Category Archives: Commentary

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.

Continue reading →

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.

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Declinations-with-Disgorgement in FCPA Cases Don’t Worry Me: Here’s Why

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Among those who follow Foreign Corrupt Practices Act (FCPA) enforcement practices, there’s been a spate of commentary on a few recent cases in which the Department of Justice (DOJ) has resolved FCPA cases with a formal decision not to prosecute (a “declination”) that includes, as one of the reasons for (and conditions of) the declination, the target company’s agreement to disgorge to the U.S. Treasury the profits associated with the (allegedly) unlawful conduct. Disgorgement is a civil remedy rather than a criminal penalty (as the U.S. Supreme Court recently emphasized); it is often employed by the Securities and Exchange Commission (SEC), which has civil FCPA enforcement authority over issuers on U.S. exchanges. Until recently, however, the DOJ – which has civil FCPA enforcement authority with respect to non-issuers, and criminal enforcement authority in all FCPA matters – had not sought disgorgement very often, and the recent “declination-with-disgorgement” resolutions appear to be something new, at least in the FCPA context.

Not everyone is happy with this development. Last week, for example, Professor Karen Woody posted an interesting commentary over at the FCPA Blog (based on a longer academic paper) on why the emergence of declinations-with-disgorgement in FCPA cases is an “alarming” development that makes her “queasy.” Professor Woody is an astute and knowledgeable FCPA commentator, and I’m hesitant to disagree with her—especially since I’m not really an FCPA specialist in the way that she is—but I’m having trouble working up a comparable level of alarm. Indeed, my knee-jerk reaction is to view the declination-with-disgorgement as a useful mechanism, one that would often be the most appropriate one to employ to resolve FCPA violations by a company that is not subject to SEC jurisdiction, and eliminating this mechanism might force the DOJ to employ a worse alternative.

Let me start by laying out the affirmative case for declinations-with-disgorgement, and then I’ll turn to Professor Woody’s concerns. Continue reading →

Model Language for an Anticorruption Citizen Suit Provision in Community Development Agreements

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Community Development Agreements (CDAs) are contracts between extractive companies and the local communities that reside near their operations. The contracts are designed to funnel some of the financial and non-financial benefits of the project to those who are most likely to be negatively impacted by their inherent destructiveness. Some developing states require CDAs from extractive companies as a precondition for granting permits, and the World Bank publishes model regulations for CDAs—recommendations that hold significant sway for many developing states. The World Bank’s model regulations are often referenced, or adopted wholesale, by countries with capacity constraints.

The World Bank model CDA, and many of the existing national laws which govern CDAs, include required, substantive terms such as monitoring components, dispute resolution systems, etc. However, CDAs have not traditionally included provisions that might allow the contracts to be operationalized in the anticorruption fight. Building on the work of Abiola Makinwa and James Gathii, I have argued that CDAs should include anticorruption clauses that would give recognized community members the right to sue as third party beneficiaries in the case of corruption, and that the World Bank should amend its model CDA to include a third party beneficiary cause of action for corruption in the making or execution of a CDA.

While my previous post advocated for this reform in general terms, my objective here is to suggest specific language that the World Bank should incorporate into its model regulations. These provisions derive in part from recommendations of the Columbia Center on Sustainable Investment’s (CCSI) analysis of Emerging Practices in Community Development Agreements and transform the CDA into an anticorruption tool. The recommended provisions are as follows:

Continue reading →

The Curious Absence of FCPA Trials

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As is well known, enforcement actions brought under the Foreign Corrupt Practices Act (FCPA) have expanded dramatically over the past decade and a half. With all this enforcement activity, someone unfamiliar with this field might suppose that the most important questions regarding the FCPA’s meaning and scope are now settled. But as FCPA experts well know, that is not the case; the realm of FCPA enforcement is a legal desert, with guidance often drawn not from binding case law but from a whirl of enforcement patterns, settlements, and dicta. As a result, many of the ambiguities inherent in the statutory language remain unresolved—even core concepts, such as what constitutes a transfer of “anything of value to a foreign official,” lack concrete legal decisions that offer guidance. While some claim that this ambiguity fades when the FCPA is applied to the facts at hand, past analysis shows that this may not always be the case.

The dearth of binding legal precedent in FCPA enforcement stems directly from the lack of FCPA cases that are actually brought to trial. Of course, most white collar and corporate criminal cases—like most cases of all types—result in settlements rather than trials. But a look at the major cases white collar cases going to trial in 2017, and the pattern of FCPA settlements, shows that FCPA trials are uniquely rare. In fact, FCPA cases are resolved through settlements more often than any other type of enforcement actions brought by the DOJ or SEC.

Why is this? Why are FCPA enforcement cases so rarely brought to trial, even compared to other white collar cases? The answer can help explain why FCPA case law is so sparse, and reveal whether this trend may change in the future.

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Internationalizing the Fight Against Corruption: The EU Mission in Kosovo

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For countries saddled with a tight-knit, corrupt leadership class, what happened last week in Guatemala is cause for celebration.  There a normally meek judiciary slapped down the president’s effort to end a corruption investigation that threatens his rule.  What made the difference was the investigation is led by a United Nations entity created under an accord an earlier government had signed with the U.N.  The agreement, and the support it enjoys both in Guatemala and abroad, gave the nation’s Constitutional Court both the legal rationale and the backbone to tell the president that even he was not above the law.

Before corruption fighters embrace internationalization as the deus ex machina in the corruption fight, however, they will want to pay heed to another, far less publicized event, that also took place last week: publication of Joschka Proksik’s analyis of the European Union’s rule of law mission in Kosovo ( (published in this volume). As with Guatemala, the government of Kosovo agreed to share with an international agency the power to enforce the nation’s criminal law.  Unlike Guatemala, however, where the U.N. can only investigate allegations of criminal misconduct and domestic prosecutors and courts must take it from there, in Kosovo the EU’s power is unlimited.  EU personnel can at any time and for any reason investigate, prosecute, and judge whether a Kosovar has violated the nation’s criminal law — without any involvement whatsoever by local authorities.  Moreover, EULEX, as the mission is known, is far larger and far better resourced than the UN’s Guatemalan mission, staffed at its peak by some 1,900 international personnel at a cost of over €100 million in administrative expense alone.

Proksik interviewed dozens of current and former EULEX staff, analyzed data on investigations, prosecutions, and convictions, and perused pervious evaluations by the European Union and independent observers to determine what the progress EULEX has made in its almost nine-year life in realizing its core objectives of helping Kosovo’s judiciary and law enforcement agencies remain “free from political interference” and adhere to “internationally recognized standards and European best practices.”  Because his careful, balanced, professional assessment merits the attention of aIl looking for ways to help countries stuck with corrupt leaders, I won’t give away the bottom line.  But safe to say it forms an important counter to the Guatemala experience.

Proksik suggests some reasons why the results of internationalizing the corruption fight in the two countries differ so: EU’s large and unwieldy bureaucracy, the lack of a shared language between Kosovars and internationals, and the short-term secondments of many international staff.  As Matthew explained earlier this year, there are pros and cons to internationalizing, or outsourcing, the fight against corruption.  Given what a successful effort can achieve, understanding why the results in Kosovo have been so different from those in Guatemala is surely a topic worthy of sustained, careful attention.

Internationalizing the Fight Against Corruption: the Guatemala Showdown

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Guatemala shows how a beleaguered citizenry can fight a thoroughly corrupt leadership.  A joint United Nations/Guatemalan agency, known by its Spanish initials CICIG, has for several years been waging all out war against corruption in Guatemala (details here).  Besides winning corruption convictions against countless senior politicians and military leaders, its investigations led to the 2015 ouster of then President Otto Pérez Molina and Vice President Roxana Baldetti for orchestrating a massive corruption scheme in customs.  CICIG has been able to withstand the inevitable backlash that cases against the powerful generate thanks to a remarkable alliance between Guatemalans fed up with corruption and impunity and those in the international community willing to provide not only financial support but political backing too.

Fearing he is about to become the target of a CICIG investigation, Guatemala’s current president Jimmy Moralesis is testing the strength of the alliance. On August 26 he issued a decree expelling CICIG’s head, claiming the commission was compromising the country’s sovereignty.  Given Guatemala’s experience with foreign intervention, one would expect his claim to resonate, but so far outside far right circles it has gained little traction. The day after his order issued the Guatemalan Constitutional Court granted an amparo (protective order) staying the expulsion order pending a hearing on its lawfulness.  Guatemalans have taken to the streets, and commentators to the airwaves and op-ed pages, to protest Morales’ action.

International backers of CICIG have come to its defense too.  The U.N. Secretary General, the U.S. State Department, the European Union, and the Latin American Association of Ombudsmen have all denounced Morales’ order.  CICIG’s most important international ally may well be U.S. Congresswoman Norma Torres.  Guatemalan by birth, she is a leading voice on U.S. policy towards Guatemala, from shaping a responsible foreign assistance program, to devising a humane immigration policy, to supporting the fight against corruption. In an August 29 opinion piece in a Guatemalan daily (reprinted below in English) she not only strongly backed CICIG but reminded Morales his actions were putting millions of dollars of U.S. aid at risk. However much cheap demagoguery about foreign intervention and “Yankee imperialism” might undermine the credibility of CICIG’s other international supporters, the Congresswoman would seem immune.

Guatemala is a model for how a small country stuck with entrenched, powerful and corrupt leaders can mobilize international organizations, friendly governments, and key members of the diaspora to help purge the nation of corruption.  The outcome of the showdown between President Moralies and that alliance in Guatemala will be a critical test of the model’s viability.

Iván Velásquez and the Future of Guatemala
by Congresswoman Norma Torres

Like many chapines [Guatemalans] in Guatemala and abroad, I was shocked and dismayed by President Morales’s decision to declare Iván Velásquez “persona non grata.”  This decision is not only a devastating step back in the progress that has been made in anti-corruption efforts, it will delay justice in the important investigations and that are currently underway. It may also have lasting repercussions for Guatemala’s future by putting at risk millions of dollars in critical assistance. Continue reading →

Conceptualizing Bank Robbery: A Pedantic Parable for Corruption Scholars

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Some years ago, an ambitious and idealistic young social scientist decided that she would put her newly-acquired research skills to good use by trying to better understand and combat some important social problem. She settled on bank robbery. Why? Well, partly her personal interest, partly her background, and partly coincidence: She had a friend whose hometown had been hit by a rash of bank robberies, and she had been reading newspaper articles about a high-profile bank robbery, and it just seemed like a good thing to work on.

She went to see a senior scholar in the field, a former editor of the Journal of Bank Robbery and chair of the International Association of Bank Robbery Studies. They had the following exchange: Continue reading →