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Tag Archives: China
From the World Cup to the Olympics: Why Are International Sporting Events So Corrupt?
The recently-concluded FIFA World Cup in Qatar has served as yet another reminder of the corruption that seems to accompany the awarding of hosting rights for major international sporting events. According to the U.S. Department of Justice (DOJ), in 2010 representatives of Qatar bribed three South American FIFA officials to win the run-off vote against the United States to host the 2022 World Cup. And this came after two members of the FIFA selection committee had already been barred from voting after they had been caught agreeing to sell their votes. This was not an isolated incident. The DOJ also alleged that Russia bribed FIFA officials to host the 2018 World Cup, and indeed more than half of those FIFA officials involved in the 2018 and 2022 host country votes—including FIFA’s then-president Sepp Blatter—have been accused of improper behavior. Nor has this sort of behavior been limited to FIFA. The International Olympic Committee (IOC) has had numerous similar scandals. The IOC has launched an investigation into nine members who were bribed to vote for granting Brazil the hosting rights for the 2016 Olympic Games; Sérgio Cabral, the former governor of Rio de Janeiro, admitted to paying $2 million to the former president of the International Amateur Athletic Federation (IAAF) to buy votes to select Rio as the 2016 Olympic host city, and the head of Brazil’s Olympic committee, Carols Nuzman, was sentenced to over 30 years in prison as a result. And when Russia secured the 2014 Winter Olympics bid, it did so with the assistance of the then-vice president of the Olympic Council of Asia, Gafur Rakhimov, an organized crime leader and heroin kingpin.
Why is the process of selecting host cities and countries for major international sporting events so constantly captured by bribery and corruption? There are several inter-related reasons for this ongoing problem:
Will China’s Property Tax Reform Be a Catalyst for Corruption?
In China, most residential property owners do not need to pay real estate taxes. In 2011, China initiated property tax trial programs in Shanghai and Chongqing, but even here, the taxes applied only to a few types of properties (newly purchased second homes and high-value properties, respectively) and the tax rates under these trial programs were quite low, and based on a property’s transaction price rather than its current appraised value. But this is about to change. President Xi Jinping’s administration sees a property tax as a key tool to achieve its goal of “common prosperity,” and last October, the government announced a major property tax reform, which is to begin with a five-year pilot program implemented at the local level in selected subnational jurisdictions. Under this reform, most residential property owners will need to pay property taxes, though local governments will have broad discretion to decide on the scope, rates, and collection procedures (see here and here).
Most of the debate about this dramatic change to China’s tax policy have focused on whether the proposed property tax can stop rampant speculation in the housing market and help redistribute wealth. Some commentators, though, have suggested that the new property tax might also help advance President Xi’s anticorruption campaign, because (it is argued) the tax will force greater disclosure of businessmen and government officials’ property ownership. But that hope is misplaced. In fact, the evidence so far suggests that the property tax reform might actually create more opportunities for corruption.
Guest Post: The Beijing Olympics Marks the End of the Era of Corrupt Authoritarian Megasports—But What Comes Next?
Today’s guest post is from Andy Spalding, a professor at the University of Richmond School of Law and the Chair of the Olympics Compliance Task Force.
The present Beijing Winter Olympics are widely seen as yet another chapter in what has become all-too-familiar story of governance disasters in megasport events like the Olympics and the FIFA World Cup: 2008, China; 2010, South Africa; 2014, Brazil; and Russia; 2016, Brazil . . . again; 2018, Russia . . . again. And now, China . . . again. But for the last decade, pressure has been building for change in how the organizers of these megasport events approach anticorruption and human rights policy. And at last, change has come—even if it’s not yet obvious to casual observers only looking at the current games.
The period between roughly 2014 and 2018 became a tipping point in megasport anti-corruption and human rights policy. Russia consecutively hosted the Sochi Winter Olympics and FIFA Men’s World Cup with dizzying human rights and corruption problems. Meanwhile, the only two bidders for the 2022 Winter Olympics were China and Kazakhstan. Something had to change. Continue reading
Chinese NPAs Target the Wrong Firms
Settlement agreements, such as non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs), have come to play a central role in resolving corporate criminal cases, including bribery cases. These settlement mechanisms are thought to improve overall enforcement by encouraging companies to voluntarily disclose wrongdoing and cooperate with investigators, in order to avoid the reputational and economic harm that would come with a criminal prosecution. The United States pioneered the use of NPAs and DPAs, but variants on these mechanisms have been adopted by many other countries as well (see here, here, and here).
The People’s Republic of China has also begun to explore a version of this mechanism. After some initial pilot programs at the local level, in June 2021 the Supreme People’s Procuratorate Office, together with eight other top authorities, promulgated Guiding Opinions on Establishing a Mechanism for Third-party Monitoring and Evaluation of Corporate Compliance Programs for Trial Implementation (or, more succinctly, the “Non-Prosecution for Compliance” mechanism). This mechanism, which can be used to resolve bribery cases as well as cases involving other types of corporate crime, resembles the NPA mechanism used in the United States: If a company accused of criminal violations admits wrongdoing, cooperates with the government’s investigation, agrees to pay certain fines, implements a compliance program that satisfies the requirements of the procuratorate office, and is overseen by a third-party monitor for up to one year, then prosecutors will agree not to prosecute the company, thus sparing the company not only the risk of criminal conviction but also the costs associated with defending against a criminal prosecution.
But there’s a big difference between the U.S. NPA system and the Chinese version: The U.S. (and other countries, like the U.K.) have used NPAs and DPAs to settle major cases against giant firms. In China so far, prosecutors (in the ten provinces and municipalities that piloted the NPA system) have only concluded NPAs with small and medium enterprises (SMEs), and have done so only when the offenses involved were minor crimes (those for which the responsible persons may be sentenced to less than three years in prison, the lowest permissible punishment for most crimes). This enforcement approach gets things exactly backwards: While the availability of NPAs can be very helpful in combating corruption and other crime in large companies—by giving those companies stronger incentives to disclose and cooperate, and by inducing them to enhance their compliance systems—offering NPAs to SMEs adds little value and is costly to the government. Rather than offering NPAs only to SMEs, as seems to have been the approach of Chinese prosecutors thus far, it would be better if SMEs were deemed ineligible for NPAs.
Leniency Revisited: China Should Also Reward Bribe Takers Who Confess
China’s anticorruption campaign has focused almost exclusively on the so-called “demand side” of bribe transactions—the public officials who request or accept bribe payments. Indeed, it is quite common for a bribe-taking government official to be prosecuted while the bribe giver receives no punishment at all (see here, here, and here). Overall, China has convicted and punished almost four times as many bribe-takers as bribe-givers, and only 1% of bribe-givers have faced criminal prosecution.
This lopsided emphasis on the demand side of bribery is mostly caused by a odd asymmetry in China’s Criminal Law. According to Article 390, bribe givers who confess their crimes to the authorities before the case is handed over the procuratorate office for criminal prosecution are eligible for leniency, including outright exemption from punishment, but there is no equivalent provision for bribe takers. (There are some general provisions in Chinese criminal law that afford criminal defendants mitigated punishment, but these sections are applicable only when suspects voluntarily turn themselves in before any investigation has commenced, or provide sufficiently valuable service in uncovering other criminal misconduct. These provisions are not as generous as Article 390.) Due to the asymmetric structure of Article 390, coupled with the fact that bribery is often hard to uncover without the cooperation of one of the parties involved in the transaction, China’s principal anticorruption agency, the Central Commission for Discipline Inspection (CCDI), has cut deals almost exclusively with bribe givers, offering them immunity pursuant to Article 390 in exchange for their assistance in going after the corrupt officials.
This asymmetry has contributed to criticism that China is too lenient on bribe givers. Some critics have argued that China should eliminate the disparate treatment of bribe givers and bribe takers by abolishing Article 390 altogether, thus making it equally difficult for bribe givers and bribe takers to receive leniency (see, for example, here and here). While China has not gone that far, it has taken steps in this direction, for example by amending Article 390 back in 2015 to narrow the set of bribe givers who would be eligible to receive mitigated punishment under that section.
I agree that the asymmetric treatment of bribe givers and bribe takers makes little sense, but rectifying that asymmetry by restricting the availability of leniency to bribe givers who voluntarily confess is the wrong approach. On the contrary, China should expand Article 390 so that bribe takers who report to the government and offer evidence against the bribe payer would be eligible for leniency. But only the party that reports first (and fully and candidly) should be eligible for leniency—the other party to the transaction would be punished harshly. This system, which would resemble the US Department of Justice’s Antitrust Leniency Program, creates a prisoner’s dilemma problem for both parties to the bribe transaction, thus helping to detect and deter bribery more efficiently.
Social Distancing Reduces Corruption Too
Together with a trio of Chinese scholars, Boston University Professor Raymond Fisman offers the latest evidence on the value of social distancing. Their research, in the July issue of the American Economic Journal: Applied Economics (here, prepublication version here), is the first rigorous, quantitative test of a result suggested by case studies of small countries (Guatemala), small towns (Fall River, Massachusetts), and small professional circles (Chicago judges). The greater the distance between those who enforce the anticorruption laws and those likely to violate them, the more likely it is the laws will be enforced.
“Social distance” to public health authorities means the actual physical space that individuals should maintain between on another (six feet for Americans, two meters for everyone else) to prevent the spread of Covid-19. Applied to the findings of Fisman and colleagues and the case studies, it means more than how far apart investigators, prosecutors, auditors, and others responsible for enforcing anticorruption laws stand physically from those whom they police. It means too the absence of school and neighborhood ties, different circles of friends, and the lack of other relationships that would make an individual hesitant to question another’s conduct let alone investigate or arrest them. In short, when evaluating social distance in the anticorruption world, “social” comes with a capital S.
Consider what Professors Fisman and his colleagues Professors Chu, Tan, and Wang found in their study of Chinese auditors.Continue reading
Corruption Should Be a Laughing Matter
Corruption is a serious matter—it sucks away public finances, undermines good governance, ends livelihoods, and consumes lives. It’s therefore understandable that many anticorruption activists center much of their work on getting people to take corruption seriously. But despite the underlying gravity of the problem, sometimes a surprisingly effective way to fight against corruption is to make people laugh about it.
Consider Alexei Navalny, the Russian activist whose attempted assassination, arrest, and imprisonment underscore just how much Moscow has recognized his power. One of the striking things about the explosive videos that Navalny has released to expose the Putin regime’s corruption is that the videos aren’t just shocking—they’re funny. People enjoy watching them because of their biting humor—and while they’re laughing, they also learn about Putin’s siphoning of public funds for his own benefit.
There are plenty of other examples of anticorruption activists effectively using humor as part of their campaigns. To mention just a few:
- Last summer, Lebanese activists staged a fake—and deliberately comical—“funeral” for the Lebanese currency (the lira), as a protest against the cronyism and mismanagement that “killed” the Lebanese lira and tanked the country’s economy. A video of the “funeral” gathered over 10,600 views on Twitter and brought renewed international attention to an anticorruption protest movement that at that point was approaching its seventh month without much success.
- A Chinese artist known as Badiucao has used satirical art to bring attention to the ruling party’s political corruption, including a famous “promotional poster” for the TV series House of Cards, with Xi Jinping sitting on the throne instead of series villain Frank Underwood. His art helped spark renewed criticism of the regime and is credited with inspiring political cartoons throughout Hong Kong’s democratic uprising against China’s controversial 2019 extradition bill.
- In Ukraine, Volodymyr Zelensky was elevated from comedian to President of Ukraine by campaigning on an anticorruption platform. Comedy was a key part of his 2018 campaign—instead of traditional rallies, he held performances by comedy troupes skewering the corruption of the incumbent regime.
- Back in 2004, the then-mayor of Bogota Antanas Mockus pushed back against the city’s petty corruption through antics like inducting 150 “honest” taxi drivers into a fictional club called the “Knights of the Zebra.”
These and other examples illustrate an important lesson for anticorruption activists: Notwithstanding the seriousness of corruption and the harm that it causes, humor can be a powerful tool in spreading an anticorruption message. As a rhetorical device, humor has a few distinctive strengths:Continue reading
Why Are the Architects of China’s Anticorruption Campaign (Mis-)Reading Tocqueville?
Back in 2013, senior Chinese Communist Party (CCP) official Wang Qishan, who was then head of the CCP’s Central Commission for Discipline Inspection (CCDI), and is widely considered the architect of President Xi Jinping’s anticorruption campaign, instructed party officials to read Alexis de Tocqueville’s L’Ancien Régime et la Révolution (The Old Regime and the Revolution). This is notable in part because the Xi regime has a reputation for rejecting Western thinking, particularly with respect to governance. The timing is also intriguing, in that Wang’s advice that CCP officials should read Tocqueville’s text occurred right as the anticorruption drive was getting underway.
It’s tempting to dismiss Wang’s apparent interest in and enthusiasm for Tocqueville is a minor idiosyncratic biographical detail, with little connection to his or the CCP’s approach to governance generally, or anticorruption more specifically. But I think his interest in Tocqueville’s work is more significant, and more revealing, about the thinking shaping China’s anticorruption strategy today.Continue reading
The Many Uses of Xi Jinping’s Anticorruption Campaign
Since Chinese President Xi Jinping launched his anticorruption campaign in 2012, much of the foreign commentary has debated the extent to which the campaign is a genuine effort to root out corruption or a means for purging or undermining President Xi’s political opponents. This simple framing, however, obscures the other uses and objectives of the anticorruption campaign. Better understanding these motivations is important to understanding the dynamics of the campaign and the role that anticorruption plays in modern Chinese politics. Three political and policy objectives are particularly notable: