Category Archives: Commentary

What Will It Take To Pass the Sri Lankan Audit Bill?

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Regular, effective auditing of public programs by an independent body is widely recognized as a crucial anticorruption tool. Yet in Sri Lanka, the legal framework that would enable such effective auditing is still not in place. Although Sri Lanka’s Auditor General’s Department (AG) has been in operation for more than 200 years, it derives most of its functions from executive practice and regulations, rather than legislation. For this reason, the office is largely toothless: It cannot take any action to enforce its findings beyond submitting reports to two parliamentary committees, but these have little to no impact, as any follow-up actions are largely dependent on executive discretion. For years, experts and citizens alike have recognized the urgent need for a National Audit Law to govern and empower the Auditor General’s Department.

Yet despite repeated efforts and a constitutional mandate, the government has still not succeeded in enacting such a robust statutory framework to govern public audits. A National Audit Bill has been in the process of “being drafted” since the early 2000s, but an actual draft bill didn’t appear until 2013. No further action was taken on that bill. When President Sirisena took office in January 2015, he declared that the government would pass a National Audit Act by March 2015 as part of his 100-day programme. But although a new Audit Bill was proposed to Cabinet in April 2015, the proposal was deferred by the Cabinet a shocking 24 times, up until October 2017. Eventually, there were encouraging reports that the “impasse” had ended and that the Audit Bill had been approved by the Cabinet. But it was not to be: it turned out that what had been approved were amendments to the proposed bill, and not the bill itself. Subsequently, the government stated that it will not be submitting the Bill to Parliament – back to square one.

Why the seemingly interminable delay? It appears that the main reason for the impasse, at least since 2015, is a contentious section which vests the AG with the power to impose a surcharge—that is, to disallow public expenditure and require monies found to have been used improperly to be refunded by the guilty parties. This has met with resistance, mainly because it would take decisions concerning enforcement out of the hands of politicians. (Opponents of the bill also claim that it would hinder the carrying out of public duties by politicians, such as when urgent funds are required to respond to natural calamities.) Yet many reformers insist that giving the AG the surcharge power is necessary and non-negotiable.

If progress on the Audit Bill is to move forward, something has got to give. In my view, despite all the policy arguments for granting the AG the surcharge power, it’s better to move ahead and enact an Audit Act that lacks this provision, rather than allowing this sticking point to further hold up its passage. This is one of those situations where we can’t let the perfect become the enemy of the good. Continue reading →

How Can We Assess the Sincerity of Anticorruption Campaigns?

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The first step to solving a problem is admitting you have one. And many countries plagued by corruption did just that over the course of 2017, with Venezuela, China, Russia, Ukraine, the Philippines, Saudi Arabia, and several other nations launching (or in some cases continuing) high-profile anticorruption campaigns. Yet outside observers often have difficulty distinguishing sincere, well-intentioned anticorruption campaigns are well-intentioned from politically-motivated purges. Moreover, this dichotomy may be too simple, as many anticorruption campaigns may have mixed or complex motives. (Very often, for example, individuals targeted by an anticorruption campaign may have both engaged in misconduct and also be political opponents of the ruling faction.) Yet even though it is difficult for outsiders to assess the motives of foreign countries’ anticorruption campaigns—especially in real time—such an inquiry is often necessary, especially when outsiders must decide how aggressively to assist with things like asset freezes, extradition of fugitives, and other sorts of aid and support for anticorruption efforts.

While there is no definite set of criteria that can be used to determine the sincerity of an anticorruption campaign, it is nonetheless possible to develop a set of questions than can serve as reference points and  channel our attention to certain key issues, or “red flags,” that might help us distinguish sincere and genuine anticorruption efforts from those that are mainly political vendettas. Such questions might include the following: Continue reading →

Beneficial Ownership Disclosure by Multilateral Development Banks

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Joseph Kraus at The ONE Campaign recently summarized for GAB readers  measures governments are taking to require companies registered in their territory to reveal the natural person or persons who own and control them, their beneficial owners.  A parallel effort has begun to persuade the international development banks – the World Bank, the African Development Bank, the Asian Development Bank, the Inter-American Development Bank, and the European Bank for Reconstruction and Development – to reveal the beneficial owners of the companies “their monies” (read taxpayer monies) fund.  In May 2017, the U.S. Congress ordered the Secretary of the U.S. Treasury to see that each bank: –

“collects, verifies, and publishes, to the maximum extent practicable, beneficial ownership information … for any corporation or limited liability company, other than a publicly listed company, that receives funds from [it].”  Division J, section 2079(f) of the  Consolidated Appropriations Act, 2017.

As the U.S. is a significant funder of each bank, an American serves on the board of each.  In the 2017 law, Congress directed the Treasury Secretary, to whom the American board members answer, “to instruct” each to urge its bank to comply with Congress’ wish on beneficial ownership.  It also required the Secretary to report on how the successful the American board member had been in persuading the other board members and the management of their bank to gather and reveal beneficial ownership information.

The Secretary’s report contains several surprises on which banks took the U.S. effort on beneficial ownership seriously and which ones blew it off.  With the banks that ignored the U.S. effort, it leaves unanswered an interesting question: What if anything did board members representing other countries committed to the disclosure of beneficial ownership do to push the issue?

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Why Samsung’s Recent Conviction Will Not Rid South Korea of Chaebols

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Samsung is in search of a new leader after Jay Y. Lee, grandson of Samsung’s founder, was convicted of bribing South Korea’s President to approve a controversial merger between two Samsung affiliates. Many thought that the proposed merger, which had been heavily criticized by independent analysts and investors, would not receive the legally-required approval from then-President Park Geun-hye’s administration. Lee allegedly bribed President and people close to her, to the tune of $38 million, for her support. When this corruption was exposed, President Park resigned and Lee was prosecuted and ultimately convicted.

Some hope that these dramatic developments portend more far-reaching changes in South Korea’s economy—in particular, the destruction of the chaebols (literally “wealth clans”), the multinational conglomerates in which leadership is passed from person to person within a family. Many credit chaebols with the successful post-World War II transformation of South Korea’s agrarian economy into an international economic powerhouse, but others criticize chaebols on a number of grounds, including the claim that they concentrate power and wealth in the hands of a small family minority, pay low dividends to ordinary investors, and facilitate the sort of grand corruption exposed in the Samsung affair.

After President Park resigned in disgrace, she was replaced by President Moon Jae-in, promised to put an end to chaebols altogether. Alas, this is unlikely. Indeed, it’s looking increasingly like Samsung’s recent scandal will not have a lasting effect on chaebols, or even on Samsung’s long-term profitability. Continue reading →

Can Sri Lanka Clean Up Its Elections?

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Schools bags, school books, seed and fertilizer, clothes, sewing machines, clocks, calendars, and mobile phones – these are just some of the items that were distributed to the public during the 2015 Sri Lankan Presidential election campaign as “election bribes”. Indeed, this election was plagued by widespread violations of election law and the blatant misuse of state resources, including the illegal display of cut-outs, distribution of money during political meetings, the use of vehicles belonging to state institutions for propaganda purposes, and the construction of illegal election offices. Moreover, overall spending on election activities by the two main candidates was colossal. Incumbent Mahinda Rajapaksa (the losing candidate) is reported to have spent over 2 billion Rupees (approximately US$13 million) of public funds on his advertising campaign alone, excluding the cost of production, while the winning candidate, Maithripala Sirisena, is reported to have had a budget of 676 million Rupees (approximately US$ 4.4 million) for electronic and print media.

In this context, reports that the Cabinet of Sri Lanka has unanimously approved a proposal to amend the country’s election laws in order to place more controls on campaign-related expenditures is good news. Such reform would address a gaping void in the existing legal framework: although Sri Lanka has laws prohibiting vote-buying and similar practices, there are currently no laws regulating campaign finance. The specifics of the approved Cabinet Memorandum are still not publicly available, and it is therefore not yet possible to offer a detailed evaluation of the proposed changes. Nonetheless, given what we already know about election campaigns in Sri Lanka—especially regarding the corruption risks associated with the lack of adequate regulation—it is possible to offer a few general observations and recommendations. Continue reading →

Learning from Defeat: The Menendez Case

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Last Friday, the Department of Justice asked for another chance to try U.S. Senator Robert Menendez on corruption charges, requesting that the court “set the case for retrial at the earliest possible date.”  The first trial resulted in a mistrial.  Ten of the 12 jurors held out for acquittal, saying prosecutors had produced no “smoking gun.”  Yet the prosecution did indeed have a smoking gun – irrefutable proof the Senator broke the law – which it did in fact show the jury.

Prosecutors can learn much about trying corruption cases from the failure to convict Menendez the first time.  Not, as one commentator claims, that America’s anticorruption laws are so flawed only the most flagrant violators need fear them.  The lessons have nothing to do with America’s anticorruption laws, which are hardly in bad shape. Nor its system of 12 citizens determining the facts in a criminal case.  Continue reading →

The Dismissal of the CREW v. Trump Emoluments Lawsuit: Some Quick Reactions

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As those who follow the debates swirling around President Trump’s extensive conflicts-of-interests are likely aware, last month a United States District Court dismissed, on jurisdictional grounds, a lawsuit asserting that President Trump’s business interests put him in violation of the U.S. Constitution’s foreign and domestic Emoluments Clauses. The opinion came down over a month ago, but I was traveling at the time and didn’t have a chance to read it until recently. There was plenty of informed commentary in the immediate wake of the decision (see, for example, here, here, here, and here), and I recognize that further discussion may not be that useful. But since I had posted several times about the case last year, I thought it might be worth saying a few words about what we might take away from the opinion and its impact.

For those whose memory of the details of the case is a bit fuzzy, a brief recap: The Foreign Emoluments Clause prohibits any official of the U.S. government from accepting any “present [or] emolument” from a foreign government, while the Domestic Emoluments Clause prohibits the U.S. President from receiving any “emolument” from the U.S. government or any state government during his or her term of office. The Citizens for Ethics and Responsibility in Washington (CREW) filed a lawsuit asserting that President Trump was in violation of both clauses. The complaint alleged that several of Trump’s businesses—from which he did not divest—solicited and received the patronage of foreign governments, in contravention of the Foreign Emoluments Clause, and that Trump companies had received business and/or benefits from both federal and state government entities, thereby offending the Domestic Emoluments Clause. The CREW suit, which was later joined by several co-plaintiffs who compete economically with Trump hotels and restaurants, asked the court to enjoin President Trump from continued or future violations of the Emoluments Clauses, and to order him to release his financial records in order to be sure that no such violations took place.

I’m sympathetic to CREW’s arguments on the merits (though I recognize that there are important arguments on the other side, which I admit I haven’t fully worked through – see here and here). But I feared that the lawsuit was likely to be dismissed—not on the merits, but on the grounds that the court lacked jurisdiction to hear the case. Indeed, I thought such a dismissal was almost certain. I also fretted that CREW’s decision to bring the case might be a serious strategic error: My worry was that the near-inevitable dismissal of the suit on jurisdictional grounds would give most of the public the misleading impression that the underlying claims of improper behavior were meritless, and that pro-Trump media outlets would foster that misimpression, with the net result that concern about Trump’s conflicts of interest would dissipate rather than intensify. My concerns somewhat but not fully abated when the additional plaintiffs (competing restaurants, hotels, and their employees) joined the suit. I thought that these additional plaintiffs, unlike CREW itself, were more likely to have “standing” (one of the requirements for the court to have jurisdiction), but that other jurisdictional problems might still stop the court from reaching and deciding the question whether President Trump is in violation of the Constitution.

So, now that the decision is out, what should we think of it, and what can we learn from it? My own reaction is, perhaps, a bit paradoxical: After reading the opinion and the subsequent commentary and news coverage, I’m even more convinced than I was before that this lawsuit and others like it will be dismissed on jurisdictional grounds, but I’m less concerned that pursuing these suits is a strategic mistake (though there are still questions about whether it’s a worthwhile use of scarce advocacy resources, or of the court system). Continue reading →

New York State of Corruption: An Opportunity for Reform Amidst a Year of Reckoning

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What do Joseph Percoco, George Maziarz, Edward Mangano, Sheldon Silver, Alain Kaloyeros, and Dean Skelos all have in common? Each of these New York public officials will go to trial on corruption charges over the next six months. The slew of trials kicks off today with the trial of Joseph Percoco, a former advisor to Governor Cuomo who is accused of taking over $300,000 from companies in a pay-to-play scheme for influence in the Cuomo administration. Next up, on February 5, George Maziarz goes to trial for filing false campaign expenditure reports in an attempt to conceal almost $100,000 in payments to a former Senate staff member who had quit amid sexual harassment allegations. March 12 brings the trial of Ed Mangano, the former Nassau County Executive charged with bribery, wire fraud, and extortion for receiving almost $500,000, free vacations, furniture, jewelry, home renovations, and other gifts as bribes and kickbacks. Sheldon Silver will be re-tried on April 16, after his conviction for obtaining nearly $4 million in bribes was vacated last year following the Supreme Court’s decision in McDonnell v. United States. In May, the former President of the SUNY Polytechnic Institute Alain Kaloyeros will stand trial for the same bribery scheme that ensnared Mr. Percoco. And finally, on June 18, Dean Skelos will be re-tried after his conviction on bribery charges was, like Mr. Silver’s, overturned in light of the Supreme Court’s McDonnell decision.

These six trials—all involving high-profile public officials, bribery and extortion charges, high stakes, and large sums of money—will receive considerable amounts of attention from the media and public, and will certainly provide much fodder for blogs like this one. While every month from January to June will bring a trial with its own drama and complexities, we can step back at the outset and consider what these trials collectively mean for corruption and ethics reform in New York. The trials will undeniably shake the public’s trust in public officials. Will these trials fuel cynicism that makes New Yorkers less likely to participate in the political process—or might these trials instead spark optimism that creates the political momentum for ethics reform?

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“Instead of Europeanizing Kosovo, We Have Balkanized EULEX”: The Need for Continued Localization in the EU’s Largest Mission

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The European Union Rule of Law Mission in Kosovo (EULEX)—the EU’s largest, costliest, and most ambitious mission—has operated in Kosovo for almost a decade with the goal of assisting the country’s judicial authorities and law enforcement agencies in tackling organized crime, corruption, and other threats to the country’s stability. To date, the 800-person mission—which consists of police officers, prosecutors, judges, and has its own power of arrest and prosecution—has resulted in over 40,000 court judgments and the investigation of over 400 war crimes. Yet allegations of corruption have dogged the project. Three years ago, Maria Bamieh was dismissed from her position as a EULEX prosecutor when she alleged corruption within the Mission, including a €300,000 bribe accepted by a EULEX judge. While a subsequent investigation and report by Professor Jean-Paul Jacqué (on behalf of the EU) dismissed Ms. Bamieh’s specific allegations, the report recommended that EULEX be reformed to better deal with corruption—a problem that, the report noted, remained “omnipresent in Kosovo.” Allegations of corruption were re-ignited in late 2017, when EULEX’s Chief Judge, Malcolm Simmons, resigned after alleging “several cases of corruption at the heart of the mission.” The accusations and counter-accusations between Judge Simmons and EULEX are complicated, and it is not my objective here to try to evaluate their credibility. In brief, Judge Simmons’ most serious allegation is that senior EULEX officials pressured him to convict Deputy Prime Minister (and former Kosovo Liberation Army commander) Fatmir Limaj, in order to prevent Mr. Limaj from taking part in the Kosovan election. (Judge Simmons also leveled other accusations, including an improper romantic relationship between a judge and a Kosovan jurist, and that a fellow judge had hacked his email.) The Mission swiftly responded that Judge Simmons himself was “the subject of a series of independent investigations into serious allegations against him,” with an EU official acknowledging that Judge Simmons is subject to five investigations and “allegations that Simmons interfered in some of the most important verdicts” in recent years. While it remains to be seen which allegations (if any) are true, the situation appears to be lose-lose for the EULEX mission.

The current EULEX mandate expires on June 14, 2018. The controversy swirling around Judge Simmons’ resignation, coupled with the upcoming discussions as to whether to renew EULEX’s mandate, provides a timely opportunity to reassess a flaw that has plagued EULEX since its inception: an actual and perceived lack of trust and accountability between the mission and local Kosovan judicial and law enforcement authorities. If EULEX’s mandate is renewed this year, steps should be taken to address this problem.

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Assessing Corruption Assessments: TI’s National Integrity System

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Paul Heywood and Elizabeth Johnson raise important questions in a recent journal article about Transparency International’s corruption assessment methodology; their article deserves close attention by consumers and producers of any type of corruption assessment.  The purpose of a corruption assessment is to determine where a country is falling short in the fight against corruption and what more it needs to do.  An assessment is the backbone of any national anticorruption policy, providing both a roadmap for reform and a gauge for measuring progress, and with a wrong map or inaccurate gauge, the chances the policy will curb corruption are slight.

TI calls its corruption assessment method the National Integrity System (NIS).  One of the more than 500 different corruption assessment methodologies (or “tools” in anticorruption jargon) now in use, it is among the oldest and most widely used.  Since 2001, it has been an input into anticorruption policy in over 100 countries.  Heywood and Johnson find it has four weaknesses  – Continue reading →