Expediting Corruption: The Dangers of Expediters in Licensing Markets

The scheme was as simple as it was brazen, and as brazen as it was frightening. On April 24, 2018, a New York City jury convicted attorney John Chambers of bribing New York Police Department (NYPD) personnel in exchange for gun permits for his numerous clients. Calling himself a “gun license expediter,” Mr. Chambers acted as an intermediary for individuals hoping to pass the necessary background check and obtain the mandatory permit in order to legally own a firearm in the city. But in a decentralized scheme involving numerous individuals inside and outside the police department, NYPD officers approved hundreds of licenses while skipping background checks, shortening license suspensions, and waving through applications containing glaring red flags—including improperly approving licenses for individuals convicted of illegal weapons possession. In return, the officers received expensive gifts, tickets to sporting events, lavish vacations, envelopes stuffed with cash—and even free guns.

At the center of the web of bribery were so-called “gun license expediters” like Chambers, who advertised their ability to help clients navigate the demanding and complex process of obtaining, renewing, or retaining a handgun license in New York City. Several of the expediters indicted in the scandal were retired police officers who had served in the NYPD Licensing Division, bribing former colleagues after leaving the police force in order to open their own expediting businesses. Fees varied depending on the difficulty and timing of the requests, but clients were routinely charged thousands of dollars per license—on top of the hundreds of dollars in mandatory city-imposed application fees. By leveraging experience, relationships, and sometimes illegal gifts, expediters such as Chambers were able to not only expedite but also to influence the outcome of applications.

In response to the revelations, the NYPD announced substantial changes to its licensing program. First and foremost, the department barred any expediter from physically visiting the Licensing Division on behalf of a client—instead requiring that all applicants appear in person to submit their own paperwork. (Expediters, however, would presumably not be barred from contacting members of the Licensing Division or directing their clients whom to talk to when they arrive.) Second, the department mandated that all gun permit approvals could only be made by the top two officers in the unit. Despite these seemingly sweeping changes, the new policies sidestep the root causes of corruption in this instance—which reveal the danger of expediters in general. Continue reading

Can U.S. History Teach Us Anything Useful About the Fight Against Corruption in the Developing World Today?

A little while back I attended a very interesting talk by California Supreme Court Justice Mariano-Florentino Cuellar about a paper of his, co-authored with the political scientists Margaret Levi and Barry Weingast, entitled “Conflict, Institutions, and Public Law: Reflections on Twentieth-Century America as a Developing Country.” It’s a short, provocative paper, well worth reading for a number of reasons, but what I really want to focus on here is less the substance of the paper itself than the broader theme, captured by the paper’s subtitle, that it may be valuable to think about the pre-World War II United States as not so different from modern developing countries. Most relevant for readers of this blog, it may be worth looking to U.S. history (and the history of other developed countries) to better understand the process by which endemic public corruption may be brought under control.

The Cuellar-Levi-Weingast paper itself touches on, but doesn’t really delve into, this issue. Nonetheless, it got me thinking about three features of the historical U.S. struggle against systemic corruption—a struggle that, while certainly not complete, does appear to have successfully transformed the United States from a system where corruption was the norm (with some happy exceptions) to one where integrity is the norm (with some unhappy exceptions). Importantly, each of these three observations casts doubt on prominent claims in the modern debate about fighting corruption in the developing world: Continue reading

Guest Post: A Behavioral Science Approach to Preventing Corruption

Johann Graf Lambsdorff, Professor of Economic Theory at Passau University, contributes the following guest post:

Some of our current approaches to corruption prevention perform badly. One reason is that many preventive methods are built on distrust towards officials and employees, who are seen as potentially corrupt actors. Yet research in behavioral science has provided us with impressive evidence that (many) people are (mostly) trustworthy, intrinsically motivated, and responsive to encouragement, praise, expressions of gratitude, and criticism. The problem with assuming that everyone is prone to engage in corruption if not carefully monitored is not only that prevention strategies premised on that assumption are very costly, but also that such approaches can be counterproductive: The atmosphere of distrust that they create can reduce interpersonal trust, intrinsic motivation, and the self-esteem that people get from contributing to public goods and working responsibly.

Economists have labelled these adverse collateral consequences “the hidden costs of control.” In a recent paper entitled “Preventing Corruption by Promoting Trust – Insights from Behavioral Science”, I explain how taking this phenomenon, as well related insights from behavioral sciences about creating positive incentives for good behavior, can help us design more effective policies. The paper illustrates this with the help of six examples: Continue reading

The Perry Indictment: Not So Farfetched

Texas Governor Rick Perry was indicted August 15 for engaging in what most Americans think of as politics as usual — or at least usual as practiced in Texas.  Perry was charged with abuse of office and coercing a public servant because he threatened to veto funding for an anticorruption unit attached to the Travis County District Attorney’s office unless DA Rosemary Lehmberg resigned.  Lehmberg, a Democrat, had been convicted of drunk driving and a video of her inebriated while in police custody had gone viral.  As Perry explained in vetoing the legislation after she refused to step down, he could not “in good conscience support continued State funding for an office . . . at a time when the person charged with ultimate responsibility of that unit has lost the public’s confidence.”

While Democrats saw a darker motive in Perry’s threat, the chance to replace a Democrat who had been a thorn in Republicans side, few think his threat was illegal.  The Washington Post and New York Times editorial pages, neither enthusiastic backers of Perry’s firebrand Texas conservatism, both sharply questioned the indictment as did President Obama’s former top political adviser David Axelrod.  Veto threats are part of the everyday give-and-take between governors and state legislatures and between Presidents and the Congress.  Indeed, as recently as the 2013 confrontation over the shutdown of the federal government President Obama used the threat of a veto to get his way with the  Republican Congress.  How can that be illegal?   And if it wasn’t, why is Perry’s?

But before politicians write the Perry indictment off as farfetched, they best consult a lawyer.  Continue reading

Klitgaard’s Misleading “Corruption Formula”

I guess I’m engaging in the “ritual slaying of the elders” in which professors often indulge. Having gone after Paolo Mauro in an earlier post, here I want to take on (a small part) of Robert Klitgaard’s work.

Klitgaard, who is one of the giants of academic anticorruption research over the last half-century, once pithily (and influentially) summed up his perspective on the causes of corruption in a “corruption formula”: C = M + D – A, or (to put this back into words): “Corruption equals monopoly plus discretion minus accountability.”  (The formula originally appeared in Klitgaard’s 1975 1988 book, Controlling Corruption.  You can find a more recent version here.)  Much as I respect Klitgaard’s work, I think this anticorruption “formula” is not merely trite, but affirmatively misleading and therefore dangerous.

Continue reading