Category Archives: Commentary

In Defense of Judicial Elections

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Many critics, including on this blog, have argued for abolishing judicial elections, partly on the grounds that judicial elections open the door to judicial corruption. These critics worry that elected judges cannot apply the law neutrally because they will be influenced by those who got them to their position and by the desire to stay there. But these risks are both exaggerated and fairy easy to control. Judicial elections actually promote legitimacy and responsiveness, and reduce opportunities for political gamesmanship. Ultimately, judicial elections can help curb judicial corruption.

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Tanzania’s President Magufuli Bulldozes the Civil Service: Is This an Anticorruption Breakthrough?

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For decades (perhaps longer), the corruption problem in Sub-Saharan Africa has seemed intractable. With only a handful of exceptions (such as Botswana, and more recently Rwanda), Sub-Saharan African countries score poorly on measures like Transparency International’s Corruption Perception Index (CPI), and direct surveys of African citizens tend to confirm that the frequency of petty bribery, while both lower and more variable than some Westerners think, are much higher than in most other countries. Declarations of war on corruption have also been a feature of African politics for decades, to the point where both citizens themselves and outside observers have grown cynical about the will or capacity of leaders to clean up the system.

But there are some preliminary, hopeful signs that in at least some major Sub-Saharan countries, things may be starting to change for the better. The country that probably gets the most attention, at least among commentators outside of Africa, seems to be Nigeria, where President Buhari—a former strongman-style President whom some have characterized as a kind of “born-again” reformer—has made anticorruption a centerpiece of both his election campaign and his administration. (For some discussions of President Buhari’s anticorruption efforts, on this blog and elsewhere, see here, here, here, and here.) But to me—as a non-expert with only the most superficial knowledge of the region or its politics—the more interesting developments are actually occurring in Tanzania, under the administration of President John Magufuli. Continue reading →

Reforming the ANDSF Payroll Management System: The Limits of a Technological Solution

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In my last post, I discussed the how the problem of “ghost soldiers”—soldiers who are inaccurately listed as on active duty, for purposes of generating salary payments that are then stolen—adversely affects the capacity and readiness of the Afghan National Defense and Security Forces (ANDSF). To make things worse, not only is the government making salary payments to soldiers who don’t exist, but some ANDSF personnel who do exist are not receiving the full salaries they are due. Approximately 20% of Afghan National Police (ANP) and 5% of Afghan National Army (ANA) personnel are paid in cash through so-called “trusted agents,” who are supposed to facilitate salary payments to ANDSF personnel when electronic funds transfers (EFTs) are not possible, but according to reports, corruption in the system could take as much as half of an employee’s salary. And while most ANDSF personnel receive their salaries via EFT to their personal bank accounts, this only reduces the threat of pilfering in the final distribution stage; it does nothing to correct for errors, either intentional or inadvertent, generated earlier in the process.

What can be done about these problems? The U.S.-led multinational military organization working with the Afghan government to reform and strengthen the ANDSF, known as the Combined Security Transition Command-Afghanistan (CSTC-A), is applying a technological band-aid that focuses on implementing a set of computerized systems that track personnel and pay. While these measures are helpful, they do not fundamentally change the incentive structures that drive corruption, and so are unlikely to represent a long-term solution, particularly after direct U.S. involvement winds down.

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Lava Jato and Mani Pulite: Will Brazil’s Corruption Investigation End Up a Wash?

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Pop quiz:

Which corruption investigation was preceded by a massive outcry against corruption, was advanced by federal prosecutors making liberal use of the plea bargain, implicated hundreds of politicians (including former and current heads of state), raised serious questions about the role of the independent judiciary, and ultimately resulted in a dramatic political crisis that led to the replacement of a long-standing populist regime with a conservative government bent on reform?

If you guessed Brazil’s Lava Jato (English: Car Wash), you’d be correct.

But if you answered Italy’s Mani Pulite (English: Clean Hands), you’d also be right.

The similarities between the two anticorruption investigations and subsequent prosecutions are no coincidence. In 2004, Brazilian Judge Sérgio Moro, currently responsible for Lava Jato, penned an essay praising the Clean Hands operation, calling it “one of the most impressive judicial crusades against political and administrative corruption,” lamenting Brazil’s failure to engage in a crusade of similar import, and setting a roadmap for the country to do so, based largely on the perceived successful tactics of Italy’s Clean Hands.

Over the last three years, Brazil’s Car Wash operation has followed Moro’s roadmap. But, as Alberto Vannucci has pointed out, Clean Hands was far from an unqualified success—on the contrary, the headline-grabbing, establishment-shaking operation arguably left the country even more mired in corruption than before. Last year, GAB contributor Daniel Binette (channeling Vannucci) predicted that Brazil could face three major challenges in the wake of Car Wash: (1) a collapse of major political parties, (2) the remote possibility of a coup, as occurred in Thailand in 2014, and (3) a loss of public confidence in the anticorruption probe itself. Some of Binette’s predictions have proven prescient, while the accuracy of others remains to be seen.

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Fighting Procurement Corruption: the Essential Role of Bid Challenge Systems

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Ensuring firms that loose the competition for a government contract can challenge the result is a critical part of the fight against corruption in public procurement.  A losing bidder will have lost the chance to make a profit and will have invested time and money in preparing its bid.  It thus has not only a strong motive for contesting a decision it believes tainted by corruption but the expertise to do so.  Bid challenge systems complement procurement oversight by civil society.  Indeed, they may even be a more powerful tool.  Whereas civil society monitoring typically relies on public-spirited volunteers unfamiliar with the technical aspects of the procurement, bid challenge systems harness firms’ self-interest and technical knowledge in service of ferreting out procurement corruption.

Transparency International’s 2014 volume on combating procurement corruption and the OECD’s 2016 procurement integrity handbook both note the importance of bid challenge systems but offer little guidance on what makes for an effective system.  Here are five questions anticorruption advocates can ask to assess the effectiveness of their nation’s bid challenge system: Continue reading →

What Might We Learn from the (Predicted) Walmart Settlement?

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My post two weeks ago discussed reports that Walmart is on the verge of reaching a settlement with the U.S. government regarding allegations that several of Walmart’s foreign subsidiaries violated the Foreign Corrupt Practices Act (FCPA), and that the total penalties that Walmart would pay would be around $300 million. That may sound like a big number, but it’s much smaller than the $1 billion penalty some commentators predicted when the investigation got under way, and only half of the $600 million the U.S. government was reportedly demanding as recently as last October.

As I write this, a settlement still hasn’t been formally announced, though it’s possible it will have been by the time this post is published. (I’m traveling this week, so I wrote this post a several days in advance and wasn’t able to update it to reflect any developments that may have occurred in the last 72 hours or so.) But let’s assume for the moment that the media reports are accurate, and that sometime this year – approximately six years after Walmart first disclosed to the SEC and DOJ that it might have an FCPA problem – the case settles for around $300 million. What would we learn from that?

Or perhaps I should frame the question more starkly, at the risk of oversimplification:

  • There are a bunch of folks out there (the “FCPA Reform” crowd) who argue that the U.S. government’s approach to FCPA enforcement is out of control, with the government imposing enormous and unjustified costs on companies for relatively minor and/or unproven infractions. The government can do this, the argument goes, because the government has corporations over a barrel: most corporations can’t risk being indicted for FCPA violations, and so (the FCPA Reform crowd asserts) the government can and does extract exorbitant settlements with little regard to whether the government’s legal theories have an adequate basis in law and fact.
  • Then there are a bunch of folks (lat’s call them the “FCPA, A-OK” crowd) who think that the aforementioned concerns are grossly exaggerated, and that in fact the U.S. government’s FCPA enforcement posture is reasonable, grounded in a plausible view of the law, and that allegations of overreaching don’t withstand critical scrutiny. (And then of course there are those who think that the government isn’t nearly aggressive enough in enforcing the FCPA, and that in fact both the resources devoted to investigation and enforcement, as well as the penalties, should be increased dramatically.)

If the Walmart settlement resembles what the most recent media reports predict, I think that both the “FCPA Reform” crowd and the “FCPA, A-OK” crowd can and will find material to support their positions. Continue reading →

The Toll Corruption Takes on Afghan Security Force Capacity

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Corruption in Afghanistan and its role in the ongoing instability of the country has been discussed on this blog before (see, for example, here, here, and here), but for the most part in fairly general, strategic-level terms. In this post, I’m going to zoom in and explain in greater detail two particularly insidious types of corruption that plague the Afghan National Defense and Security Forces (ANDSF): 1) the problem of “ghost” soldiers, and 2) the pilfering of fuel, weapons, and other supplies intended for security force personnel. These forms of corruption leave Afghan security forces hollow and ill-equipped to accomplish the missions assigned to them. As long as pervasive corruption continues to undermine force capacity, readiness, and morale, the prospect of Afghan government forces gaining the upper hand on the Taliban and other insurgents remains slim.

“Ghost soldiers” are fictitious troops added to personnel rosters by corrupt officials who then collect the extra pay allocated for these (in some cases deceased, in some cases no longer active, and in some cases totally made-up) soldiers. To give a sense of the scale of the problem, consider the 215th Corps of the Afghan National Army. In 2015, local officials suggested that up to 40 percent of names on the books did not correspond to actively-serving soldiers. For the 215th Corps, with an authorized strength of 18,000, that would mean fewer than 11,000 soldiers were actually available to fight. Earlier this year, US Army Major General Richard Kaiser, commander of Combined Security Transition Command-Afghanistan (CTSC-A), told the Wall Street Journal that the US had removed from the Afghan military payrolls more than 30,000 suspected ghost soldiers. That group of names amounted to over one-sixth of the Afghan army, significantly less than 40 percent but nevertheless a staggering figure. For reference, 30,000 is the same number of additional US troops President Obama sent to Afghanistan in December 2009 in a surge deemed necessary to turn the tide in the conflict.

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If Voters Hate Corruption, Why Do Elected Politicians Resist Anticorruption Reform? Lessons from South Dakota

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If U.S. voters dislike corruption so much, why don’t U.S. politicians see anticorruption as a winning issue—or at the very least feel more pressure to act aggressively against the corruption that voters claim to hate? This question, which has been explored on this blog before, is interesting to consider in the context of recent developments in South Dakota. South Dakota is considered to be one of the most corrupt states in the U.S., and in recent years has suffered through several major public corruption scandals, including massive misappropriations after the state privatized its EB-5 visa program, and the theft of over a million dollars earmarked for scholastic grants for the state’s American Indian population. In the past, although some Democratic state representatives had introduced bills to crack down on corruption, these measures failed in largely party-line votes in South Dakota’s Republican-dominated state legislature. Yet South Dakota, like many U.S. states, has a ballot initiative process that empowers voters to approve new laws by popular referendum. Last November, South Dakota voters used this process to approve Initiated Measure 22 (IM-22), also known as the “South Dakota Anti-Corruption Act.” While IM-22, despite its title, is not a direct anticorruption bill—its focus was on reforming campaign finance and lobbying—the message from the South Dakota voters was clear: they saw corruption as a problem and wanted to take measures to combat it.

Yet after the referendum passed, Republican lawmakers immediately took steps to halt the new rule. Within two weeks, 25 Republican South Dakota lawmakers brought suit against the state, arguing that the ethics commission created by the referendum violated the state’s constitution, and they succeeded in getting a temporary injunction against the new rules. Ultimately, the South Dakota State Senate struck down the law, using a provision of state law that allows the state legislature that repeals a referendum. Thus elected stood in direct opposition to an attempt to combat corruption enacted through a popular democratic initiative. Moreover, events in South Dakota reveal that some of the more conventional explanations that have been offered—including by previous analyses on this blog—are at best incomplete.

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Jared Kushner May Have Violated the Foreign Corrupt Practices Act

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Recent media reports – which would be even more sensational if we weren’t getting so desensitized to Trump-related scandals – indicate that prior to Trump’s inauguration, his son-in-law and senior advisor Jared Kushner had private meetings with Russian government officials, including both Ambassador Sergey Kislyak and Sergey Gorkov, the head of a Russian state-owned bank (and a close associate of Vladamir Putin). We still don’t know (and may never know) the precise contents of the meeting, but based on circumstantial evidence, several of the media reports discuss speculations Kushner and his Russian government contacts discussed the possibility of extending financing to business ventures owned by Kushner or his family (including, most notably, a financially struggling office building at 666 Fifth Avenue in Manhattan), if Kushner would help to persuade his father-in-law, the President-Elect of the United States, to lift the sanctions that the U.S. had imposed on Russia for its military intervention in Ukraine.

Again, we don’t yet know whether this is true. But let’s suppose for a moment that some version of that story is approximately correct: that during conversations with Russian government officials, Jared Kushner proposed or endorsed the idea that he would try to persuade his father-in-law to lift the Russia sanctions, and that Kushner did so because he believed (or was told) that if he did, a Russian state-owned development bank would provide valuable financing for his family’s business.

If that’s what occurred, then even nothing further came of these discussions, then there’s a very good argument that Jared Kushner committed a criminal violation of the Foreign Corrupt Practices Act (FCPA). Though there’s been quite a bit of discussion in the reports so far about various federal laws that Kushner may or may not have been broken in connection with these meetings (such as the little-used Logan Act, which prohibits private citizens from interfering with U.S. diplomacy). But I haven’t seem much discussion of the FCPA angle. So even though it might still seem unrealistic to imagine that FCPA charges will be brought, let me elaborate a bit on why I think there’s a plausible case for an FCPA violation here, if the evidence supports the characterization of the meetings sketched above: Continue reading →

China Should Go After Bribe Takers in FCPA Cases

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As other contributors to this blog have noted (see here, here, here, here, and here), in transnational corruption prosecutions there is a huge disparity in the enforcement of corruption laws against bribe-givers (the “supply side”) and bribe-takers (the “demand side”). For example, corporations have been penalized under the U.S. Foreign Corrupt Practices Act (FCPA) for bribes they allegedly paid to foreign officials, but the foreign officials implicated in these enforcement actions have largely remained untouched under their respective countries’ legal and political regimes. The reasons why demand-side governments have not stepped up and investigated officials who have been implicated in FCPA cases may include the lack of political will, the lack of capacity, and lack of inter-governmental cooperation. The particular reasons likely vary from country to country.

The People’s Republic of China is one of the demand-side countries that has demonstrated such a disparity. In 2016, for example, the SEC concluded 26 FCPA-related enforcement actions, 14 of which were related to corruption in China. In the same year, the DOJ published 24 FCPA-related enforcement actions as well as five declinations under its pilot program, and ten of these cases involved China. (Note that there were some overlap between the DOJ and the SEC’s enforcement actions.) Yet there has been no report about China initiating investigations into any of the officials implicated in these cases. This suggests a failure, or missed opportunity, in China’s otherwise aggressive and wide-ranging anticorruption campaign. If the government officials who take bribes can escape without any consequences, even as the bribe-paying firms are penalized, it will be very hard to effect fundamental changes to corrupt business and cultural norms, which eventually will become roadblocks to the Chinese economy’s healthy and sustainable development. Furthermore, unlike other countries, China does not seem to face significant structural obstacles that prevent it from acting on these FCPA cases. It has the political will and capacity, and it has been collaborating with the U.S. government on other matters, such as bringing back corrupt fugitives from the U.S. It seems to be just a matter of awareness or choice. This post urges the Chinese government to take a look into the government officials implicated in the FCPA cases.

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