Corruption and the COVID-19 Vaccine: The Looming Problem of Distribution

From the earliest days of the COVID-19 pandemic, activists and analysts have called attention to the significant corruption risks associated with the response to both the public health crisis itself and the economic disruption it has caused. Anticorruption advocates have highlighted, for example, the corruption risks associated with the distribution of relief funds and personal protective equipment, and have emphasized the need for reforms like enhancing transparency, requiring audits, and ensuring protections for whistleblowers. (For samples of the discussion of the need for anticorruption measures in coronavirus response, see here, here, here, and here.) Yet there has been surprisingly little sustained discussion or planning concerning a specific issue which, while still prospective, is of pressing global importance: the inevitable corruption risks that will be associated with the distribution of a COVID-19 vaccine, if and when such a vaccine becomes available.

This is not to say that there has been no exploration of the subject. Commentators have discussed the difficulties of ensuring that a vaccine is distributed equitably, as opposed to simply being given to the most affluent, and have called attention to the problems of black markets and price gouging that are likely to emerge once vaccines are available. There has also been some general, abstract discussion of the fact that the distribution of a COVID-19 vaccine, once one exists, has significant potential for both grand and petty corruption. Absent from the discussion, though, has been the development of concrete plans for incorporating anticorruption measures in vaccine distribution—plans that take into account the inherent logistical challenges. The World Health Organization (WHO), to its credit, has released a seventeen-page plan for fair allocation of a COVID vaccine, which discusses detailed measures to ensure that vaccines are distributed fairly. However, the WHO plan devotes little more than a page to promises of “strong accountability mechanisms” in the governing bodies to “ensure protection against undue influence.” The WHO does note that the primary role of its own Independent Allocation Validation Group is to ensure that proposals from the vaccine Allocation Taskforce remain “transparent and free from conflicts of interest,” but while this sort of internal monitoring is laudable, the WHO plan conspicuously lacks any further guidance or recommendations on appropriate anticorruption measures once the vaccines are handed over to their allocated countries.

Although the timeline for a vaccine remains uncertain—and there’s no guarantee that a vaccine will be available any time soon—it would make sense for both international organizations and national governments to identify the most likely corruption risks associated with vaccine distribution and to begin developing safeguards to mitigate those risks. While there are many possible corruption risks associated with vaccine distribution, the two most significant are diversion of vaccines and extortion. Let’s examine each in turn:

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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 Danielle Brian

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Danielle Brian, the Executive Director of the Project on Government Oversight (POGO), a U.S. civil society watchdog organization that focuses on investigating, exposing, and preventing government corruption, fraud, and waste, and more broadly lobbies for systemic reforms to improve accountability and integrity in the U.S. government.

The interview begins with a conversation about POGO’s history and current work, and discusses POGO’s somewhat “hybrid model,” which combines investigation work on specific cases with a broader policy reform agenda. Ms. Brian provides, as an encouraging example of how groups like POGO can have a positive impact, POGO’s work in promoting significant reform in the regulations governing payments to oil and gas companies. She describes the case study as a useful illustration of a successful advocacy campaign, but also emphasizes that one of the lessons from this and other cases is that genuine reform takes time and requires patience. We then turn to several other challenges that anticorruption advocacy groups like POGO face, including how to maintain a reputation for nonpartisanship and how to balance the interest in engaging with the government and publicly criticizing the government. Ms. Brian and I also touch on a number of more specific issues, including concerns about corruption in the allocation of coronavirus relief funds, questions about whether or how to frame lobbying or other influence activities as “corrupt,” and the so-called “revolving door” problem.

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.

One other note: KickBack will be going on holiday in August, but we’ll be back with a new episode on September 7.

Guest Post: The Coalition for Integrity’s New Report on How To Ensure Oversight of U.S. Coronavirus Response Funds

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.

The U.S. Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), enacted in late March to address the economic fallout from the coronavirus pandemic, provides over $2 trillion in various forms of relief, including over $600 billion for the Paycheck Protection Program (PPP), which provides loans to small businesses, and approximately $500 billion in additional discretionary Treasury Department loans. To ensure appropriate allocation of these funds, and to reduce the risks of corruption, fraud, and other forms of misappropriation, transparency and oversight are essential. Indeed, we have already seen the perils of a lack of transparency in awarding the PPP loans. Instead of prioritizing businesses who were in danger of failing without an injection of cash, many large chains and other well-funded companies received loans. Further, there are reports that businesses owned by members of Congress received money under the program, which raises conflict of interest concerns.

Unfortunately, the Trump Administration has resisted even relatively modest measures to assure transparency and accountability in the allocation of CARES Act funds. Treasury Secretary Steven Mnuchin previously announced that the names of PPP recipients would not be made public, making the misguided claim that the identity of PPP loan recipients is the companies’ confidential and proprietary information. But taxpayer have a right to know where their money is going (a principle the U.S. vigorously applies when sending foreign aid dollars overseas). Eventually Secretary Mnuchin relented to pressure to change course, and agreed to provide information regarding PPP loans in excess of $150,000. Yet the administration’s resistance to transparency and oversight has continued, as demonstrated by alarming reports that the Treasury Department’s Office of General Counsel has issued a legal opinion claiming that the Department has no obligation to provide key information to oversight officials, including the Pandemic Response Accountability Committee (PRAC), about the CARES Act’s PPP and discretionary business loan programs.

These reports underscore the importance of keeping up the pressure on Congress and the Administration to take appropriate steps to ensure genuine transparency and accountability in the allocation of pandemic response funds. Congress in particular may need to add new legal provisions to address the flaws in the oversight system. The Coalition for Integrity recently released a new report, entitled Oversight is Better than Hindsight: Anti-Corruption Recommendations for the CARES Act, which documents the current oversight gaps in the CARES Act and presents a set of recommendations on how best to close those gaps. These recommendations include, among others: increasing appropriations for oversight bodies, enacting for-cause removal protections for Inspectors General, enhancing whistleblower protections, requiring the Federal Reserve to comply with Sunshine’s Act meeting transcript or recording requirements, and appointing a chairperson to the Congressional Oversight Commission. The report also highlights a number of measures that the Administration can and should take, including better and more effective cooperation with the oversight bodies, creating a public-facing website with detailed information on contracts awarded under the stimulus program (as was done by the Recovery Accountability and Transparency Board, which oversaw the stimulus funding enacted in response to the 2007-2008 financial crisis), and ensuring more generally that agencies are responsive rather than resistant to requests and recommendations from oversight bodies.

Effective oversight is not a partisan political issue. Misuse of stimulus money will compound the country’s collective misery at a time when millions are already suffering from the grave health and economic effects of the pandemic. In this context, insufficient public transparency and a lack of full cooperation with oversight bodies should worry us all.

 

Should International Organizations Like the IMF Require More Anticorruption Conditions on Their Pandemic Emergency Funding?

In response to the unprecedented COVID-19 pandemic, governments across the world are taking emergency measures to secure and distribute necessary medical equipment to hospitals, front-line medical workers, and at-risk groups. Moreover, to respond to the dangerous economic crisis that has resulted from stay-at-home orders and other essential public health measures, national governments have rapidly adopted new fiscal programs and other measures that have pushed trillions of dollars out the door. Multilateral institutions like the International Monetary Fund (IMF) have also stepped in to assist countries that have seen their foreign exchange inflows drying up due to a variety of factors associated with the pandemic (including lower international oil prices, lack of tourism receipts, and declining remittance flows). These countries urgently need for foreign exchange to purchase critical medical supplies and equipment from abroad. The IMF has existing facilities for providing emergency funding to address balance of payments shortfalls in times of emergency (the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI)), and has  already begun providing funding under these programs, with more funds likely on the way. In contrast to other IMF programs, there are relatively few conditions that recipients need to satisfy up front in order to have access to RCF/RFI financing.

The global anticorruption community has been understandably worried about the risks that emergency response funds could be misappropriated or mismanaged, which would impede the collective public health efforts. (See, for example, the pieces collected here and here). For example, Transparency International has pushed for open data publishing on public procurement, and Sarah Steingrüber, the Global Health Lead for CurbingCorruption, recently made the case on GAB for the establishment of oversight task forces and for directing some donor funds to enhancing anticorruption safeguards (i.e. public financial management improvements and CSO funding). With respect to the IMF in particular, a group of 99 civil society organizations (CSOs) sent an open letter to the IMF, pushing back against what they characterized as the Fund’s “retroactive approach” to anticorruption efforts, and instead called for loan conditions that would require recipient governments to (1) receive all IMF funds in a single Treasury account, (2) hire independent auditors within six months of disbursement, (3) publish a procurement plan with names and beneficial ownership information, and (4) repeal or amend laws that prevent groups from safely monitoring government spending.

While nobody seriously questions the importance of reducing corruption and other forms of “leakage” of funds spent to fight the coronavirus and its associated economic dislocation, much of the emerging commentary from the anticorruption community seems to lack a sufficient appreciation of, and engagement with, the trade-offs between controlling leakage and ensuring a sufficiently rapid response. The CSOs’ open letter to the IMF is an illustrative example of the apparent neglect of these trade-offs. Continue reading

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

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.

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

Heightened Transparency of Stock Trading by Public Officials Could Help Convey Reliable Information in Crises that the Public Deserves to Know

On February 7, 2020, there were 34,876 confirmed cases of Covid-19 worldwide, but none in the United States. On that day, Fox News published a reassuring opinion piece co-authored by Republican Senator Richard Burr, arguing that the US is prepared to face any outbreak. Around February 13, a couple of days before the first confirmed cases in the US were discovered and before the stock markets began to plunge, Burr sold hundreds of thousands of dollars’ worth of stocks, many of which were in the hotel industry. Senator Burr’s stock sale was not public at the time; the sales were first reported by ProPublica only a month later.

We do not yet know whether Senator Burr’s decision to dump his stocks was based on confidential government information to which he had special access. On the one hand, new information on the Covid-19 pandemic was coming out every day, and perhaps Senator Burr was simply one of many investors who changed their minds regarding the outbreak and were lucky to exit the market in time. On the other hand, Senator Burr is the Chair of the Senate Intelligence Committee, which was receiving regular briefings on the coronavirus situation, so the suspicions towards him are understandable. (It also didn’t help matters that a few weeks after the publication of his op-ed Senator Burr told wealthy donors in a closed-door meeting that the Covid-19 outbreak “is probably more akin to the 1918 pandemic,” but never revised his previous public reassurances.) Whether justifiably or not, Senator Burr was harshly criticized (including on this blog), with many calling for his resignation, and he has been sued for insider trading by a shareholder of one of the companies whose stocks he dumped. In addition to the criticism leveled at Senator Burr, several commentaries, including Cristina’s post on this blog, have argued that this incident demonstrates the need to amend the 2012 STOCK Act to impose stricter limitations on the freedom of senior US government officials, including Members of Congress, to trade in stocks.

My perspective is somewhat different. While I acknowledge the legitimate concerns that motivated calls to strengthen prohibitions on stock trading by government officials, in my view regulation should be more focused on ensuring the transparency of those trades, rather than on further limiting or blocking stock trading.

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Guest Post: COVID-19 and Corruption–Two Risks and One Opportunity

Today’s guest post is from Peter Glover, Program officer for the Center for International Private Enterprise’s Anti-Corruption and Governance Center.

The immediate consequences of COVID-19 are visible and visceral for everybody, even as some feel the effects more than others. In addition to reshaping everyday life, COVID-19 will also transform global governance—including with respect to corruption and related issues. In this post I want to emphasize three ways that the COVID-19 pandemic will interact with corruption: Continue reading