Category Archives: Commentary

Does Compulsory Voting Increase or Decrease Corruption? (Preliminary Thoughts)

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As Courtney discussed in yesterday’s post, Peru’s presidential elections are scheduled for next month, and issues of corruption loom large in the public debate. The role of corruption in Peruvian politics is such a rich and complex topic, one about which I must confess I know very little. But one feature of the Peruvian election system, about which I was previously ignorant, caught my attention during conversations at a fascinating meeting in Lima last month (sponsored by the Peruvian Controller General’s Office): In Peru, voting is compulsory–there are penalties for failing to vote. Compulsory voting requirements, while not exactly common, are enforced in quite a few democracies, including (in addition to Peru) Argentina, Australia, Brazil, Cyprus, Ecuador, Liechtenstein, Luxembourg, Nauru, Singapore, and Uruguay. Some sub-national jurisdictions (such as the Indian state of Gujarat and the Swiss canton Schaffhausen) have compulsory voting, and there are also several countries that had compulsory voting at some point in their history, but have since abolished it (including, for example, Italy, the Netherlands, and Venezuela). In the United States, President Obama himself has suggested that the U.S. should consider some form of compulsory voting.

What does this have to do with corruption? Well, that’s actually the question I want to explore in this post. Although there’s a small political science literature on compulsory voting, there seems to be very little sustained discussion of the implications of compulsory voting for corruption control. (There is a bit, some of which I’ll mention below, but usually the mentions are brief and in passing.)

I’ll readily admit I don’t know much about this topic, but it seems to me an interesting question, and I can see a few arguments cutting both ways. So, without reaching any firm conclusions, let me first sketch out a few reasons why compulsory voting might reduce corruption, and then suggest a few reasons why compulsory voting might increase corruption. Continue reading →

Sins of the Father: Keiko Fujimori’s Presidential Candidacy in Peru

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Dynastic politics are still strong across the globe. Hillary Clinton seems poised to follow in her husband’s footsteps and become President of the United States. Another Trudeau was elected Prime Minister of Canada last October. Chinese President Xi Jinping is a so-called “princeling.” And, as has been well documented on this blog, dynasties rule the political scene in the Philippines.

The front runner in Peru’s presidential election also has a familiar last name: Fujimori. Congresswoman Keiko Fujimori is the daughter of former president Alberto Fujimori, who held office from 1990 to 2000. Ex-President Fujimori’s regime did some good in Peru; for example, his liberal economic reforms helped to launch a period of economic growth. But his regime was also brutal and plagued by corruption. President Fujimori is in prison today, serving a 25 year sentence for human rights violations. He’s also been convicted of a number of corruption-related offenses, including using his spy chief to bribe journalists, business people, judges, and opposition politicians.

Despite this legacy of corruption, and the fact that Peruvians view corruption as one of the most serious problems facing the country, Congresswoman Fujimori sits atop the polls of the 2016 election. Is this a problem? How much should Peruvian voters consider Alberto Fujimori’s corruption and human rights abuses when they vote next month? And to what extent should the Fujimori family legacy affect their assessment of Congresswoman Fujimori’s approach to corruption?

Continue reading →

Fixing Perpetually Corrupt Institutions—The Philadelphia Story

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Often in the anticorruption world we grapple with the question of how to deal with perpetually corrupt institutions. One example is the Philadelphia City Commission and its elected commissioners. In recent years, Anthony Clark, the Chair of the City Commission got paid despite not showing up to work, while other commissioners have engaged in overt patronage politics, such as doling out jobs to family members and steering city contracts to businesses and institutions run by family members (leading to the federal indictment of the daughter of the long-serving former Chair on corruption charges). And although credible voter fraud charges in Philadelphia are uncommon, the Commission has not done a particularly good job of administering elections, its primary job. For example, in 2012 more than 27,000 registered voters were somehow left out of the official polling books, and had to cast provisional ballots.

Things with the elected Philadelphia City Commissioners have gotten so bad that some (including the Committee of Seventy, a good governance group in Philadelphia, and the city’s two largest newspapers, the Philadelphia Inquirer and the Philadelphia Daily News) have called for abolishing the elected positions altogether. The Committee of Seventy has called for replacing the elected City Commissioners with an appointed board of professions to administer Philadelphia’s elections, although its plan is short on details.

This proposal relates to a larger issue with which anticorruption reformers in many jurisdictions struggle: which positions should be elected, and which should be appointed? When is democratic accountability the solution, and when is it the problem? There is no one right answer, of course—it all depends on context. Yet in the specific context of the Philadelphia City Commission, the instinct to eliminate the democratic process is premature for two reasons. Continue reading →

Time to Investigate Nike’s ‘Commitment Bonus’ to Kenya’s Track and Field Authority

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Since last November Kenya has been rife with claims (here and here for press reports) that American shoemaker Nike bribed the nation’s track and field authority to ensure the country’s runners compete wearing Nike shoes.  While Nike denies wrongdoing, the March 6 issue of the New York Times provides details which suggest the allegations are true.  Yet despite the mounting evidence that an American company is at the center of a high profile corruption case in Kenya, the Times reports the U.S. has not opened an investigation.  Its failure to do so, in the face of President Obama’s stern lecture about corruption to the Kenyan elite during his July 2015 visit to the country and the agreement reached during his visit pledging the U.S. to help Kenya fight corruption, has left Kenyans frustrated and angry at America.  It is “hypocritical,” famed Kenyan corruption fighter John Githongo told the Times, for the American government to “bang on” about Kenya without investigating allegations against the iconic American company.

According to the Times, American officials believe the U.S. is powerless to investigate because, even if Nike did indeed pay a bribe, it was to employees of a private entity, and private sector bribery is not covered by the anti-bribery provisions of the Foreign Corrupt Practices Act.  But while private sector bribery itself is not an FCPA offense, this does not mean Nike is off the hook.  If an American company bribes an employee of a private entity, as it is alleged Nike has, it runs afoul of numerous state and federal statutes, anyone of which could provide the basis for launching an investigation.  Four that come to mind immediately are:   Continue reading →

It’s Official: Hiring a Foreign Official’s Relative in Exchange for Business Violates the FCPA

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The U.S. Foreign Corrupt Practices Act (FCPA) prohibits the entities it covers from corruptly offering “anything of value” to a foreign official for the purposes of obtaining or retaining business. In most cases, the “thing of value” offered is a traditional bribe—money, expensive gifts, lavish vacations, etc. But in some cases, firms do “favors” for foreign officials that are less direct, and do not conform quite so obviously to traditional notion of bribery. Making a generous donations to the official’s favorite charity is one example; another, which has become increasingly prominent in recent FCPA investigations—primarily in cases involving China—is preferential hiring of the relatives of the foreign officials in exchange for business opportunities. This issue got a lot of press particularly in connection with the SEC’s investigation of hiring practices at JP Morgan and other investment banks in China, but the issue is more pervasive.

These investigations raised an interesting legal question: Can providing a job or internship to the adult relative of a foreign official ever count as providing “anything of value” to the official him- or herself? To my mind, the answer is a clear yes, but not everyone agrees. Last year, Professor Andy Spalding and I engaged in a spirited and constructive debate on this question (see here, here, here, and here)—and though I think in the end our positions (mostly) converged, there was perhaps still some lingering doubt (though not in my mind) as to whether the U.S. government would or should adopt the view that offering a bribe to an official’s relative can count as offering something of value to the official.

That doubt has been laid to rest. In the BNY Mellon settlement from last August, the settlement document explicitly endorsed the view that the firm’s decision to provide internships to foreign officials’ relatives counted as providing “anything of value,” because “[t]he internships were valuable work experience, and the requesting family members derived significant personal value in being able to confer this benefit on their family members.” And last week, the SEC announced a settlement with Qualcomm regarding investigations into Qualcomm’s alleged FCPA violations in China; although the violations included more traditional bribes (such as lavish gifts, travel, and entertainment), the settlement focuses substantially on Qualcomm’s practice of hiring the relatives of Chinese officials (and executives at state-owned enterprises, who count as foreign officials for FCPA purposes) in exchange for favorable treatment—even when these candidates would not meet Qualcomm’s normal hiring standards.

As GAB readers know, I think that this view is legally correct, good policy, and entirely consistent with the DOJ and SEC’s past statements on this issue, including the FCPA Resource Guide (which admittedly doesn’t discuss this specific scenario explicitly). The recent settlements in BNY Mellon and Qualcomm do not, of course, have any bearing on whether I’m correct in those views. But insofar as there might have been any uncertainty about the U.S. government’s position, it has been eliminated. This is likely bad news for J.P. Morgan, but good news for the world. Why do I think it’s good news for the world? Three main reasons: Continue reading →

Does Immunity Mean Impunity?: Understanding Obstacles in the Prosecution of U.N. Corruption

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Corruption has yet again publicly surfaced as a significant problem at the United Nations. The current bribery scandal implicates John Ashe, the U.N. ambassador from Antigua and Barbuda and the former President of the General Assembly, along with several others. Ashe stands accused of accepting $1.3 million in bribes from Chinese developers in exchange for promoting real estate projects. Among the others who have come under scrutiny is Francis Lorenzo, the Dominican Republic’s deputy ambassador to the U.N., who allegedly accepted and paid bribes as a part of a scheme to influence decisions related to the development of a multi-billion dollar U.N. conference center in Macau.

As both Sarah and Matthew have previously discussed, the U.N. has not done an admirable job of policing itself. But now the organization may be getting help from the U.S. Attorney’s Office for the Southern District of New York. In October 2015, the FBI arrested Ashe and Lorenzo on charges of tax evasion and bribery, respectively. But the prosecution of officials of an international organization poses uncommon challenges. U.N. diplomats can claim certain immunity against suit in American courts, and both Ashe and Lorenzo plan to assert such immunity as a complete defense. U.S. Attorney Preet Bharara feels confident that he will be able to defeat these immunity claims, and he has further implied that he will be able to do so in future cases.

Is Bharara’s confidence well-founded? Any assessment of how American prosecutors (or other national prosecutions) may fight corruption at the U.N. requires delving into the complex legal doctrines on diplomatic immunities. This post aims to offer a brief primer on the key legal concepts and doctrines, and how they might apply in the Ashe and Lorenzo cases. Continue reading →

Countering Procurement Corruption with Integrity Pacts: The Indian Experience

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Corruption in government procurement is a massive problem worldwide, especially in developing countries. In an ideal world, measures to combat procurement corruption would include structural changes that would open up monopolies, break cartels, and enact rational, uniform, and effective procurement laws. Sadly, the potential effectiveness of these measures is matched only by the near impossibility of their implementation any time soon. We should continue to push for comprehensive structural solutions to the procurement mess, of course. But in the meantime, are there other measures that can be implemented in countries struggling with widespread procurement corruption, which can at least help alleviate the problem?

One possible solution, heavily promoted by Transparency International (TI), is the use of so-called “Integrity Pacts” (IPs). An integrity pact is a voluntary agreement between a government agency and the bidders entering into a procurement contract, where both sides agree to refrain from corrupt practices. Bidders violating the pact could be blacklisted, placed under investigation, or have their contracts cancelled. Civil society actors monitor and arbitrate disputes in enforcement of IPs. The first IP was implemented in Ecuador for a refinery project in 1994; since then, TI has collaborated with government agencies to implement IPs in public contracts of more than 30 countries including Germany, Hungary, South Korea, Malaysia, Mexico, Argentina, Pakistan, China and India.

No one expects IPs to be a panacea—deeper structural reforms are still essential. But do IPs at least help? Or are they a distraction from more meaningful reforms? While a general answer may not be possible, we can learn from the past three decades of experience with IPs in different countries. One useful test case for the effectiveness of IPs is India. And the evidence is, on the whole, encouraging. Continue reading →

How Asset Return Agreements Can Bolster Reform: The Kazakh Experience

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Guest contributor Robert Packer last week highlighted what can be the most contentious issue presented by the U.N. Convention Against Corruption – a request for the return of assets stolen as a result of corruption.  One reading of the convention seems to give countries victimized by corruption an absolute, unrestricted right to the return of the proceeds of corruption located in a second state.  But as Robert observed, states holding stolen assets can be reluctant to return them to a country where the chances the assets will again be lost to corruption are high and can find language in the convention arguably giving them the right, if not to keep the assets, to make return conditional on the requesting state taking steps to ensure the returned assets benefit citizens rather than again being stolen.  While there is always the danger that conflict over whether a return should be unrestricted or conditional will become acrimonious, a recent experience shows the result can also lead to a solution that benefits all parties. Continue reading →

Dear International Anticorruption Court Advocates: It’s Time to Answer Your Critics

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Over the last year or so, proposals for an International Anti-Corruption Court (IACC), modeled on (but distinct from) the International Criminal Court (ICC), have attracted an increasing amount of attention in the anticorruption community and beyond. This attention is due in part to the understandable frustration with the continued impunity of many kleptocrats, and in part to the instinctive attraction (in some quarters) to international judicial solutions to political problems. It’s also the result of the dogged and determined advocacy of IACC proponents. As some readers of this blog probably know, I’m skeptical. But I nonetheless admire the IACC advocates for their willingness to think creatively and to spark an important debate.

That admiration, however, is waning, and the reason is simple: For all their talk about wanting to start a conversation, IACC advocates have shown surprisingly little interest in engaging, in any serious way, with substantive objections to the proposal. It’s now over 18 months since the campaign for an IACC began. Very early on, sympathetic but skeptical critics—including me, as well as several others (see here and here)—raised a number of serious questions and concerns. These concerns are not minor details about implementation—they go to the heart of the proposal, and if the criticisms are on the mark, then the whole enterprise is misguided. Now, maybe the criticisms are not well-founded; maybe there are good answers to all of them. Yet so far IACC advocates have not really provided those answers. (To be fair, the main pro-IACC webpage includes an FAQ section that purports to offer some preliminary responses, but to call those responses “thin” would be generous.) When pressed, IACC advocates have a tendency to respond with one or both of the following rejoinders: (1) “Corruption is really bad—don’t you want to stop it?”; (2) “The critics have raised a number of concerns that will need to be addressed when we work out the details of the proposal.” But nobody in this debate seriously disputes the harms of corruption, and the criticisms that have been raised are not about minor details. At this point, if IACC advocates are serious, they need to offer more than that, and what’s to be found on the brief FAQ page.

Just to recap the main objections: Continue reading →

You Can’t Go Home Again: A Surprising Concession from South Africa’s President

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“Nkandlagate” has been the gift that keeps on giving for South Africa’s satirists and social media quipsters. It started with the scandal itself: Jacob Zuma, the country’s president, spent at least 256 million rand (what was then more than US$30 million) in public funds to install a swimming pool, amphitheater, chicken run, and cattle corral at his private home, called Nkandla. When the expenditures were revealed, he claimed they were “security upgrades.” After all, the most natural way to ensure you have enough water on hand to put out a fire is to install a swimming pool, right? Political cartoonists and puppet-starring TV shows alike have weighed in on Zuma’s recalcitrance in the face of Public Protector Thuli Madonsela’s report demanding that Zuma pay back some of the misused funds.

The jokes are understandable: after years of living with the consequences of an infamous arms deal–the “original sin” that “infected [the country’s] politics” with corruption when the lack of consequences for its high-level participants fostered a sense of impunity–many South Africans have turned to dark comedy as a form of release.

The need for that type of gallows humor may have dipped slightly earlier this month.  President Zuma, after refusing for years to admit he’d done anything wrong and publicly mocking the outcry about Nkandla, finally conceded to the country’s highest court that he should have obeyed the findings of Madonsela’s report. Rather than insisting that President Zuma did nothing illegal, his defense team is now arguing that the president made a mere “mistake of law.”  What explains this stunning reversal? And what will the implications be?

Continue reading →