Category Archives: Commentary

Government Donors Should Demand More Accountability and Integrity from International Aid Charities

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Oxfam, the international aid organization with more than 10,000 staff worldwide and many hundreds of millions of dollars of income from donations alone, has been getting a lot of bad press recently. Many readers will likely be familiar with the Oxfam sex scandal, wherein Oxfam workers in Haiti had sex with victims of the 2010 earthquake, perhaps including child victims. In 2014, Oxfam’s former antifraud chief was arrested for embezzlement. And last February, the chairman of Oxfam International, Juan Alberto Fuentes, was arrested in Guatemala for his role in a corruption scandal that developed over his time as the finance minister of Guatemala. Although the arrest of Mr. Fuentes was for conduct that predated his work at Oxfam, the arrest sparked further questions about corruption and accountability in the organization, and called into question the reliability and credibility of Oxfam’s anticorruption advocacy work.

Of course, both sex scandals and corruption scandals happen in other organizations too, including governments and for-profit corporations. So far as I know, there’s no evidence that aid organizations are systematically more prone to such institutional failures than other entities. Yet these scandals feel particularly disturbing when they occur at an organization like Oxfam, perhaps because we implicitly hold do-gooder NGOs to a higher ethical standard. And in fact we should: both the legitimacy and effectiveness of the international work done by NGOs like Oxfam rests, at least to some degree, on some sense that these organizations have the moral authority to enter a country and change the way things are run. To retain that moral authority, aid organizations must take extra steps to ensure they remain above suspicion. The failure of the Oxfam board to conduct due diligence on Fuentes is a strike against Oxfam’s credibility, and this fundamentally hurts its mission.

The question is what Oxfam, or similar organizations, can do to increase the chances of meeting these high standards, and avoid similarly embarrassing scandals in the future. My answer: Oxfam should tie its own hands and mandate top-down, independent integrity oversight, supervised by donating governments.

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“Corruption Proofing” Statutes and Regulations: The Next Big Thing in Anticorruption Strategy?

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So-called “corruption proofing” is an ex ante preventive measure that entails review of the form and substance of legal acts (principally statutes or regulations) in order to minimize the risk of future corruption. It is a relatively new strategy in the anticorruption toolkit. As of 2015, 13 countries had enacted some form of corruption proofing: Armenia, Albania, Azerbaijan, Kazakhstan, South Korea, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan.

While there is some divergence between each country’s specific practices, generally a corruption proofing system requires that draft and/or existing legal acts (statutes and regulations) are subjected to a review process by a designated institution (or institutions), which are tasked with identifying “corruptogenic factors”—aspects of those laws that might create risks of future corruption. Examples of corruptogenic factors that corruption proofing systems have identified include unclear definitions of the rights and duties of public officials; broad discretionary power; over-broad freedom to enact by-laws and other subsidiary legislation; linguistic ambiguity; inadequate sanctions; lack of (or conflicting) regulatory and administrative procedures; and disproportionate burdens on citizens to exercise their rights. The reviewing institution then makes recommendations for changes to the law that would mitigate those risks. The governmental body from which the legal acts originate (the parliament, in the case of statutes) is obligated to consider these recommendations but is not required to implement them, though in some systems the governmental body must state its reasons for rejecting the reviewing institution’s recommendations. Another common practice is that the proofing agency’s recommendations (and, if applicable, the explanations for why they were disregarded) are circulated as an annex to the draft law being debated in the legislature and are also published online, thus providing both lawmakers and citizens with more information about the potential corruptogenic factors associated with the law. Continue reading →

India and Ireland Enact Anticorruption Compliance Program Laws

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Legislation just approved in both Ireland and India create a powerful incentive for businesses to establish anticorruption compliance programs.  Both give firms a defense to criminal charges if one of their employees or agents is caught paying a bribe. Section 18 of the Irish Criminal Justice (Corruption Offences) Act 2018 provides that a “body corporate” can avoid liability if it can prove that “it took all reasonable steps and exercised all due diligence to avoid the commission of the offence.”  Under section 9 of India’s Prevention of Corruption (Amendment) Bill 2018, a “commercial organization” escapes liability if it proves it “had in place adequate procedures in compliance of such guidelines as may be prescribed [by the Attorney General] to prevent persons associated with it from undertaking such conduct.”

The compliance provisions differ, as the quoted language shows, in two respects.  India imposes liability on any “commercial organization,” which includes not only corporations but partnerships and business associations “of any kind,” whereas the Irish law is limited to corporations alone.  Second, while the Irish Minister for Justice and Equality has the discretion to issue guidance on what constitutes “all reasonable steps” and “all due diligence” to prevent employee bribery, the Indian Central Government must, “in consultation with the concerned stakeholders . . .  prescribe such guidelines as may be considered necessary which can be put in place for compliance by [commercial] organizations.”

The Indian requirement follows a report of the Indian Law Commission on an earlier version of the bill.  Noting the “immediate and significant impact” the bill would have on corporations, particularly smaller ones, and that both the U.K. Bribery Act and the U.S. Foreign Corrupt Practices Act require law enforcement authorities to issue compliance guidance, the Commission recommended that the liability provision cum compliance defense be effective only once the Central Government published guidance on what was expected of companies wanting to assert a compliance defense.  An earlier post noted the burgeoning literature on compliance programs by governments, international organizations, and commentators alike evidences a broad consensus on what constitutes an effective compliance program.  Hence in practice the requirement shouldn’t lead to any real difference between what will be required under Indian law and what other nations with a compliance law already require.

The Nations with Anticorruption Compliance Laws table shows Ireland and India are now the fourteenth and fifteenth nations to enact legislation creating a defense to a criminal charge for businesses that have a compliance program.  (Readers are asked to submit a comment if I missed any country.)  With the six countries plus Quebec that require certain firms to have a compliance program, and with the United States, which both tempers corporate liability for firms with an “effective” compliance program and requires those winning public contracts of any appreciable size or duration to have one, the number of jurisdictions with some type of compliance program law now stands at 23.

What are the other 163 parties to UNCAC waiting for?  Why aren’t they enlisting their private sector in the fight against corruption?  Do they really think they can win the fight on their own?

A Big Victory in the Emoluments Clause Litigation Against Trump–But Might It Be Too Big To Last? A Search for Limiting Principles…

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As many of our readers may already be aware, there was a significant and encouraging development last week in the litigation challenging President Trump’s ongoing business dealings with foreign and state governments as unconstitutional under the U.S. Constitution’s Foreign and Domestic Emoluments Clauses. For those readers who haven’t already been following this, here’s a quick synopsis. (Readers who have been following this issue can skip to the end of this bullet point list.)

  • Although President Trump claimed he would turn over his business operations to his sons Donald Jr. and Eric, in fact President Trump retains substantial interests in those businesses. Several of those businesses, particularly his hotels (and among those hotels, especially his DC hotel, located at a property leased from the federal government) do substantial amounts of business with representatives of foreign governments, as well as with state governments. Many people have argued that accepting foreign government or state government patronage at Trump hotels violates the Foreign and Domestic Emoluments Clauses, respectively. The Foreign Emoluments Clause states that “no Person holding any Office of Profit or Trust under [the United States] shall, without the consent of Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any … foreign State.” In other words, no officer of the U.S. federal government can accept an “emolument” (whatever that is – more on this question in a moment) from a foreign government. The Domestic Emoluments Clause states that the President “shall not receive [during his term of office] any other Emolument [besides his official salary] from the United States, or any of them.” In other words, the federal government can’t provide any “emolument” to the President other than his official salary, nor can any state government provide any emolument to the President.
  • So, the argument goes, if a foreign government pays for rooms at a Trump hotel, which increases the Trump Organization’s profits and hence President Trump’s personal wealth, President Trump has received an “emolument” from a foreign state. Similarly, if a state government pays for rooms at a Trump hotel (or purchases other goods or services from a Trump business), the President is receiving an emolument from a state government. An additional violation of the Domestic Emoluments Clause may have occurred when the General Services Administration (GSA) (the federal government agency which is, in essence, the landlord for the Trump DC hotel) concluded that the Trump Organization could retain its lease even after Trump’s inauguration, despite the fact that the express terms of the lease appear to preclude this. The argument goes that in allowing the Trump Organization to keep its lease on the property, a federal government agency (in this case the GSA) had granted an “emolument” to the President, in violation of the Domestic Emoluments Clause.
  • Several separate lawsuits alleged these constitutional violations. When they were filed, many people (including me) expected the suits to be dismissed on jurisdictional grounds, in particular though not exclusively the inability of the plaintiffs in these cases to show that they were personally and directly harmed by the alleged constitutional violations. And that was indeed what happened to the first case, filed by a civil society nonprofit in New York. But in a separate lawsuit filed in Washington DC by the DC government and the state of Maryland, the judge last April determined that court had jurisdiction over at least some of the plaintiff’s claims (including the claims described above).
  • The President’s lawyers then filed a motion to dismiss, arguing that even if everything the plaintiffs alleged were true (a stipulation the President reserves the right to deny later), there’s no constitutional violation, because neither the profit from a business transaction nor a favorable regulatory decision would count as an “emolument.” Rather, on the President’s view, an “emolument” is only a payment made as compensation for official services.
  • Last week, the District Court issued an order denying the President’s motion to dismiss, rejecting the President’s narrow interpretation of “emolument” and instead endorsing a sweeping definition in which an emolument, for purposes of the relevant constitutional clauses, includes anything of value.

That ruling, as Joe Biden might say, is a big f’ing deal. It’s not the end of the case—far from it—but it’s a huge win for the plaintiffs. Among other things, it means there will now be more fact-finding, including discovery, and probably in a few months we’ll have motions for summary judgment and another judicial order in response, which will likely both keep the issue in the news and possibly bring to light even more damaging information about the President’s business dealings. (The President’s lawyers may try to get an appeals court to consider the jurisdictional issue before this process moves forward by asking for what’s called an interlocutory appeal, but by friends who are experts in civil procedure tell me that such a motion is extremely unlikely to succeed, or at least it would be in an ordinary case.)  So, speaking as someone who was initially skeptical of this litigation—who not only thought it was unlikely to succeed but who worried that it could backfire—I’m delighted to confess error. (I suppose we could still debate whether this was a smart gamble at the time, but it does seem that the gamble is paying off, and who am I to argue with success?)

That doesn’t mean that these suits will ultimately succeed. Even if the plaintiffs prevail in the District Court, there will be an appeal, and I think the odds of the plaintiffs prevailing in the Court of Appeals are low. And even if they do win, the Supreme Court is almost certain to hear the case, and I predict that the Court would find a way to dismiss the case on jurisdictional grounds. (That said, if for some reason the Senate doesn’t confirm Judge Kavanaugh’s nomination to the Supreme Court, and in the November 2018 elections the Democrats take the Senate and vow to block any Trump nominee to fill the open seat, then it’s possible that the Supreme Court could deadlock 4-4, leaving any lower court decision in place.)

Now, in addition to the jurisdictional question, one of the issues on appeal will concern the breadth of the District Court’s definition of “emolument.” A lot of the arguments on this point concern matters of text and history. (How did 18th– century dictionaries define “emolument”? What do we learn from debates about the Emoluments Clauses at the Constitutional Convention and ratifying debates? What did early practice look like?) Those arguments are important, but I’m not going to explore them here. There is, however, a separate question of what definition of “emolument” would best serve the purposes of the Emoluments Clauses, which is closely related (if not necessarily identical) to the question of which definition would be the most sensible. I’m very sympathetic to the plaintiff and the District Court’s arguments that the main purpose of the Emoluments Clauses is to serve as broad prophylactic anticorruption measure, one that targets not only quid pro quo deals, but more broadly seeks to eliminate the possibility of governments currying favor with US officials by conferring benefits on them. And I agree that such benefits can take a wide variety of forms. Nonetheless, I do think that the breadth of the definition of “emolument”—as literally anything of value, or as any “profit, gain, or advantage”—might create some problems, and it’s important to think about how the potentially sweeping implications of this definition might be cabined.

I say this not because I’m terribly sympathetic to President Trump’s arguments that he’s not in violation of the Emoluments Clauses. Indeed, based on what I know thus far, I’m fairly confident that President Trump is violating the Emoluments Clauses, and should lose this case on the merits (though the jurisdictional arguments are a closer question). Rather, it’s important to think about appropriate limiting principles for two reasons. First, the likelihood of prevailing on appeal is higher if the plaintiffs and their allies can offer plausible rebuttals to the parade-of-horribles the President’s lawyers will argue follows from defining an emolument as “anything of value.” Second, whatever the appeals court (or perhaps the Supreme Court) says on this issue might have consequences for other cases—with other defendants and different sorts of conduct. So, in the remainder of this post I will first sketch out why the broadest version of the “emolument means literally anything of value” argument might create difficulties, and then consider a series of possible responses to those (alleged) problems. Continue reading →

Expediting Corruption: The Dangers of Expediters in Licensing Markets

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The scheme was as simple as it was brazen, and as brazen as it was frightening. On April 24, 2018, a New York City jury convicted attorney John Chambers of bribing New York Police Department (NYPD) personnel in exchange for gun permits for his numerous clients. Calling himself a “gun license expediter,” Mr. Chambers acted as an intermediary for individuals hoping to pass the necessary background check and obtain the mandatory permit in order to legally own a firearm in the city. But in a decentralized scheme involving numerous individuals inside and outside the police department, NYPD officers approved hundreds of licenses while skipping background checks, shortening license suspensions, and waving through applications containing glaring red flags—including improperly approving licenses for individuals convicted of illegal weapons possession. In return, the officers received expensive gifts, tickets to sporting events, lavish vacations, envelopes stuffed with cash—and even free guns.

At the center of the web of bribery were so-called “gun license expediters” like Chambers, who advertised their ability to help clients navigate the demanding and complex process of obtaining, renewing, or retaining a handgun license in New York City. Several of the expediters indicted in the scandal were retired police officers who had served in the NYPD Licensing Division, bribing former colleagues after leaving the police force in order to open their own expediting businesses. Fees varied depending on the difficulty and timing of the requests, but clients were routinely charged thousands of dollars per license—on top of the hundreds of dollars in mandatory city-imposed application fees. By leveraging experience, relationships, and sometimes illegal gifts, expediters such as Chambers were able to not only expedite but also to influence the outcome of applications.

In response to the revelations, the NYPD announced substantial changes to its licensing program. First and foremost, the department barred any expediter from physically visiting the Licensing Division on behalf of a client—instead requiring that all applicants appear in person to submit their own paperwork. (Expediters, however, would presumably not be barred from contacting members of the Licensing Division or directing their clients whom to talk to when they arrive.) Second, the department mandated that all gun permit approvals could only be made by the top two officers in the unit. Despite these seemingly sweeping changes, the new policies sidestep the root causes of corruption in this instance—which reveal the danger of expediters in general. Continue reading →

Lights, Camera, Integrity? From “Naming and Shaming” to “Naming and Faming”

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“Can a reality TV show discourage corruption?” This was the recent attention-grabbing headline of an article in The Economist about Integrity Idol, the brainchild of the NGO Accountability Labs. It was started in Nepal in 2014, and has since spread to Pakistan, Mali, Liberia, Nigeria, and South Africa.

The format of the show is simple. Citizens are asked to nominate civil servants whom they believe display the highest standards of honesty and integrity. These nominations are then reviewed by a panel of judges comprising local and international experts, who select five finalists. Videos are then produced, each around 2-5 minutes long, containing excerpts from an interview with the finalists and their superiors, colleagues, and subordinates, along with glimpses into their work lives. (See here and here for examples). These videos are disseminated among the citizenry via traditional and non-traditional media. Citizens vote for their favorite, and the “Integrity Idol” is crowned.

This isn’t the first time a non-traditional cultural medium has been used to spread an anticorruption message. Other approaches, including museums, TV dramas, music, and poetry  have been discussed on this blog previously (see here, here, here and here). Thanks to Integrity Idol, reality TV can be added to the list. That might seem a bit surprising. Reality TV has a (deserved) reputation for depicting an over-dramatized, intentionally provocative, and often manipulated caricature of real life. One hopes that no one would cite Real Housewives of New York as a reliable source for understanding the lives of real housewives in New York! Integrity Idol is different: it is an intentional effort to draw attention to real stories of real people, and often the unaltered stories of these people are compelling in and of themselves. The vision of Accountability Labs and its founding director, Blair Glencorse, is to “support change-makers to develop and implement positive ideas for integrity in their communities, unleashing positive social and economic change.” Continue reading →

“We Have to Reclaim Our City”: Lessons From the “Eye People”

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Last year, a 22-year-old Afghan woman went to a local government office to get documentation to travel abroad. She was promptly turned away because she was not accompanied by her father or husband, and because she refused to pay the official a small bribe to overlook this detail. As recently as a few years ago, she may have paid the bribe. But things had changed. Defiantly, she confronted the official and proclaimed: “I will go to the eye people.”

The “eye people” she invoked are three activists—Lima Ahmad, Kabir Mokamel, and Omaid Sharifi—who in 2014 founded a grass-roots anticorruption movement in Afghanistan called ArtLords. ArtLords (whose name is a deliberate play on the “warlords” and “drug lords” that too often define Afghanistan’s image) seeks to raise awareness about corruption and other social issues (including women’s rights and domestic terrorism) by empowering youth to “have a say in how we run the government” and giving them the courage and a forum to speak out on these issues. ArtLords’ founders began their work by organizing small group discussions to better understand young people’s concerns. Unsurprisingly, corruption was the most frequently mentioned. The founders sought a way to publicize these concerns and provide an outlet for discussions to shape the national dialogue. To do this, ArtLords creates public art projects, in which artists trace beautiful, powerful designs on blast walls (concrete barriers constructed to protect buildings and people from terrorist-related explosions) across Afghanistan. To date ArtLords has painted more than 400 murals in almost half of Afghanistan’s 34 provinces; the most famous is a piercing set of feminine, hazel eyes glaring onto the front entrance of the National Directorate of Security in Kabul (which is why the group is known to some as “the eye people”).

Through these projects, the group has inspired a generation of younger Afghans. As Faisal Imran, a student in Afghanistan, noted as he painted a mural on a blast-wall, “this art has a message of hope.” It is this message that has driven young girls to draw murals with the words “I can’t go to school because of your corruption. I can see you.” Moreover, beyond providing an outlet and educational opportunity for the youth of Afghanistan, ArtLords has achieved concrete success by both naming and shaming corrupt officials and naming and family good civil servants, working with the national government to drive change, and inspiring grass-roots social movements, including a recent campaign to challenge warlords and corrupt government officials who drive around Afghanistan with black tinted windows and no license plates. Additionally, one of the founders of ArtLords, Lima Ahmad, was invited to serve as the Director of Monitoring and Evaluations in the Office of the President of Afghanistan, a position from which she advocated for anticorruption and other social reform. In fact, over the past year, the group and its founders have been invited by government officials to speak at conferences and engage in substantive policy decisions.

I recently had the opportunity to interview Ms. Ahmad about her experience, and about what lessons that experience might hold for other civil society groups focused on combating corruption. Our conversation highlighted several important messages for other civil society groups seeking to use similar artistic tools—whether art, music, dance, or others—to combat corruption and promote broader social reform.

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The Case for Preserving South Korea’s Crackdown on Gifts

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In September 2016, South Korea’s Improper Solicitations and Graft Prohibition Act, better known as the “Kim Young-ran Law,” came into effect. The Kim Young-ran Law, regarded by some as the strictest anti-graft law in the world, included important provisions aimed at combating Korea’s deep-seated gift-giving culture that infested the public sector and cultivated corruption (including, for example, the corruption blamed for the 2014 Sewol ferry disaster, as well as the scandals that ultimately led to the impeachment of former President Park Geun-hye in 2017). The law’s provisions on gifts ban public servants, educators, and journalists from receiving free meals worth over 30,000 won ($28), gifts over 50,000 won ($46), and congratulatory or condolence money over 100,000 won ($92)—the so-called “3-5-10” restriction.

Although a majority of the Korean public believes that the Kim Young-ran Law has been effective in reducing bribery, the restrictions on gifts were widely perceived as too strict, with almost two-thirds of surveyed Koreans supporting an amendment that would loosen the 3-5-10 thresholds. In light of this, in December 2017 the legislature revised the law to double the price limits on gifts for agricultural, livestock, and fishery goods to 100,000 won, and to reduce the allowance for congratulatory or condolence money to 50,000 won—so, it’s still a “3-5-10” restriction, though the “5” and the “10” have flipped. However, scholars are concerned that even this alteration of the original rules would set a precedent for changes and exceptions that would defeat the initial spirit and purpose of the Kim Young-ran Law. Indeed, the arguments for relaxing the gift limitations do not withstand scrutiny; it was likely a mistake for South Korea to give in to pressure to amend the law, and it would certainly be a much graver mistake to relax the 3-5-10 thresholds further. Those who believe that the Kim Young-ran law’s limits on gifts are too stringent have advanced three major critiques, but none of them is persuasive:

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Fighting Corruption in Nigeria

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Nigeria continues to enjoy pride of place in the global discourse on corruption.  A Google search for “Nigeria corruption” brings up more than 53 million entries led by a lengthy Wikipedia article on the subject. Matthew’s bibliography lists over 100 books, monographs, and scholarly articles on corruption in the country which analyze everything from its colonial roots to how and why it is endemic to what can be done to tame it.  This blog has ruminated on matters ranging from why the head of the Economic and Financial Crime Commission was replaced to whether the then newly-elected President Muhammadu Buhari was serious about fighting corruption to outgoing First Lady Patience Jonathan’s impatience with the thought something was untoward in her receiving “small gifts” totaling $15 million while her husband held high office.

Two current papers by authors with very different backgrounds, one a former U.S. intelligence analyst, the other a former Nigerian professor and incoming head of the Nigeria’s corrupt practices commission, continue the discussion.   Both agree corruption is pervasive and that it has done much harm to the state and its citizens.  Not surprisingly perhaps, given who they are and where they sit, they offer quite different assessments of where the country stands in the fight against corruption.  In Real Challenges of Fighting Corruption in Nigeria, remarks delivered to the Corruption Hunters Network (CHN) June 25, Professor Bolaji Owasanoye, nominated to chair the Independent Corrupt Practices and Other Related Offences Commission, radiated optimism, ticking off a series of reforms that have made a difference and predicting more progress is on the horizon.  By contrast, the tone of a July monograph for the Carnegie Endowment for International Peace by Matthew Page, the former Nigerian analyst for the U.S. intelligence community, is decidedly pessimistic.  When it comes to what can be done, he offers nothing beyond a scheme to help policymakers make sense of the dizzying variety of forms corruption in the country takes.

My money is on Owasanoye and not just because I had the opportunity to hear him deliver his talk. My reasons for optimism about Nigeria’s fight against corruption are several. Continue reading →

Many U.S. States Are About To Legalize Sports Betting. How Can They Do So in a Way that Minimizes Risks of Sports Corruption?

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Last May, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), finding the federal prohibition on sports betting unconstitutional. Accordingly, all states (not just Nevada) may now legalize sports betting. Excited about the potential revenue bump, a few states, including New Jersey and Delaware, have already passed legislation to open their doors to sports betting. Other states including Pennsylvania, New York, Mississippi, and West Virginia have sports betting bills pending in their legislature, and at least fifteen other states have introduced bills in some form. Unlike PASPA, a federal statute that provided a uniform application for nearly all states across the country, each state’s gambling laws will be unique to their state. And those lawmakers who are considering enacting gambling legislation are also trying to determine how to best regulate the industry—a complicated issue that requires balancing a number of difficult considerations, including: how the state should tax sports betting; whether the state should allow for in person bets only or also online betting; whether the state should permit access to bets with a higher risk of corruption, such as one-off prop bets; and whether the state should the state provide fees to leagues to assist them in corruption prevention. (See here for a discussion of these issues in New York).

While there is a debate in the anticorruption community about whether legalization of sports betting is good or bad for corruption, for those states that do decide to legalize betting, it’s important to do it in such a way that the black market for sports betting shrinks. States considering legalization must ensure that legal betting is a sufficiently attractive option as compared to sports betting in the black market. Otherwise, sports bettors will remain in the black market, which not only would pose numerous challenges for regulating corruption but also would lead to low revenues for states. Thus, at least for those states that choose to legalize sports betting in some form, the twin objectives of maximizing state tax revenue and preventing corruption (especially match fixing and spot fixing), often thought to be in tension with one another, are both advanced by maximizing the market share for legalized betting in their state, as opposed to limiting opportunities for betting.

To maximize market share and decrease corruption risk, states should include the following provisions in sports gambling legislation:

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