Category Archives: Commentary

Suspended Nigerian Anticorruption Agency Head Rebuts Charges

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As this blog has reported, Ibrahim Magu, the Acting Chair of Nigeria’s Economic and Financial Crime Commission, was detained July 7 by the state security service on vague charges involving corruption and misfeasance in office.  Since then, in what would appear to be an orchestrated campaign to discredit him, the Nigerian press has been awash with allegations of Magu’s wrongdoing.  They range from a claim that he secretly owns property in Dubai to charges he has embezzled millions from the Commission to an assertion he has paid off Nigeria’s sitting Vice President.

A point-by-point rebuttal of the allegations, issued by Mr. Magu’s counsel Wahab Shittu, is below.  An interview with Mr. Shittu on the public affairs program “Law Weekly,” is here, and a discussion of the issues raised by Magu’s treatment and their implications for Nigeria’s fight against corruption is here.

Many Nigerians fear that the real reason Magu was detained and subsequently suspended from office is that he has been far too effective a corruption hunter (examples here and here). Let’s hope the Presidentially appointed panel investigating Magu acts promptly, fairly, and decisively.  Nigeria needs an strong, effective Economic and Financial Crimes Commission to fulfill President Buhari’s pledge to fight corruption.

THE CHAIRMAN                                                                                                                               The Presidential Investigation Committee on The Alleged Mismanagement Of Economic and Financial Crimes Commission (EFCC)                                                                               Federal Government Recovered Assets and Finances From May 2015 to May 2020.

Attention: Hon Justice Isa Ayo Salami (Rtd)

Gentlemen:

PUBLICATIONS PREJUDICIAL TO THE PROCEEDINGS OF THIS HONOURABLE PANEL Continue reading →

Countering Corruption in the Energy Sector: After Initial Missteps, Tanzania Shows the Way

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The effects of corruption can be felt long after the incidents take place. There’s no better illustration of this than the history of Tanzania’s energy sector. In 1992, the Government of Tanzania was facing an energy crisis, and was in discussions with a Canadian company to develop its natural gas fields with funding from the World Bank. But then, the Tanzanian government received an unsolicited proposal from a Malaysian company, which offered to partner with a local Tanzanian firm to build and operate an emergency diesel-fueled power plant. The government abandoned its discussions with the Canadian company and, in 1995, signed a 20-year power purchase agreement (PPA) with Independent Power Tanzania Limited (IPTL), a joint venture entity formed by these Malaysian and Tanzanian private interests. By 1995, however, the energy crisis had already passed, and it was not at all clear that this PPA was in the government’s interest. In fact, Tanzania’s principal energy regulation agency, the Ministry of Energy and Minerals (MEM), consistently opposed the deal. Yet parties with significant ownership interests in IPTL managed to get the PPA through, in part by bribing senior officials and politicians.

The deal was a disaster, one that had a substantial negative impact on Tanzania’s energy sector for close to two decades. (The initial corrupt deal, together with multiple other improprieties, significantly undermined the financial stability of Tanzania’s energy sector, resulting in lower investment, substantial delays in the construction of more efficient power plants, higher energy costs for consumers, and inadequate expansion of electrification into rural communities.) But, without minimizing the seriousness of the mistakes that were made or the costs that resulted from this corrupt deal, ultimately Tanzania’s efforts over the last decade to hold the corrupt actors accountable and to overhaul its regulatory system provide a roadmap for how countries that have suffered from this sort of corruption, in the energy sector and elsewhere, can respond. Continue reading →

Two Legal Changes Which Would Bolster Israel’s Protection of Whistleblowers

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Like many other jurisdictions around the world, Israel has long recognized the value of whistleblowers who report and expose illegal acts in their workplaces. Without such whistleblowers, it is almost certain that Israeli citizens and law enforcement would never have learned, for example, about alleged corruption in the Israel Tax Authority, municipalities, Israel Aerospace Industries, the Ministry of Transport and Road Safety, and others. In order to encourage more whistleblowers to come forward, Israel has developed several legal instruments, the strongest and most central being the Protection of Workers (Exposure of Offenses and of Harm to Integrity or to Proper Administration) Law (PoWL) (see here and here). The PoWL, originally enacted in 1997 and amended three times since then, civilly and criminally forbids employers from retaliating against employees for whistleblowing, and establishes an employee-friendly mechanism for the victims of such retaliation to seek damages. These cases are heard by Israel’s specialized Labor Courts. In addition to awarding compensatory damages, the courts are also authorized to order employers to pay exemplary (that is, punitive) damages, and may also invalidate the whistleblower-plaintiff’s dismissal, or order that the whistleblower be moved to “another appropriate position” in the workplace.

While at first glance the PoWL seems to offer strong protections for whistleblowers, the PoWL suffers from two major weaknesses that significantly compromise its effectiveness. These problems must be addressed if the PoWL is to provide whistleblowers with adequate protections against retaliation: Continue reading →

FIFA Can and Should Do More To Crack Down on Corruption in International Soccer

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Just over one year ago, in June 2019, Ahmad Ahmad, the president of the Confederation of African Football (CAF) and a Vice President of FIFA (international soccer’s governing body), who had long been dogged by reports of corruption, was detained by French police at a luxury hotel in Paris. Eight months later, in February 2020, the accounting firm PwC released an audit of CAF’s finances, documenting scores of financial irregularities by Ahmad and his colleagues, including an alleged kickback scheme involving a company run by a friend of Ahmad that did business with CAF.

CAF is just the latest in a long line of international soccer organizations beset by corruption scandals. Corruption in international soccer, long the subject of rumor and speculation, first made mainstream headlines back in 2015, when the U.S. Department of Justice unsealed a series of indictments against officials in FIFA and the regional soccer federations for North and South American (CONCACAF and CONMEBOL, respectively). Those indictments—and the resulting public outcry—forced FIFA, CONCACAF, and CONMEBOL to adopt a series of structural anticorruption measures, such as publicizing financial statements and creating independent audit committees.

Unfortunately, those reforms are not enough. The alleged corruption by Ahmad and his CAF colleagues is not anomalous, but rather symptomatic of two important factors that will continue to contribute to corruption in international soccer, notwithstanding the reforms implemented by FIFA and a few other federations in the aftermath of the 2015 indictments.

Continue reading →

Undermining President Buhari’s Fight Against Corruption? Alarming News out of Nigeria

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Nigerian media have been filled with conflicting accounts (here and here) about whether Ibrahim Magu, Acting Chairman of the Economic and Financial Crimes Commission, was himself arrested for corruption Tuesday.  A press release issued by a member of the Presidential Advisory Committee Against Corruption meant to clarify the situation reveals highly disturbing ongoing machinations within the Nigerian government over President Buhari’s effort to curb corruption.  It is reprinted below. UPDATE: Since its appearance, other advisory committee members have said they do not endorse it.

Press Release: Professor Femi Odekunle, Member, Presidential Advisory Committee Against Corruption.

This is a preliminary reaction of the Presidential Advisory Committee Against Corruption (PACAC) to the alleged ‘arrest’ of Ibrahim Magu, Acting Chairman the Economic Financial Crimes Commission (EFCC). Of course, the real information reaching us is that he was only invited to appear before a Panel set up not long ago concerning some alleged memo by Malami, Attorney General and Minister of Justice, regarding some alleged malfeasance by Magu, along with nominations for his replacement.

It was just that those sent to invite him for whatever reasons best known to them invited some press along and made it look an arrest. That mischief has been confirmed by some apparent afterthought denial by the DSS [the Department of State Services, the domestic intelligence agency] that it was not an arrest. While PACAC has not had a formal meeting on this development, I have discussed with the Chairman and some other members and the following can be considered as PACAC’s preliminary reaction to this development.

The alleged originating Malami memo, up to the current “arrest “ seems an outcome of power-play by power blocs in the corridors of power in which Malami appears to be an arrow-head or major agent of a power bloc that is not really interested in, or in support of, Buhari’s anti-corruption fight.

  1. One can recall the earlier non-confirmation experience of Magu by the 8th Assembly, orchestrated by a power bloc and supported by the DSS ‘Security’ reports.
  2. One can also note the non-resubmission of Magu for confirmation since May 2019 despite the apparent willingness of the 9th Assembly to consider it this time around.
  3. Furthermore, one must take cognisance of the alleged memo referred to earlier i.e by Malami concerning alleged corrupt practices by Magu, along with his own nominations for Magu’s replacement.
  4. Again, we cannot forget Malami’s demand of certain high-profile case files from Magu which the latter has been resisting.

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World Bank Monitoring of Repatriated Assets Should Be Part of Major Settlements

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The issue of repatriating the proceeds of corruption to the countries from which they were stolen has attracted substantial commentary, including in multiple posts on this blog (see here, here, here, here and here). Much of the discussion focuses on whether and how to return funds to countries that still suffer from systemic corruption or outright kleptocracy. In these cases, the risk that the assets, if simply returned, will be stolen again is, in the view of some critics, unacceptably high. In some cases, despite these risks, the government that seized the assets nevertheless repatriates the seized funds directly to the government from which they were originally stolen; the US Department of Justice (DOJ) has done this in several cases, including asset returns to Peru, Italy, and Nicaragua. In other cases, by contrast, the seized funds have been funneled to a local NGO rather than to the government. This was done in the agreement among the United States, Switzerland, and Kazakhstan regarding the transfer of corruption proceeds to Kazakhstan (an agreement which created a new NGO called the BOTA Foundation). This mechanism was also included in the DOJ’s settlement with Equatorial Guinea over the disposition of assets stolen by the President’s son, Teodorin Obiang. Another approach, which we saw in this past February’s trilateral agreement among the United States, Jersey, and Nigeria regarding the return of $308 million in assets stolen by former Nigerian dictator General Sani Abacha (which I discussed at greater length in a previous post), entails the earmarking of the repatriated funds for specific infrastructure projects, coupled with oversight by a yet-to-be-determined independent auditor and yet-to-be-determined independent civil society organizations (CSOs), with both the auditor and the CSOs selected by Nigeria, but subject to a veto by the United States and Jersey.

The inclusion of these various conditions is understandable. Notwithstanding the sovereignty-based objections advanced by the so-called “victim countries”—which often assert that they have an absolute right to the unconditional return of assets stolen from their national treasuries—returning huge sums to corrupt or weak governments without any safeguards would be irresponsible. Nevertheless, there are many pitfalls involved with leaving oversight largely to the victim country government and local CSOs, and the ability of countries like the United States to monitor compliance with the terms of repatriation agreements in foreign countries is limited. The best way to address these concerns is to involve an international institution—such as the World Bank, or possibly one of the regional multilateral development banks—in monitoring the terms of repatriation agreements.

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Finding Politically Feasible Anticorruption Reforms in Bosnia and Herzegovina: The Case for Indirect Approaches

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Bosnia and Herzegovina (BiH), like many of its neighbors in the Western Balkans, is beset by endemic, seemingly unsolvable corruption. Understandably, many Bosnian citizens would like to see the prosecution and conviction of high-level officials engaged in corrupt practices. Local activists and the international community have pressed for improvements to BiH’s judicial sector and law enforcement capacities, at least in part to make such high-level prosecutions more likely, and more likely to succeed. Yet while convictions of corrupt senior officials should indeed be one important goal, in the short term it will be very difficult to achieve, for the simple and familiar reason that political leaders will vigorously resist any changes that could put themselves at risk of criminal prosecution. Ending the culture of elite impunity in BiH, while necessary, will remain a long-term project.

That doesn’t mean, though, that there’s nothing that can be done about corruption in BiH in the short-to-medium term. Indeed, there are a number of measures, besides direct criminal prosecutions, that could reduce corruption in ways that are more indirect, and therefore less threatening to those currently in power. That feature, coupled with the fact that many of these reforms would also produce substantial economic benefits even independent of their corruption-reducing effect, makes these kinds of reforms more politically feasible. Reforms in the two following economic areas are examples of how BiH could cut opportunities for corruption and make everyday life better for Bosnians, and do so in a way that might be acceptable or even attractive to incumbent politicians. Continue reading →

Canadian Legislation to Permit Use of Stolen Assets for Humanitarian Relief

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Ontario Senator Ratna Omidvar has introduced legislation to allow the Canadian government to use frozen assets for humanitarian end. The Frozen Assets Repurposing Act (Loi sur la réaffectation des biens bloqués) would authorize the Attorney General or a designee to request the court where an asset is frozen to seize it. If after a hearing the court is satisfied on the balance of probabilities that the asset is “associated with a foreign national who is responsible for or complicit in” corruption or human rights violations, the asset would be liquidated and the proceeds paid into the court. The court may then distribute the funds to any person, organization, or foreign state for a “just and appropriate” purpose.

The Senator’s bill solves a problem both Canada and the European Union faced in the wake of the Arab Spring.  Canada’s federal government and EU executive both had the power to freeze assets where there was evidence that they were obtained through corruption. But the law allowed them to do no more.  The laws of both assumed the governments from which the assets had been stolen would initiate return proceedings in accordance with chapter V of UNCAC.  But thanks to some combination of a lack of capacity and political wherewithal, successor governments in Egypt, Libya, Tunisia, and Yemen did not. The freezes either ended and the funds went back to the crooked leader or they remain frozen indefinitely.

Although the legislation leaves it to the court to decide how to use the confiscated funds, Senator Omidvar’s bill explicitly states that consideration be given to helping foreign states accommodate refuges. She suggests for example that the frozen funds of Venezuela’s corrupt rulers could be distributed to Colombia and other neighboring countries to alleviate the suffering of Venezuelans who have sought refuge in them.

The confiscation process follows that in the U.K.’s Unexplained Wealth Order law. The holder of the asset would be given the opportunity to show he or she had obtained it through lawful means.  Only if the holder failed to convince the court that it was would confiscation follow.

The legislation was inspired by this 2018 World Refugee Council paper.  The Senator’s “Make Corrupt Foreign Officials Pay,” an article in the online journal Policy Options Politique, makes a strong case for its enactment.  The arguments are not Canada-specific. Perhaps legislators in other countries where the corrupt hide their money will be inspired to copy her bill?  The text is here.

Municipal Dissolution as a Means of Combatting Criminal Corruption

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In December of 2019, the Italian government dissolved the municipal government of the Calabrian town of Africo, replacing it with a national governmentk commission that would run the city for the next 12 to 24 months. This drastic action, decried by (former) Africo city councilor Nicola Paris as “interrupting democracy,” was authorized by a special Italian law, adopted in 1991, that permits the national government to dissolve a local government if that local government has been infiltrated by the mafia. Since 1991, 341 such dissolution decrees have been issued (though 21 were cancelled by administrative courts), with 22 issued in 2019-2020 alone. Sixty-six communities have seen their local government dissolved more than once. (Africo’s city council, for example, has now been dissolved three times.) And the practice is spreading geographically. Between 1991 and 2011, the vast majority of city council dissolutions were in the three regions under the “traditional” sphere of mafia control (Campania, Calabria, and Sicily), with only three dissolutions outside of those regions. But since 2011, the Italian government has dissolved city councils in 21 municipalities outside of that traditional sphere.

The dissolution of city councils is a serious measure, and is strictly regulated. The process begins when concrete evidence emerges of links between town councilors and organized criminal elements that could bias political decision-making or affect public security. This evidence is submitted to the Prefecture, an administrative body responsible for implementing state functions at the local level. The Prefecture appoints a three-person Committee of Inquiry. After an investigation, which usually takes roughly 3-6 months, the Committee presents its findings to the Prefect, who presents them to the Minister of Interior within 45 days. The Minister of Interior, after deliberating with the Council of Ministers, then decides whether to issue a proposal of dissolution; a dissolution is only finalized when the President of the Republic issues a decree of resolution. The issuance of such a decree is judicially reviewable by the administrative courts (and, as noted above, 21 dissolution orders have been judicially nullified). When a municipal government is dissolved, the mayor, councilors, and members of the executive committee are removed from office, and a group of three individuals, known as the Extraordinary Commission, takes over all council activities for a period of up to two years. At the end of this time, new local elections are held.

Even with all of this process, dissolution of a local government is an extreme measure, but in Italy, where deeply-entrenched organized criminal groups are able to secure their control thorough corruption of local governments, such an extreme response is warranted. Indeed, other countries struggling with similar problems might consider adopting a similar mechanism. Continue reading →

Protecting Guyana from the Natural Resource Curse

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The ethnically-divided country of Guyana is one of the smallest and poorest countries in South America. It has a population of just 782,000 people—roughly the size of North Dakota—and its income per capita is less than $5,000 per year. But while the rest of the world faces a crippling recession, Guyana’s economy is projected to grow by 53% this year, thanks to a significant offshore discovery. (The country’s projected growth had been even higher before the recent stress in oil markets.) Guyana sold its first barrel of oil this past January, and national oil output is expected to reach 750,000 barrels/day by 2025 and 1.2mm barrels/day by 2030—more than a barrel of oil per day for each of Guyana’s 782,000 citizens.

But will this oil wealth benefit Guyana’s citizenry? Many observers worry that Guyana may fall victim to the “natural resource curse”—a paradoxical phenomenon in which resource wealth not only fails to generate sustainable economic growth but actually worsens the standard of living for most of a country’s citizens. While some manifestations of the natural resource curse are macroeconomic in nature (for example, the so-called “Dutch disease,” in which resource-driven currency appreciation stifles other tradable sectors), other versions of the resource curse involve resource wealth undermining institutions and weakening governance. Natural resource wealth, especially from point-source resources like oil, gives the political leaders who control the resource cash flows the power and opportunity to engage in various forms corruption. Not only can these leaders profit directly through kickbacks or embezzlement, but they can use resource wealth to solidify their own political power through favoritism and clientelism. In both cases, political leaders may weaken or eliminate transparency, accountability, and institutional checks that are designed to constrain their ability to improperly use resource wealth for their own personal or political benefit. These risks are greatest in countries that already have relatively poor governance and weak institutional frameworks when the resource wealth is discovered. And this corruption and institutional weakening may make ordinary citizens worse off than they were before the resource boom, even as those with connections or political power get rich.

This manifestation of the resource curse is a significant concern for Guyana, a country with political institutions that are already fragile and prone to corruption. In a winner-take-all political system with voters split along ethnic (and even geographic) lines, politicians win by favoring their base and suppressing opposition turnout. And indeed, this year’s presidential elections, conducted just two months after the country’s first oil sale, were marred by vote rigging, civil unrest, and violence. But there are also encouraging signs that the Guyanese government is taking steps to address the resource curse concern by strengthening budgetary institutions. In January 2019, the government established the Natural Resource Fund (NRF) to manage the country’s natural resource wealth. Similar to funds established in Ghana and Timor-Leste, the NRF is structured as an offshore fund that invests in liquid international securities with well-established guidelines governing fund transfers to Guyana’s Ministry of Finance. By codifying transfer rules and prohibiting fund borrowing, the NRF will compel the government—and whichever political party controls it—to save a significant portion of its oil revenue, limiting its discretionary spending abilities and curbing the corruption opportunities that arise from unencumbered financial resources.

The NRF, however, is not sufficient. While the NRF is restricted from borrowing, the Guyanese government is not. And while the NRF limits a government’s ability to withdraw more oil revenue than the NRF’s bylaws allow, the Guyana state is not forbidden from borrowing against this revenue. This loophole would allow a profligate government—especially one that intended to reward its constituents or award suspicious investment contracts—to borrow in international financial markets to fund its expenditures. Furthermore, even with the constraints imposed by NRF transfers, Guyana’s central government expenditures are projected to double from 290 billion Guyanese dollars (approximately US$1.4 billion) to 580 billion Guyanese dollars (US$2.8 billion) over the next five years. This presents ample opportunity for political leaders to leverage their power over discretionary spending to enrich and entrench themselves.

To further constrain the sort of resource-fueled discretionary spending associated with the natural resource curse, Guyana should take at least two additional steps: Continue reading →