Category Archives: Commentary

Whistle While You Work: Protections for Internal Whistleblowers under Dodd-Frank

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One of the many objectives of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was to encourage whistleblowers to report securities violations—including violations of the Foreign Corrupt Practices Act (FCPA)—to the Securities and Exchange Commission (SEC). Among other things, Dodd-Frank created new remedies for whistleblowers who suffer retaliation by their employers, including allowing whistleblowers to sue their (former) employers on more favorable terms than existing anti-retaliation laws. But what if an employee doesn’t report a possible violation to the SEC, but only told her boss? If that “internal whistleblower” is subsequently terminated, can she avail herself of Dodd-Frank’s anti-retaliation provisions?  Because of the way the law was drafted, this turns out to be a difficult legal question, one on which courts across the U.S. have divided.

Nevertheless, there are strong practical reasons—above and beyond the basic reasons that could be advanced in any context—why Dodd-Frank should cover internal whistleblowers. Unless the courts resolve their division in favor of internal whistleblowers soon (most likely through a Supreme Court decision), Congress should step in and rewrite the law to remove any doubt that internal whistleblowers are protected.

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Take Two: Will a Second Attempt at Hacking Corruption in China Work?

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Late 2010 to early 2011 was the heyday for India’s “I Paid A Bribe” (IPAB) website, which encouraged Indian citizens to report personal encounters with bribe solicitation from public officials. As Rick Messick previously reported, although the site experienced its share of challenges, the fact is that IPAB worked (and even thrived at times) and continues to be operational today. For digitally-inclined anti-kleptocrats, IPAB seemed like a prime example of a bottom-up approach to tackling corruption, one that could be emulated elsewhere. But in the summer of 2011, when a handful of concerned netizens in China attempted to import the IPAB model into China’s cyberspace, their attempts almost immediately failed. While these copycat sites enjoyed a brief period of temporary government approval (or at least ambivalence), they were all shut down well within half a year of founding, with most squashed within a month.

What the initial popularity of these sites indicated was a strong desire among Chinese netizens to function as self-appointed watchdogs who sniff out incidents of government corruption. (Indeed, between 2003 and 2010, China’s most popular media source saw a 20-fold increase in the number of anticorruption-related posts.) In late 2013, the Chinese Communist Party (CCP) tried to tap into this newfound desire. The CCP’s Central Commission for Discipline Inspection (CCDI) created a corruption-reporting website that allowed citizens to access anticorruption laws, suggest proposals to anticorruption policy, and most importantly, “submit tips on current investigations or suspected cases of corruption.” In June 2015, the CCDI released a smartphone app version of the reporting site, which allows users to report up to 11 different categories of corrupt acts (e.g. using public funds for international travel and domestic tourism, and hosting extravagant banquets and parties), and even lets users upload pictures or videos of the act.

So will this new, Party-controlled version of crowdsourced anticorruption reporting prove more successful than its predecessor? Maybe. But there are also a number of reasons to be skeptical.

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Furthering Cross-Border Cooperation to Fight Corruption

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Some of the best news on the corruption front is the growing cross-border cooperation among domestic law enforcement agencies.  The French firm Alstom’s December 18 agreement to pay R$ 60 million, US$ 16 million, to Brazil to settle bribery claims nicely illustrates the pay off from such cooperation.  Thanks to information supplied by French and Swiss authorities, Brazilian prosecutors showed that Alstom had bribed officials of Sao Paulo’s state government to win a contract to supply electrical equipment to the state’s power company.  A critical element in the case was evidence that the officials had deposited large sums in Swiss banks around the time the contract was awarded.

Although Brazil, France, and Switzerland are all bound by domestic legislation and treaties to help one another investigate and prosecute corruption cases, law alone is not enough to produce the kind of cooperation that resulted in the Alstom settlement.  As Silvio Marques, one of the Alstom prosecutors, explained the other day in a note to colleagues, the key element is – Continue reading →

Where Does the $2.6 Trillion Corruption Cost Estimate Come From?

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Last year, I published a post expressing my puzzlement regarding the source of the widely-cited statistic that over $1 trillion dollars are paid annually. I was pleasantly surprised by the speed with which several GAB readers pointed me to the original source that described the methods and data used to calculate that number—and while I wasn’t entirely satisfied, it was at least nice to know where the number came from.

I’m hoping someone out there can help me with a very similar question: Within the last few months, I’ve been at several conferences and meetings where someone has quoted the figure that worldwide corruption (not just bribery) imposes annual costs to the global economy of approximately $2.6 trillion, roughly 5% of global GDP. I’ve looked and looked, and I cannot for the life of me figure out where this number comes from. Continue reading →

Corruption By Another Name: The Conviction of a Rapist Cop

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Former Oklahoma City police officer Daniel Holtzclaw was convicted earlier this month of sexually assaulting over a dozen women while on duty. Holtzclaw’s attacks were despicable. Several of his victims reported that he threatened to arrest them if they did not comply with his sexual demands. In some instances, he made clear that his victims had to provide him with sexual gratification to avoid arrest—an explicit quid pro quo exchange. In other cases, including the case that triggered the investigation into his conduct, Holtzclaw did not explicitly solicit a sexual bribe, but there was still an implicit quid pro quo – if the woman let him get away with the assault he indicated that he wouldn’t make trouble for her.

Holtzclaw is a rapist, but he is not only a rapist – he is also a dirty cop. The fact that he was a police officer is not incidental to his crimes: he was able to sexually assault women and get away with it for so long precisely because of his publicly entrusted power. That abuse of public power for private gain is the definition of corruption. As pointed out in a previous post, the currency of corruption can as easily be sex as money. When a police officer, soldier, immigration official, or judge demands sex in exchange for an official action, that is a type of quid pro quo sexual corruption (sometimes called “sextortion” ). When an official “steals” sex from a woman who is less able to resist the attack or to report it due to his publicly entrusted power, that is another type of sexual corruption. In addition to sexual assault, then, Holtzclaw should have also been charged with bribery and official misconduct.

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Order from the Court: Judiciaries as a Bulwark Against Legislative Corruption in Vanuatu

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Imagine that one-third of the members of your national legislature were convicted of bribery, and then decided to pardon themselves, and you’ll only begin to appreciate the scope and oddity of Vanuatu’s current political drama.

On October 9, Vanuatu’s Supreme Court convicted 14 of the 33 members of the ni-Vanuatu Parliament of bribery. The politicians, who at the time of their unlawful conduct included the deputy prime minister and four other members of the cabinet, had last year accepted around US$9,000 each to support a vote of no confidence in the prime minister—that is, to kick him out of office. Though the prime minister discovered the scheme and suspended the participants, they successfully sued for an end to their suspension, and promptly followed through on their plan to eject the sitting government.  Now holding Parliament’s top-ranked positions themselves, the bribe-takers nevertheless fell under police investigation, and a trial against them began this September.

After the bribe-takers were convicted but before they were sentenced, the president, who was not a member of their coalition, took a trip abroad. Under Vanuatu’s constitution, that left the Parliament speaker in charge. The problem? That Parliament speaker was one of the people convicted of bribery—and he promptly decided to use his temporary power to suspend the Ombudsman (the officer charged with investigating corruption) and pardon himself and his co-conspirators. The president quickly returned to Vanuatu and revoked the pardons, but it’s not clear that he had the legal authority to do so. With the Court of Appeals having recently rejected the appeals of the members of Parliament (MPs), the MPs are now kicked out of the legislature, and new elections may have to be held.

As idiosyncratic as this story may seem, it still speaks to some deeper truths about the problem of corruption in the Pacific Islands—and may yet resolve itself in a way that provides some clues about effective ways to fight it. So, what went wrong in Vanuatu, and what can still go right?

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“Charitable Giving” — A Way Around the FCPA? Part I

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The facts below were alleged in a recent case involving Hyperdynamics Corporation, an American firm whose sole asset is an oil concession in Guinea:

* In 2005 the Secretary General of Guinea told the company that “further review” of its concession was necessary.  On August 1, 2006, the company’s CEO founded the NGO American Friends of Guinea and on September 22, 2006, the government approved a renegotiated concession.

* In September 2007, following critical reports in the local news about the renegotiated concession and government threats to cancel it, the Secretary General visited Hyperdynamics’ Houston office.  Over the next year American Friends of Guinea “delivered and paid for antibiotics and glucose fluids for men, women, and children who were stricken with cholera and . . . planned new water well projects to get to the source of solving the problem.”

* On September 11, 2009, the Guinean government and the company signed a memorandum affirming with modifications its oil concession.  On September 29 Hyperdynamics donated stock in the company to American Friends of Guinea.

* In September 2011 after a new, transition government was installed, a further dispute about the concession arose.  That year the firm donated $20,000 worth of computer equipment to the Ministry of Mines and some $8,000 -$10,000 to the Guinean Offshore Department of Environment.

Assuming these allegations are true, do they amount to a “payment . . .  to [a] foreign official for purposes of influencing any act or decision of such foreign official in his official capacity” and thus constitute a violation of the U.S. Foreign Corrupt Practices Act? Continue reading →

The Amount of Bribery and the Cost of Bribery Are Not the Same

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I’ve posted before (see here, here, and here) about some of my concerns regarding the accuracy of the estimates people sometimes throw around about the total amount of bribes paid each year (sometimes given in absolute terms, sometimes as a percentage of global GDP, but in all cases based on dubious extrapolations from suspect data). But for the moment I want to put those concerns aside to make another point: Even if we knew the total amount of bribes paid, that would not necessarily tell us much of anything about how much bribery costs society. (And that’s true even if we limited attention to economic costs, narrowly construed.) This is not an original point – lots of people have made it, and indeed it’s fairly obvious when you stop to think about it. Yet I keep seeing references to estimates of the amount of bribery that treat these figures as if they were measures of the cost of bribery. (For examples, see here, here, here, here, and here.) But that’s just not right. Continue reading →

France’s Failure to Fight Foreign Bribery: The Problem is Procedure

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When it comes to effective implementation of the OECD Anti-Bribery Convention, France is the black sheep of the herd. In 2012, the OECD’s Working Group on Bribery’s Phase 3 Report praised France’s efforts to enact an adequate legal framework, but expressed concerns on the low number of convictions. Two years later, the Working Group reiterated its concerns that France was insufficiently compliant with the Anti-Bribery Convention, and the EU’s 2014 Anti-Corruption Report expressed similar worries. In 2015, Transparency International placed France in the category of “limited enforcer” and has stated that France had failed to prosecute foreign bribery cases efficiently. Indeed, in the 16+ years since the OECD Convention came into force, no companies have ever been convicted in France for foreign bribery, and only seven individuals have been found guilty. The only French-led conviction against a company–Safran–was overturned on appeal last January. Even in this case, on appeal, the prosecution did not seek the conviction of the corporation, stating that the conditions to corporate criminal liability were not met (the court of appeal did not rule on that specific issue, and overturned the conviction on factual grounds).

The low number of French convictions for foreign bribery offenses is not due to the fact that French corporations do not bribe. In fact, a recent study on purchasing activities in the private sector showed that 25% of the Chief Purchasing Officers in France have been offered bribes by other French companies. And French companies have often been penalized by more aggressive enforcers, particularly the United States, when they have jurisdiction. (Most recently, Alstom agreed to pay a $772 million fine for violating the U.S. FCPA by bribing officials in several countries.) While some in France have grumbled about U.S. overreach, others in France share the views of the President of Transparency International France, who declared (in reference to cases like Alstom), “It’s humiliating for everyone in France that our judiciary is not capable of doing the work themselves”.

Why is France such a laggard with respect to its enforcement obligations under the OECD Convention? The issue is not France’s domestic legislation criminalizing foreign bribery, which is more than adequate. The real issue resides in France’s failure to enforce these laws. And the explanation for this lies not in France’s substantive criminal law on corruption, but rather in a number of important aspects of French criminal procedure and prosecutorial practices. Continue reading →

Fighting Corruption in Central America: Suggestions for Improving the CICIG Model

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There has been a great deal of optimism surrounding Guatemala’s International Commission Against Impunity (CICIG) in recent months. This UN-sponsored body, in existence since 2006, played a key role in exposing a massive customs fraud scheme that implicated the nation’s president and vice president. Both leaders are currently awaiting trial in Guatemala following their resignations and arrests. Following talk, including on this blog, about the merits of instituting CICIG-like bodies in other Central American nations, a Honduran version of CICIG is now set to become operational in 2016. As I discussed in a previous post, CICIG’s counterparts in Honduras and El Salvador are less robust (as currently formulated) than CICIG, though ultimately their effectiveness will depend on the strength of their leadership.

Yet notwithstanding CICIG’s recent high-profile successes, there are some important weaknesses in the CICIG model–weaknesses that reformers should consider and address before CICIG-like structures can be fully embraced as the solution to corruption and impunity in Central America. Key areas for improvement include the following: Continue reading →