CREW’s Long-Shot Emoluments Clause Lawsuit Against Trump: Calculated Risk or Reckless Gamble?

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After the events of the last ten days, worrying about the potential conflicts of interest created by the Trump organization’s business dealings with foreign governments seems almost quaint. It appears that under the Trump Administration, constitutional crises don’t get resolved, they just get overshadowed by bigger constitutional crises; such are the strange times in which we live. But I did want to return to the topic I wrote about a couple of weeks ago, concerning the pending lawsuit brought by the Citizens for Responsibility & Ethics in Washington (CREW) alleging that the Trump Organization’s business relationships with foreign governments violate the Constitution’s Foreign Emoluments Clause. In my post a couple of weeks ago, I predicted that U.S. courts are likely to toss the suit out on jurisdictional grounds, without reaching the merits of the claim. That assessment appears to be shared by the overwhelming majority of legal experts who have weighed in (see here, here, here, here, here, and here), though the consensus is not quite universal.

Several people have suggested to me that even if the suit has little chance of success, it was good that CREW filed it. They’ve offered two arguments for this assessment: First, even if there’s only a very small chance of success, the costs of bringing the suit are relatively low, and the benefits if the suit does end up succeeding are enormous—so what’s the harm in trying? Second, the mere act of filing the suit, even if it’s ultimately dismissed on jurisdictional grounds, will generate attention to the underlying constitutional and ethical issues, and help both educate and mobilize the citizenry. My colleague Larry Tribe, who is one of the parties who filed the CREW brief, laid out this position clearly and succinctly in an interview shortly after the brief was filed:

Litigation can help bring important principles to light… It helps me teach my students, and it performs an educational function vis-à-vis the public. Of course, I don’t take on causes that I feel confident I will lose purely for educational purposes. But win or lose, we’re going to help educate the public on something that’s very important.

Much as I wish those arguments were true, and much as I wish the CREW lawsuit had some chance of succeeding, I respectfully and reluctantly disagree. I hope that events will prove me wrong, but at the moment I fear that CREW’s decision to file this lawsuit was not only a long shot, but was a serious tactical blunder that will probably hurt the cause overall. Continue reading →

The Role of Corruption in the Syrian Civil War

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Many forces spurred on the development of the Syrian Civil War, a conflict that has likely led to the deaths of over half a million people, as well as the displacement of ten million more. While fighting was sparked by protests within Syria, a reflection of the larger wave of discontent in the Middle East and North Africa that spurred the so-called Arab Spring, the uniquely destructive path of Syria’s internal instability is tied to more specifically Syrian problems, including rule by a minority religious group – the Alawites – over a mostly Sunni country, early and continued support by Russia to maintain the Assad regime, a partially autonomous Kurdish minority in the north, and the rise of Sunni rebel groups including ISIS. While these larger points are important, another, more mundane factor is often overlooked: the pervasive corruption of the Assad regime, which contributed to the outbreak of the civil war in at least three ways:

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Appearances Can Be Revealing: The Trump Administration’s Corruption Perceptions Problem

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In the wake of President Trump’s Executive Order “Protecting the Nation from Foreign Terrorist Entry into the United States” (also known as the “Muslim Ban”), numerous media outlets published articles highlighting the fact that Trump’s order excluded several predominantly Muslim countries where the Trump organization conducts business (see here, here and here). The implication was that this exclusion was intentional, and demonstrates the extent to which Trump’s business ventures create conflicts of interest that influence his policy decisions. Although this explanation is plausible, another likely explanation is that the list of countries targeted by the ban tracked the visa waiver program restrictions Congress passed in 2015 and the Obama administration expanded in 2016 (see here).

Were the limitations on the ban driven by corruption or policy priorities? We don’t know—and that’s the problem. Even if Trump’s executive order had no connection with his business, Trump’s extensive conflicts of interest and unwillingness to divest from foreign holdings casts a shadow of corruption over any decision made by the administration. The fact that every decision Trump makes could be tainted with the appearance of self-interest, regardless of whether his administration actually is doing what it believes is in the public’s interest, is incredibly damaging, delegitimizing, and destabilizing. This is why we have ethics rules for government officials that seek to prevent not only corruption, but also the appearance of corruption. Trump’s failure to clear his presidency of any potential conflicts of interest has a few particularly pernicious effects:

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The Impending Repeal of the U.S. “Publish What You Pay” Rules for Extractive Industries

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As many readers of this blog are likely aware, the U.S. Congress is poised to invoke a statute called the “Congressional Review Act” to override the rules that the Securities and Exchange Commission promulgated last year to implement a provision of the Dodd-Frank Act (Section 1504) that required companies in the extractive industries (oil, gas, and mining) to publicly disclose the amounts that they pay to foreign governments in connection with projects abroad. (A timeline of the legislation and its implementing regs is here.)

The vote is scheduled for this coming Monday. Like many in the anticorruption community, I think eliminating the Publish What You Pay (PWYP) regs would be a bad idea. Alas, I don’t have time to write up a substantive discussion of the issue before the Monday vote. Fortunately, there are already a fair number of discussions of the issue elsewhere; for example, Jodi Vitori of Global Witness, who previously served as an intelligence officer in the Air Force, has a succinct explanation of why eliminating these PWYP rules would be bad for U.S. national security here.

While I usually don’t use this blog to engage in direct activism/advocacy, in this case I wanted to reach out to those GAB readers who are based in the U.S., particularly those whose representatives are Republicans, and encourage you to call your House Representative and Senator to express your opposition to the invalidation of the rules implementing Section 1504. (If you’re not sure who your House Representative is, you can find that here, and you can find a list of contact information here. Senate contact information is here.)

Guest Post: The Finnish Paradox–Anticorruption Success Without Anticorruption Policy

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

In its January 2017 Inclusive Growth and Development report, the World Economic Forum listed five countries as the best of the advanced economies in addressing corruption: New Zealand, Singapore, Sweden, Norway, and–heading the list–Finland. Finland, along with its fellow Scandinavian countries, is often held out as a model of clean and effective government, toward which other countries should aspire. Yet 50 years ago, Finland’s reputation was quite different. As Niklas Jensen-Eriksen has documented, for example, senior British policymakers in the 1950s and 1960s viewed corruption in the upper strata of Finnish politics as an issue, and warned that it might not be possible for British companies to do business there without paying bribes. What changed over the course of that half-century? The Finnish Ministry of Justice’s delightfully-smug official report, as well as a limited number of other similar publications, suggest a number of micro- and macro-level changes, some planned for and some accidents of social and political evolution, that are assumed (although there’s no real proof) to have denied the opportunity and incentive for corruption.

These include long-term and stable legal and administrative environments that also engaged members of society at all levels, the absence of strata of bureaucracy and devolved public (and public-focused) spending that promoted local engagement, transparent decisionmaking and the right of citizen redress, universal education, adequate official salaries, state funding of political parties, access to all public records (including tax records), access to funds (legal aid) to challenge state decisions. Yet among these changes Finland never did much of anything specifically about corruption (and indeed the country still attracts disapproving comments from GRECO and the OECD for not doing more even now).

This, then, is the Finnish Paradox: a country that didn’t decide to “fight corruption” over the last 50 years is now held up as an exemplar of effective anticorruption control. It is a model to which other countries should aspire (and that donors should have in mind as a target) when designing anticorruption strategies and interventions.

This Finnish paradox highlights two possible lessons that challenge much of the thinking behind current approaches championed by the “anticorruption industry” (including many donors, activists, and other reformers): Continue reading →

How Should the U.S. Anticorruption Community Respond to Trump? Engagement vs. Confrontation

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So Donald Trump is now the President of the United States, and has been for almost two weeks. Yes, this is really happening. And yes, this is really frightening. As has been pointed out countless times, Donald Trump poses a unique and unprecedented threat to American political institutions. It’s not mainly the hard-right policies that President Trump and the Republican Congress will push. People can strongly disagree with much of that policy agenda (as I do), but those policy positions are, alas, within the American political mainstream. And it’s not just Trump’s obvious narcissism, racism, and ignorance, bad as those are. On top of all that, Trump seems to view the presidency mainly as an opportunity for personal enrichment, and many of his top-level advisors and appointees seem to have a similar attitude. Notwithstanding his (obviously disingenuous) “drain the swamp” rhetoric, Trump—and many congressional Republicans—seem to have little regard for basic ethical norms and principles. And there are reasonable fears, based on what we’ve seen so far, that much of the Trump Administration’s policy agenda, though couched in familiar conservative market-oriented rhetoric, will in fact be oriented toward enriching the friends and families of senior administration officials, including but not limited to Trump’s own organization.

A democratically elected head of government who ran on a populist platform, but whose agenda seems to be oriented primarily toward using political power to enrich himself and his cronies? This might be a new experience for Americans, but as Professor Palifka pointed out in her post last week, this is a familiar story in many other countries (including Mexico, Ms. Palifka’s lead example). Think Silvio Berlusconi in Italy, Nestor and Cristina Kirchner in Argentina, Thaksin Shinawatra in Thailand, Jacob Zuma in South Africa, and countless others. Now that the U.S. seems to be facing a similar situation, the U.S. anticorruption community—which I’ll define loosely as the diverse set of activists, advocacy groups, commentators, researchers, scholars, and others who focus on anticorruption in their professional work—needs to be actively involved in responding.

Unfortunately, the U.S. anticorruption community is not especially well-prepared to deal with this situation. Put aside for the moment that the most prominent international anticorruption advocacy group—Transparency International (TI)—recently voted to strip its U.S. chapter (TI-USA) of its accreditation, triggering an ongoing internal fight that has, I gather, left the chapter in limbo. (That’s a whole other story.) Much more important than any internal organizational drama is the fact that most U.S. anticorruption advocacy groups have typically focused on questions of U.S. anticorruption policy—such as FCPA enforcement, asset recovery, corporate transparency, and the like—not on systemic corruption in the U.S. government itself. True, some groups have in the past positioned themselves as fighting systemic corruption in the U.S. government, but those groups generally use a broad (in my view, overly broad) definition of “corruption” that emphasizes primarily campaign finance and lobbying reform—noble causes, to be sure, but not really the main worry right now. The U.S. anticorruption community faces a challenge that’s more akin to the challenge anticorruption communities have faced (or are still facing) in places like Mexico, Italy, Argentina, Thailand, and South Africa, though perhaps with even higher stakes.

My sense is that many leading figures in the U.S. anticorruption community are already thinking hard, and having many constructive conversations, about how to respond to the unique challenges posed by the Trump Administration. In the remainder of this post, I want to focus on a basic strategic question that I’ve seen come up many times in these conversations: Engage or confront? Continue reading →

Why Does the SEC Enforce the FCPA?

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Donald Trump’s nomination of Jay Clayton to chair the Securities and Exchange Commission (SEC) has attracted some attention and concern from the anticorruption community. That concern is due mainly to a report issued by a New York Bar Foundation committee, chaired by Mr. Clayton, which criticized the Foreign Corrupt Practices Act (FCPA) for its alleged adverse and asymmetric impact on U.S. corporations. Though it remains to be seen how strongly committed Mr. Clayton is to the views expressed in the report, the concern is understandable given that the SEC is one of the two agencies—along with the Department of Justice (DOJ)—that is responsible for enforcing the FCPA. This controversy also highlights another, broader question that some FCPA critics have raised: Why is the SEC even involved in FCPA enforcement in the first place?

Congress created the SEC in 1934 through the aptly named Securities Exchange Act to enforce federal regulations regarding the trade of securities after they have been issued. The main impetus for the SEC’s creation was the belief that an under-regulated securities market helped drive the 1929 stock market crash. However, over the past 80 years, the SEC has expanded into other areas of enforcement—such as FCPA enforcement—that seem tentatively tied to the SEC’s original mandate. Some have argued that due to resource limitations, it does not make sense for the SEC to pursue vigorous FCPA enforcement at the expense of diverting resources from protecting investors. In pushing this point, some critics also point out that the SEC’s major regulatory fumbles of the past decade coincide with the escalation of FCPA enforcement activity—which perhaps suggests that expanding the SEC’s responsibilities beyond its original mandate has indeed weakened the agency.

The reasons for the SEC’s involvement in FCPA enforcement are partly historical, as explained further below. But beyond that, despite the critics’ complaints, in fact FCPA enforcement remains a valuable use of the SEC’s resources in the 21st century.

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Anticorruption Bibliography–January 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

Why CREW’s Foreign Emoluments Lawsuit Probably Won’t Succeed

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A couple months back, before Donald Trump was formally inaugurated as President of the United States, I dismissed as a “pipe dream” the idea of successfully suing President Trump for violations of the U.S. Constitution’s Foreign Emoluments Clause—which prohibits any United States officeholder from accepting any “emolument” from a foreign state without the consent of Congress—due to the Trump Organization’s business dealings with foreign governments. Was my dismissive take premature? We may find out soon: Earlier this week, the Citizens for Responsibility and Ethics in Washington (CREW) filed a lawsuit in the Southern District of New York raising this very claim, and asking the New York court to issue an order enjoining President Trump from continuing to violate the Clause.

I have a great deal of respect for CREW, and on the merits, I tend to think that Trump may well be in violation of the clause (though I don’t think it’s quite as obvious as the CREW brief and some other commentators have suggested, for reasons I might get into in a future post). But I continue to be skeptical that this suit has much chance of success, because I don’t think that the court will ever reach the merits of the claim. Rather, the case is likely to be dismissed before reaching the merits, for three reasons. Continue reading →

Building a Cadre of Procurement Professionals

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Government purchases of goods, services, and public works constitute anywhere from 15 percent to as much as 40 percent of total public spending, and thus any government committed to fighting corruption should make procurement a priority. Corruption sneaks into public procurement in many ways in the long and often complex chain of events in the process: from identifying a need to designing the specifications for meeting the need to the award of a contract and the delivery of the final product.  While stepping up procurement audits and investigations can weed procurement out of corruption, far better is to keep it from infecting the process in the first place.

For that a government needs a cadre of well-trained public procurement professionals dedicated to ensuring their country receives the best value for every dollar it spends building roads or acquiring high tech communications equipment or simply buying pencils and papers for schools. Procurement professionals must be knowledgeable about law, finance, engineering, project management, economics, and of course corruption, and while some of that learning can be picked up through intensive on-the-job training programs, building a first-rate, technically sophisticated cadre of procurement specialists takes more than putting those with a generalist degree through a few o-j-t courses.  It requires, as Francis Fukuyama explains in discussing how the public services of Japan, Germany, and the United Kingdom’s public services were built, university courses that teach prospective public servants basic analytic skills and tools, knowledge that simply cannot be mastered in a week or even several week intensive training course.

For the United Nations Office on Drugs and Crime I have been asked to suggest what a curriculum leading to an undergraduate degree in public procurement might look like.  In “Building Sustainable Capacity in Public Procurement,” Peter Trepte of Nottingham University’s Public Procurement Research Group explains that teaching public servants what the procurement law is and how to comply with it is not enough.  To conduct fair, effective, and efficient procurements requires an interdisciplinary course of study that trains students in how to identify procurement needs, plan procurement activities, assess market conditions, manage relations with bidders and contractors, and administer contracts.

Below is my effort to follow Professor Trepte’s advice.   Comments are most welcome. Continue reading →