Tag Archives: new york city

The Importance of Public Relations in the Fight against Corruption

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It’s long been recognized that public relations (PR) is a crucial tool in the fight against corruption. (For a recent exposition of that argument on this blog, see here.) This recognition is codified in the United Nations Convention Against Corruption (UNCAC), Article 13 of which requires state parties to “[u]ndertak[e] public information activities that contribute to non-tolerance of corruption, as well as public education programs,” and Article 6 of which calls on state parties to “increase[e] and disseminat[e] knowledge about the prevention of corruption.” Governments fulfill their UNCAC obligations in a variety of ways, and examples of anticorruption public awareness campaigns are as diverse as they are numerous. A famous example of how PR can be used effectively comes from Hong Kong’s Independent Commission Against Corruption, which spends millions of dollars annually on thousands of workshops to educate public employees and private citizens about the effects of corruption and how to combat it. New York City has likewise deployed large-scale educational programming with similar success. In addition to government-run campaigns such as these, multilateral organizations such as the UN Office on Drugs and Crime (UNODC) and NGOs like Transparency International also regularly engage in efforts to raise public awareness around corruption issues (see here, here, here, and here). These campaigns deploy tools as varied as video, music, and drawing to convey their anticorruption messages.

Critics sometimes contend that these PR campaigns consume scarce anticorruption resources that would be better devoted to investigation or enforcement efforts. This criticism is misguided and shortsighted. Of course a badly-designed PR effort can waste resources. Yet effective anticorruption PR helps accomplish several goals that other, “harder” anticorruption measures are incapable or ineffective at achieving on their own:

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Ownership Transparency Works: Geographic Targeting Orders in the US Real Estate Market

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The anticorruption community, along with those concerned about tax evasion, fraud, and other forms of illicit activity, has made anonymous company reform a high priority on the reform agenda. It’s not hard to see why: Kleptocrats and their cronies, as well as other organized criminal groups, need to find ways to hide and launder their assets, and to do so in ways that are difficult for law enforcement authorities to trace. Moreover, those whose legitimate sources of income would be insufficient to obtain luxury assets would like to conceal their ownership of such assets, as the ownership itself could arouse suspicion, and might make the assets more vulnerable to forfeiture.

So-called “know-your-customer” (KYC) laws in the financial sector have made it much more difficult—though, alas, far from impossible—for account owners to conceal their identities from the banks and government overseers, at least in the US and most other OECD countries. But it is still far too easy for criminals to purchase substantial assets in wealthy countries like the United States while keeping their identities hidden. All the bad actor needs to do is, first, form a company in a jurisdiction that does not require the true owner of the company to be disclosed and verified to the government authorities, and, second, have this anonymous shell company purchase assets in a transaction that is not covered by KYC laws. Step one is, alas, still far too easy. Though we often associate the formation of these sorts of anonymous shell companies with “offshore” jurisdictions like the British Virgin Islands, in fact one can easily form an anonymous shell company in the United States. Step two, having the anonymous company purchase substantial assets without having to disclose the company’s owner, is a bit trickier, because you’d need to avoid the banking system. But you can get around this problem by having your anonymous company purchase assets with cash (or cash equivalents, like money orders or wire transfers), so long as no party to the transaction is under obligations, similar to those imposed on banks, to verify the company’s true owner.

One of the sectors where we’ve long had good reason to suspect this sort of abuse is common is real estate, especially high-end real estate. Though money laundering experts had long been aware of the problem, the issue got a boost from some great investigative journalism by the New York Times back in 2015. The NYT reporters managed to trace (with great effort, ingenuity, and patience) the true owners of luxury condos in one Manhattan building (the Time Warner Center), and found that a number of units were owned by shady characters who had attempted to conceal their identities by having shell companies make the purchases.

The US still hasn’t managed to pass legislation requiring verification of a company’s true owners as a condition of incorporation, which would be the most comprehensive solution to the anonymous company problem. Nor has the US taken the logical step of extending KYC laws to real estate agents across the board. But starting back in 2016, the US Treasury Department’s Financial Crimes Enforcement Network (known as FinCEN) took an important step toward cracking down on anonymous purchases of luxury real estate by issuing so-called Geographic Targeting Orders (GTOs). And thanks to some excellent research by the economists C. Sean Hundtofte and Ville Rantala (still unpublished but available in working paper form), we have strong evidence that many purchasers in the luxury real estate market have a strong interest in concealing their true identities, and that requiring verification of a company’s ultimate beneficial owners has a stunningly large negative effect on the frequency and aggregate magnitude of anonymous cash purchases. Continue reading →

Expediting Corruption: The Dangers of Expediters in Licensing Markets

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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 →

Guest Post: How District Attorneys Can Avoid Conflicts of Interest in Campaign Fundraising

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Jennifer Rodgers, Executive Director of the Columbia University Law School’s Center for the Advancement of Public Integrity (CAPI), and Izaak Bruce, CAPI Research Fellow, contribute the following guest post:

Last fall, New York County District Attorney Cyrus Vance received quite a bit of negative press for his handling of potential cases involving some high-profile potential defendants. In one case, Vance declined to bring sexual assault charges in 2015 against Harvey Weinstein despite a detailed victim account. In another case, back in 2012, Vance ultimately decided not to criminally charge members of the Trump family for making false and misleading statements to promote one of their real estate ventures, again despite what on the surface appeared to be credible evidence of wrongdoing. Of course, prosecutors have to make difficult judgment calls all the time about what cases to bring, often based on information that outsiders do not have access to and/or are not in a good position to judge. But what made these cases so troublesome to many was the suggestion or insinuation of improper influence. The New York County DA is an elected position, and in both the Weinstein case and the Trump case, the attorneys who successfully convinced Vance not to bring charges also made hefty donations to Vance’s reelection campaign.

Vance and his supporters insist that there was no impropriety, let alone a quid pro quo, and rightly point out that DAs raise substantial campaign contributions from many attorneys. But the reports were nonetheless deeply troubling, not least because these incidents evince a more general problem. In a couple of cases, DAs have been convicted for accepting campaign contributions as bribes in exchange for favorable defendant outcomes; much more common, however, is the appearance of impropriety caused by campaign donations from individuals involved in cases before the district attorney’s office; these are problematic even if no underlying crime is proved. And of course there is always the possibility of unconscious bias when a DA makes decisions about criminal cases that involve a campaign donor, even if the DA believes his or her decision making is unaffected. Yet despite these obvious problems, there are very few legal limits on donations by individuals to district attorneys, either in New York or elsewhere. In New York, for example, campaign contributors can give a DA candidate up to the maximum amount (almost $50,000 in New York County) with no regard for whether those contributions might lead to a conflict of interest or an unconscious bias on the part of the district attorney. And there is virtually no guidance for DAs on how to handle these potential or apparent conflict-of interest issues.

To help address this problem, my organization, the Center for the Advancement of Public Integrity (CAPI) at Columbia Law School, recently released a report on DA fundraising practices. DA Vance, to his credit, specifically requested this review, which included an examination of his own campaign fundraising practices. In conducting its review, CAPI considered the donation acceptance policies of DA Vance’s campaign, and analyzed contributions to his campaigns over his three election cycles, paying particular attention to contributions from attorneys. CAPI conducted research into applicable laws, regulations, and guidance for DAs, and lawyers generally, in this area, and interviewed numerous stakeholders on the topic, including DAs, election regulators, good governance groups, and legal ethics experts, to learn from their experiences and solicit their views. After conducting this review, the report offered seven recommendations for DAs to follow to avoid actual and potential conflicts of interest and biases. While these recommendations are geared to DAs in New York, they are instructive for elected prosecutors all over the United States: Continue reading →

Building Booms and Bribes: The Corruption Risks of Urban Development

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Windfall gains often create opportunities for corruption. The big inflow of money increases the opportunities and incentives for kickbacks and bribery as a means to capture new funds. Well-known examples of this phenomenon include disaster relief efforts, resource booms, and humanitarian aid. Yet the concern is not limited to those contexts. Changes in the price and value of land in a given area can also create the opportunity for windfall, and associated corruption risks.

The corruption risks in the land sector and real estate industry have been discussed broadly as pervasive; routine land administration and land grabbing provide ample opportunities for corruption to flourish where land governance is weak. Yet these discussions sometimes overlook another sort of corruptogenic windfall in land markets, one that is often hiding in plain sight: the effects of gentrification of urban centers. Experiences from cities around the world exemplify three common ways in which these windfall gains from gentrification provide opportunity for corruption. Continue reading →

Guest Post: “Global Cities–Joining Forces Against Corruption” Conference Recap, Part 2

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Jennifer Rodgers and Gabriel Kuris, the Executive Director and Deputy Director, respectively, of the Columbia University Center for the Advancement of Public Integrity (CAPI), have provided a two-part series of guest posts summarizing CAPI’s conference on “Global Cities–Joining Forces Against Corruption”, which we previously advertised on GAB. This is the second of the two posts. (Part 1 can be found here.)

The CAPI “Global Cities” conference featured two speakers who discussed their own experience working to promote strong municipal anticorruption enforcement, though there could hardly be a wider gulf in the circumstances they currently face. Commissioner Mark Peters of the New York City Department of Investigation (DOI) talked about about his office’s strong history of combating not only corruption but waste and mismanagement in NYC government, and Lev Pidlisetskyy of Ukraine’s Parliament gave an inside account of the incredible challenges his brand-new political party faces in fighting the massive and entrenched corruption left over from the Yanukovich era by instituting reforms in the judiciary, decentralizing authority, and engaging the public through new transparency tools

The panel discussion on “Engaging the Public: Mobilizing Citizens, Civil Society, and the Media” looked at the how cities can effectively partner with outside entities to better fight corruption. Athanasios Tsiouras of the Athens Mayor’s Office described Athens’ sophisticated and award-winning online platform for disbursing important information and collecting citizen complaints. Jose Ramon Amieva of the Mexico City Mayor’s Office spoke about major efforts to streamline local government processes like obtaining permits and licenses. And Fuad Khoury, the Comptroller General of Peru, discussed his office’s unique Young Auditors Program, which enlists students and teachers nationwide to help root out corruption, waste, and inefficiency. Dick Dadey, of Citizens Union of the City of New York, provided a civil society perspective, encouraging city governments to utilize networks of good government groups to make change. And Jeri Powell of New York City’s DOI took a historical view, emphasizing the importance of gaining the public’s trust in fighting corruption.

The next panel, “Game Changing Cases: An Inside Look at Breakthrough Investigations” featured prosecutors from all over the world discussing some major law enforcement successes, as well as the challenges they confront. A leading prosecutor from Venice explained a highly successful case in which 50 defendants, including a sitting mayor, were arrested for corruption offenses. New York federal prosecutors generated a lively discussion by describing a bribery case against a sitting state legislator, charged after another legislator agreed to cooperate with authorities and wear a recording device during his interactions with his colleague. A leader from the Catalan antifraud office described working on a variety of cases that help local officials build their own integrity systems. And a Malaysian prosecutor explained how a major case, built up during an extensive and lengthy investigation, was derailed by a defendant’s suicide while in custody.

Finally, “Ensuring a Clean Clean-Up: Fighting Fraud in the Wake of Disaster” provided an illuminating and instructive look at corruption risks related to major events that city governments should plan for to avoid making a bad situation worse. A member of the U.S. Attorney’s Office for the Eastern District of Louisiana spoke about how his office got up and running in the wake of Hurricane Katrina and what they would do differently today. Steve Lee, the Acting Director of the Department of Consumer Affairs of New Jersey, drew practical lessons from what kinds of consumer frauds his office has handled since Hurricane Sandy. And Alan Brill from Kroll provided a fascinating look at how easily criminals can steal unwitting citizens’ identities by setting up bogus free wifi sites, and how we can better protect ourselves against this kind of fraud.

From Perth to Barcelona, from Lima to Toronto, cities have become crucial battlefields in the fight against corruption. The citizens of the world’s growing urban majority are demanding fair and honest services from local governments, putting cities on the vanguard of public integrity enforcement and innovation. CAPI’s inaugural Global Cities conference made a compelling case that the international anticorruption community can learn from the voices of the local practitioners, policymakers, and public citizens working to clean up city halls worldwide. Interested readers can learn more about the conference from the online  videos, presentation slideshows, and other conference materials. And don’t forget to register now for CAPI’s upcoming online discussion forum on which we’ll soon be dissecting what we learned at Global Cities in greater detail with the participants!

Big Data and Anticorruption: A Great Fit

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There is no shortage of buzz about Big Data in the anticorruption world. It’s everywhere — from public efforts like Transparency International’s public procurement analysis to cutting-edge private-sector FCPA compliance programs implemented by Ernst & Young. TI has blogged about Big Data and corruption, with titles like “Can Big Data Solve the World’s Problems, Including Corruption?” and “The Potential of Fighting Corruption Through Data Mining.” Ernst & Young’s conclusion is more definite: “Anti-Corruption Compliance Now Requires Big Data Analytics.”

In previous posts, contributors to this blog have written about how the anticorruption community was excited about social media-style apps (“crowdsourcing”) in anticorruption efforts. Apps like iPaidABribe allow citizens to report their encounters with corrupt officials, generating a fertile data set for anticorruption activists. Big Data is a related effort: activists can mine huge amounts of data for patterns that reveal corrupt activity, making it a powerful tool for transparency. However, as the name suggests, Big Data requires massive amounts of data in order to be useful.The anticorruption community should throw its weight behind proposals to open up data sets for Big Data analysis. As with crowdsourced anticorruption efforts, the excitement surrounding Big Data could quickly turn into disappointment unless this tool can be integrated into the broader anticorruption effort. Continue reading →

Corruption as Culture and Health Care Fraud in Brooklyn

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The astonishing prevalence of health care fraud in the Russian-speaking communities of Brighton Beach and Coney Island in New York City presents an interesting case study on the causes of corruption. The Brighton Beach-Coney Island area is populated by people who immigrated from one of the most corrupt countries in the world to one of the least. You can take the person out of the corrupt system, but does this remove the propensity to engage in corrupt acts from the person?

In the wake of a recent spate of health care fraud scandals in Russian-speaking New York City communities (as well as a scheme to defraud Medicaid perpetuated by dozens of Russian diplomats), the facts and some commentators suggest no. Brighton Beach has the second highest rate of Medicaid and Medicare-related malfeasance in the United States. In February 2012, federal authorities uncovered the largest no-fault insurance fraud scheme in United States history, which was operated out of Brighton Beach-based clinics. A law-enforcement official drew a direct link between “the Russian mind-set” that “if you’re not scamming the government…you’re looked upon as a patsy” and this widespread fraud. Professor Mark Galeotti expanded on this point, suggesting that “from cradle to grave” Russians have been inculcated to “bureaucratic systems that are parasitic and hostile, almost designed to make you pay bribes.”

I think “old habits die hard” as an explanation is too simplistic and uncomfortably resembles notions (discussed elsewhere on this blog) that corruption is an inherent cultural touchstone in certain societies. Furthermore, emerging evidence shows that Russians within Russia are developing a moral aversion to bribery.

An alternative explanation for the puzzle of the Brighton Beach health care fraud phenomenon is below. Under this model, culture is not the only, and perhaps not the first, link in the chain of causation. Continue reading →