Category Archives: Commentary

Using the Unmatched Count Technique (UCT) to Elicit More Accurate Answers on Corruption Experience Surveys

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With apologies to those readers who couldn’t care less about methodological issues associated with corruption experience surveys, I’m going to continue the train of thought I began in my last two posts (here and here) with further musings on that theme—in particular what survey researchers refer to as the “social desirability bias” problem (the reluctance of survey respondents to truthfully answer questions about sensitive behaviors like corruption). Last week’s post emphasized the seriousness of this concern and voiced some skepticism about whether one of the most common techniques for addressing it (so-called “indirect questioning,” in which respondents are asked not about their own behavior but about the behavior of people “like them” or “in their line of business”) actually works as well as is commonly assumed.

We professors, especially those of us who like to write blog posts, often get a bad rap for criticizing everything in sight but never offering any constructive solutions. The point is well-taken, and while I can’t promise to lay off the criticism, in today’s post I want to try to be at least a little bit constructive by calling attention to a promising alternative approach to mitigating the social desirability bias problem in corruption experience surveys: the unmatched count technique (UCT), sometimes alternatively called the “item count” or “list” method. This approach has been deployed occasionally by a few academic researchers working on corruption, but it hasn’t seemed to have been picked up by the major organizations that field large-scale corruption experience surveys, such as Transparency International’s Global Corruption Barometer (GCB), the World Bank’s Enterprise Surveys (WBES), or the various regional surveys (like AmericasBarometer or Afrobarometer). So it seemed worthwhile to try to draw more attention to the UCT. It’s by no means a perfect solution, and I’ll say a little bit more about costs and drawbacks near the end of the post. But the UCT is nonetheless worth serious consideration, both by other researchers designing their own surveys for individual research projects, and by more established organizations that regularly field surveys on corruption experience.

The way a UCT question works is roughly as follows: Continue reading →

Bribery in College Basketball: What the Corruption Ring Means for the Future of Collegiate Athletics

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Last Tuesday, the U.S. Attorney for the Southern District of New York, Joon H. Kim, shined light onto the “dark underbelly of college basketball” by charging a number of individuals with violating federal bribery, fraud, and corruption statutes. Among those charged were James Gatto, Director of Global Sports Marketing for Adidas, and assistant basketball coaches at the University of Arizona, Auburn University, Oklahoma State University, and the University of Southern California. Additional investigations are currently ongoing at the University of Louisville and the University of Miami.

U.S. Attorney Kim outlined two distinct schemes that were uncovered during FBI investigations. The first involved Adidas executive James Gatto, who allegedly bribed high school basketball stars to sign with certain colleges that were sponsored by Adidas. The second scheme involved financial advisers and agents bribing assistant coaches at universities in exchange for convincing their players to hire those advisers when they became professional athletes.

For those who follow college sports, particularly football and basketball, the illicit activity is not surprising. As longtime collegiate sports journalist Pat Forde explained, “Every basketball program in America is running scared right now, because this is how business gets done. A lot of people knew it, but nobody was able to lay it out with proof like the feds did on Tuesday. It’s a dirty sport, and today we know how dirty.”

It’s nevertheless a bit surprising that the Department of Justice decided now was the time to get involved, as if the corruption has not been going on for decades. The recent charges raise two questions: First, given the longstanding history of bribes in college basketball, why did the Department of Justice finally decide to get involved? Second, what does this mean for the future of collegiate athletics?

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Preventing Corruption in Development Projects: The World Bank’s La Guajira Project

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Report Number No: 38508-CO for a Proposed Loan in the Amount of US$ 90 Million to the Department of La Guajira with the Guarantee of the Republic of Colombia for a Water and Sanitation Infrastructure and Service Management Program is probably not the first place one would turn for advice on preventing corruption in development projects.  But it should be.  For annex 11 contains a text book example of how to identify and mitigate the risk of corruption in a donor-funded project.

The annex is part of the project appraisal document, the paper the World Bank’s Board of Directors relied upon in February 2007 in approving a $90 million loan to the Department of La Guajira in Colombia to upgrade the department’s water and sanitation services.  The loan was for the purchase of equipment and construction of civil works in some dozen or so municipalities and pilot water and sanitation projects in several remote rural areas.  While the project document made a strong case for the project’s benefits, it minced no words when it came to the risks of corruption the project faced: “The Department of La Guajira has a reputation for weak governance, corruption, and the continued presence of parallel institutions which have prevented public sector efforts to meet citizen needs in an equitable and effective manner.”  To be sure the message was not lost on board members, the authors went on to warn that “corruption, public sector malfeasance, capture by elites and special interests, and the paucity of accountability and transparency” is endemic in La Guajira and is the reason why the department remains so poor.

After reading such a clear, candid statement of the project’s corruption risks, one might question the sanity of any board member who voted to put $90 million of World Bank funds at risk.  But in fact an unvarnished analysis of the risk of corruption in the project is the first reason why the board was right to approve the loan the corrupt environment in La Guajira notwithstanding.  Project managers cannot prevent corruption in their projects if they are in denial about the risks they face.

The second reason why the board was right to approve the project loan is the chart that appears in the annex. Continue reading →

Can Indirect Questioning Induce Honest Responses on Bribery Experience Surveys?

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As I noted in my last post, bribery experience surveys – of both firms and citizens – are increasingly popular as a tool not only for testing hypotheses about corruption’s causes and effects, but for measuring the effectiveness of anticorruption policies, for example in the context of assessing progress toward the Sustainable Development Goals’ anticorruption targets. Bribery experience surveys are thought to have a number of advantages over perception-based indicators, greater objectivity chief among them.

I certainly agree that bribery experience surveys are extremely useful and have contributed a great deal to our understanding of corruption’s causes and effects. They’re not perfect, but no indicator is; different measures have different strengths and weaknesses, and we just need to use caution when interpreting any given set of empirical results. In that spirit, though, I do think the anticorruption community should subject these experience surveys to a bit more critical scrutiny, comparable to the extensive exploration in the literature of the myriad shortcomings of corruption perception indicators. In last week’s post, I focused on the question of the correct denominator to use when calculating bribery victimization rates – all citizens, or all citizens who have had (a certain level of) contact with the bureaucracy? Today I want to focus on a different issue: What can we do about the fact that survey respondents might be reluctant to answer corruption questions truthfully?

The observation that survey respondents might be reluctant to truthfully answer questions about their personal bribery experience is neither new nor surprising. Survey respondents confronted with sensitive questions often have a tendency to give the answer that they think they “should” give (or that they think the interviewer wants to hear); social scientists call this tendency “social desirability bias.” There’s quite robust evidence that social desirability bias affects surveys on sensitive topics, including corruption; even more troubling, the available evidence suggests that social desirability bias on corruption surveys is neither constant nor randomly distributed, but rather varies across countries and regions. This means that apparent variations in bribery experience rates might actually reflect variations in willingness to truthfully answer questions about bribery experience, rather than (or in addition to) variations in actual bribery experience (see here, here, and here).

So, what can we do about this problem? Existing surveys use a range of techniques. Here I want to focus on one of the most popular: the “indirect questioning” approach. The idea is that instead of asking a respondent, “How much money does your firm have to spend each year on informal payments to government officials?”, you instead ask, “How much money does a typical firm in your line of business have to spend each year on informal payments to government officials?” (It’s perhaps worth noting that the indirect questioning method seems more ubiquitous in firm/manager surveys; many of the most prominent household surveys, such as the International Crime Victims Survey and the Global Corruption Barometer, ask directly about the household’s experience rather than asking about “households like yours.”) The hope is that asking the question indirectly will reduce social desirability bias, because the respondent doesn’t have to admit that he or she (or his or her firm) engaged in illegal activity.

Is that hope justified? I don’t doubt that indirect questioning helps to some extent. But I confess that I’m skeptical, on both theoretical and empirical grounds, that indirect questioning is the silver bullet solution for social desirability bias that some researchers seem to suggest that it is. Continue reading →

Regulatory Discretion and Corruption in the FDA

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In the United States, the regulatory agency responsible for ensuring safe food and medicine, the Food and Drug Administration (FDA), has been marred by numerous scandals – from a 2016 insider trading prosecution to a 2009 politicized medical device approval to a 2013 ProPublica investigation that found the FDA overlooked fraudulent research and let potentially unsafe drugs stay on the market. These scandals have, understandably, undermined public confidence in the FDA. What’s the explanation for these problems? Why is there such a large public perception of corruption, and so many questionable incidents, at the FDA?

Much of the explanation has to do with institutional design: Corruption blooms where transparency and accountability are lacking, yet the FDA has vast discretion over the regulations it sets, incredibly loose restrictions on the money it can receive from industry, and little public accountability. The following steps can be taken to reform the FDA, in the interest of rooting out corruption and restoring public confidence in the agency:

Continue reading →

Uzbek Civil Society on the Hazards of Investing in Kleptocracies

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Tonight Uzbekistan President Shavkat Mirziyoyev will tout the benefits of investing in his country to executives of multinational firms at a swank dinner at the Onyx Room in mid-town Manhattan.  He will point to measures the government has taken since the death last year of its first president, renowned kleptocrat lslam Karimov, to open the country to foreign investment — from reforms to economic policy to steps to improve its atrocious human rights record.  But before they open their checkbooks, the execs will want to heed the warnings contained in a letter Uzbek civil society activities just sent Washington lawyer Carolyn Lamm, chair of the American-Uzbekistan Chamber of Commerce, the host of tonight’s get-together.

Reprinted below, the letter cautions that there are still many signs that Uzbekistan has yet to shed its kleptocratic past, from the appointment of one of the most notorious kleptocrats of the previous regime as prime minister to the rise to power of Mirziyoyev’s sons-in-law.  The authors remind Ms Lamm and the members of her organization what happened to those who invested in Karimov’s kleptocracy.  Not only did their investments turn out to be a bust, but the bribes the investors had to pay to do business have cost them (or more accurately their shareholders) dearly.  One firm was fined $795 million by Dutch and American authorities and a second recently told shareholders it anticipates paying over $1 billion to resolve the case against it.

The authors sent a copy of their letter to the members of Ms Lamm’s organization, a group that includes General Electric,  General Motors, Boeing, Catepillar, Coca-Cola, Honeywell, Visa, and other well-know, well-respected companies traded on American stock exchanges (and thus subject to the Foreign Corrupt Practices Act). Readers holding shares in any of these companies will want to ensure company executives pay careful attention to the letter’s warnings.

Ms Carolyn Lamm
Chair
American-Uzbekistan Chamber of Commerce
601 13th St NW # 600S
Washington, D.C. 20005

September 18, 2017

An Open Letter to the American-Uzbekistan Chamber of Commerce regarding the Situation in Uzbekistan on the Eve of its Meeting with President Mirziyoev

Dear Chairwoman Lamm:

We, the undersigned Uzbek citizens and activists, write to you on the eve of your dinner with President Shavkat Mirziyoev on September 20, 2017, to express concern that your members may be misled into believing that meaningful reform is underway in our country. We ask you to share with them this letter explaining the current conditions in Uzbekistan and the risks any firm investing or doing business in the country will face. We further ask you to urge the President to reform the judiciary and create an independent, impartial and effective body to investigate allegations of corruption. Continue reading →

In Bribery Experience Surveys, Should You Control for Contact?

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Perception-based corruption indicators, though still the most widely-used and widely-discussed measures of corruption at the country level, get a lot of criticism (some of it misguided, but much of it fair). The main alternative measures of corruption include experience surveys, which ask a representative random sample of firms or citizens about their experience with bribery. Corruption experience surveys are neither new nor rare, but they’re getting more attention these days as researchers and advocates look for more “objective” ways of assessing corruption levels and monitoring progress. Indeed, although some early discussions of measurement of progress toward the Sustainable Development Goals (SDGs) anticorruption target (Target 16.5) suggested—much to my chagrin—that changes in Transparency International’s Corruption Perceptions Index (CPI) score would be the main measure of progress, more recent discussions appear to indicate that in fact progress toward Goal Target 16.5 will be assessed using experience surveys (see here and here).

Of course, corruption experience surveys have their own problems. Most obviously, they typically only measure a fairly narrow form of corruption (usually petty bribery). Also, there’s always the risk that respondents won’t answer truthfully. There’s actually been quite a bit of interesting recent research on that latter concern, which Rick discussed a while back and that I might post about more at some point. But for now, I want to put that problem aside to focus on a different challenge for bribery experience surveys: When presenting or interpreting the results of those surveys, should one control for the amount of contact the respondents have with government officials? Or should one focus on overall rates of bribery, without regard for whether or how frequently respondents interacted with the government?

To make this a bit more concrete, imagine two towns, A and B, each with 1,000 inhabitants. Suppose we survey every resident of both towns and we ask them two questions: First, within the past 12 months, have you had any contact with a government official? Second, if the answer to the first question was yes, did the government official demand a bribe? In Town A, 200 of the residents had contact with a government official, and of these 200, 100 of them reported that the government official they encountered solicited a bribe. In Town B, 800 residents had contact with a government official, and of these 800, 200 reported that the official solicited a bribe. If we don’t control for contact, we would say that bribery experience rates are twice as high in Town B (20%) as in Town A (10%). If we do control for contact, we would say that bribery experience rates were twice as high in Town A (50%) as in Town B (25%). In which town is bribery a bigger problem? In which one are the public officials more corrupt?

The answer is not at all obvious; both controlling for contact and not controlling for contact have potentially significant problems: Continue reading →

Lessons of Moral Psychology for Anticorruption Strategy

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Most countries attempt to fight public corruption through policies that increase the magnitude and the probability of punishment, on the logic that rational individuals will be deterred from engaging in corrupt acts if the expected costs exceed the expected benefits. This approach is certainly valuable, but it is incomplete, and anticorruption strategies based exclusively on a view of potentially corrupt public officials as “rational actors” are unlikely to be fully effective. This is because human beings are not (only) rational animals, they are also moral animals: As already discussed on this blog (see here and here), the decision-making process of a potentially corrupt public official is influenced not only by her calculation of expected (material) costs and benefits, but also by her moral values and self-image.

In fact, when people act in accordance with their own moral standards, their brain-reward centers are activated, which may explain why individuals value honesty and desire to live ethically at their own eyes. Notwithstanding, even otherwise morally upright subjects can engage in corruption. What do individuals take into account when choosing whether to engage in profitable dishonesty or to maintain their positive self-image by adhering to their moral standards?

A growing stream of research on moral psychology and neuroscience has shown that individuals employ certain psychological mechanisms, such as rationalization, that enable them to cheat at a certain level without considering themselves as “cheaters”; this, in turn, allows them to benefit from the dishonest behavior while not damaging their positive self-image. But when it becomes more difficult for people to justify their unethical behavior to themselves, the likelihood that they will engage in dishonest behavior will decrease. The tendency to engage in dishonest behavior is also affected by individuals’ ability to exercise self-control when facing temptation — that is, by their capacity to subdue their desire to attain short-term benefits in order to achieve long-term goals.

Greater attention to these insights would make possible the design of anticorruption policies tailored both to inhibit the use of rationalizations and to encourage the exertion of self-control when individuals face the opportunity to act dishonestly. For example, public agencies (especially those in corruption-prone sectors like public procurement) could take the following steps:  Continue reading →

Improper Payments and American Financial Mismanagement

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Sound government fiscal management requires, among other things, ensuring that government payments are made accurately—to the right payee, in the correct amount, and with sufficient documentation. Failure to implement effective systems to prevent improper payments leaves the government checkbook at risk of fraud, corruption, and other forms of abuse. Alas, the magnitude of improper payments in the United States is astounding: in 2016, the US reported $144 billion in improper payments—nearly the double the budget for the Department of Education. Improper payments for Medicaid alone are more than ten times the total size of the Community Development Block Grants that the Trump Administration intends to cut – allegedly to save money, even though eliminating this program would have disastrous consequences for programs such as Meals on Wheels.

While improper payments in other contexts are part of corruption schemes, such as the “ghost soldiers” in Afghanistan that Sarah his discussed in this post, improper payments under domestic U.S. programs like Medicaid are more likely to be the result of fraud or simple mismanagement than public corruption. That said, we have no idea how much corruption contributes to the massive improper payments problem. In either case, the most effective policy responses are largely similar, regardless of the underlying cause of the problem.  However, the U.S. response to the improper payments problem has so far been inadequate.

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ISO 37001 and the Federal Sentencing Guidelines Compared

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The International Standards Organization’s ISO 37001: Antibribery Management Systems – Requirements with Guidance for Use has prompted an outpouring of commentary since publication last October.  Meant to set forth “reasonable and proportionate” measures organizations of any kind and size located anywhere can take to prevent, detect, and respond to bribery, it has received generally positive reviews — on this blog, the FCPA blog (examples here and here), and elsewhere (here, here, and here for examples).  Commentators offer it as a best practice guide for corporations wanting to instill an ethical culture among their employees and, not incidentally, avoid prosecution under the Foreign Corrupt Practices Act and its many offspring.  But none of the commentary, or at least none I have seen (a Google search for ISO 37001 brings back several hundred thousand hits), lists, let alone discusses, what ISO 37001 recommends.

As a start on filling this gap, the recommendations are summarized on this spreadsheet.  For perspective, ISO 37001 is compared to the latest version of the granddaddy of corporate compliance guides, the U.S. Government’s Federal Sentencing Guidelines (pp. 525 -33).  To make the comparison, both are benchmarked against the elements of a compliance program listed in the Anticorruption Ethics and Compliance Handbook for Business, a volume jointly issued by the OECD, the World Bank, and the UNODC in 2013.

Continue reading →