Owning a castle has never been easier. In 2017, Italy’s State Property Agency made international headlines by announcing that the country would be giving away over a hundred castles for free. The only catch? Takers must promise to restore the dilapidated structures and turn them into tourist sites. (The program builds on an existing initiative in which the Agency gives historical federally-owned properties to local authorities for restoration.) At first glance, this program looks like a win for everyone. The Italian federal government no longer has to deal with crumbling historic castles, the properties will be cleaned up and made available to tourists, and lucky entrepreneurs and local governments can reap the profits. Unfortunately, however, there are reasons to worry that this program, like so many other castle restoration initiatives, will end up sapped by corruption, money laundering, collusion, and nepotism.
Corruption and related malfeasance is quite common in the context of castle ownership and restoration. This is not all that surprising, given that corruption is a perennial issue within the construction industry as a whole. All of the usual problems in that sector—including bribery in the bidding process, collusion to funnel work to friends and family, embezzlement, and the substitution of substandard materials—apply in the specific context of castle restoration. On top of that, real estate has long been a favorite of those involved in money laundering due to the lower scrutiny that real property transactions receive, at least in comparison to stock or other commodities. But in addition to these familiar risk factors, castle restoration projects have several additional distinctive features that make them even more vulnerable to corruption than comparable construction projects and real estate transactions:
Continue readingThere is no longer any doubt that corruption does enormous harm – to individuals, businesses, governments, and whole societies. Nor is there any dispute that those harmed should have a right to recover damages for their injuries. In drafting the UN Convention Against Corruption, governments agreed quickly and without dissent upon what is now article 35. It requires parties to ensure their domestic law permit any person or entity harmed by corruption to “initiate legal proceedings against those responsible for the damage to obtain compensation.”
Yet what evidence there is shows article 35’s promise remains largely unfulfilled.
For the UN Office on Drugs and Crime and the StAR Initiative, I am examining just how far there is to go for that promise to be met. With their resources and the help of the International Bar Association, I have reviewed the case law in close to one-third of the 187 UNCAC states parties. The most common victim recovery cases I find are those where a government agency or state-owned corporation has recovered damages when an employee took a bribe. In a few, courts have also awarded damages to third-parties harmed by the bribery. There are in addition a miscellany of actions I am still digesting covering actions by the competitors of a bribe-payer, consumers, and NGOs.
Below are the bribery victim cases I have located to date. A second post will review the other cases. Reader contributions and comments warmly solicited.
Continue readingCivil society and investigative journalism have long played key roles in exposing corruption, and many CSOs and media watchdogs—especially newer, younger organizations—now make extensive use of social media platforms to engage with the public. In Albania, for example, relatively new organizations like Nisma Thurje and Faktoje frequently expose instances of corruption via Facebook, one of the most popular social media platforms in Albania. However, corrupt politicians are taking notice of these innovative tactics and finding equally innovative ways to silence their critics. In addition to ongoing efforts to censor the media and harass activists (see, for example, here and here), the Albanian elite has undertaken more clandestine efforts to attack civil society and journalists.
One savvy scheme involves Acromax Media GmBH (Acromax), a German digital rights company owned by two Albanians, which has close ties to Albania’s ruling Socialist Party. Acromax has contracts with over 95% of Albanian television stations, with far-reaching rights to take action on its own initiative against alleged copyright violations. For example, when a civil society group like Nisma Thurje posts a story on Facebook about a politician’s corruption, and includes a link to interviews or clips of the politician’s speeches that were originally broadcast on one of those TV stations, Acromax files a complaint with the social media platform alleging a copyright violation—even though re-sharing public content that clearly displays the original source is common practice around the world and does not meet the definition of copyright infringement. Moreover, Acromax only files such complaints with respect to stories that are critical of the government; pro-government posts, including clips from these same channels, are not flagged as intellectual property infringement by Acromax.
Distressingly, even though the claims of intellectual property infringement seem bogus, Facebook has largely complied with Acromax’s demands to take down content. This may be due in part to the European Union’s recent 2019 Directive on Copyright in the Digital Single Market, Article 17 of which makes content-sharing platforms, not just individual content uploaders, liable for intellectual property violations, which in turn has caused Facebook to employ even more automation to deal with its new legal responsibilities. Unfortunately, the automated algorithms currently in use cannot reliably distinguish genuine copyright infringement from legal re-sharing, and the algorithms are sufficiently complex and opaque that it is very difficult for CSOs to challenge the take-down decisions and get their content reinstated. Acromax has exploited these weaknesses in the system to make legitimate civil society watchdogs look like serial copyright infringers. Indeed, Acromax’s harassment campaign has been so successful that two of Nisma Thurje’s founders had personal social media pages shut down because of complaints from Acromax, and Facebook further labeled Nisma Thurje “a dangerous group” and limited the range of Nisma Thurje’s social media capabilities. The technology giant further warned Nisma Thurje that its page would be shut down entirely if Facebook received even one more copyright infringement claim.
Acromax is a well-tuned operation for squelching civil society watchdogs that threaten to expose government wrongdoing, and may serve as a model for similar censorship efforts. Tackling this problem seems daunting, but these are some concrete steps that various actors—including governments, technology companies, and the civil society groups themselves—can take to address this new kind of assault. Continue reading
GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris and New York offices of Debevoise & Plimpton and a Lecturer at Columbia Law School, who contributes the following guest post:
In the fight against transnational bribery and other forms of corporate crime, a key element of some national prosecution agencies’ strategy is to encourage corporations to “self-report” to the government and to cooperate with any subsequent investigation. The United States Department of Justice (DOJ) pioneered this strategy, but other jurisdictions are beginning to adopt it as well. The basic approach is to offer companies both a stick and a carrot: The stick: If corporations do not self-report and are ultimately discovered, they will be prosecuted vigorously. The carrot: A self-reporting, cooperating company can obtain a more favorable settlement, and perhaps avoid prosecution altogether. From a public policy perspective, it is vastly more efficient for prosecutors to work with corporations in the fight against corruption, essentially enlisting them as partners to detect, investigate, and bring to justice the individuals responsible for corruption, than for prosecutors to do all this work themselves.
From the company’s perspective, though, the decision whether to self-report is difficult: By making a first phone call to a prosecutor, the company all but commits to negotiating a settlement and abandons both the chance of non-detection and the (perhaps scant) possibility of a successful defense. At a minimum, starting this process will entail large costs (particularly legal fees), as well as risks, including the risk that prosecutors may discover more matters to be investigated. There is also the problem, already discussed on this blog, of evaluating whether a negotiated outcome in one country will preclude or deter prosecution in another. And at least at the early stages, the company may not even be certain whether a violation has in fact taken place, or how widespread or egregious such violations may have been. For these reasons, when a company’s leaders learn that there may have been violations of anti-bribery or other laws, the company will retain a seasoned legal team to oversee a thorough internal investigation of the facts in order to make a reasoned decision whether, and where, to self-report.
When a company asks lawyers to do this, it is essential that the attorneys’ work be protected by the attorney-client privilege, at least until such time as the company decides to share fruits of the investigation with prosecutors. If a company knew that everything learned or generated by its lawyers in the course of an internal investigation could be subject to seizure or forced disclosure to prosecutors, then companies would face a huge disincentive to start the process of conducting an internal investigation at all, since doing so could simply create a handy road map – and compelling evidence — for the prosecutor. In the United States, although the conduct of such an internal investigation poses a number of possible traps for the unwary, if the investigation is properly managed then the company can generally be assured that no prosecutor will get her hands on the fruits of its lawyers’ work unless and until the company specifically authorizes such disclosure. Matters are more complicated in Europe, however. For example, in-house counsel are generally not considered to be “attorneys” capable of generating a protectable professional privilege. And in some countries, such as France, the client does not necessarily have the power to “waive” the secret professionel (the rough equivalent of the attorney-client privilege) at all. Most notably—and most troublingly—recent court decisions in the UK and Germany have gone even further in making the results of lawyers’ internal investigations discoverable by prosecutors without the company’s consent. These decisions, if not reviewed or curtailed by legislation, will create huge disincentives to self-investigation, and hence to self-reporting. Continue reading
Sometimes it feels like corruption has become the topic of the year: We’ve heard repeatedly that it is (the perception of) corrupt elites that has fueled the rise of populists, nationalists, and new socialist parties and politicians. The most prominently of these, though not the only one, is Donald Trump, who promised in his campaign to take back power from the corrupt elites (see here and here).
But has the topic of corruption actually become increasingly prominent in popular and media discourse over the last two years? To investigate this question, I did a simple search on the Factiva database within the eight most widely-circulated American newspapers (USA Today, the New York Times, the Wall Street Journal, the Los Angeles Times, the New York Post, the Chicago Tribune, the Washington Post, and Newsday) for the term “corruption.” I did a similar search for Germany, using the term “Korruption” and the eight most widely-circulated German newspapers (BILD, BILD am Sonntag, Süddeutsche Zeitung, Frankfurter Allgemeine Zeitung, Die Zeit, Westdeutsche Allgemeine Zeitung, Rheinische Post, Welt am Sonntag and Rheinische Post). Surprisingly (at least to me), over the last two years there was no growth in U.S. newspaper reporting on corruption. As the following graph shows, reporting on corruption in the U.S. has been rather stable over this period, with between 500 and 750 articles a month. A slightly different picture emerges for Germany, where newspaper reports on corruption, which were substantially less frequent than in the U.S. to begin with, have actually declined over the past two years. (A side note, though perhaps an interesting one: The most reported corruption topic in both countries, with about 2.5 times more stories than the next-most-mentioned topic, was FIFA.): Continue reading
GAB is delighted to welcome back Gönenç Gürkaynak (Managing Partner at ELIG Attorneys-at-Law in Istanbul and 2015 Co-Chair of the B20 Anti-Corruption Task Force), who, along with his colleagues Ç. Olgu Kama (ELIG partner and B20 Anti-Corruption Task Force Deputy Co-Chair) and Burcu Ergün (ELIG associate), contributes the following guest post:
Combating international corruption has come a long way in the last decade. More and more jurisdictions are adapting and updating their legal systems in an effort to eradicate impunity for corruption crimes. Yet an important question persists: Who should be held primarily liable for corruption crimes, the individual or the company? The US and European countries have traditionally provided diverging answers to this question, but there now seems to be some evidence of an emerging convergence, though a consensus is yet to be reached.
In the United States—the pioneering legal system in terms of fighting international corruption—although individuals can be charged with violations of the Foreign Corrupt Practices Act (FCPA), it is the companies that are primarily held liable for FCPA violations. The US embraces a broad notion of corporate criminal liability, based on the principle of respondeat superior (the employer is responsible for the acts or omissions of its employees) and the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have employed this theory as the basis for FCPA settlements with scores of corporations, raking in hundreds of millions of dollars in fines. However, there have been relatively few FCPA cases brought against individuals. This may be due in part to the fact that it is often difficult to attribute a corrupt act to any one specific individual, though it may also be due to the DOJ’s and the SEC’s traditional focus on going after the “deep pockets” of the corporations that come under their scrutiny.
In contrast to the US, the focus of criminal law in continental European systems has typically been on the culpability of individuals; thus, the introduction of the concept of “corporate criminal liability” is a relatively new development. Traditionally, the continental European systems have taken the view that criminal punishment can only be imposed on grounds of personal culpability, and that organizations cannot be held liable under criminal law (societas delinquere non potest). To that end, some European jurisdictions have preferred imposing administrative liability on corporations for actions that are considered to be administrative (rather than criminal) offenses.
In terms of deterring corrupt acts, a broad notion of corporate criminal liability goes a long way. The willingness of US authorities to impose significant fines on corporations provides powerful incentives for corporations to self-police. Furthermore, the threat of criminal FCPA sanctions—and the associated “moral sanctioning” of criminal liability—may have a more powerful effect on corporations than would similar fines imposed as administrative sanctions. On the other hand, the threat of corporate criminal liability is likely not sufficient, on its own, to foster a compliance culture within an organization. In a legal environment in which individuals face a credible threat of prosecution for their personal roles in organizational corruption, corporations could maintain a stronger culture of compliance as the employees themselves would be legally responsible for their misconduct and therefore less likely to engage in (or turn a blind eye to) corrupt practices.
Even though significant differences remain among jurisdictions, it is an encouraging development that there now seems to be gradually converging views regarding corporate criminal liability among these different legal systems. Continue reading
Well, between the ICIJ release of the searchable Panama Papers/Offshore Leaks database, the impeachment of President Rousseff in Brazil, and the London Anticorruption Summit, last week was quite a busy week in the world of anticorruption. There’s far too much to write about, and I’ve barely had time to process it all, but let me try to start off by focusing a bit more on the London Summit. I know a lot of our readers have been following it closely (and many participated), but quickly: The Summit was an initiative by David Cameron’s government, which brought together leaders and senior government representatives from over 40 countries to discuss how to move forward in the fight against global corruption. Some had very high hopes for the Summit, others dismissed it as a feel-good political symbolism, and others were somewhere in between.
Prime Minister Cameron stirred things up a bit right before the Summit started by referring to two of the countries in attendance – Afghanistan and Nigeria – as “fantastically corrupt,” but the kerfuffle surrounding that alleged gaffe has already received more than its fair share of media attention, so I won’t say more about it here, except that it calls to mind the American political commentator Michael Kinsley’s old chestnut about how the definition of a “gaffe” is when a politician accidentally tells the truth.) I’m going to instead focus on the main documents coming out of the Summit: The joint Communique issued by the Summit participants, and the individual country statements. There’s already been a lot of early reaction to the Communique—some fairly upbeat, some quite critical (see, for example, here, here, here, and here). A lot of the Communique employs fairly general language, and a lot of it focuses on things like strengthening enforcement of existing laws, improving international cooperation and information exchange, supporting existing institutions and conventions, and exploring the creation of new mechanisms. All that is fine, and some of it might actually turn out to be consequential, but to my mind the most interesting parts of the Communique are those that explicitly announce that intention of the participating governments to take pro-transparency measures in four specific areas:
Again, that’s far from all that’s included in the Communique. But these four action areas struck me as (a) consequential, and (b) among the parts of the Communique that called for relatively concrete new substantive action at the domestic level. So, I thought it might be a useful (if somewhat tedious) exercise to go through each of the 41 country statements to see what each of the Summit participants had to say in each of these four areas. This is certainly not a complete “report card,” despite the title of this post, but perhaps it might be a helpful start for others out there who are interested in doing an assessment of the extent of actual country commitments on some of the main action items laid out in the Communique. So, here goes: a country-by-country, topic-by-topic, quick-and-dirty summary of what the Summit participants declared or promised with respect to each of these issues. (Because this is so long, I’m going to break the post into two parts. Today I’ll give the info for Afghanistan–Malta, and Thursday’s post will give the info for Mexico–United States). Continue reading
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