TI Report on Anti-Bribery Compliance Programs in the Defense Industry: Some Quick Reactions

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Last April Transparency International UK released a very interesting report on the quality of corporate anti-bribery compliance programs in the defense industry. (This was the second such report; the first was issued in 2015). The report evaluated the ethics and anti-bribery compliance programs of 163 defense companies along five dimensions (leadership & governance, risk management, policies & codes, training, personnel & helplines) using publicly available information, supplemented with additional internal information from 63 cooperating firms, and assigned each firm a letter grade (A-F). The most eye-catching result, and the one that has gotten the most attention in the press releases and reporting on the report, is how badly the defense industry seems to be doing overall on this issue: Of the 163 firms included in the review, there were 4 As, 23 Bs, 29 Cs, 31 Ds, 19 Es, and 57 Fs. Thus, fewer than 17% of the defense firms examined scored in the A or B range, while close to half (47%) received a failing grade of E or F.

That’s certainly a notable and important (and depressing) finding, but digging a bit deeper, there are a few other interesting features of the report that have gotten a bit less attention, and are worth highlighting. Continue reading →

Two Questions for the Open Contracting Partnership

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One of today’s more promising global anticorruption movements is The Open Contracting Partnership.  A venture that brings together organizations as different as the World Bank, the Philippines Government Procurement Policy Board, and Oxfam, its goal is to open government contracting to greater transparency and public participation.  As many studies show (click here, here, and here for recent examples), corruption infects all stages of the procurement process  — from skewing the specifications to favor a single firm to rigging the tendering process to rampant cheating in contract performance.  And as many of these same studies argue, less secrecy and more public involvement in the process is one way to curb it.

The Partnership has taken important steps towards realizing these objectives since its launch in October 2012.  It has developed global principles governing contract openness, created a standard format for reporting data on government contracts, collated information on open contracting in the award of natural resource concessions and land, assembled a quality staff and advisory board, and a fostered an enthusiastic global community of practice.

All this is not only welcome but laudable, and the organizers and supporters of the Partnership are to be congratulated for the initiative.  Now that the Partnership is firmly established, however, it is time to address two questions it has so far avoided. Continue reading →

Anticorruption Bibliography–June 2015 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.

Fighting Officer Involved Domestic Violence: Preventing Police Corruption from Hindering Investigation

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Corruption within police forces is a well-known foe that rears its head in a dozen different ways. Police corruption is often discussed in terms of monetary abuses, from kickbacks to shakedowns to opportunistic theft. Yet these crimes are far from the only form of police misconduct. For example,there have been numerous incidents in which police officers demand sex from prostitutes in exchange for allowing them to continue working–a form of corruption that falls under the general category of “sextortion,” which I wrote about in an earlier post. Less discussed is the corruption that makes it hard to fight sky-high rates of officer involved domestic violence (OIDV).

OIDV is a serious problem, in the United States and (presumably) elsewhere. In the U.S., two studies, one with 728 police officers and one with 425 officers, found that 40% of officers self-reported that in the previous six months they had “lost control and behaved violently towards their spouse.” The comparable rate in the general population is roughly one-fourth as high. The reasons for these high OIDV rates are complex and not fully understood. Some advocates believe that aspects of police training give officers who are violent at home the knowledge and capability to target and intensify their abuse. Others make the case that the amount of violence police are exposed to as part of their job spills over to the home. But irrespective of the causes of OIDV, corruption within the police department makes fighting OIDV significantly more difficult. Continue reading →

Scorpions with Wax Wings: How Anticorruption Agencies Can Avoid Flying Too Close to the Sun

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Public rhetoric about the battle against corruption often centers on the need for “zero tolerance”–the need for institutions, including perhaps most importantly law enforcement agencies–to aggressively root out graft through vigorous prosecution, no matter the circumstances.  What more often goes unsaid, though, is that actually following such strategies may end up being counterproductive.  The aggressive pursuit of corruption-busting litigation can lead to political elites pulling the rug out from underneath the anticorruption agency (ACA).  In South Africa, for example, the National Assembly dissolved the Scorpions, a special investigative unit, once it began going after high-ranking government officials.

As a result of the danger of being undercut, ACAs face an inherent tension in their work: they want to fight corruption to the greatest extent possible, but fighting it too aggressively can lead to the agency’s ability to perform its duties being completely undercut.  How far, then, can an ACA push? Though the unique context of any given ACA means no universal lessons exist, there are some general guidelines ACAs should consider when shaping their anticorruption efforts, if they want to avoid a backlash that ultimately consolidates the power of the corrupt:

Continue reading →

Guest Post: The Role of Compensation Systems in Promoting Anti-Bribery (Non-)Compliance

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GAB is pleased to welcome back anti-bribery consultant Richard Bistrong, who contributes the following guest post:

These days, most sophisticated multinational firms, at least those that might be subject to liability under the Foreign Corrupt Practices Act or similar laws, have official anti-bribery compliance programs. But as many observers have rightly noted, while formal control systems are important, they have their limits: the formal rules in place, or what top-level management asserts when setting the “tone from the top,” may often differ from what actually happens on the ground. As I’ve emphasized my earlier posts on this blog, understanding what actually happens out in the field requires careful attention to the actual incentives of the people on the front lines: the regional managers, salespeople, and the like. And with respect to these individuals, many corporations that have seemingly robust anti-bribery programs, and whose C-Suite executives say all the right things about ethics and integrity and zero tolerance, are actually creating incentives that foster corruption. Here I want to focus on incentive plans for international sales, marketing, and business development teams. I have identifies three common features of the compensation system for salespeople may contribute substantially to bribery risk. Continue reading →

The SELDI Report on Combating Corruption in Southeast Europe: Good News/Bad News

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In an earlier post I cataloged several studies evaluating anticorruption policies in different regions or by different agencies and promised to summarize each for time-pressed readers.  Today I review a report by the Southeast Europe Leadership for Development and Integrity (SELDI), Anticorruption Reloaded: Assessment of Southest Europe, on the state of corruption in nine states:  Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Serbia, and Turkey.  SELDI is a coalition of 17 civil society organizations from the nine countries with one, the Center for the Study of Democracy in Sofia, serving as its secretariat.  The 250 page report was authored by the Center based on extensive consultations with SELDI members, assessments in each of the nine countries, and comparisons of surveys on corruption taken in 2001 and 2002 with the results of identical surveys taken in 2014.

The good news?  The report provides an exhaustive analysis of corruption trends in the nine countries, what each has done to reduce corruption, and what more needs to be done.  The focus is on critical, but often overlooked issues: corruption in the legislature and the courts, weaknesses in public financial management and how they fuel corruption.  The empirical and qualitative data are weaved together skillfully to provide a detailed picture of each country along with specific recommendations.  The really good news?  The existence of civil society organizations in these nine countries capable of producing such a high quality report.

The bad news? Continue reading →

Troubling Signs of a Resurgent Anti-FCPA Lobbying Campaign

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One of the biggest stories in anticorruption enforcement over the last two decades is the surge in enforcement of the U.S. Foreign Corrupt Practices Act. This development has not only been greeted with enthusiasm by anticorruption advocates, but has had bipartisan political support, at least within the executive branch (the enforcement surge began under President George W. Bush, and has continued through President Obama’s administration). But not everyone has been happy about aggressive FCPA enforcement. About five years ago, the U.S. Chamber of Commerce and its allies launched a coordinated lobbying assault on the statute and on the U.S. government’s enforcement practices. The Chamber not only published a report (“Restoring Balance”) advocating significant limitations on the FCPA’s scope, but it convinced (and/or paid) a number of other “experts” to take up the cause, writing op-eds, testifying before Congress, and lobbying in other forums. (The Chamber seemed to deliberately prefer to hire ex-DOJ officials to make its case, most notably former Attorney General Michael Mukasey.) These editorials and presentations, perhaps not surprisingly, tended to recite the same Chamber of Commerce talking points.

But this concerted, coordinated lobbying effort basically went nowhere. Why not? Well, there were probably a number of reasons, including the vigorous resistance of the Department of Justice, the intrinsic weakness of many of the Chamber’s arguments, and the difficulty of getting anything through the U.S. Congress. But another major factor was the Walmart corruption story, which the New York Times broke in 2012 (see here and here.) The allegations involving Walmart’s conduct in Mexico were so shocking that any appetite there might have been in Congress for “reforming” (that is, weakening) the FCPA quickly dissipated. Although FCPA critics continued to advocate changes to the statute and current enforcement practices, the concerted, orchestrated push for FCPA “reform” faded away.

But now there are signs that it’s back. Maybe I’m over-reading the limited evidence, but I think a new campaign for FCPA reform may well be underway—and anticorruption advocates should may attention and be ready to fight back. Continue reading →

Shedding Sunlight on Procurement

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In a previous post, I extolled the virtues of Big Data in the fight against corruption, including in the important realm of government procurement. From the UK to Georgia to the Czech Republic, government procurement agencies have been collaborating with civil society groups to analyze their data, uncovering inefficiencies that range from the mundane to the outright corrupt. Governments are not alone: international development agencies like the World Bank are embarking on similar projects.

But there’s a problem. Big Data needs lots of data to work, entailing a high degree of government transparency and massive disclosures — sometimes called Open Government — that are sometimes at odds with the goals of anticorruption. In the case of government procurement, public data watchers need to know which firms bid for the project, at what price, and who won on what terms before they can play a useful watchdog role. However, as Rick has pointed out on this blog, public disclosure rules in procurement has the perverse effect of enabling private collusion. Cartels of contractors can agree amongst themselves to inflate their prices and select which among them will receive the contract, and are able to enforce their shady agreement because, of course, all offers are public.

Rick’s concerns seem to be directly implicated by the newly-proposed Open Contracting Data Standard, a push to “enhance and promote disclosure and participation in public contracting.” The project essentially asks every procurement agency in the world to upload their contracting documents onto the internet in a standardized manner that would encourage public oversight, including through the use of Big Data tools. So, is the push for open government procurement data doomed to backfire, creating collusion where perhaps it did not even exist before? Fortunately not. The increased risk of collusion is completely outweighed by the potential for the use of Big Data and other civil society monitoring techniques. Continue reading →

The ATS, the FCPA, and Being Thankful for Criminal & Civil Liability

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In a recent post, Matthew teased out a counterintuitive worry that has bothered FCPA supporters in recent years — the fear that increased enforcement against individuals might actually be bad for the FCPA on the whole. Matthew’s argument is straightforward and intuitive: DOJ has long been able to press expansive interpretations of some of the statute’s more ambiguous provisions because corporations have been unwilling to litigate FCPA liability. But as the Esquenazi, Shot Show, and Aquilar cases show, individual defendants are far more likely to go to trial to combat FCPA charges. So, as DOJ prosecutes more individuals, we’re likely to see more extended legal challenges to the FCPA and, perhaps, more sympathetic defendants. Maybe the decisions will continue, like Esquenazi, to go DOJ’s way. The fear, though, is that they may not, and that narrowing constructions of the statute could undercut its deterrent force.

Matthew’s post drew my thoughts to another statute — specifically, the Alien Tort Statute (“ATS”) — which has graced our pages a couple times courtesy of Maryum (here and here). Over the past few decades, the ATS — a two-centuries-old statute that permits aliens to sue in U.S. courts for torts committed in violation of the law of nations — has followed a path that is, in a way, the inverse of the FCPA: at first it was used primarily to sue individual foreign officials who often fled U.S. jurisdiction rather than litigate; only after a few decades was the ATS commonly used to target corporations, and these targets began to push back in court. Unfortunately for ATS plaintiffs, that inverse story arc hit its climax in the Supreme Court’s 2013 decision in Kiobel, a case that did to the ATS what Matthew fears might happen to the FCPA.

Fret not, though, supporters of the FCPA! Yes, the rise and fall of the ATS might teach us something about the fate of the FCPA — but I think the lesson is to be thankful, not fearful. Here’s why: Continue reading →