Category Archives: Commentary

No Silver Bullet: Why Ukrainian Anticorruption Activists Should Not Fixate on Creating a Specialized Anticorruption Court

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Ukrainian civil society activists have been aggressively campaigning for the establishment of an independent anticorruption court (see, for example, here, here, and here), in which international donors and other partners would participate in the selection of judges. Until very recently, President Poroshenko had vigorously resisted this campaign, asserting that “all courts in the country should be anti-corruption,” and proposing instead to have an anticorruption chamber within the current court system as part of his judicial reform plan. Yet in a surprising turn of events, on October 4th President Poroshenko appeared to yield to the demand of activists and international pressure to create such a court.

Poroshenko’s flip-flop seems to be a major victory for anticorruption activists in Ukraine. Yet it might be too early to celebrate. As promising as it sounds, a specialized anticorruption court is unlikely to live up to Ukrainian activists’ expectations. In a country like Ukraine—an oligarchic democracy in which governmental power is not delineated clearly by the constitution or legal framework, the executive is not effectively checked by the judiciary, and businesses are entangled with politics—the creation of a new judicial body is unlikely to be a game-changer. Moreover, in focusing so much on the campaign to create a specialized anticorruption court, domestic and international activists may be diverting energy and resources from more important issues, such as reforming the Prosecutor General’s Office (PGO), strengthening the role of the National Anti-Corruption Bureau of Ukraine (NABU), and adopting more comprehensive political and economic reforms reduce the clout of the country’s oligarchs.

There are two main reasons that the proposed Ukrainian anticorruption court is unlikely to live up to activists’ expectations:

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Some Thoughts on the Trump-Tillerson FCPA Exchange

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Dexter Filkins’ terrific New Yorker piece on US Secretary of State Rex Tillerson earlier this month included an anecdote about an exchange between Tillerson and President Trump concerning the Foreign Corrupt Practices Act (FCPA). For those who haven’t seen it, here’s the basic gist: In February 2017, shortly after Tillerson was sworn in as Secretary, he was meeting with Trump about an unrelated personnel matter when Trump launched into a tirade about the FCPA, and how it put US businesses at an unfair disadvantage. (That Trump holds this view is no surprise: He had expressed similar criticisms of the FCPA in public prior to his election.) But Tillerson pushed back, using an anecdote about how, when Tillerson was CEO of Exxon, senior officials from Yemen had demanded a $5 million bribe to close a deal that Exxon was pursuing in that country. Tillerson told Trump that he refused to pay, and made it clear to the Yemenis that this wasn’t how Exxon does business—and in the end Exxon got the deal anyway. According to Mr. Filkins’ source, “Tillerson told Trump that America didn’t need to pay bribes—that we could bring the world up to our own standards.”

Though it’s only a minor part of Filkins’ piece, the alleged exchange about the FCPA has attracted a fair bit of attention and commentary over the past month (see, for example, here, here, here, and here), much of it expressing or implying concern about this further evidence of President Trump’s hostility to the FCPA. It’s slightly puzzling that this anecdote is attracting more attention now, since the alleged exchange (which took place in February) was actually reported in early March—though Filkins’ piece has a little bit more detail (like the name of the country involved). Perhaps it’s because a news item about the FCPA was drowned out in early March by more pressing and immediate matters. (Trump issued the second version of his travel ban two days before the March report about the Trump-Tillerson FCPA exchange, and the federal district judge in Hawaii issued its injunction temporarily blocking enforcement of the ban a week later.) And perhaps the renewed attention to this item also has something to do with recent reports of an increasingly strained relationship between Trump and Tillerson.

Ultimately, though, it’s not so important to figure out why this anecdote is getting more attention now than it did back in March. The more interesting question is what, if anything, it reveals about the state of thinking—in government and the private sector—about the FCPA. There’s only so much that one can or should draw from a single vignette, but I do think it invites a few observations: Continue reading →

How Transparent Should Prosecutors Be About Investigations Into High-Level Corruption?

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Today’s post is going to be one of those ones where I raise a question that I’ve been puzzling over, without having much to offer in the way of good answers.

Here’s the question: How open and transparent with the public should the officials investigating serious allegations of high-level corruption be about the progress of their investigations?

To be sure, no competent investigator or prosecutor would or should be completely transparent, as doing so might well tip off the targets of the investigation to what the investigators know, their investigative and legal strategies, and so forth. But even with that constraint, there’s a fairly broad range of options. Investigators could be absolutely tight-lipped about everything. Or they could hold regular press conferences covering significant developments in the case (and perhaps even going further to comment on the larger issues that the investigation implicates). Or something in between.

I was prompted to think more about this question in part by an exchange I had with Jose Ugaz at last month’s Harvard conference on Populist Plutocrats. I was asking Mr. Ugaz about his experience serving as Peru’s Ad Hoc State Attorney investigating and prosecuting high-level corruption in the Fujimori regime, and in particular how he dealt with concerns that his investigation might be perceived as politicized. Those who are interested can watch the video of our exchange (which starts around 7:15:55), but the key part of Mr. Ugaz’s response (slightly edited for clarity) ran as follows: Continue reading →

Getting Serious (and Technical) About Procurement Corruption: The Transparent Public Procurement Rating Project

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For corruption fighters, public procurement is notable for two reasons. One, it is damnably complex. Two, it is often permeated with corrupt deals.  The latter makes it a critical target of anticorruption policy, the former a tough nut to crack. The thicket of laws, regulations, standard bidding documents, and practices that govern procurement means civil society groups advocating counter corruption measures are often at sea.  Lacking expertise on this bewildering set of rules, they can do little more than campaign in general terms for reform, urging steps like “greater transparency” or “tougher penalties” for corrupt activities.

But as anyone knows who has tried to persuade a government of uncertain will and commitment to adopt effective anticorruption policies, the devil is in the details.  Unless one has mastered the details of public procurement, a government can do all sorts of things to “improve transparency” or “crack down on procurement scofflaws” that are nothing but public relations gambits. So it is a pleasure to report that civil society organizations in Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine have joined to form the Transparent Public Procurement Rating Project, which provides a way for staff to master the details of the public procurement and to thus be able to present detailed proposals for rooting corruption out of their nation’s public procurement systems.    Continue reading →

Did the McDonnell Decision Legalize Putting Public Officials on Retainer? Menendez’s Challenge to the “Stream of Benefits” Theory

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In my post two weeks ago, I argued that in order to assess whether the U.S. Supreme Court’s decision in the McDonnell case would have a major impact on public corruption prosecutions—and in the slightly-hyperbolic words of some commentators, whether the decision “legalized public corruption”—the case to watch is the trial of New Jersey Senator Bob Menendez. Since most of the case law coming out of the McDonnell decision has focused on the definition of “official acts” in the context of quid pro quo bribery, many of those watching the Menendez trial expected it to center on how the court interpreted “official acts,” and whether Menendez’s actions qualified. But the case took an unexpected twist: the same day I published my post, Judge William Walls zeroed in on McDonnell’s effect on the prosecution’s stream of benefits theory of corruption—a key part of the government’s case.

According to the “stream of benefits” theory of corruption, prosecutors can establish an implicit quid pro quo by showing that a series of bribes were made to keep an official “on retainer,” so the donor can benefit from the official’s service as needed. In other words, on this theory, the government does not need to connect a specific individual gift to a specific individual act. Instead, the government can show that the private party provided a series of payments or gifts to the public servant over time, in exchange for the public servant being “on call” to perform official acts in return as needed. On this theory, the specific official act (the “quo”) doesn’t need to be known or contemplated at the time of the bribe (the “quid”). In Menendez, prosecutors invoked that theory, and attempted to show that the many favors Dr. Salomon Melgen did for Senator Menendez over a period of several years—such as rides on his private plane and trips to luxury resorts in the Caribbean—were offered in exchange for a series of actions Menendez took to lobby the executive branch on Dr. Melgen’s behalf. (The government alleges other charges against Menendez, such as making false statements on financial disclosure forms related to the bribery, but the stream-of-benefits bribery allegations are the heart of the case.)

Senator Menendez’s defense team—drawing on an argument developed in a Cato Institute report—moved to dismiss the case, arguing that McDonnell narrowed the scope of “official act” so much so that the public official must agree to perform a “specific and focused” act rather than a “broad policy objective,” meaning that the theory that a public official is kept “on retainer” in exchange for a series of favors cannot stand. Judge Walls said he was not sure that the stream of benefits theory was still viable after the McDonnell ruling, and asked the parties to brief the issue over the weekend, even saying to the DOJ lawyers that “if stream of benefits still lives, then you’ve got a chance.” Commentators accordingly rang the alarm bells, worried what extending McDonnell this far would mean for public corruption cases (see here and here).

Judge Walls eventually ruled last Monday that McDonnell did not prevent prosecutors from arguing a stream of benefits theory, concluding instead that the issue of whether there was a quid pro quo was a question of fact for the jury to decide. This was the right decision. Indeed, it’s troubling that the judge took the issue as seriously as he seemed to, as the idea that a fair reading of McDonnell requires outright rejection of the stream of benefits theory seems farfetched. Continue reading →

Chasing Dirty Money: A Public Database of Ukrainian PEPs

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Two weeks ago I posted Ferreting Out Kleptocrats’ Buddies: The Ukrainian Solution which described a list of Ukrainian public officials, their relatives, and close associates that a Ukrainian NGO had compiled. Banks and other financial institutions are required by national antimoney laundering laws to ask these individuals, “politically exposed persons” in antimoney laundering lingo, how they came by their money before doing business with them.  The idea is to keep money obtained through corrupt and other criminal means from polluting the financial system.  The hope is that such controls will either discourage PEPs from stealing from the public or, if not, open up one more way to catch those who have.

As Ferreting Out explained, currently the institutions subject to the antimoney laundering laws rely on PEP lists sold by large international companies, lists that often omit many names that should be on them.  Despite antimoney laundering laws in place around the globe, Ukrainian PEPs are spiriting money out of the country and into foreign financial institutions, real estate, and other investments at an alarming rate.  To help staunch the flow, the Ukrainian Anticorruption Action Center developed and published its own list of Ukrainian PEPs.  The list draws on many local sources and was compiled to complement the ones peddled by commercial vendors.

Center staff presented their work last weekend at the IMF-World Bank Annual Meetings.  A summary of their presentation with a link to the database follows. Continue reading →

Transparency International’s Anti-Corruption Pledge Tracker Is Badly Flawed. It Needs To Be Redone from Scratch.

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In May 2016, at the London Anticorruption Summit sponsored by then-Prime Minister David Cameron, participating countries issued declarations announcing a variety of commitments—some new, some continuations of existing policies—to further the fight against international corruption. Of course, all too often governments fail to follow through on their grandiose promises, so I was heartened by Transparency International’s announcement, in September 2016, that it had gone through all the country declarations, compiled a spreadsheet identifying each country’s specific promises, and would be monitoring how well each country was following through on its commitments.

Last month, a year after TI published the spreadsheet documenting the list of summit commitments, TI released a report and an interactive website that purport to track whether countries have followed through on those commitments. So what do we learn from this tracking exercise?

Alas, the answer is “almost nothing.” TI’s “Anti-Corruption Pledge Tracker,” in its current form, is a catastrophic failure—a slapdash, amateurish collection of arbitrary, often inconsistent judgments, unsupported by anything that resembles serious research, and (ironically) non-transparent. This is all the more surprising—and disappointing—given the fact that TI has done so much better in producing similar assessment tools in other contexts. Indeed, at least one such recent tool—TI’s Government Defense Anti-Corruption Index—provides a model for what the Pledge Tracker could and should have looked like. Given the importance of tracking countries’ fulfillment of their summit pledges, and TI’s natural position as a leader on that effort, I dearly hope that TI will scrap the Pledge Tracker in its current form, go back to the drawing board, and do a new version.

I know that sounds harsh, and perhaps it seems excessive. But let me explain why I don’t find the Pledge Tracker, in its current form, worthy of credence. Continue reading →

Some Realistic Steps to Address Corruption in Cambodia’s Prisons

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Prisons are perfect environments for corrupt activity (see here and here), even in countries that are generally not corrupt. A captive, marginalized, and powerless population is at the mercy of an armed, empowered group for everything from safety to basic food and water supplies. In Cambodia, a deeply corrupt country to begin with, prison corruption impacts every aspect of incarcerated life. Prison conditions are abysmal; water and food are scarce and are often unsafe to consume; prisons are severely overcrowded; and prisoners are subject to beatings and sexual abuse by other prisoners and guards. The Cambodian NGO Licadho found that “[t]here is a price tag attached to every amenity imaginable [in prison], from sleeping space to recreation time. Those who can’t afford to pay are forced to endure the most squalid conditions.” Even release from prison at the end of a sentence can be contingent on paying bribes.

These conditions constitute clear, and awful, violations of the human rights of prisoners. Cambodian prison corruption also threatens to undermine Cambodia’s already shaky justice system: As long as prisons are seen as institutions of corruption, torture, and injustice, as opposed to centers of rehabilitation, they will never escape the image left behind by the Khmer Rouge.

There aren’t a lot of feasible solutions, however. Both financial resources and political will to address prison corruption are very limited. Major reforms that would address fundamental problems, such as the lack of an independent judiciary, are hard and expensive, and the current government is not open to them. Nevertheless, there are a range of more modest reforms, which are both less expensive and more politically feasible, that could reduce corruption in prisons and improve the situation of many prisoners. Consider three such low-hanging fruit:

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To Gauge McDonnell’s Impact, Menendez—Not Skelos or Silver—Is the Case To Watch

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In June 2016, the United States Supreme Court vacated the conviction of former Virginia Governor Bob McDonnell. McDonnell had been convicted for accepting loans, gifts, vacations, and other valuable items from a businessman. In return, Governor McDonnell allegedly promised or performed a number of “official acts,” mostly in connection with trying to help the businessman get state government support for a nutritional supplement his company was developing. The Supreme Court vacated the conviction on the grounds that the trial court improperly instructed the jury on what conduct could count as an “official act” (the “quo” in a quid pro quo) under the federal bribery statute. In particular, the trial court had instructed the jury that “official acts” could include things like helping the businessman by arranging meetings with state government decision-makers, hosting an event to promote his business, or suggesting that subordinates speak to him. The Supreme Court ruled that this definition of “official act” was too broad, since it encompassed almost any act a government official takes.

How much did McDonnell change the landscape for federal corruption prosecutions in the United States? Some worry that it has already had a large and unfortunate impact, and point to recent developments in New York: Last July, a little over a year after the McDonnell decision, a federal appeals court relied on McDonnell as the basis for vacating the conviction of Sheldon Silver, the former New York State Assembly Speaker who was found guilty in 2015 for taking millions in payments in return for supporting legislation and directing grants that helped the payers. And just last month, another panel of that appellate court also relied on McDonnell in vacating the conviction of former New York State Senate Majority Leader Dean Skelos, who was convicted in 2015 (along with his son Adam) for bribery, extortion, and conspiracy. According to prosecutors, Skelos had promised votes and taken actions benefitting three companies in exchange for providing his son with consulting fees, a job, and direct payments.

Skelos’ and Silver’s convictions were seen as a victory for federal prosecutors, and a much-overdue effort to clean up the notoriously corrupt New York state government. Many commentators pointed to the recent appellate court rulings vacating those convictions as evidence of McDonnell’s broad and malign effects on efforts to clean up corruption (see, for example here , here, and here). But while the vacations of these convictions are a setback for anticorruption advocates, they do not actually reveal much about the reach of McDonnell, nor are they likely to materially change the fates of Skelos and Silver. The much more important case to watch—the one that will be a better indicator of McDonnell’s long-term impact— is the trial of New Jersey Senator Robert Menendez. Continue reading →

Curbing Corruption in Development Projects: Memo for the World Bank Board of Governors

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The wAnnual meetingsorld’s finance ministers serve as the governors of the World Bank and meet this weekend to review the Bank’s activities over the last year and set policy for the coming one.  The annual meeting is the first since the OECD released a remarkable document, one that subtly but unmistakably  damns the development community for failing to curb corruption in the projects it finances. In skillfully-crafted prose that points the finger at no one miscreant while charging all with dereliction of duty, the OECD’s Council for Development identifies weaknesses large and small in the corruption prevention efforts of both bilateral and multilateral development organizations and urges major reforms.  Corruption in development projects not only defeats the reason development aid is provided but, as the council stresses, many times leaves the recipient worse off than had no aid been extended in the first place.

The Bank’s Board of Governors should make the report and its recommendations the focus of their meeting. For two reasons. Continue reading →