seen a head-of-state manage to keep his or her remarks under half an hour. This strikes me as absurdly unrealistic time allocation.

The rest of the conference program suffers from similar problems, generally allocating around 9-11 minutes per speaker, on average (not including the session chairs, and again assuming no delays or dead time). And I strongly suspect that the most of these speakers will want to take at least 15 minutes for their presentations. So, what will happen (I predict) is that sessions later in the day will be rushed, there will be no time for Q&A or meaningful exchanges among the panelists, and the coffee breaks and lunch hour–often the most productive times of these meetings, because that’s when people really get a chance to interact–will be drastically compressed.

I’m hoping that I’ll be proven wrong, and if I am, I’ll post a mea culpa. But otherwise, we can add this to my litany of complaints about anticorruption conferences (and other conferences, for that matter): Overcrowded programs, with too many speakers and too little time–and perhaps an over-emphasis on getting “fancy” speakers giving prepared remarks, rather than creating opportunities for genuine dialogue. But, again, I fully expect some useful material to come out of this meeting, given the great lineup of speakers. This is hardly an unusual problem. Consider this not so much a criticism as a plea, for future conference organizers, to think carefully about what’s a realistic allocation of minutes-per-speaker.

The U.S. Government’s New Anticorruption Proposals: A Cause for Cynicism, Optimism, or Both?

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Last Thursday, two United States cabinet departments – the Department of the Treasury and the Department of Justice – issued separate but thematically related announcements (see here and here) regarding new initiatives to combat corruption, money laundering, and related malfeasance:

  • Treasury announced the finalization of a new Customer Due Diligence (CDD) rule (discussed previously on this blog), which would require that financial institutions collect and verify the personal information of the beneficial owners of accounts held at those institutions. Treasury also announced a proposal for new regulations that would require certain foreign-owned entities (single-member limited liability companies (LLC)) to obtain a tax ID number and report comply with the associated reporting requirements—a move that would close a loophole that currently allows these entities to shield the foreign owners of non-U.S. assets.
  • Treasury also announced that it plans to send draft legislation to Congress (the text of which does not yet seem to be publicly available) that would require companies to know and report accurate beneficial ownership information at the time of a company’s creation, and to file this information with the Treasury Department.
  • Justice also submitted proposed legislation to Congress that would give the Department new investigative powers (including the use of administrative subpoenas, rather than slower and less flexible grand jury subpoenas, for money laundering investigations, enhanced authority to access foreign bank and business records, and the ability to restrain property based on a request from a foreign country for 90 rather than 30 days). The draft legislation would also creating a mechanism to use and protect classified information in civil asset recovery cases, and would expand the scope of the money laundering offense to include, as a sufficient predicate offense, any violation of foreign law that would be a violation of U.S. law if committed in the United States.

I have not yet had time to review the final CCD rule or the proposed LLC rule, and as I noted above, I don’t think the full text of the legislative proposals is yet available. So I’m not yet in a position to comment on the substance, but at least on the surface, all this seems encouraging. It’s possible to take the cynical view that most of this doesn’t mean very much or represent genuine progress. And I’ll admit part of me is inclined to embrace the cynical view. But on the whole, I do think that last week’s announcements are genuinely encouraging, and signal the possibility of building greater political momentum for real progress.

First, though, the reasons for cynicism: Continue reading →

Laissez-nous Faire: France is Forgoing an Opportunity to Fight Corruption, But Maybe It is the Wrong One

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In an ongoing exchange on this blog, Susan Hawley and Matthew Stephenson have debated the desirability and practicality of global standards for the settlement of foreign bribery cases (see here, here, here, and here). A key country at issue in this discussion is France, which has bucked the trend among its peer nations – including the U.S., the U.K., the Netherlands, Switzerland, and Germany – toward resolving foreign corruption cases through negotiated resolution. In fact, France has increasingly come under fire from organizations like the OECD, the EU, and Transparency International for its failure to hold corrupt companies accountable at all – over the past 16 years, the French government has not secured a single corporate conviction for overseas bribery. As Sarah convincingly argued on this blog, the reason is not that French companies are less corrupt or that French authorities are less capable, but rather that procedural barriers prevent productive investigation and resolution of cases. Primarily, the French civil law system lacks a settlement mechanism by which companies can negotiate lighter penalties in exchange for fines and cooperation. France is thus an important target for legal and policy reform affecting out-of-court settlement procedures.

Until very recently, the French government was poised to undertake such reform. Late last year, French Minister of Finance Michel Sapin developed legislation aimed at strengthening the fight against corruption. The draft version of Loi Sapin II, as it is known, contained provisions that put in place a new national anticorruption agency with investigative and oversight powers, enhanced compliance requirements, greater protections for whistleblowers, and stricter disclosure protocols for public officials. The most powerful and controversial element of Loi Sapin II, however, was the “convention de compensation d’intérêt public” (CCIP). Also known as a transaction pénale, the CCIP is a settlement mechanism modeled on the American deferred prosecution agreement (DPA). This tool would have allowed agreements between companies and the government, by which an accused corporation would institute compliance measures and pay fines (capped at 30% of average revenue over the preceding three years) in lieu of facing prosecution.

Just before the text of the law was formally presented, however, the Conseil d’État – the government body that must review draft legislation sponsored by non-parliamentarians before it can be introduced in Parliament – issued a negative opinion on the CCIP. When the text was submitted to the government on March 30, it did not include the transaction pénale. Procedurally speaking, the provision isn’t yet dead – it may still be reintroduced by members of Parliament. Nevertheless, the opinion of the Conseil d’État says a lot about France’s approach to anticorruption, trends in global enforcement, and the prospects for universal settlement standards in a world where legal cultures differ substantially.

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The Petrobras Investigations and the Future of Brazil’s Democracy: Thailand and Italy as Cautionary Tales

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In March of 2014, when Alberto Youssef, the initial whistleblower for the now infamous Petrobras scandal disclosed his knowledge of the scheme to his lawyers, he prefaced his revelations with a grim prediction: “Guys, if I speak, the republic is going to fall.” While that prediction may have seemed melodramatic at the time, the recent turmoil in Brazil surrounding the Petrobras scandal and the impeachment proceedings against President Dilma Rousseff have led some to begin to question whether Mr. Youssef’s prediction might in fact ring true.

The Petrobras scandal may be the single biggest corruption scheme in any democracy, ever. By some estimates, up to US$5.3 Billion changed hands through inflated construction contracts and kickbacks to Petrobras executives and politicians. Even for a country accustomed to political corruption scandals, this case is unique in its breadth and scope. Dozens of Brazil’s economic and political elite have been implicated, including the CEO of the country’s largest construction firm (sentenced to 19 years in jail), and the former treasurer of Rousseff’s Workers’ Party (sentenced to 15 years in jail), plummeting Brazil into a true political and economic crisis. The investigations transcend party lines: Eduardo Cunha, the speaker of the House leading the charge for President Rousseff’s impeachment (for using accounting tricks to mask the nation’s deficit), has himself been charged in connection with the Petrobras Scandal. Indeed, this scandal appears to be a political reckoning, an indictment of the entire elite class in Brazil.

By most accounts, Brazil is a thriving democracy—elections are free and fair, and there is a multi-party system marked by vigorous competition between rival parties. Civil liberties are generally well respected. Protests against the government have been massive, but by most accounts peaceful and undisturbed by state authorities. But some have gone so far as to speculate that the unprecedented scale of this scandal may lead to a collapse of Brazil’s democratic system. At least one historical example suggests that this might not be so far-fetched: In Thailand, the political deadlock in 2014 following the ouster of President Yingluck Shinawatra on allegations of corruption and abuse of power ended with a military coup, and democracy has yet to return. Yet perhaps another, somewhat less dramatic but nonetheless troubling precedent is even more apt: In Italy in the 1990s, the Mani Pulite (Clean Hands) campaign revealed endemic corruption and led to the collapse of the four governing political parties. In this case, while democratic elections continued, the political void left in the wake of Clean Hands was filled by new, corrupt actors like Silvio Berlusconi, and political graft remains rampant. Though Brazil seems unlikely to suffer a fate similar to Thailand, it is highly plausible that the aftermath of the Petrobras scandal might resemble the Italian experience.

Let’s consider some of the possible parallels between Brazil and Thailand, on the one hand, and Brazil and Italy, on the other.

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Canada’s Supreme Court Hands Corruption Fighters a Victory Worth Savoring

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In its April 29 opinion in World Bank Group v. Wallace the Canadian Supreme Court upheld the use of a growing practice in the fight against transnational corruption, ruling that World Bank investigators can provide information to the Royal Canadian Mounted Police about corruption in Bank projects and that it can do so without becoming subject to Canadian law.  The investigators had provided material suggesting executives of a Canadian company had paid bribes to win a Bank-financed contract in Bangladesh.  After being charged, the executives sought to depose the investigators and inspect Bank files in Washington.  Had the Court ruled for defendants, the World Bank and other development banks would almost certainly have halted further information sharing with national law enforcement agencies.  In ruling for the Bank, the Court not only endorsed information sharing arrangements but explained why it was essential that national authorities have unimpeded access to information from the Bank and other development finance institutions: “multilateral banks . . . are particularly well placed to investigate corruption and to serve at the frontlines of international anticorruption efforts” (¶94).

In Wallace the Court had to decide two questions:  1) Did the Bank’s immunity from Canadian law apply when it cooperated with the RCMP?  2) Would defendants be denied a right to a fair trial if they were not allowed to depose the investigators and search Bank records?  The Court’s reasoning in answering both questions in the Bank’s favor  offers valuable guidance that development banks will want to consider when entering into sharing arrangements with national law enforcement agencies in the future.    Continue reading →

The Panama Papers and the Structure of the Market for Asset-Concealment Services: Whack-a-Mole or Squeegee Men?

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The news item that’s caused the most buzz in the anticorruption community in the past month is likely the bombshell release of the so-called “Panama Papers” (though the initiation of impeachment proceedings against Brazilian President Dilma Rousseff runs a close second). Most readers of this blog probably don’t need much explanation of the Panama Papers or their significance. These documents, leaked from Panamanian law firm Mossack Fonseca to the International Consortium of Investigative Journalists, reveal how a very large number of very wealthy individuals, including many senior government officials and their close associates, have made use of middlemen, shell companies, obscure corporate secrecy rules, and other legal techniques to conceal their wealth from tax authorities, law enforcement, and the general public. (Rick’s post from a few weeks ago usefully highlights some of the most important legal loopholes that Mossack Fonseca helped its clients exploit.) Though in some cases the assets in question may have been acquired legitimately, in many cases they probably weren’t. And while it’s not entirely clear whether Mossack Fonseca broke any laws in assisting its clients, the whole affair is a window into the shadowy and often sordid practices that the very wealthy—including corrupt public officials and their cronies—use to hide their assets.

I haven’t yet weighed in on the Panama Papers brouhaha on this blog, mainly because I’m not sure what there is to say. On the one hand, the Panama Papers leaks are hugely consequential for at least two reasons: First, the identification of specific individuals—in addition to feeding our collective appetite for celebrity gossip—is likely to be important for holding those individuals legally or politically accountable. (And indeed, the release of the Panama Papers has already forced the resignation of Iceland’s former Prime Minister Davio Gunnlaugsson.) Second, the Panama Papers revelations have gotten a great deal of mainstream media attention, including front-page coverage on major newspapers and prominent discussions elsewhere. This may well help build momentum for efforts that anticorruption activists and others have been pushing for some time (such as crackdowns on corporate secrecy, closing gaps in the international money laundering regime, and other matters). Yet at the same time, individual names aside, it’s not clear that the Panama Papers revelations have told the anticorruption community anything that wasn’t already widely known (or at least strongly suspected): That corrupt leaders, and plenty of others with an interest in hiding their assets, take advantage of lax or uneven regulatory oversight, combined with networks of shell companies. So, while the added publicity is a boon, and the identification of individuals is necessary (though of course not sufficient) to holding them accountable, I’m not entirely sure whether the Panama Papers revelations have told us all that much that’s new. Of course, we still have a lot to learn from these documents—many of which haven’t yet been published—and I would be lying if I said I’d studied what has been released carefully enough to have any strong opinions. But I’ve been struggling to come up with something interesting to say about the Panama Papers, and mostly coming up empty.

There is, however, one thing about these revelations did strike me as potentially interesting, which I haven’t seen discussed in the coverage of the Panama Papers that I’ve read so far, so I thought I’d throw it out here to see what other people think: Continue reading →

Why Hasn’t Jacob Zuma’s Latest Anti-Anticorruption Effort Succeeded Yet?

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Any time South African President Jacob Zuma is involved in something, it’s easy to jump to the conclusion that corruption will somehow be involved as well. That’s particularly true in relation to the tension between him and Finance Minister Pravin Gordhan. This tension has recently manifested itself through a fractious battle, often via proxies, over decades-old happenings in the South African Revenue Service (SARS), an institution of which Gordhan used to be the head.

The attack upon Gordhan is largely motivated by concerns that he has the power and willingness to cut off some of Zuma’s corrupt lines of patronage. So far, nothing new: Zuma has a history of going after anyone who he perceives as threatening the network of graft which he’s woven. What’s particularly noteworthy this time, though, is that he’s facing some difficulty getting Gordhan out of his way—and that difficulty might hint at some hope for anticorruption advocates.

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Welcome (Back) to The Jungle: Why Privatization of Meat Inspections Will Increase Corruption and Threaten Food Safety

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Over a century ago, the tales of squalid meat production in Upton Sinclair’s famous novel The Jungle shocked the United States, contributing to a public outcry that ultimately led to regulations requiring a government inspector to examine every single meat carcass intended for human consumption. The U.S. Department of Agriculture’s FSIS (Food Safety Inspection Service) is responsible for the inspection regime. The established assessment program requires multiple FSIS inspectors to be on-site, performing a process of continual, carcass-by-carcass inspection during slaughter. The system is far from perfect and has never been a stranger to scandal (see here, here, and here). Yet it has been seen as vital to safeguarding public health from foodborne illnesses, including e.coli and salmonella outbreaks. It is also backed by a robust legal regime designed to insulate the inspectors from bribery and other forms of improper influence.

Unfortunately, throughout its history, FSIS has faced pressure to favor in-house inspectors over government inspectors in the name of creating a “flexible, more efficient” system. The most recent experiment with limiting the role of FSIS inspectors is HIMP (Hazard Analysis and Critical Control Point-Based Inspection Management Program), a program being piloted in a handful of pork plants and set to be proposed as a final regulation soon. (The related New Poultry Inspection System is being phased in now despite legal challenges.) HIMP uses in-house staff to conduct most of the inspections, particularly early on. A limited number of FSIS personnel do paperwork oversight and spot checks at particular points on the line.

However one chooses to balance competing calls for efficiency and safety, this is a short-sighted idea. Government inspectors and regulatory personnel are not perfect, but they are covered by anti-bribery laws and whistleblower protections that in-house inspectors are not, making them a safer bet for the safety of the meat supply. Filth and disease garner headlines, but civil society should continue to fight for an active role for government inspectors for another reason—public corruption is easier to fight than private influence. Even if one agrees that government inspectors are less efficient (a questionable proposition, despite how often it’s repeated), there are a number of laws and regulations in place designed to prevent (or expose) the corruption of these inspectors by the meat industry; there is no comparable regulatory regime in place to prevent equivalent corruption, or other forms of more subtle improper influence, from distorting the decisions of in-house private inspectors. Consider a few key areas of separation:

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Lasting Legacies: Marcos’ Denial Feeds into a Culture of Corruption

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In the past several months, Philippine Vice Presidential hopeful Senator Ferdinand “Bongbong” Marcos Jr. has faced a great deal of criticism for refusing to recognize and apologize for the acts of his father, Ferdinand Marcos, Sr., who, in addition to committing numerous human rights abuses against Philippine citizens during his 20-year reign as dictator, amassed an estimated $10 billion in ill-gotten wealth for himself and his cronies. Although some assets were seized after the People Power Revolution ended the Marcos regime, the Marcoses and their cronies held on to a great deal of ill-gotten wealth. (Indeed, when the new government was installed, it created an entire agency, the Presidential Commission on Good Government (PCGG), dedicated to recovering those assets.) In the eyes of many Filipinos, the Marcos name represents an era that saw billions stolen from the people, a fact illustrated by the PCGG’s recent decision to use a virtual exhibit of extravagant jewelry belonging to former first lady Imelda Marcos as an anticorruption campaign. Called the “Story of Extravagance,” it features a diamond tiara in platinum, a ruby tiara in silver, and numerous other jewels, along with descriptions of how the costs of each item could have been used to fund education, energy projects, and health initiatives.

The controversy over Bongbong’s refusal to apologize for this and other unsavory aspects of his father’s regime (including systematic human rights abuses) began last August, when the younger Marcos first asked what he should have to say sorry for, while highlighting the economic progress made during his father’s time in power. Since then, Bongbong has continued to insist that he has no need to apologize, even as criticism of his stance intensified in February, when the country celebrated the 30th anniversary of the People Power Revolution. The controversy has been further inflamed by revelations in the Panama Papers that Bongbong’s sister, Governor Imee Marcos, and her three sons were among those linked with offshore accounts. The Marcoses have so far issued no statement on the matter. In fact, not even a week after these revelations, Bongbong reiterated his stance that he has no reason to apologize for his family.

Others on this blog have discussed whether younger generations must take responsibility for the corrupt actions of their parents (see here for Courtney’s discussion of Peru’s Keiko Fujimori). In the case of Bongbong Marcos, and of the younger generation of Marcoses generally, the interesting and troubling reality is that their political careers will likely survive their outright refusal to acknowledge the corrupt acts of Ferdinand Marcos, Sr. This frustrating truth speaks volumes about the culture of impunity that plagues Philippine politics, and has troubling implications for the broader anticorruption fight.

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Don’t Blunt the Spearhead: Why the Proposed Revision of Indonesia’s KPK Law is a Bad Idea

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Indonesia’s Corruption Eradication Commission (Komisi Pemberantasan Korupsi, or “KPK”) was established in the hope that an independent anti-graft agency would effectively and fearlessly combat endemic corruption in Indonesia. True to its purposes, the KPK, in collaboration with other actors, has become one of Indonesia’s few anticorruption success stories. Since its establishment in 2003, the KPK has successfully charged 82 legislators in the parliament for corruption—a remarkable achievement in a country that has been known for the impunity of its political elite. After the appointment of its newest team of commissioners in 2015, the KPK has furthered its success in catching corrupt public officials, one of which was again a member of Indonesia’s House of Representatives (Dewan Perwakilan Rakyat, or “DPR”). It is safe to say that the KPK can indeed be deemed the “spearhead” of Indonesia’s corruption eradication efforts.

Yet, as an Indonesian proverb has it, “The taller the tree stands, the stronger the wind blows”: Attempts to weaken the KPK have grown in direct proportion to the agency’s success in bringing cases against powerful individuals and institutions. One example of this is the ongoing “Gecko v. Crocodile” struggle between the KPK (the small “gecko” with limited resources and young age) and the Indonesian National Police Force (the fierce “crocodile” with abundant power and resources), in which every time the KPK brings corruption charges against members of the Police Force, their members retaliate with criminal charges or harassment against members of the KPK. More recently, and more troublingly, members of the national parliament are now also trying to do what they can to undermine the KPK: Six out of the ten member parties in the DPR have proposed a revision of the current KPK Law–despite protests from the remaining political parties, NGOs, academics, and even the general public. Those opposed to this amendment argue (correctly) that there is no article in the revision that would increase the performance of the KPK, but instead all of the proposed revisions would undermine the KPK’s power and independence. Despite being packaged as a set of procedural improvements, the revision seeks to render KPK impotent – a strategy both subtler and likely more effective than the ham-handed tactics of the police in the “Gecko v. Crocodile” conflict.

The proposed law includes four main points of revision that proponents claim will improve the KPK’s performance. In fact, all four pose threats to the KPK’s independence and effectiveness:

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