Making Political Parties Liable for Corruption

When corrupt politicians are caught and convicted, they may suffer a variety of penalties, including fines and incarceration, and the government might also seize assets that were the proceeds of the wrongdoing. But punishing the individual politicians is not enough to deter wrongdoing or to compensate for the harm that the corruption causes. Moreover, even when an individual politician was the only actor who deliberately and intentionally engaged in corrupt criminal activity, that individual politician is not the only one at fault. Politicians’ decisions are affected by norms within a political party— for example, by expectations (sometimes unstated) that politicians will bring in a certain amount of money for campaign funds through graft.

For these reasons, political parties— in addition to the individual politicians— should be held liable for corrupt acts committed by their members in the course of their political activities or official duties. And such liability should attach even if the political parties’ leaders did not specifically know about or overtly endorse the corrupt acts in question.

This may seem like a radical suggestion, but in fact there are many contexts in which the law imposes so-called “vicarious liability” on organizations for acts committed by the organization’s members or agents. For example, the legal doctrine of respondeat superior (Latin for “let the master answer”) says that an employer (or other principal) can be held accountable for the wrongful actions of an employee (or agent), if the wrongful actions were within the normal “scope of employment.” Common examples include suing a hospital for the malpractice of one of its physicians or holding the government financially liable for wrongful conduct by law enforcement officers. (Although respondeat superior derives from English common law, other legal systems, such as those of Brazil and France have broadly similar concepts of vicarious liability.) Similarly, under the law of many jurisdictions, a corporation may be held liable (not only civilly, but also criminally) for acts committed by corporate employees—even if corporate management did not condone or even know about the criminal acts. These vicarious liability doctrines are important because a single employee frequently does not have the resources to redress the wrongs committed, and also because the employer often bears some responsibility for whatever the employee did, due to company culture, training, and incentive schemes. Because of this, economists point out that vicarious liability can be more socially efficient: The organization may be in a better position to detect and prevent wrongful conduct, so placing the liability on the organization can give it the appropriate incentives to take cost-justified measures to prevent the wrongful activity from occurring in the first place.

Although vicarious liability is a well-established legal principle, often used to hold employers responsible for the conduct of their employees, that concept has not yet been extended to hold political parties, as organizations, legally responsible for the corrupt acts of their members. Such an extension may seem radical, and in a sense it is, but it would be justified.

To make this case, I’ll apply the three-pronged standard that Black’s Law Dictionary lays out for respondeat superior liability to be appropriate in the employment context: (1) The individual was an employee when the occurred; (2) The employee was acting within the scope of his or her employment; and (3) The activities of the employee were a benefit to the employer. Continue reading

Guest Post: Mercosur’s New Framework Agreement Is an Asset Recovery Landmark, But Significant Flaws Remain

GAB is delighted to welcome back Mat Tromme, Director of the Sustainable Development & Rule of Law Programme at the Bingham Centre for the Rule of Law, who contributes the following guest post:

In asset recovery, international collaboration is key. In December 2018, four Mercosur countries—Argentina, Brazil, Paraguay, and Uruguay—adopted a new kind of landmark framework agreement to collaborate in investigations and sharing of forfeited assets resulting from transnational organized crime, corruption, and illicit drug trafficking. The agreement’s provisions on law enforcement collaboration are important but not groundbreaking, as many countries collaborate in investigations, including through Mutual Legal Assistance (MLA) agreements. This framework agreement can be seen as a direct application of Article 57(5) of the UN Convention Against Corruption, which calls on state parties to “give consideration to concluding agreements or mutually acceptable arrangements, on a case-by-case basis, for the final disposal of confiscated property.”

Where the new framework agreement is particularly novel and innovative is in its provisions on asset return. While there are a number of technical details, the big picture is that any of the four countries may lay claim to a portion of the assets, so long as that country played a role in its forfeiture, irrespective of where the assets are located. The framework agreement provides (in Articles 7 and 8 in particular), that the asset shares will be negotiated on a case-by-case basis, with each country’s share to be based principally on that country’s role in the investigation, prosecution, and forfeiture of the assets. Other factors that may be considered include the nature of the forfeited assets, the complexity and significance of international cooperation, and the extent to which cooperation led to the forfeiture.

To the best of my knowledge, this sort of framework agreement is rare, the only other recent example is the “Framework for Return of Assets from Corruption and Crime in Kenya (FRACCK)”, a multilateral non-binding initiative for the return of assets between the Governments of Kenya, Jersey, Switzerland and the UK. There had been calls to establish a similar initiative in Latin America going back several years (see here and here). The framework agreement has the potential to set a precedent by institutionalizing the return of assets across borders, not only improving the asset recovery and return process in Latin America, but also serving as an example for other regional collaboration agreements in Africa, Latin America, or Asia. Indeed, the 3rd African Anti-Corruption Day (held last week, on July 11th) was organized on the theme of finding a “Common African Position on Asset Recovery.” According to the African Union, the purpose of this is to advocate for Africa’s unity in demanding the recovery and return of stolen assets, and making the return process transparent and accountable.

While the approach and ambition of the agreement is laudable, the framework agreement has three important shortcomings: Continue reading

New Podcast Episode, Featuring Debra LaPrevotte

A new episode of KickBack: The Global Anticorruption Podcast is now available. This week’s episode features an interview with Debra LaPrevotte. After a long and distinguished career with the US Federal Bureau of Investigations (FBI), where she specialized in asset seizure cases (among other things), Ms. LaPrevotte joined The Sentry, an international non-governmental organization that fights war cries and other atrocities in sub-Saharan Africa by “following the money”–shining a light on how kleptocrats and their cronies try to hide the assets that they amass from their illegal and exploitative activities. In the interview, Ms. LaPrevotte discusses here work on asset seizure at the FBI, her work on tracking and exposing kleptocratic assets for The Sentry, and her reflections and insights regarding broader controversies and policy questions related to the asset recovery and return process.

You can find this episode, along with links to previous podcast 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.

Returning Stolen Assets to Kazakhstan: Did the World Bank Flub It?

In 2012, Kazakhstan and Switzerland agreed to return $48.8 million that Switzerland had confiscated in a money-laundering case involving Kazakh nationals. This is the second time Switzerland has returned stolen assets to Kazakhstan. In the first, out of a fear the funds might be stolen again, the two had created an independent foundation with stringent oversight mechanisms to administer the money (details here).  This time the two decided to rely on the World Bank alone to see that returned funds were not misused.

One of the projects being funded is a $12 million grant program to instill a public service ethic in the nation’s youth, and a consortium of Kazakh NGOs has been selected to manage it. Although the consortium only recently began making grants, questions about the integrity of the grant-making process are already being raised.  In February, the Corruption and Human Rights Initiative identified several apparent irregularities. Among them: 1) The consortium’s lead NGO is headed by Dariga Nazerbayev, at the time of the award to the consortium she was the daughter of the country’s president and is now Speaker of the Kazakh Senate; 2) The youth wing of the ruling party was awarded a grant for “awareness-raising activities among vulnerable youth groups” across the country in seeming violation of the ban in the World Bank’s charter on political activities; 3) numerous grants have been awarded for an amount just under that which would trigger World Bank review; and 4) program managers have coached grant applicants on how to circumvent Bank procurement rules.

A full report on the irregularities is here. At the request of the Swiss government, the World Bank is said to be investigating.

 

Guest Post: France’s New Asset Recovery Bill Is an Important Step Toward Achieving Victim Compensation

GAB is delighted to welcome back Mat Tromme, Director of the Sustainable Development & Rule of Law Programme at the Bingham Centre for the Rule of Law, who contributes the following guest post:

Where asset recovery is concerned, France is probably best known for the conviction of Teodorin Obiang—the Vice President of Equatorial Guinea and son of the President—for money laundering (the first time that a French court has convicted a serving senior official of a foreign government), which resulted in the court ordering the forfeiture of some of Obiang’s assets, worth around USD 150 million. The decision is still under appeal, and the next hearing is scheduled for December 2019. But even if the conviction and associated forfeiture order are upheld, under existing French law those assets will go to the French state. (It is unclear whether other plaintiffs who can also establish a valid claim on the assets could also benefit from them in any way.) The forfeited funds will not go to the true victims of Obiang’s corruption—the people of Equatorial Guinea.

There are obviously a number of moral and practical questions coming out of this, not least the fact that the French state keeps the looted assets, as French courts remarked. Some countries and commentators argue that in cases of grand corruption like this, the forfeited assets should go back to the country from which the funds were stolen. But in the Obiang case, it would seem nonsensical to suggest that the forfeited assets be transferred to the government of Equatorial Guinea, as that would be tantamount to returning those assets to the Obiang family itself. The challenge, which many have struggled with, is how to return assets to a country in a way that benefits the victim populations when the country’s government is controlled by a kleptocratic political elite and where there is no rule of law. Related to this, it also raises questions about who ought to be considered the victim (the state, or the population?), and, if the latter, how to go about making appropriate compensation.

Earlier this month, the French Senate agreed on a new asset forfeiture bill that would address this problem by amending existing law so that when a French court orders the forfeiture of the illicit assets of a foreign public official or other politically exposed person (PEP), those assets, rather than being forfeited to the State, would instead go into a special fund that seeks to improve living standards of victim populations, improve the rule of law, and fight against corruption in the country where the offenses took place. (The state would, however, be able to retain a portion of the assets, up to a specified limit, to cover the costs of bringing the case in the first place.) Under the proposed bill, assets would be forfeited to the French state only in those cases where it is “absolutely impossible” to return the assets to the victim populations. The bill also calls for greater “transparency, accountability, efficiency, solidarity, and integrity” in the asset return process, principles that civil society had actively pushed for.

Of course, a great many details would still need to be worked out as the bill makes its way through the lower house of the French parliament (the Assemblée Nationale), especially as it’s not altogether straightforward to figure out how best to ensure that the seized funds will benefit the victim populations. The discussions at the Committee level in the Senate evince a preference for channeling forfeited funds through Overseas Development Assistance (ODA) on a case by case basis. But many of the practicalities still need attention, and French legislators have instructed the Conseil d’Etat (a body that provides legal advice to the government and doubles as a supreme court for administrative matters) to advise on the practical implementation of orders to return assets to victim populations. (When the Conseil d’Etat does so, this will itself be an important decision, one that the anticorruption should pay close attention to.)

And there are some other difficulties too, which Senators and their officials have openly acknowledged. As it currently stands, the French Criminal Procedure Code says that the return of assets requires the agreement of the requesting state (which, as discussed above, may not happen where a country is very corrupt), and so the Code will likely need amendments.Moreover, the offenses that would trigger asset forfeitures under the proposed bill are limited to concealment and laundering the proceeds of all crimes, though the Committee report also recognizes there may be difficulties with including any crime within the scope of offenses that can lead to forfeiture. Finally, though the bill focuses on assets seized from PEPs, that term is not actually fully defined in French law.

Despite these concerns, the bill is a significant step in the right direction, and a good illustration of how civil society organizations can inform and influence the asset return process (Transparency International France played a key role in encouraging the Senate to table the Bill, and CSOs and governments are also coming together to address the difficult questions that cases like these raise with respect to victim compensation.) Indeed, civil society involvement will be crucial to ensuring that the law is adopted by the Assemblée Nationale and implemented in a transparent way.

Whatever Happened with that Charity That the Obiang Settlement Was Supposed to Fund?

When a country seizes assets that a foreign public official stole from his or her own government, the usual next step is to return those assets to the foreign government from which they were stolen–in much the same way that if I were to steal a computer belonging to Harvard University, and the police caught me and recovered the computer, they should give it back to Harvard (assuming it wasn’t needed as evidence in my trial). But of course in the context of countries beset by systemic corruption–or outright kleptocracies–things are not so simple. Returning the money that the corrupt foreign official stole from the national treasury back to that national treasury may be tantamount to giving the money back to the person who stole it in the first place. So what to do?

One possibility, increasingly popular in some quarters, is to use the money to fund charitable activities in the country where the public funds were stolen, on the logic that doing so does return the money to the “victim country,” but does not return it to that country’s government (which is most certainly not a “victim,” whatever its formal legal claim on the assets in question). This mechanism was employed in the 2014 settlement between the U.S. Department of Justice and Teodoro Nguema Obiang Mangue, the son of Equatorial Guinea’s (extremely corrupt and dictatorial) President Teodoro Obiang Nguema Mbasogo. According to the settlement agreement, the proceeds from the sale of the illicit assets the US had seized would go to a charity that would use the funds to benefit the people of Equatorial Guinea. The charity was to be jointly selected by the US and Obiang, or, if they could not agree on a charity within 180 days of the sale of the assets, the proceeds would be controlled and disbursed by a three-person panel, rather than an existing charity. That panel would consist of one member selected by the US government, one member selected by the government of Equatorial Guinea, and a chair jointly selected by the US and Obiang. As a backstop, the settlement stated that if, 220 days after the sale of the assets, the US and Obiang could not agree on a chair, the court that approved the settlement could force the parties to enter mediation or simply appoint a panel chair itself.

My post today is not a commentary on this arrangement, but a question about it: What ever ended up happening with this? I spent a fair amount of time searching online, and I couldn’t find any information about whether a charity had been selected, or whether a panel was formed, and if so how it was formed and who was/is on it. I also can’t find any information about how the charity or panel disbursed the money from the proceeds of the sale of Obiang’s assets. It’s been over five years since the settlement, so I assume whatever was going to happen has happened already. But strangely, though there are lots of references in various recent publications and articles to the provision of the 2014 settlement that calls for the money to be used for charitable purposes in Equatorial Guinea rather than returned to the government, I can’t find any sources that discuss what actually ended up happening. This is not a trivial question, since several people (including on this blog) expressed skepticism that it was possible for a model like this to work in a country like Equatorial Guinea, where there isn’t much/any space for a genuinely independent civil society to operate.

I’m sure there’s a simple answer to my factual question, and I’m probably just not looking in the right place. So I’m hoping someone out there in reader-land can help me. What ended up happening to the proceeds recovered from the sale of Obiang’s assets? Did the parties agree on a charity? If so, which one, and what did it do with the money? Or was the three-person panel formed to handle the money? If so, how was it formed, who was on it, and what did it do with the money? Anyone have any idea?

Asset Repatriation Under UNCAC

One of the most far-reaching changes the United Nations Convention Against Corruption made to international law was the requirement that states cooperate to return assets stolen through corruption to the country where the crime was committed.  No international convention had ever before required a state where the proceeds or the instruments of the crime were found to return them to the state where the offense was committed.

The overarching principle is straightforward, but translating it into exacting, legally binding language is anything but. The drafters had to account for cases where the state requesting return and the requested state have quite different laws on transferring ownership rights by judicial decree and on the effect a decree in one state has on proceedings in another. The result is series of lengthy, complex provisions laced with a thicket of paragraphs, subparagraphs, and cross-references that may warm some lawyers’ hearts but in which many reader can easily become lost.

I mapped the provisions for a forthcoming asset return conference. As the map isn’t (at least yet!) on Google maps, a copy is below. Two experienced UNCAC guides kindly read and corrected an earlier version (thank you Queensland University Senior Lecturer Radha Ivory and Mat Tromme of the Bingham Centre for the Rule of Law).  Readers spotting any further mis-directions or errors are asked to flag them. Continue reading