Is It a Crime To Promise To Support a Legislator Who Votes the Way You Want?

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Last March, while President Trump and House Speaker Paul Ryan were trying—ultimately unsuccessfully—to muster enough votes for the first version of their proposed Obamacare replacement, the American Health Care Act (AHCA), the Koch brothers’ political organizations announced that they would set up a fund to provide substantial campaign support to all Republicans who voted against the AHCA (which the Koch brothers opposed on the grounds that it didn’t go far enough in repealing the health insurance expansions brought about by the Obamacare). Stripped to its essence, the Koch brothers said to Republican House Representatives: “If you vote the way we want on this bill, we’ll donate (more) money to your campaigns; if you don’t, we won’t.”

Was that offer a violation of the federal anti-bribery statute? In a provocative essay, Louisiana State University Law Professor Ken Levy says yes, it was. Professor Levy reasons as follows: The anti-bribery statute, codified at 18 USC § 201(b), prohibits any person from “giv[ing], offer[ing] or promis[ing] anything of value to any public official … with intent to influence any official act.” The Koch brothers certainly “offered” or “promised” campaign donations, and campaign donations indubitably count as a “thing of value.” Moreover, the Koch brothers made this promise in order to influence a vote in the legislature, clearly an official act. Moreover, as Professor Levy points out, although many people seem to think that the Supreme Court has ruled that providing campaign donations in exchange for votes is constitutionally protected, in fact the Court has held the opposite: promising campaign donations in exchange for an “official act” does qualify as an unlawful bribe, so long as there’s a quid pro quo; in the absence of a quid pro quo, Congress’s power to regulate campaign donations or expenditures is more limited. Thus, all the elements of a §201(b) violation are present, and at least in principle, the Koch brothers could be prosecuted, convicted, and sentenced to a prison term of up to 15 years and/or a fine of up to three times the value of the thing of value offered (which this case could run into the tens of millions of dollars).

Professor Levy’s legal analysis seems, at least on a first reading, to be correct. At the same time, I find it unthinkable that any federal prosecutor—not just Jeff Sessions, but even someone like Preet Bharara—would bring criminal charges in this case, or that any judge would allow a conviction to stand. Professor Levy’s provocative essay has forced me to think a bit harder about why that is. The fact that I can’t imagine a federal bribery case could or should be brought against the Koch brothers for their announced campaign support plan, despite the fact that the conduct seems clearly to violate the letter of the law, suggests that something has gone seriously awry with how U.S. law, and U.S. political culture, think about the relationship between campaign donations, political speech, and criminal bribery. Continue reading →

Shareholder Proposals as a Response to Trump’s Conflicts of Interest

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Donald Trump’s continuing failure to place his assets in a blind trust creates an opportunity for him to abuse the public office of the Presidency for private gain—his own and his family’s. The Trumps have shown themselves willing to work with blatantly corrupt business partners in the past; now, with the awesome power of the Presidency, Trump is in a unique position to do significant damage to the anticorruption agenda. People who, like me, are bothered by the conflicts of interest have sought ways to fight back. While my last post discussed the viability of the Trump anticorruption boycotts, here I discuss a different but potentially complementary approach: shareholder proposals.

What is a shareholder proposal? Every year, each shareholder receives a long booklet of information, called a proxy statement, from every company in which he or she holds stock. These proxy statements are compiled by corporate leadership and distributed to shareholders, who are asked to vote on certain matters: electing directors to the board, hiring the corporate accounting firm, and approving executive compensation. At the end of the proxy statement come the shareholder proposals, short recommendations for the board of directors. Shareholders are asked to vote for or against those proposals.

Under SEC Rule 14a-8, any shareholder (or group of shareholders) who holds $2,000 or 1% (whichever is less) of the company for at least one year may submit a proposal. (There are a few other procedural requirements as well, but they are not too onerous.) Although shareholder proposals are merely advisory—the directors and management retain their power to make decisions on behalf of the corporation—shareholder proposals in the past have been used to advance social and political goals. For example, social activists used shareholder proposals to urge divesting from South Africa during the apartheid era. Last year Exxon Mobile included shareholder proposals to place a climate expert on the Board and to report on compensation for women. A shareholder proposal for Coca-Cola asked the company to report on its operations in high-risk regions with poor human rights records.

In this vein, anticorruption activists who hold stock in corporations that do business with the Trump family brands (such as Amazon, Macy’s, or Zappos) could submit shareholder proposals urging those companies to report on or cease all such business. To be sure, shareholder proposals are merely recommendations to the board. But shareholder proposals are nonetheless a low-cost tool in the anticorruption advocate’s toolbox that can help keep public attention on the issue and prevent the normalization of Trump’s conflicts.

An anti-Trumpian-conflicts-of-interest shareholder proposal, cast in the formalistic style typical of such proposals, might look something like the following:

Continue reading →

Post-TPP Withdrawal: Loss of a Trade-Corruption Milestone?

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As promised, President Trump removed the United States from the Trans-Pacific Partnership (TPP) trade agreement soon after he took office in January. The move withdrew the world’s leading economy from the largest regional trade deal ever proposed. It also represented a major step back from what looked like a breakthrough in linking anticorruption and trade. As I discussed in a previous post, the TPP’s anticorruption chapter was an important step towards inclusion of anticorruption commitments in trade deals, making the U.S. withdrawal from the TPP a step backwards for the decades-old movement to incorporate anticorruption provisions in trade agreements.

Yet Trump’s move was not the end of the TPP negotiations. Nor should it be the end of championing an increased role for anticorruption and transparency in trade deals. With the TPP having reached the final stages of negotiation, its Transparency and Anticorruption Chapter can provide an outline for future trade deals that might provide further opportunities for trade-corruption linkage. As outlined in a previous post, the TPP’s chapter on anticorruption made several strides forward, including obligations to join UNCAC and respect other anticorruption instruments. What’s more, the anticorruption provisions were to be made enforceable in trade dispute resolution tribunals (though, as Danielle has previously written, corruption can already support certain actions in trade dispute arbitration). Looking at the strides forward in the draft TPP, there are three key avenues through which the Transparency and Anticorruption Chapter can continue to strengthen international trade deals.

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Guest Post: When It Comes To Attitudes Toward Corruption, Russians Are More Like Americans Than You Think

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Today’s guest post is from Marina Zaloznaya, Assistant Professor of Sociology at the University of Iowa and author of, The Politics of Bureaucratic Corruption in Post-Transitional Eastern Europe:

Russia and corruption have been dominating the news recently – with the reporting from Washington and Moscow converging in an unusual way. Ongoing accusations against Trump Administration officials resonate even more strongly when linked to Russia, a country most Americans view as rife with corruption. Indeed, many Americans think that Russian citizens are perfectly comfortable with the systematic corruption of political and business elites.

This is a myth. Yes, it is true beyond doubt that corruption is common in Russia – much more so than in the United States – affecting hundreds of thousands of people. But this is not because Russians are systematically more tolerant of corruption than are Americans. Continue reading →

The Costs of Procurement Gaming: Evidence from the Czech Republic

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Like any complex bureaucratic process, a public procurement system can be “gamed,” its rules manipulated to defeat the system’s purpose.  Procurement systems are particularly susceptible to gaming for they are designed to advance two objectives in conflict.  One is to allow governments to buy what they need when they need it quickly and easily.  The second is to prevent fraud and corruption from infecting the system by imposing elaborate safeguards at every step in the purchasing process – at the cost of making it slow, cumbersome, and costly.  The pressures to privilege the first at the expense of the second are many: the agency needs a replacement part immediately; every day the road is left unrepaired traffic snarls and citizens’ patience tested; overworked staff don’t have time to conduct a full-blown procurement.  The result is that procurement officers are always on the lookout for ways to bypass, or “game,” the rules that slow the process down.

One way is to attach an unrealistically low estimate on what the item to be procured will cost.  If the estimated price is below a certain amount, procurement officers can avoid conducting a full-fledged, open tender.  Below the threshold, in many systems $1 million, procurement officers need not prepare a lengthy, formal tender document, advertise it widely for a several week period, constitute a technical committee to evaluate the bids, and follow the many other rules for open, competitive procurements. They can instead use streamlined procedures — variously termed “shopping” or a “request for” or “invitation to submit” quotes—which allow them to call a few suppliers for a price quotation and take the lowest one offered.

No one with experience in public procurement doubts that threshold gaming sometimes occurs.  The questions are how often and why.  Do procurement staff regularly underestimate the contract price to push it below the threshold and avoid the panoply of procurement rules that would otherwise have to be applied?  Do staff do so to secure desperately needed items faster and cheaper?  For other legitimate ends?   Or to further corrupt deals?

New research now settles these questions – at least for the Czech Republic. Moreover, in answering them the researchers use techniques that others can employ to analyze the same questions in their countries. Continue reading →

Profiting from the Presidency? Tracking Corruption and Conflicts of Interest in the Trump Administration

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The Trump Administration has been dogged by accusations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests. We’ve had numerous posts on this blog about these issues (see, for example, here, here, here, here, and here), including a recent overview of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct.

Because it can be hard to keep track of the various allegations related to corruption and conflict of interest in the Trump Administration–and because accusations of “corruption” are sometimes framed quite broadly–we’re going to try to keep track of credible allegations that relate specifically to President Trump, his family, and his close associates exploiting the office of the presidency for personal financial gain. Just as President Trump’s son Eric will be providing President Trump with “quarterly” updates on the Trump Organization’s business affairs, we will do our best to provide readers with regularly updates on credible allegations of presidential profiteering. (We are not the only ones keeping track of these issues. For other useful resources and compilations, see here, here, and here.)

We will organize the issues into the following four categories, which capture four related but distinct ways that political leaders leverage the power of public office to enrich themselves, their families, and their cronies:

  1. U.S. Government Payments to the Trump Organization
  2. Use of the Power of the Presidency to Promote Trump Brands
  3. U.S. Government Regulatory and Policy Decisions that Benefit Business Interests of the Trump Family and Senior Advisors
  4. Private and Foreign Interests Seeking to Influence the Trump Administration Through Dealings with Trump Businesses

You can find our first report here.

The Interational Olympic Committee’s Revised Host City Contract: Another Failed Attempt at Preventing Corruption

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Recent Olympic Games, including the 2014 Sochi Winter Games and the 2016 Rio Summer Games, have been dogged by corruption scandals (see here and here). The Sochi Games were particularly egregious: Russian politician Boris Nemtsov believes that the total scale of the embezzlement accounts for 50-60% of the stated final cost of the Russian Olympics. One example cited was the main 40,000-seat Fisht Olympic Stadium, which was first projected to cost about $49 million. Anticorruption activist Alexy Navalny estimates that the real final cost could well exceed $520 million and may total more than $700 million, many times the fair value. This has led to some very bad publicity for the International Olympic Committee (IOC), which organizes the Games. In response to these and other concerns, this past February the IOC made changes to its Host City Contract, which sets out the requirements that cities must meet in order to host the Olympic Games. For the first time, the IOC included specific anticorruption standards and human rights requirements, which were noticeably absent from all previous versions.

The revised provision in the contract states that [the host city must] “refrain from any act involving fraud or corruption, in a manner consistent with any international agreements, laws and regulations applicable in the Host Country and all internationally-recognized anti-corruption standards applicable in the Host Country, including by establishing and maintaining effective reporting and compliance.” The IOC’s revised language integrated a number of recommendations from organizations such as Transparency International, Amnesty International, and the Sport and Rights Alliance. IOC President Thomas Bach explained that the IOC adopted the changes because “[t]ransparency, good governance and accountability are key elements of Olympic Agenda.”

However, both the substance of the terms and lack of enforcement mechanisms mean this provision does absolutely nothing in fighting corruption. The change is little more than a public relations stunt by the IOC to improve its image following numerous criticisms from recent games. Rather than applauding Bach for placing words in a contract, anticorruption activists should continue to push for meaningful change at the Olympic Games. The revised contract fails to represent genuine progress on fighting Olympic corruption for three reasons:

Continue reading →

The Opportunity to Address Kenya’s Corruption Problem

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With the Kenyan Presidential elections on the horizon in 2017, incumbent President Uhuru Kenyatta, who hopes to continue his regime, has spoken out against corruption, emphasizing that combating this widespread problem requires effort on the part of every Kenyan. In his first term, President Kenyatta had shown promising signs of staying true to his philosophy of holding everyone accountable by actually getting rid of members of the Cabinet. Yet Kenya’s recent history makes many skeptical. For over a decade, Kenyan presidents have been pledging to get corruption under control. In 2003, newly-elected President Kibaki promised to stamp out corruption in Kenya. He proceeded to enact two important pieces of legislation in his first year: the Anti-Corruption and Economic Crimes Act, which established the Kenya Anti-Corruption Commission (KACC) to investigate corruption and educate the public, and the Public Officer Act, which required all public officers to declare their wealth. Yet at the end of President Kibaki’s decade-long regime, the situation remained bleak, with corruption running rampant. Kenya’s education sector offers a particularly troublesome glimpse into the continued prevalence of the problem. A 2010 forensic audit of Kenya’s Education Sector Support Programme found that misappropriation of funds and leakages in transfer of cash and materials from the Ministry of Education to schools, as well as other types of private embezzling and mis-accounting of funds, had led to the loss of 4.2 Billion Kenya Shillings (US$55 million) that was originally intended for education. Furthermore, most of the suspected actors went unpunished; even when caught, the culprits were either transferred to new departments or at most suspended from their role.

As for President Kenyatta’s more recent efforts, the President claims that he has done his part in the anticorruption fight and is frustrated by the lack of complementary efforts by others. Yet many critics claim that President Kenyatta has not demonstrated the political will necessary to fight corruption. And some have gone further, accusing the president of suspect and excessive awarding of government contracts to companies like Safaricom without an open bidding process. Safaricom have been involved in multiple corruption scandals already, leading to suspicions of bribery. Critics have also been highlighting the fact that those close to Kenyatta seem immune from serious scrutiny for corrupt acts.

Even if we put those concerns to one side, and assume that both President Kenyatta and President Kibaki before him were acting in good faith, the numerous anticorruption initiatives undertaken by both administrations do not seem to have had much of an impact. There are a few things that Kenya’s next president—whether it is Kenyatta or someone else—could do that would go further in making progress against the corruption problem than the measures that have been adopted so far: Continue reading →

Exposing Secret Offshore Bank Accounts: American Law

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Kleptocrats, drug traffickers, and other big-time crooks face a common problem: How to hide their money from the authorities while retaining easy access to it.  Yesterday former Senate staffer Elise Bean described one common, low-cost, easy solution and how a recent U.S. law has made it far more difficult for American criminals to turn to it. The solution, create a corporation in another country and then open a bank account in that country in the corporation’s name, is now widely known thanks to the Panama Papers.  What Bean offered in her April 26 testimony before a Congressional committee was a step-by-step explanation of how the scheme works and the U.S. law’s success in making it far harder for Americans to take advantage of it.

Committee members peppered her with questions about the law, its effect, and ways to improve its operation.  About the only question they didn’t ask is why more countries don’t have a similar law.  That would be one for anticorruption advocates to put to legislators in countries lacking one.

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Anticorruption Bibliography–April 2017 Update

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An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written