Category Archives: Commentary

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?

Continue reading →

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 →

The International Anti-Corruption Conference Should Alter Its Agenda To Address the Trump Situation

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The 17th Annual International Anti-Corruption Conference (IACC) will be held next month (Dec. 1-4) in Panama. General information about the conference is here, you can register here, and the current agenda is here. Overall, it looks like a great agenda. But in light of the result of the US Presidential election–which, as I argued last week, is likely to have significant and potentially devastating effects on the global anticorruption movement–it was striking to me that not a single session (out of seven plenary sessions and over 30 substantive panels) focuses on the consequences of the US election for the global anticorruption fight and how the movement should respond.

This strikes me as a very serious oversight. I’m sure that many of the speakers on the existing panels will address this issue, and I also know that the process of creating the agenda was a long and laborious one. But the Trump presidency poses perhaps the single greatest threat to the progress that the anticorruption movement has achieved over the last 25 years, and the IACC–as the leading global forum for anticorruption activists and advocates–needs to address this issue head-on. I don’t know if we have any of the IACC organizers (or anyone with access to them) among our readers, but if we do, I implore you to create a special session, preferably one of the plenaries, devoted specifically to meeting this challenge.

Corruption in Kurdistan: Implications for U.S. Security Interests

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Since the rise of ISIS, the Kurdish Regional Government (KRG) has been a vital U.S. ally in the fight against ISIS. The KRG is in many ways a unique sub-state, created through U.S. intervention following Saddam Hussein’s genocidal campaign against the Kurds, and preserved in the new Iraqi constitution through Article 137, which grants the KRG a degree of autonomy.  Yet Kurdistan is plagued by corruption common to governments that, like the KRG, are heavily reliant on oil and gas revenue. Of the hundreds of millions dollars produced by the oil and gas industry in Kurdistan each month, only a portion reaches the actual Kurdish economy. Kurdish officials have tried to combat this problem to some degree, but oil revenues continue to “leak” from official channels to foreign advisors and government ministers. The problems are exacerbated by the fact that the KRG government, while nominally a democracy, is dominated by two tribal-familial groups, the Barzani and the Talabani, and the government actually resembles a hereditary dictatorship more than a parliamentary democracy, with the Barzani family in particular controlling the presidency, prime minister, and head of the region’s security forces through direct familial ties. In fact, current president Massoud Barzani has been serving without a democratic mandate since 2013.

KRG corruption is not just a concern for the Kurdish people, but a real security threat for the United States, for two main reasons: Continue reading →

US Anticorruption Policy in a Trump Administration: A Cry of Despair from the Heart of Darkness

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Like many people, both here in the US and across the world, I was shocked and dismayed by the outcome of the US Presidential election. To be honest, I’m still in such a state of numb disbelief, I’m not sure I’m in a position to think or write clearly. And I’m not even sure there’s much point to blogging about corruption. As I said in my post this past Tuesday (which now feels like a million years ago), the consequences of a Trump presidency are potentially so dire for such a broad range of issues–from health care to climate change to national security to immigration to the preservation of the fundamental ideals of the United States as an open and tolerant constitutional democracy–that even thinking about the implications of a Trump presidency for something as narrow and specific as anticorruption policy seems almost comically trivial. But blogging about corruption is one of the things I do, and to hold myself together and try to keep sane, I’m going to take a stab at writing a bit about the possible impact that President Trump will have on US anticorruption policy, at home and abroad. I think the impact is likely to be considerable, and uniformly bad: Continue reading →

Corrupt Land Grabbing: A Cambodian Response

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For the vast majority living in developing nations the principal source of wealth is  land: whether the plot where their house is located, the fields they farm, or the forestlands that provide daily sustenance.  The first effects of economic development often show up as sharp increases in the value of this property.  Once valuable only as a place to locate a small village or to eke out a living in subsistence agriculture, land prices suddenly skyrocket when an airport, ocean terminal, or other significant new infrastructure is to be located nearby.  While offering neighboring property holders a chance to escape poverty, these investments can also put them at great risk.  Land registries in poor countries are often not well-kept and registry staff poorly paid, making the doctoring or forging of ownership records possible.

An example what can happen occurred recently near Sihanoukville City, Cambodia.  After plans to expand the city’s port were announced, a powerful official connected to the port authority began a campaign to evict residents of a nearby village from land they live on and which their families have farmed for generations.  Strategically placed bribes have given him a colorable claim to the land, and he has mobilized local authorities to try and force the residents off the property.

Although all too often Cambodians in a similar situation have surrendered, a group of villagers decided to fight and turned to Bunthea Keo, a young Cambodian public interest lawyer, for help.  Thea brought suit to halt the eviction, and in a paper written for the Open Society Foundations’ Justice Initiative he explains not only the legal theories behind the case but the organizational and financial issues involved in bringing a public interest suit on behalf of a large group of citizens in Cambodia.  It is the ninth in a series of papers the Justice Initiative has commissioned on civil society and anticorruption litigation following earlier ones on i) standing by GAB editor-in-chief Matthew Stephenson, ii) civil society litigation in India by Vidhi Centre for Legal Policy Director Arghya Sengupta, iii) private suits for defrauding government by Houston Law School Professor David Kwok, iv) private prosecution in the U.K. by Tamlyn Edmonds and David Jugnarain, v) damages for bribery under American law by this writer, vi) public trust theory by Professor Elmarie van der Schyff, a professor of law at South Africa’s North-West University, vii) private suits for procurement corruption by Professor Abiola Makinwa of the Hague University of Applied Sciences, and viii) international tribunals as a means for forcing government action on corruption by Adetokunbo Mumuni, Executive Director of the Social and Economic Rights Project.  All papers are available here.

The Road Ahead in Anti-Money-Laundering (AML): Can Blockchain Technology Turn the Tide?

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One of the most exciting developments in financial and information technology in the past decade is the emergence of so-called blockchain technology. A blockchain is a database of information distributed over a network of computers rather than located on a single or multiple servers. The first and most famous practical application of blockchain technology is the electronic currency Bitcoin. Bitcoin and similar cryptocurrencies using blockchain technologies offer users the equivalent of anonymous cash transactions, and have been linked to illicit transactions in drugs, weapons, and prostitution as they. It is therefore no wonder then that blockchain technology is sometimes viewed as a problem, or at least a challenge, for those interested in fighting financial crime and corruption.

But blockchain technologies have other uses, many of which could in fact aid in the fight against these crimes. In an earlier post on this blog, Jeanne Jeong discussed how blockchain technology could be used managing land records. Another use for blockchain that has occasionally been mentioned (see here and here), but not yet sufficiently pursued, is anti-money-laundering (AML). Currently, banks spend about US$10 billion per year on AML measures, yet money laundering continues to take place on a vast scale. The goal of laundering money is to “wash” illegally obtained money (e.g. through corruption) into “clean” money, making the origins of the money untraceable. Blockchain technologies have five features that could make AML efforts both more effective and less costly:

Continue reading

Why Does the Chinese Communist Party Tear a Hole in its Own Democracy Cloak?

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The People’s Republic of China recently uncovered the biggest vote-buying scandal since its founding in 1949. On September 13, 2016, the Standing Committee of the National People’s Congress (NPC), the national legislature, dismissed 45 of the 102 NPC representatives from Liaoning province for securing their seats in the NPC through vote buying. These NPC representatives had apparently bribed representatives to the Liaoning provincial Congress, which elects NPC representatives; 523 out of the 619 Liaoning provincial congress representatives were also implicated in this scandal, and have either resigned or been removed for election rigging, rendering the Liaoning provincial legislature inoperable. The central authorities stated that the “unprecedented” bribery scandal challenged the “bottom line” of China’s socialist system and the rule of the Chinese Communist Party (CCP).

For many observers, reports of this vote-buying scandal came as a surprise. Some commentators wondered why people would risk getting caught and punished for corruption, just to secure a seat in a legislature that has been derided as little more than a rubber stamp. The most plausible explanation is that a seat on the NPC facilitates access to the rich and powerful, and it is this consideration, rather than the mostly symbolic power of the legislature itself, that motivates candidates to buy votes in NPC elections. (See here, here and here). There is, however, a second puzzle about the recent vote-buying scandal—one that is in fact more puzzling and important, though it has not received as much attention: Why do CCP leaders care about electoral corruption in NPC elections, if the NPC merely rubber-stamps party decisions? True, the CCP under President Xi Jinping has made the fight against official corruption a top priority—but given the prevalence of corruption in so many areas of Chinese government, many of which have immediate practical consequences, why target electoral corruption in the NPC?

The question becomes even more interesting when one considers that calling attention to vote-buying in NPC elections—a form of corruption that might otherwise not attract much attention—poses certain risks to the CCP. First, even if the NPC is mostly a rubber stamp legislature, it represents the symbolic core of state power, and is central to the CCP’s “socialist democracy,” a model the Party has long used to resist the Western-style multi-party democracy. As one commentator put it has observed, the exposure of the NPC vote-buying scandal has torn a large hole in the country’s “democracy cloak.” Second, exposing widespread corrupt practices could also increase pressure for systemic reforms. So why did CCP leaders choose to crack down on corruption in the legislature so openly? Continue reading →