The Trump Administration’s Ethical Conduct: An Appreciation

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Whatever else one might say about corruption and the Trump Administration, it has been a godsend for those who teach ethics and integrity courses.  Recent, real-world examples can spice up otherwise dry, abstract presentations while helping drive home key points, and Trump officials’ habit of skating at the edge of permissible conduct never fails to provide headline grabbing fodder for classroom discussion.  The most recent debt of gratitude ethics instructors owe the Trump Administration arises from the Environmental Protection Agency chief’s choice of a D.C. landlord.  In one fell swoop agency head Scott Pruitt’s actions illustrate the finer points of not one but two key ethical norms, the receipt of gifts and the duty to appear impartial.

The story begins with Pruitt’s decision after appointment as chief regulator of American environmental protection laws to not move to Washington, D.C. but instead to rent a place just for the nights spent in the nation’s capital.  He found the spare bedroom in a two-bedroom apartment located in a tony part of town whose owners agreed to rent the extra bedroom for $50 for each night Pruitt spent in Washington.

Real estate agents told the New York Times that Pruitt got quite a bargain: $50 a night was less than one would expect to pay on the open market.  Pruitt’s ethical travails begin here. Continue reading →

Announcement: PAR Blog Symposium on “Corruption and Anti-Corruption in the 21st Century”

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Here at GAB we’re always thrilled to see more useful discussion of corruption-related issues in the blogosphere. I’m therefore delighted to announce that the Public Administration Review is organizing a special “blog symposium” on “Corruption and Anti-Corruption in the 21st Century,” and is soliciting contributions from anticorruption experts. The symposium editors, Liz David-Barrett and Paul Heywood, provide the following overview of the symposium theme and the sorts of contributions they’re looking for:

It is a quarter of a century since the launch of the global anti-corruption NGO, Transparency International. In those 25 years, corruption has become a major focus of academic research, while seeking to curb corruption has become a core preoccupation of ever more international organisations, national governments, dedicated agencies and civil society groups, as well as an issue with which the private sector increasingly engages.

Yet many question what has really been achieved and bemoan our seeming inability to distill research and experience into effective lessons for action. Scholars and practitioners alike complain that they lack channels through which to share ideas and learning, and that all too often their respective agendas and insights fail to connect. And many international organisations, including the World Bank, IMF and OECD, are reassessing their approaches. This blog symposium seeks to develop an open and engaged dialogue to facilitate learning.

We invite scholars and practitioners to contribute posts on the topic of Corruption and Anti-Corruption in the 21st Century, which:

  • Showcase new approaches to understanding and tackling corruption.

  • Share learning about how change can be encouraged, achieved and sustained.

  • Exchange ideas on how to evaluate the impact of anti-corruption interventions.

Those interested in contributing should submit a proposal/abstract by midnight GMT on April 27th (two weeks from today); the proposal should not exceed 150 words, and should outline the main argument and examples to be discussed. The submission should also include a brief bio of the author(s), not to exceed 100 words. Please send your proposal by email to e.david-barrett@sussex.ac.uk and Paul.Heywood@nottingham.ac.uk, and mark the subject line “Blog Symposium Proposal.” The editors will invite 20 authors (or author teams) to contribute, and will notify the selected authors on May 11th. Invited authors should submit their completed blog posts (1200 words max) by June 1st, and shortly thereafter the blog posts will then be published in an online symposium hosted by the Public Administration Review.

Here at GAB, we look forward to reading (and perhaps responding to) what we’re sure will be a set of insightful and provocative contributions in this symposium.

An Encouraging, Albeit Limited, Development in the Emoluments Clause Litigation Against Donald Trump

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Sometimes it feels great to have been wrong. Last week, a United States District Judge ruled that a lawsuit brought by the District of Columbia and the State of Maryland against Donald Trump for alleged violations of the Constitution’s Foreign and Domestic Emoluments Clauses could go forward (at least for now). More specifically, the judge rejected President Trump’s argument that the plaintiffs lacked “standing,” as well as various related but distinct challenges to the court’s jurisdiction to hear the case.

When the first Emoluments Clause suits were filed against Trump (three have been brought so far, in different courts by different plaintiffs), I was one of many commentators who predicted that the cases would be dismissed on jurisdictional grounds. That prediction seemed borne out when the first of these cases, brought by the Citizens for Responsibility and Ethics in Washington (CREW) was dismissed on jurisdictional grounds last December. While some of the legal reasoning of that decision was questionable, I’d assumed that other courts would follow suit, on the logic that most judges would want to avoid having to decide these cases on the merits, and the jurisdictional doctrines are sufficiently malleable that a competent judge would be able to write a defensible opinion dismissing the cases for want of jurisdiction. (Initially I also fretted that a jurisdictional dismissal could be exploited by Trump and his allies to imply that the courts had rejected the merits of the argument that Trump’s mixture of his business affairs and his public office crosses a constitutional line, but on further reflection I now tend to think no development in these cases short of a Supreme Court ruling on the merits—and possibly not even that—would have a measurable impact on public opinion.) So it came as a welcome surprise that the ruling last week held that the Emoluments Clause suit can proceed.

There’s already been a fair bit of coverage of the ruling (see, for example, here, here, here, and here), and I’m not sure if I have that much to add, but since I’ve been commenting fairly regularly on developments in the Emoluments Clause cases, I’ll make a few additional observations: Continue reading →

The Missing Piece in UK’s Unexplained Wealth Order Mechanism

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All of a sudden politicians, public figures, and oligarchs – such as Russian First Deputy Prime Minister Ignor Shuvalov and former Nigerian Oil Minister Diezani Alison-Madueke – have to explain how they are able to afford the swanky apartments in London’s posh Mayfair neighborhood on their modest official salaries. This is due to the UK’s new Criminal Finances Act (CFA), which came into force in February and is meant to crack down on the flow of dirty money into the UK—a flow that has given London in particular a reputation as a “Death Star” of global kleptocracy. Most notably, the CFA adds a new investigative tool, the Unexplained Wealth Order (UWO), into the civil recovery regime. Originally proposed by Transparency International UK a few years ago, a UWO is an order granted by the High Court in cases where there are reasonable grounds to believe (1) the respondent owns some property worth more than £50,000; (2) either the respondent is a politically exposed person (PEP), or the respondent or a person connected to the respondent has been involved in a serious crime; and (3) respondent’s lawfully earned income would not be sufficient to obtain the property in question. If there are reasonable grounds to believe that each of these three conditions is satisfied, the High Court may issue an order requiring the respondent to provide information regarding the nature of her interests in the property in question and how she was able to lawfully obtained such property. If the respondent is unable to provide a reasonable explanation, the UK Government can subsequently initiate the civil forfeiture process and seize these assets.

Lauded as “a powerful new weapon in[] the anti-corruption arsenal,” UWOs are expected to be particularly helpful when there is no conviction against the respondents in their countries of origin, or when efforts to get a corrupt foreign government to cooperate with investigations have led to naught. Moreover, even though UWOs are a civil enforcement mechanism, the information they uncover may be useful in pursuing criminal investigations, and if respondents recklessly or knowingly make false statements or mislead the enforcement body in responding to an order, they may be criminally prosecuted. There’s already some evidence that the new law will make a difference: In March, a month after the promulgation of the CFA, two UWOs were issued requiring a tycoon in Central Asia to explain how he is able to afford real properties in the UK totaling £22 million.

Yet notwithstanding the enthusiasm for UWOs in some quarters, the effectiveness of the UFO mechanism is likely to be hampered by an important missing piece in the UK’s anticorruption framework, namely an effective means for ensuring genuine transparency regarding the beneficial ownership of real and movable property. Without knowing who really owns what, the new law is unlikely to realize its full potential, and indeed may not make much difference outside of a handful of cases involving particularly careless criminals.

Continue reading →

Guest Post: Tackling Health Sector Corruption—Five Lessons from Afghanistan

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GAB welcomes back Mark Pyman, Senior Fellow at the London Institute for Statecraft, who previously served as Commissioner of the Afghanistan Joint Independent Anti-Corruption Monitoring and Evaluation Committee (MEC). He contributes this post together with Hussain Rezai, a researcher at MEC.

Despite the horror stories, interesting things are happening on tackling corruption in Afghanistan. Besides the progress (discussed in previous posts) on education and procurement, a major anticorruption initiative has been underway in the Afghanistan health system since June 2016. The initiative, which is another surprising (if qualified) anticorruption success story in a very difficult environment, offers five lessons for anticorruption practitioners and health ministers in other countries. Continue reading →

Report on the OECD’s 6th Global Anti-Corruption and Integrity Forum

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For the sixth year running the Organization for Economic and Cooperation is hosting a two-day conference on ethics and corruption.  This year’s theme is how corruption has eroded trust in government and is helping advance what Secretary General Gurria termed in his opening remarks the three destructive “isms” haunting the world today: populism, nationalism, and protectionism.

The organization’s members are 35 of the world’ s richest nations (all save Russia and the PRC), and despite extraordinary levels of wealth by any historical measure, and recent upbeat economic news, citizens across the 35 have soured on their governments.  Trust in government across the 35 is at a record low while cynicism and distrust in elected leaders is at an all-time high, and though the Secretary General put much of the blame for the current funk on the 2008 economic crisis and the still uneven and unbalanced recovery, corruption, he stressed, has done its part.  Revelations of wrong-doing at the highest levels of government coupled with the petty corruption that frustrates the delivery of basic government services has only deepened citizens’ suspicions in their government.  If OECD member states are to win back citizens’ confidence, and avoid those destructive “isms,” they cannot, he argued, ignore the corruption question.

For those unable to fund a trip to Paris or with a sponsor or client willing to foot the bill, the conference home page with the agenda is here.  Four things I found useful on day one: Continue reading →

More on the 2017 Corruption Perceptions Index, and the Relationship Between Media/Civil Society Freedom and Corruption

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The rest of the anticorruption commentariat (and the mainstream media) may have already moved on from the publication of Transparency International’s 2017 Corruption Perception Index (CPI), but I wanted to follow up on my other posts from earlier this month (here and here) to discuss one other aspect of the new CPI. The general overview, press release, and other supporting materials that accompanied the latest CPI stress as their main theme the importance of a free press and a robust, independent civil society in the fight against corruption. As TI states succinctly in the overview page for the 2017 CPI, “[A]nalysis of the [CPI] results indicates that countries with the least protection for press and non-governmental organisations (NGOs) also tend to have the worst rates of corruption.” And from this observation, TI argues that in order to make progress in the fight against corruption, governments should “do more to encourage free speech, independent media, political dissent and an open an engaged civil society,” and should “minimize regulations on media … and ensure that journalists can work without fear of repression or violence.” (TI also suggests that international donors should consider press freedom relevant to development aid or access to international organizations, a provocative suggestion that deserves fuller exploration elsewhere.)

Speaking in broad terms, I agree with TI’s position, and I’m heartened to see TI making an effort to use the publicity associated with the release of the CPI to push for concrete improvements on a particular area of importance, rather than simply stressing the bad effects of corruption (such as the alleged adverse impacts on inequality and poverty), or devoting undue attention to (statistically meaningless) movements in country scores from previous years. Whether TI succeeded in leveraging the CPI’s publicity into more attention to the freedom of the media and civil society is another story, but the effort is commendable.

That said, I spent a bit of time digging into the supporting research documents that TI provided on this issue, and I find myself in the uncomfortable position of finding the proffered evidentiary basis for the link between a free press/civil society and progress in the fight against corruption problematic, to put it mildly—even though my own reading of the larger academic literature on the topic makes me think the ultimate conclusion is likely correct, at least in broad terms. That latter fact, coupled with my recognition that the materials I’m evaluating are advocacy documents rather than academic research papers, makes me reluctant to criticize too harshly. Nonetheless, on the logic that it’s important to hold even our friends and allies accountable, and that in the long term promoting more careful and rigorous analysis will produce both more suitable policy prescriptions and better advocacy, I’m going to lay out my main difficulties with TI’s data analysis on the press freedom-corruption connection: Continue reading →

Are Jury Trials the Solution to Corruption in Armenian Courts?

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Judicial corruption should be a priority for anticorruption efforts in nearly every country, since so much anticorruption work relies on the judiciary. Yet many countries struggle to address judicial corruption. Armenia is one such country, as its citizens well know. In 2015, Transparency International reported that “70 percent of citizens in Armenia do not consider the judiciary free from influence.” The practice of bribery is so open and notorious that in 2013, Armenia’s human rights ombudsman published a “price list” that judges used to set the price required to obtain various outcomes. One official estimated that most bribes add up to 10% of the cost of the lawsuit, but could be higher for higher-level courts. And in 2017, four judges were arrested for taking bribes that ranged between $1,200 and $30,000. Corruption is not the only problem with Armenian courts—Armenia’s judiciary is weak and generally subservient to the executive branch, and the courts often struggle with institutional competence and public distrust—but all of these problems are compounded by corruption.

Some advocates, including the American Bar Association, have proposed that one solution to judicial corruption in Armenia is to introduce jury trials. In fact, the first post-Soviet Armenian constitution explicitly allowed jury trials, though in the end no jury trials were ever held due to the absence of implementing legislation and lack of political will. When the constitution was amended in 2005, the language allowing jury trials was removed. Nonetheless, there has been some recent public debate in Armenia about whether introducing jury trials would be a good idea (see, for example, here and here).

Could juries be part of the solution to judicial corruption? There are several reasons to think juries can fight judicial corruption in Armenia, and elsewhere as well:

Continue reading →

India’s Political Party Finance Reform Falls Short of Ensuring Complete Transparency—But Is Still a Step in the Right Direction

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On March 1, 2018, India began its latest effort to clean up the financing of political parties and elections. This efforts involves the sale of so-called “electoral bonds” at select state banks across the country. The term “electoral bonds” is a misnomer, for these “bonds” are not linked to elections, nor do they involve paying back a loan or yielding interest. Rather, these instruments are simply a new means to facilitate financial donations to political parties, and are intended to displace the undocumented cash transfers that form the lifeblood of Indian politics. As India’s Finance Minister argued, this cash-based system causes two problems: First, “unclean money from unidentifiable sources” facilitates corruption and money laundering. Second, the reliance on cash allows parties to underreport both their budgets and spending. These concerns led the government last year to reduce the limit on anonymous cash donations from $300 to $30. Electoral bonds intend to further disrupt the system and achieve at least some increases in transparency of political spending.

Announcement of the new system has generated significant commentary, with the few admirers crowded out by the numerous detractors (see, for example, here, here, and here). The main focus of criticism is the new scheme’s guarantee of donor anonymity: Electoral bonds will carry no name and nobody, other than the bank and donor, can know who made the donation unless the donor willingly discloses her identity. The government has defended the anonymity guarantee as a way to prevent reprisals against donors, but critics understandably argue that the lack of transparency means that much political financing will continue to come from “unidentifiable sources,” allowing big business to keep lobbing money in exchange for policy favors while the public remains in the dark. (Moreover, the government’s emphasis on fear of reprisals as the rationale for anonymity suggests the government is unduly concerned with protecting the only class of donors for whom this would be a significant concern, namely large capitalists.) The electoral bond scheme has thus been painted as a move that potentially strengthens the crony capitalism responsible for India’s dire economic situation.

This strong negative reaction to the electoral bond scheme is, in my view, overwrought. True, the new policy does not solve the deep and serious problems with political finance in India. But it does have some notable advantages over status quo. Additionally, critics of the electoral bond system sometimes seem to treat donor transparency as an unalloyed good, when in fact donor transparency may have some drawbacks as well (even if one doesn’t take too seriously the government’s official line on political reprisals). Let me elaborate on each of these points: Continue reading →

Guest Post: The Financial Secrecy Index Identifies the Countries Most Responsible for the Illicit Financial Flows that Facilitate Global Corruption

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Andres Knobel, an analyst at the Tax Justice Network, contributes today’s guest post:

Illicit financial flows have dreadful consequences across the world, not least because they facilitate kleptocracy and other forms of grand corruption. A crucial step toward addressing this issue is identifying those jurisdictions that are the most significant contributors to the problem, and offering specific, concrete recommendations for how they can improve. The Tax Justice Network aims to help do this through its Financial Secrecy Index (FSI), the latest edition of which was published this last January. The 2018 FSI includes a ranking of 112 countries and territories according to their global impact of their financial secrecy, measured by balancing the level of secrecy and the country’s weight in the international financial sector.

The FSI differs from standard “tax haven” lists in that it does not purport to single out a handful of jurisdictions for special opprobrium. Such lists tend to imply that only a few jurisdictions, often small countries, are responsible for all of the world’s illicit financial flows. The 2018 FSI, by contrast, covers 112 jurisdictions, and the next assessment will analyze 130. (The objective is to eventually cover all countries and territories.) Moreover, the FSI ranks countries not solely on the degree of financial secrecy that they allow, but rather on a combination of the degree of financial secrecy (the “Secrecy Score”) and the actual use of a jurisdiction’s financial services (the “Global Scale Weight”), in order to rank countries according to their overall contribution to the problem of illicit financial flows. In other words, the FSI ranking is not necessarily ranking the most secretive countries at the top; rather, the FSI identifies the biggest “problem countries”—those that have financial systems that are both secretive (even if not the most secretive) and that are large and used frequently by non-residents. According to this measure, the ten jurisdictions that make the largest contribution to global financial secrecy are (in order starting with the worst contributors): Switzerland, the United States, the Cayman Islands, Hong Kong, Singapore, Luxembourg, Germany, Taiwan, the United Arab Emirates, and Guernsey. These are the jurisdictions that bear the greatest share of responsibility for enabling global illicit financial flows, including those stemming from corruption and tax evasion, and these are therefore the jurisdictions that most urgently need to become more transparent if we are to see real progress in the fight against illicit global financial flows. While all jurisdictions should act to become transparency, starting with these ten jurisdictions would have the most significant impact in the short term.

Interestingly, and perhaps unsurprisingly for those who follow these issues, a “heat map” of the worst offenders on the FSI looks like the inverse of the more familiar heat map showing the countries perceived to be most corrupt, according to Transparency International’s Corruption Perception Index (CPI). One way to interpret this is the following: public officials and their private-sector cronies in the world’s most corrupt countries according to the CPI (such as Yemen, Sudan, Afghanistan, Venezuela, Libya, etc.) very likely take advantage of financial secrecy to hide the proceeds of corruptions in the countries that most contribute to financial secrecy according to the FSI. Put differently, the worst CPI countries depend on jurisdictions like the FSI’s top ten in order to launder the proceeds of illicit activities.

And what should these (and other) jurisdictions do? On this question, it is important to emphasize that the FSI is not just a ranking system. The FSI report also includes in-depth discussions of all relevant loopholes and sources of information related to financial secrecy in each jurisdiction. This enables researchers, government authorities, activists, and financial institutions to obtain relevant information to be used for risk assessment, policy decisions, or to advocate for specific transparency measures. (All these details are available online, for free and in open data format.) And while every country is different, most jurisdictions would do well to implement what the Tax Justice Network refers to as the “ABC of Fiscal Transparency”:

  • Automatic exchange of bank account information with all other countries, especially developing countries, pursuant to the OECD’s Common Reporting Standard;
  • Beneficial ownership registration in a central public register for companies, partnerships, trusts and foundations (for more specific information, see Tax Justice Network publications here, here, here, and here, as well as this recent paper I published with the Inter-American Development Bank) ; and
  • Country-by-Country reporting, where all multinational companies publish this information online.