What, Besides Creating a New Court, Could the International Community Do To Fight Grand Corruption? A Partial List

Last week, Richard Goldstone and Robert Rotberg posted a response to Professor Alex Whiting’s critique of the proposal to create an International Anti-Corruption Court (IACC). Early in their response, Goldstone and Rotberg–both advocates for an IACC–remarked, a bit snarkily, that “[n]otably absent from [Professor Whiting’s] post is a description of what the other effective responses to combating grand corruption might be.”

That struck me as a bit of a cheap shot. Professor Whiting’s post offered a careful, thoughtful argument based on his experience and knowledge of the International Criminal Court (ICC) and similar tribunals, and not every such critical commentary on a given proposal must include a full-blown discussion of alternatives. Still, Goldstone and Rotberg’s implicit challenge to IACC skeptics to articulate alternative responses to grand corruption is worth taking seriously, for two reasons:

  • First, this seems to be a common rhetorical gambit by advocates for an IACC, or for other radical measures that critics deem impractical: Rather than answering and attempting to refute the critics’ specific objections directly, the move is to say, “Well, but this is a huge problem, and there’s no other way to solve it, so poking holes in this proposal is really just an excuse for inaction. This may seem like a long shot, but it’s the only option on the table.”
  • Second, and more charitably to those who make this point, grand corruption is indeed an enormous problem that needs to be addressed. And so even though not every critical commentary on a particular proposal needs to include a full-blown discussion of alternatives, those of us who (like me) are skeptical of deus-ex-machina-style responses to the grand corruption problem ought to make a more concerted effort to lay out an alternative vision for what can be done.

In this post I want to (briefly and incompletely) take up the implicit challenge posed by Goldstone and Rotbert (and, in other writings, by other IACC proponents). If the international community is serious about fighting corruption, what else could it do, besides creating a new international court and compelling all countries to join it and submit to its jurisdiction? When people like Professor Whiting (and I) suggest that lavishing time and attention on the IACC proposal might be a distraction from other, more effective approaches, what do we have in mind? What else could international civil society mobilize behind, besides something like an IACC, to address the problem of grand corruption?

Here are a few items on that agenda: Continue reading

How We Did It: the U.S. Congress’ Exposure of the Grand Scale of Global Corruption

 Over the past two decades the U.S. Senate Permanent Subcommittee on Investigations has laid bare how Gabonese President Omar Bongo, Chilean dictator Augusto Pinochet, Equatorial Guinean President Teodoro Obiang, and a gaggle of friends and relatives of the leaders of Mexico, Pakistan, Nigeria, Angola, Saudi Arabia, and other countries conspired with large, prestigious banks to hide the enormous sums they stole from their nation’s citizens.  Financial Exposure, the new book by subcommittee investigator and later staff director Elise Bean, recounts how Democrats and Republicans united not only to document egregious cases of grand corruption but to enact legislation making banks’ complicity in future cases a crime.

Americans depressed by the rancorous polarization now gripping Congress will find her book a welcome reminder that Democrats and Republicans can work together to advance the public interest.  Scandals involving money laundering by banks in other nations, most recently Denmark’s Danske Bank and Latvian bank ABLV, should prompt non-Americans to send their parliamentarians a copy of Ms Bean’s book.  Below Ms. Bean offers a few morsels from the book to whet readers’ appetites.    

There isn’t room here to recount all the subcommittee’s anti-corruption investigations, but a few examples will illustrate what they showed and what results they produced.

Citibank Private Bank.  Corruption was the subject of a key investigation by the subcommittee in 1999, which was led by then subcommittee chair Republican Senator Susan Collins of Maine. Rumors were flying then that the United States had become the preferred banker for corrupt foreign officials around the world. Working with Democratic Senator Carl Levin of Michigan (my boss), the subcommittee elected to zero in on so-called “private banks,” banking units that opened accounts only for wealthy individuals with at least $1 million in deposits.

The inquiry ended up detailing four accountholders at Citibank Private Bank: Raul Salinas, brother to the then president of Mexico; Omar Bongo, then president of Gabon; Asif Ali Zardari, then known for his marriage to Benazir Bhutto, former prime minister of Pakistan; and the sons of Sani Abacha, recently deceased president of Nigeria.  Senate hearings exposed how Citibank had not only accepted tens of millions of suspect dollars from the accountholders, but also created offshore shell companies to hide their identities, helped them secretly move millions of dollars around the globe, and continued servicing them even after learning of corruption allegations. Continue reading

Adjusting Corruption Perception Index Scores for National Wealth

My post two weeks ago discussed Transparency International’s newly-released 2017 Corruption Perceptions Index (CPI), focusing in particular on an old hobby-horse of mine: the hazards of trying to draw substantive conclusions from year-to-year changes in any individual country’s CPI score. Today I want to continue to discuss the 2017 CPI, with attention to a different issue: the relationship between a country’s wealth and its CPI score. It’s no secret that these variables are highly correlated. Indeed, per capita GDP remains the single strongest predictor of a country’s perceived corruption level, leading some critics to suggest that the CPI doesn’t really measure perceived corruption so much as it measures wealth—penalizing poor countries by portraying them as more corrupt, when in fact their corruption may be due more to their poverty than to deficiencies in their cultures, policies, and institutions.

This criticism isn’t entirely fair. Per capita income is a strong predictor of CPI scores, but they’re far from perfectly correlated. Furthermore, even if it’s true that worse (perceived) corruption is in large measure a product of worse economic conditions, that doesn’t mean there’s a problem with the CPI as such, any more than a measure of infant mortality is flawed because it is highly correlated with per capita income. (And of course because corruption may worsen economic outcomes, the correlation between wealth and CPI scores may be a partial reflection of corruption’s impact, though I doubt there are many who think that this relationship is so strong that the causal arrow runs predominantly from corruption to national wealth rather than from national wealth to perceived corruption.)

Yet the critics do have a point: When we look at the CPI results table, we see a lot of very rich countries clustered at the top, and a lot of very poor countries clustered at the bottom. That’s fine for some purposes, but we might also be interested in seeing which countries have notably higher or lower levels of perceived corruption than we would expect, given their per capita incomes. As a crude first cut at looking into this, I merged the 2017 CPI data table with data from the World Bank on 2016 purchasing-power-adjusted per capita GDP. After dropping the countries that appeared in one dataset but not the other, I had a 167 countries. I then ran a simple regression using CPI as the outcome variable and the natural log of per capita GDP as the sole explanatory variable. (I used the natural log partly to reduce the influence of extreme income outliers, and partly on the logic that the impact of GDP on perceived corruption likely declines at very high levels of income. But I admit it’s something of an arbitrary choice and I encourage others who are interested to play around with the data using alternative functional forms and specifications.)

This single variable, ln per capita GDP, explained about half of the total variance in the data (for stats nerds, the R2 value was about 0.51), meaning that while ln per capita GDP is a very powerful explanatory variable, there’s a lot of variation in the CPI that it doesn’t explain. The more interesting question, to my mind, concerns the countries that notably outperform or underperform the CPI score that one would predict given national wealth. To look into this, I simply ranked the 167 countries in my data by the size of the residuals from the simple regression described above. Here are some of the things that I found: Continue reading

French Court Convicts Equatorial Guinean Vice President Teodorin Obiang for Laundering Grand Corruption Proceeds

GAB is pleased to publish this account and analysis by Shirley Pouget and Ken Hurwitz of the Open Society Justice Initiative of the decision in the criminal trial for money laundering of Equatorial Guinean Vice President Teodorin Nguema Obiang. Their earlier posts on the trial are here, here, here, here, here, herehere, and here.

court roomIn the first ever peacetime conviction of a high-ranking, incumbent office holder by the court of another state, a Paris criminal court has convicted Equatorial Guinean First Vice President Teodoro Nguema Obiang Mangue of laundering monies from corruption in Equatorial Guinea in France.  The historic decision, announced by the 32nd Chamber of the Tribunal Correctionnel de Paris on Friday, October 27, was tempered by the reality the court faced in finding a senior official of another country guilty of violating French law.  While it unconditionally awarded Transparency International – France, which as a “civil party” helped investigate the case, €10,000 in moral and €41,081 in material damages, and ordered seizure of much of the €150 million in assets Teodorin holds in France, it suspended (sursis) the three- year prison sentence and €30 million fine it imposed on Teodorin so long as the VP stays out of trouble for five years.   It also stayed the part of the asset seizure order confiscating the obscenely extravagant 101-room property on Avenue Foch Teodorin owns pending the outcome of proceedings before the International Court of Justice where, as explained in a previous post, the EG government is claiming the assets belong to it rather than to Teodorin.

The President of the Tribunal, Mrs Benedicte de Perthuis, detailed the reasoning supporting the ruling in a 45 minute oral explanation accompanying the judgement.  She explained that the three judge court rejected all Teodorin’s procedural and substantive defenses, including a claim asserting Teodorin’s immunity from criminal prosecution on the basis of his position as  First Vice-President of Equatorial Guinea.  She noted on the latter that his nomination as First Vice-President had conveniently occurred after his indictment by the French Courts, and the Tribunal ruled that his new functions could not be equated to those of a Head of State or Minister of Foreign Affairs (officials who, under ICJ precedent, would indeed enjoy immunity from this kind of a prosecution).

The verdict sends a clear message that grand corruption and the related offense of money laundering are no longer risk-free enterprises in France.  Continue reading

Guest Post: The Obiang Trial Suggests Innovative Approaches To Fighting International Corruption

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Over the past two months, the French Tribunal de Grande Instance in Paris (the principal trial court) heard evidence in the case against Teodoro Nguema Obiang Mangue (known as Teodorin), on charges of corruption and money laundering, among other allegations. Teodorin is the son of Teodoro Obiang Nguema Mbasogo, the long-time – and notoriously corrupt – President of Equatorial Guinea, a resource-rich country that also has some of the most widespread poverty in the world. Yet Teodorin, who is currently Vice President , owns vast real estate in Paris, a private jet, a yacht, and a fleet of vintage and modern automobiles, among his other known assets. This case has been discussed extensively on this blog (see here, here, here, here, here, here, here, and here), but it’s useful to recap how the case came to trial in the first place:

The case against Teodorin was primarily the result of diligent efforts by NGOs, including the French anticorruption group Sherpa and the French chapter of Transparency International (TI). In 2007, Sherpa and others filed a complaint with the Public Prosecutor in Paris alleging that the ruling families of Equatorial Guinea, Angola, Burkina Faso and the Republic of the Congo held assets in France that were not the fruits of their official salaries. After a brief investigation, the Public Prosecutor dismissed the claims. Several of the NGOs, joined in some instances by citizens of the countries in question, then used a French procedure known as constitution de partie civile to cause a criminal investigation by an investigating magistrate (juge d’instruction). This effort was opposed by the Public Prosecutor. A Court of Appeals initially upheld the prosecutor’s position and dismissed TI’s intervention, but in an important 2010 ruling, the French Cour de Cassation (Supreme Court) ruled that TI was a proper partie civile authorized to instigate the criminal investigation. Ultimately Teodorin was bound over for trial, now with the support of the Public Prosecutor (as well as the continued active participation of TI and other NGOs). A decision is expected in October.

The procedures that brought Obiang to trial are interesting because they highlight four important differences between French and US criminal procedures, and more generally illustrate several legal deficiencies, in countries like the United States, that often hinder the worldwide fight against transnational corruption: Continue reading

The Obiang Trial: Misstatements of Facts and Law in the Defense’s Closing Arguments

GAB is pleased to publish this account and analysis by Shirley Pouget and Ken Hurwitz of the Open Society Justice Initiative of the final arguments of Equatorial Guinean Vice President Teodoro Nguema Obiang’s lawyers at his Paris trial for what is in effect kleptocracy.

court roomTeodoro Nguema Obiang Mangue’s trial concluded July 5, 2017, with closing arguments by his defense counsel. The trial marks a major milestone in the struggle to ensure accountability for grand corruption, even when committed by those at the highest political levels.  A spicy mixture of high principle, juridical gravitas, and sophisticated argumentation on intricate issues of pressing urgency in the real world, the trial also contained moments of wrenching emotion and undignified, even scandalous, claims and insinuations.

The final day was devoted to arguments by Teodorin’s lawyers: Emmanuel Marsigny, Equatoguinean jurist Sergio Tomo, and Thierry Marembert.  In sum they claimed i) that their client didn’t steal enormous sums of money from the people of Equatorial Guinea, ii) that even if he did, the theft wasn’t illegal under Equatorial Guinean law, and iii) that even if he did steal the money and it was a violation of EG law, a French court did not have the right to try him for it.  Their arguments mixed misleading and often downright false statements of the evidence with strained and fanciful interpretations of the law, all seasoned with dark suggestions that the trial was about race and politics rather than the massive theft of resources from the citizens of Equatorial Guinea.     Continue reading

The Obiang Trial: Prosecutor Seeks 3 Years Imprisonment, Large Fine, Asset Confiscation  

GAB is pleased to publish this account and analysis by Shirley Pouget and Ken Hurwitz of the Open Society Justice Initiative of the concluding arguments the civil parties and the prosecution made at the trial of Equatorial Guinean Vice President Teodorin Nguema Obiang.

The July 5th proceedings in the Obiang trial opened with the court rejecting the defense request that it be allowed to pursue its claim that the prosecution was unconstitutional.  It closed with the state prosecutor asking the court to find Teodorin guilty, sentence to him three years in prison, fine him €30 million, and confiscate all of his assets located in France.  In between the two civil parties – CORED, a coalition of Equatorial Guinean political parties, and Transparency International-France – presented their arguments in support of conviction.  Continue reading