Category Archives: Commentary

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

Posted on by
1

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.

Continue reading →

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

Posted on by
2

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:

Continue reading →

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

Posted on by
3

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.

Continue reading →

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

Posted on by
4

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:

Continue reading →

Should Other Countries Enact a False Claims Act?

Posted on by
1

For governments looking for a cheap, easy way to curb fraud and corruption in government contracts, the American False Claims Act seems like a no lose proposition.  It authorizes private citizens to file civil suits against companies they believe have cheated the federal government, and if their suit succeeds, the citizen is entitled to anywhere between 15 to 30 percent of any damages the government collects.  The offer of a reward creates an army of volunteer investigators and lawyers willing to invest their own time and energy into ferreting out fraud and corruption.  If they win the case, the government recoups most of its losses.  If they lose, the government isn’t out a cent.  The data suggests that False Claims Act suits have indeed been a bonanza for the U.S. government.  Recoveries in recent years have exceeded $2 billion per year with an average of $1.7 billion going to the government and the rest to citizen sleuths.

Before copying the False Claims Act verbatim, however, policymakers will want to consider University of Houston Law Center Professor David Kwok’s paper on why the statute seems to work well in the U.S., why an exact copy might not work so well elsewhere, and how it might be changed to fit countries where conditions differ from those in the United States.  The paper is the third in the series of papers commissioned by the Open Society Justice Initiative on civil society and anticorruption litigation, following earlier ones on standing by GAB editor-in-chief Matthew Stephenson and on civil society litigation in India by Vidhi Centre for Legal Policy Director Arghya Sengupta. As with those by Matthew and Arghya, David’s paper provides civil society activists and policymakers wanting to bolster the enforcement of anticorruption laws in their country much to deliberate on.

A Detailed Critique of the NGO Call for Global Standards for Corporate Settlements in Foreign Bribery Cases

Posted on by
7

In my last couple of posts, I’ve responded to—and criticized—the joint letter that several of my favorite anticorruption NGOs (Corruption Watch, Transparency International, Global Witness, and the UNCAC Coalition) sent to the OECD last month, urging the adoption of “global standards for corporate settlements based on best practice.” My first post took issue with the claim (further developed in a Corruption Watch report) that the current approach (mainly in the U.S.) to corporate settlements in foreign bribery cases was inconsistent with adequate enforcement, while my next post questioned the need for global guidelines. But both of my prior posts could fairly be criticized for (among other things) being too abstract, and for not responding to the specific list of 14 “best practices” identified in the NGOs’ joint letter.

I take that criticism to heart, so in this post—at the risk of overkill on this one letter, but in the hopes of spurring further constructive dialogue on this important topic—I’ll offer a point-by-point reaction to each of the 14 principles listed in the joint letter. Here goes: Continue reading →

Is it Legal in the U.S. To Buy Delegate Votes at Party Nominating Conventions?

Posted on by
4

As bizarre as the U.S. presidential campaign has been so far, it may get even more so this summer. There is a chance (although maybe not a probability) that the Republican Party will have its first contested convention since 1976. If no candidate has a majority of delegates on the first ballot, then many “bound delegates” can switch their vote to any candidate for the nomination (here is a brief primer on how a contested convention might work). If that happens, might some candidates (or, more likely, their surrogates) actually try to buy delegates’ votes—offering them cash or other crude material inducements in exchange for support? Donald Trump recently told a friend—apparently (and hopefully) in jest—he would “buy the delegates” if he did not obtain a majority in the primaries.

Such conduct would certainly be corrupt in the traditional sense. Believe it or not, however, such vote buying might not be against the law. Buying votes in a federal election is certainly illegal. But, as a recent Bloomberg article explained, “There is nothing in the [Republican National Committee]’s rules that prohibits delegates from cutting a deal for their votes, and lawyers say it is unlikely that federal anti-corruption laws would apply to convention horse-trading. (It is not clear that even explicitly selling one’s vote for cash would be illegal.)” Similarly, when respected former Republican National Committee counsel Ben Ginsberg was recently asked whether an unbound delegate to the convention could legally accept a suitcase full of cash in exchange for a vote for a candidate for the nomination, Ginsberg replied, “That is a great legal question that I’m not sure there’s an answer [to]. It’s not official [] action.” (Ginsberg did, however, emphasize that most lawyers “would not want to be defending somebody who just took a suitcase of cash for a vote at a convention.”)

So while outright vote buying at a contested convention is not exactly likely, it’s a serious enough concern to make it worthwhile to assess the risks, the current law that might apply, and the steps that Congress and the political parties can take to do something about this concern. Continue reading →

#Ley3de3 and the Power of Mexican Civil Society

Posted on by
5

As I discussed in an earlier post, Mexico enacted a series of constitutional anticorruption reforms last spring. I praised those reforms for their comprehensiveness and their potential to resolve problems of corruption at the state and local levels. However, I also noted that they required secondary enabling laws to actually go into effect. Until recently, the likelihood of enacting those laws on time looked slim, as the late-May deadline approached with considerable foot-dragging by the legislature. But Mexican civil society has risen to the challenge in an exciting way. Thanks to a 2012 constitutional reform that allows citizens to introduce bills to the legislature with 120,000 signatures (or 1.3 percent the voter rolls), an anticorruption bill has now been delivered to and is being debated by the Mexican Senate.

Called Ley 3de3, the initiative is an extraordinary example of civic engagement. Leading civil society groups have spearheaded the campaign, and universities and even for-profit businesses have gotten involved (see here and here). When the law was first delivered to the Mexican Senate on March 17th, it had over 300,000 signatures. A second installment of almost 325,000 more signatures was delivered nineteen days later. The legislation works to fill a number of important holes in the Mexican anticorruption landscape. For example, it requires public servants to disclose their assets, private interests, and tax returns (the 3-out-of-3 which gives the law its title) and proposes protection for whistleblowers who report corruption. The law faces a number of obstacles before it is passed, and other laws will be necessary to fully enact the National Anticorruption System promised by the constitutional reforms. However, the Ley 3de3 effort should be cause for, at least tempered, optimism. Continue reading →

Not the “Panama Papers” But the “BVI Papers” or Better Still the “EI” Papers

Posted on by
9

The immense public service performed by the consortia of journalists who exposed the inner-workings of the Panamanian law firm Mossack Fonseca is plain to all.  The thousands of stories in multiple languages revealing how M/F works with law firms and banks around the globe to help individuals hide their wealth has provided law enforcement a cornucopia of leads — as the investigations launched in France, Switzerland, South Africa, Pakistan, the United Kingdom, El Salvador, Argentina, and India attest to.  Far more important than nailing a few tax cheats or crooked politicians, though, are the revelations showing how easily firms like M/F can dodge laws that supposedly bar them from helping individuals keep their wealth a secret and what changes are needed to end this legal dodge ball.

But there is a risk that, because the revelations have been dubbed the “Panama Papers,” reformers will be thrown off the scent.  Panama is a small part of the story at best.  The real problem lies in jurisdictions like the British Virgin Islands where, as an April 4 Guardian story shows, an obscure provision in its antimoney laundering law allows M/F and other firms like it to establish a BVI corporation without having to verify who the true, or beneficial, owner of the corporation will be.  This creates an opportunity to introduce a layer of secrecy between the owner and his or her money and law enforcement authorities.  A name better calculated to lead reformers in the right direction would have been the “BVI Papers” since most of the corporations M/F establishes for clients are created under the law of BVI.

An even better name still might be the “EI Papers” as it is the “EI” provision of BVI law that allows M/F to duck verifying the identity of the beneficial owners of the corporations it creates.  “EI” stands for “eligible introducer,” and the best way to see how the EI provision in BVI law makes hiding money so easy is through an example.  Suppose, just for the sake of illustration, Russian President Vladimir Putin was about to come into a large amount of rubles that he would rather Russian citizens and his critics abroad not know about.  How would the EI provision in BVI law help him keep his wealth secret? Continue reading →

Against Global Standards in Corporate Settlements in Transnational Anti-Bribery Cases

Posted on by
2

A couple weeks ago, Susan Hawley, the policy director of the UK-based NGO Corruption Watch, published a provocative post on this blog calling for the adoption of “global standards for corporate settlements in foreign bribery cases.” Her post, which drew on a recent Corruption Watch report on the use (and alleged abuse) of the practice of resolving foreign bribery enforcement actions through pre-indictment diversionary settlements—mainly deferred-prosecution and non-prosecution agreements (DPAs/NPAs)—echoed similar arguments advanced in a joint letter sent by Corruption Watch, Transparency International, Global Witness, and the UNCAC Coalition to the OECD, on the occasion of last month’s Ministerial meeting on the OECD Anti-Bribery Convention.

A central concern articulated in Ms. Hawley’s post, as well as the CW report and the joint letter, is the fear that corporate settlements too often let companies off too easily–and let responsible individuals off altogether–thus undermining the deterrent effect of the laws against transnational bribery. I’m sympathetic to the concern about inadequate deterrence, but unconvinced by the suggestion that over-reliance on DPAs/NPAs is the real problem. (Indeed, I tend to think that under-use of these mechanisms in other countries, such as France, is a far greater concern.) My last post took up that set of issues. But, as I noted there, the question whether the U.S. use of settlements is (roughly) appropriate is conceptually distinct from the question whether there ought to be global standards (or guidelines) on the use of such settlements. After all, while one could object to U.S. practices and call for (different) global guidelines—as Corruption Watch does—one could also object to U.S. practices but still resist attempts to develop global guidelines. Or one could not only endorse current U.S. practices, but also call for global guidelines that similarly endorse those practices. And then there’s my position: basically sympathetic to the general U.S. approach to corporate settlements in FCPA cases, and generally skeptical of the case for global guidelines.

Having spent my last post elaborating some of the reasons for my former instinct, let me now say a bit about the reasons I’m unconvinced by the call for global guidelines on corporate settlements (or at least why I think such calls are premature): Continue reading →