Furthering Cross-Border Cooperation to Fight Corruption

Some of the best news on the corruption front is the growing cross-border cooperation among domestic law enforcement agencies.  The French firm Alstom’s December 18 agreement to pay R$ 60 million, US$ 16 million, to Brazil to settle bribery claims nicely illustrates the pay off from such cooperation.  Thanks to information supplied by French and Swiss authorities, Brazilian prosecutors showed that Alstom had bribed officials of Sao Paulo’s state government to win a contract to supply electrical equipment to the state’s power company.  A critical element in the case was evidence that the officials had deposited large sums in Swiss banks around the time the contract was awarded.

Although Brazil, France, and Switzerland are all bound by domestic legislation and treaties to help one another investigate and prosecute corruption cases, law alone is not enough to produce the kind of cooperation that resulted in the Alstom settlement.  As Silvio Marques, one of the Alstom prosecutors, explained the other day in a note to colleagues, the key element is – Continue reading

Do Corrupt Politicians Deserve a Second Chance?

In 2003, Joe Ganim left his fifth term as mayor of Bridgeport, Connecticut in disgrace. A federal jury convicted Ganim on sixteen corruption charges, including racketeering, extortion, bribery, and mail fraud, and he served seven years in prison. Yet five years after his release, Ganim is poised to become mayor again, having won the Democratic Party primary (in overwhelmingly Democratic Bridgeport)—defying the predictions of those who thought his corruption sentence would make a political comeback all but impossible. Yet if Bridgeport were located just across the Connecticut border, in neighboring New York, Joe Ganim would not be allowed to run, because New York—along with several other states such as Mississippi, South Carolina, and Virginia—has a disqualification law. Such laws prevent officials who have been convicted of corruption-related crimes from running for elected office, for periods ranging from several years to life (depending on the state). We see something like this approach in many other countries as well, though different countries have adopted varied approaches to the question of whether people convicted of crimes – corruption-related or not – can run for office. In Brazil, politicians convicted of certain enumerated crimes, including corruption-related offenses, are barred for eight years pursuant to a 2009 bill (which had been championed by civil society groups). In Canada, those convicted for corrupt acts must wait seven years from the date of conviction before they can run for the House of Commons (the limit for those convicted of other crimes is five years). In France, courts have the discretion to impose, as part of criminal conviction, a period of up to ten years during which the defendant may not vote or run for public office. Other countries, like Denmark and Finland, leaves the matter up to the parliament, which can vote to disqualify someone convicted of an offense showing untrustworthiness or unfitness for public office.

Are disqualification rules of this sort a good idea? Would it be better if Connecticut had a law like New York’s, which would prevent someone like Joe Ganim from running for life? Should other democracies that suffer from widespread public corruption follow the example of countries like Brazil, which have adopted these sorts of disqualification laws? This solution is indeed a tempting one. After all, the Bridgeport race—and numerous elections elsewhere—show that voters will not always prevent those convicted of serious corruption offenses from seeking and winning public office. Yet the experience of countries that have adopted statutory disqualification signals reasons for caution. Although one must be careful about overly broad generalizations, given the extent of variation in government structure and political culture, disqualification laws raise serious risks, and may not be necessary. Continue reading

Guest Post: A “Guatemalan Spring”? — Not Yet.

Alicia Robinson, a student at Harvard Law School, contributes the following guest post:

Guatemala has long been beset by persistent poverty, corruption, and a culture of impunity – an Unholy Trinity that has afflicted much of Central and South America. Moreover, Guatemala has the misfortune of being geographically located at the center of major drug trafficking routes to the North American and European markets, where the unrelenting demand has allowed organized crime to strengthen its hold over the country’s institutions of governance. Yet as Mathieu Tromme’s recent post on this blog highlighted, there are some encouraging signs of change. Most notably, the recent uncovering of a massive tax fraud orechestrated at the highest levels of the executive branch triggered protests that forced the resignation of the vice president – a major victory against impunity in the country.

However, despite this success, and the broad popular support for more action against corruption and impunity, Mr. Tromme may be overly optimistic when he characterizes this this event and the surrounding protests as the inception of a “Guatemalan Spring” that will bring an end to the era of impunity in Guatemala. Corruption still very much riddles every corner of Guatemalan society and the toughest part of the battle lies ahead. Continue reading

“The Whole World Can Commit Corrupt Acts” : Petrobras and the Brazilian Election

“There are corrupt people everywhere,” said Brazilian President Dilma Rousseff. “In my opinion, the whole world can commit corrupt acts.” Brazil’s presidential election is neck and neck, the closest in a generation. As both candidates accuse each other of corruption, two questions come to mind: First, is corruption influencing the outcome of this race? Second, should it? Continue reading

Maybe Brazil’s Painful World Cup Defeat Was a Blessing in Disguise

So the 2014 World Cup is over (congratulations, Germany), and the result was a disappointment for the host nation, to say the least.  Brazil’s ignominious 7-1 defeat in the semi-finals will probably go down as one of the worst sports losses in the country’s history.  As someone with many very close Brazilian friends, I’m hesitant to suggest that there may be anything good about Brazil’s loss.  But I’m going to anyway, from the perspective of anticorruption activism.  Here goes:

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Let’s Create Sub-National Corruption Perception Indexes for the BRICS

For all their flaws, the major cross-country corruption indexes—Transparency International’s Corruption Perceptions Index (CPI), the World Bank Institute’s Worldwide Governance Indicators (WGI), and the like—have been quite useful, both for research (at least when used appropriately) and for advocacy.  But one important limitation of these datasets is that by focusing on corruption (or perceived corruption) at the country level, they may obscure the fact that there can be substantial within-country variation in the level of (perceived) corruption.  This variation may occur across government institutions—the same country may have quite different degrees of corruption in the health sector, the police force, the judiciary, customs, etc.  More pertinent here, there may also be significant heterogeneity across regions, particularly in large countries with substantial political decentralization.  Indeed, numerous studies have exploited within-country regional variation in corruption levels to test various hypotheses about corruption’s causes and consequences; such studies include research on Italy, Russia, China, the Philippines, and the United States, among others.  But these studies typically make use of particular data sets that are not reproduced year-to-year.

As we’re starting to see rapidly diminishing returns from the major cross-country corruption datasets, it is high time for those organizations with the resources and capacity to compile information on corruption perceptions on an ongoing basis to turn their focus to within-country regional variation in corruption.  I propose the creation of a sub-national corruption perceptions index (snCPI), starting with the so-called BRICS countries (Brazil, Russia, India, China, and South Africa), which would gather and compile data (primarily perception-based data, perhaps supplemented with more objective data when available) on perceived corruption levels within the major sub-national units (states/provinces, autonomous regions, and municipalities) within each of those countries.

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Guinean, American Anticorruption Investigators Tear Up the “Best Private Mining Deal of Our Generation”

The mining mogul Benny Steinmetz was once feted for the “best private mining deal of our generation,” after his company secured Africa’s richest iron ore deposit in Simandou, Guinea. Today, the deal “lies in ruins.” A two-year investigation by Guinea’s government has found that Steinmetz’s firm BSGR used corrupt practices to win its mining rights from Ahmed Sekou Touré, Guinea’s former dictator, . The company has now been stripped of these rights. Meanwhile, the FBI has Steinmetz on tape authorizing millions of dollars in payments to the wife of a former Guinean dictator. A BSGR associate, Frederic Cilins, has pled guilty to obstructing an FCPA inquiry into the mining deal in a Manhattan court; Swiss prosecutors are looking to question Steinmetz himself. Perhaps unbelievably for Benny Steinmetz, anticorruption authorities around the world have responded furiously to a clandestine deal in an overlooked, West African backwater.

Four takeaways from these incredible developments, after the jump.

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Investigating a Company “As Big as Brazil”

“Petrobras is bigger than all of us,” declared Brazilian President Dilma Roussef. “Petrobras is as big as Brazil.” Brazil’s federal police had raided the state-run oil company’s headquarters three days earlier, on April 11, and President Roussef was defensive. “No one and nothing,” she said, “will destroy Petrobras.” That the probe proceeds despite President Roussef’s warnings demonstrates the power of the Brazilian people. While it is too early to know whether Brazil will prosecute its biggest company, the investigation, and a separate congressional inquiry, may be testaments to the impact that mass public protests — involving more than 1 million protestors over the course of the last year — have had on prosecutors and government officials.

The Petrobras probe’s initiation months before a presidential election, and the political battle surrounding it, however, raise a red flag: are the people speaking, or are powerful political groups?

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Brazilian Anticorruption and the World Cup

The FIFA World Cup is more than “a mere sporting event. It’s a tool to promote social transformation.”  So said Ricardo Teixeira, the President of the Brazilian Football Confederation, after Brazil won the bid to host the 2014 games. Despite initial optimism, however, the buildup to the Cup in Brazil has been marred by widespread protests and accusations of corruption. If there is a basis to these accusations, the World Cup provides an early — and high-profile — opportunity to test Brazil’s new anticorruption law. Maryum’s post earlier this week might be right that the national government has a political incentive to prove that it’s serious about anticorruption, but the World Cup contradicts that narrative. The Cup’s high profile might skew the national government’s incentives: identifying corruption in Brazil’s World Cup could be a national embarrassment.  If the federal government’s incentives are misaligned, the decentralized enforcement powers in the CCA – which Maryum’s post criticizes – offer hope that corruption will be punished. Continue reading

Brazil’s Clean Companies Act: Ineffective for Combating Local Corruption?

In January 2014, the Brazilian Clean Companies Act (CCA) came into effect. Under the CCA, Brazilian companies and foreign entities with a Brazilian registered office, branch, or affiliate can be sanctioned (civilly and administratively) for the bribery of domestic or foreign public officials, with penalties up to 20% of a company’s gross billings. The Act may be cause for optimism that Brazil is going to get serious about the corruption that has hampered its development, undermined trust in government, and provoked riots.

But despite the CCA’s tough sanctions and sweeping provisions, there are reasons to doubt whether the law will be effective at combatting corruption at the local level (as opposed to national-level officials).  Even if the CCA might go some way toward dealing with corruption at the national level, the new law fails to to adequately address local-level corruption in Brazil — and this is a major limitation, because local corruption in Brazilian business dealings is especially rampant.  There are at least two reasons why it is questionable the CCA will effectively combat local corruption. Continue reading