Category Archives: Commentary

The Giving Trees: Fighting Corruption in the Timber Industry with Technology

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The 3-hour drive from the port city of Douala, Cameroon to the capital, Yaoundé, is unsettling–and not just because drivers hurtle down the road, careening around blind curves into oncoming traffic. What is more worrying is that the oncoming traffic is comprised largely of huge lorries on their way to the shipyards transporting some of the biggest trees I’ve ever seen. After passing 10-15 trucks on my first trip, I started to wonder where the trees were coming from and how they could possibly be arriving in such a steady stream. Perhaps this large-scale lumber harvesting is not by itself all that unusual. But the facts that Cameroon ranks 144/177 on Transparency International’s Corruption Perception Index, and that nearly two-thirds of these round logs leave the country destined for China–the world’s largest importer of illegally-sourced timber–raise red flags.

Indeed, illegal logging in southern Cameroon and the rest of the Congo Basin is a serious problem, contributing to the destruction of 2.5% of the world’s second largest rainforest over a single decade. Studies show that in two of Cameroon’s nearest neighbors, Gabon and the Democratic Republic of Congo (DRC), illicit logging could account for as much as 70% of the timber market. In fact, the entire greenbelt envelops countries where corruption is rife – India, China, Brazil, Peru, Indonesia, Ethiopia, DRC, Nigeria – and the links between corruption and over-logging have been widely studied by the likes of TI, U4, UNODC, and the World Bank.

Current efforts to address poor governance of the timber industry are admirable but insufficient. The EU FLEGT Action Plan and the US Lacey Act regulate trade in wood and ban the importation of illegally sourced goods. Under the FLEGT Plan, Cameroon and the EU agreed to a licensing scheme to promote proper forest management. But no such regulation exists in China, a market that has boomed over the past 15 years largely in response to American demand for manufactured wood products. Furthermore, as the US Environmental Investigation Agency has shown in the Peruvian market, transparent trade depends on formal paperwork – export permits, certificates of origin, etc. – that are easily forged and exchanged on the black market. As a result, the same study points out, American importers often remain culpable, despite regulations.

We need a coordinated global response that can be effective independent of manipulable documents. What might this answer look like? A major component might well be the deployment of new technologies and scientific techniques to verify the origin of timber and timber products. Continue reading →

Beyond Sextortion: How Corruption Uniquely Affects Women

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A teenage girl at a refugee camp in Sierra Leone applies to the camp administrator for the food, soap, and medicine she’s entitled to and needs to survive. He falsely tells her that “your name is not on the list” but, instead of demanding money – the classic corruption scenario — he demands sex and she has no choice but to comply.

Corrupt sexual extortion (dubbed “sextortion” by the International Association of Women Judges) is not hypothetical and it is not rare. For example, a report from Human Rights Watch last September found that sexual exploitation by Burundian and Ugandan soldiers in Somalia is “routine and organized.” A refugee in Sierra Leone said “If you do not have a wife or a sister or a daughter to offer the NGO workers, it is hard to have access to aid.” Another refugee said “In this community no one can have access to CSM [a soya nutrient] without having sex first.” According to Transparency International, “the perception that women do not have the money to pay bribes may mean that they are not asked for payments… Instead, compensation may take the form of sexual favours.” This corrupt sexual exploitation often has a far greater adverse effect on victims than monetary corruption, not only because of the act itself–which can be extremely violent and is always a violation of personal dignity and human rights–but also because of the possibility of disease, pregnancy, and, all too frequently, social ostracization, victim blaming, and loss of prospects in the marriage market.

Yet despite occasional references to corrupt sexual exploitation by anticorruption activists, most major anticorruption groups have neglected this topic, focusing instead on monetary corruption. This is a mistake. The anticorruption community should recognize sextortion and other forms of corrupt sexual coercion as a distinctive and devastating form of corruption, deserving of special attention and appropriately-tailored responses. Continue reading →

The Political Will to Fight Corruption: Lessons from Nigeria

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“Political will” is often said to be the sine qua non of a successful anticorruption policy (click here, here, and here for some examples), yet the term remains, as Linn Hammergren complained almost two decades ago, one of “the slipperiest concepts in the policy lexicon.”  Derick Brinkerhoff tried to pin down what those advising on anticorruption meant by it in a 2010 U4 policy brief.  He concluded that most used the term to refer to some combination of commitment by controlling corruption by top-level political leaders together with the ability to do something about it.

While a reasonable definition, a moment’s reflection will show that advising developing countries that to fight corruption they must have political will is empty advice.  If a country’s leadership had the commitment to deal with corruption and the tools for doing so, it wouldn’t need advice on what to do, it would be in the heat of the battle.  The reason most countries remain on the sidelines is that their leaders lack the necessary commitment and capacity.  So telling developing countries that a successful anticorruption effort begins with political will assumes away the problem.

What would help is advice on how to create the commitment and ability to fight corruption.  Continue reading →

JP Morgan, Sons & Daughters, and the Rule of Law

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One of the more interesting ongoing Foreign Corrupt Practices Act investigations involves allegations that the investment banking giant JP Morgan’s “sons and daughters” program in China. According to media reports, JP Morgan’s China and Hong Kong offices offered jobs, and in some cases consulting contracts, to the children of well-connected officials in China (including the heads of state-owned enterprises and senior party officials) in return for lucrative business opportunities in the Chinese market (see, for example, here and here). The case is still under investigation, the facts are still in dispute, and the government enforcement agencies have not yet accused JP Morgan of any of its executives of any wrongdoing. Yet there have been hints that if the facts turn out to be as bad as they look, the U.S. government will consider JP Morgan’s so-called “sons & daughters” hiring program to have violated the FCPA’s anti-bribery provisions. That conclusion would depend crucially on the premise that providing a job to the (adult, non-dependent) child of a foreign official counts as providing “anything of value” to the official. (Things would be different if there were evidence that the officials’ children funneled some of the money back to their parents, but at the moment no such evidence has come to light.)

About six months ago, Professor Andrew Spalding (who has also contributed a number of insightful posts to this blog – see here, here, and here) published a provocative four-part series at the FCPA Blog (see here, here, here, and here) raising serious concerns about this legal theory, and suggests that applying it in JP Morgan’s case would be not only inappropriate, but a serious affront to fundamental legal principles. Somewhat unusually, I find myself in disagreement with Professor Spalding. Indeed, if the facts turn out to be as bad as early media reports suggest, I think that this is an easy case. To my mind, it’s straightforward that offering a benefit to a third party can count as offering “anything of value” to a foreign official under the FCPA, and nothing in the DOJ’s prior opinion releases would constrain the U.S. government from applying that principle in this case. Continue reading →

Crowdsourced Anticorruption Reporting, 2.0

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Crowd-based reporting tools have garnered tremendous attention for their role in anticorruption efforts all around the world. Deservedly so: these platforms harness rapidly increasing internet and mobile access in the developed world to tackle the age-old problem of corruption. Perhaps the best known of this new wave of crowdsourced reporting tools, iPaidABribe (which started in India and has been successfully recreated in other parts of the world), allows any citizen with a smartphone or other access to the internet to report bribery incidents nearly-instantaneously. Citizens can report the amount of a bribe, the recipient of the bribe, the institution that took or demanded the bribe, and so on — all anonymously. Visitors can read the reports as well as view a sort of “heat map” that aggregates the reports to demonstrate where bribery is most prevalent. The very act of broadcasting one’s own experiences with corrupt officials, and the commensurate naming-and-shaming effect this has when many such reports are aggregated, is proving to be extremely powerful.

To be sure, not all attempts to use modern internet and mobile technology to crowdsource anticorruption reporting have been as successful. Some (perhaps most) platforms never really get off the ground. Observers on this blog and elsewhere have pointed out that this may be due to a mismatch between local social conditions and the platform itself. These challenges are real, but I want to focus for now on platforms that have managed to gather and report significant data on corruption. Even in these cases, some commentators have pointed out, the full potential of crowd-based corruption reporting platforms has yet to be realized. The data they are gathering is still relatively “raw” and unprocessed by entities that could really use it — such as government anticorruption agencies. Thus it is important to highlight how these platforms can improve, and how they can avoid having their efforts thwarted by unwanted side-effects. As platform developers move past their early obstacles and start achieving real success in their primary goal — getting people to use their reporting system — the need now is to direct the platforms and their potential partners in such a way as to enhance their effectiveness and to avoid the possibility that their data will be misused. Continue reading →

Conflict of Interest and Democratic Theory: Lessons from Bruce Cain’s Democracy More or Less

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Although written for Americans worried about what ails their democracy, non-Americans will profit from a close study of Stanford Professor Bruce Cain’s new book Democracy More or Less: America’s Political Reform Quandary as well.  Cain’s thesis is that different views about the role of citizen participation, representative institutions, interest groups, and apolitical experts in governing the United States produce sharply different prescriptions for reforming its political system.  Non-Americans will recognize that these same views inform reform in their countries, from community driven-development programs that bypass representative institutions to the replacement of elected governments with a cabinet of technocrats.  What makes Cain’s book so valuable, to Americans and non-Americans alike, is that he shows when and why reforms inspired by these competing views improve governance and when and why they make matters worse.

GAB readers will find particularly instructive his analysis of how different theories of government influence the ongoing effort in the United States to police conflicts of interest by elected officials, civil servants, and judges

Continue reading →

A Problematic Proposed Whistleblowing Law in Switzerland

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Switzerland is currently not a particularly hospitable country for whistleblowers.  The anti-retaliation protections provided to potential whistleblowers are relatively sparse – individuals fired from their jobs can, at best, hope to receive up to the equivalent of six months of their salary rather than reinstatement – and there are few legislative incentives in place to encourage individuals to report corruption or other forms of corporate wrongdoing.  Moreover, not only are the country’s laws rather harsh when it comes to encouraging and protecting whistleblowers in the private sector, commentators have noted the “brutally hard line” that the Swiss government has taken in a number of high-profile whistleblower prosecutions.

Unfortunately, a proposed law which has passed the country’s Council of States and will be considered by its National Council, initially billed as an attempt to address ambiguities within the current whistleblower system, appears likely, if enacted, to make an already hostile climate for whistleblowers even worse.

Continue reading →

Sua Sponte Corruption Inquiries by Arbitral Tribunals: Causing More Harm than Good?

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As several prior posts on this blog have discussed (see here, here, and here), corruption has emerged as a significant and controversial issue in international investor-state arbitration proceedings, with a number high-profile cases in which the tribunal refuses to provide relief on the grounds that the underlying contract was procured through corruption. In these cases, corruption allegations usually surface at the initiative of one of the parties. For example, this summer, Djibouti filed an arbitration against Dubai-owned port operator DP World, seeking annulment of a port concession because DP World allegedly formed its contract with Djibouti for the operation of Africa’s largest container terminal through corrupt means. However, in rare instances, corruption can enter the picture without either party raising the issue during the proceedings. In these cases, the arbitral tribunal considers the issue of corruption sua sponte, even when neither party alleges corruption by the other.

Perhaps the most prominent example of this is the tribunal’s decision in Metal-Tech v. Uzbekistan. In Metal-Tech, the ICSID tribunal, in its words, “required explanations” from the parties for suspicious facts that “emerged in the course of the arbitration”–in particular the fact that Metal-Tech had paid exorbitant, seemingly unjustifiable sums for consulting services to an Uzbeki government official and individuals with close ties to Uzbeki leadership. The ICSID tribunal then essentially placed the burden of disproving corruption in light of this circumstantial evidence on Metal-Tech, which could not come up with enough evidence to overcome the tribunal’s presumption. The ICSID tribunal held it did not have jurisdiction and dismissed Metal-Tech’s claim.

On the surface, sua sponte efforts by tribunals to address corruption may seem like a positive step in the anticorruption fight. Indeed, it might seem irresponsible for the tribunal to stick its head in the sand given such facially suspicious facts. As Michael Hwang and Kevin Lim assert in a recent paper endorsing this sua sponte practice, “Tribunals must remain vigilant and alert to the possibility of corrupt dealings being hidden by one or both parties, otherwise they may become unwitting accessories to heinous acts.” But in fact, the approach adopted by the tribunal in Metal-Tech, might do more harm than good. Indeed, by engaging in sua sponte considerations of corruption, arbitral tribunals might unwittingly perpetuate corruption under several different scenarios: Continue reading →

More on the “News from Nowhere” Problem in Anticorruption Research

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One of my all-time favorite academic papers — which should be required reading not only for those who work on anticorruption, but on any topic where people casually throw around statistics — is Marc Galanter‘s 1993 article News from Nowhere: The Debased Debate on Civil Justice. Professor Galanter’s paper doesn’t have anything directly to do with international corruption. Rather, he sets out to debunk a series of widely-held but mostly-false beliefs about civil litigation in the United States, and in the process he traces the origins of many of the statistics often cited in debates about that topic. He finds that many of these statistics come from, well, nowhere. Here’s my favorite example: Around the time Professor Galanter was writing, it was common to hear claims that the civil justice system costs $80 billion in direct litigation costs; indeed, that figure appeared in an official report from the President’s Council on Competitiveness. The report’s only source for that estimate, however, was an article in Forbes; Forbes, in turn, had drawn the figure from a 1988 book by Peter Huber. But Huber himself hadn’t done any direct research on the costs of the system. Rather, Huber’s only source for the $80 billion figure was an article in Chief Executive magazine, which reported that at a roundtable discussion, a CEO claimed that “it’s estimated” (he didn’t say by whom) that insurance liability costs industry $80 billion per year. So: A CEO throws out a number at a roundtable discussion, without a source, it gets quoted in a non-scholarly magazine, repeated (and thus “laundered”) in what appears to be a serious book, and then picked up in the popular press and official government reports as an important and troubling truth about the out-of-control costs of the US civil justice system.

I thought about Galanter’s book the other day when I was reading the Poznan Declaration on “Whole-of-University Promotion of Social Capital, Health, and Development.” The Declaration itself is about getting universities to commit to integrating anticorruption and ethics into their programs; I may have something to say about the substance of the declaration itself in a later post. But the following assertion in the Declaration caught my eye: “Despite the relative widespread implementations of anti-corruption reforms and institutional solutions, no more than 21 countries have enjoyed a significant decrease in corruption levels since 1996, while at the same time 27 countries have become worse off.” Wow, I thought, that seems awfully precise, and if it’s true it’s very troubling. Despite the fact that I spend a fair amount of time reading about the comparative study of corruption, that statistic is news to me. It turns out, though, that it’s news from nowhere. Continue reading →

National Anticorruption Strategies: Lessons from the Asia-Pacific Region

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The 173 nation that have ratified the U.N. Convention Against Corruption are obliged by article 5 to “develop and implement or maintain effective, coordinated anticorruption policies . . . .”  Many meet this requirement by adopting a national anticorruption strategy, and such strategies are so common that the World Bank, the U4 Anticorruption Resource Centre, and Transparency International have all published works advising how to develop and implement them.  The latest, and most useful entry, comes from the Bangkok office of the U.N. Development Program.   Released December 9,  Anticorruption Strategies: Understanding What Works, What Doesn’t and Why — Lessons from the Asia-Pacific Region draws on the experience of 14 countries in the region  to  help guide policymakers wanting to promulgate a national strategy or revise an existing one. Continue reading →