Category Archives: Commentary

The Fishrot Files: Clean Countries and Fishy Business

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The Nordic countries are often seen as world leaders when it comes to anticorruption, ranking at the top of Transparency International’s Corruption Perceptions Index (CPI). Yet critics have pointed out that while the Nordic countries have a sterling reputation for suppressing corruption at home, they have a much spottier record when it comes to dealing with exported corruption. This has been the case in Sweden and Denmark, and most recently, in Iceland, which has been widely criticized for its handling of the country’s first high-profile foreign bribery scandal.

The case in question was first exposed in November 2019 when three media outlets published joint investigative findings alleging that an Icelandic fishing company had paid millions of dollars in bribes to Namibian officials in order to gain access to the country’s valuable fishing zones (see here, here, and here). The reporting relied on thousands of leaked documents, which were dubbed the “Fishrot Files,” as well as first-hand testimony provided by a whistleblower, a former manager of the company’s operations in Namibia who admitted that he himself had played a role in bribing Namibian officials.

Though the scandal triggered public protests by Icelandic citizens, senior government officials in Iceland have sought to shift the blame to Namibia’s “weak” and “corrupt government.” Yet whatever governance weaknesses in Namibia may have contributed to the wrongdoing in the first place, it is notable that Namibian authorities moved swiftly to prosecute officials implicated in the scandal, including two high-level government ministers. These ministers were forced to resign and were subsequently arrested; they and eight other defendants now face charges of corruption, fraud, money laundering and tax evasion. In contrast, Icelandic authorities have yet to make any arrests or issue indictments in the case, more than three years after the initial revelations. To date, the executives implicated in the scandal have escaped official sanctions and have remained in their roles at the company.

In this instance, then, we see something rather unusual in foreign bribery cases: A strong response by a demand-side country in the global South (in this case Namibia), and a weak response by the supply-side country. Better understanding Namibia’s unusually strong response to the scandal is important in its own right, but for now, let’s focus on the question of why Iceland—which was one of the first signatories to the OECD Anti-Bribery Convention in 1998 and has readily available the legal framework necessary to handle the matter adequately—has been so ineffective in enforcing its laws against foreign bribery offences. Consider several possible explanations: Continue reading →

UNODC Statistical Framework to Measure Corruption: Comments Requested

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Within the global anticorruption community, no topic has generated as much discussion as the measurement issue. Start with the most basic of questions. Is there an agreed upon definition of corruption? Get by the heated objections to claim there is none, and next consider: are there ways to measure something that by its nature is clandestine? Take for granted clever social scientists can, then ask if these measures are comparable. Across time? Different nations?

The methodological and epistemological debates over such questions have raged in the academy for millennia. But as corruption has gained ever more salience as a policy issue, the debate has ranged far beyond the academy. Just ask any political leader forced to explain to citizens why his or her country scored poorly on some corruption-rating scale.

The United Nations Office on Drugs and Crime has now brought needed clarity to the debate. At the request of the 189 state parties to the U.N. Convention Against Corruption, it has published the first draft of a comprehensive statistical framework to measure corruption (here) with a form for providing comments (here).

Bearing in mind my bias, I contributed (very slightly and with more comments promised), I think the draft is a first class piece of work.  Two of many reasons why.

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The FDA Drug Approval Process Has Problems—But It Is Not Corrupt

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Is the US drug approval process corrupt? Many critics say that it is, leveling the charged rhetoric of corruption at the Food and Drug Administration (FDA) (see, for example, here, here, and here). Yet there have been few, if any, credible allegations of illegal bribery or the exchange of quid pro quo benefits in relation to FDA drug approvals. Rather, when critics speak of “corruption” at the FDA, they are alluding to a perhaps all-too-cozy relationship between the FDA and the pharmaceutical companies it regulates. That is indeed a source of concern: Big business likely has too much sway in Washington, D.C. on a whole range of issues, and the FDA is not immune to the powerful influence of powerful lobbies like Big Pharma. Yet the casual deployment of the rhetoric of “corruption” in this context, though offering attractive click-bait, is both misleading and potentially counterproductive. Continue reading →

Another Annual CPI Is Out. Yet Again, Here’s a Gentle Public Service Reminder Not to Focus on Year-to-Year Changes in Individual Countries’ Scores

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Every year for the last umpteen years (I’ve lost count), shortly before or shortly after Transparency International releases its annual Corruption Perceptions Index (CPI) and associated reports and press releases, I’ve done a blog post reminding everybody that we should not attention to year-to-year changes in individual countries’ CPI scores, and we certainly should not construct elaborate narratives about how well countries are doing in fighting corruption based on those changes. And every year, TI itself and pretty much all the media coverage of the CPI basically ignores this and does it anyway. If anything, TI seems to have gotten worse about this in the last couple of years.

Still, it seems like this admonition bears repeating, so now that TI has released its 2022 CPI, I’ll do it again. Rather than repeat, yet again, all the reasons that looking at year-to-year changes in an individual country’s CPI score is uninformative and counterproductive, I’ll just supply links to posts from prior years explaining why this is so. See here, here, here, here, here, here, here, and here.

As I’ve also said many times, I like the CPI! I’m not one of those academics who likes to trash it. I think it provides a lot of relevant information, and is very useful for many research and advocacy purposes. But really, frustrating as it is to keep hammering on this same message, these scores cannot be used as indicators of progress or backsliding, and should not be so employed.

A South African “Abuse of Public Power” Offense? Some Suggestions for Drafting a Proposed Statutory Crime

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South Africa has laws which criminalize various forms of corruption (bribery, embezzlement, and the like), yet officeholders have regularly exploited their positions of power for illicit gains (see here and here). Part of the reason for this is that it often can be very difficult to prove the elements of a specific corruption offense, even when it seems clear that the officeholder abused his or her authority. To address this problem, a prominent judicial commission in South Africa (known as the Zondo Commission) recently recommended that South Africa adopt a statutory criminal offense for the “abuse of public power.” The proposed offense would cover “any person who exercises or purports to exercise any public power vested in such person…otherwise than in good faith and for the purpose for which such power was conferred,” and if the prosecution can prove such abuse of public power, then the defendant can be subject to up to 20 years imprisonment and/or a maximum fine of approximately US$12 million.

If the offense sounds very broad, that’s because it is. The Zondo Commission’s proposal contemplates a low threshold for what would constitute an abuse of public power, with no restriction to officials of senior rank. To illustrate, the Zondo Commission offered a wide range of potential examples of “abuse of public power,” including not only conduct such as the president granting an unauthorized person access to the “national wealth,” but also conduct like a junior official who suspends a colleague due to “envy or revenge.” Continue reading →

Corruption-Proofing Legal Norms: A Technique Worth Copying?

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“Corruption-proofing” is a method for assessing whether a draft law or regulation poses a risk of corruption. A independent expert analyzes whether the way a proposed legal norm is drafted or to be implemented is likely to pose a risk of corruption and if so, how it can be amended to minimize or eliminate the risk. First used in the early 2000s by EU Eastern Partnership Countries, it has since spread to other states in Eastern Europe and Central Asia and to South Korea.  

The technique’s immediate value is that it gives lawmakers a chance to revise their drafts to address the corruption risks they might create. Of even greater import, when citizens or civil society have an opportunity to weigh in on corruption risks, it opens the door to public discussion and participation in what is government’s most critical task: the making of legal norms binding on all.

My reading of the experience with corruption-proofing suggests others would benefit from adopting a similar procedure. What I learned about that experience is summarized below. Comments welcome and information on other studies or countries where it has been tried most welcome.

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Should Culpable Whistleblowers Be Eligible for Rewards?

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John Doe is a whistleblower who provided critical information to the U.S. Securities and Exchange Commission (SEC) regarding an international bribery scheme, assisting the agency in bringing a successful enforcement action. Doe timely filed an application for reward under a provision of federal law that directs the SEC to pay an award to whistleblowers who voluntarily provide original information to the agency, contingent on such information leading to a successful SEC enforcement action with monetary sanctions exceeding $1 million. Yet, in Doe’s case, the SEC denied his application for a reward—and the courts upheld this denial—because Doe himself had already pleaded guilty to bribery charges related to the same scheme he helped expose. Under the relevant statute, the SEC is barred from paying an award to any whistleblower who is convicted of a criminal violation “related to the [enforcement] action for which the whistleblower otherwise could receive an award.” In other words, if a whistleblower provides the SEC with information on a particular corruption scheme but is convicted of a crime related to that same scheme, as in Doe’s case, they are ineligible for reward.

What about whistleblowers who are culpable in the unlawful scheme they help expose, but who have not been criminally convicted in connection with that scheme? The SEC has explicitly declined to institute a rule barring culpable but non-convicted whistleblowers from receiving an award. Therefore, participants in an unlawful scheme, including a bribery scheme, may still receive an award if they blow the whistle on the offense, so long as they are not convicted for their role. The SEC’s position has been criticized as both unfair and potentially harmful. During the agency’s rulemaking process, several commenters, including a group of senior corporate executives and the American Bar Association, advocated for a more stringent rule in order to avoid incentivizing violations of securities laws. Recently, a Bloomberg Law article branded the program as “enrich[ing] fraudsters,” reflecting the continuing sentiment that no culpable whistleblower should be eligible for reward.

These criticisms are misplaced. While it is undoubtedly important to ensure that whistleblowers cannot profit from their own wrongdoing, it would be unwise to implement a more stringent standard than the one set out in the SEC’s current rule.

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Full Disclosure of Donations to Intra-Party Political Campaigns: An Anticorruption Imperative in South Africa

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In South Africa, the Political Party Funding Act (the PPFA) regulates campaign donations and expenditures to political parties. By imposing various limits and transparency requirements, the PPFA—which is overseen by South Africa’s Electoral Commission—is supposed to prevent corruption and other forms of undue influence that campaign donors may seek to exert over officeholders. But South Africa’s political campaign financing laws contain a significant loophole, one that arises due to an unusual feature of how appointments to the executive branch of government work in South Africa. In contrast to many other jurisdictions, in South Africa members of the incoming governing coalition who seek appointment in the executive branch (including the president) engage in hotly contested intra-party political campaigns, and these campaigns are also funded through donations. Until recently, not only were donations to these intra-party campaigns not regulated by the PPFA, but they did not have to be disclosed under the Executive Ethics Code (Ethics Code). This potentially opened the door for corruption and influence peddling, with millions of dollars funneled to campaigns of South African politicians who sought positions in the executive branch.

For instance, President Cyril Ramaphosa’s 2017 intra-party political campaign (the “CR17 campaign”) to become president of the African National Congress (ANC) and, eventually, South Africa, received an estimated US$20 million in donations. It was subsequently uncovered that US$37,000 had been donated by a corrupt entity formerly known as Bosasa. Bosasa was notorious for making exorbitant donations to the ANC as a quid pro quo to secure significant contracts from the ANC-led government (see here and here). While it remains to be proven whether the allegations that Bosasa’s donation to the CR17 campaign was nefarious, or whether Ramaphosa personally benefited from donations made to his campaign, the non-disclosure of these and similar donations raises serious risks.

Recently, however, the Constitutional Court held that the Ethics Code in its current form is unconstitutional insofar as it fails to require disclosure of all donations made to intra-party political campaigns. The Court reasoned such non-disclosure deprived South African citizens of their constitutional right to information that is essential to making informed political choices when exercising their constitutional right to vote; the Court also concluded that this lack of transparency increased the risk of corruption. The Court mandated the president cure the defect arising by amending the Ethics Code by September 2023. The Court did not, however, prescribe the precise form the amendment should take because doing so would be inconsistent with the role of the judiciary under South Africa’s separation-of-powers doctrine.

When amending the Ethics Code to comply with the Court’s ruling, the guiding principle should be, to the extent feasible, to align disclosure obligations for donations to intra-party campaigns with the obligations currently imposed by the PPFA on inter-party political campaigns. Applying that principal suggests that the Ethics Code should be amended to impose the following two core requirements: Continue reading →

Statutory Leniency for Bribe-Givers in Egypt: Revolutionary or Reprehensible?

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Bribery and other forms of collusive corruption are notoriously difficult to detect. In many cases, the only people who even know that a crime has been committed are the perpetrators. To address the inherent difficulty of proving bribery, many countries use so-called leniency agreements, in which the government offers some form of sanction reduction or exemption to parties who voluntarily self-report and provide evidence against co-conspirators. Most of these leniency programs are designed and implemented by prosecutors’ offices (though they may be authorized by statute). Prosecutors exercise discretion in deciding whether and to what degree to offer sanction reductions to cooperating parties. Under the typical anticorruption leniency program, a self-reporting bribe-giver cannot claim, as a matter of law, an entitlement to any sort of sanction exemption.

Egypt is different. Unusually, and perhaps uniquely, Egypt’s anti–bribery law (Article 107bis of the Penal Code No. 58 of 1937) offers a full and absolute exemption from sanctions for any bribe-giver who self-reports and gives evidence against the culpable bribe-taker.

This approach is misguided, for several reasons: Continue reading →

When and Why Do Whistleblower Reward Programs Succeed?

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It is often difficult to expose and unravel corruption schemes without the cooperation of insiders. Yet would-be whistleblowers are frequently deterred from making disclosures due to the personal and professional risks of doing so. One increasingly popular way that countries are addressing this problem is through whistleblower reward programs. While such programs vary widely in their specifics, most operate under the same basic framework, offering a whistleblower who discloses material nonpublic information that leads to an enforcement action a monetary reward—typically, a percentage of the fines imposed on the liable parties—as an inducement to come forward.

In the United States, which pioneered this mechanism, whistleblower reward programs have seen broad success. Between 1986 and 2020, whistleblower cases under the False Claims Act (FCA) brought in $46.5 billion in penalties, with whistleblowers receiving $7.8 billion in rewards. And this is only under the FCA—other U.S. whistleblower reward programs have also led to the recovery of significant additional sums. For example, under the whistleblower program created by the Dodd-Frank Act, which was created in 2011, whistleblower tips have contributed to at least $2 billion in financial remedies for violations of the securities laws, with over $720 million awarded to whistleblowers. The success of whistleblower reward programs in the United States has inspired similar programs in several other countries, including South Korea, Canada, Nigeria, Ghana, Hungary, and Kenya. But not all of these programs have been similarly successful. For example, in Ghana, the first country in Africa to introduce a whistleblower reward program, no rewards are known to have been issued—in fact, few have made use of the Ghanaian Whistleblower Act’s provisions at all.

What factors help explain when a whistleblower reward program will work as intended? There is no easy or simple answer—the issue is complex, and the effect of any given program depends in part on details of the program’s design, including the prerequisites for receiving a reward and the scope of the program, as well as the country’s culture around whistleblowing. That said, two factors stand out as key indicators of whether a whistleblower reward program will succeed in encouraging substantial numbers of whistleblowers to come forward:

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