Category Archives: Commentary

What Can Young Lawyers Do To Fight Corruption Now that Trump Is President?

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I promise that eventually I’ll go back to blogging about things other than Trump, but that seems to be the most important challenge facing the anticorruption community right now. Also, I wanted to contemplate a question that a friend and recent law school graduate (who is currently working for the US government, and so cannot be identified by name) put to me in response to the “cry of despair” I posted in the immediate aftermath of the election. This young lawyer asks:

What can people do in the face of all this? Is there anything young lawyers who care about anticorruption policy can do? If we can expect a drop in enforcement and weakening of the FCPA, where can people concentrate their efforts?

This is a great set of questions, and I wish I had good answers. I don’t, but in the interests of contributing to these important conversations, let me offer a few preliminary thoughts (which are probably worth approximately what you’ve paid for them): Continue reading →

Community Development Agreements: A New Anticorruption Tool?

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Projects in the extractive industries are often enormous, long-lasting, multi-billion dollar affairs. Given the disruption, potential for environmental disaster, and permanent changes in the state of the land, these projects tend to generate conflict and controversy, especially in low-income countries, where citizens may enjoy fewer legal protections. As a way to mitigate these risks, some nations require extractive firms to enter into “Community Development Agreements” (CDAs) with local communities. (CDAs—which are also sometimes known as Benefit Sharing Agreements, Impact Benefit Agreements, or Community Joint Ventures—are sometimes voluntary corporate social responsibility initiatives, but my focus here is on CDAs that are required by, and incorporated into, national regulatory frameworks.) At the most general level, CDAs are created through a process that engages local populations in important decision-making about the project and its profits. The process varies, but usually includes the following steps:

  • Identify the people who will be affected
  • Allow those identified to determine what the community could gain from the project (whether that be jobs, money, education, infrastructure, long-term benefits, etc.)
  • Write a CDA that encompasses the demands of the community and aligns with regulatory requirements
  • Provide monitoring tools to the affected population
  • Set up dispute resolution systems
  • Strategize for how to prepare the population for the end of the project’s lifespan.

This process takes time and can be expensive. But extractive projects typically last for decades, and so building a sustainable relationship with the local population is vital to the project’s success. After all, many corporations fund similar stakeholder engagement processes without being required by law to do so. That is because CDAs can be a good business decision: empowering the community allows the company to avoid violent conflict and signaling that the firm is a good corporate citizen.

For those countries that do require a CDA for extractive projects, the law also regulates the substantive terms, requiring CDA contracts to contain certain clauses–typically monitoring components, dispute resolution mechanisms, and local spending or employment quotas. However, one thing that is never included in a CDA is an anticorruption clause. The words “bribery” or “corruption” appear nowhere in the World Bank’s model CDA agreement, and the Columbia Center on Sustainable Investment (CCSI) is silent on the issue. Building on recent work by Abiola Makinwa and James Gathii, I posit that CDAs should include anticorruption clauses, to empower private citizens in fighting corruption in public contracts. The basic idea is to allow the recognized community members—those covered by the CDAs—as “third party beneficiaries” to the contract between the government and the extractive company. The community members would then be entitled to sue if there was corruption in the making or execution of the contract.
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The Crucial Role of Corporate Boards in Ensuring Corporate Integrity

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Volkswagen’s diesel emissions cheat has cost the company dearly. Last October, Volkswagen reached a US$16.5 billion dollar settlement with the US government, and the value of Volkswagen’s stock today is worth about 50% of what it was before the scandal – a US$60 billion drop in the company’s valuation. Criminal charges against several senior managers, including chairman Hans Dieter Poetsch, are still pending. Countless customers are furious, while many employees fear for their jobs as Volkswagen scrambles to cut its costs. (Some background on the scandal, as well as a regularly updated timeline, can be found here.)

What started as a “simple cheat” became a slippery slope for the whole company. Volkswagen failed to create a culture of corporate integrity; the institutional checks and balances that are supposed to prevent something like this from happening were purposefully or ignorantly subverted, and the company created all the wrong incentives. As Alison Taylor has argued on this blog, these are the perfect ingredients for a corrupt corporate culture.

Who to blame for this mess (and, similarly, many other corporate messes)? Just as “a fish rots from the head down,” a company’s board of directors must take responsibility for creating or allowing a toxic corporate culture that permits cheating and other unethical and illegal behavior. Continue reading →

Will Leaving His Business “Completely” Solve Trump’s Conflict of Interest Problems?

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President-elect Trump tweeted early November 30 “that legal documents are being crafted which take me completely out of business operations.”  Will this suffice to resolve concerns about the potential conflicts of interest that could arise during his presidency?  While the answers of the anti- and pro-Trump camps are predictable (a heated, vitriolic “no” and an equally heated, vitriolic “yes” respectively) for others the answer will turn on two issues:

1) What conduct they understand the conflict of interest rules prohibit, and

2) Whether they think Trump’s removing himself “completely” from his businesses is enough to prevent it.

Media coverage about conflict of interest since Trump’s election has been so colored by opposition to Trump generally that those trying to fairly evaluate Trump’s plan are likely confused about both issues.  Herewith a guide to both to help fair-minded citizens evaluate the Trump plan.    Continue reading →

Donald Trump Will Probably Violate the Foreign Emoluments Clause. So What?

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Those of us who are still reeling from the shock and horror of Donald Trump’s election are going through many of the typical stages of grief: denial, anger, depression, etc. To these I’d add an additional stage of (political) grief, which seems to disproportionately afflict my fellow law professors: the desperate concoction of legally plausible but politically dead-on-arrival constitutional theories designed to stop Trump from becoming President (or stop him from doing lots of the things he wants to do).

Enter the Foreign Emoluments Clause of the U.S. Constitution (Article I, Section 9, Clause 8), which provides that “no person holding any office [of the United States government] … shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.” Many legal scholars, including my colleague Larry Tribe, as well as a number of legal ethics experts, have argued (persuasively, in my view) that Donald Trump’s global business dealings may well put him in violation of this Clause: If any foreign state pays above-market-value for any goods or services provided by the Trump business empire, or does any other favor (with a cash value) designed to benefit President Trump’s businesses, that could well be deemed a “present … of any kind.” The wording of the Emoluments Clause is broad: It does not require a quid pro quo, it does not require a showing that the gift was intended to influence a decision or an expression of gratitude for a decision already made. In contrast to the conflict-of-interest statutes, there is no explicit exemption from the Foreign Emoluments Clause for the President (though some scholars have sought to argue that the President is not covered, for reasons I don’t find all that persuasive). Furthermore, the “of any kind” modifier would seem to defeat many of the otherwise-plausible claims that the terms “present” and “emolument” should be read narrowly. (I imagine that there might still be a “de minimis” exception from the Emoluments Clause, allowing for ceremonial gifts of various kinds, but that’s not really what we’re talking about in the Trump case.) Though I’m no expert, based on what I’ve read thus far I’m prepared to accept the claim that should foreign governments provide benefits to the Trump Organization while Donald Trump is President—including paying above-market-rates, or steering business to Trump’s companies—then President Trump would be in violation of the Foreign Emoluments Clause.

The question is: So what? What’s the remedy for this constitutional violation?

There are three possibilities—a judicial remedy, an “elite” political remedy, and a public opinion remedy. None of them seems especially promising. Continue reading →

The Destructive Attacks on Trump’s Ethics

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Attacking President-elect Trump on the basis of his expected violations of the conflict of interest laws provides the anti-Trump crowd a convenient outlet to vent their anger and frustration over his election.  But as the attacks continue to pop up in op-eds and on cable and be smuggled into straight news reporting, those launching them might bear two things in mind:  the attacks will surely further divide the nation and, even worse for the anti-Trumpers, make it more likely Trump will pursue the policies he espouses that they so adamantly reject.

As explained here last week, the conflict of interest laws do not apply to presidents; suggestions that Trump should follow them even though he is exempt make no sense.    Continue reading →

Was I Too Pessimistic on FCPA Enforcement in a Trump Administration? I Fear Not, But Hope So

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A couple weeks back, I published a post (really, more of an extended wail) about the likely consequences of the Trump presidency for anticorruption efforts. Among my many worries was the concern that under a Trump administration, we may see the end (or at least the significant cutback) of the era of aggressive enforcement of the Foreign Corrupt Practices Act. Other analysts—notably Peter Henning and Tom Fox—are less pessimistic in their assessments, and have written interesting explanations as to why FCPA enforcement is unlikely to change much under President Trump. I hope they’re right. And I suspect they probably are, if only because commentators—including, perhaps especially, so-called “experts”—have a demonstrated tendency to over-predict dramatic change. Most of the time, the safest prediction is that the future will resemble the past. And more specifically here, the forces of inertia in the U.S. federal government are strong, and sudden changes are both rare and unlikely.

Still, I’m not sure I’m fully convinced by the reasons that Mr. Fox, Mr. Henning, and others have offered for their more sanguine conclusion that FCPA enforcement will not change much under a Trump Administration. So, with the understanding (and sincere hope) that I’m probably wrong, let me address some of the principal arguments that have been advanced for the “no change” prediction. Continue reading →

US Courts’ Evaluation of Foreign Judicial Corruption: Different Stages, Different Standards

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Last August, a US appeals court may have finally brought to a close a case that the court described as “among the most extensively chronicled in the history of the American federal judiciary”: a lawsuit, initially filed in 1993, seeking damages for adverse environmental and health consequences of oil exploration and drilling by Texaco (later acquired by Chevron) in the Ecuadorian Amazon. Chevron and the plaintiffs each have their own version of the long, complicated, and contentious litigation. (For a concise, relatively balanced summary see here.) For present purposes, the essential facts are as follows: After eight years of US litigation, in 2001 Chevron persuaded a US court to send the case to Ecuador. In 2011, after an additional decade of litigation in Ecuador, the Ecuadorian courts ultimately found in favor of the plaintiffs, ordering Chevron to pay an $18.5 billion judgment (later reduced to $9 billion). Unfortunately for the plaintiffs, Chevron doesn’t have any assets in Ecuador, so the plaintiffs have been trying to enforce their judgment in a number of other jurisdictions, including the United States. In its August ruling, the US appeals court affirmed the district court’s 2014 holding that the Ecuadorian judgment could not be enforced in the United States because it was a product of fraud and corruption—including the shocking finding that plaintiff’s attorneys had bribed the judge with a promise of $500,000, and ghostwrote the multi-billion dollar judgment.

At first glance, there appears to be a contradiction, or at least a tension, between how the US courts treated allegations of judicial corruption in Ecuador at two different stages in the proceedings. After all, Chevron was able to successfully persuade a US court to send the case to Ecuador in 2001 because Chevron had successfully argued that Ecuador’s judiciary was sufficiently insulated from corruption to prevent injustice, yet in the most recent ruling, Chevron convinced the court not to enforce the judgment on the grounds of judicial corruption in an Ecuadorian court. But what might at first glance appear to be a contradictory set of rulings can be explained by the fact that US courts apply divergent standards when assessing judicial corruption at different stages of litigation.  Continue reading →

The OAS Did Not Do Enough to Intervene in Nicaragua’s Corrupt Election

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Last Sunday, Nicaraguan president Daniel Ortega won his third term in office, alongside his running mate—who also happens to be his wife—Rosario Murillo. For months, critics have been calling out the Nicaraguan election as a classic example of a corrupt, rigged election. The voting system was entirely controlled by Ortega’s party. The husband-wife ticket ran unopposed, and not for lack of actual opposition within the country. Indeed, over the summer, the Ortega-influenced Supreme Court blocked an opposition candidate from running against the incumbent. Though there were protests within the country expressing disapproval of Ortega’s increasingly authoritarian regime, it is difficult to say how much opposition there was to the election because the reported number of votes cast was surely inflated by the Ortega administration.

This hardly came as a surprise, as this type of one-sided election is nothing new in Nicaragua. What might be more of a surprise is the apparent lack of outrage, or even concern, by the international community, particularly the Organization of American States (OAS), the regional body that is tasked with, among many other goals, promoting democracy in Latin America. In mid-October, the OAS published a press release that noted the OAS was going to enter into a “dialogue” with the government of Nicaragua concerning the country’s electoral process. There were no further details in the press release, and the “constructive exchange” between the organization and Ortega’s government did not seem to go anywhere. The press release didn’t even explicitly say that Nicaragua’s election was corrupt or undemocratic. The OAS did send election observers to Nicaragua, but OAS election observation missions these days are mostly a formality—the OAS sends observers to nearly every Latin American election, and these missions are notoriously ineffective, ranging from 20 to 100 observers and lasting only 20 days on average. In the case of Nicaragua’s election, the observers were present for just three days.

Even though the OAS has only limited power, it is nonetheless capable of delivering strong, symbolic messages in the face of corrupt, anti-democratic institutions. The OAS has a long history of issuing reports, especially those that highlight human rights abuses, and the OAS has condemned subversion of the democratic process in other countries, such as Venezuela. Even if purely symbolic, a pronouncement condemning the Nicaraguan election would demonstrate that the regional coalition denounces corrupt practices, and such symbolism could help support internal protestors or critics who might otherwise feel alone. Yet the OAS failed to do so, choosing instead to issue a half-hearted, ambiguous press release . Why?

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Conflict of Interest and President-elect Trump: A Primer

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How Donald Trump intends to keep his business interests separate from his duties as President has become a principal point of contention since he won the election eight days ago.  Trump has said he will turn over management of his affairs to his children, but critics say this is not enough and have begun stepping up an attack based on potential conflicts between his personal financial interests and his responsibilities as President.  For reasons both legal and practical, however, the attack is without substance, and continuing it only diverts attention from real worries about his policies while fueling the hyper-partisanship surrounding discussions of ethics in American political life.  Furthermore, whatever the President-elect thinks about ethics and corruption-fighting, using the conflict of interest cudgel to beat him around the head and shoulders is unlikely to make him more sympathetic to the cause readers of this Blog share. Continue reading →