Category Archives: Commentary

Going After the Bribe Takers: The World Bank Program

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Two weeks ago I wrote about the growing disparity between transnational prosecutions for paying bribes and those for receiving bribes.  The number of cases where OECD countries have prosecuted their nationals or firms subject to their jurisdiction for bribing developing country officials has been growing steadily, but there are disappointingly few cases where a developing state has gone after its nationals for accepting bribes.  Last week I suggested one way to increase the number of cases against bribe-taking officials is to publicize whenever a firm or individual has been convicted of paying a bribe in a developing state.  For every payer, there is a taker, and if the details of the case are widely publicized, my contention was that civil society, the media, and the political opposition would then press the authorities to prosecute the taker.

The World Bank has tried something similar when an investigation reveals corruption in one of its projects, and the experience suggests that, though not a silver bullet, the effort is worthwhile.

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Revolving Doors and Corruption

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I recently came across a couple of interesting blog posts about corruption and the “revolving door” in the U.S. government (the cycling of individuals from the private sector to government and back again—often as representatives of the same industries they used to regulate while in government).

First, last month Chandu Krishnan (who served as Executive Director of Transparency International UK from 2004-2012) published an insightful post on the Safra Center’s blog, noting how the revolving door—and in particular the promise of lucrative post-government employment—may lead government officials to make laws that reflect the preferences of “industry lobbies” rather than the “will of the people.” Mr. Krishnan adds his voice to the chorus of calls for reform; in particular, he recommends lengthening the legally-required “cooling off” period (during which former government officials are prohibited from lobbying) from one to three years (or longer for positions involving especially high risk, such as procurement).

Around the same time, Mike Koehler, who runs the FCPA Professor Blog, posted a comment on Charles Duross’s recent departure from his position as head of the DOJ’s FCPA enforcement division to take up a position at the law firm Morrison & Foerster. In this post, Professor Koehler reiterated his earlier calls for extending and expanding the “cooling off” period, so that former government FCPA lawyers could not provide any FCPA defense or compliance services for five years after leaving government service.

What struck me about reading these two posts in rapid succession was the fact that although Mr. Krishnan and Prof. Koehler seem in agreement on the problem and the solution, in fact their hypotheses about the effect of the revolving door on government officials’ incentives are not only different, but polar opposites. Mr. Krishnan worries that the prospect of future employment at private sector firms will cause government officials to go too easy on those firms—leading to overly passive or timid enforcement of U.S. law. (He views this as a kind of “institutional corruption.”) Prof. Koehler worries that the prospect of future private sector employment causes government officials to be too aggressive in their enforcement of the law—creating or augmenting the demand for the defense & compliance services these ex-government officials then provide.

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Social Media and Anticorruption Reform: When Does Crowdsourcing Work?

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Is social media the next great tool in fighting corruption, or is its role more limited? As Matthew noted in his last post, some anticorruption activists have used blogs and other online platforms to circumvent traditional media, and there’s some limited evidence they may have had an effect. Perhaps even more exciting, the launch and the early successes of the website I Paid A Bribe, started by an Indian nonprofit, suggested that the egalitarian internet could take advantage of “crowdsourcing” approaches to provide information on corrupt activities, disincentivize bribe-taking, and educate the public. Anticorruption reformers in other countries took note of I Paid A Bribe’s achievements, launching their own country-specific spinoff websites.

But those websites have not been universally successful. One of the most notable recent disappointments has been in China, where I Paid A Bribe and similar crowdsourced antibribery platforms failed, and ultimately folded. Recent research by Yuen Yuen Ang examines the short-lived existence of China’s crowdsourced antibribery platforms and offers some explanations for why the Chinese efforts failed to accomplish their objectives. While she stops short of offering broader takeaways on the role of social media in combating bribery, we can draw some conclusions using her work as a starting point. Broadly speaking, her conclusions suggest that social media is only effective in combating bribery where an adequate educational, social, and political framework exists to support its use. Continue reading →

Do Americans Care About Corruption?

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We usually imagine that democratic accountability serves an important anticorruption function: since voters presumably do not approve of corruption, a benefit of democracy is the ability to give untrustworthy pols the boot. Yet in a recent op-ed in the Washington Post, Hilary Krieger provocatively claims that American voters don’t really care if a politician engages in corrupt acts, so long as “a political leader has otherwise furthered the public good.” In addition to this descriptive claim, she also makes the normative argument that Americans voters are right not to reflexively vote out politicians tainted by corruption.

Although both her descriptive and normative claims have some truth to them–elections are multi-faceted, and corruption is not the end-all-be-all issue–both the descriptive and normative arguments have serious flaws.

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Going After the Bribe Takers: Step One

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Last week I wrote about the gap between prosecutions for transnational bribe paying and transnational bribe taking.  Even after a bribe payer in one state has been convicted or pled guilty, most countries where the bribe was paid have shown little interest in investigating who took the bribe – an often easy inquiry given the evidence unearthed in the bribe payer case.  I also noted that in almost every instance the bribe was paid by a firm in an OECD country to a government official in a developing state.

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Do Anticorruption Blogs Matter? Alexei Navalny’s Example

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Some blogs, including this one, are devoted to analysis and discussion of anticorruption policy issues.  But a number of anticorruption bloggers are more like investigative journalists—finding and exposing instances of (alleged or apparent) corruption. Do these blogs make a difference?

This question is related to the more general question of whether the modern communications revolution—particularly the spread of internet access—will be helpful in fighting corruption. There’s reason for optimism: there’s already lots of evidence that the spread of traditional media (newspaper and radio) were crucial in the fight against corruption in the 20th century, and the internet (along with other communications technologies, like mobile phones) lowers the cost of both disseminating and accessing information about corrupt activities. In addition to individual anticorruption bloggers and websites, platforms like I Paid a Bribe and Bribespot are emerging that may enable much larger numbers of people to disseminate information. These new technologies have gotten a lot of press, but do they make a big difference?

There’s surprisingly little systematic evidence on the impact of internet on corruption, but a recent paper on the Russian anticorruption blogger (and opposition figure) Alexei Nevalny, co-authored by Ruben Enikolopov, Maria Petrova, and Konstantin Sonin, suggests that this sort of anticorruption blogging may have a real impact. Nevalny is a well-known (and controversial) figure in Russia, and he got a lot of international press last month for his exposé on corruption in the Sochi Winter Olympics. But he got his start blogging about corruption in Russian state-owned companies. And, according to Enikolopov, Petrova, and Sonin, Navalny’s posts made a difference: when he posted about a company on his anticorruption blog, that company’s value took a significant hit. What can we learn from this? Continue reading →

The Economist’s Crony Capitalism Index Does Not Measure Crony Capitalism

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The Economist’s recent cover story, introducing what it calls the “Crony-Capitalism Index”, has generated a lot of buzz. The study ranks 23 countries (counting Hong Kong separately) based on the Economist’s calculation of the prevalence of politically connected business dealing. The study takes billionaires from the Forbes Billionaires List who are primarily active in certain industries (such as casinos, banking, extractive industries, real estate, utilities, etc.) that the Economist deems “rent-heavy,” and looks at these billionaires’ share of the economic pie in their country. The index has already been used as the basis for media criticism of those countries that scored poorly, such as Hong Kong (1st) and Malaysia (3rd) — indeed, the Malaysian government was so upset that it censored the Economist for the week the index came out.

Some of the results are unsurprising: Russia and India score fairly high in this measure of crony capitalism, whereas Germany bottoms out the list. But other results are more puzzling.  Not only does the index report that Hong Kong has more crony capitalism than mainland China, but also that mainland China has less crony capitalism than either the United States or Great Britain. What gives? Does the United States really have more of a crony capitalism problem than China?

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The OECD Bribery Convention as Cover for US FCPA Enforcement Abroad

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Both Rick and Matthew’s posts earlier this week discussed the effectiveness of the 1997 OECD Anti-Bribery Convention in combating international corruption. Rick emphasizes the Convention’s success in prosecuting supply-side bribery, noting the hundreds of convictions and settlements since the Convention came into force. But as Matthew pointed out, and as the OECD itself has acknowledged, the impressive-sounding aggregate enforcement numbers mask the fact that enforcement is highly unevenly distributed: the majority of the Convention’s 40 member countries still do not enforce their anti-bribery laws effectively (if at all)–and most of the increase in enforcement that Rick highlights comes has come not from the countries that recently adopted extraterritorial anti-bribery laws, but from the United States, which has had such a law – the FCPA – on the books for more than 35 years.

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Do Companies Benefit from Self-Disclosing FCPA Violations?

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At last Month’s Chatham House conference on Combating Global Corruption, much of the discussion focused on how to create incentives for corporations to uncover and voluntarily disclose violations of foreign anti-bribery laws like the U.S. Foreign Corrupt Practices Act (FCPA). This is important, because as I noted in last week’s post, most FCPA violations are revealed because of self-disclosures, rather than government or media investigation. During the conversation, a distinguished lawyer (whom I cannot identify by name, because of the Chatham House Rule) made the following argument: Although the U.S. Department of Justice claims to give corporations credit for self-disclosure of FCPA violations, “a careful examination of the evidence reveals” that self-disclosure does not result (on average) in any reduction in penalties.

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What About the Bribe Takers? (1)

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Yesterday Matthew noted the success of the OECD Anti-Bribery Convention in curbing the bribery of public officials by individuals or firms subject to the laws of the 40 countries that have now ratified it.  The enforcement data is surely impressive.  Reports by Transparency International show a steady increase in investigations and prosecutions by the parties to the convention, and the latest OECD data, from 2012, disclose that since the convention took effect in 1999 over 300 individuals and 200 enterprises have been convicted or pled guilty to bribery-related charges with cases pending against another 150 persons and 20 plus firms.

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