The Trump Administration and Corruption: A Preliminary Retrospective

As of yesterday at 12 noon, U.S. East Coast Time, Donald Trump is no longer the President of the United States of America.

First, let’s all breathe a collective sigh of relief.

OK, now we can start thinking about what we’ve learned from this traumatic experience. There is no shortage of political and cultural commentary on the Trump era and its implications, and I have little of substance to add to that general discussion. But, given that this is a blog specifically focused on corruption, let me offer a few reflections on the implications of the last four years for corruption and anticorruption in the United States.

At the risk of self-indulgence, I’ll frame this preliminary discussion in terms of my own guesses, as of four years ago, about how the Trump Administration would affect U.S. corruption and anticorruption policy. Immediately after Trump’s election, I wrote a despondent post about why I thought that Trump’s election would be a disaster for the fight against corruption on many different dimensions. Roughly a year later, I did a follow-up post assessing my own predictions, concluding that on some issues my pessimistic forecasts proved inaccurate (for reasons I did my best to assess), while on other dimensions the Trump administration was as bad or worse than I had feared. Now that Trump is finally out of office, it’s a good time for another retrospective assessment—both to understand where things stand now with respect to U.S. policy and leadership on anticorruption issues, and also to see what lessons we might be able to draw from the experience of the past four years. Continue reading

Is the Global Magnitsky Sanctions Program Working?

The 2016 Global Magnitsky Human Rights Accountability Act (GMA), inspired by the imprisonment and death of Sergei Magnitsky in Russia after his discovery of $230 million in tax fraud orchestrated by the Russian government, stands as the boldest authorization of U.S. economic sanctions in the fight against corruption. Executive Order 13818, issued in December 2017, designated the first sanctioned parties under GMA, enabling asset freezes and travel bans.

Since then, approximately 150 individuals and entities worldwide have been sanctioned for corruption under the GMA. (The GMA also allows for sanctions against human rights violators, and such authority was exercised to target 75 more individuals and entities.) The list includes current and former government officials—or those acting on their behalf—in Cambodia, China, Cyprus, Democratic Republic of the Congo, Dominican Republic, Equatorial Guinea, Gambia, Iraq, Latvia, Lebanon, Mexico, Nicaragua, Serbia, South Africa, South Sudan, Uganda, and Uzbekistan, among others. The designations include familiar names in the anticorruption community such as Gulnara Karimova, former Uzbek first daughter convicted of embezzlement and other corruption totaling more than $1.3 billion, Dan Gertler, the Israeli billionaire who earned millions of dollars through underpriced mining contracts in the Democratic Republic of the Congo, and Angel Rondon Rijo, a Dominican lobbyist central to Brazilian construction firm Odebrecht’s $4.5 billion Latin America-wide bribery-for-contracts scheme. Other sanctioned parties include the former Gambian president and first lady for misappropriating $50 million in state funds, a former Mexican judge and a former Mexican governor who took bribes from drug cartels, and a Sudanese businessman who, along with senior South Sudanese government officials, embezzled millions of dollars from a government food program.

The GMA represents a new era of so-called “smart sanctions.” Instead of limiting transactions with an entire country—as in the case of U.S. sanctions programs targeting Cuba, Iran, North Korea, and Syria—these individualized sanctions are designed to maximize harm and minimize collateral economic damage by restricting only bad actors’ access to global commerce, not that of entire populations. This approach is catching on outside the United States, with Canada, the United Kingdom, and the European Union recently announcing their own GMA-esque sanctions, while other countries, like Australia and Japan, are actively considering adopting similar programs.

Yet, a fundamental question remains: is the GMA working?

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What Made Alexei Navalny an Anticorruption Icon?

On August 20, 2020, former Russian presidential candidate Alexei Navalny fell ill while on a flight from Tomsk to Moscow. He slipped into a coma and was immediately evacuated to Berlin, where doctors discovered that Navalny had been poisoned by a Soviet-era nerve agent. While the Kremlin has denied any involvement, the chemical nerve agent used on Navalny was similar to the one that Russia was accused of using to poison former Russian spy Sergei Skripal and his daughter in 2018.

A Kremlin-orchestrated attempt on Navalny’s life was hardly surprising. For the past decade, Navalny has been making a name for himself as one of the leading figures opposing Russian President Vladimir Putin and his United Russia party. Navalny has denounced United Russia as a “party of crooks and thieves” and has organized campaigns to unseat Putin-affiliated politicians across the country. Furthermore, Navalny’s investigative journalism has uncovered government corruption, and he has used these exposés to advocate for political reform and to bolster his own popularity, especially among the younger generation. Navalny’s success in exposing corruption highlights several interesting and unique tactics and personal attributes that allowed him to be an effective advocate in a country that routinely punishes government opposition.

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Lebanon Disaster Update: An Excellent and Disturbing OCCRP Report Sheds New Light on the Backstory of the Deadly Explosion

A couple of weeks ago, I did a short post in reaction to the deadly warehouse explosion in Beirut, which killed at least 182 people, wounded thousands, and left hundreds of thousands homeless. My post wasn’t really about the Lebanon blast per se—especially because the causes of the explosion, and the role that corruption may have played, were unclear—but rather discussed more generally the direct and indirect ways that widespread corruption can increase the risk of deadly accidents. But I continue to wonder whether, with respect to the Beirut tragedy, it will turn out that corruption (rather than “mere” incompetence) will have been a contributing cause.

We still don’t have all the answers—particularly with respect to the decision-making process within Lebanon itself—but thanks to excellent investigative reporting by an international team of journalists with the Organized Crime and Corruption Reporting Project (OCCRP), we now have a great deal more information about the shadowy and highly suspicious backstory of the abandoned ship that brought the ammonium nitrate to Beirut in the first place. I don’t think I can do the report justice, but I highly recommend that everyone read it—it’s available here. And to give you a sense of what’s in it, I’ll just quote the main findings summarized at the beginning of the report: Continue reading

The U.S. Should Enact the Rodchenkov Anti-Doping Act

As I have previously discussed on this blog, corruption is sports is a serious and systemic issue. I recommended that the World Anti-Doping Agency (WADA) ban Russia from the 2020 Tokyo Olympics, and WADA did indeed decide to ban Russia from global sports for four years in the aftermath of Russia’s years-long state-sponsored doping program. The 2020 Olympics was postponed due to the coronavirus, and other major sports events will not be taking place for the foreseeable future, but once it is safe to hold these events again—indeed, before then—the work to combat corruption in sports must continue. Russia appealed WADA’s decision, and thus far the ban is the only consequence facing Russia and the state officials who engineered the doping program. It is unclear whether the ban will be enough for Russia to learn its lesson, or enough to deter other countries from trying to get away with similar ploys.

Fortunately, the United States has the opportunity to become a leader in fighting this kind of corruption in sports. Last fall, the U.S. House of Representatives passed the Rodchenkov Anti-Doping Act of 2019, named for Dr. Grigory Rodchenkov, the whistleblower who revealed the Russian state-sponsored doping scheme and who has been the target of Russian retaliation ever since. This bill would make it a crime for “any person, other than an athlete, to knowingly carry into effect, attempt to carry into effect, or conspire with any other person to carry into effect a scheme in commerce to influence by use of a prohibited substance or prohibited method any major international sports competition” in which U.S. athletes compete; the bill also permits U.S. citizens to pursue monetary compensation for deceptive competition and provides protections for whistleblowers. The bill, now pending in the U.S. Senate, has received bipartisan support, as well as the endorsement of the U.S. Anti-Doping Agency.

WADA, on the other hand, has raised concerns about the bill, especially the proposed law’s allegedly impermissible extraterritorial reach. This objection is unpersuasive, for several reasons:

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New Podcast, Featuring Charles Davidson

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Charles Davidson, currently the publisher of the American Interest magazine, and previously the co-founder of Global Financial Integrity and the Hudson Institute’s Kleptocracy Initiative. We discuss a variety of topics, including financial integrity, beneficial ownership transparency, and kleptocracy–including the threat that kleptocratic wealth from authoritarian states poses to liberal democracies, the use of targeted sanctions against individual corrupt actors, and concerns about how kleptocrats use Western institutions not only to launder their money, but also to launder their reputations.

You can find this episode, along with links to previous podcast episodes, at the following locations:

[NOTE: This episode begins with some introductory housekeeping material about future directions for the KickBack podcast. If you want to jump straight to the interview, it begins at 3:07.]

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

If the International Community Takes Corruption in Sports Seriously, Russia Should Be Banned from the 2020 Olympics

Corruption in sports has been recognized as a serious and systemic problem (see here and here). One of the most egregious examples of sports-related corruption is Russia’s state-sponsored doping program. A 2015 report issued by an independent commission of the World Anti-Doping Agency found that this program involved athletes, coaches, trainers, doctors, and Russian institutions. Some of the most serious allegations were that members of the Russian secret service (the FSB) had pressured lab workers to cover up positive drug testing results (with one lab destroying more than 1,400 samples), top Russian sports officials submitting fake urine samples, and athletes assuming false identities, paying for destruction of positive doping results, and bribing anti-doping authorities. The former director of Russia’s anti-doping lab, Dr. Grigory Rodchenkov, has provided additional explanations as to how he and others, including FSB agents, enabled doping for the country’s athletes.

In light of these revelations, WADA recommended that the International Olympic Committee (IOC) ban Russia in the 2016 Rio Summer Olympics; however the IOC permitted each sport to consider individual athletes for participation. After an additional 2016 investigation known as the McLaren report produced additional evidence regarding Russian violations, the IOC did ban Russia from the 2018 Winter Olympics, and banned several individual athletes for life, but the IOC permitted 168 Russians to compete neutrally as “Olympic Athletes from Russia.” WADA reinstated Russia’s Anti-Doping Agency as compliant with the World Anti-Doping Code in September 2018, subject to two conditions: (1) Russian anti-doping authorities must accept the McLaren report findings; and (2) Russia must make data in its Moscow laboratory available to WADA inspection.

Yet Russia has not learned its lesson:

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New Podcast Episode, Featuring Sergei Guriev

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Professor Sergei Guriev, who until last month served as the Chief Economist for the European Bank for Reconstruction and Development (EBRD). In the conversation (which took place a couple of months ago, when Professor Guriev was still in his EBRD post), we discuss a range of topics, including his academic work (both his research on the role of oligarchs in the Russian economy and his more recent work on how expanded high-speed internet access affects both perceptions of and political responses to widespread corruption); the question why some post-socialist countries were more successful than others in making a transition to a market economy and reasonably well-functioning democratic government, while others remain mired in corruption; and some of the major challenges and opportunities confronted by international organizations, like the EBRD, that want to help advance the fight against corruption in challenging political environments.

You can find this episode, along with links to previous podcast episodes, at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Guest Post: An Austrian Political Corruption Scheme was Caught on Video–But Most Probably Aren’t

Today’s guest post is from Jennifer Kartner, an anticorruption researcher who recently received her Ph.D. in political science from Arizona State University:

On Friday, May 17, 2019, the German newspapers Der Spiegel and the Die Sueddeutsche Zeitung released an explosive video showing two key politicians of the far-right Austrian Freedom Party (FPÖ), Heinz-Christian Strache and Johann Gudenus, scheming with a woman who claimed to be a wealthy Russian citizen. Their meeting took place in July 2017, a few months before the October 2017 Austrian parliamentary elections. In the video, Strache and Gudenus discuss how, with the help of the woman, they could ensure that the FPÖ wins the upcoming elections. The plan was that the Russian would buy 50% of the Austrian newspaper Die Kronen Zeitung—a newspaper reaching a third of all Austrian news consumers—before the elections, and then she would ensure that the already-populist newspaper would drum up more support for the FPÖ. (Mr. Strache estimates in the video that the newspaper takeover would help push the FPÖ’s expected vote share from 27 to 34 percent.) Once the FPÖ won the election, FPÖ elected officials would return the favor by helping the oligarch win contracts for public construction projects; all she had to do was to establish a construction company that could plausibly compete with the Austrian firm Strabag. The three meeting participants also talked about the possibility of privatizing the Austrian public broadcast station ORF, and Mr. Strache spoke of wanting to build a media landscape “just like Viktor Orbán built in Hungary.” But the deal never actually came together. Die Kronen Zeitung didn’t change owners, the FPÖ came in third in the parliamentary elections and ended up entering into a coalition government with the center-right ÖVP, and Strabag continues to win the majority of public construction contracts in Austria.

The political backlash in response to the publication of the video was swift and severe. An estimated 5,000 people came out to protest on the streets. A day after the publication, Mr. Strache resigned from his Vice-Chancellorship, as well as his other political and party positions, and issued a public apology, and a couple of days after that, all remaining FPÖ ministers in the government were fired or resigned in protest. While Austrian authorities are still debating whether they can charge Mr. Strache for any criminal activities, the public’s response shows that, regardless of the legal ramifications, ordinary citizens view this behavior as corrupt.

But perhaps one of the most disturbing things about this affair is that if the parties had gone through with their plan, and the secret video had never been leaked, neither the authorities nor the public would likely have ever had any reason to suspect a complex corruption scheme behind it. To see this, suppose for the moment that the scheme went ahead as planned. Would anyone have caught on? The answer is likely no: Continue reading

Why (and How) the US Should Use “Sanctions Money” to Help Victims of Corruption 

Individually-targeted sanctions pursuant to the 2016 Global Magnitsky Act (GMA) have been used to hold individuals responsible for acts of grand corruption and human rights abuse in places like Russia and the DRC (explained here and here). Yet more can and should be done to compensate the victims of those same crimes. Advocates should push the US to use the compensatory mechanisms of other US sanctions regimes to strengthen the power of the GMA to compensate victims.

GMA sanctions, like other individually-targeted sanctions, are administered by a division of the US Treasury Department called the Office of Foreign Assets Control (OFAC). When an individual is placed on the US sanctions list—known as the “specially designated nationals” (SDN) list)—that individual’s US assets are frozen in an interest-bearing account until either the individual is removed from the SDN list or the assets are seized. In the interim, any US-dollar denominated transaction with those accounts is blocked. Moreover, any person subject to US jurisdiction who does business with any individual on the SDN list can be hit with a steep civil fines for every transaction with the blocked assets, which can cumulatively run into the millions, sometimes billions, of dollars.

Those two pots of money—the frozen assets of the individuals on the SDN list, and the fines imposed on those who violate the sanctions imposed on those SDNs—could and should be used to compensate the individuals victimized by the corruption or other wrongful conduct of those SDNs. Here’s how these approaches might work in the US context, given precedent of other sanctions regimes:

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