Guest Post: Anticorruption Enforcement Is the Key to Democratic Consolidation–Not the Other Way Around

GAB is delighted to welcome Cristina Nicolescu-Waggonner, visiting professor of Political Science at Pomona College and Scripps College, Claremont, to contribute the following guest post, drawn from material in her new book, No Rule of Law, No Democracy:

It is fashionable to argue that the only way to root out systemic corruption is to establish a political system characterized by genuine democratic accountability and the rule of law. Unfortunately, corruption – specifically the conflicts of interest of political and judicial leaders – does not allow for this sort of development. True, there may be democracy, but in the presence of widespread corruption it will remain in a perpetual state of unconsolidated democracy, without true rule of law. And in such weak democracies, the electoral process stimulates rather than discourages corruption: Eager to win and short on cash, politicians make deals with businesses and misappropriate public funds to finance campaigns, a vicious cycle that starts political tenure with illicit means. Different from lobbying, this illegal activity puts the breaks on rule of law reform. Corrupt politicians, afraid of retribution, do not reform or establish enforcement mechanisms: supervisory commissions, integrity agencies, anticorruption institutions, genuinely independent courts, whistleblower protection, etc. This dilemma is exemplified by the Czech Republic, which does well on various international democracy and rule-of-law indexes, but in fact is a corruption hotbed, with politicians, members of the judiciary, and business people involved in a web of misappropriation of public funds—partly for personal enrichment, but more importantly for election and re-election. The same vicious cycle is prevalent in new democracies all over the world, from Brazil to Romania to South Korea to Mexico to Tunisia: Corruption negatively affects the process of democratization and stalls it before democracy can have a chance to fight corruption.

So, what can we do? Continue reading

Guest Post: A Breakthrough in Guatemala’s Fight Against Judicial Corruption

GAB is honored to welcome Judge Claudia Escobar, who contributes the following guest post:

Guatemala usually does not get a lot of attention from the international media, and when it does it is usually because of widespread violence or political instability. But lately the country is gaining recognition for its serious efforts to fight corruption and impunity. Partly due to the legacy of 36 years of internal armed conflict, Guatemala has been plagued by a culture of impunity, as well as a legacy of criminal structures that infiltrated government institutions—structures that are still operating today, more than a decade after the 1996 Peace Accords. In response to this problem, the Guatemalan government to ask the United Nations for help in rebuilding the rule of law, and in response, the International Commission against impunity in Guatemala—CICIG—was created in December 2006 when the Guatemala Government and the UN signed the agreement. This new institution was conceived as an independent body to support the Public Prosecutor’s Office, the National Police, and other state law enforcement institutions. The ultimate goal of CICIG is to strengthen institutions within the judicial branch so that they will be able to confront illegal groups and organized crime.

CICIG has already been hailed as a major success and a potential model for other countries in the region to follow. Its most well-known impact to date is that its investigation into systemic corruption in the government of President General Otto Perez Molina and Vice President Roxana Baldetti ultimately forced both of them to resign. Another, more recent development has gotten much less attention in the international press, but is also a crucial step forward in Guatemala’s struggle to build the rule of law: On October 2016, as a result of a CICIG investigation that commenced two years earlier, former Congressman Godofredo Rivera and attorney Vernon Gonzalez were found guilty on corruption-related charges for attempting to influence a judge. Sentencing two white-collar defendants, with strong political connections, to lengthy prison terms for attempting to influence a judge is unprecedented in Guatemala, and a major step forward. This case was the first case of corruption to be presented against a high official in power by the office of the Attorney General Attorney and CICIG since the Commission was established. It is also the first sentence handed down under the anticorruption law approved in 2012 (which, coincidentally, Congressman Rivera signed into law when he was president of Congress).

The sentence also has a great deal of personal meaning for me, because I was the judge who Rivera and Gonzalez tried to corrupt, and I was the one who filed the case with CICIG. Continue reading

Guest Post: The Case for Greater US Deference to Foreign Anticorruption Prosecutions–A Response to Maruca

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Last fall, I published two posts in which I raised concerns about overlapping jurisdiction in foreign bribery cases, and about the appropriate role of US enforcement authorities in such cases. My first post noted that the US is not bound by the outcome of criminal processes in other countries, but can—and sometimes does—bring FCPA cases against foreign companies that have already resolved investigations for the same conduct brought initiated by their home countries. (As I also observed, the absence of any such constraint on US authorities creates an asymmetry with respect to countries that endorse an international ne bis in idem/double jeopardy bar, which can block such countries from pursuing a corporation or person that has already been pursued in the US.) My second post urged that the US Department of Justice (DOJ) should be more transparent in articulating when it will defer to non-US prosecutions in the corruption area.

A few weeks back, Michael Maruca posted an interesting critical commentary on my posts. The main thrust of Mr. Maruca’s very thoughtful comment was that the DOJ should not unnecessarily defer to non-US counterparts, partly because he worries about downgrading the effectiveness of US FCPA enforcement efforts, and partly because he envisions competition among national authorities as encouraging a “race to the top” in achieving optimal enforcement of foreign bribery laws. He proposes that the DOJ, rather than being more deferential to foreign resolutions of conduct that might violate the FCPA, the DOJ should go further in sharing the monetary outcomes of multinational investigations, and he provides commonsense principles for how it might do so.

Mr. Maruca’s intervention usefully advances the discussion on a very important issue. I agree with much of what he says. Nonetheless, I continue to view the lack of sufficient US deference to foreign resolutions of foreign bribery cases as a problem, and I have the following concerns about the points Mr. Maruca’s makes: Continue reading

Why the Repeal of the U.S. Publish-What-You-Pay Rule Is a Major Setback for Combating Corruption in the Extractive Sector

Bonnie J. Palifka, Assistant Professor of Economics at Mexico’s Tecnológico de Monterrey (ITESM) contributes today’s guest post:

Last Friday, following the U.S. House of Representatives, the Senate voted to repeal a Securities and Exchange Commission (SEC) regulation that required oil, gas, and minerals companies to make public (on interactive websites) their payments to foreign governments, including taxes, royalties, and “other” payments. The rule was mandated by Section 1504 of the 2010 Dodd-Frank Act, but had only been finalized last year. President Trump’s expected signature of the congressional resolution repealing the rule will represent a major blow to anticorruption efforts, and a demonstration of just how little corruption matters to his administration and to Congressional Republicans.

The extractive industry had lobbied against this rule, arguing that having to report such payments is costly to firms and puts them at an international disadvantage. Some commentators have supported their efforts, arguing, for example, that the Section 1504 rules are unnecessary because the Foreign Corrupt Practices Act (FCPA) already prohibits firms under SEC jurisdiction—including extractive industry firms—from paying bribes abroad. This argument misses the mark: The extractive sector poses especially acute and distinctive corruption risks, which the FCPA alone is unlikely to remedy if not accompanied by greater transparency. Continue reading

Guest Post: The Finnish Paradox–Anticorruption Success Without Anticorruption Policy

GAB is pleased to welcome back Alan Doig, Visiting Professor at Newcastle Business School, Northumbria University, who contributes the following guest post:

In its January 2017 Inclusive Growth and Development report, the World Economic Forum listed five countries as the best of the advanced economies in addressing corruption: New Zealand, Singapore, Sweden, Norway, and–heading the list–Finland. Finland, along with its fellow Scandinavian countries, is often held out as a model of clean and effective government, toward which other countries should aspire. Yet 50 years ago, Finland’s reputation was quite different. As Niklas Jensen-Eriksen has documented, for example, senior British policymakers in the 1950s and 1960s viewed corruption in the upper strata of Finnish politics as an issue, and warned that it might not be possible for British companies to do business there without paying bribes. What changed over the course of that half-century? The Finnish Ministry of Justice’s delightfully-smug official report, as well as a limited number of other similar publications, suggest a number of micro- and macro-level changes, some planned for and some accidents of social and political evolution, that are assumed (although there’s no real proof) to have denied the opportunity and incentive for corruption.

These include long-term and stable legal and administrative environments that also engaged members of society at all levels, the absence of strata of bureaucracy and devolved public (and public-focused) spending that promoted local engagement, transparent decisionmaking and the right of citizen redress, universal education, adequate official salaries, state funding of political parties, access to all public records (including tax records), access to funds (legal aid) to challenge state decisions. Yet among these changes Finland never did much of anything specifically about corruption (and indeed the country still attracts disapproving comments from GRECO and the OECD for not doing more even now).

This, then, is the Finnish Paradox: a country that didn’t decide to “fight corruption” over the last 50 years is now held up as an exemplar of effective anticorruption control. It is a model to which other countries should aspire (and that donors should have in mind as a target) when designing anticorruption strategies and interventions.

This Finnish paradox highlights two possible lessons that challenge much of the thinking behind current approaches championed by the “anticorruption industry” (including many donors, activists, and other reformers): Continue reading

Guest Post: Living in a Kleptocracy–What to Expect Under President Trump

Bonnie J. Palifka, Assistant Professor of Economics at Mexico’s Tecnológico de Monterrey (ITESM) contributes today’s guest post:

The news regarding President Donald Trump appointments and nominations, and the increase in foreign governments’ business at Trump properties, has caused considerable concern regarding possible conflicts of interest, nepotism, insider trading, and other types of grand corruption. Many are worried about what this means—if President Trump’s tendencies toward crony capitalism, or quasi-kleptocracy, are as serious as his critics fear, what can we expect will happen over the next four or eight years?

While grand corruption among the political elite may be new for US citizens, this challenge is all too familiar in many other parts of the world. As a long-time resident of Mexico and corruption scholar, I have some insight regarding life in a relatively corrupt environment, which might be relevant to what the US is about to face: Continue reading

Guest Post: Using Animated Videos to Change Children’s Attitude Toward Corruption

Robert Clark, Legal Research Manager at TRACE International, contributes today’s guest post:

Although corruption is a broadly entrenched social ill, each corrupt act is a decision made in its own specific place and time. To address the global problem of corruption, we need to focus our attention locally and join together in our individual acts of resistance. That dynamic is concisely expressed in the phrase “United Against Corruption”—the official slogan of 2016’s International Anti-Corruption Day (officially observed this past December 9th). The associated “United Against Corruption” campaign focuses on corruption as an impediment to development, and offers a wide range of suggestions for what governments, media, businesses, and individuals can do to participate in the ongoing struggle. The campaign’s website includes a series of powerful videos illustrating the dire effects of corruption.

Children are often the ones that suffer the effects of corruption, but they can also play a key role in changing a society’s tolerance of it. The United Against Corruption campaign encourages individuals to “[e]ngage the youth of your country about what ethical behavior is, what corruption is and how to fight it.” In that spirit, TRACE International has created a series of short animated stories featuring the “Bribe Busters”—an elite young team of corruption fighters who fight corruption around the world with the help of a time travel teleportation super-computer. Their mission: to ensure that children everywhere have a fair future. Each episode focuses on a different aspect of corruption, and shows the viewer that although the world is full of unfairness, things don’t have to be that way. (For example, in episode two, the team is able to convince a government safety inspector not to look the other way at building code violations by showing him—with the help of their time-traveling computer friend—the devastation of a consequent building collapse. In another episode, the team helps an underserved remote village organize to get rid of a kleptocrat whose greed has prevented an important road project from being completed.) These videos, which have already been viewed in 44 different countries, are available on YouTube in EnglishFrench, and Spanish, with Arabic coming soon. Additionally, comic versions of the episodes (in PDF form) can be downloaded here.

TRACE is working with anti-corruption networks around the world–including Anti-Corruption International (ACI), the Economic and Financial Crimes commission (EFCC) / Creative Youth Initiative against Corruption, the Global Youth Anti-Corruption Network (GYAC), and ZERO Tolerance-Wise Youth Trust –to distribute the videos. If you are interested in distributing the Bribe Busters series in your anticorruption network, please contact us here. We hope that this series can not only help teach children about the harms of corruption (as if they didn’t already know), but also help them develop a sense that they can do something about it. We believe that’s also the basic message of the United Against Corruption campaign, and it’s one we are happy to endorse.