A Step in the Wrong Direction: How Term Limits Could Increase Corruption

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The recent federal corruption convictions of Sheldon Silver and Dean Skelos, longtime New York legislative leaders, have rightly led many to offer suggestions for preventing political corruption by elected officials. In two posts on this blog, Sarah suggested a mechanism for creating additional parties to make elections more competitive, and, in an earlier post, she proposed limiting New York legislators’ opportunity to take on additional employment. Others have suggested increasing legislator pay, amending campaign finance laws to close the “LLC loophole,” and increasing enforcement, including with independent ethics officers. This list is far from exhaustive.

One other “fix” that comes up again and again: term limits for legislators. Soon after the corruption scandal involving Silver and Skelos hit the news, a New York Post opinion piece called for term limits. And since Silver and Skelos were convicted, the calls have continued for term limits as part of a package of reforms (see, for example, here, here, and here). Although no one asserts that term limits are the silver bullet for ending corruption, many claim that term limits can play a constructive role as part of a comprehensive anticorruption package. But I am not convinced that term limits actually reduce the likelihood of corruption. Not only are term limits unlikely to be much help, but—as others have also argued (see here and here)—term limits might even increase corruption. Here’s why:

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Bitcoin, Blockchain, and Land Reform: Can an “Incorruptible” Technology Cure Corruption?

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Since its inception in 2009, Bitcoin—a digital currency secured by encryption—has attracted attention, interest, and controversy. Less attention (at least until recently) has been paid to other applications of the underlying technology, “blockchain,” that makes Bitcoin possible. And while the anonymity associated with Bitcoin is, if anything, often associated with illicit transactions in the “dark web,” other applications of the blockchain technology might be used to enhance transparency and promote integrity. Some of the early proposals along these lines are indeed encouraging; at the same time, blockchain is not a technological panacea, and recognizing its limitations can identify areas that may require particular attention in anticorruption efforts.

First, a bit more (non-technical) information on the technology. Blockchain functions as an online, public digital ledger. In the Bitcoin context, the technology makes it possible to track and record Bitcoin transactions in the ledger and distribute that information in real-time to all computers connected to the Bitcoin network. Because of this distribution, the ledger is updated independent of any central authority. Moreover, because each chronological “block” in the chain contains both unique information about each transaction and also a unique identifier of the previous block, which is then distributed to all computers on the network, it is very difficult (perhaps impossible) to tamper with or alter the transaction records.

While the blockchain technology made Bitcoin possible, its public and tamper-proof data storage function could assist with efforts to promote transparency and fight corruption. For example, in the context of land reform, Austin-based start-up Factom has reached an agreement with the Honduran government to transfer its land registry onto a blockchain-enforced digital database. The objective is to create a reliable land title-keeping system in a country where, as USAID notes, “only 14% of Hondurans legally occupy properties and, of the properties held legally, only 30% are registered.” In addition to a lack of registration, government officials currently can alter titles to those properties that are registered, allocating properties to themselves (or to others in exchange for bribes). Moreover, citizens often lack access to records, which may provide conflicting information, and are thus unable to defend themselves against infringement of property, use, or mineral rights. By recording land title in an immutable public registry (relying, according to reports, on the Bitcoin blockchain’s data-embedding function), the partnership between Factom and the Honduran government seeks to secure for the public a clear, trustworthy record of ownership in order to improve protection of land rights, and to incentivize registration.

This seems like a worthwhile initiative, and one that transparency and anticorruption advocates should watch closely. At the same time, it’s worth noting several reasons we should be careful not to lose sight of important corruption challenges amidst the excitement surrounding the digitized ledger: Continue reading →

Guest Post: A “Right to Truth” in Grand Corruption Cases?

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Lucas E. Gómez and Ignacio A. Boulin Victoria of the Latin American Center for Human Rights (Centro Latinoamericano de Derechos Humanos, CLADH) in Argentina contribute the following guest post:

Argentina, 1978. In the midst of terror, a group of parents searching for their children finds no answer in domestic justice. Thousands of habeas corpus petitions are rejected by judges. The military dictatorship denies having any clue about them: Videla, the leader of the government, declares: “they are neither dead, nor alive; they are disappeared.” These parents respond with innovative strategies (maybe without being aware of the innovation): They start sending letters of complaint (over a thousand) to the Inter-American Commission on Human Rights (IAHCR). The result: the IACHR visits Argentina and issues a 1980 report recognizing widespread human rights violations; the report has an enormous impact both inside and outside of Argentina. Yet by 1990, these parents still don’t know what happened to their children. Despite the return to democracy in 1983, and some trials of military officers and terrorists shortly thereafter, in 1986 and 1987 Congress passes two acts restricting the criminal prosecution of military officers, and a few years later, President Menem pardons both military hierarchies and terrorists, releasing them from jail.

Argentina, 1995. Some of these parents devise a new strategy: Even if criminal prosecution is forbidden, they assert that there is still a “right to the truth”—a right to know what happened to the disappeared. Though Argentina’s Supreme Court rejects the claim, the parents again take the case to the IACHR. Finally, in 1999, Argentina settles the IACHR case, recognizing the existence of the right to truth. This development ultimately led to the re-opening of the criminal prosecutions against military officers: Once information about the atrocities came out, society started mobilizing for justice. The right to truth put in front of people’s eyes the extent and gravity of the crimes, and the identities of both the victims and the perpetrators. Continue reading →

“Charitable Giving” — A Way Around the FCPA? Part II

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In a December post I asked readers how they would rule in an FCPA-related case recently before U.S. federal trial judge Melinda Harmon.  As judge Harmon was required to do when deciding the case, readers were asked to assume the following was true:  The chief executive of Hyperdynamics Corporation, a Houston-based oil exploration company, had established “American Friends of Guinea,” an NGO, in 2006 after the Guinean government had threatened to revoke the company’s oil concession, its sole asset; and shortly after “Friends” was created, the government approved a renegotiated concession.  In 2007, when the government again threatened its concession, “Friends” made a substantial contribution of medicines to care for Guineans stricken with cholera, and in 2009, after the government again reaffirmed the concession, Hyperdynamics donated company stock to “Friends.”  Finally, in 2011 the firm itself gave government ministries some $30,000 worth of computer equipment.

Well, readers, what do you think?  Do the above allegations, if true, state a plausible violation of the FCPA?  That is, could a reasonable jury, or judge sitting as a finder of facts, infer from them that one or more of the donations was actually a bribe Hyperdynamics paid to Guinean government officials in return for allowing it keep its oil concession? Continue reading →

It’s Time to Abandon the “$2.6 Trillion/5% of Global GDP” Corruption-Cost Estimate

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In my post a couple weeks back, I expressed some puzzlement about the source of the widely-quoted estimate that corruption costs the global economy approximately $2.6 trillion, or roughly 5% of global GDP. I was hoping that someone out there in GAB Reader-Land would be able to point me to the source for this figure (as several GAB readers helpfully did when I expressed similar puzzlement last year about the source for the related estimate that there are approximately $1 trillion in annual bribe payments). Alas, although several people made some very insightful comments (some of which are in the public comment thread with the original post), this time it seems that nobody out there has been able to point me to a definitive source.

I’ve done a bit more poking around (with the help of GAB readers and contributors), and here’s my best guess as to where the $2.6 trillion/5% of GDP number comes from: Continue reading →

Whistle While You Work: Protections for Internal Whistleblowers under Dodd-Frank

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One of the many objectives of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was to encourage whistleblowers to report securities violations—including violations of the Foreign Corrupt Practices Act (FCPA)—to the Securities and Exchange Commission (SEC). Among other things, Dodd-Frank created new remedies for whistleblowers who suffer retaliation by their employers, including allowing whistleblowers to sue their (former) employers on more favorable terms than existing anti-retaliation laws. But what if an employee doesn’t report a possible violation to the SEC, but only told her boss? If that “internal whistleblower” is subsequently terminated, can she avail herself of Dodd-Frank’s anti-retaliation provisions?  Because of the way the law was drafted, this turns out to be a difficult legal question, one on which courts across the U.S. have divided.

Nevertheless, there are strong practical reasons—above and beyond the basic reasons that could be advanced in any context—why Dodd-Frank should cover internal whistleblowers. Unless the courts resolve their division in favor of internal whistleblowers soon (most likely through a Supreme Court decision), Congress should step in and rewrite the law to remove any doubt that internal whistleblowers are protected.

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Guest Post: Connecting Health and the Fight Against Corruption

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Taryn Vian, Associate Professor of Global Health at the Boston University School of Public Health, contributes the following guest post:

The recent endorsement of the Sustainable Development Goals (SDGs) has prompted greater discussion and debate about the most important aspects of, and the most effective means for achieving, sustainable development. Most of the discussion of corruption in the context of the SDGs has focused on SDG 16 (“Promote just, peaceful, and inclusive societies”), which specifically includes anticorruption and related objectives among its targets (and which has prompted some debate on this blog – see here, here, here, and here.) But the fight against corruption is also closely linked to the achievement of another one of the SDGs: SDG 3 (“Ensure healthy lives and promote well-being for all at all ages”).

On its face, SDG 3 is about health, not corruption. But the fight against corruption is in fact closely connected to SDG 3, and health professionals need to open their eyes to this connection. Corruption worsens health outcomes in many ways: siphoning off resources that are supposed to be devoted to health care (for example, through embezzlement and absenteeism), increasing the cost and decreasing the availability of medicines and medical equipment (or enabling the spread of fake medicines), creating barriers to use of health services (particularly by poor and uneducated people who are especially vulnerable to bribery) and reducing the overall availability and quality of health services. Thus the fight for increased health ought to be—perhaps must be—seen as inextricably connected to the fight against corruption.

Though measuring the impact of corruption on health is challenging, at this point we have a sufficiently large (and growing) body of evidence that corruption threatens health. Consider the following: Continue reading →

Take Two: Will a Second Attempt at Hacking Corruption in China Work?

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Late 2010 to early 2011 was the heyday for India’s “I Paid A Bribe” (IPAB) website, which encouraged Indian citizens to report personal encounters with bribe solicitation from public officials. As Rick Messick previously reported, although the site experienced its share of challenges, the fact is that IPAB worked (and even thrived at times) and continues to be operational today. For digitally-inclined anti-kleptocrats, IPAB seemed like a prime example of a bottom-up approach to tackling corruption, one that could be emulated elsewhere. But in the summer of 2011, when a handful of concerned netizens in China attempted to import the IPAB model into China’s cyberspace, their attempts almost immediately failed. While these copycat sites enjoyed a brief period of temporary government approval (or at least ambivalence), they were all shut down well within half a year of founding, with most squashed within a month.

What the initial popularity of these sites indicated was a strong desire among Chinese netizens to function as self-appointed watchdogs who sniff out incidents of government corruption. (Indeed, between 2003 and 2010, China’s most popular media source saw a 20-fold increase in the number of anticorruption-related posts.) In late 2013, the Chinese Communist Party (CCP) tried to tap into this newfound desire. The CCP’s Central Commission for Discipline Inspection (CCDI) created a corruption-reporting website that allowed citizens to access anticorruption laws, suggest proposals to anticorruption policy, and most importantly, “submit tips on current investigations or suspected cases of corruption.” In June 2015, the CCDI released a smartphone app version of the reporting site, which allows users to report up to 11 different categories of corrupt acts (e.g. using public funds for international travel and domestic tourism, and hosting extravagant banquets and parties), and even lets users upload pictures or videos of the act.

So will this new, Party-controlled version of crowdsourced anticorruption reporting prove more successful than its predecessor? Maybe. But there are also a number of reasons to be skeptical.

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Furthering Cross-Border Cooperation to Fight Corruption

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Some of the best news on the corruption front is the growing cross-border cooperation among domestic law enforcement agencies.  The French firm Alstom’s December 18 agreement to pay R$ 60 million, US$ 16 million, to Brazil to settle bribery claims nicely illustrates the pay off from such cooperation.  Thanks to information supplied by French and Swiss authorities, Brazilian prosecutors showed that Alstom had bribed officials of Sao Paulo’s state government to win a contract to supply electrical equipment to the state’s power company.  A critical element in the case was evidence that the officials had deposited large sums in Swiss banks around the time the contract was awarded.

Although Brazil, France, and Switzerland are all bound by domestic legislation and treaties to help one another investigate and prosecute corruption cases, law alone is not enough to produce the kind of cooperation that resulted in the Alstom settlement.  As Silvio Marques, one of the Alstom prosecutors, explained the other day in a note to colleagues, the key element is – Continue reading →

Where Does the $2.6 Trillion Corruption Cost Estimate Come From?

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Last year, I published a post expressing my puzzlement regarding the source of the widely-cited statistic that over $1 trillion dollars are paid annually. I was pleasantly surprised by the speed with which several GAB readers pointed me to the original source that described the methods and data used to calculate that number—and while I wasn’t entirely satisfied, it was at least nice to know where the number came from.

I’m hoping someone out there can help me with a very similar question: Within the last few months, I’ve been at several conferences and meetings where someone has quoted the figure that worldwide corruption (not just bribery) imposes annual costs to the global economy of approximately $2.6 trillion, roughly 5% of global GDP. I’ve looked and looked, and I cannot for the life of me figure out where this number comes from. Continue reading →