Guest Post: Anonymous Companies Are Undermining Mexico’s Public Health

Today’s guest post is by Miguel Ángel Gómez Jácome, the Communications Coordinator at the Mexican civil society organization Impunidad Cero (Zero Impunity).

The COVID-19 pandemic has already affected millions of people. (As of the time this piece was initially drafted, around 2 million people had been infected; the exponential spread of the virus means that by the time this piece is published, that number is likely to be much higher.) And while Mexico has not yet been as severely impacted as other countries, official statistics (which likely understate the true prevalence) already report thousands of infections and hundreds of deaths. To confront this problem, Mexico, like other countries, will need to marshal its resources effectively. Unfortunately, though, Mexico’s ability to manage the COVID-19 epidemic is threatened by Mexico’s epidemic of embezzlement in the health sector, much of it facilitated by anonymous shell companies. This widespread corruption drains away vital public resources needed to combat public health emergencies like the COVID-19 pandemic.

In March 2020, two civil society organizations (Justicia Justa (Just Justice) and Impunidad Cero (Zero Impunity)), documented the extent of the problem in a research report entitled Fake Invoices: The Health Sector Epidemic. The research found that between 2014 and 2019, 837 shell companies issued 22,933 fake invoices to 90 health institutions across the country (in 30 of Mexico’s 32 states, as well as the federal government), ultimately embezzling a total of over 4 billion pesos (roughly $176 million US dollars) from the health sector—an amount that could have paid for around 80,000 hospital beds or between 3,400 and 6,900 ventilators. (To put this in context, Mexico currently has 5,000 ventilators in the whole country, and the government is looking to acquire 5,000 more.) And the problem is only getting bigger: According to Mexico’s Tax Administration authority (the SAT), the number of anonymous shell companies in the country has increased from 111 in 2014 to over 9,000 in 2020.

To crack down on the abuse of shell companies to embezzle public funds from the health sector (as well as other sectors), the authors of the Fake Invoices report propose three responses: Continue reading

Where the Real Blame for Letting Bridgegate Defendants Off Lies: Part I

The Supreme Court continues to bear the blame for two political operatives getting off scot free for an admitted blatant abuse of power: creating nightmarish traffic jams for residents of a small New Jersey town because its mayor had not endorsed their boss’ reelection as governor.  Though the record showed the stunt endangered the lives of some and inconvenienced thousands and their lawyer admitted it was an abuse their power as state officials to cause the jams, the Court acquitted them on all charges.  Its decision in the Bridgegate case, so named because the traffic jams were created by blocking two lanes of the bridge the residents used to commute to New York City, is indeed the immediate reason defendants escaped sanction.

But that ruling was the inevitable consequence of earlier decisions by the other branches of government.  For decades Congress has ignored the Court’s warning that the hodgepodge of federal laws used to prosecute state and local officials for corruption is Constitutionally infirm.  And for decades, and despite some spectacular earlier reversals by the Court, the Executive branch has continued to rely on these statutes to prosecute state and local corruption.

Those genuinely interested in fighting corruption need to stop denouncing the Court and focus their energies instead on these two branches of government.  Below is what they should demand of the Executive.  Part II of this post will explain what they should demand of Congress. Continue reading

New Podcast, Featuring Sarah Steingrüber

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Sarah Steingrüber, an independent consultant on corruption and public health issues. Among her other activities in this area, she currently serves as the global health lead for the CurbingCorruption web platform, and was the co-author of the U4 Anti-Corruption Resource Centre’s report on Corruption in the Time of COVID-19: A Double-Threat for Low Income Countries. Much of our conversation naturally focuses on how corruption and related issues may intersect with the coronavirus pandemic and its response, in particular (1) misappropriation of relief spending, and (2) how some corrupt leaders may use the coronavirus pandemic as a pretext to eliminate checks and oversight. A central tension we discuss is how the urgency of emergency situations affects the sorts of measures that are appropriate, and draws on lessons from prior health crises such as the Ebola outbreak in West African in 2013-2016. We then discuss other more general issues related to corruption and health, such as how the monetization and privatization of health may contribute to undue private influence on decision-making processes in the health sector.

You can find this episode here. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Corruption 2020: How The U.S. Supreme Court Might Leave Presidential Elections Vulnerable to Corruption

The United States uses an indirect voting process called the Electoral College to elect the president. In this system, which is mandated by the Constitution, each state is assigned a number of “electors” based on the number of representatives the state has in both Houses of Congress; the voters in each state do not actually vote directly for a presidential candidate, but rather for a slate of electors, appointed by the state, who have pledged to vote for that candidate when the Electoral College convenes to select the president. (This odd system is why there have been instances, including in the most recent U.S. presidential election in 2016, when the winner of the popular vote does not become the president.) But suppose an elector who has pledged to support one candidate decides to switch her vote? This is not purely hypothetical: Throughout American history, 157 electors have defected from their pledge. Some states seek to prevent this through laws under which such “faithless electors” can be subject to civil penalties, including replacement. Electors from the 2016 Presidential Election have brought a case in the Supreme Court challenging these “faithless elector” laws as unconstitutional.

This challenge is obviously important for U.S. presidential elections—but (many readers might be wondering) what does it have to do with corruption? It turns out that, as U.S. anticorruption advocates have emphasized, if the Supreme Court rules that states cannot compel electors to vote as they have pledged, this could leave U.S presidential elections vulnerable to corruption. If electors cannot be legally required to vote for the candidate who won the popular vote in their state, then electors can be bribed—or, if not outright bribed, then subject to other forms of improper influence.

Part of the problem is that U.S. campaign finance laws and government ethics rules, as currently written, do not cover electors. Likewise, U.S. anti-bribery laws prohibit bribes to public officials and candidates for public office, but electors don’t clearly fall into either of those categories. The most relevant federal criminal statute is likely the prohibition on vote-buying and vote-selling in elections, codified at 18 U.S.C. §597. That section prohibits “mak[ing] or offer[ing] to make an expenditure to any person, either to vote or withhold his vote, or to vote for or against any candidate.” But this statute has been construed narrowly to only apply to instances of a quid pro quo, which leaves the door open for private interests to corruptly influence electors so long as they avoid any explicit bargain. Moreover—and even more troubling—the U.S. President has virtually unlimited pardon powers, so if a candidate’s surrogates bribed enough electors to win the presidency, in blatant violation of §597, the President could simply pardon both the agents who paid the bribes and the electors who took them. These two problems—the difficulty of proving a quid pro quo and the President’s pardon power—also explain why the problem couldn’t be fixed by expanding the scope of other federal campaign finance, government ethics, and anti-bribery rules to cover electors as well as public officials and political candidates.

So, should the Supreme Court decide that electors cannot be penalized by the states for defecting from their pledged votes, the U.S. presidential election might be up for sale. And, for the reasons sketched above, this problem couldn’t be easily fixed simply by expanding existing federal anticorruption laws to apply to electors.

Should the Supreme Court side with the “faithless electors,” what could be done to protect the integrity of U.S. presidential elections (short of abolishing or significantly reforming the electoral college—steps that would require a constitutional amendment and so are not likely any time soon)? There are three possibilities: Continue reading

Tracking Corruption and Conflicts of Interest in the Trump Administration–May 2020 Update

Over three years ago, in May 2017, this blog started the project of tracking and cataloguing credible allegations that President Trump, and his family members and close associates, have been corruptly, and possibly illegally, leveraging the power of the presidency to enrich themselves. The newest update is now available here.

Perhaps unsurprisingly, the most significant updates this month (as was also the case last month) concern the ways in which the financial interests of the Trump Organization may intersect with the Trump Administration’s response to the coronavirus/COVID-19 pandemic. Although the main criticisms of the Trump Administration’s response to the coronavirus/COVID-19 pandemic have focused on the administration’s delays, misinformation, and general incompetence, some critics have highlighted suggestive evidence that the personal business interests of President Trump, his family, and their close associates may be influencing the administration’s approach to the pandemic. Critics have pointed to the following concerns:

    • Resistance to stay-at-home orders: There is some suspicion that the Trump administration’s slow and equivocal response to the pandemic may have been influenced by President Trump’s desire to avoid hurting the hospitality industry, one of the Trump Organization’s major lines of business. Media reports suggest that President Trump pushed for an end to social distancing by mid-April in part because of the adverse effect social distancing has had on his own hotels and resorts, and although President Trump ultimately relented and extended the social distancing guidelines through at least the end of April, he renewed his push for states to lift their stay-at-home orders in mid-May, despite the fact that states had not hit any of the targets laid out in the federal government’s own guidance on when it would be safe to reopen the economy. The potential conflict of interest was highlighted by the fact that on May 10, President Trump retweeted an announcement from the Trump Organization’s golf club in LA that it would be re-opening, accompanied by President Trump’s declaration that it’s “great to see our Country starting to open up again.” Former hear of the Office of Government Ethics Walter Shaub characterized this tweet as “shameless, corrupt, and repugnant.”
    • Scope of travel ban: Critics highlighted the fact that the 30-day ban on travel from Europe that President Trump announced on March 11 initially excluded the United Kingdom and Ireland, where Trump owns hotels and golf courses, though a few days later the Administration extended the travel restrictions to cover both countries.
    • Access to economic relief funds: President Trump’s financial interests may have influenced the administration’s response to the pandemic’s economic costs. In early March 2020, President Trump mentioned the possibility of a bailout for the hotel industry, and later that month, as Congress and the administration were negotiating an economic relief package, President Trump refused to rule out the possibility that his personal properties would accept relief funds under this package. However, the bill that ultimately passed, known as the CARES Act, however, banned President Trump’s properties from receiving government support. Nevertheless, when signing the legislation, President Trump issued a statement that suggested his administration would not treat the portion of the legislation that requires the newly-created Inspector General to report to Congress without presidential approval as legally binding, a move that raises concerns about both transparency and compliance. Furthermore, despite the fact that the CARES Act bars businesses owned by President Trump or other government officials from receiving stimulus funding, the Trump administration has funneled COVID-19 small business loans to companies connected to Trump and his allies. Separately from CARES Act relief, the Trump Organization, which leases the Old Post Office Building in Washington D.C. from the General Services Administration (GSA) for the Trump International Hotel, has reportedly asked the GSA for relief from its rent payments, a request that highlights the inherent conflict of interest in the President’s family company renting a building from the federal government.
    • Promotion of particular COVID-19 tests and treatments. For several weeks, President Trump aggressively promoted hydroxychloroquine as a potential treatment for COVID-19. Hydroxychloroquine is produced by Sanofi, a French pharmaceutical company. Three Trump family trusts have small investments in Sanofi, major Republican donor Ken Fisher owns a majority stake, and Commerce Secretary Wilbur Ross used to run a fund that invested in Sanofi. Rick Bright, the former head of the U.S. Government’s Biomedical Advanced Research and Development Agency, filed a whistleblower complaint alleging that he was pressured to give government contracts to political cronies, including to Aeolus Pharmaceuticals, a pharmaceutical company that produced hydroxychloroquine, because the company’s CEO was friends with President Trump’s son-in-law Jared Kushner. Another troubling example is the Trump Administration’s selection of a firm called OSCAR Health—a company founded by Jared Kushner’s brother and formerly partially owned by Jared Kushner—to develop a website to facilitate coronavirus testing. (The website was developed but quickly scrapped, and in the end OSCAR Health was not paid for its efforts.)

 

A previously noted, while we try to include only those allegations that appear credible, 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.)

Guest Post: What the U.S. Congress Must Do To Ensure Adequate Oversight of COVID-19 Relief Spending

Today’s guest post is by Shruti Shah, the President and CEO of the Coalition for Integrity, a civil society advocacy organization focused on corruption in the United States.

We are facing an unprecedented crisis, and governments around the world have responded with unprecedented actions. In the United States, Congress has responded to the economic disruption caused by the COVID-19 crisis with the $2 trillion CARES Act and the subsequent $484 billion replenishment; still more legislation, allocating even more money for crisis response, is under discussion. When this much money is in play, oversight and fraud prevention are essential. There are already reports of PPP loans meant for small businesses going to larger companies, scammers targeting small business owners, stimulus checks being sent to deceased people, and several other COVID 19 scams. But the current safeguards for preventing fraud, corruption, and abuse in COVID-19 relief spending are woefully insufficient. As negotiations over further relief packages continue, those in Congress who care about government integrity—and the effectiveness of these trillion-dollar programs in achieving their objectives—should insist on correcting these deficiencies. In particular, here are five crucial steps that Congress can and should take to ensure that COVID-19 relief spending helps its intended beneficiaries rather than lining the pockets of grifters and grafters: Continue reading

Law Profs: Stop the Overheated Rhetoric About Bridgegate

As Matthew explained yesterday, last Thursday the Supreme Court ruled that a political dirty trick, generating a traffic jam for a town’s residents after their mayor refused to support the reelection of the state’s governor, while an abuse of power, does not constitute fraud under federal criminal law. The Court’s unanimous decision in “Bridgegate,” so named because the traffic jam was created by closing two of the three lanes residents use to drive across the George Washington Bridge, was authored by former Harvard Law School Dean and Obama Solicitor General Justice Elena Kagan.  That the decision was unanimous and written by a member of the Court’s liberal wing are two of several clues in the Court’s opinion showing it is no part of a Trump-inspired plot to legalize public corruption. Washington Post readers, however, could be forgiven for thinking otherwise. For Michigan Law School Professor Leah Litman wrote in the paper’s March 10 edition that the Court’s decision is the latest in “a string of failed corruption cases” that has made it “almost impossible to put a crooked politician in jail.”

This is plain nonsense. Continue reading