Tag Archives: oversight

Small Town Corruption: The Cautionary Tale of Jasiel Correia

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Elected at the age of 23 to serve as mayor of Fall River, Massachusetts, Jasiel Correia looked like a wunderkind. A tech entrepreneur who founded his own startup, Correia was the youngest-ever mayor of his hometown, the golden boy who promised to use his technological prowess and puckish energy to bring his aging town into the 21st century

Then it all came crashing down. In 2018, Correia was charged with various personal misdeeds, including tax and wire fraud, related to his tech company. A defiant Correia maintained his innocence and rejected calls for his resignation. Then, a second round of charges hit, this time alleging public corruption. Correia purportedly took over $600,000 in bribes from marijuana business license applicants—including one marijuana business owner who paid the Mayor $100,000 and promised him 2% of his future sales revenue in exchange for a lucrative operating permit. By the time Mayor Correia went to trial, he faced 24 separate criminal charges, and on May 14, 2021, the jury found him guilty of 21 of those 24 counts.

Mayor Correia’s downfall might seem like a relatively minor matter involving local corruption in one small city. (Such stories are, alas, all too common.) But this incident usefully highlights the corruption risks associated with devolving regulatory authority to local governments. While there are certainly virtues of giving local governments power over local affairs, we need to be clear-eyed about the dangers that local control can pose, particularly in the context of regulating lucrative industries like legal marijuana. The Fall River example highlights several such risks:

Continue reading →

Guest Post: Ensuring Adequate Anticorruption, Accountability, and Transparency Measures During the Pandemic

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Today’s guest post is from Shruti Shah and Alex Amico from the Coalition for Integrity:

We are living through an emergency more severe than anything in recent memory. The COVID-19 public health crisis has triggered an associated economic crisis, and both will require a dramatic government response. But the fact that we are dealing with an emergency situation—in which swift and drastic government action is essential—does not mean that we should put aside our concerns about government corruption, or relax our vigilance about demands for transparency and accountability in government programs. Quite the opposite: In order to respond effectively, and to demonstrate that they can be trusted, governments other institutions need to demonstrate that they are committed to honest oversight of the extraordinary actions necessary to combat this pandemic. The need to act swiftly does not abrogate the government’s responsibility to adhere to principles of anticorruption, accountability, and transparency.

There is no better illustration of this than the stimulus package being negotiated (at the time of writing) in the U.S. Congress. This stimulus will result in a flow of an enormous amount of money, and the risks of corruption, fraud, and misappropriation or diversion are extremely high. It is therefore essential that the stimulus bill incorporate meaningful transparency, oversight, and anticorruption provisions. For example: Continue reading →

Fighting Police Corruption in Nigeria: An Agenda for Comprehensive Reform

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Nigeria has a serious problem with police corruption, at all levels. At the top, senior police officials embezzle staggering sums of public funds. To take just one example, in 2012, the former Inspector General of Police, Sunday Ehindero, faced trial for embezzling 16 million Naira (approximately US$44,422). Meanwhile, at the lower levels, rank-and-file police officers regularly extort money from the public, and crime victims must pay bribes before the police will handle their cases. As a 102-page report by Human Rights Watch documented, police extortion is so institutionalized that Nigerians are more likely to encounter police demanding bribes than enforcing the law. No wonder Nigeria’s police force was ranked as the worst of those included in the 2016 World Internal Security and Police Index, and that Transparency International’s Global Corruption Barometer survey found that a staggering 69% of Nigerian citizens think that most or all police officers are corrupt.

To combat such a deep-rooted and systemic problem, bold and comprehensive reforms are needed. What would an effective reform agenda look like? Here is an outline of the most important reforms that are needed, drawing on international best practices but also tailored to Nigeria’s particular circumstances: Continue reading →

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

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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 →

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

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 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 →

The Role of Judicial Oversight in DPA Regimes: Rejecting a One-Size-Fits-All Approach

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In late March 2018, the Canadian government released a backgrounder entitled Remediation Agreements and Orders to Address Corporate Crime that outlines the contours of a proposed Canadian deferred prosecution agreement (DPA) regime. DPAs—also appearing in slightly different forms such as non-prosecution agreements (NPAs) or leniency agreements—are pre-indictment diversionary settlements in which offenders (almost exclusively corporations) agree to make certain factual admissions, pay fines or other penalties, and in some cases assume other obligations (such as reforming internal compliance systems or retaining an external corporate monitor), and in return the government assures the corporation that it will drop the case after a period of time (ordinarily a few years) if the conditions specified in the agreement are met. Such agreements inhabit a middle ground between declinations (where the government declines to file any charges, but where companies still might forfeit money) and plea agreements (which require guilty pleas to criminal charges filed in court).

While Canada has been flirting with the idea of introducing DPAs for over ten years, several other countries have recently adopted, or are actively considering, deferred prosecution programs. France formally added DPAs (known in France as “public interest judicial agreements”) in December 2016, and entered into its first agreement, with HSBC Private Bank Suisse SA, in November 2017. In March 2018, Singapore’s Parliament installed a DPA framework by amending its Criminal Procedure Code. And debate is underway in the Australian parliament on a bill that would introduce a DPA regime for offenses committed by corporations.

The effect of DPAs in the fight against corruption, pro and con, has been previously debated on this blog. One critical design component of any DPA regime is the degree of judicial involvement. On one end of the spectrum is the United States, where courts merely serve as repositories for agreements at the end of negotiations and have no role in weighing the terms of any deal. On the other end of the spectrum is the United Kingdom, where a judge must agree that negotiations are “in the interests of justice” while they are underway, and a judge must declare that the final terms of any DPA are “fair, reasonable, and proportionate.” British courts also play an ongoing supervisory role post-approval, with the ability to approve amendments to settlement terms, terminate agreements upon a determined breach, and close the prosecution once the term of the DPA expires.

Under Canada’s proposed system of Remediation Agreements, each agreement would require final approval from a judge, who would certify that 1) the agreement is “in the public interest” and 2) the “terms of the agreement are fair, reasonable and proportionate.” While the test used by Canadian judges appears to parallel the U.K. model—including using some identical language—the up-or-down judicial approval would occur only once negotiations have been concluded. This stands in contrast to the U.K. model mandating direct judicial involvement over the course of the negotiation process.

The decision by the Canadian government to chart a middle course on judicial oversight is all the more notable given that an initial report released by the Canadian government following a several-month public consultation regarding the introduction of DPAs appeared to endorse the U.K. approach, noting that the majority of commenters who submitted views “favoured the U.K. model, which provides for strong judicial oversight throughout the DPA process.” Moreover, commentators have generally praised the U.K. model’s greater role for judicial oversight of settlements, especially judicial scrutiny of the parties charged (or not) in any given case, the evidence (or lack thereof), and the “fairness” (or not) of any proposed deal.

Despite these positions, one should not reflexively view the judicial oversight regime outlined in Canada’s latest report as a half-measure. Perhaps the U.K. model would be better for Canada, or for many of the other countries considering the adoption or reform of the DPA mechanism. But the superiority of the U.K. approach can’t be assumed, as more judicial involvement is not categorically better. Rather than a one-size-fits-all approach favoring heightened judicial oversight, there are several factors that countries might consider when deciding on the appropriate form and degree of judicial involvement in DPA regimes: Continue reading →

For Foreign Aid and Fighting Corruption, Less Is More

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The US government learned many hard lessons from its military occupation of Iraq. With respect to corruption in security and reconstruction projects, one of the clearest lessons—emphasized by the 2013 final report from the Special Inspector General for Iraq Reconstruction (SIGIR), among others—was that smaller, short-term projects were more effective, and less susceptible to massive and debilitating corruption, than big, long-term projects. Indeed, a month after publication of the SIGIR report, Paul Cooksey, the Deputy Special Inspector General for Iraq Reconstruction, testified to Congress that large amounts of money should not be injected into an unstable region without enough well-trained, experienced personnel to oversee it. The better strategy, he argued, was to use small projects that could be more tightly managed. For example, one battalion commander in Iraq mentioned that greenhouse and drip irrigation projects—which allowed farmers to use water more efficiently and grow vegetables year-round—were small enough to be easily monitored to completion. This may not be as grandiose as building massive infrastructure, but it can still have a meaningful impact on people’s lives.

Yet despite the clarity and consistency of this message, it has not been heeded in Afghanistan. Continue reading →

New York City Pays a Steep Price for Failing to Guard a Guardian

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This past Monday, April 28, U.S. federal trial court judge George B. Daniels sentenced three persons at the center of a corrupt scheme that cost New York City some $600 million to 20 years each in prison.  Despite the massive loss and the large number of firms and individuals that participated, the scheme was quite simple.  Its simplicity, and the vulnerability of a government as large and sophisticated as that of New York City to it, is a stark reminder of how critical contract administration — one of the more prosaic-sounding responsibilities of government — is to controlling corruption.

The New York scam arose from a $63 million contract to modernize its payroll system. Software contracts, like construction contracts, can take months if not years to perform and may need to be modified as the contractor runs into issues not anticipated when the contract was drafted.  More computer code than initially foreseen may be required to capture the way employees in some departments record their hours; a road may have to be re-routed because the ground along the original route turns out to be unstable.  But it may also be that more code isn’t needed or that the original routing of the road is fine.  Instead, it may simply be that the contractor is looking for a way to squeeze more money out of government.

To deal with this concern, governments typically rely on expert professionals to evaluate a contractor’s requests for change orders. Often these professionals also decide whether the completed project meets contract specifications.  They thus serve as guardians of project quality and integrity.  What happened in New York was simple: the guards deserted their post, conspiring with the contractor to bilk the city of out hundreds of millions of dollars. Where the city erred was its failure to heed the famous question attributed to the Roman satirist Juvenal:  Who guards the guardians?

Heeding that question and coming up with a satisfactory answer are, of course, two different things.  What can a government do to avoid the sort of collusion that cost New York City so much money? Continue reading →