Category Archives: Commentary

The Source of the $1 Trillion in Annual Bribes Figure

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In my last post, I discussed my unsuccessful attempts to track down the source for the widely-cited “$1 trillion in annual bribe payments” figure (other than a 2004 World Bank press release, which referenced an unpublished study without further citation).  Several readers were kind enough to direct me to the best published source on the $1 trillion figure: the appendix in a chapter by Daniel Kaufmann in the World Economic Forum’s 2005-2006 Global Competitiveness Report.  The chapter addresses most—though perhaps not all—of my concerns.

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Income and Asset Disclosure Statements: No Anticorruption Magic Bullet

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For the second time in the space of a couple of months I find myself explaining to the leaders of an anticorruption agency that a program requiring senior officials to disclose their income, assets, and other details of their personal finances won’t end corruption or, for that matter, cure the common cold or otherwise solve all their nation’s ills.  There seems to be some kind of myth floating around the development community and at least some self-anointed anticorruption “experts” that such a program can by itself lead to the exposure of a great deal, if not all, of corrupt activity.

If only it were that easy.  The truth is the evidence points in virtually the opposite direction. Continue reading →

Where Does the “$1 Trillion in Annual Bribes” Number Come From?

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Given the generally accepted view that bribery is widespread around the world, it probably doesn’t make sense to get too hung up over the specific numbers. That said, I’ve seen the figure of (approximately) $1 trillion in annual bribe payments thrown around quite a bit, and I was curious where that number came from.  It seems to me it would be very difficult for even the most intrepid researcher to come up with a plausible ballpark estimate of the total dollar amount of annual bribe transactions. After poking around a bit on the web and in some of the relevant literature, I’m coming up empty. Here’s what I can tell so far: Continue reading →

What if Shame Isn’t Enough: The OECD and a Noncompliant South Africa

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Matthew recently expressed skepticism about proposals to expand the OECD Anti-Bribery Convention to countries like China and India.  As he explained, adding new parties may undermine the peer review system that is key to the Convention’s success.  To succeed, that system requires (in Matthew’s words) that “(1) countries are willing to issue harsh reports about their peers, and (2) countries care about the reports, and find bad reviews embarrassing and/or politically damaging.” But what if public shaming isn’t enough?  Imagine that a member state didn’t care enough to change its ways after critical reports.  What would be next?  Unfortunately, South Africa might help answer that question soon.

Last month, the OECD Working Group on Bribery (“WGB”) issued a scathing Phase 3 Report on South Africa’s compliance with the Convention.  As the FCPA Blog recounted, the OECD appeared to have “encountered a brick wall,” with the reviewing nations “repeatedly express[ing] exasperation with South Africa’s failure . . . to prosecute a single foreign bribery case.”  Calling the need for enforcement “imperative,” the WGB insisted that South Africa take “urgent steps” to address a host of infirmities; among other problems, the WGB found that South Africa had allowed political and economic considerations to impede investigations by the nation’s under-resourced anticorruption unit.  The OECD also took the unusual steps of (1) asking South Africa to submit a self-assessment and (2) threatening to “take appropriate measures,” including requiring an additional Phase 3bis review, to address South Africa’s continued compliance problems.

With South Africa’s ruling party under increasing fire for its failure to combat corruption, the nation’s 2014 elections could mark a turning point in South Africa’s antibribery efforts.  But what if they don’t?  What if continuing to embarrass South Africa through follow-on reports and a statement of noncompliance isn’t enough to jumpstart enforcement of the Convention in Africa’s largest economy?

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Objective Validation of Subjective Corruption Perceptions?

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As discussed on this blog and elsewhere, one of the big concerns about the most popular cross-country datasets on corruption (the Transparency International Corruption Perceptions Index (CPI), the World Bank Institute’s Worldwide Governance Indicators (WGI), etc.) is that they are based (largely or entirely) on perceptions of corruption. As Rick noted in a recent post, and as the critical literature has pointed out ad nauseam, perceptions, while perhaps important in their own right, are not necessarily based in reality. Indeed, some recent research (including, but certainly not limited to, nice papers by Claudio Weber Abramo, by Mireille Razafindrakoto and Francois Rouband, and by Richard Rose and William Mishler) indicates that national corruption perceptions are only weakly correlated with survey results asking about individuals’ personal experience with bribery. This raises serious questions about whether the perception-based indicators are useful either for general assessment or for testing hypotheses about the causes or consequences of corruption.

But might there be more objective measures that could be used to assess whether the corruption perceptions indices are picking up something real? Off the top of my head, I can think of four quite clever recent papers that demonstrate a strong correlation between a subjective corruption perception index and some more objective measure of dishonest behavior. I’m sure there are more, but let me note the four examples that I can think of, and then say a bit on what this might mean for the use of perception-based indicators in empirical corruption research.

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Rethinking Kiobel: Is there Room for Human Rights in FCPA Enforcement?

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Today is the one-year anniversary of the U.S. Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co. In its decision, the Court narrowed the admissibility of Alien Tort Statute (ATS) claims related to extraterritorial human rights abuses, ruling that such claims are not actionable unless the claim has a sufficient nexus to U.S. territory. What kind of nexus is enough for an ATS case arising from exterritorial conduct? For cases involving foreign multinational companies, such as the defendant Royal Dutch Petroleum in Kiobel, a “mere corporate presence” in the U.S. is not enough.

A striking feature of this holding is the clear contrast between how a “mere corporate presence” in the U.S. is not enough for an ATS claim based on extraterritorial conduct, but is sufficient for a Foreign Corrupt Practices Act (FCPA) prosecution. Although Royal Dutch Petroleum’s “mere corporate presence” in the U.S. was not a sufficient basis for an ATS claim, if these human rights abuses were tied to corruption for the retention or solicitation of business in Nigeria (and involved U.S. interstate commerce — a requirement not difficult for the DOJ and SEC to overcome), Royal Dutch Petroleum could be liable for FCPA violations. As a foreign multinational company, Royal Dutch Shell Company lists its shares on the New York Stock Exchange and prepares filings for the SEC. Such activity is sufficient for establishing FCPA jurisdiction.

This suggests a possible strategy for human rights advocates dismayed by the Kiobel decision: Perhaps it might be possible to more aggressively utilize FCPA enforcement for circumstances in which corporate accountability for human rights abuses is tied to bribery. Continue reading →

The Scandal of Corruption in Development Aid

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For all the effort development agencies invest to help developing states combat corruption, recent reports of corruption in Japanese and Norwegian development aid projects along with an earlier paper on corruption in World Bank projects remind that the development community does little to attack corruption in the one area where it has the most control: the projects it funds. Continue reading →

Can Foreign Anti-Bribery Enforcement Statistics Help Us Measure Corruption Levels Objectively?

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We’ve spent a fair amount of time, in the early days of this blog, talking about the challenges of measuring corruption cross-nationally. The well-known perception measures are useful to a point, but suffer from well-known drawbacks, chief among them concerns about how accurately perceptions capture reality. A recent working paper by Laarni Escresa and Lucio Picci, “A New Cross-National Measure of Corruption,” tries to get around these difficulties. Using data on enforcement of foreign anti-bribery laws like the U.S. Foreign Corrupt Practices Act (FCPA), Escresa and Picci they derive a new index, which they call the Public Administration Corruption Index (PACI), to make more objective cross-country comparisons in corruption levels. The paper is really clever and creative—but in the end I think it doesn’t work. Let me first say what I think is so cool about the idea, and then explain what I think are the biggest flaws. Continue reading →

Could FCPA Investigations Influence International Arbitration?

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Is it possible for violations of the Foreign Corrupt Practices Act (FCPA) and other domestic anti-corruption regimes to influence the outcomes of international investment arbitrations? In my last post, I showed how allegations of corruption could be relevant in investment treaty arbitration, both as a “sword” wielded by investors, and as a “shield” used by sovereign states. In this post, I consider how evidence from domestic anti-corruption proceedings could be used in arbitration, and what effects its use might have on the international system. Continue reading →

McCutcheon v. FEC Is a Substantive Clash, Not a Definitional One

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The U.S. Supreme Court’s decision last week in McCutcheon v. Federal Election Commission – which struck down limits on the aggregate amount any one individual could contribute to multiple candidates during a single electoral cycle – has attracted a great deal of attention.  Indeed, it has already generated so much discussion that I’m not sure I have much to add (particularly given that I’m not a campaign finance expert). But one piece of commentary on the decision caught my eye: on the Wall Street Journal’s blog, Jacob Gershman argues that McCutcheon is not just about the clash over the value of political speech and the effect of money on political integrity, but “at a more basic level” the decision is about “how to define the concept of ‘corruption.’”  Many of my colleagues in the legal academy – several of whom are quoted in Mr. Gershman’s post – agree with that assessment, as does Justice Breyer in his dissenting opinion in McCutcheon.  But I don’t think it’s quite right—or at least it’s only partly right.

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