Walking Free on Stolen Time, Najib Sees 1MDB Appeal Prospects Improve

When $681 million ended up in the personal bank account of then-Prime Minister of Malaysia Najib Razak, he thought it was a political donation from the King of Saudi Arabia. Sure, it’s strange that the King transferred such a large sum directly into Najib’s personal account as opposed to that of a government institution, and yes, such a personal donation to a foreign leader was an unprecedented move by the Saudi royals. But the late King had assured Najib that some sort of donation was coming his way, so why not over half a billion dollars? Perhaps Najib would’ve examined the transfer a little more closely if he wasn’t so accustomed to lavish gifts. Indeed, when the financial anomaly came to light and the police raided his properties, that’s what filled the nearly 300 boxes the police discovered: gifts! The 567 luxury handbags (including a $219,000 Birkin bag) stuffed with $30 million in cash, the 423 designer watches, the 234 pairs of sunglasses, 14 tiaras, and 12,000 pieces of jewelry—all gifts from friends and admirers. So of course Najib was shocked—shocked!—to discover that the $681 million that appeared in his bank account actually came not from the Saudi royals, but from 1MDB, a government-run strategic development company where he served as chairman. Poor Najib was simply the unwitting victim of a network of 1MDB officers who embezzled $4.5 billion from the fund, kept comparatively meager amounts for themselves, and then deviously planted the lion’s share of the loot in Najib’s accounts to implicate him as the mastermind behind their corruption.

Unconvinced? You’re in good company. Neither was the trial court that convicted Najib last July on seven criminal charges including money laundering, criminal breach of trust, and abuse of power for his role in the 1MDB scandal, the world’s largest kleptocracy scheme. Najib faces 12 years in prison and a $49 million fine if this verdict is upheld. (And this is only the first case—he faces another 35 criminal charges in related cases.)

But alas, there is a very real possibility that Najib’s conviction will be set aside on appeal. Not because his account of how the $681 million ended up in his account has gotten any more plausible (despite Najib’s new legal strategy), but because Najib and his party—which is now back in power—are drawing out the process as best they can in order to give themselves sufficient time to subvert the judicial process and manipulate public opinion.

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Guest Post: Adverse Selection – Civil Society Support for Honest Judges and Prosecutors in Guatemala, Honduras, and El Salvador

Corruption in Guatemala, Honduras, and El Salvador continues unabated. Proof can be found at the U.S.-Mexican border. Guatemalans, Hondurans, and Salvadorians remain willing to risk the treacherous journey to the border and the uncertainties of a U.S. asylum application to escape corruption’s daily hardships.

Critical to taming that corruption, and the flow of refugees it produces, are honest, courageous prosecutors and judges willing to pursue corruption cases no matter who is implicated. In all three countries, a new generation of professionals is coming forward to take on this challenge, but corrupt elites are at work blocking their appointment.  Fortunately, civil society organizations across the region are engaged in countering these efforts, pushing their governments and citizens to see that honourable men and women take the bench or join the public prosecutor’s office and that those who aren’t don’t.

In this guest post, Kristen Sample reviews what civil society in the three nations has accomplished, what more it can do, and how the international community can help.  Now Governance Director at the National Democratic Institute, Kristen has worked on political integrity and civil society strengthening programs in Guatemala, Peru, and Bolivia for more than 15 years. The research behind the post was conducted for Open Society Foundations and the Washington Office on Latin America with support from the National Democratic Institute and the Due Process of Law Foundation.

On January 26, Mynor Moto was elected by the Guatemalan Congress to fill a vacancy on the Constitutional Court despite being under investigation by an elite unit in the public prosecutor’s office.  Civil society was emphatic in its criticism of Moto and the selection process. The new U.S. Administration weighed in as well, asserting that Moto’s presence on the court “threatens the rule of law…and debilitates the integrity of the court.” 

Moto’s swearing in was blocked and is now on hold indefinitely thanks to a February 1 arrest warrant prosecutors issued. He has chosen to flee rather than contest the charges.

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Guest Post: The Ukrainian Constitutional Court’s Invalidation of Anticorruption Laws Has Plunged the Country into a Double Crisis

Today’s guest post is from Kyrylo Korol, a judicial clerk at the High Anti-Corruption Court of Ukraine.

This past fall, between August and October, the Constitutional Court of Ukraine (CCU) ruled that several of Ukraine’s most important anticorruption laws and institutions are unconstitutional.

  • The CCU first ruled unconstitutional the Decree of the President of Ukraine on the appointment of the director of the National Anti-Corruption Bureau of Ukraine (NABU), which is responsible for anticorruption investigations; the Court also invalidated the President’s powers to appoint NABU’s head, a decision that created uncertainty regarding the legitimacy of the current director of NABU. The Court reasoned that the because the power to appoint the NABU director was not included in the list of presidential powers specified in the Constitution, the President could not exercise this power. The CCU also ruled unconstitutional the external commission that evaluates NABU’s performance.
  • In a subsequent case, the CCU declared unconstitutional the powers of the National Agency on Corruption Prevention (NACP) to check the public official’s declarations of assets. The Court reasoned that the NACP’s powers to review asset declarations extended to asset declarations submitted by judges, and that this arrangement would give an executive body impermissible control over the judiciary. The CCU further ruled that the law that imposes criminal liability for knowingly submitting a false asset declarations was unconstitutional, on the grounds that the penalties (which can include fines of up to $1,700, community service, or, imprisonment and disqualification from certain offices) was unconstitutionally disproportionate to the damage caused by the crime. These decisions led to the closure of hundreds of criminal cases for false declaration and the acquittals of public officials who had been found guilty of this crime. Going forward, the elimination of penalties for public officials who fail to file asset declarations, or who file false declarations, essentially nullifies the financial declaration system.

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South Korea’s Moment for Chaebol Reform is Now

In late 2016, South Korea’s President Park Geun-hye was impeached and removed from office following revelations of massive corruption in her government. While the scandal included plenty of sensational and salacious material, the core accusations involved improper quid pro quo relations between the Park administration and several chaebols—the massive, dynastically controlled business conglomerates that are the cornerstones of the South Korean economy. Following impeachment, President Park and several senior officials in her administration were arrested, tried, and convicted for a variety of offenses, including bribery, abuse of power, and coercion. In the aftermath of this massive scandal, new President Moon Jae-in swept into office with a commanding majority and a pledge to clean up the mess by instituting strong anticorruption reforms.

However, most of President Moon’s anticorruption initiatives have received mixed reviews at best. For example, President Moon’s proposed Anti-Corruption Agency, though authorized by parliament in December 2019, has yet to be established, and has been roundly criticized for its potential to be used to suppress political opponents. And President Moon’s attempt to exert more centralized control over prosecutors was derided by critics as a retaliatory measure against prosecutors investigating government corruption. But perhaps the greatest disappointment of the Moon administration’s approach to anticorruption is its reluctance to target the root of the country’s most serious corruption problem: the unchecked power of the chaebols. Though President Moon announced chaebol reform as a platform priority, his actions since his election have borne little fruit.

That chaebols were at the center of the Park administration scandal is neither surprising nor unusual. Indeed, chaebols have been at the center of South Korea’s most significant grand corruption cases, and they are routinely implicated in scandal after scandal after scandal. But neither the chaebols themselves nor their senior executives face a meaningful risk of significant liability. Even when prosecutors bring cases, chaebols and their executives benefit from judicial leniency, a phenomenon that has been documented both anecdotally and quantitatively. Indeed, South Korean high courts are infamous for overturning stricter lower court sentences in favor of what has come to be known as the “three-five” rule, available exclusively for chaebol executives: a guilty chaebol executive typically receives a three-year prison sentence, suspended for five years, and subsequently commuted—meaning that the executive serves no prison time. There are two likely explanations for this unusual and counterproductive judicial leniency toward chaebols and their executives. Continue reading

Presidential Power Grab: Corruption and Democratic Backsliding in Mongolia

Mongolian democracy is in trouble. On March 26, President Khaltmaa Battulga proposed emergency legislation that would grant the presidency unprecedented powers to dismiss members of the judiciary, the prosecutor general, and the head of the state anticorruption agency (the Independent Authority Against Corruption, or IAAC). One day later, parliament approved this legislation by a vote of 34-6 (with 36 members of parliament either absent or abstaining), despite the fact that President Battulga hails from the Democratic Party (DP) while the rival Mongolian People’s Party (MPP) controls parliament. Technically the law doesn’t grant the dismissal powers directly to the president, but rather to a three-member National Security Council (NSC) composed of the president, prime minister, and speaker of parliament, and an oversight body called the Judicial General Council. But President Battulga dominates the NSC and personally appoints the members of the Judicial General Council, giving him effective authority to remove Mongolia’s judges and chief law enforcement officials at will. Sure enough, promptly after the law was passed, Battulga dismissed the head of the IAAC, the Chief Justice of the Supreme Court, and the prosecutor general.

This new legislation, a crippling blow to Mongolian democracy, has its origins in corruption, and corruption is likely to be its effect. President Battulga induced parliament to grant him such extraordinary powers by claiming that he alone can really take on Mongolia’s severe corruption problem. In his statement to parliament introducing the new legislation, Battulga alleged that the country’s law enforcement leaders were “part of a conspiracy system” that “fabricat[ed] criminal cases with a political agenda” while covering up others. The president pointed to Mongolia’s numerous unresolved corruption scandals to argue that the institutions of justice were “serving the officials who nominated and appointed them” rather than the public, and he argued that reducing the independence of the judiciary, the prosecutorial apparatus, and the IAAC would make those institutions more responsive to the popular will to fight corruption.

President Battulga is correct when he asserts that Mongolia has a corruption problem of serious, perhaps epidemic, proportions. Mongolians regularly list corruption as one of the country’s biggest issues (second only to unemployment in a 2018 survey) and political institutions such as parliament and political parties as among the most corrupt entities. The past few years have been especially scandal-plagued. During the 2017 presidential campaign, all three candidates faced accusations of corruption; most egregiously, the MPP candidate—who, until January 2019, served as speaker of the Mongolian parliament—was caught on video discussing a plan to sell government offices in a $25 million bribery scheme. Further, late in 2018, journalists discovered that numerous politically-connected Mongolians, including somewhere from 23 to 49 of the 75 sitting members of parliament, had been treating a government program designed to provide funding for small- and medium-sized enterprises (SMEs) as a personal piggy bank, taking out over a million dollars in low-cost loans. Beyond these scandals, Mongolia’s poor enforcement record compounds its corruption problem. For example, in 2015, only 7% of cases investigated by the IAAC resulted in convictions, and in 2018 public approval of the IAAC reached an all-time low.

But is there any reason to believe that President Battulga is right that giving him greater personal control over law enforcement and the judiciary will lead to less corruption? All the evidence points to no:

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Band-Aids Don’t Fix Bullet Holes: The West Virginia Supreme Court Needs To Address Its Corruption Problem

The headlines wrote themselves: a $32,000 couch (complete with $1,000 worth of throw pillows). A $10,000 payment to a private attorney to “ghostwrite” a court opinion. Illegal overpayments to former colleagues in the hundreds of thousands of dollars. Public outcry erupted in late 2017 when news broke that the justices on the West Virginia Supreme Court of Appeals (the highest court in the state) had spent lavishly on office renovations. Further investigations revealed that some justices had used state-owned vehicles and government credit cards for personal use. Three of the justices were accused of scheming to overpay retired judges who were contracted by the judiciary to fill in on the trial courts in times of vacancy or high caseloads. But the most brazen allegations were leveled against Chief Justice Allen Loughry, who was convicted of wire fraud and obstructing an investigation into his enriching himself at taxpayer expense—despite the modest fame and fortune he (ironically) earned as the author of a book on political corruption in West Virginia.

The pervasiveness and diversity of the misdeeds on the West Virginia Supreme Court of Appeals over the past few years suggest that the corruption was in many ways a cultural problem. But it’s worth noting that the most serious allegations of corruption were likely not actually criminal. A quirk in West Virginia’s law gave the Supreme Court near-total control over its own budget, paving the way for the unchecked spending. Likewise, the intentional overpayments to retired judges reeked of cronyism but may or may not have been illegal; while a statute capped payments to part-time judges, the judiciary still arguably retained ultimate control how and how much to spend.

In response to the revelations of corruption, West Virginia’s government settled on two aggressive solutions. First, in August 2018 the West Virginia House of Delegates approved 11 articles of impeachment against the four justices still on the court and scheduled trials for each of them before the State Senate to determine if they should be removed from office. (The normally five-member court was already down a justice, who resigned in July a few weeks before pleading guilty to federal fraud charges.) The impeachment proceedings were met with outrage by some commentators (see here, here, and here), who saw them as a partisan power grab. Questionable motives aside, the results of the impeachment charges were still a mixed bag: one justice resigned from the Supreme Court before her trial. Another was acquitted of all charges but formally censured by the State Senate in a lopsided vote. The other two justices escaped any impeachment trial after an interim slate of state Supreme Court justices threw out the impeachment charges against their fellow justices on technical grounds. Chief Justice Loughry resigned following conviction in federal court (that makes three resignations overall, if you’re keeping count), and the legislature backed down from further impeachments. Second, after the impeachments, West Virginia’s voters overwhelmingly approved a constitutional amendment that wrested control over the judiciary’s budget away from the Supreme Court, giving the legislature the power to cap the judiciary’s annual spending, so long as the total amount is no less than 85% of the previous year’s budget.

But even if these measures work precisely as planned, the problem in West Virginia is far from solved. The damage to the judiciary’s legitimacy has been severe. A common refrain states that judges “like Caesar’s wife, must not only be virtuous but above suspicion.” And Chief Justice Loughry—of all people—echoed this same bold claim in his book: “Of all the criminal politicians in West Virginia, the group that shatters the confidence of the people the most is a corrupt judiciary…. It is essential that people have the absolute confidence in the integrity and impartiality of our system of justice.”

Unfortunately, the remedies implemented thus far serve only the short-sighted goals of stopping yesterday’s corruption. What is missing in the aftermath of the West Virginia scandals is a concerted effort on rebuilding trust in the judiciary. As previous scandals in the public and private sectors suggest, regaining trust in the judiciary requires public remedial actions by the judiciary itself. Replacing certain justices and adding high level legislative oversight may have been appropriate, even essential, measures, but they don’t necessarily help the court restore its integrity and repair its tarnished reputation. Moreover, focusing exclusively on these externally-imposed remedies may send a signal that the judiciary can’t be trusted to handle its own affairs. This makes it all the more imperative that the judiciary take the initiative in addressing its cultural problem and rebuilding public trust in the courts. A willingness to accept responsibility for past mistakes and engage in transparent self-evaluation will be critical as the West Virginia Supreme Court begins its new term this month. In particular, there are two steps the Court could take that would be helpful: Continue reading

Argentinians Cry Out “Cambiemos,” But Can They?

In early January 2018, five prominent Argentinian officials were arrested on corruption charges, including Amado Boudou, Argentina’s former vice president. These arrests come on the heels of President Mauricio Macri’s landslide victory on a “Cambiemos,” or “Let’s Change,” platform—a promise to root out public corruption. Late last year, Argentina’s Congress passed a new anticorruption law, which punishes companies for corruption by blacklisting them from public contracts and levying fines of up to five times the amount companies have obtained by illegal means. The new law also requires corporate compliance programs for the first time. But, while these reforms are welcome, the Argentinian judiciary remains an obstacle to genuine progress in eradicating the rot of corruption.

While the Macri government should be praised for making steps in the right direction, its efforts will fall short unless something is done about Argentina’s judicial system. More specifically, Argentina’s judicial institutions suffer from three problems that impede effective anticorruption efforts: Continue reading

In Defense of Judicial Elections

Many critics, including on this blog, have argued for abolishing judicial elections, partly on the grounds that judicial elections open the door to judicial corruption. These critics worry that elected judges cannot apply the law neutrally because they will be influenced by those who got them to their position and by the desire to stay there. But these risks are both exaggerated and fairy easy to control. Judicial elections actually promote legitimacy and responsiveness, and reduce opportunities for political gamesmanship. Ultimately, judicial elections can help curb judicial corruption.

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Verdicts and Judicial Strength: Why Convictions Should Not Be the Focus of Anticorruption Efforts

As I discussed in my last post, effective anticorruption enforcement requires a judicial system with the capacity and will to hold powerful defendants criminally liable for their malfeasance. Understandably, then, judicial institutions, especially in developing countries, are often written off as weak or corrupt if they are unable to convict and sentence high-profile corruption defendants. Acquittals can seem synonymous with impunity, regardless of the justifications put forth by the court. On this measure, many domestic judiciaries charged with high-profile cases fail. For example, almost all of the central figures ousted in the 2011 Arab Spring uprisings in Egypt were ultimately acquitted of all corruption-related charges. Additional examples of high-profile corruption acquittals or dismissals abound around the world (see here, here, here, here, and here).

To be sure, the inability of many judiciaries to hold high-profile corruption defendants criminally accountable is often indicative of underlying problems in the court system, and these problems must be addressed. At the same time, though, I worry that domestic and international constituencies sometimes put too much emphasis on individual verdicts, or overall conviction rates, as the measure of judicial effectiveness. While these indicators can provide important information, overemphasizing guilty verdicts in particular corruption cases, or overall conviction rates, could actually be counterproductive to anticorruption progress, for at least three reasons: Continue reading

Order from the Court: Judiciaries as a Bulwark Against Legislative Corruption in Vanuatu

Imagine that one-third of the members of your national legislature were convicted of bribery, and then decided to pardon themselves, and you’ll only begin to appreciate the scope and oddity of Vanuatu’s current political drama.

On October 9, Vanuatu’s Supreme Court convicted 14 of the 33 members of the ni-Vanuatu Parliament of bribery. The politicians, who at the time of their unlawful conduct included the deputy prime minister and four other members of the cabinet, had last year accepted around US$9,000 each to support a vote of no confidence in the prime minister—that is, to kick him out of office. Though the prime minister discovered the scheme and suspended the participants, they successfully sued for an end to their suspension, and promptly followed through on their plan to eject the sitting government.  Now holding Parliament’s top-ranked positions themselves, the bribe-takers nevertheless fell under police investigation, and a trial against them began this September.

After the bribe-takers were convicted but before they were sentenced, the president, who was not a member of their coalition, took a trip abroad. Under Vanuatu’s constitution, that left the Parliament speaker in charge. The problem? That Parliament speaker was one of the people convicted of bribery—and he promptly decided to use his temporary power to suspend the Ombudsman (the officer charged with investigating corruption) and pardon himself and his co-conspirators. The president quickly returned to Vanuatu and revoked the pardons, but it’s not clear that he had the legal authority to do so. With the Court of Appeals having recently rejected the appeals of the members of Parliament (MPs), the MPs are now kicked out of the legislature, and new elections may have to be held.

As idiosyncratic as this story may seem, it still speaks to some deeper truths about the problem of corruption in the Pacific Islands—and may yet resolve itself in a way that provides some clues about effective ways to fight it. So, what went wrong in Vanuatu, and what can still go right?

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