Tag Archives: Russia

The CICIG Crisis in Guatemala: How the Trump Administration Is Undermining US Anticorruption Leadership

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Back when Donald Trump was first elected, a lot of people—me included—worried about the implications of his presidency for US leadership in the global fight against corruption. Some of the dire predictions have not (yet) come to pass; for example, so far US enforcement of the Foreign Corrupt Practices Act (FCPA) does not seem to have abated despite Trump’s well-documented and ill-informed hostility to that statute. But even if US enforcement of the FCPA has proceeded without much discernible effect (so far), there are other, less easily measurable respects in which the Trump Administration’s foreign policy, and its own cavalier disregard for ethics, may be undermining US leadership on anticorruption issues, and consequently undermining anticorruption efforts and bolstering those who would seek to undermine such efforts.

As just noted, much of this effect is diffuse and hard to observe directly, but there are a few examples where the Trump Administration and its allies are undermining the global fight against corruption is more evident. Perhaps the most striking and disheartening is the situation unfolding in Guatemala, ably documented in a compelling piece by Colum Lynch on Foreign Policy’s FP Blog earlier this month. Long story short: The Trump Administration and its allies in Congress appear to be supporting, or at least tacitly accepting, the efforts of Guatemalan President Jimmy Morales to shut down Guatemala’s UN-sponsored anti-impunity commission, known by its Spanish acronym CICIG, which has proved instrumental in fighting high-level corruption in Guatemala, and forced the resignation of President Morales’s predecessor, Otto Perez Molina. President Morales campaigned on an anticorruption platform, but he now wants to shut CICIG down, apparently because it’s investigating his own family members and associates. And the US, which had supported CICIG in the past and pressured President Molina to renew its mandate when he was inclined to terminate it to protect himself, seems to be backing Morales rather than CICIG.

I won’t go into all the details here, as the story is ably laid out in Mr. Lynch’s excellent piece. I’ll just highlight some themes that emerge from the reporting that Mr. Lynch and others have done, which illustrate connections—some direct, some indirect—between the Trump Administration’s approach to government and the dissipation of US leadership on anticorruption issues, as illustrated by the CICIG debacle. Continue reading →

Lessons from Moldova’s “Theft of the Century”

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One year ago today, on April 20th, 2017, a Moldovan businessman named Veaceslav Platon was sentenced to 18 years in prison. His crime? Helping to steal a billion dollars. Between 2012 and 2014, businessmen and politicians siphoned off money from Moldova’s three largest banks in a crime now known as the “Theft of the Century.” While corruption is endemic in many parts of Eastern Europe, the theft in Moldova was spectacular in its size and in the severity of its consequences.

This theft was an economic, social, and political catastrophe for Moldova. The amount of money that disappeared was similar to the amount implicated in the 1MDB scandal in Malaysia–but Malaysia’s GPD is 2.3 times the size of Moldova’s. The Moldovan government’s secret bailout of the banks cost $870 million, one-eighth of Moldova’s GDP. As a result of the theft, three of Moldova’s main banks went bankrupt and were liquidated; more banks are still under the supervision of the National Bank of Moldova, and there is persistent instability in the financial sector. And then there’s the human cost. For example, the misuse of money in the State Health Insurance Company’s accounts led to a medicine shortage in 2014-2015. During street demonstrations that ensued after the theft became public, two dozen people were injured. The political fallout from the theft has also been substantial: Confidence in the government was shattered, as every government branch and every major political party seemed implicated. Furthermore, because the party seen as most heavily involved in the theft was a pro-EU party, Moldovan support for joining the EU plummeted. Pro-Russian sympathizers capitalized on the public reaction, and the pro-Kremlin Igor Dodon was elected president in 2016. Dodon has talked about joining the Russia-controlled Eurasian Economic Union, halted participation in NATO exercises, and opposes the opening of a NATO office in Chisinau, Moldova’s capitol.

The investigation into the theft has dragged. More than 40 people have been implicated, and more prosecutions are supposedly in the pipeline, but only a few people have been convicted so far. With Moldova’s 2018 elections looming, now is a good time to look back at the fallout and lessons from the Theft of the Century.

Continue reading →

Adjusting Corruption Perception Index Scores for National Wealth

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My post two weeks ago discussed Transparency International’s newly-released 2017 Corruption Perceptions Index (CPI), focusing in particular on an old hobby-horse of mine: the hazards of trying to draw substantive conclusions from year-to-year changes in any individual country’s CPI score. Today I want to continue to discuss the 2017 CPI, with attention to a different issue: the relationship between a country’s wealth and its CPI score. It’s no secret that these variables are highly correlated. Indeed, per capita GDP remains the single strongest predictor of a country’s perceived corruption level, leading some critics to suggest that the CPI doesn’t really measure perceived corruption so much as it measures wealth—penalizing poor countries by portraying them as more corrupt, when in fact their corruption may be due more to their poverty than to deficiencies in their cultures, policies, and institutions.

This criticism isn’t entirely fair. Per capita income is a strong predictor of CPI scores, but they’re far from perfectly correlated. Furthermore, even if it’s true that worse (perceived) corruption is in large measure a product of worse economic conditions, that doesn’t mean there’s a problem with the CPI as such, any more than a measure of infant mortality is flawed because it is highly correlated with per capita income. (And of course because corruption may worsen economic outcomes, the correlation between wealth and CPI scores may be a partial reflection of corruption’s impact, though I doubt there are many who think that this relationship is so strong that the causal arrow runs predominantly from corruption to national wealth rather than from national wealth to perceived corruption.)

Yet the critics do have a point: When we look at the CPI results table, we see a lot of very rich countries clustered at the top, and a lot of very poor countries clustered at the bottom. That’s fine for some purposes, but we might also be interested in seeing which countries have notably higher or lower levels of perceived corruption than we would expect, given their per capita incomes. As a crude first cut at looking into this, I merged the 2017 CPI data table with data from the World Bank on 2016 purchasing-power-adjusted per capita GDP. After dropping the countries that appeared in one dataset but not the other, I had a 167 countries. I then ran a simple regression using CPI as the outcome variable and the natural log of per capita GDP as the sole explanatory variable. (I used the natural log partly to reduce the influence of extreme income outliers, and partly on the logic that the impact of GDP on perceived corruption likely declines at very high levels of income. But I admit it’s something of an arbitrary choice and I encourage others who are interested to play around with the data using alternative functional forms and specifications.)

This single variable, ln per capita GDP, explained about half of the total variance in the data (for stats nerds, the R2 value was about 0.51), meaning that while ln per capita GDP is a very powerful explanatory variable, there’s a lot of variation in the CPI that it doesn’t explain. The more interesting question, to my mind, concerns the countries that notably outperform or underperform the CPI score that one would predict given national wealth. To look into this, I simply ranked the 167 countries in my data by the size of the residuals from the simple regression described above. Here are some of the things that I found: Continue reading →

Transparency International’s Anti-Corruption Pledge Tracker Is Badly Flawed. It Needs To Be Redone from Scratch.

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In May 2016, at the London Anticorruption Summit sponsored by then-Prime Minister David Cameron, participating countries issued declarations announcing a variety of commitments—some new, some continuations of existing policies—to further the fight against international corruption. Of course, all too often governments fail to follow through on their grandiose promises, so I was heartened by Transparency International’s announcement, in September 2016, that it had gone through all the country declarations, compiled a spreadsheet identifying each country’s specific promises, and would be monitoring how well each country was following through on its commitments.

Last month, a year after TI published the spreadsheet documenting the list of summit commitments, TI released a report and an interactive website that purport to track whether countries have followed through on those commitments. So what do we learn from this tracking exercise?

Alas, the answer is “almost nothing.” TI’s “Anti-Corruption Pledge Tracker,” in its current form, is a catastrophic failure—a slapdash, amateurish collection of arbitrary, often inconsistent judgments, unsupported by anything that resembles serious research, and (ironically) non-transparent. This is all the more surprising—and disappointing—given the fact that TI has done so much better in producing similar assessment tools in other contexts. Indeed, at least one such recent tool—TI’s Government Defense Anti-Corruption Index—provides a model for what the Pledge Tracker could and should have looked like. Given the importance of tracking countries’ fulfillment of their summit pledges, and TI’s natural position as a leader on that effort, I dearly hope that TI will scrap the Pledge Tracker in its current form, go back to the drawing board, and do a new version.

I know that sounds harsh, and perhaps it seems excessive. But let me explain why I don’t find the Pledge Tracker, in its current form, worthy of credence. Continue reading →

Jared Kushner May Have Violated the Foreign Corrupt Practices Act

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Recent media reports – which would be even more sensational if we weren’t getting so desensitized to Trump-related scandals – indicate that prior to Trump’s inauguration, his son-in-law and senior advisor Jared Kushner had private meetings with Russian government officials, including both Ambassador Sergey Kislyak and Sergey Gorkov, the head of a Russian state-owned bank (and a close associate of Vladamir Putin). We still don’t know (and may never know) the precise contents of the meeting, but based on circumstantial evidence, several of the media reports discuss speculations Kushner and his Russian government contacts discussed the possibility of extending financing to business ventures owned by Kushner or his family (including, most notably, a financially struggling office building at 666 Fifth Avenue in Manhattan), if Kushner would help to persuade his father-in-law, the President-Elect of the United States, to lift the sanctions that the U.S. had imposed on Russia for its military intervention in Ukraine.

Again, we don’t yet know whether this is true. But let’s suppose for a moment that some version of that story is approximately correct: that during conversations with Russian government officials, Jared Kushner proposed or endorsed the idea that he would try to persuade his father-in-law to lift the Russia sanctions, and that Kushner did so because he believed (or was told) that if he did, a Russian state-owned development bank would provide valuable financing for his family’s business.

If that’s what occurred, then even nothing further came of these discussions, then there’s a very good argument that Jared Kushner committed a criminal violation of the Foreign Corrupt Practices Act (FCPA). Though there’s been quite a bit of discussion in the reports so far about various federal laws that Kushner may or may not have been broken in connection with these meetings (such as the little-used Logan Act, which prohibits private citizens from interfering with U.S. diplomacy). But I haven’t seem much discussion of the FCPA angle. So even though it might still seem unrealistic to imagine that FCPA charges will be brought, let me elaborate a bit on why I think there’s a plausible case for an FCPA violation here, if the evidence supports the characterization of the meetings sketched above: Continue reading →

Guest Post: Trump’s Pledge To Enforce the Global Magnitsky Act–A Skeptical View

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Ilya Zaslavskiy, a research expert with the Free Russia Foundation, contributes today’s guest post:

Earlier this month the White House sent a letter to Congress pledging a commitment to the “robust and thorough enforcement” of the 2016 Global Magnitsky Act (GMA). The GMA, which grew out of a similar 2012 law that focused only on Russia, allows the executive branch to impose certain sanctions—including visa bans and freezing of U.S. assets—on any foreign citizen who commits gross human rights violations or who retaliates against whistleblowers who expose corruption. After Trump won the election, many feared that his administration would shelve meaningful enforcement of the GMA. (After all, the Obama Administration had also been reluctant to implement the original Magnitsky Act aggressively, and did so only under pressure from Congress.) In light of those low expectations, the White House’s statement was taken by many as an encouraging sign.

But many activists and NGOs fighting corruption, in Putin’s Russia and elsewhere, remain rightly skeptical. After all, Trump’s praise and upbeat rhetoric about corrupt authoritarian leaders—not only Putin, but President Erdogan or Turkey and President Duterte of the Philippines—naturally call into question the Administration’s seriousness about aggressive GMA enforcement. Consider further the fact that, despite the overwhelming evidence coming out of Chechnya that its president Ramzan Kadyrov has authorized massive abuses against the LGBT community and opened what is amounting to prisons for gays, there are no signs that the Trump Administration is considering adding Kadyrov to any open sanctions lists, despite not only recent events, but his long track record of corruption and human rights abuses.

Moreover, the White House’s statement in support of the GMA might be an attempt to create the appearance of taking a firm stand against corruption and human rights abuses, to diminish political momentum for more consequential actions. Specifically in regard to Russia, the latest statement about the GMA should also be understood in the context of the broader scandal regarding the Trump team’s ties to Russia. This scandal has, if anything, intensified anti-Russian sentiment in Congress. Not only have leading Senators and Representatives come out in strong support of sustaining existing sanctions against Russia, but there are now a half-dozen initiatives under consideration in Congress that would both codify and expand these sanctions. In such context, it might actually be useful to Trump (and arguably his Russian friends) to appear to be taking firm measures against Russia and other kleptocrats, while resisting adoption or implementation of more meaningful responses. The recent White House statement pledging robust enforcement of the GMA fits that narrative. After all, rhetoric aside, neither the original Magnitsky Act nor the GMA create more than a small headache for Trump and Russians. Only few really high level names have been sanctioned under those initiatives. Financial sanctions (particularly restrictions on long-term loans) are what matters for the Kremlin most. Indeed, Russian leadership might even be happy to have the Magnitsky laws in place if those restrictions are relaxed.

 

Guest Post: When It Comes To Attitudes Toward Corruption, Russians Are More Like Americans Than You Think

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Today’s guest post is from Marina Zaloznaya, Assistant Professor of Sociology at the University of Iowa and author of, The Politics of Bureaucratic Corruption in Post-Transitional Eastern Europe:

Russia and corruption have been dominating the news recently – with the reporting from Washington and Moscow converging in an unusual way. Ongoing accusations against Trump Administration officials resonate even more strongly when linked to Russia, a country most Americans view as rife with corruption. Indeed, many Americans think that Russian citizens are perfectly comfortable with the systematic corruption of political and business elites.

This is a myth. Yes, it is true beyond doubt that corruption is common in Russia – much more so than in the United States – affecting hundreds of thousands of people. But this is not because Russians are systematically more tolerant of corruption than are Americans. Continue reading →

How Corrupt Are Your Courts? Too Corrupt To Be Fair?

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In complex transnational litigation, ensuring the rights of all parties is especially challenging. Consider the following situation: A plaintiff brings a lawsuit against a US multinational in US court, alleging wrongful conduct in some foreign country; the defendant corporation moves to dismiss the case on the ground that the courts of the country where the alleged conduct took place are a more appropriate forum for adjudicating the suit, and the plaintiff should therefore be required to pursue the suit there; but the plaintiff opposes the motion to dismiss on the grounds that the foreign country’s courts are so corrupt that it would be impossible to get a fair trial. What should the US court do when confronted with that sort of situation?

The technical legal term for a motion to dismiss a case because the plaintiff ought to file the suit in a different (and more convenient) judicial forum is the forum non conveniens motion. To successfully win on such a motion in a US federal court, the defendant must convince the court that an alternative forum would provide “basic fairness.” When the alternative forum is the judiciary of a foreign country, plaintiffs sometimes try to oppose these motions by pointing to judicial corruption in the foreign forum. But as one court highlighted, “the argument that the alternative forum is too corrupt to be adequate does not enjoy a particularly good track record.” Indeed, as I noted in my previous post on the Chevron-Ecuador litigation, the district judge in that case rejected the plaintiff’s claim that Ecuadorian judicial corruption made it impossible to get a fair trial in Ecuador, remarking that “the courts of the United States are properly reluctant to assume that the courts of a sister democracy are unable to dispense justice.” Even when confronted with clear and undisputed evidence of corruption in a foreign court, US courts have generally been unwilling to accept this as a sufficient reason to keep the case in US court. (In one case a US court reaffirmed a forum non conveniens decision even after the plaintiff successfully bribed a Mexican judge to have the case sent back to the US court.) Consistent with this deferential approach, there are very few cases where a US court has found a foreign forum inadequate due to credible allegations of widespread judicial corruption. (There are admittedly a handful of such cases, including Bhatnagar v. Surrendra Overseas, Ltd., in which the court found that the extensive delay, unreliability, and general corruption of the Indian judiciary made it an inadequate forum for the plaintiff.)

By contrast, other jurisdictions take allegations of foreign judicial corruption more seriously as a reason not to dismiss a lawsuit and insist that it remain in the forum of the plaintiff’s choice. Notably, although the forum non conveniens analysis is very similar in US and Canadian courts, Canadian courts have been more willing to find foreign forums inadequate because of pervasive corruption. For example, in Norex Petroleum Limited v. Chubb Insurance Company of Canada, a US court dismissed the case on forum non conveniens grounds, while the Canadian court took jurisdiction, denying the defendant’s forum non conveniens motion in light of the Canadian court’s finding that—even though every other factor weighed heavily in favor of Russia as the better forum—extensive judicial corruption in Russia would prevent the plaintiff from accessing a fair and impartial court. It’s certainly not the case that Canadian courts have been consistently receptive to these sorts of arguments—for example, a recent Canadian ruling found Guatemala an appropriate forum despite significant corruption concerns—but the contrast between Canada and the US demonstrates that the US courts’ “see no evil” approach is far from inevitable.

Although it may be helpful for the purposes of international comity for courts to presume that foreign judiciaries are fair, and there are legitimate reasons to dismiss a case in favor a foreign forum (such as easier access to evidence and witnesses), the reluctance of US courts to accept credible allegations of judicial corruption as a reason to deny a forum non conveniens motion likely goes too far. Respect for foreign courts is a good thing in principle, but in practice it can undermine the ability of plaintiffs to get a fair hearing. US courts should hesitate before dismissing cases to foreign forums when there are plausible claims of corruption for two reasons:  Continue reading →

London Anticorruption Summit–Country Commitment Scorecard, Part 2

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This post is the second half of my attempt to summarize the commitments (or lack thereof) in the country statements of the 41 countries that attended last week’s London Anticorruption Summit, in four areas highlighted by the Summit’s final Communique:

  1. Increasing access to information on the true beneficial owners of companies, and possibly other legal entities, perhaps through central registers;
  2. Increasing transparency in public procurement;
  3. Strengthening the independence and capacity of national audit institutions, and publicizing audit results (and, more generally, increasing fiscal transparency in other ways); and
  4. Encouraging whistleblowers, strengthening their protection from various forms or retaliation, and developing systems to ensure that law enforcement takes prompt action in response to whistleblower complaints.

These are not the only subjects covered by the Communique and discussed in the country statements. (Other topics include improving asset recovery mechanisms, facilitating more international cooperation and information sharing, joining new initiatives to fight corruption in sports, improving transparency in the extractive sector through initiatives like the Extractive Industries Transparency Initiative, additional measures to fight tax evasion, and several others.) I chose these four partly because they seemed to me of particular importance, and partly because the Communique’s discussion of these four areas seemed particularly focused on prompting substantive legal changes, rather than general improvements in existing mechanisms.

Plenty of others have already provided useful comprehensive assessments of what the country commitments did and did not achieve. My hope is that presenting the results of the rather tedious exercise of going through each country statement one by one for the language on these four issues, and presenting the results in summary form, will be helpful to others out there who want to try to get a sense of how the individual country commitments do or don’t match up against the recommendations in the Communique. My last post covered Afghanistan–Malta; today’s post covers the remaining country statements, Mexico–United States: Continue reading →

Doping and Corruption in Sports: Why We Should Care, and What We Should Do

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In December of 2014, a German TV channel, Das Erste, released a documentary alleging that a “majority” of Russian track and field athletes—up to 99% as claimed by one whistleblower—had been illegally doping, and implicated Russian Athletics Federation (RAF) officials with covering up the abuse. The alleged scheme was simple: in exchange for 5% of an athlete’s winnings, the Russian Anti-Doping Agency (RUSADA) would supply athletes and doctors with performance enhancing drugs (PEDs), and RUSADA and the RAF would protect athletes against positive tests through a combination of tip-offs, false identities, and clean urine.

In response to the allegations, Russian and international authorities were quick to express outrage and condemn any wrongdoing. The RAF threatened legal action against what it deemed “slanderous allegations,” while the International Association of Athletics Federations (IAAF) and the International Olympic Committee (IOC) promised to investigate. Last month, however, Lamine Diack, the president of the IAAF, was placed under criminal investigation by French authorities for allegedly taking 200,000 Euros in bribes to cover up positive Russian doping tests, despite having previously referred to allegations of systematic doping and corruption as “a joke.”

The full scope of the scandal was substantiated in an exhaustive report issued by the World Anti-Doping Agency (WADA) on November 9, 2015, which not only implicated high level officials at the RAF and IAAF, but also Russian government officials in the Ministry of Sport, and even the FSB, the modern-day successor to the KGB. While doping scandals may be most commonly thought of as a few bad apples cheating to win, the WADA report made it evident that this was a full-blown state-sponsored corruption scheme that profited public officials, and as such should merit the attention of the anticorruption community.

This scandal offers several takeaways for the anticorruption community:

Continue reading →