The Role of Judicial Oversight in DPA Regimes: Rejecting a One-Size-Fits-All Approach

IIn late March 2018, the Canadian government released a backgrounder entitled Remediation Agreements and Orders to Address Corporate Crime that outlines the contours of a proposed Canadian deferred prosecution agreement (DPA) regime. DPAs—also appearing in slightly different forms such as non-prosecution agreements (NPAs) or leniency agreements—are pre-indictment diversionary settlements in which offenders (almost exclusively corporations) agree to make certain factual admissions, pay fines or other penalties, and in some cases assume other obligations (such as reforming internal compliance systems or retaining an external corporate monitor), and in return the government assures the corporation that it will drop the case after a period of time (ordinarily a few years) if the conditions specified in the agreement are met. Such agreements inhabit a middle ground between declinations (where the government declines to file any charges, but where companies still might forfeit money) and plea agreements (which require guilty pleas to criminal charges filed in court).

While Canada has been flirting with the idea of introducing DPAs for over ten years, several other countries have recently adopted, or are actively considering, deferred prosecution programs. France formally added DPAs (known in France as “public interest judicial agreements”) in December 2016, and entered into its first agreement, with HSBC Private Bank Suisse SA, in November 2017. In March 2018, Singapore’s Parliament installed a DPA framework by amending its Criminal Procedure Code. And debate is underway in the Australian parliament on a bill that would introduce a DPA regime for offenses committed by corporations.

The effect of DPAs in the fight against corruption, pro and con, has been previously debated on this blog. One critical design component of any DPA regime is the degree of judicial involvement. On one end of the spectrum is the United States, where courts merely serve as repositories for agreements at the end of negotiations and have no role in weighing the terms of any deal. On the other end of the spectrum is the United Kingdom, where a judge must agree that negotiations are “in the interests of justice” while they are underway, and a judge must declare that the final terms of any DPA are “fair, reasonable, and proportionate.” British courts also play an ongoing supervisory role post-approval, with the ability to approve amendments to settlement terms, terminate agreements upon a determined breach, and close the prosecution once the term of the DPA expires.

Under Canada’s proposed system of Remediation Agreements, each agreement would require final approval from a judge, who would certify that 1) the agreement is “in the public interest” and 2) the “terms of the agreement are fair, reasonable and proportionate.” While the test used by Canadian judges appears to parallel the U.K. model—including using some identical language—the up-or-down judicial approval would occur only once negotiations have been concluded. This stands in contrast to the U.K. model mandating direct judicial involvement over the course of the negotiation process.

The decision by the Canadian government to chart a middle course on judicial oversight is all the more notable given that an initial report released by the Canadian government following a several-month public consultation regarding the introduction of DPAs appeared to endorse the U.K. approach, noting that the majority of commenters who submitted views “favoured the U.K. model, which provides for strong judicial oversight throughout the DPA process.” Moreover, commentators have generally praised the U.K. model’s greater role for judicial oversight of settlements, especially judicial scrutiny of the parties charged (or not) in any given case, the evidence (or lack thereof), and the “fairness” (or not) of any proposed deal.

Despite these positions, one should not reflexively view the judicial oversight regime outlined in Canada’s latest report as a half-measure. Perhaps the U.K. model would be better for Canada, or for many of the other countries considering the adoption or reform of the DPA mechanism. But the superiority of the U.K. approach can’t be assumed, as more judicial involvement is not categorically better. Rather than a one-size-fits-all approach favoring heightened judicial oversight, there are several factors that countries might consider when deciding on the appropriate form and degree of judicial involvement in DPA regimes: Continue reading

National Digital Currencies Raise New Risks of Grand Corruption

In 2017, you may have heard of this thing called blockchain. The technology, which works by creating a decentralized, encrypted, and independently verifiable ledger of transactions distributed over a network of computer systems, has allowed innovations in the design of secure systems for recording votes, registering land ownership, and confirming digital identity. The most famous application of the blockchain, however, has been the creation of digital currencies such as Bitcoin, Ethereum, and Ripple. Many private individuals consider these currencies to be the way of the future, and the death knell of the central banker: universal, transparent, and valued according to mathematical laws rather than political preferences, cryptocurrencies—according to their proponents—will bring with them immeasurable benefits, among them making the fight against corruption easier by allowing all interested parties to “see the entirety of any transaction instantly and accurately.”

But private citizens aren’t the only ones who have heard of the blockchain: the same central bankers who are meant to be rendered irrelevant by the advent of cryptocurrencies have also taken notice. Several governments, including those of Israel, Russia, China, Estonia, Sweden, and Venezuela, have announced plans to create their own national digital currencies (NDCs) based on blockchain technology. While there are several sound economic reasons for introducing an NDC, governments frequently cite the same anticorruption benefits mentioned above.

However, there are crucial differences between NDCs and cryptocurrencies like Bitcoin. Rather than open architectures enabling full financial transparency, most NDCs currently plan to use some form of centralized ledger, giving government authorities (and only them) the ability to see and police transactions. While such centralized transparency will give honest governments a much-needed boost in the fight against corruption, it will also give oppressive and kleptocratic regimes another tool with which to steal from and oppress their populations. Continue reading

Is Trump Administration Corruption a Winning Issue for Democrats this November?

The corruption of the Trump administration is bad news for the United States—will it also prove to be bad news (politically) for Trump’s Republican Party allies? A number of astute political commentators have recently argued that the answer is yes. Most notably, Jonathan Chait published an article last week making the case that “corruption … is Trump’s greatest political liability,” and that even though Trump himself is not on the ballot in the 2018 midterm elections, it would be wise politics for the Democrats to focus on the corruption of the Trump administration in their quest to retake one or both chambers of Congress.

Chait notes, as an initial matter, that despite Trump’s historic unpopularity, Democrats face two interrelated challenges: First, there’s just so much negative news about Trump—from the Russia investigation to his racism and misogyny to the lurid revelations regarding his crude attempts to cover up an affair with an adult film actress—that it’s hard to focus on any one thing. Second, and more importantly, the majority of Trump’s supporters already knew back when they voted for him that he was a crass, crude, adulterous bully and bigot–which means that pointing out his infidelity, his bullying, and his bigotry now isn’t likely to have much impact. (The Russia investigation is another matter, but Chait suggest that it’s too abstract and complex for most voters.) Corruption, according to Chait, is the one story that could move the needle, even with Trump supporters. Chait’s reasoning (presented in a somewhat different order from his original article) runs as follows: Continue reading

Legalized Sports Betting in the United States: Analyzing the Impact of Legalization on Corruption Risk

The rise of corruption in sport has captured the attention of many anticorruption groups, including Transparency International and the United Nations Office on Drugs and Crime. Sports corruption takes many forms, but one of the most prevalent is match fixing, which occurs when players or officials alter the outcome of a sporting event in a way that benefits those who bet money on those “fixed” games.

In the United States, concerns about match fixing, among other things, led Congress to enact the Professional and Amateur Sports Protection Act (PASPA) in 1992. The Act prohibits most states from legalizing sports gambling, with only Nevada allowed to offer betting on single games. Yet PASPA failed to curb gambling on sports, mainly because bettors turned to the black market; each year, Americans gamble an estimated $150 billion-$400 billion in illegal sports betting.

PASPA appears to be in legal jeopardy: Last December, the U.S. Supreme Court heard oral arguments in the case of Christie v. National Collegiate Athletic Association (NCAA), and while a decision in the case is not expected until later this year, legal experts believe that the Supreme Court will invalidate PASPA. This would provide all 50 states with the opportunity to legalize and regulate sports betting in their state. With that in mind, it is important to consider the effects that legalized sports gambling may have on bribery in professional sports.

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Defending Those Who Expose Corruption: Defamation Safe Harbor Legislation to Protect Investigative Journalists

In May 2017, Russian journalist Dmitry Popkov, who investigated corruption in local governments, was shot five times and found dead in his backyard. The perpetrators were never identified. In October 2017, a car bomb killed Maltese journalist Daphne Caruana Galizia, who had been investigating possible corruption by Maltese Prime Minister Joseph Muscat. Although three suspects were charged with carrying out the attack, the masterminds behind the plot were never found. And in February 2018, an unidentified hitman killed Slovak journalist Ján Kuciak and his fiancée, both 27, in the couple’s newly-purchased home. Kuciak was in the middle of an investigation of the Italian organized crime group ’Ndrangheta and its corrupt ties to Slovakia’s governing political party SMER. Slovak officials arrested seven suspects allegedly connected to the ’Ndrangheta and the murder, but did not find enough evidence to file charges and released them 48 hours later. Although weeks of mass demonstrations led to the resignation of the Slovak Prime Minister, the perpetrators of Kuciak’s murder were never held accountable.

Sadly, these are not the only such incidents. Reporters Without Borders states that last year 39 journalists were murdered because “their reporting threatened political, economic, or criminal interests.” And in many of these cases, despite government assurances of a thorough investigation—and despite a 2013 United Nations Resolution that urges Member States to conduct “impartial, speedy and effective investigations” of journalist murders—the perpetrators are never brought to justice. Perhaps this is not surprising. After all, these murders are often associated with sophisticated crime syndicates that leave few traces for investigators to follow, and an effective investigation would require significant resources and expertise beyond the capacity of many governments. (In some cases, such as Caruana Galizia’s murder, assistance from Dutch forensic experts and the FBI enabled local authorities to arrest suspects linked to the attack, but this is not regular practice.) Perhaps more importantly, resolving the murders of journalists who expose public corruption is not always in the interest of government officials, at least when doing so might provide further evidence of the government’s corrupt acts and expose officials implicated in the journalist’s work.

Given these weaknesses, many corrupt officials and associated criminal networks may conclude that killing a journalist before a story is published may be an effective way to eliminate it altogether. Sadly, this is indeed often the case. But not always: One of the striking things about the recent case in Slovakia is the decision of Kuciak’s employer, the news website Aktuality, to publish his unfinished article. And it appears that this decision to publish, not just the murders themselves, contributed to the massive public outcry and political backlash that has already forced the Prime Minister and several other high-level officials to resign.

Publishing a journalist’s unfinished article is not common practice for newspapers; it was likely done in the Kuciak case because the investigation was almost finished. Usually newspapers are hesitant to publish due to fear of defamation lawsuits, which are a drain on the publication’s resources and reputation. So-called SLAPPs (Strategic Lawsuits Against Public Participation) are filed in jurisdictions with strong defamation laws in order to intimidate journalists and media outlets, and prevent them from publishing certain articles. Some members of the European Parliament have been pushing the European Commission to protect investigative journalism by adopting anti-SLAPP measures.

Another reform measure, which hasn’t yet been part of the conversation, would be to create a special exception to defamation laws that would apply when a media outlet publishes a story, on a matter of public concern, by a journalist who was murdered before the story was complete. In other words, countries should enact a “safe harbor” from the ordinary operation of defamation laws in these special circumstances—one that would allow for the expedient dismissal of defamation suits against media outlets that publish the incomplete work of a murdered journalist.

Creating such a safe harbor would have a number of important advantages, and only very limited downsides:  Continue reading

Tracking Corruption and Conflicts of Interest in the Trump Administration–April 2018 Update

Last May, we launched our project to track credible allegations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests.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 regular updates on credible allegations of presidential profiteering (despite the fact that Eric Trump seems to think this is a violation of his family’s First Amendment rights). Our April 2018 update is now available here.

There are not too many new items in this month’s update, though there have been some additional stories on Jared Kushner’s potential conflicts of interest, most notably concerns raised about his White House meetings last year with representatives of financial institutions that subsequently provided substantial loans to Kushner family companies. There was also another example of mostly trivial but blatantly improper use of the presidency as a marketing tool, with Trump Organization golf courses ordering tee markers with the presidential seal, in clear violation of a law forbidding such private, non-official uses of the seal. (The tracker doesn’t include a discussion of allegations that EPA Administrator Scott Pruitt received a below-market-rate apartment from an industry lobbyist, as this seemed sufficiently removed from issues related to the personal enrichment of Trump’s family and inner circle, but Rick has a good discussion of the ethics issues raised by the Pruitt situation in yesterday’s post.)

As always, we note that while we try to include only those allegations that appear credible, we acknowledge that many of the allegations that we discuss are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.

The Trump Administration’s Ethical Conduct: An Appreciation

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