The Case for Preserving South Korea’s Crackdown on Gifts

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In September 2016, South Korea’s Improper Solicitations and Graft Prohibition Act, better known as the “Kim Young-ran Law,” came into effect. The Kim Young-ran Law, regarded by some as the strictest anti-graft law in the world, included important provisions aimed at combating Korea’s deep-seated gift-giving culture that infested the public sector and cultivated corruption (including, for example, the corruption blamed for the 2014 Sewol ferry disaster, as well as the scandals that ultimately led to the impeachment of former President Park Geun-hye in 2017). The law’s provisions on gifts ban public servants, educators, and journalists from receiving free meals worth over 30,000 won ($28), gifts over 50,000 won ($46), and congratulatory or condolence money over 100,000 won ($92)—the so-called “3-5-10” restriction.

Although a majority of the Korean public believes that the Kim Young-ran Law has been effective in reducing bribery, the restrictions on gifts were widely perceived as too strict, with almost two-thirds of surveyed Koreans supporting an amendment that would loosen the 3-5-10 thresholds. In light of this, in December 2017 the legislature revised the law to double the price limits on gifts for agricultural, livestock, and fishery goods to 100,000 won, and to reduce the allowance for congratulatory or condolence money to 50,000 won—so, it’s still a “3-5-10” restriction, though the “5” and the “10” have flipped. However, scholars are concerned that even this alteration of the original rules would set a precedent for changes and exceptions that would defeat the initial spirit and purpose of the Kim Young-ran Law. Indeed, the arguments for relaxing the gift limitations do not withstand scrutiny; it was likely a mistake for South Korea to give in to pressure to amend the law, and it would certainly be a much graver mistake to relax the 3-5-10 thresholds further. Those who believe that the Kim Young-ran law’s limits on gifts are too stringent have advanced three major critiques, but none of them is persuasive:

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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 →

Fighting Corruption in Nigeria

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Nigeria continues to enjoy pride of place in the global discourse on corruption.  A Google search for “Nigeria corruption” brings up more than 53 million entries led by a lengthy Wikipedia article on the subject. Matthew’s bibliography lists over 100 books, monographs, and scholarly articles on corruption in the country which analyze everything from its colonial roots to how and why it is endemic to what can be done to tame it.  This blog has ruminated on matters ranging from why the head of the Economic and Financial Crime Commission was replaced to whether the then newly-elected President Muhammadu Buhari was serious about fighting corruption to outgoing First Lady Patience Jonathan’s impatience with the thought something was untoward in her receiving “small gifts” totaling $15 million while her husband held high office.

Two current papers by authors with very different backgrounds, one a former U.S. intelligence analyst, the other a former Nigerian professor and incoming head of the Nigeria’s corrupt practices commission, continue the discussion.   Both agree corruption is pervasive and that it has done much harm to the state and its citizens.  Not surprisingly perhaps, given who they are and where they sit, they offer quite different assessments of where the country stands in the fight against corruption.  In Real Challenges of Fighting Corruption in Nigeria, remarks delivered to the Corruption Hunters Network (CHN) June 25, Professor Bolaji Owasanoye, nominated to chair the Independent Corrupt Practices and Other Related Offences Commission, radiated optimism, ticking off a series of reforms that have made a difference and predicting more progress is on the horizon.  By contrast, the tone of a July monograph for the Carnegie Endowment for International Peace by Matthew Page, the former Nigerian analyst for the U.S. intelligence community, is decidedly pessimistic.  When it comes to what can be done, he offers nothing beyond a scheme to help policymakers make sense of the dizzying variety of forms corruption in the country takes.

My money is on Owasanoye and not just because I had the opportunity to hear him deliver his talk. My reasons for optimism about Nigeria’s fight against corruption are several. 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 →

Many U.S. States Are About To Legalize Sports Betting. How Can They Do So in a Way that Minimizes Risks of Sports Corruption?

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Last May, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), finding the federal prohibition on sports betting unconstitutional. Accordingly, all states (not just Nevada) may now legalize sports betting. Excited about the potential revenue bump, a few states, including New Jersey and Delaware, have already passed legislation to open their doors to sports betting. Other states including Pennsylvania, New York, Mississippi, and West Virginia have sports betting bills pending in their legislature, and at least fifteen other states have introduced bills in some form. Unlike PASPA, a federal statute that provided a uniform application for nearly all states across the country, each state’s gambling laws will be unique to their state. And those lawmakers who are considering enacting gambling legislation are also trying to determine how to best regulate the industry—a complicated issue that requires balancing a number of difficult considerations, including: how the state should tax sports betting; whether the state should allow for in person bets only or also online betting; whether the state should permit access to bets with a higher risk of corruption, such as one-off prop bets; and whether the state should the state provide fees to leagues to assist them in corruption prevention. (See here for a discussion of these issues in New York).

While there is a debate in the anticorruption community about whether legalization of sports betting is good or bad for corruption, for those states that do decide to legalize betting, it’s important to do it in such a way that the black market for sports betting shrinks. States considering legalization must ensure that legal betting is a sufficiently attractive option as compared to sports betting in the black market. Otherwise, sports bettors will remain in the black market, which not only would pose numerous challenges for regulating corruption but also would lead to low revenues for states. Thus, at least for those states that choose to legalize sports betting in some form, the twin objectives of maximizing state tax revenue and preventing corruption (especially match fixing and spot fixing), often thought to be in tension with one another, are both advanced by maximizing the market share for legalized betting in their state, as opposed to limiting opportunities for betting.

To maximize market share and decrease corruption risk, states should include the following provisions in sports gambling legislation:

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No Swords, But an Absolute Shield: India’s Over-broad Judicial Immunity Against Corruption Prosecutions

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Over the past four decades, India’s “activist” higher judiciary (the state High Courts and the federal Supreme Court) has significantly altered the balance of power between branches of government. This has been done by liberalizing the rules on who can petition the court for relief, as well as expanding the scope of the judicial relief that can be provided. Today it is entirely normal for the Court to take up the task of monitoring the execution of government policies as well as the progress of criminal investigations. But this expansion of judicial power has not been matched by a coequal expansion of oversight mechanisms to ensure that judicial power is not abused—a significant problem given the serious corruption problem in India’s courts (see also here). Certain problems with the court system have attracted the attention of both commentators and the Parliament, including the Chief Justice’s unfettered power to assign cases to different judges and the system for appointments and impeachment. Surprisingly, far less attention has been paid to another instance of no oversight over the judicial branch: the doctrine of judicial immunity.

Across countries, judicial officers are conferred broad judicial immunity to allow courts to fearlessly perform their functions. Significantly though, in most countries this protection applies only to acts in furtherance of the “judicial function”; for acts outside that scope, judges are subject to the law just like ordinary citizens. Not so in India. In 1991, the Indian Supreme Court created a rule that no criminal investigation whatsoever could begin against a member of the higher judiciary without first “consulting” the Chief Justice of India (or, if allegations are against the Chief Justice, consulting with any other Supreme Court Justice). According to the Court, this rule was needed to protect judges from “frivolous prosecution and unnecessary harassment.”

Such a broad judicial immunity rule makes no sense, either generally or in the Indian context. While it’s reasonable to prevent a judge from being prosecuted for how she decided a case, it makes no sense to protect her for having murdered somebody, or for taking a bribe. Indeed, in addition to its other obvious problems, this broad judicial immunity rule creates serious difficulties for efforts to fight endemic judicial corruption in India. 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 →

Tracking Corruption and Conflicts of Interest in the Trump Administration–July 2018 Update

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Since May 2017, GAB has been tracking credible allegations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests, and providing monthly updates on media reports of such issues. Our July 2018 update is now available here.There are not too many substantive updates since last month–the most notable concerns revelations that Commerce Secretary Wilbur Ross appears to have misled Congress and the public about potential financial conflicts of interest.

Laura Kovesi’s Statement Upon Being Fired As Romania’s Chief Anticorruption Prosecutor

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Romanian President Klaus Iohannis yesterday fired the National Anticorruption Directorate’s chief prosecutor Laura Codruţa Kovesi under intense, unrelenting pressure from the parliamentary majority.  Although article 133 of the Romanian Constitution protects public prosecutors from parliamentary whims, in a head-scratching decision May 30 Romania’s Constitutional Court ruled that the president must heed a directive by the Justice Minister ordering him to fire Kovesi.  Iohanis had initially resisted, but the parliamentary majority demanded he obey the Justice Minister’s directive — even after citizens demonstrated in Kovesi’s favor and the European Union signaled its support for her.  Indeed, in recent days the majority made it clear that if Iohannis refused to obey the order, it would impeach him.  Iohanis relented early Monday morning, July 9, signing a decree terminating Codruţa Kovesi.

 Codruţa Kovesi issued a statement later in the day defending her agency’s record combating corruption, voicing the concerns of many that her dismissal will undermine the fight against corruption by subordinating prosecutors to parliament, and urging all Romanians not to give up the struggle against corruption.  The full text of her remarks (her own English version) are below.

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How “Scandalizing” Corruption Can Backfire

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High profile corruption scandals are making headlines almost every day: Israeli Prime Minister Benjamin Netanyahu is embroiled in multiple bribery allegations; Brazilian President Luiz Inácio Lula da Silva (known as Lula) was convicted for his involvement in corruption; Peruvian President Pedro Pablo Kuczynski was forced to resign after his allies were caught on tape buying political support to defeat his impeachment vote. The list could go on and on. And one cannot help noticing that the media coverage of these high-profile corruption cases often focuses on the most lurid, sensational aspects of individual politicians’ corrupt behavior. For example, as the Netanyahu probes unfolded, the Israeli media emphasized the juicy details: how Netanyahu and his wife were bribed with Cuban cigars and Dom Pérignon worth up to $130,000, the state’s annual allocation of approximately $3,000 for the PM’s pistachio ice cream supply, and his son’s bragging of how his father pushed through a gas deal caught on tape in a strip club. And this is but one example. It seems that corruption cases are often covered as if they were TV dramas, with entertaining plot twists and voyeuristic appeal. To put this in the terminology developed by Shanto Iyengar in his book on how TV news frames political issues, much of the contemporary media coverage of corruption tends to be “episodic” (focusing on individual stories or specific events, putting the issues in a more subjective light, and including sensational or provocative content) as opposed to “thematic” (more systematic, abstract, and in-depth, and providing a wider context for a more nuanced understanding of the causes and trends).

Such salacious coverage of corruption is perhaps unavoidable; these tawdry details attract more readers and viewers than dry reporting on financial misdeeds and back-room negotiations. And one might think that such coverage would be more effective in motivating citizens to take action against corruption—whether through votes, protests, organizing, or other means. After all, as Jimmy Chalk argued last year on this blog, anticorruption narratives can be more effective when they include dramatic stories with virtuous heroes and sinister villains. That may well be true for narratives fashioned by activists in the context of a campaign, but for news reporting, the episodic/scandal-centric approach may be counterproductive, for three main reasons:

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