The Sometimes Grubby World of Political Fundraising

The recent bribery charges levelled against New York City Building Commissioner Eric Ulrich remind of the corruption risk the private financing of political parties and candidates creates.

Ulrich raised money for Eric Adams’ successful campaign for New York City Mayor, and after his election Adams appointed him to a position in the city’s Department of Buildings. As the New York Times explained in its story on the charges, “the department regulates the construction and real estate industries, issuing permits, licensing contractors and policing construction safety and the city’s building code, and thus can have a significant impact on development.”  According to the indictment, Ulrich accepted more than $150,000 in bribes in return for granting licenses and permits.

The corruption risk private campaign financing creates arises from candidates’ search for money to win their election. One needs lots of money to get elected Mayor of New York (Adams’s raised more than $9 million.) That in turn requires people willing to help raise it from friends and associates. Some help knowing that if the candidate they are helping wins, they can use the relationship they have developed with the candidate and senior campaign staff to make money. 

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Judicial Integrity and Judicial Independence: A Clash of Values?

This past spring, the investigative journalism site ProPublica broke a major story about ethically questionable—and previously undisclosed—relationships between ultra-wealthy (and politically active) individuals and Supreme Court justices. The reports focused in particular on Justice Thomas and Justice Alito, two of the Court’s most conservative members. According to ProPublica’s reports, in 2008 Justice Alito accepted a luxury fishing trip—which involved flights on a private jet and a stay at a lodge that charges more than $1,000 a day—from billionaire Paul Singer, whose hedge fund often had cases before the Court, including a 2014 case in which Justice Alito did not recuse himself and voted in the hedge fund’s favor. With respect to Justice Thomas, ProPublica revealed that for years—starting shortly after he joined the Court—Justice Thomas has received substantial benefits from billionaire “friends,” including private plane flights, luxury vacations, VIP passes to sporting events, and private school tuition for his nephew (whom Justice Thomas has raised like a son). Most of these gifts came from right-wing billionaire Harlan Crow, who also purchased from Justice Thomas (in a previously undisclosed deal) the house where Justice Thomas’s mother and other members of his family lived, but Justice Thomas received substantial benefits from other billionaires as well.

Many critics denounced these gifts and other transactions as evidence of blatant corruption (see here, here, here, and here). Some even drew a connection  between the Court’s jurisprudence in corruption cases—which has embraced an ever-more-restrictive definition of corruption, often limiting it to quid pro quo deals—and the Justices’ own proclivity for accepting gifts, perks, and other benefits from people with a strong ideological (and sometimes personal) stake in the Court’s decisions (see here and here). Justice Thomas and Justice Alito vigorously defended their conduct (see here and here), though they did ultimately update their financial disclosure forms for 2022 (though not earlier years) to show additional benefits they had received, and to proffer some explanations. And the Justices’ supporters have accused the accusers of using these alleged ethical issues as a pretext for attacking Supreme Court Justices whom they dislike on ideological grounds (and overlooking similar ethical lapses by Justices whose ideology they prefer).

I have my own fairly strong views about this specific controversy, but I don’t want to go into that right now. I’m not sure I have anything to add—and I’m acutely aware that, whether or not one buys the charges of pretext and selective outrage—it is very difficult to talk about this issue without being influenced by (or perceived as influenced by) one’s views on Justice Thomas’s and Justice Alito’s jurisprudence and ideology. But even putting the specifics mostly to one side, I do think the fallout from ProPublica’s reporting implicates a more general issue—one that is very difficult, and that is relevant not only in the United States but in many other countries as well: To what extent can or should the other branches of government (the executive, the legislature, or—in the countries where such entities exist—an independent anticorruption commission) impose and enforce ethical rules on the highest court (the Supreme and/or Constitutional Court)? Continue reading

Would the Foreign Extortion Prevention Act Help the U.S. Counter China?

The U.S. Foreign Corrupt Practices Act (FCPA) makes it a criminal offense for U.S. domestic concerns, firms that issue U.S. and any anyone acting in U.S. territory from offering or paying bribes to foreign government officials. The FCPA does not, however, apply to the foreign officials who receive those bribes. (On occasion some prosecutors have advanced the theory that a foreign government official who takes a bribe can be convicted for aiding and abetting, or conspiring in, an FCPA violation, but courts have generally rejected these theories.) Additionally, while U.S. criminal law prohibits domestic government officials from soliciting or accepting bribes, the relevant statutory provisions do not apply to foreign officials who engage in comparable conduct.

Many U.S. anticorruption activists believe that U.S. law ought to target the demand side of foreign bribery transactions (that is, the bribe-takers), not just the supply side, and have therefore advocated for the adoption of the so-called Foreign Extortion Prevention Act (FEPA). These advocacy efforts appear to be paying off: In late July, the Senate adopted FEPA as an amendment to the Senate’s version of the National Defense Authorization Act. This does not guarantee that FEPA will become law, as the House of Representatives has yet to vote on a comparable bill, and there is no guarantee that the FEPA language will remain in the bill after final negotiations conclude. But the odds have gone up significantly.

Would FEPA be a good idea? I think the answer is probably yes, though the impact is likely to be modest, and probably somewhat less than FEPA’s proponents hope. I may post again later about my own assessment of FEPA’s likely impact, should it pass in something like its current form. But for now, I want to focus on a striking argument in favor of FEPA that appeared in an op-ed a couple of weeks ago. That op-ed, coauthored by Elaine Dezenski (Senior Director at the Foundation for Defense of Democracies) and Scott Greytak,(Director of Advocacy at Transparency International’s US office), argued that FEPA would “blunt China’s malign economic influence” by countering the practice of Chinese government or government-affiliated entities using bribes to secure access to valuable resources and to expand China’s political sway over developing countries.

There are many good arguments in favor of FEPA, but I’m not sure that this is one of them. I don’t want to dismiss it outright, as it’s entirely possible that I’ve missed something. But it seems to me that FEPA would have little to no impact on corrupt overseas bribery by Chinese entities, and at least in the short term might make that problem (slightly) worse. So let me lay out the source of my confusion: Continue reading

Ukraine’s Fight Against Corruption: Whistleblowing

Last Friday, July 7, some 50 civil society representatives, media personnel, and government policymakers spent the day discussing the law and practice of whistleblowing in Ukraine. They heard from among others National Anticorruption Prevention Committee (NAPC) officials explain how whistleblowing fit into the government’s anticorruption efforts, Anticorruption court Judge Oleksiy Kravchuk on measures for fostering respect for whistleblowers, and how the law protected Oleh Polishchuk after he blew the whistle on his employer’s corruption.

I spoke at the closing panel with TI Ukraine head Andrii Borovyk and Serhiy Derkach, Deputy Minister for Community, Territories and Infrastructure Development of Ukraine. The English version of the program is here and the slides I spoke from here. Minister Derkach’s closing remarks are below —

“Whistleblowing during the recovery process in Ukraine is even more important. It is not only about corruption but also about the security and efficiency of how funds and resources are used.

“There are three key conditions for whistleblowers to report wrongdoing:

✔️ Official channel for reporting
✔️ Confidence that the reports will be reviewed and the perpetrators brought to justice
✔️ Protection from retaliation by management

“At the Ministry of Renovation, we support a zero-tolerance culture towards corruption and are actively working to implement an effective compliance system.

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How Open Data Will Prevent Corruption in Ukraine Reconstruction

Ukraine is creating the world’s most transparent system for the procurement of public works. To assure citizens and donors that the billions needed to reconstruct the nation’s infrastructure will be wisely and honestly spent, it has developed DREAM, the Digital Restoration EcoSystem for Accountable Management. DREAM will provide citizens, investors, and donors access to microlevel data on every single reconstruction project — from the initial feasibility study through the procurement process to the completion of construction.

Analysis of DREAM data will show when bills of quantity are unbalanced, when bids were likely collusively prepared, and suggest if not reveal other signs of project-level corruption.  Analysis of DREAM data across all procurements will disclose if cost estimates vary too much from the bid price and the final price, suspicious patterns in initial versus actual completion date, variation orders, or subcontracting, and similar indicators of possible weaknesses in the procurement and oversight of projects.

In a talk next week I will recommend the Ukrainian government use DREAM data to conduct the analyses listed below. Surely there are more I am missing. Comments/additions welcome.

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Trump Indictment’s Lesson for Prosecutors Charging Senior Political Figures

At long last federal prosecutors have filed charges against former President Donald Trump for crimes arising from his unlawful possession of classified documents. The charges are contained in what is called an indictment in the United States.

One aspect of the indictment merits the attention of prosecutors everywhere. Or at least for those considering charging senior government officials or ex-officials who, like Trump, can be expected to try to sway public or elite opinion by any means to escape convictions.

The Trump indictment is what American prosecutors call a “speaking indictment.”

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Supreme Court to Congress: Your Fault Corrupt Officials Getting Off

Two recent unanimous Supreme Court decisions overturning federal convictions for blatantly corrupt conduct again emphasize the need for Congressional action. The one case arose from bid rigging on a New York state contract, the second from the acceptance of a $35,000 “fee” by the manager of then Governor Andrew Cuomo’s reelection campaign to “fix” a problem the payor had with a state agency.

In both prosecutors charged defendants under the statute making it a federal crime to use the mail or telephones or other means for communicating across state lines to cheat an individual of money or property.* For, by my count, the fifth time in recent years (here), the Court rejected prosecutors’ efforts to stretch a law originating in claims “eastern city slickers” were using the mail system to swindle naïve Midwesterners to cover state and local corruption.

The Court also again put the blame for allowing corruption to go unpunished on Congress, reiterating that if it wants federal prosecutors to police the conduct of state and local officials, it must write a law that says so in clear and uncertain terms. Congress took a stab at doing so once, making it an offense to deprive citizens of the “honest services” of a public official.  But as the Court held in acquitting the Cuomo aide, legislators forgot the term “clear” in the Court’s injunction, failing to provide any definition of what conduct was honest and what dishonest. The law was thus unconstitutionally vague, for it did not, as all criminal statutes must, give defendants fair notice of the conduct that was unlawful.

Justice Gorsuch summed up the current situation in a concurring opinion in the Cuomo aide case.  Because Congress won’t say with the precision required of all criminal statutes what conduct by state and local officials violates federal law, it: 

“leaves prosecutors and lower courts in a bind. They must continue guessing what kind of fiduciary relationships this Court will find sufficient to give rise to a duty of honest services.” 

Every time a prosecutor and a court guess wrong, as they did in the New York cases, we get a highly publicized acquittal, leaving citizens to wonder why, if their government is serious about curbing corruption, it is letting crooked pols and their pals off the hook. For reasons to obvious to state, this is no time to be undermining citizen confidence in the government’s commitment to fighting corruption. Isn’t it time Congress seriously considered the metes and bounds of federal power to prosecute state and local corruption?

  • *The law is found in title 18 of the United States Code, sections 1343 and 1346. The operative language: “Whoever … devise[s] any scheme… to defraud… for obtaining money or property … causes to be transmitted by means of wire, radio, or television communication …any writings… for the purpose of executing such scheme… shall be … imprisoned not more than 20 years….” In 1988 Congress added “The term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”

Anticorruption Strategies for Small Population Countries

As I discussed in a prior post, countries with very small populations face distinct challenges when it comes to detecting and fighting corruption. In places where everyone knows everyone, personal ties between decision-makers and stakeholders are practically unavoidable. This not only makes it more difficult to avoid conflicts of interest, but also fosters a culture of informality that may inhibit efforts to impose stricter procedures and requirements for public decision-making. Furthermore, in small, close-knit communities it is harder to ensure anonymity of whistleblowers, and to detect corruption that takes the form of inappropriate long-term reciprocity rather than explicit quid pro quo exchanges.

The distinct challenges posed by corruption in small populations may call for distinct solutions. While there may not be any single solution to these challenges, there are a few approaches that may help:

  • Calling corruption by its name: When a person in a position of public trust prioritizes particular familial or social loyalties over those owed to the public, she is engaged in a form of corruption—abusing her entrusted power to benefit her friends and family. But such corruption may be perceived as benign or even salutary when it takes place in a community characterized by a high degree of close familial and social ties. The fact that these corrupt relationships often do not involve exchange of money may further help to camouflage them as a social interactions rather than as transactions involving the abuse of public trust. Unless corruption is identified and perceived as such, no anticorruption effort is going to succeed. Therefore, there needs to be constant and systematic education within the community to raise awareness about the causes and manifestations of kinship corruption, as well as the harms caused by it, in order to de-normalize this form of corruption (see here, here and here).
  • Leveraging the power of public opinion: In tight-knit communities, informal social sanctions (social exclusion, ostracism, and stigmatization) may be much more powerful in these communities and can be a meaningful constraint on corruption (see here). This is, of course, a double-edged sword: As noted above, unless kinship corruption is recognized as such, those involved are unlikely to be shamed by their peers and may actually be socially punished if they decline to do favors for friends and family. Similarly, social pressure can be used to reinforce clientelism and nepotism (see here and here). But anticorruption reformers can and should try to find ways to leverage the power of shaming, and other social sanctions, to promote integrity.
  • Depersonalize decision-making: As noted above, in small communities, it is harder to enforce the sorts of strict conflict of interest rules that are feasible in larger communities. Furthermore, even where there is no “formal” conflict of interest, in small countries there is an increased likelihood that public decisionmakers will have personal relationships or connections with some of the people who would be affected by their decisions. In a hiring process, for example, those responsible for the hiring will very often have some connection with at least one of the applicants. Therefore, small-population countries should place an even greater emphasis on removing the personal element as much as possible. For example, anonymizing administrative procedures and implementing “blind” decision making not only makes nepotism and clientelism harder, but also reduces the risk of unconscious bias (see here and here).
  • International assistance: Another, potentially more controversial way for small countries to overcome the inherent difficulties in aggressively applying anticorruption laws within a close-knit community is to seek the assistance of the international community, for example by relying more heavily on international assistance to fight corruption. This is not only because outsiders may be less likely to have conflicts of interest. It is also because small population countries may simply have fewer talented people to devote to any single matter, including anticorruption (see here and here). International assistance, for example in the form of manpower with suitable expertise, may help to alleviate such issues.

As we are often reminded, there is no one-size-fits-all approach to anticorruption, and it is also true that there is no one anticorruption recipe for all small countries. Nevertheless, when designing anticorruption strategies for very small jurisdictions, it is useful to recognize some of the common challenges that such jurisdictions face, and to design anticorruption strategies that leverage some of the advantages of smallness while ameliorating some of its drawbacks.

Reforming Corporate Criminal Liability in South Africa: Deferred Prosecution Agreements

Although South African law allows corporations to be held criminally liable for the misconduct of their directors and officers, in practice holding companies liable for corruption and other crimes can be a protracted process due to backlogs, delays, and an under-resourced prosecutorial agency. In recognition of this problem, as well as the prominent role corporations have had in facilitating corruption and state capture, South Africa’s Judicial Commission of Inquiry into State Capture has recommended, among other things, reforming South Africa’s corporate criminal liability laws to allow prosecutors to negotiate deferred prosecution agreements (DPAs) to resolve corporate criminal cases. (Currently, South African prosecutors may negotiate and conclude plea and sentencing agreements with corporations, but this prosecutorial authority does not extend to DPAs.) The South African Law Reform Commission (SALRC) has been tasked to consider the introduction of DPAs as part of its review of South Africa’s criminal justice system; the SALRC’s report and recommendations are expected to be finalized by 2024.

This issue has garnered considerable discussion among South African commentators. While many welcome the introduction of DPAs as a much-needed reform, a number of commentators have raised concerns, most prominently the concern that introducing DPAs in South Africa will enable prosecutors and corporations to strike secret deals and fail to hold corporations accountable (see here, and here, and here). Fortunately, there are a number of ways to mitigate this potential problem, which the SALRC can and should include in its report and recommendations. Continue reading

Comments on Sri Lanka Proposed Anticorruption Bill

Sri Lanka is known for the quality of its legal scholarship, and the draft anticorruption bill the government gazetted April 6 leaves little doubt the reputation is warranted. It contains many thoughtful, well drafted provisions other nations looking to reform their laws will want to borrow. Too bad for the drafters they can’t copyright their work.

At 162 pages I did not have time to give it the the intensive review the legislature will want to conduct before approving it. But I did find several provisions that I would urge legislators should examine as part of that review —

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