Category Archives: Commentary

Verdicts and Judicial Strength: Why Convictions Should Not Be the Focus of Anticorruption Efforts

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As I discussed in my last post, effective anticorruption enforcement requires a judicial system with the capacity and will to hold powerful defendants criminally liable for their malfeasance. Understandably, then, judicial institutions, especially in developing countries, are often written off as weak or corrupt if they are unable to convict and sentence high-profile corruption defendants. Acquittals can seem synonymous with impunity, regardless of the justifications put forth by the court. On this measure, many domestic judiciaries charged with high-profile cases fail. For example, almost all of the central figures ousted in the 2011 Arab Spring uprisings in Egypt were ultimately acquitted of all corruption-related charges. Additional examples of high-profile corruption acquittals or dismissals abound around the world (see here, here, here, here, and here).

To be sure, the inability of many judiciaries to hold high-profile corruption defendants criminally accountable is often indicative of underlying problems in the court system, and these problems must be addressed. At the same time, though, I worry that domestic and international constituencies sometimes put too much emphasis on individual verdicts, or overall conviction rates, as the measure of judicial effectiveness. While these indicators can provide important information, overemphasizing guilty verdicts in particular corruption cases, or overall conviction rates, could actually be counterproductive to anticorruption progress, for at least three reasons: Continue reading →

Senator Menendez and the Great Speech or Debate Clause

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The corruption allegations against Senator Robert Menendez (D-NJ) have the hallmarks of a classic Capitol Hill scandal. The Department of Justice’s Public Integrity Section indicted Senator Menendez last spring for allegedly using his official position to promote the business and personal interests of his friend and long-time donor Dr. Salomon Melgen, a Florida ophthalmologist. According to the allegations, Dr. Melgen provided Senator Menendez with lavish trips to Florida, Paris, and the Dominican Republic, as well as political contributions to allies. In exchange, Senator Menendez allegedly interceded with immigration authorities to help Dr. Melgen secure visas for his foreign girlfriends, sought to influence an administrative enforcement action against Dr. Melgen for $8.9 million in Medicare overbilling, and pressured the Executive Branch to intervene in Dr. Melgen’s contract dispute with the Dominican Republic.

Unsurprisingly, this legal fight has been ugly. Senator Menendez and his legal team have accused the prosecution of gross misconduct in the grand jury investigation, of “misapplying” and “making up from whole cloth” certain legal standards, and “disparaging defendants’ motives and defense counsel.” The prosecution, for its part, has accused the Senator’s camp of deploying “vituperation” instead of substance and of advancing “false factual premises and specious legal reasoning.”

The latest iteration of this saga is taking place at the appellate level, where the Third Circuit recently heard oral arguments on Senator Menendez’s assertion that his actions on behalf of Dr. Melgen are entitled to immunity under the U.S. Constitution’s “Speech or Debate” Clause (an argument the trial court rejected). The Speech or Debate Clause provides that “for any Speech or Debate in either House, [Members of Congress] shall not be questioned in any other Place.” Like many legislative immunity clauses in other countries, the Speech or Debate Clause was born in part out of a desire to protect legislators from political prosecution for the views they express when legislating, and to encourage free and informed debate.

U.S. courts have interpreted the Clause quite generously over the years, reading it to cover not only actual speeches and debates, but also other “legislative acts” (such as voting on legislation, authorizing an investigation by a Congressional Committee, preparing reports, and holding hearings). Senator Menendez, however, argues for an even broader understanding of the conduct that qualifies as “legislative acts” shielded by the Clause. These arguments should be rejected. Not only are Senator Menendez’s claims legally dubious under existing precedents, but, if accepted, they would also hamstring the prosecution of classic quid pro quo corruption.

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When Should Governments Keep Stolen Assets?

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The Swiss government agreed in early March to return $321 million to the Nigerian government that was stolen by the late Sanni Abacha during his kleptocratic reign as the country’s president.   The agreement provides that the funds will be used for programs to benefit the Nigerian people in “an efficient and accountable way” and, to ensure the funds do indeed go to such programs, the World Bank will monitor their use.

World Bank oversight is one way to ensure returned assets are not again stolen, and in the case of Nigeria — a relatively open society with an elected government, a lively, unconstrained media, and a vibrant civil society – World Bank monitoring, when coupled with these conditions, may be sufficient to guarantee the funds are put to good use.  But what about in closed societies?  Those without elections, free media, an independent civil society.  Countries where the same tight-knit, authoritarian group which stole the assets in the first place remains in power?  Is there any way to ensure stolen assets returned to these countries will be used to benefit the nation’s citizens rather than going straight back into the pockets of the thieves? Continue reading →

The Roles of Anticorruption Academics and Advocates: Insights from the NGO Side

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One of the purposes of this blog (as noted in our mission statement) is to promote the interchange of ideas across disciplinary boundaries, including–indeed, especially–between researchers and practitioners. It turns out that despite our shared interests in understanding and fighting corruption, there’s often quite a gulf between the academic and advocacy communities. I’ve commented this difference in perspectives in the past (from the perspective of an Ivory Tower academic), both in general terms, and with respect to some particular topics, such as the optimal degree of simplification, the role of university education, and the use of eye-catching statistics. While I recognize that discussion of these issues may seem like navel-gazing, I actually think these conversations are quite important, given the complementary but distinct roles that academic research and advocacy work have in the overall anticorruption project.

I was therefore delighted to read a recent speech by Robert Barrington, the Executive Director of Transparency International UK, on precisely this topic. It’s one of the best discussions of this issue that I’ve come across. (And I’d say that even if he didn’t reference one of my posts on this blog!) Whereas I come at this issue from an academic perspective, Mr. Barrington is a leading voice in the advocacy community, and he has some good advice for all of us. The speech is very short, so instead of attempting to summarize it I’ll just encourage interested readers to click on the link above. But let me close here by quoting Mr. Barrington’s summation, with which I wholeheartedly concur:

We should be two communities that work closely together. There is little excuse not to. As an advocate, this is my message: our subject is too important for academics to be obscure or self-referential, or for NGOs to be ill-informed, misguided or unchallenged. Our choice is not whether to work hand-in-hand, but how we should do so.

Diamonds are an Autocrat’s Best Friend: Corruption in Zimbabwe’s Mining Industry

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Earlier this month, Robert Mugabe, Zimbabwe’s president of nearly 30 years, announced his intention to nationalize diamond mining. He explained the decision by blaming corruption in the industry for “robbing [the Zimbabwean people] of our wealth,” estimating the government’s loss in the past seven years as upwards of $13 billion. For a country with an annual budget of $4 billion, 30% of which comes from the money that does make its way from the diamond mines to the government’s coffers through taxes and other fees, this move has enormous economic significance. Factor in Zimbabwe’s recent attempts to convince international donors and investors that its basket case economic days are behind it, and the ripple effects of Mugabe’s decision are likely to be even more important.

Undoubtedly, Mugabe is right about one thing: there’s been plenty of corruption surrounding the diamonds of Marange, a district in eastern Zimbabwe, since the 2006 realization that the pebble-like objects “so common that children were using them in their catapults to shoot birds” actually represented “the richest diamond field ever seen by several orders of magnitude.” The trouble is that Mugabe is the one mostly responsible for that corruption. In fact, this nationalization plan is best understood as the next step in Mugabe’s utilization of corruption at the mines for his own benefit.

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Claims Against Petrobras Highlight Prospects for Shareholder Enforcement in US Courts

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The fallout continues from the ongoing investigation of corruption at Petrobras, Brazil’s giant state-owned oil company. (See New York Times coverage here, and helpful timelines of the scandal here and here.) In March of 2014, Brazilian prosecutors alleged that Petrobras leadership colluded with a cartel of construction companies in order to overcharge Petrobras for everything from building pipelines to servicing oil rigs. Senior Petrobras executives who facilitated the price-fixing rewarded themselves, the cartel, and public officials with kickbacks, and concealed the scheme through false financial reporting and money laundering. The scandal has exacted a significant human toll: workers and local economies that relied on Petrobras contracts have watched business collapse: several major construction projects are suspended, and over 200 companies have lost their lines of credit. One economist predicted unemployment may rise 1.5% as a direct result of the scandal.

The enormous scale of the corruption scheme reaches into Brazil’s political and business elite. The CEO of Petrobras has resigned. As of last August, “117 indictments have been issued, five politicians have been arrested, and criminal cases have been brought against 13 companies.” In recent months, the national Congress has initiated impeachment proceedings against President Dilma Rousseff, who was chairwoman of Petrobras for part of the time the price-fixing was allegedly underway. And last month, federal investigators even received approval from the Brazilian Supreme Court to detain former President Luiz Inácio Lula da Silva for questioning. (Lula was President from 2003 to 2010—during the same period of time that Ms. Rousseff was chairwoman of Petrobras.) Meanwhile, the House Speaker leading calls for President Rousseff’s impeachment has himself been charged with accepting up to $40 million in bribes.

As Brazilian prosecutors continue their own investigations, another enforcement process is underway in the United States. Shareholders who hold Petrobras stock are beginning to file “derivative suits,” through which shareholders can sue a company’s directors and officers for breaching their fiduciary duties to that company. Thus far, hundreds of Petrobras investors have filed suits. In one of the most prominent examples, In Re Petrobras Securities Litigation, a group of shareholders allege that Petrobras issued “materially false and misleading” financial statements, as well as “false and misleading statements regarding the integrity of its management and the effectiveness of its financial controls.” (For example, before the scandal broke, Petrobras publicly praised its Code of Ethics and corruption prevention program.) The claimants allege that as a result of the price-fixing and cover-up, the price of Petrobras common stock fell by approximately 80%. In another case, WGI Emerging Markets Fund, LLC et al v. Petroleo, the investment fund managing the Bill & Melinda Gates Foundation has alleged that the failure of Petrobras to adhere to U.S. federal securities law resulted in misleading shareholders and overstating the value of the company by $17 billion. As a result, the plaintiffs claim they “lost tens of millions on their Petrobras investments.”

Thus, in addition to any civil or criminal charges brought by public prosecutors, private derivative suits offer a way for ordinary shareholders to hold company leadership accountable for its misconduct. In these derivative suits, any damages would be paid back to the company as compensation for mismanagement; the main purpose of the suits is not to secure a payout for shareholders, but to protect the company from bad leadership. The Petrobras cases illustrate how derivative suits can offer a valuable mechanism for anticorruption enforcement, but they also face a number of practical challenges.

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Can a Corporate Settlement that Names Names Be Grounds for a Defamation Suit?

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A running theme in discussions—and criticisms—of government settlements with corporations in foreign bribery cases is the failure to focus adequately on individuals. Most commonly, this criticism emphasizes the alleged failure of the “supply-side” enforcers (e.g., the U.S. Department of Justice (DOJ), the U.K. Serious Fraud Office (SFO), etc.) to bring charges against the individual corporate officers and employees responsible for the illegal conduct. Additionally, though, some—including some contributors to this blog (see here and here)—have emphasized that settlements with supply-side enforcers should contain enough information on the illegal transactions that enforcement authorities in the demand-side countries (that is, the countries whose public officials took the bribes) can go after individuals under their jurisdiction. Such individuals would include, most obviously, the government officials who took the bribes, but might also include third-party intermediaries and other local agents over whom the supply-side enforcers lack jurisdiction.

The idea that the public documents in these settlement agreements ought to include a detailed discussion of the transactions, including the identities of the individuals involved, sounds like a good idea. Indeed, I think it generally is a good idea (though I confess I haven’t thought through the issue carefully). But recent news reports out of Tanzania last week highlight a potential pitfall that I confess I hadn’t previously considered: The individuals named as wrongdoers in corporate settlement agreements might sue. Are such suits viable? I have no idea. But the problem is worth considering.

Let me first lay out a brief synopsis of the Tanzania case, and then offer a few under-informed speculations about what this all means. Continue reading →

Measurement Brings Action: The Need for a Global Sexual Corruption Index

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Sexual corruption is a scourge, to varying degrees, in almost every country–from immigration officials demanding sex for green cards, to U.N. soldiers using their power to force themselves on refugees or the local population they are supposed to be protecting, to police officers who demand sex in exchange for not arresting someone. The International Association of Women Judges has been trying to bring attention to this “sextortion” problem, with some limited success: Transparency International (TI) describes sextortion as a form of corruption, and last September’s International Anti-Corruption Conference devoted a high-profile session to discussing this issue.

Yet despite this increasing recognition that this sort of sexual corruption is indeed corruption–the abuse of public power for private gain–the major international indexes used to measure corruption, such as TI’s corruption perception index (CPI) (and the underlying studies used to generate the CPI), focus overwhelmingly on material corruption–principally monetary bribery and embezzlement–not the abuse of public power to extort sexual favors from victims. This is a problem: As we have seen over and over again (both in the corruption context, and in other contexts such as the Millennium Development Goals (MDGs)), for better or worse, national-level country ratings drive action. Right now, a country that wishes to improve its global standing on corruption currently has little incentive to tackle sexual corruption. And there is no separate, easy-to-understand metric that calls attention to how well (or poorly) countries are doing, relative to one another, in addressing that problem.

It is time for that to change. It is time to create a Global Sexual Corruption Index. Continue reading →

CICIG’s Achilles Heel: Suggestions for Reforming the Guatemalan Judiciary

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In 2015, an innovative institution in Guatemala—the International Commission Against Impunity (CICIG)—got a lot of attention (including from me on this blog). Among CICIG’s triumphs last year were the resignations and arrests of former Guatemalan President Otto Perez Molina and Vice President Roxanna Baldetti on corruption-related charges following a Guatemalan Spring of sorts. Perez was formally charged in December with illicit association, customs fraud, and bribery. He maintains his innocence, claiming to be a scapegoat and arguing that nothing has changed about corruption in Guatemala except that he is now in jail. Unfortunately, without major changes he is likely to be right on the latter point. To be sure, removals of corrupt leaders like Perez and Baldetti are victories. But while Perez’s fall from grace and the general outpouring of public anticorruption sentiment in Guatemala are cause for great optimism, there is reason for trepidation as his case moves toward trial this year.

The reason is a decade-old compromise made during CICIG’s founding based on national sovereignty concerns. A Guatemalan court ruled that CICIG would be unconstitutional if empowered to try cases outside of the Guatemalan judicial apparatus. As a result, the success of CICIG and its proposed spin-offs remains inextricably tied to the strength of domestic institutions. CICIG can investigate and support prosecutorial efforts, but must rely on the domestic judiciary to hear its cases. Unfortunately, domestic governments across Central America remain notoriously corrupt. Even after a decade of CICIG’s efforts toward capacity building, the Guatemalan government is no exception. The Guatemalan court system is largely defined in Guatemalan citizens’ political consciousness by its inability to obtain convictions in important cases. Reform of the judiciary must be a central focus of anticorruption efforts going forward. The following challenges should be prioritized: Continue reading →

What Others Can Take from Anticorruption Litigation in India

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As Ken Hurwtiz of the Open Society Justice Initiative explained here in February, the Justice Initiative has commissioned a series of papers on civil society and anticorruption litigation to, among other things, alert anticorruption activists and litigators in one country to legal developments in another they can adapt, if not borrow wholesale, for use in cases they are pursuing.

The second paper in the series, Arghya Sengupta’s “Anti-Corruption Litigation in the Supreme Court of India,” just released and now available on the JI web site, fills this bill admirably.   As Sengupta, Founder and Research Director of the Vidhi Centre for Legal Policy in Delhi, explains, there is much in the Indian experience of value to lawyers in other nations.  Since the late 1990s Indian courts have issued a series of extraordinary, precedent setting decisions to address the rampant corruption that infects India’s public sector.  In response to cases brought by civil society, they have ordered law enforcement authorities to investigate grand corruption cases they had been ignoring, appointed civil society monitors to ensure the investigations are faithfully conducted, and invalidated executive actions tainted by corruption.

Sifting through the massive number of precedents to find ones useful elsewhere would be a daunting task for the non-Indian jurist or researcher.  Sengupta’s paper makes it easy.  He organizes the cases by theme and summarizes the holdings of the key decisions.  He notes too where the courts’ decisions have had unintended effects and where critics argue that the cost of a court’s intervention may have exceeded the benefit. While litigators in other common law countries will find the paper an invaluable guide to cases they can lift directly, lawyers in civil law countries will be able to make great use of it as well, suggesting innovative arguments for a judicial solution to the chronic corruption problems affecting their nations.