Category Archives: Guest Commentary

Guest Post: The Problem With Anticorruption Diagnostic Tools Is Not (Primarily) Too Much Standardization

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José-Miguel Bello y Villarino, an official with the Spanish Ministry of Foreign Affairs and doctoral candidate at the University of Sydney, contributes today’s guest post:

There is a wide debate about how to produce and use data to assess and compare countries’ performance, particularly in domains that are, by nature, global such as human rights. In the corruption domain there are some well-known international indexes that purport to express a country’s perceived corruption level in a single number, such as the Corruption Perceptions Index (CPI) published annually by Transparency International (TI). Other diagnostic tools have been developed to assess individual countries’ anticorruption frameworks and policies against some global standard or benchmark. Among the latter, TI produces the National Integrity System (NIS) Country Assessments.

These assessments do not try to determine how much corruption there is in a country, but rather “how well a country tackles the problem.” NIS assessments do not aim to give each country a final “score” that can be compared to the scores of other countries. The assessments’ declared objective is to look into the effectiveness of each country’s anticorruption institutions by focusing on a standard set of “pillars” (things like democratic institutions, the judiciary , the media, and civil society). Consequently, NIS assessments are not meant to provide definitive conclusions, but rather observations within a common framework to supply a starting point for analysis, and to identify risks and possible areas for improvement. Their conclusions are designed to help stakeholders work to develop more concrete and country-specific responses.

The NIS Country Assessments, and similar tools (TI has identifies roughly 500 diagnostic tools used in the anticorruption area), have come in for a fair share of criticism. Much of this criticism centers upon their allegedly formalistic, formulaic, standardized approach to assessing anticorruption institutions. Some of those criticisms have appeared on this blog. A few months ago Richard Messick posted a commentary on a piece by Paul Heywood and Elizabeth Johnson that challenged the relevance and value of NIS reports for developing democracies (using Cambodia as an illustrative example), principally due to insufficient appreciation of cultural distinctiveness and an overemphasis on compliance-based approaches. Last month, Alan Doig’s post continued this conversation. Mr. Doig defended the value of the NIS Country Assessments as they were originally conceived, but argued that TI’s current approach to NIS assessments has become overly formalistic, which limits the utility of NIS country studies as an effective starting point for analysis or platform for progression. Though coming from a different perspective, Mr. Doig’s criticism is very similar to the core argument of Professors Heywood and Johnson. In essence, they share a skepticism that one can usefully apply broad global standards or categories to individual countries, given each country’s unique, particular, idiosyncratic circumstances.

Respectfully, I think these criticisms go too far. Taking individual country circumstances into consideration of course has value. However, standardization of assessment methodologies, the somewhat “formulaic” approach, can have benefits that may outweigh the costs. Continue reading →

Guest Post: Towards an African Voice on Anticorruption

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Today’s guest post is from Selemani Kinyunyu, Senior Policy Officer for Political and Legal Matters at the African Union Advisory Board on Corruption. The views expressed in this post are his own.

The African Union (AU) has declared the year 2018 is the African Anti-Corruption Year, and the fight against corruption was a central focus of the 31st Summit of the AU, which was held this past July 1 and 2 in Mauritania. The Summit, along with other recent developments, have made clear that there is an emerging African voice on this issue, one that emphasizes certain issues of pressing importance and that articulates a distinctive perspective on these issues. The AU Summit in particular highlighted four notable issues: Continue reading →

Guest Post: By Refusing to Respect Attorney-Client Confidentiality, European Courts Threaten To Undermine Anti-Bribery Enforcement

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GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris and New York offices of Debevoise & Plimpton and a Lecturer at Columbia Law School, who contributes the following guest post:

In the fight against transnational bribery and other forms of corporate crime, a key element of some national prosecution agencies’ strategy is to encourage corporations to “self-report” to the government and to cooperate with any subsequent investigation. The United States Department of Justice (DOJ) pioneered this strategy, but other jurisdictions are beginning to adopt it as well. The basic approach is to offer companies both a stick and a carrot: The stick: If corporations do not self-report and are ultimately discovered, they will be prosecuted vigorously. The carrot: A self-reporting, cooperating company can obtain a more favorable settlement, and perhaps avoid prosecution altogether. From a public policy perspective, it is vastly more efficient for prosecutors to work with corporations in the fight against corruption, essentially enlisting them as partners to detect, investigate, and bring to justice the individuals responsible for corruption, than for prosecutors to do all this work themselves.

From the company’s perspective, though, the decision whether to self-report is difficult: By making a first phone call to a prosecutor, the company all but commits to negotiating a settlement and abandons both the chance of non-detection and the (perhaps scant) possibility of a successful defense. At a minimum, starting this process will entail large costs (particularly legal fees), as well as risks, including the risk that prosecutors may discover more matters to be investigated. There is also the problem, already discussed on this blog, of evaluating whether a negotiated outcome in one country will preclude or deter prosecution in another. And at least at the early stages, the company may not even be certain whether a violation has in fact taken place, or how widespread or egregious such violations may have been. For these reasons, when a company’s leaders learn that there may have been violations of anti-bribery or other laws, the company will retain a seasoned legal team to oversee a thorough internal investigation of the facts in order to make a reasoned decision whether, and where, to self-report.

When a company asks lawyers to do this, it is essential that the attorneys’ work be protected by the attorney-client privilege, at least until such time as the company decides to share fruits of the investigation with prosecutors. If a company knew that everything learned or generated by its lawyers in the course of an internal investigation could be subject to seizure or forced disclosure to prosecutors, then companies would face a huge disincentive to start the process of conducting an internal investigation at all, since doing so could simply create a handy road map – and compelling evidence — for the prosecutor. In the United States, although the conduct of such an internal investigation poses a number of possible traps for the unwary, if the investigation is properly managed then the company can generally be assured that no prosecutor will get her hands on the fruits of its lawyers’ work unless and until the company specifically authorizes such disclosure. Matters are more complicated in Europe, however. For example, in-house counsel are generally not considered to be “attorneys” capable of generating a protectable professional privilege. And in some countries, such as France, the client does not necessarily have the power to “waive” the secret professionel (the rough equivalent of the attorney-client privilege) at all. Most notably—and most troublingly—recent court decisions in the UK and Germany have gone even further in making the results of lawyers’ internal investigations discoverable by prosecutors without the company’s consent. These decisions, if not reviewed or curtailed by legislation, will create huge disincentives to self-investigation, and hence to self-reporting. Continue reading →

Guest Post: How to Fix TI’s National Integrity System Country Assessments

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

Transparency International (TI) has developed a number of tools to assess corruption in different countries. The best-known is probably the Corruption Perceptions Index (CPI), which purports to reduce each country’s level of (perceived) corruption to a number, to facilitate international comparisons. But TI has also developed another tool, the “National Integrity System” (NIS) assessment, which evaluates an individual country’s governance system with respect to both internal corruption risks and its capacity to fight corruption in the society more broadly; the NIS evaluations typically focus on a number of governance “pillars,” such as the legislative, executive, and judicial branches, audit agencies, anticorruption agencies, media, civil society, etc. (TI maintains a number of more recent NIS assessments on its website.)

Recently, the NIS evaluations have been subjected to withering critiques. For example, last year on this blog Rick Messick summarized a critical article by Professors Paul Heywood and Elizabeth Johnson, which argued, on basis of the NIS for Cambodia, that the NIS reviews relied on a “narrowly conceived institutional approach,” displayed “insufficient appreciation of cultural distinctiveness,” failed to properly conceptualize the notion of “integrity,” and over-emphasized “compliance-based approaches to combating corruption at the expense of the positive promotion of integrity.” Alas, this critique largely misses the mark, and in fact goes a long way (as does Mr. Messick’s blog post) to perpetuating myths and incorrect assumptions about the NIS approach. It’s true that something has gone badly awry with TI’s NIS assessments—on that point, I agree with Heywood, Johnson, and Messick. But though these authors tell us what is wrong with the NIS, they never bother to ask themselves why; more importantly, they make the mistake of confusing errors in execution (on the basis of a single country!) with inherent problems with the concept itself. Continue reading →

Guest Post: There’s Nothing (Legally) New About “Declinations” Under the DOJ’s Corporate Enforcement Policy

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Today’s guest post is from Professor Karen Woody, at Indiana University’s Kelley School of Business:

Last year, the US Department of Justice (DOJ) announced a new “Corporate Enforcement Policy” (CEP) that would apply to Foreign Corrupt Practices Act (FCPA) cases, among others. A key feature of the CEP was the offer of leniency—in the form of a “declination”—so long as the company met certain conditions, including voluntary disclosure of the violation, full cooperation, and disgorgement of any ill-gotten gains from the unlawful conduct. While the basic contours of the DOJ’s new policy are reasonably clear, the use of the term “declination” has created some confusion and uncertainty. Is a “declination” merely a decision not to prosecute? Is it something more? Does it depend?

This confusion is illustrated by Maddie McMahon’s post last month, in which she argued that declinations granted pursuant to the CEP are indeed a “new” kind of enforcement action, distinct from a simple decision not to prosecute. And the DOJ has to some extent fostered that understanding: As Maggie points out, the CEP itself states (somewhat enigmatically), “if a case would have been declined in the absence of such circumstances [of compliance with the CEP], it is not a declination pursuant to the Policy,” which seems to imply that there still may be DOJ declinations, in addition to distinct declinations “pursuant to the CEP.” But in fact the CEP does not create a new mechanism for resolving FCPA cases (or other corporate enforcement actions). What it does do (confusingly and unhelpfully) is use the same term—“declination”—to describe two distinct, but familiar well-established, types of resolution.

To see this, it is critical to distinguish two types of cases for which the DOJ might issue a “declination” pursuant to the CEP: (1) unilateral declinations, where any required disgorgement is made in a separate settlement with the Securities and Exchange Commission (SEC); and (2) “declinations with disgorgement,” in which the SEC lacks jurisdiction and the disgorgement required to qualify for a “declination” under the CEP is made as part of an agreement between the company and the DOJ. Continue reading →

Guest Post–Assessing Corruption with Big Data

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Today’s guest post is from Enestor Dos Santos, principal economist at BBVA Research.

Ascertaining the actual level of corruption is not easy, given that it is usually a clandestine activity, and much of the available data is not comparable across countries or across time. Survey data on corruption experience can be helpful, but it is often limited to very specific kinds of corruption (such as petty bribery). Researchers and analysts have therefore, quite reasonably, tended to rely on subjective corruption perception data, such as Transparency International’s well-known Corruption Perceptions Index (CPI). (The CPI aggregates corruption perception data from a variety of other sources, mostly expert assessments.) But conventional corruption perception measures (including those use to construct the CPI) have well-known problems, including limited coverage (with respect to both years and countries) and relatively low frequency (usually annual). And they rely on the perceptions of a handful of experts, which may not necessarily be representative. These limitations mean that while traditional perception measures like the CPI may be useful for some purposes, they are not as helpful for others, such as measuring the impact of individual events or news reports on corruption perceptions, or how changes in corruption perceptions affect government approval ratings.

To address these concerns, a recent study by BBVA Research, entitled Assessing Corruption with Big Data, offered an alternative, complementary type of corruption perceptions measure, based on Google web searches about corruption. To construct this index, we examined all web searches classified by Google Trends in the “Law and Government” category for individual countries, and calculated the proportion of those searches that contain the word “corruption” (in any language and including its misspellings and synonyms). Our index, which begins in 2004, covers more than 190 countries and, unlike traditional corruption indicators, is available in real-time and with high-frequency (monthly). Moreover, it can be reproduced very easily and at very low cost.

Here are some of our main findings: Continue reading →

Guest Post: The UK’s Compensation Principles in Overseas Corruption Cases–A New Standard for Aiding Victims of Corruption?

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GAB is delighted to welcome back Susan Hawley, Policy Director at Corruption Watch, to contribute today’s guest post:

The issue of whether money from foreign bribery settlements should go back to the people of affected countries has generated a fair amount of heat over the years. Back in 2013, the World Bank’s Stolen Asset Recovery Initiative (StAR) asked whether countries whose people were most harmed by corrupt practices were being left out of the bargain in foreign bribery settlements. According to the StAR study, out of the $6 billion in monetary sanctions imposed for foreign bribery in 395 settlements between 1999 and 2012, only 3.3%, or $197 million, had been returned to the countries where the bribes were paid. Those statistics have provoked considerable controversy, as has the question whether the UN Convention Against Corruption (UNCAC) requires states parties to share money from foreign bribery settlements with affected countries. Yet the fact remains that when the huge fines paid by US and European companies for bribing officials in developing countries go into the treasuries of the US and Europe, while the people of those countries affected by that bribery get nothing, this creates a serious credibility and legitimacy problem for the international anticorruption regime.

For that reason, the UK enforcement bodies’ publication, this past June 1st, of joint principles to compensate overseas victims of economic crime is a welcome development, and provides another opportunity to think again about what is possible and what is desirable in terms of compensating the people of affected countries when companies get sanctioned for paying bribes. The UK Compensation Principles were first mooted and drafted at the 2016 London Anti-Corruption Summit; that Summit’s Joint Communique recognized that “compensation payments and financial settlements … can be an important method to support those who have suffered from corruption,” and led nine countries (though only four from the OECD) to commit to develop common principles for compensation payments to be made “safely, fairly and in a transparent manner to the countries affected.” The UK’s new principles are an effort to fulfill that Summit commitment. They commit the UK’s enforcement bodies to:

  • Consider compensation in all relevant cases;
  • Use whatever legal means to achieve it;
  • Work cross-government to identify victims, assess the case and obtain evidence for compensation, and identify a means by which compensation can be paid in a transparent, accountable and fair way that avoids risk of further corruption; and
  • Proactively engage where possible with law enforcement in affected states.

Interestingly, these principles have been in informal operation since late 2015, which helps shed some light on how these principles are likely to operate in practice. Continue reading →

Guest Post: More on the Hazards of Public Beneficial Ownership Registries–What Stephenson and Others Miss

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Today’s guest post, from Geoff Cook (the CEO of Jersey Finance), continues an ongoing debate an exchange we’ve been hosting here at GAB regarding the desirability of public (as opposed to confidential) registries of the ultimate beneficial owners (UBOs) of companies and other legal entities. This exchange was prompted by a piece that Martin Kenney, a lawyer specializing in asset recovery in the British Virgin Islands, published on the FCPA Blog, which criticized the UK’s decision to mandate that the 14 British Overseas Territories create public UBO registries. Mr. Kenney’s post prompted reactions from Rick Messick and from me. Our critical reactions stimulated another round of elaboration on the critique of the UK’s decision, with a new post from Mr. Kenney and another from Mr. Cook. I subsequently replied, explaining why I did not find Mr. Kenney’s or Mr. Cook’s criticisms fully persuasive. Mr. Kenney responded to that post earlier this month, and in today’s post Mr. Cook contributes his critical reactions to my response: Continue reading →

Guest Post: More Transparency Is Needed to Fight Grand Corruption in the Pharmaceutical Sector

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Today’s guest post is from Till Bruckner, the founder of TranspariMED:

In the pharmaceutical sector, public agencies are routinely handing over billions in public money to private companies for products whose value they cannot accurately assess, because the vendors control the flow of information generated by clinical trials. (Even the purchasing price is often kept secret, but that is another story.) If we observed this sort of opacity in the public procurement sector, it would immediately raise red flags. If public contractors were taking billions from governments in exchange for products of dubious quality that the governments cannot assess, the anticorruption community would be–rightly–up in arms. But for the pharmaceutical industry, this is business as usual.

Consider, as one particularly egregious example, what can only be described as an $18 billion heist of public money by a pharma company. In 2006, governments around the world began stockpiling Tamiflu, an anti-retroviral drug, due to fears that outbreaks of bird flu (and later swine flu) could turn into a lethal global pandemic. The evidence available at the time suggested that the drug was safe and effective at reducing the symptoms of influenza. In total, 96 counties accumulated enough Tamiflu to treat 350 million people. Then, in 2009, a doctor noticed that the results of eight clinical trials of Tamiflu were missing from the public record. (Worldwide, around half of all clinical trials have never reported their results.) After a struggle lasting four years, independent scientists finally got the company to turn over the relevant data from these trials—and concluded that the drug did little, if anything, to help patients.

This example is especially egregious, but it is not otherwise exceptional. Amazingly, comprehensive information on the safety and effectiveness of drugs is not only inaccessible to independent scientists, but also to government agencies. When a drug company applies for a marketing license, it has to submit detailed documentation from every relevant trial to regulatory agencies such as the U.S. Food and Drug Administration (FDA). Regulators review these submissions, called Clinical Study Reports (CSRs) – and then promptly lock them away in their confidential archives. This is especially frustrating for scientists working for health technology agencies, who are tasked with assessing the cost-effectiveness of different drugs but are often unable to access CSRs. To date, only the European Medicines Agency systematically releases (some) CSRs.

Politicians have tried to bring transparency into the sector, but the laws they pass often remain unenforced. In the United States, the 2007 FDA Amendment Act made it compulsory for companies and universities to publish the summary results of some clinical trials on public registries. (Summary results are a kind of “executive summary” of a clinical trial; they are far shorter and less detailed than CSRs, but still better than nothing). In 2015, an investigation by STAT News found that pharmaceutical companies routinely violated the law. The law stipulates a fine of up to $10,000 for every day a result is overdue. In theory, Big Pharma has already racked up over $25 billion in fines. In practice, the FDA has yet to collect a single cent. In the European Union, a similar regulation exists, but there too it remains unenforced by national agencies. In Britain, a 2013 parliamentary inquiry called for greater transparency, but its recommendations were largely ignored.

Last December, a coalition of four health integrity organisations issuing a wake-up call for governments to finally get serious about clinical trial transparency. Transparency International Pharmaceuticals & Healthcare (PHP), TranspariMED, Cochrane, and the Collaboration for Research Integrity and Transparency (CRIT) released a study that documents in detail how opacity in the sector harms patients, prevents public health agencies from making informed decisions, wastes public health funds, slows down medical progress, and exposes shareholders to substantial risks. The study also shows that clinical trials can be made significantly more transparent without introducing new legislation. Public research funders could demand that grantees report the results of publicly funded trials. Regulators could make continued market access conditional on companies agreeing to make CSRs publicly available. And in many cases, simply enforcing the rules already on the book could make a huge difference – and the costs of enforcement could easily be covered by imposing fines for noncompliance.

The medical research community has long called for greater transparency in medical research. The AllTrials campaign, which calls for all clinical trials to be registered and fully reported, has attracted the support of over 700 groups, including the American Medical Association and dozens of patient groups, and TranspariMED is currently building a broader coalition to push for greater transparency in the sector. It’s high time for the wider anticorruption community to join the fray.

Guest Post: The Taxi Driver Paradox–or How Descriptive Social Norms Shape Corrupt Behavior

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Nils Köbis, a post-doctoral researcher at the Center for Experimental Economics and Political Decision-Making (CREED), University of Amsterdam, contributes today’s guest post:

Whenever I am traveling and take a taxi, I try to strike up a conversation with the driver. The beauty of this situation is that both sides can be really candid. The length is typically short, and chances are you will never meet again. The chat usually kicks off with some small talk about sports, weather, and food. Once warmed up, I have often asked: “What do you think is the biggest problem in your society?” So far, the most common answer has been corruption. And my taxi-driver-based anecdotal evidence is consistent with large  international surveys. Notwithstanding the old canard that people who live in corrupt societies generally tolerate corruption as normal and natural, ample empirical evidence (and my taxi drivers) suggests that this is not true: People widely despise corruption, especially in countries riddled with it. Yet on several occasions the very same taxi driver who has been ranting to me about corruption has stopped by a traffic police officer—and willingly paid a bribe to avoid a ticket.

What explains this apparent paradox? The most frequent explanation for why a person outraged by corruption would nevertheless pay a bribe is that “everybody does it”—as the Nigerian novelist Chimamanda Adichie nicely puts it, “If we do something over and over again it becomes normal. If we see the same thing over and over again it becomes normal.” This notion of normality plays an important role in explaining why corruption is sometimes the exception and sometimes the rule. Scholars who research social norms differentiate between injunctive norms, which concern whether a given behavior is acceptable, and descriptive norms, which indicate whether the same behavior is common. This distinction might help to explain the taxi-driver-paradox: People might often bribe because everybody else is doing it, even though they think it’s wrong. Continue reading →