Category Archives: Commentary

State-Level Responses to Trump’s Business Conflicts: A More Promising Line of Attack?

Posted on by
1

It is genuinely alarming how much Donald Trump seems intent—in true kleptocratic/crony capitalist style—on using his position as President to advance the commercial and financial interests of himself, his immediate family members, and their various business enterprises. As I’ve written before, this approach to governance (if you can call it that) has plenty of precedents elsewhere in the world, but it’s a new experience for Americans. One hopes the U.S. electorate will come to its senses and throw the bum out in four years, but that’s a long way away. In the meantime, the hope that the President might be impeached over his possibly unconstitutional conflicts of interest seems profoundly unrealistic: Republicans control both the House and the Senate, and most Republicans actually seem quite happy to accommodate themselves to a Trump Administration if it enables them to advance their policy goals. Even those Republicans who find Trump’s conduct inexcusable are far more worried about a primary challenge supported by Trump’s rabid supporters than they are about the general electorate. For the same reason, proposals for new federal legislation that would strengthen ethical restraints on the President, whatever their symbolic value, are likely dead-on-arrival as practical proposals. Perhaps understandably, some anticorruption advocates have placed their hopes in the federal courts, most notably through lawsuits alleging that the Trump Organization’s business dealings with foreign governments violate the U.S. Constitution’s Foreign Emoluments Clause, though for reasons I have explained in previous posts (see here and here), I’m doubtful that such lawsuits have much chance of success.

This is all very depressing, and I acknowledge that in the short term there’s relatively little that can be done; the ultimate remedy will have to be through the electoral process. Nonetheless, I do think that the ideas of enacting new legislation and pursuing certain forms of litigation do hold some promise as means to impose significant constraints on Trumpian corruption. The problem with the proposals I noted above is that they involve proposed responses at the federal level, and for the most part they target the President himself. There’s an alternative, though: Litigation and legislation at the state level, targeting Trump’s business interests and their potential commercial partners. Though hardly a complete solution, there may be a number of things to do at the state level to constrain at least some of the abuses associated with politically-connected business interests that seek to leverage those political connections for commercial advantage, or to facilitate corrupt or otherwise unlawful conduct. To illustrate, let me note a couple of ideas that other experts have floated about how aggressive state attorneys general (or perhaps private litigants) might make use of existing state laws to target Trumpian corruption: Continue reading →

Trump Official: Fighting Foreign Bribery “Solemn Duty” of Justice Department “Regardless of Party Affiliation”

Posted on by
5

The Trump Administration official with immediate responsibility for overseeing enforcement of the Foreign Corrupt Practices Act suggested yesterday there would be little change in the act’s enforcement under the new administration.  Trevor N. McFadden, newly-installed as Deputy Assistant Attorney General in the Criminal Division of the Department of Justice, told a Washington audience that while it would be “hard to predict exactly” how enforcement will evolve, “some common themes are clear.”  The three he identified:

1)  FCPA enforcement will continue to be a priority.  “The FCPA has been and remains an important tool in this country’s fight against corruption.”  McFadden underlined that at his confirmation hearing incoming Attorney General Jeff Sessions “explicitly noted his commitment to enforcing the FCPA, and to prosecuting fraud and corruption more generally.”  McFadden went on to stress that “The fight against official corruption is a solemn duty of the Justice Department, emphasizing that “each generation of Department leaders and line prosecutors takes up this mantel from their predecessors, regardless of party affiliation.”

2)  Prosecution of individuals remains a priority.  In a September 2015 Memo to Justice Department prosecutors, “Individual Accountability for Corporate Wrongdoing,” then Obama Administration Deputy Attorney General Sally Yates stressed the importance of prosecuting individual corporate executives and employees for corporate crimes. In his remarks McFadden not only seconded this effort but suggested that the growing cooperation between the Department and foreign law enforcement authorities would lead to its expansion. “The Criminal Division will continue to prioritize prosecutions of individuals who have willfully and corruptly violated the FCPA. … Indeed, our partnerships with foreign authorities are increasingly allowing us to ensure that even individuals living abroad are held accountable for their actions.”

3) Cooperating defendants will be rewarded.  Seconding a long-standing DoJ policy, the newly appointed Deputy Assistant Attorney General said a corporation’s voluntary disclosure of violations coupled with its cooperation and remedial efforts will remain an important factor when making charging decisions.  “These principles continue to guide our prosecutorial discretion determinations, and they further our ultimate goal of compliance with the law.”

McFadden spoke to a group of lawyers, accountants, and others involved in counseling corporations on FCPA issues at a conference organized by Global Investigations Review, perhaps the leading global news service on the enforcement of corporate criminal law.  Previously a partner at a major American law firm, McFadden brings a background both in public service, as an aide to the Deputy Attorney General in the George W. Bush Administration, and in private practice where he specialized in FCPA compliance work.  From all accounts a mainstream Republican who could well have been appointed to the same position by any Republican president, McFadden’s remarks strongly suggest that whatever changes the Trump Administration may have in store elsewhere, it will not back off vigorous enforcement of the FCPA. The full text of his remarks are here.

Civil Society on Returning Stolen Assets to Highly Corrupt Governments

Posted on by
3

 

The return of the proceeds of corruption to the victim country is a “fundamental principle” of the United Nations Convention Against Corruption.  How that return is to be realized, however, remains subject to dispute, particularly when the victim country’s government is highly corrupt.  Should governments where the stolen assets are discovered send them back no matter how corrupt the victim country’s government is?  Wouldn’t the return to a highly corrupt government frustrate the Convention’s most basic purpose — the prevention of corruption.

How to resolve this tension has been the subject of vigorous debate on this blog (here, here, here, here, here and here).  Now some 50 members of the UNCAC Coalition’s Civil Society Working Group on Accountable Asset Return, from both countries where stolen assets have been found and those where return has been requested or realized, have weighed in.  In a February 14 letter to an UNCAC conference on asset recovery (addis-ababa-conf-agenda-february-2017-updated-02-02-2017), they write that where the victim country’s government is highly corrupt, it should be bypassed: “returning and receiving countries should in consultation with a broad spectrum of relevant experts and non-state actors find alternative means of managing the stolen assets” (emphasis in original).  The letter offers powerful arguments in support of its position.  The full text and the list of signers follows.  Continue reading →

After the Repeal of the U.S. Publish-What-You-Pay Rule, What Happens Next?

Posted on by
11

As most readers of this blog are likely aware, despite the valiant lobbying efforts of a broad and bipartisan swath of the anticorruption community (as well as a last-minute plug from GAB), the United States House and Senate recently passed a joint resolution, pursuant to a statute called the Congressional Review Act (CRA), to repeal the “Publish What You Pay” (PWYP) rules for the extractive sector (oil, gas, mining) that the Securities & Exchange Commission (SEC) had promulgated pursuant to a statutory mandate contained in Section 1504 of the 2010 Dodd-Frank Act. Once President Trump signs the CRA joint resolution disapproving the PWYP rule, it is wiped off the books. Professor Bonnie Palifka’s post last week explained some of the reasons why PWYP rules are so important to fighting corruption in the extractive sector, and why this repeal is the first sign that the new administration, and the Republican-controlled Congress, threaten to undermine U.S. anticorruption efforts and leadership. (For another very good analysis along similar lines, see here.) What I want to do in this post is to consider a somewhat more specific question: What are the implications of the CRA repeal of the SEC rule for the implementation of the Dodd-Frank Act’s PWYP mandate going forward?

This turns out to be a tricky legal question, involving some unexplored and untested issues concerning the relationship between the Dodd-Frank Act, the implementing regulations, and the CRA. Let me start with a quick summary of the key legal provisions, keeping this as non-technical as possible: Continue reading →

The 2016 CPI and the Value of Corruption Perceptions

Posted on by
7

Last month, Transparency International released its annual Corruption Perceptions Index (CPI). As usual, the release of the CPI has generated widespread discussion and analysis. Previous GAB posts have discussed many of the benefits and challenges of the CPI, with particular attention to the validity of the measurement and the flagrant misreporting of its results. The release of this year’s CPI, and all the media attention it has received, provides an occasion to revisit important questions about how the CPI should and should not be used by researchers, policymakers, and others.

As past posts have discussed, it’s a mistake to focus on the change in each country’s CPI score from the previous year. These changes are often due to changes in the sources used to calculate the score, and most of these changes are not statistically meaningful. As a quick check, I compared the confidence intervals for the 2015 and 2016 CPIs and found that, for each country included in both years, the confidence intervals overlap. (While this doesn’t rule out the possibility of statistically significant changes for some countries, it suggests that a more rigorous statistical test is required to see if the changes are meaningful.) Moreover, even though a few changes each year usually pass the conventional thresholds for statistical significance, with 176 countries in the data, we should expect some of them to exhibit statistical significance, even if in fact all changes are driven by random error. Nevertheless, international newspapers have already begun analyses that compare annual rankings, with headlines such as “Pakistan’s score improves on Corruption Perception Index 2016” from The News International, and “Demonetisation effect? Corruption index ranking improves but a long way to go” from the Hidustan Times. Alas, Transparency International sometimes seems to encourage this style of reporting, both by showing the CPI annual results in a table, and with language such as “more countries declined than improved in this year’s results.” After all, “no change” is no headline.

Although certain uses of the CPI are inappropriate, such as comparing each country’s movement from one year to the next, this does not mean that the CPI is not useful. Indeed, some critics have the unfortunate tendency to dismiss the CPI out of hand, often emphasizing that corruption perceptions are not the same as corruption reality. That is certainly true—TI goes out of its way to emphasize this point with each release of a new CPI— but there are at least two reasons why measuring corruption perceptions is valuable: Continue reading →

Good News in the Anticorruption War

Posted on by
1

I had planned to write a reply, and partial rebuttal, to last week’s posts by Matthew and Travis on ethics, corruption, and Donald Trump.  The more I tried to come up with something to say, however, the more depressed I grew.  Instead, as a tonic — for this writer and perhaps others born or living in Trumplandia — what follows is instead good news on the global anticorruption front –

Laos: Shedding Fancy Government Vehicles that Smack of Corruption.  A December decree orders all government officials to trade their government-bought Mercedes, BMWs, Lexus, and other high-end vehicles for more modest means of transport.  Prime Minister Thongloun Sisoulith and President Bounnhang Vorachit have both returned their BMW 7 Series and now drive Toyota Camry 2.5 cars instead. Other ministry and party officials must follow suit. (Details here.)

The Netherlands: Civil Society Attacks Money Launderers.  SMX Collective, a grassroots organization of Dutch and Mexican activists, academics, artists, journalists, curators and researchers concerned about the extreme impunity and violence suffered by Mexican people, has filed a complaint with the Dutch Public Prosecutor demanding the Dutch Bank Rabobank be charged with money laundering for its role in aiding Mexican drug cartels.  Vigorous pursuit of banks and other intermediaries for facilitating corrupt activities is urgently required, and Dutch civil society’s complaint is a welcome sign and an example others should copy.  For an English language summary of the complaint, click on “Continue Reading” at the bottom of the page.

France & Peru: Former Heads of State in Anticorruption Dock.  Prosecutors are pursuing charges against former French President Nicolas Sarkozy for campaign finance violations (NYT account here; Le Monde here) and former Peruvian President Alejandro Toledo for accepting a bribe (AP/NYT here; El Comercio here).  Neither case seems political.  Both have been brought by career law enforcement authorities who have no apparent ax, political or otherwise to grind.  The two may ultimately be found innocent by their nations’ courts, but the fact that high office in the two countries does not automatically carry with it immunity from prosecution for corruption crimes has to be considered very good news.

All three stories lifted my spirits.  I trust it will help other readers recognize that despite the fact President Trump is unlikely to fall over corruption claims (nicely explained by New Yorker writer James Surowieki here), the war against corruption is proceeding apace.

Summary in English of SMX complaint:  Continue reading →

CREW’s Long-Shot Emoluments Clause Lawsuit Against Trump: Calculated Risk or Reckless Gamble?

Posted on by
3

After the events of the last ten days, worrying about the potential conflicts of interest created by the Trump organization’s business dealings with foreign governments seems almost quaint. It appears that under the Trump Administration, constitutional crises don’t get resolved, they just get overshadowed by bigger constitutional crises; such are the strange times in which we live. But I did want to return to the topic I wrote about a couple of weeks ago, concerning the pending lawsuit brought by the Citizens for Responsibility & Ethics in Washington (CREW) alleging that the Trump Organization’s business relationships with foreign governments violate the Constitution’s Foreign Emoluments Clause. In my post a couple of weeks ago, I predicted that U.S. courts are likely to toss the suit out on jurisdictional grounds, without reaching the merits of the claim. That assessment appears to be shared by the overwhelming majority of legal experts who have weighed in (see here, here, here, here, here, and here), though the consensus is not quite universal.

Several people have suggested to me that even if the suit has little chance of success, it was good that CREW filed it. They’ve offered two arguments for this assessment: First, even if there’s only a very small chance of success, the costs of bringing the suit are relatively low, and the benefits if the suit does end up succeeding are enormous—so what’s the harm in trying? Second, the mere act of filing the suit, even if it’s ultimately dismissed on jurisdictional grounds, will generate attention to the underlying constitutional and ethical issues, and help both educate and mobilize the citizenry. My colleague Larry Tribe, who is one of the parties who filed the CREW brief, laid out this position clearly and succinctly in an interview shortly after the brief was filed:

Litigation can help bring important principles to light… It helps me teach my students, and it performs an educational function vis-à-vis the public. Of course, I don’t take on causes that I feel confident I will lose purely for educational purposes. But win or lose, we’re going to help educate the public on something that’s very important.

Much as I wish those arguments were true, and much as I wish the CREW lawsuit had some chance of succeeding, I respectfully and reluctantly disagree. I hope that events will prove me wrong, but at the moment I fear that CREW’s decision to file this lawsuit was not only a long shot, but was a serious tactical blunder that will probably hurt the cause overall. Continue reading →

The Role of Corruption in the Syrian Civil War

Posted on by
14

Many forces spurred on the development of the Syrian Civil War, a conflict that has likely led to the deaths of over half a million people, as well as the displacement of ten million more. While fighting was sparked by protests within Syria, a reflection of the larger wave of discontent in the Middle East and North Africa that spurred the so-called Arab Spring, the uniquely destructive path of Syria’s internal instability is tied to more specifically Syrian problems, including rule by a minority religious group – the Alawites – over a mostly Sunni country, early and continued support by Russia to maintain the Assad regime, a partially autonomous Kurdish minority in the north, and the rise of Sunni rebel groups including ISIS. While these larger points are important, another, more mundane factor is often overlooked: the pervasive corruption of the Assad regime, which contributed to the outbreak of the civil war in at least three ways:

Continue reading →

Appearances Can Be Revealing: The Trump Administration’s Corruption Perceptions Problem

Posted on by
5

In the wake of President Trump’s Executive Order “Protecting the Nation from Foreign Terrorist Entry into the United States” (also known as the “Muslim Ban”), numerous media outlets published articles highlighting the fact that Trump’s order excluded several predominantly Muslim countries where the Trump organization conducts business (see here, here and here). The implication was that this exclusion was intentional, and demonstrates the extent to which Trump’s business ventures create conflicts of interest that influence his policy decisions. Although this explanation is plausible, another likely explanation is that the list of countries targeted by the ban tracked the visa waiver program restrictions Congress passed in 2015 and the Obama administration expanded in 2016 (see here).

Were the limitations on the ban driven by corruption or policy priorities? We don’t know—and that’s the problem. Even if Trump’s executive order had no connection with his business, Trump’s extensive conflicts of interest and unwillingness to divest from foreign holdings casts a shadow of corruption over any decision made by the administration. The fact that every decision Trump makes could be tainted with the appearance of self-interest, regardless of whether his administration actually is doing what it believes is in the public’s interest, is incredibly damaging, delegitimizing, and destabilizing. This is why we have ethics rules for government officials that seek to prevent not only corruption, but also the appearance of corruption. Trump’s failure to clear his presidency of any potential conflicts of interest has a few particularly pernicious effects:

Continue reading →

How Should the U.S. Anticorruption Community Respond to Trump? Engagement vs. Confrontation

Posted on by
4

So Donald Trump is now the President of the United States, and has been for almost two weeks. Yes, this is really happening. And yes, this is really frightening. As has been pointed out countless times, Donald Trump poses a unique and unprecedented threat to American political institutions. It’s not mainly the hard-right policies that President Trump and the Republican Congress will push. People can strongly disagree with much of that policy agenda (as I do), but those policy positions are, alas, within the American political mainstream. And it’s not just Trump’s obvious narcissism, racism, and ignorance, bad as those are. On top of all that, Trump seems to view the presidency mainly as an opportunity for personal enrichment, and many of his top-level advisors and appointees seem to have a similar attitude. Notwithstanding his (obviously disingenuous) “drain the swamp” rhetoric, Trump—and many congressional Republicans—seem to have little regard for basic ethical norms and principles. And there are reasonable fears, based on what we’ve seen so far, that much of the Trump Administration’s policy agenda, though couched in familiar conservative market-oriented rhetoric, will in fact be oriented toward enriching the friends and families of senior administration officials, including but not limited to Trump’s own organization.

A democratically elected head of government who ran on a populist platform, but whose agenda seems to be oriented primarily toward using political power to enrich himself and his cronies? This might be a new experience for Americans, but as Professor Palifka pointed out in her post last week, this is a familiar story in many other countries (including Mexico, Ms. Palifka’s lead example). Think Silvio Berlusconi in Italy, Nestor and Cristina Kirchner in Argentina, Thaksin Shinawatra in Thailand, Jacob Zuma in South Africa, and countless others. Now that the U.S. seems to be facing a similar situation, the U.S. anticorruption community—which I’ll define loosely as the diverse set of activists, advocacy groups, commentators, researchers, scholars, and others who focus on anticorruption in their professional work—needs to be actively involved in responding.

Unfortunately, the U.S. anticorruption community is not especially well-prepared to deal with this situation. Put aside for the moment that the most prominent international anticorruption advocacy group—Transparency International (TI)—recently voted to strip its U.S. chapter (TI-USA) of its accreditation, triggering an ongoing internal fight that has, I gather, left the chapter in limbo. (That’s a whole other story.) Much more important than any internal organizational drama is the fact that most U.S. anticorruption advocacy groups have typically focused on questions of U.S. anticorruption policy—such as FCPA enforcement, asset recovery, corporate transparency, and the like—not on systemic corruption in the U.S. government itself. True, some groups have in the past positioned themselves as fighting systemic corruption in the U.S. government, but those groups generally use a broad (in my view, overly broad) definition of “corruption” that emphasizes primarily campaign finance and lobbying reform—noble causes, to be sure, but not really the main worry right now. The U.S. anticorruption community faces a challenge that’s more akin to the challenge anticorruption communities have faced (or are still facing) in places like Mexico, Italy, Argentina, Thailand, and South Africa, though perhaps with even higher stakes.

My sense is that many leading figures in the U.S. anticorruption community are already thinking hard, and having many constructive conversations, about how to respond to the unique challenges posed by the Trump Administration. In the remainder of this post, I want to focus on a basic strategic question that I’ve seen come up many times in these conversations: Engage or confront? Continue reading →