Category Archives: Commentary

Barring Corrupt Officials from Entering the United States: A Guide to the Process

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Since 2004 it has been American policy to deny entry into the United States of corrupt foreign officials and their immediate families. President George W.  Bush initiated the policy by presidential order, and in 2008 Congress added its voice, enacting legislation barring “foreign kleptocrats involved in the extraction of natural resources” from entering the United States.  Beginning in 2012, the Congressional ban was extended to include all those involved in “significant corruption,” and in 2014 the provision was expanded again to cover foreign officials involved in “a gross violation of human rights.” The following year Congress clarified that designations may be made publicly or privately.

The first public designation was made in 2018 (Albanian judge and prosecutor Adriatik Llalla), and since then more than 150 individuals from over 30 countries have been publicly barred from entry — either for corruption or human rights violations.  Although the State Department web site does not keep a running list of those who have been barred, the NGO Human Rights First does. A spreadsheet available on its website can be sorted by country, crime, date, and other fields and includes links to each State Department sanctions announcement. It is updated whenever new sanctions are announced

The Department encourage civil society activists, foreign diplomats, and others with information relevant to the designation process to contact it. The best way is through its personnel in the field as designations typically arise from recommendations made by U.S. embassy staff.

Two excellent descriptions and discussions of the visa denial policy by analysts at the Library of Congress’ Congressional Research Service are here and here.

The Human Right First spreadsheet, “U.S. Government Public Section 7031(c) Sanctions Designations to Date,” can be accessed here.

GAB contributor Daniel Binette’s recommendations for greater clarity in how visa denial decisions are made is here.

Are There Common Features of Dysfunctional Organizational Cultures? Corruption and Police Brutality

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For the second time in the last several months, I’m finding it extremely difficult to blog about corruption due to a more urgent crisis. A few months ago, it was the Covid-19 pandemic, which is still very much with us. But now, in addition to the ongoing public health emergency, my home country (the United States) is in the midst of widespread social and political unrest triggered by the murder of an unarmed black citizen at the hands of police officers, as well as several other similar incidents. The underlying problems—systemic racism and misconduct by law enforcement agencies—are, sad to say, longstanding problems with deep roots. But the protests have given them new urgency and salience. And while there have been instances of rioting and looting—acts that the vast majority of peaceful protestors have roundly condemned—we have also seen what can only be described as a grossly disproportionate response by far too many law enforcement agencies and officers. In multiple cases, police have used unnecessary force not only against rioters and looters, but against peaceful protestors and members of the media who clearly identified themselves as such. And multiple senior elected officials, including President Trump and Senator Tom Cotton, have advocated the use of military force to suppress what they would characterize as civil unrest.

Suffice it to say that, given all this, it’s hard for me to think of something interesting or worthwhile to say about global corruption. But as I’ve been doing more to educate myself about the root causes of police misconduct (a mild term for a category that includes, among other things, brutality and racially discriminatory enforcement), I’ve noticed some intriguing similarities to some of the prevailing theories regarding the roots of organizational corruption (in both government agencies, including but not limited to police departments, and in private firms). Perhaps this shouldn’t be so surprising, because in both cases the ultimate issue concerns the reasons for widespread rule-breaking within an organization. To be clear, I don’t want to overstate the similarities, either with respect to the severity of the misconduct (I condemn bribery as strongly as anyone, but I wouldn’t dream of equating it with systemic racism or police brutality) or with respect to all of the causes and characteristics. I should also emphasize that I’m by no means an expert in police misconduct, and I suspect that many of my observations here will have already been made, or possibly already refuted, in the existing research literature with which I am not yet familiar. With those caveats, let me highlight some potentially intriguing similarities between the characteristics of police departments prone to racism and violence, on the one hand, and firms or divisions that engage in bribery, embezzlement, and other forms of financial malfeasance. These similarities may suggest some common features of ethically dysfunctional organizations. Continue reading →

Why Western Accounting and Consulting Firms Are Facilitating Global Corruption, and How To Stop Them

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In 2016 the then-president of Angola, José Eduardo dos Santos, appointed his daughter, Isabel dos Santos, as chairwoman of Sonagol, Angola’s struggling state oil company. Ms. dos Santos quickly recruited the management consulting firms Boston Consulting Group (BCG) and McKinsey and Company to help restructure the company. BCG and McKinsey were not paid directly by Sonangol, however, but rather by a holding company controlled by Ms. dos Santos, Wise Intelligence Services. On paper, Wise Intelligence Services oversaw the consulting firms’ work, but in reality this payment plan enabled Ms. dos Santos to embezzle millions of dollars from the Angolan treasury by overcharging for the consultants’ work and then pocketing the difference. The firms, of course, still received enormous fees, and do not appear to have raised any concerns or objections regarding the highly unusual and suspicious payment arrangements. BCG and McKinsey were not the only Western professional services firms to profit from working with Ms. dos Santos. The accounting firms PwC, Deloitte, KPMG, and Ernst and Young all audited some of the companies owned by Ms. dos Santos and signed off on those companies’ contracts with the Angolan government. In January 2020 Angolan prosecutors announced that they would charge Ms. dos Santos—whose personal wealth is estimated at around $2 billion—with embezzlement of state funds in connection with her business relationships with the Angolan government.

This is far from the first corruption scandal that has implicated the same cohort of large professional services firms. McKinsey has received enormous criticism for its partnership with a company connected to the kleptocratic Gupta family in a $700 million contract with the South African government to resuscitate the country’s failing state-owned power company. Deloitte, Bain, and KPMG have also faced scrutiny for their respective roles in facilitating or otherwise enabling South Africa’s myriad corruption scandals. In Mongolia, McKinsey partnered with a firm owned by a top government official in a contract to reshape the country’s rail system; Mongolian officials ultimately levied corruption charges against three different Mongolians involved in brokering that deal.

These and numerous other scandals illustrate that, far too often, professional services firms have either facilitated, or at best been passively complicit in, the theft of massive sums from state coffers. Why have professional services firms been repeatedly implicated in corruption scandals involving their public sector work? Part of the explanation is simply the inherent risk associated with settings in which developing-country governments, where corruption risks are high to begin with, are handing multi-million dollar contracts to Western firms in an effort to modernize their national infrastructure. But in addition, two structural issues help to explain why accounting and management consulting firms are particularly susceptible to these sorts of problems.

Continue reading →

Financial Asset Recovery Conditions: The IMF’s New Anticorruption Playbook

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Since the Euromaidan revolution in 2014, the IMF has provided substantial macroeconomic stabilization assistance to Ukraine, but has conditioned disbursements on, among other things, significant anticorruption reforms—an approach that has been hotly debated, including on GAB (see here, here, here, and here). The most recent financial assistance agreement also targets corruption, but in a more indirect fashion. Last December, the IMF and Ukraine provisionally agreed to a $5 billion financial assistance program. It soon became clear, though, that the launch of the new program hinged on the Ukrainian parliament successfully passing legislation on land and banking reform. Ukraine complied, and the new agreement is likely to be signed in the coming weeks.

The banking bill, which provides a more general bank resolution framework, is clearly designed to address outstanding issues for the country’s largest commercial bank, PrivatBank, which was nationalized in December 2016. The PrivatBank case is particularly complicated due to the historically close relationship between President Volodymyr Zelensky and the bank’s former owner, the oligarch Igor Kolomoisky. (Prior to winning Ukraine’s presidential election in April 2018, Zelensky—a former TV comedian—had no political experience, and his only political connection appeared to be his friendship with Kolomoisky, who owned the television network that broadcast the TV program that catapulted Zelensky’s political career.) Many commentators speculated that the IMF had been delaying a bailout for Ukraine due to concerns that Zelensky’s administration would not aggressively pursue efforts to recoup money stolen from PrivatBank. By successfully leveraging and re-purposing past conditionalities, the IMF has driven a wedge between the Zelensky and Kolomoisky, forcing the new President to abandon his toxic personal relationship with this oligarch in order to unlock international financial assistance. While Ukraine is an interesting case study in its own right, the IMF should make more frequent use of financial asset recovery conditions in other countries. Not only can such conditions support a country’s fiscal sustainability framework, but they may be especially helpful if and when well-intentioned political leaders struggle to break ties with corrupt allies. Continue reading →

Where the Real Blame for Letting Bridgegate Defendants Off Lies: Part II — the Congress

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Anticorruption advocates roundly condemned the Supreme Court for its May 7 Bridgegate decision overturning two New Jersey officials’ corruption convictions for conduct even their lawyer admits was wrong (examples here, here, and here).  But as explained in a previous post on Bridgegate, so named because the case involved closing bridge entry ramps to create traffic jams, the Court is not to blame for the result.  The immediate cause was Bridgegate prosecutors pushing beyond the limits the Court has ruled current law sets on their power to police state and local corruption.

It is Congress, though, that bears the lion’s share of the blame for the outcome. Congress needs to clarify when state and local officials can be prosecuted under federal law for corruption.  Until it does, more Bridgegates, cases where the Court rebuffs federal prosecutors’ expansive view of their power to prosecute state and local corruption, are in store.  As with Bridgegate, the result will be that corrupt officials get off scot free while the American public is left to question their government’s commitment to fighting corruption. Continue reading →

Albanian Political Leaders Are Using Covert Tactics to Silence Anticorruption Watchdog Groups

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Civil society and investigative journalism have long played key roles in exposing corruption, and many CSOs and media watchdogs—especially newer, younger organizations—now make extensive use of social media platforms to engage with the public. In Albania, for example, relatively new organizations like Nisma Thurje and Faktoje frequently expose instances of corruption via Facebook, one of the most popular social media platforms in Albania. However, corrupt politicians are taking notice of these innovative tactics and finding equally innovative ways to silence their critics. In addition to ongoing efforts to censor the media and harass activists (see, for example, here and here), the Albanian elite has undertaken more clandestine efforts to attack civil society and journalists.

One savvy scheme involves Acromax Media GmBH (Acromax), a German digital rights company owned by two Albanians, which has close ties to Albania’s ruling Socialist Party. Acromax has contracts with over 95% of Albanian television stations, with far-reaching rights to take action on its own initiative against alleged copyright violations. For example, when a civil society group like Nisma Thurje posts a story on Facebook about a politician’s corruption, and includes a link to interviews or clips of the politician’s speeches that were originally broadcast on one of those TV stations, Acromax files a complaint with the social media platform alleging a copyright violation—even though re-sharing public content that clearly displays the original source is common practice around the world and does not meet the definition of copyright infringement. Moreover, Acromax only files such complaints with respect to stories that are critical of the government; pro-government posts, including clips from these same channels, are not flagged as intellectual property infringement by Acromax.

Distressingly, even though the claims of intellectual property infringement seem bogus, Facebook has largely complied with Acromax’s demands to take down content. This may be due in part to the European Union’s recent 2019 Directive on Copyright in the Digital Single Market, Article 17 of which makes content-sharing platforms, not just individual content uploaders, liable for intellectual property violations, which in turn has caused Facebook to employ even more automation to deal with its new legal responsibilities. Unfortunately, the automated algorithms currently in use cannot reliably distinguish genuine copyright infringement from legal re-sharing, and the algorithms are sufficiently complex and opaque that it is very difficult for CSOs to challenge the take-down decisions and get their content reinstated. Acromax has exploited these weaknesses in the system to make legitimate civil society watchdogs look like serial copyright infringers. Indeed, Acromax’s harassment campaign has been so successful that two of Nisma Thurje’s founders had personal social media pages shut down because of complaints from Acromax, and Facebook further labeled Nisma Thurje “a dangerous group” and limited the range of Nisma Thurje’s social media capabilities. The technology giant further warned Nisma Thurje that its page would be shut down entirely if Facebook received even one more copyright infringement claim.

Acromax is a well-tuned operation for squelching civil society watchdogs that threaten to expose government wrongdoing, and may serve as a model for similar censorship efforts. Tackling this problem seems daunting, but these are some concrete steps that various actors—including governments, technology companies, and the civil society groups themselves—can take to address this new kind of assault. Continue reading →

Should International Organizations Like the IMF Require More Anticorruption Conditions on Their Pandemic Emergency Funding?

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In response to the unprecedented COVID-19 pandemic, governments across the world are taking emergency measures to secure and distribute necessary medical equipment to hospitals, front-line medical workers, and at-risk groups. Moreover, to respond to the dangerous economic crisis that has resulted from stay-at-home orders and other essential public health measures, national governments have rapidly adopted new fiscal programs and other measures that have pushed trillions of dollars out the door. Multilateral institutions like the International Monetary Fund (IMF) have also stepped in to assist countries that have seen their foreign exchange inflows drying up due to a variety of factors associated with the pandemic (including lower international oil prices, lack of tourism receipts, and declining remittance flows). These countries urgently need for foreign exchange to purchase critical medical supplies and equipment from abroad. The IMF has existing facilities for providing emergency funding to address balance of payments shortfalls in times of emergency (the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI)), and has  already begun providing funding under these programs, with more funds likely on the way. In contrast to other IMF programs, there are relatively few conditions that recipients need to satisfy up front in order to have access to RCF/RFI financing.

The global anticorruption community has been understandably worried about the risks that emergency response funds could be misappropriated or mismanaged, which would impede the collective public health efforts. (See, for example, the pieces collected here and here). For example, Transparency International has pushed for open data publishing on public procurement, and Sarah Steingrüber, the Global Health Lead for CurbingCorruption, recently made the case on GAB for the establishment of oversight task forces and for directing some donor funds to enhancing anticorruption safeguards (i.e. public financial management improvements and CSO funding). With respect to the IMF in particular, a group of 99 civil society organizations (CSOs) sent an open letter to the IMF, pushing back against what they characterized as the Fund’s “retroactive approach” to anticorruption efforts, and instead called for loan conditions that would require recipient governments to (1) receive all IMF funds in a single Treasury account, (2) hire independent auditors within six months of disbursement, (3) publish a procurement plan with names and beneficial ownership information, and (4) repeal or amend laws that prevent groups from safely monitoring government spending.

While nobody seriously questions the importance of reducing corruption and other forms of “leakage” of funds spent to fight the coronavirus and its associated economic dislocation, much of the emerging commentary from the anticorruption community seems to lack a sufficient appreciation of, and engagement with, the trade-offs between controlling leakage and ensuring a sufficiently rapid response. The CSOs’ open letter to the IMF is an illustrative example of the apparent neglect of these trade-offs. Continue reading →

The Bribery Trial of Sitting Israeli Prime Minister Netanyahu Poses Unprecedented Challenges

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The criminal trial of Israeli Prime Minister Netanyahu, on multiple corruption charges, opened yesterday, only ten days after the formation of a new government, and after years of police investigations, indictment procedures, and three rounds of early general elections. The trial is an unprecedented event in Israel, and one of the few examples anywhere in the world where a sitting head of government has stood trial on criminal charges in his own country. This situation poses unique challenges. On the one hand, the court must ensure that Netanyahu’s rights, as a criminal defendant, are respected. That said, though, some adjustments will have to be made to secure both the fairness of the trial and the integrity of Israeli executive and judicial branches, given that as the trial unfolds, Netanyahu will continue to serve as Prime Minister.

Continue reading →

Adapting Anticorruption Enforcement to an Age of Populism and Polarization

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Shortly after the U.S. Senate acquitted President Clinton in 1999, he apologized for triggering the impeachment process. President Trump, in contrast, declared that his acquittal called for “a day of celebration,” and immediately started firing White House employees who had testified before the House of Representatives. In 2008, then-Israeli Prime Minister Olmert resigned shortly after the police recommended that he should be indicted on corruption charges. In contrast, after Prime Minister Netanyahu was indicted on multiple bribery charges, he infamously said that Israeli citizens should “investigate the investigators,” and even with the trial approaching, Netanyahu shows no signs of considering resignation. Instead, he is currently fiercely promoting legislation to amend several of the Israeli Constitutional Basic Laws in ways that will allow him to remain in office for years to come. These troubling examples illustrate how the resurgence of populism, coupled with increasing polarization, are making it easier for corrupt politicians to evade accountability, even in countries with functional legal and judicial systems. Deep political divisions and strong partisan loyalty are not new, but in the past, it seems there was a degree of overlapping consensus on minimum standards of integrity and propriety, and enough citizens were willing to enforce these standards on a non-partisan basis that leaders would be restrained by political checks—enforced through things like elections and internal party discipline—that could complement judicial processes.

Moreover, leaders like Trump and Netanyahu have acted aggressively to undermine the institutions of justice in order to protect themselves. Both leaders have cavalierly attacked the professionalism and integrity of their country’s law enforcement agencies by suggesting that investigations targeting the leader or his associates are politically motivated “witch hunts.” And both have taken more concrete action to undermine the ordinary operation of the machinery of justice. In the U.S., after his Senate trial acquittal, President Trump intervened to help allies who had been found guilty in cases related to investigations of impropriety by Trump’s 2016 campaign. For example, Trump’s Attorney General ordered the Department of Justice to seek a more lenient sentence for Trump’s former consultant Roger Stone, and Trump pardoned or commuted the sentences of several others in a short and unorthodox process. Netanyahu has been even more aggressive in trying to weaken legal institutions in order to protect himself. After being indicted, Netanyahu fired the Minister of Justice and appointed in her place a low-ranking member of his party with no prior ministerial experience. The new Minister’s first action was to appoint a new Solicitor General—the immediate superior of the prosecution team in Netanyahu’s case–through an irregular process and against the recommendation of the non-partisan Attorney General. (Due to the political deadlock, the Minister is part of a caretaker government and could therefore appoint an interim Solicitor General without the approval of the public committee that the law would otherwise require.) On the eve of Israel’s third round of elections, the new Solicitor General decided—against the opinion of the Attorney General and many others—to launch a police investigation into a firm in which Netanyahu’s chief rival Benny Gantz served as a director (obscuring the fact that Gantz himself is not a suspect). More recently, the Minister of Justice gave the unprecedented order to freeze all non-urgent judicial procedures due to the Covid-19 outbreak—a move that indefinitely postpones Netanyahu’s trial. While the Covid-19 outbreak has disrupted or delayed judicial proceedings in many countries, there was no expert opinion supporting such drastic measures in Israel, especially given that Israel has more per capita testing and ventilators capacity than nearly any country on earth. Even now, when newly detected cases are close to zero, a new date for the trial has yet to be set. Moreover, to avoid a fourth round of elections, given the continued deadlock, Netanyahu is now fiercely and unprecedently promoting legislative amendments to Israel’s Constitutional Basic Laws that would allow him to hold onto office for years to come.

When professional, and traditionally non-partisan, law enforcement agencies find themselves under attack by corrupt populists, these agencies often do not respond, presumably due to the belief that the only way to maintain integrity, legitimacy, and professionalism in the face of such attacks is to refrain from commenting on unfounded claims meant to disparage state attorneys and police investigators. There is much to be said for that approach, but at the same time, the institutions of justice can and should do more to counter the attempts of corrupt populists to undermine those institutions in order to remain in power.

Continue reading →

Where the Real Blame for Letting Bridgegate Defendants Off Lies: Part I

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The Supreme Court continues to bear the blame for two political operatives getting off scot free for an admitted blatant abuse of power: creating nightmarish traffic jams for residents of a small New Jersey town because its mayor had not endorsed their boss’ reelection as governor.  Though the record showed the stunt endangered the lives of some and inconvenienced thousands and their lawyer admitted it was an abuse their power as state officials to cause the jams, the Court acquitted them on all charges.  Its decision in the Bridgegate case, so named because the traffic jams were created by blocking two lanes of the bridge the residents used to commute to New York City, is indeed the immediate reason defendants escaped sanction.

But that ruling was the inevitable consequence of earlier decisions by the other branches of government.  For decades Congress has ignored the Court’s warning that the hodgepodge of federal laws used to prosecute state and local officials for corruption is Constitutionally infirm.  And for decades, and despite some spectacular earlier reversals by the Court, the Executive branch has continued to rely on these statutes to prosecute state and local corruption.

Those genuinely interested in fighting corruption need to stop denouncing the Court and focus their energies instead on these two branches of government.  Below is what they should demand of the Executive.  Part II of this post will explain what they should demand of Congress. Continue reading →