Category Archives: Commentary

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 →

Remembering Ferdinand Marcos’ History of Corruption is Relevant to the Philippines’ Present Anticorruption Efforts

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Ferdinand Marcos, who ruled the Philippines as a dictator from 1972 to 1986, is remembered for the thousands of human rights violations he committed, as well as his massive corruption. Indeed, Marcos holds the dubious title of being the most corrupt Philippine president (a title for which there is unfortunately stiff competition), and has been identified in one study as the second most corrupt government leader in the world, as measured by the value of public assets he stole. The profligacy of Ferdinand Marcos and his wife Imelda—even at a time when the Philippines was spiraling into recession and a debt crisis—was shameless, and symbolized by Imelda’s 2,700 pairs of shoes and extravagant shopping sprees.

Given the magnitude of the corruption and abuses he perpetrated, one would think that Marcos’ place in Philippine history and in Filipinos’ collective memory is already well-settled. But alarmingly, a “revisionist” account of his presidency has recently gained, and continues to gain, wide currency. Many Filipinos are now beginning to consider the notion that Marcos may not really have been so bad—that his “sins” were merely overstated by the victors who wrote post-Marcos history. (Some of these issues are discussed here, here and here, but they are more frequently debated informally in mass and social media platforms.) These revisionist narratives spiked during the 2016 Philippine elections, when Marcos’ son, Ferdinand, Jr. (known as “Bongbong”), ran for, and almost won, the Vice Presidency. During his campaign, Bongbong denied his father’s legacy of corruption and framed his own platform as a revival of Marcos’ supposed “golden age” of peace and progress. Bongbong’s efforts to whitewash his father’s historical record to suit his electoral objectives gained traction, and has even spread to other fronts, like Wikipedia and Facebook. It did not help that President Rodrigo Duterte favorably endorsed the Martial Law declaration that paved the way for Marcos’ dictatorial rule in 1972 (calling it “very good”), and that the Supreme Court, in a recent controversial ruling, allowed the interment of Marcos’ remains in the Libingan ng mga Bayani (“Cemetery of Heroes”).

From a historical perspective, this phenomenon is disturbing in itself; but, if not arrested, this distortion of collective memory about Marcos’ history of corruption would also have dangerous implications for the Philippines’ ongoing and future anticorruption efforts. Continue reading →

How to Crack Down on Cryptocurrencies

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Bitcoin and other cryptocurrencies are electronic currencies that rely on a technological innovation called a “blockchain”—essentially, a complete transaction record, or “ledger,” stored across a network of computers rather than on a single site. Because of the transparency and alleged incorruptibility of the blockchain ledger, many anticorruption advocates have welcomed the possibility that blockchain technology might be an effective technology to combat corruption in a variety of ways, from ensuring transparency and accuracy in land records to helping to fight money laundering. Whether that optimism is justified remains to be seen. Unfortunately, the most popular application of blockchain to date—Bitcoin—is proving to be a major problem for the fight against corruption, money laundering, and a whole range of other black-market transactions.

Bitcoin is an unregulated currency and is fundamentally difficult to track. Bitcoin allows for the transmission of large amounts of money without the need to go through the traditional, and heavily regulated, financial service providers. Unlike cash, which is also difficult to trace, bitcoins are easy to hide, as the information necessary to stash hundreds of millions of dollars can be kept on a small USB thumb drive. And despite the vaunted transparency and incorruptibility of the Bitcoin “ledger,” which does indeed record all Bitcoin transactions, there is no easy way to establish the real-world identities of Bitcoin users. Nor is there any easy way to generate a record of individuals’ bitcoin holdings, which would have to be reconstructed from hundreds of thousands of transactions. Laundering money with bitcoins is further facilitated through the use “mixing” technologies that pool bitcoins and forward them onward to other accounts, thwarting the transparent blockchain.

Government efforts to address these problems have so far fallen short. China has begun to crack down on domestic Bitcoin exchanges, and some countries such as Bolivia have outright outlawed the use of Bitcoin. But these efforts have largely failed because the storage and exchange of bitcoins requires so little information; you can send bitcoins using protocols as simple as email or text message. Many governments have financial disclosure laws that require public officials to declare all their assets, including bitcoins. And sometimes officials do: three Ukrainian ministers recently disclosed, pursuant to Ukraine’s new asset declaration law, holdings of a combined US$45 million worth of bitcoins. But if corrupt government officials chose to violate the law by failing to disclose their Bitcoin holdings, it would be all too easy for them to do so without getting caught. Governments could also crack down on the services that make bitcoins easier to use—the digital exchanges and apps—but all this would likely do is cause the providers of those electronic services to shift their operations to other jurisdictions, as has happened with digital torrenting sites (which facilitate the pirating of digital content) after the US cracked down.

There is, however, an alternative regulatory strategy that holds more promise:  Continue reading →

Do Mandatory Asset Declarations Reduce Corruption? And If So, How?

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The United Nations Convention Against Corruption (UNCAC) calls on States Parties to adopt asset declaration and financial disclosure regimes for their public officials (see Article 8, paragraph 5 and Article 52, paragraph 5), and most states have complied with this commitment in one form or another. Indeed, according to a report by the Stolen Asset Recovery Initiative, there is a continuous upward trend in the number of states that have enacted financial disclosure laws (see Figure 1.1 at page 8). Yet the near-universal popularity of mandatory asset declarations does not mean that this tool is actually effective. True, there have been a few high-profile cases where asset declarations played an important role in anticorruption efforts, such as the impeachment of the Chief Justices of the Philippines and Sri Lanka, as well as the resignation of the Vice Rectors of a prestigious university in Thailand and the top brass of a state bank in Portugal. But such high-profile cases are rare and may not be representative of the larger picture. In a previous post on this blog, Rick Messick expressed some skepticism about the extent to which asset declarations and other forms of mandatory financial disclosures actually contribute to anticorruption efforts, and criticized what he saw as extravagant and unrealistic claims about the effectiveness of such disclosures as anticorruption tools.

So what does the existing research actually say about the effectiveness of asset declarations on anticorruption efforts? While there are only a few studies on this topic, the evidence they supply nevertheless offers valuable insights.

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Lessons from the “Isolated Capital” Effect for the Fight Against Public Corruption

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As numerous commentators have written on this blog and elsewhere, the New York state legislature suffers from a serious corruption problem (see, for example, here and here), with six corruption convictions of government leaders in eleven years, and suspicions that the rot runs much deeper. Would things be any better if New York’s capital were in New York City rather than in Albany? While it’s impossible to say for sure, research suggests—perhaps surprisingly—that the answer might be yes. In an influential paper, Filipe Campante and Qhoc-Anh Do found that, on average, corruption (as measured by federal corruption-related crime convictions per capita) is higher in states where the state capital is more “isolated”—that is, farther from the state’s major population centers. (States with relatively isolated capitals include not just New York (Albany), but also Illinois (Springfield), South Carolina (Columbia), Nevada (Carson City), and Florida (Tallahassee), among others.)

Of course, states are very unlikely to relocate their capitals, but understanding the likely mechanisms that explain Campante and Do’s surprising finding may help us better understand the sorts of policy levers that might help reduce corruption in state government. So why might it be the case that states with more isolated capital cities might have more corruption? Continue reading →

Corruption Risk Assessments: Am I Missing Something?

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Surely one of most salutary developments to result from the intense focus on corruption over the past two decades is the growing use of corruption risk assessments by public and private entities alike.  Risk assessments were first employed in the 17th century to assess the likelihood a steam engine would explode and refined over the years to address risks as varied as the meltdown of a nuclear reactor or climate change.  A corruption risk assessment estimates the chances a government agency or private corporation will experience one or more types of corruption.  Just as assessing the risks of an engine explosion or reactor melt-down is an indispensable prerequisite for designing measures to mitigate if not eliminate these risks, a corruption risk assessment provides the critical information public and private sector decisionmakers need to design practicable corruption prevention programs.

A plethora of guides explaining how to conduct a corruption risk assessment are posted on the internet (examples for the public sector here and here; for the private sector here, here, and here).  All recite the standard method for assessing risks of any kind found in text books and government reports.  First, all conceivable forms of corruption to which the organization, the activity, the sector, or the project might be exposed is catalogued.  Second, an estimate of how likely it is that each of the possible forms of corruption will occur is prepared and third an estimate of the harm that will result if each occurs is developed.  The fourth step combines the chances of occurrence with the probability of its impact to produce a list of risks by priority.

The critical steps are the second and third.  If the estimate of where bribery is likely occur or its impact if it does occur is wrong, prevention efforts will not be properly targeted. That happened to the U.K. insurance firm Aon Limited.  Thinking bribery was more likely to occur in its U.K. operations than those overseas, it put the bulk of its enforcement efforts into preventing bribery in the U.K.  Because, as the U.K. financial regulator found, it “failed properly to assess … the higher risks presented by some of the countries in which [its overseas] divisions operated,” it thus spent little time overseeing its non-U.K. agents.  That mistake was costly.  When it was revealed that many non-U.K. agents had paid bribes, the U.K. Financial Services Authority, the U.S. Department of Justice, and Securities Exchange Commission all brought enforcement actions.

Given the importance of accurate estimates of bribery risk and impact to developing a corruption risk assessment, one would expect “how to” guides to explain ways to improve the accuracy of the estimates.  Especially since risk assessments in other areas do. Continue reading →

Petty Corruption, Grand Corruption, and the Politics of Absolution

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My post last month offered some reflections on Professor Giovanni Orsina’s interesting observations, at last September’s Populist Plutocrats conference, about how the wide-ranging Clean Hands (mani pulite) investigations in Italy may have contributed to the rise of Silvio Berlusconi—first by creating a power vacuum, and second by contributing to the delegitimation of professional politicians and traditional political organizations. Today I want to pick up on another thread of Professor Orsina’s analysis, echoed and amplified by his co-panelist, the journalist Beppe Severgnini. Professor Orsina and Mr. Severgnini’s insight is that is that part of the secret to Berlusconi’s success – and the apparent willingness of many Italian voters to overlook his corruption and other misdeeds – is what for lack of better terminology I’ll call the “politics of absolution.” Here’s how Mr. Severgnini describes the phenomenon (see 57:34 on the video):

[A] populist plutocrat [like Berlusconi] is warm, empathetic, admits his sins – and forgives yours. It’s a very smart thing because he admits his huge sins, and he forgives your little sins…. [To] every shopkeeper who gave 50 Euros to the local policeman, … Berlusconi [said] “OK, don’t worry, this is not important.” … The smart thing, and the very subtle thing [is that by saying,] “I forgive you for those 50 Euros,” … in a way I buy your [acquittal of] me, [even though for me] it was 50 billion, not 50 Euro…. I forgive you the small things, so you forgive me for the big things – and maybe you vote for me. And that’s exactly the psychological trick, and it works extremely well.

Professor Orsina’s analysis is similar, emphasizing the contrast between Berlusconi’s forgiving, indulgent populism and what many voters perceived as the arrogant moralization of his chief opponents on the Italian left (at 45:20):

[The Italian left said to the voters,] “This is a corrupt country, this is a country that must be … corrected, … and we are those who can … teach the Italians how to behave.” Now, this was perceived as extremely arrogant…. On the other side, [Berlusconi] was saying, “Come on, guys! You are good! This is a great country…. I am in no position to tell you what to do…. What I want to do is to create the conditions for you to do what you want to do because what you want to do is good.” Of course there was no match…. Now, of course, when Berlusconi was telling the Italians, “You’re good, you can do whatever you want,” he was wrong. And when the left was telling the Italians, “We should behave better,” they were right…. [But] this [is] … why Berlusconi won the elections and the left lost.

I lack the expertise to assess, or even to intelligently discuss, whether this analysis of Italian politics is correct. But it strikes me as plausible, and moreover, if the diagnosis is accurate in this or other contexts, then understanding the politics of absolution may have at least two implications for efforts to combat corruption. Continue reading →

“Petty” Corruption Isn’t Petty

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Grand corruption attracts plenty of attention—from activists, the mainstream media, and other commentators (including on this blog)—and for good reason. While the media may simply be riveted by the decadent lifestyles of corrupt actors, the anticorruption community has increasingly recognized the devastating impact that kleptocrats and their cronies can have. No doubt, this attention to grand corruption is welcome and recent successes in fighting it are laudable. At the same time, though, this increased focus on grand corruption carries with it the risk of making smaller, more everyday forms of corruption—sometimes called “petty” corruption—seem less consequential.

Yet so-called “petty” corruption remains widespread, and its aggregate impact should not be underestimated. By way of example, consider the most recent results from the Transparency International (TI) Global Corruption Barometer (GCB) survey of citizens in Latin America and the Caribbean, which found that one-third of people who used a public service paid a bribe in order to do so. In other words, for these 90 million people, their ability to access a government service to which they were entitled was conditioned upon an extralegal payment—and that’s just accounting for this one region.

Even as the anticorruption community rightly focuses attention on combatting grand corruption, we can’t forget the real havoc wreaked by smaller-scale corruption. So-called “petty” corruption is not a petty concern. Rather, it’s a serious, pervasive problem that deserves just as much sustained attention as does politicians buying collector cars and oceanfront properties with assets from their secret offshore bank accounts. At the risk of repeating familiar points, it’s worth reviewing the ways in which small-scale corruption has, cumulatively, a range of incredibly destructive effects:

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