Category Archives: Commentary

Mozambique Government Announcement of Settlement of Hidden Debt Claims Against UBS

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Mozambique’s citizens are the victim of likely the most egregious corruption scandal of the 21st century. As explained on GAB and numerous media accounts (here, here, here, and here), employees of Swiss banking giant Credit Suisse together with Mozambique government officials, and Middle East ship-building company Privinvest put the country’s government on the hook for $2.2 billion in loans for projects of little or no value. Citizens of one of the word’s poorest nations are now stuck repaying them.

Some of the only good news to come out of this enormous crime was the Mozambique’s government decision to bring suit against Credit Suisse, Privinvest, and some of the other perpetrators in London (complaint here). A favorable judgment could not only result in cancelling the debt but an award of damages. Damages because of the enormous hit the Mozambique economy took when the loans, hidden because they were taken out in violation of an IMF bailout loan, were finally revealed.

Earlier today the Mozambique government announced it had settled with UBS, which assumed Credit Suisse’s liability when it took the bank over. On its face, the settlement appears to be a very good deal for UBS. Whether it is a good one for the citizens of Mozambique remains to be seen.

Mozambique’s Prosecutor General disclosed some of the terms in a press conference earlier today in Maputo. According to an on-scene report,

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When Do Partisans Turn on One of Their Own? Reflections on the New Menendez Case

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The biggest corruption-related political news in the United States over the past couple of weeks is the decision by the Department of Justice (DOJ) to indict Senator Bob Menendez (Democrat of New Jersey) for allegedly taking bribes (including cash, gold bars, and a luxury car) from several businessmen, in exchange for using his influence to help these businessmen in various ways. If you’re having a sense of déjà vu, it’s because we’ve seen this movie (at least the beginning) before: Back in 2015, the DOJ indicted Senator Menendez for accepting lavish gifts from a wealthy friend and campaign donor, allegedly in exchange for using his influence to help advance that donor’s personal and business interests. That prosecution was unsuccessful: The DOJ pursued the case, but although the prosecutors prevailed on some important issues of law, the trial, which took place in 2017, ended in a hung jury—presumably because some of the jurors did not think that prosecutors had proved, beyond a reasonable doubt, that the luxury trips and gifts bestowed on Senator Menendez were bribes, rather than personal hospitality offered by a close friend.

It remains to be seen whether the legal outcome will be different in this case (and of course, it should go without saying, Senator Menendez is entitled to the presumption of innocence in a court of law, though he is entitled to no such presumption in the court of public opinion). But there is already one notable difference between the current case and the 2015 case: the reaction of Senator Menendez’s colleagues in the Democratic party. As I write this (several days before the post will likely be published, so forgive me if this is a bit out of date), a number of prominent Democrats, including New Jersey Governor Phil Murphy, several Democratic Senators, and numerous Democratic House Members, including former Speaker Nancy Pelosi, have called on Menendez to resign. To be sure, as a critics have noted, several leading Democrats—including President Joe Biden and Senate Majority Leader Chuck Schumer—have not called on Senator Menendez to resign. But this is still a marked contrast from 2015, when to the best of my recollection (and readers should feel free to correct me if I’m wrong) no prominent Democrats called on Senator Menendez to resign. Why the difference? Continue reading →

Has Russia’s Invasion Empowered President Zelensky in His Fight Against Corruption?

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A national crisis can have a wide range of effects on a country’s commitment to fighting corruption. Sometimes, the sense of crisis leads countries (for better or worse) to de-prioritize corruption, out of a sense that other matters are higher priority, or even out of a sense that tolerance for a certain degree of corruption is a price worth paying to achieve other more pressing objectives. But in other situations, a sense of national crisis can strengthen a government’s resolve to crack down aggressively on corruption. There seem to be at least two closely related reasons why this may sometimes occur. First, corruption might be seen as directly and significantly impeding the country’s ability to tackle the emergency at hand. Second, a time of crisis can strengthen the position of the nation’s chief executive (the president or prime minister)—both in the formal legal sense (in that during times of crisis the chief executive may be able to wield extraordinary emergency powers) and in the softer more political sense (in that the chief executive may enjoy a surge in popularity if the country is under threat, and the public perceives the chief executive as providing strong leadership in the crisis). If that chief executive is genuinely committed to fighting corruption (a big if), then he or she may be able to leverage this unusual power to move aggressively against corruption, in a manner that would be politically difficult or impossible in “normal” times.

My impression, based on news stories and informal conversations with actual experts (which I am not!), is that the latter characterization is more apt for what is happening in Ukraine right now. It was not obvious that things would go this way initially—particularly given that, shortly after Russia’s full-scale invasion, the Ukrainian parliament suspended the asset declaration requirement for public officials, which though justified at the time as a way to keep potentially sensitive information from the Russians, was viewed with understandable concern. But a series of developments since then has demonstrated what looks to an outsider (at least to this outsider) like a consistent and quite aggressive effort to crack down on corruption, even at the risk of some (temporary) disruption to aspects of the war effort.

At least for me, one of the most notable and encouraging signs was the arrest, earlier this month, of Ihor Kolomoisky, one of Ukraine’s most powerful oligarchs, on fraud charges. Continue reading →

The Sometimes Grubby World of Political Fundraising

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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?

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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?

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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

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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

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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

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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

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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.”