New Podcast Episode, Featuring Fernanda Odilla and Anwesha Chakraborty

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my colleague Nils Köbis interviews Fernanda Odilla and Anwesha Chakraborty, two researchers studying how technology can be used to assist bottom-up anticorruption efforts–particularly, though not exclusively, in Brazil and India. The interview covers a range of initiatives in this category, discussing their strengths, limitations, and future possibilities. 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.

New Podcast Episode, Featuring Michael Mohallem

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Michael Mohallem, a Brazilian law professor, lawyer, and consultant based in Rio de Janeiro, about recent developments in Brazil’s struggle against corruption. Our conversation focuses on the so-called Lava Jato (“Car Wash”) operation, particularly recent developments including the Bolsonaro Administration’s decision to terminate the Car Wash task force, and recent decisions by the Supreme Court invalidating the corruption conviction of former President Lula. We also discuss the Bolsonaro administration’s overall anticorruption record, and the prospects for future progress against corruption in Brazil in light of what appears to be a very challenging and inhospitable political environment for the foreseeable future. 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.

Why AMLO Won’t Let the Pemex Investigation Clean Up Corruption in Mexico

The case was expected to be a “blockbuster.” In July 2020, Emilio Lozoya Austin, former director of Mexican state-owned oil giant Petróleos Mexicanos (Pemex), was extradited from Spain to Mexico on charges of bribery, money laundering, and racketeering. The most significant of the charges related to his receipt of $10.5 million in bribes from embattled Brazilian construction firm Odebrecht. Upon his return to Mexico, Lozoya leveled bombshell accusations in a plea for prosecutorial leniency, claiming that former Mexican President Enrique Peña Nieto, along with his former treasury minister, two other former presidents, five former senators, and two former presidential candidates, orchestrated an extensive corruption scheme throughout the government ranging from securing bribes to passing controversial energy reform legislation. Lozoya’s accusations appeared to confirm information that Mexican authorities uncovered years ago. Back in 2017, after Odebrecht admitted to paying millions of dollars in bribes in Mexico, a Mexican special prosecutor determined that in 2012 Lozoya, then the newly-minted Pemex director, awarded Odebrecht several lucrative contracts in exchange for bribes. Then-President Peña Nieto, however, fired the special prosecutor and stalled the investigation.

But Mexico’s current president Andrés Manuel López Obrador (AMLO), who made anticorruption a cornerstone of his 2018 presidential campaign, vowed to reignite the investigation and prosecution of Lozoya. And last year’s extradition of Lozoya to Mexico seemed to be a sign that Mexico was (finally) on the verge of a real reckoning with endemic corruption akin to the Lava Jato (Car Wash) investigation in Brazil. Lava Jato, which began as an investigation into alleged corruption and money laundering by Brazilian state-owned oil company Petrobras, eventually ensnared Odebrecht, exposed the company’s decade-and-a-half long bribery scheme in a dozen countries, and led to the recovery of more than $5 billion in government funds and the conviction of more than 170 people—including several senior politicians. Despite recent setbacks (including the premature disbanding of the Lava Jato Task Force and the judicial invalidation of the operation’s highest-profile conviction), the Lava Jato investigation nonetheless provides a template for how an investigation that starts with one corrupt official at a state-owned country can snowball into a national reckoning that disrupts a long-entrenched corrupt system. The parallels between Lava Jato and investigation into Pemex are obvious, and many anticorruption advocates, both inside and outside of Mexico, were hoping for something similar.

Instead, nearly a year after Lozoya’s arrest, there has been little progress on the case, and it seems increasingly unlikely that this investigation will prompt the same kind of anticorruption reckoning as in Brazil. Indeed, court-watchers now fear that Lozoya and those he named will escape any real consequences. While many factors have contributed to this disappointing result, an apparent lack of enthusiasm and commitment from AMLO and his government has played an important role. Instead of doing everything in his power to move the investigation forward, AMLO slashed the budget of the Mexican Attorney General’s Office (FGR), which is leading the Pemex investigation, condoned soft treatment for Lozoya, and has seemed generally ambivalent about the investigation’s apparent lack of progress.

AMLO’s behavior is this regard seems puzzling, since one would think that AMLO has every incentive to support the investigation. After all, AMLO’s 2018 anticorruption platform was wildly popular, and—especially given that his support is waning—revitalizing this anticorruption narrative might improve the standing of his newcomer political party, Morena, heading into this coming June’s midterm elections. So why has AMLO’s support for the Lozoya investigation been so tepid? There are, I think, two main explanations, both of which cast doubt on the sincerity of AMLO’s commitment to rooting out corruption in Mexico’s government.

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Recovering Damages for Corruption — Bribery Victims

There is no longer any doubt that corruption does enormous harm – to individuals, businesses, governments, and whole societies.  Nor is there any dispute that those harmed should have a right to recover damages for their injuries.  In drafting the UN Convention Against Corruption, governments agreed quickly and without dissent upon what is now article 35. It requires parties to ensure their domestic law permit any person or entity harmed by corruption to “initiate legal proceedings against those responsible for the damage to obtain compensation.”

Yet what evidence there is shows article 35’s promise remains largely unfulfilled.

For the UN Office on Drugs and Crime and the StAR Initiative, I am examining just how far there is to go for that promise to be met. With their resources and the help of the International Bar Association, I have reviewed the case law in close to one-third of the 187 UNCAC states parties.  The most common victim recovery cases I find are those where a government agency or state-owned corporation has recovered damages when an employee took a bribe. In a few, courts have also awarded damages to third-parties harmed by the bribery. There are in addition a miscellany of actions I am still digesting covering actions by the competitors of a bribe-payer, consumers, and NGOs.

Below are the bribery victim cases I have located to date. A second post will review the other cases. Reader contributions and comments warmly solicited.

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Guest Post: Corruption in Covid-19 Vaccine Distribution–Early Lessons from Brazil

Today’s guest post is from Guilherme France, a legislative assistant in the Brazilian Senate

The urgency of halting the Covid-19 pandemic, combined with the limited supply of vaccines, has increased the challenges of distributing the vaccine quickly but fairly. As others have pointed out, including on this blog, there are significant risks of corruption in the vaccine distribution process. Brazil provides a troubling illustration of this problem, with instances of corruption or other improprieties related to vaccine distribution having already sparked investigations into mayors and other local officials. For example, there have been complaints that in Manaus, a Covid-19 epicenter, relatives of a local businessman in were fraudulently appointed as employees in health clinics so that they would qualify for early vaccination. And this is but one of several cases where mayors and other local officials allegedly helped their relatives or close associates cut in the line. There have also been reported attempts to pay bribes to nurses for early vaccine access.

There has been similar line-cutting behavior on a grander scale, with various groups, such as prosecutors and judicial authorities, using their political influence and leverage to attempt (without success) to get priority status for receiving the vaccine, ahead of those, like health care workers and the elderly, who need it more urgently. On other occasions, the government acceded to the use of the “priority status” for vaccine distribution as a bargaining chip. In the midst of strike negotiations, it agreed to place truck drivers and other transportation workers ahead of the general population in the vaccination line.

This behavior, while reprehensible, is understandable. Given how hard Brazil has been hit by Covid-19, access to the vaccine is a life and death matter, and the temptation to cut the line, for oneself or a loved one, is just too great. This is why increased control and transparency for vaccine distribution should be a priority for governments at all levels. Continue reading

Fixing the Brazilian Anticorruption Leniency Program

When the Brazilian Anticorruption Law came into force in 2014, pundits celebrated the enactment of a statute that finally authorized action against corporations and other legal entities involved in public corruption, and that provided for substantial penalties. The statute’s most important innovations, however, were not so much its substantive provisions but rather the procedural reforms it introduced, chief among them the Anticorruption Leniency Program, which, alongside the criminal plea bargains for accomplice cooperation created by the Organized Crime Act (enacted on the same day as the Anticorruption Law), authorizes enforcement agencies to settle corruption-related cases.

            The Anticorruption Leniency Program largely reproduces the key features of Brazil’s Antitrust Leniency Program, which, in turn, was inspired by the amnesty program adopted by the U.S. Department of Justice’s Antitrust Division. To qualify for a leniency agreement, a company must be the first among those involved in a corruption scheme to state its interest in cooperating, admit its participation in the wrongdoing, cease any further involvement, cooperate fully with the investigation, and agree to pay compensation for any harm caused to the Public Administration. In exchange, the qualifying company can receive a significant reduction in the administrative fine, as well as protection against debarment or suspension from doing business with the Public Administration. (In contrast to the Antitrust Leniency Program, however, an Anticorruption Leniency agreement does not shield individuals associated with the qualifying company from criminal prosecution.)

Despite its importance in high-profile investigations such as the Lava Jato investigation (Operation Car Wash), critics have emphasized shortcomings of the Anticorruption Leniency Program. Coordination – or rather the lack thereof – between different enforcement agencies is often considered the most significant weak point of the program. However, I want to suggest a different source for the relative ineffectiveness (so far) of the Anticorruption Leniency Program: the requirement that, in order to be eligible for leniency, a company must admit its participation in the wrongdoing. Importantly, this requirement is not (merely) that the company accepts legal responsibility; rather, the program requires admissions of facts—facts that the company cannot subsequently dispute in other proceedings, which, from an enforcement standpoint, is precisely what creates the need for coordination between agencies. But such admissions can also entail additional collateral consequences:

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How Grand Corruption Threatens Liberal Democratic Institutions

As regular readers may have noticed, GAB has been inactive for the past week (that is, until Rick’s post yesterday). Apologies for the lack of content – as I’m sure you can imagine, the U.S. presidential election has been consuming my attention and that of most of our regular contributors. But now that the election outcome is clear (notwithstanding President Trump’s baseless claims of election fraud and the craven complicity of his Republican Party enablers), it’s time to get back to blogging. I suspect that much (though not all) of our content over the next couple of weeks will be related to the outcome of the U.S. elections—both backward-looking evaluation of the impact of the Trump Presidency on corruption in the US and beyond, and forward-looking considerations about the anticorruption agenda under the incoming Biden Administration.

Today’s post isn’t about Trump per se, but it’s loosely inspired by both certain aspects of his presidency and his current refusal to acknowledge and accept the outcome of the election. I want to say a few words about the ways in which corruption, particularly grand corruption at the highest levels of the government, can threaten to undermine the institutions of liberal democracy (free and fair elections, formal and informal checks and balances, the rule of law, etc.). To be clear, I don’t have in mind principally the ways in which politicians might engage in corrupt conduct to help win elections (for example, vote-buying, acceptance of illegal campaign donations in exchange for favors, diverting public funds for partisan purposes, etc.), though these are of course serious and important problems. Nor do I have in mind the broader and more diffuse “institutional corruption” associated with the excessive influence of concentrated wealth, though this too is a grave concern. Rather, I want to consider how grand corruption in the highest levels of government may threaten to erode or subvert (explicitly or de facto) the basic institutional structures of liberal constitutional democracy.

Nothing of what I have to say on this topic is original; it’s all drawn from existing literature, and the arguments are likely familiar to many readers. Still, I thought it might be helpful to highlight three ways in which unchecked grand corruption may contribute to democratic backsliding: Continue reading

Measuring the Success of Brazil’s 2014 Anticorruption Law

In January 2014, following nationwide protests prompted by concerns about widespread corruption, the Brazilian Congress enacted a new Anticorruption Law. The 2014 Anticorruption Law was a landmark in part because it represented the shift from the traditional focus on individual bribe-takers to the bribe-paying corporations. Although a few prior statutes did address the conduct of alleged bribe payers, the Anticorruption Law both authorized much more stringent penalties on bribe-paying companies (including fines of up to 20% of a company’s gross revenue in the prior year, and even mandatory dissolution of the company in extreme cases), and also adopted a revolutionary strict liability regime for corporate corruption offenses.

More than six years have passed since the Brazilian Anticorruption Law entered into force. Has the law been effective? What do we know so far about its enforcement? On the whole, the enforcement numbers seem rather disappointing, suggesting that the law has not (yet) been deployed aggressively to sanction bribe-paying corporations in most parts of Brazil. Nonetheless, there are a variety of reasons why it would be premature to conclude from these numbers that the law has not been, or will not be, effective.

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Guest Post: Promoting Procurement Transparency During the COVID-19 Pandemic in Brazil

Today’s guest post is from Guilherme France, the Research Coordinator at Transparency International Brazil (TI Brazil), together with TI Brazil researchers Maria Dominguez and Vinicius Reis.

While the new coronavirus has slashed through Brazil at alarming rates since March, an old problem has undermined the government’s response: corruption. A considerable portion of the government money spent to deal with the pandemic may have already been lost to corruption and waste. To give just a few examples: in Amazonas the state government bought inadequate medical ventilators from a wine store; In Santa Catarina, the government spent over US$5 million on 200 ventilators that were never delivered; and in Rio de Janeiro, fraud led to losses of more than 700 million reais in the hiring of a company to construct emergency hospitals, most of which were never delivered.

As many have pointed out, the corruption risk in procurement is heightened during an emergency, because traditional procurement rules are relaxed or circumvented to allow goods and services to be purchased in a timely fashion. In Brazil, the problem is compounded by a lack of centralization—with over 5,000 independent government entities (federal institutions, states, and municipalities) competing with each other and international buyers for the same equipment.

In this challenging context, efforts to increase the transparency of government procurement and to promote social accountability are essential. To promote greater integrity and transparency in COVID-19 emergency procurement, last May Transparency International Brazil (TI Brazil) and the Federal Court of Accounts jointly published a set of Transparency Recommendations in Public Procurement. These recommendations inspired a methodology for assessing how well government entities were implementing transparency mechanisms to make emergency procurement data available in their websites. (The assessment method examines four dimensions: (1) the presentation of detailed information on suppliers and contracts, (2) the publication of data in open formats that allow complex analysis, comparison, and reuse; (3) information on the government’s own legislation regarding emergency procurement and related matters; and (4) the quality and availability of channels for citizens to make Freedom of Information requests and report on irregularities related to COVID-19 procurement, as well as the existence of committees, with civil society organizations, to monitor emergency procurement.) Using this method, TI Brazil has created an index on Transparency Ranking on Efforts Against COVID-19, which ranks government entities on a 0-100 scale and also assigns a designation of Poor, Bad, Regular, Good or Great, depending on how well the entity performs on the four dimensions of transparency described above. The initial index included an assessment of 53 local governments (states and state capitals), and monthly evaluations have been undertaken since.

The results are impressive so far. Between the first and the third rounds, for instance, every local government analyzed improved its score, and in the most recent round, 33 governments (20 capitals and 13 states) earned a transparency grade of “Good” or “Great”. The average scores increased from 46 to 85 (capitals) and from 59 to 85 (states). Continue reading

New Podcast, Featuring Irio Musskopf

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my collaborators Nils Köbis and Christopher Starke interview Irio Musskopf, a Brazilian software engineer who co-founded and developed an open-data anticorruption project called Operation “Serenata de Amor, which uses artificial intelligence algorithms to analyze publicly available data to identify and publicize information about suspicious cases involving potential misappropriation of public money. Mr. Musskopf discusses the background of the project,the basic statistical approach to detecting suspicious spending patterns,the reasons for relying exclusively on public data (even when offered access to non-public information), and some of the challenges the project team has encountered. The conversation also discusses more general questions regarding the role that intelligent algorithms can play in anticorruption efforts, including questions about whether and where such algorithms might be able to supplant human analysis, and when human decision-making will remain essential..

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.