Category Archives: Guest Commentary

Guest Post: Corporate Criminal Liability and Corruption in Italy — Early Findings from an Ongoing Research Project

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In Italy, as in many other countries, little data is available to evaluate the effect of the corporate liability regime — on deterring corporate crime and on the companies themselves. A research project supported by the Milan-based Fondazione Centro Nazionale di Prevenzione e Difesa Sociale (the National Center for Social Protection and Defense Foundation or CNPDS) has set out to fill the void. Coordinated by Professors Stefano Manacorda and Francesco Centonze, the project has enlisted Italian judicial institutions and the private sector in the collection of empirical data.

For the first time the Ministry of Justice, the Office of the General Public Prosecutor of the Supreme Court of Cassation, and two business associations, — Confindustria, which represents more than 150,000 Italian companies, and Assonime, representing the Italian companies listed on the Italian stock market, — are collaborating to gather information on the impact of a law.  Below Marco Colacurci of the Università della Campania and Pierpaolo Astorina of the Università di Bergamo, two assistant Professors involved in the project, explain the data they are gathering and summarize what they have learned so far about corporate liability for corruption.

Their findings will likely be of great interest not only to GAB readers but to the OECD, which will soon assess Italy’s compliance with the Anti-Bribery Convention. Thanks to Professors Colacurci and Astorina for sharing their work with GAB and to Professor Stefano Manacorda for facilitating it.

Twenty years have passed since Italy introduced liability for companies (the liability is formally administrative but modelled on the criminal features). Possible reforms to the legislation are now a matter of intense debate.. Anniversaries indeed represent valuable occasions to reflect on what works and what does not, and the same goes for Legislative Decree n. 231/2001. Conferences and seminars are underway in Italy both to celebrate the law that introduced the direct liability of corporations for crimes committed by individuals acting for them, and, at the same time, to highlight the critiques that have emerged over the years.

These latter have several aspects, such as the under-use of international standards in the creation and judicial evaluation of compliance programs, the intense discretionary powers of public prosecutors and criminal judges, the lack of recognition of pretrial diversion mechanisms apt to stimulate effective forms of corporate cooperation, the failure to consider the size and organizational complexity of companies, and the list could go on.

Most of all, and despite the growing attention which scholars (and law firms) have been directing towards liability over the last two decades, the praxis seems to show that prosecutions for corporate crimes are rare. Consequently, judgments too are rare, and decisions acknowledging the adequacy of the compliance programs adopted by indicted companies are scarce. This could reflect a degree of indifference in this area, on the part of the public prosecutors’ offices or, alternatively, could be interpreted as a sign of the preventive effects of the Decree 231.

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Guest Post: Ensuring Integrity in U.S. Infrastructure Spending

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Today’s guest post is from Shruti Shah, the President and CEO of the Coalition for Integrity (C4I), and Taylor Cerwinski, a consultant for C4I on various anticorruption and ethics issues.

The biggest item on the U.S. Congress’s legislative agenda right now is infrastructure. Last month, the Senate voted to pass a $1 trillion infrastructure bill focused on surface infrastructure and broadband projects, including $550 billion in funding for new projects. That bill is set for a House vote on Thursday, though the politics are complicated by the debates within the Democratic Party over the proposed $3.5 trillion federal budget bill that includes investment in “human infrastructure” via support of child care, education, healthcare, and other projects. While all eyes on Washington are focused on whether the Democrats will be able to hold together their progressive and centrist wings to pass both of these bills, there’s another important concern regarding the proposed infrastructure investment that ought to receive attention: the need for more effective oversight of how the money is spent.

While strong infrastructure is vital to ensure a healthy economy and thriving communities, the scope, complexity, and cost of the proposed infrastructure projects make it vital to ensure that there is clear and robust oversight, so that these projects are carried out in a fiscally responsible manner. Without such oversight, there is a substantial risk that infrastructure projects at the federal and state level will fall victim to waste, fraud and other abuses. Internationally, estimates of losses to bribery in construction are as high as 10 to 30 percent of construction costs. And the United States is not impervious to mismanagement and corruption in infrastructure projects. A review of prior high-profile projects such as the California High Speed train, the Central Artery Project in Boston (The Big Dig), and the awarding of contracts related to disaster relief and clean-up efforts in the aftermath of Katrina reveals cost overruns, fraud, and incidents of bribery and other forms of public corruption.

The infrastructure bill now pending before the House incorporates several measures to combat potential corruption. These include requirements that federal agencies award grants on a competitive basis, regularly publish reports on the implementation of grant programs, and fund oversight functions. While a good start, these measures do not go far enough. Assuming the infrastructure bill passes, agencies must—through implementing regulations and actual practice—go further to ensure transparency, accountability, and integrity in infrastructure spending. As a new Coalition for Integrity’s report on Oversight of Infrastructure Spending, there are a number of useful measures that would be helpful, including the following: Continue reading →

The trial of Mozambique’s “hidden debt case”: the omnipresent absence of Filipe Nyusi

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As the corruption trial of the decade if not the century enters its fifth day in a Mozambique court, guest commentator Marcelo Mosse, editor and publisher of the independent online outlet Carta de Mozambique, notes that the presence in the courtroom of a very large elephant remains unremarked. During the first days of the trial, witnesses have identified those responsible for a scheme saddling one of the world’s poorest nations with $2.1 billion of debt and driving millions into poverty. Mosse explains that the culprits have been identified by name and by the office held when the scheme was hatched and executed. With one exception. His own translation of his commentary from Carta de Mozambique on the significance of that exception is below.

Almost 20 years ago, at the time of the trial of the murder of journalist Carlos Cardoso, Mozambican society witnessed a judicial process that hit the presidential family to the core, due to the suspected involvement of Nyimpine Chissano [son of the then president] in the crime. This involvement was never proven. However, incriminating “nuances” of various kinds remained engraved in the imagination of the Mozambicans.

In addition, the trial was conducted within a tacit agreement among the interveners: everything was acceptable, except directly tweaking [then president] Joaquim Chissano. Bringing his name out at the hearings was like striking at the heart of the State, shattering our Mozambicanity, emptying the last stronghold of the beloved homeland, draining out its blood. Although the son ended up somewhat hit by the unraveling of his calls, the father, Joaquim, came out unscathed. Mozambicans would not be the ones to bury their own Father, even if hostile forces wanted to. Moreover, the administration of Justice was able to achieve this desideratum.

Twenty years later, history repeats itself, with the due distinctions of circumstance. The first four days of the trial of the “hidden debts” showed that we are facing the same tacit understanding: no one has yet mentioned Filipe Nyusi‘s name, but everyone mentions the Minister of Defense at the time. However, nobody asked for the name of the Minister at the time. Neither Judge Baptista nor the prosecutor Sheila Marrengula. Much less the Bar Association [participating in the case as assistant to the prosecution].

The Bar Association demanded that the former Minister of Finance, Manuel Chang, be required to come and testify as a declarant. The request followed several mentions made by the defendants Cipriano Mutota and Teófilo Nhangumele about his presence in decision-making meetings on the coastal protection project for which some of the debt was incurred.

However, just as Chang’s name was mentioned, the Minister of Defense was also mentioned several times, but never by name. We emphasize: no one wanted to know the name of this minister, much less his role in the various meetings where he would have been invested with his decision-making power on the subject. Several ministers of the time were addressed by name; the former President of the Republic, Armando Guebuza, was as well.

Why has no one mentioned Nyusi by name? Neither the judge nor the prosecutor asks about the role of this so-called Minister of defense. Why? That is the question.

The trial is still in its beginning stages. And our assertion may be refuted as the days go by, especially with the long awaited testimony of Antonio do Rosário, the second “mastermind” of the default. It is very likely that he will call a spade a spade. However, this taboo regarding Filipe Nyusi’s name shows that ultimately, and as we wrote a few days ago, we are facing the ultimate trial of Guebuzaism. And Nyusi will probably get off without being tweaked. Nyusi is still the President of Mozambique.

 Editor’s note: The trial is live streaming on Mozambican public television. Links here and (Facebook link) here. Excerpts can viewed on YouTube by searching “television moçambique dividas ocultas.”

Guest Post: How One Family Is Capturing the Sri Lankan State

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Today’s guest post is from Professor Liz David-Barrett, Director of the Centre for the Study of Corruption at the University of Sussex.

Sri Lanka, a fragile democracy that emerged from a 26-year civil war only in 2009, is on the verge of becoming a captured state, thanks to a concerted power grab by the Rajapaksa family. When Gotabaya Rajapaksa was elected president in late 2019, he appointed his brother Mahinda to serve as both premier and Finance Minister. He later relieved Mahinda of the latter role, but replaced him with another brother. A fourth brother is Minister of Irrigation, and Mahinda’s son runs another two ministries. All told, Ministries run by the Rajapaksa family control an estimated 24% of the state budget. And another six Members of Parliament are members of the family. The Rajapaksas have further extended their control by appointing allies (including other family members) to other high-ranking government jobs and leadership roles in state-owned enterprises.

Even more troubling than the extent of the Rajapaska family’s dominance over Sri Lankan government is the way in which the Rajapaksas are using the familiar state capture playbook to ensure that they stay in power:

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Guest Post: Illicit Enrichment Laws and the Presumption of Innocence

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GAB is pleased to welcome this guest post by Andrew Dornbierer of the Basel Institute on Governance, author of the recently released open-access book Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth.

Laws targeting illicit enrichment are increasingly prevalent. To date, at least 98 jurisdictions have some form of illicit enrichment law. While the design and scope of these laws vary—some are criminal laws that can be used to convict individuals who control assets disproportionate to their lawful income, while others are civil laws that allow governments to seize assets whose lawful origins cannot be adequately explained—the common characteristic of all illicit enrichment laws is that they do not require prosecutors to secure a conviction for the underlying criminal conduct that allegedly produced the illicit wealth. Rather, illicit enrichment laws only require that the government show that the person enjoyed an amount of wealth that cannot be explained by reference to their lawful sources of income.

This characteristic serves as the primary point of attack for many critics. They claim that by not requiring a state to prove criminal activity, illicit enrichment laws effectively reverse the burden of proof, requiring the targets of the enforcement action to prove their innocence. And some countries have resisted adopting illicit enrichment laws for this very reason. While the UN Convention Against Corruption includes a specific article recommending that state parties consider adopting illicit enrichment laws, during negotiations “many [national] delegations indicated that they faced serious difficulties, often of a constitutional nature, with the inclusion of the concept of the reversal of the burden of proof.” Similar concerns were raised during the drafting of the Inter-American Convention Against Corruption (IACAC), and while in the end this convention did include a provision calling on states parties to adopt illicit enrichment laws, the United States filed a particularly clear reservation to this provision when it joined, noting that because “[t]he offense of illicit enrichment … places the burden of proof on the defendant,” such an offense “is inconsistent with the United States Constitution and fundamental principles of the United States legal system.” And in Ukraine, in February 2019 the Constitutional Court of Ukraine invalidated the local illicit enrichment law on the basis that it was inconsistent with the presumption of innocence.

Is there any truth to the claim that illicit enrichment laws unfairly place a burden of proof on the defendant, and thus violate the presumption of innocence?

The short answer is no.

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Guest Post: How Not To Balance Efficiency and Integrity in Public Procurement–The Case of Italy

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Today’s guest post is from Roberta De Paolis, a Ph.D. researcher in criminal Law at the Sant’Anna School of Advanced Studies.

In designing an effective public procurement system, a key challenge is striking the proper balance between ensuring efficiency and promoting integrity. But emergency situations make it hard to maintain an appropriate balance, as the response to the global Covid-19 pandemic has again demonstrated. When confronted with an urgent situation, governments often allow the need for speed to trump the interest in transparency and oversight, and thus grant public procurement authorities exemptions from the ordinary rules and monitoring procedures.

If one wants to find a good example of how not to address the challenge of striking the right balance between these competing interests, one need look no further than Italy. Rather than design a system that can ensure an appropriate degree of integrity without stifling efficiency, while at the same time building in adequate flexibility to handle urgent situations appropriately, the Italian public procurement system is characterized by a set of overly rigid, stifling baseline rules, from which the government has created a set of overly broad discretionary exceptions to address situations in which the application of the usual rules is untenable.

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Guest Post: A Market Research Approach to Encouraging Citizen Participation in Anticorruption

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Today’s guest post is from Torplus Yomnak, Jake Pattaratanakul, Apichart Kanarattanavong, Thanee Chaiwat, and Charoen Sutuktis of Chulalongkorn University in Bangkok, Thailand.

A team at Chulalongkorn University recently undertook a research project to examine the factors that increase public participation in anticorruption efforts, so as to develop a more effective communication strategy to promote public participation. (The final paper is currently only available in Thai, though an English translation is in progress, and a summary of the work can be found here.) The study employed a concept used in marketing research called “segmentation,” which seeks to identify latent classes of people—sorted by various characteristics and indicators—who will be more responsive to particular kinds of messaging. In marketing research, the idea is to identify which potential consumers will be most responsive to certain marketing strategies. The same research techniques can be used to classify different segments of the public by their likely responsiveness to anticorruption messaging (or to different kinds of anticorruption messaging).

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Guest Post: Highlights from the UNGASS Anticorruption Session Side Events

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Last month, the UN General Assembly held its first-ever Special Session focused specifically on the fight against corruption. In addition to the UN General Assembly Special Session (UNGASS) itself, various governments and civil society organizations arranged various side events, held in parallel with the main UNGASS meeting, to allow activists, policymakers, and researchers to share their expertise. Today’s guest post, contributed by Michaella Baker, a JD-MBA student at Northwestern University (working in collaboration with Northwestern Law Professor Juliet Sorensen), summarizes the themes and principal contributions of three of these side events.

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Guest Post: The Case for Corruption Truth Commissions

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Today’s guest post is from Blair Glencorse, the Executive Director of the Accountability Lab, a civil society network that promotes accountability, transparency, and open government.

When corruption is deeply entrenched, it is very difficult to dislodge through criminal prosecution and similar law enforcement efforts. In systems that create very strong incentives to behave corruptly—those where powerful social norms favor graft over honesty—one can expect widespread resistance to attempts at stepped-up enforcement of anticorruption rules, given the number of people who might rationally fear being implicated in wrongdoing. Moreover, given the reluctance of participants in systemically corrupt regimes to disclose their illicit conduct and improper relationships, it is very hard to understand how the corrupt systems operate, who the most culpable perpetrators are, and how such systems can be more effectively dismantled.

A promising response to these problems might be drawn from the experience of addressing widespread human rights violations in moments of transition: truth commissions. While it would obviously be very difficult to set up such a commission during normal times, when the opportunity arises—say, after a regime change, or a significant political turnover sparked by popular protests against corruption—a country could set up an independent body—a corruption truth commission—to manage a process by which amnesty would be offered to those who had engaged in unlawful corrupt acts, in exchange for a full and truthful accounting of the corrupt conduct that they had perpetrated or witnessed.

This approach has several practical benefits. It creates a permanent record of the abuse of power, builds an evidence base to go after those perpetrators who either reject the offer of amnesty or are too high-level to be eligible, and can help countries recover ill-gotten assets. By exposing the workings of corrupt networks, corruption truth commissions would also help us better understand how to identify and counter corrupt networks before they can take root.

While the appropriate design of such a body would obviously depend on the specific circumstances of each individual country, five general principles are broadly applicable:

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Time for the U.K. to Match U.S. Ambitions in the Fight Against Corruption

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GAB is pleased to welcome this guest post by Susannah Fitzgerald, Network Co-Ordinator of the UK Anti-Corruption Coalition, which brings together the UK’s leading anti-corruption organisations to tackle corruption in the UK and the UK’s role in facilitating corruption abroad.

President Biden’s June 3 commitment “to prevent and combat corruption at home and abroad” is welcome news to corruption fighters around the globe. Five years ago, then U.K. Prime Minster David Cameron outlined similar ambitions at the International Anti-Corruption Summit in London. Yet, despite a promising start in the years after the Summit, the U.K. anti-corruption agenda now looks alarmingly close to stalling.

It is time reinvigorate that agenda, and not only for the sake of British citizens. Like the United States, the United Kingdom is an important financial center, and the measures it takes to curb corruption, fight money laundering, and ease the return of stolen assets will benefit populations around the world.

Here is what the UK has done so far do to tackle corruption, why it matters, and what more the Coalition believes it needs to do.

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