Rewarding Whistleblowing to Fight Kleptocracy

Last February, Massachusetts Congressman Stephen Lynch introduced the Kleptocracy Asset Recovery Rewards Act (KARRA), which seeks to improve detection of stolen assets housed in American financial institutions by paying whistleblowers for reports that lead to the identification and seizure of these assets. The logic of paying rewards to whistleblowers is straightforward, and nicely summarized in the draft KARRA itself:

The individuals who come forward to expose foreign governmental corruption and klep­toc­ra­cy often do so at great risk to their own safety and that of their immediate family members and face retaliation from persons who exercise foreign political or governmental power. Monetary rewards and the potential award of asylum can provide a necessary incentive to expose such corruption and provide a financial means to provide for their well-being and avoid retribution.

Paying whistleblowers for information is a sound economic idea.  But in light of the cogent explanation for these rewards, the original draft of the KARRA legislation doesn’t go nearly far enough. Indeed, this original proposal provides much weaker incentives and protections for whistleblowers than several other existing US whistleblower rewards programs. It is unlikely that this bill has a real chance of being enacted in the current Congress, but if its introduction this year is a harbinger of a more sustained effort to enact legislation of this kind—and I hope it is—then I also hope that the next time around KARRA supporters will introduce a more ambitious bill, one that provides much higher potential rewards, fewer limitations on which whistleblowers are eligible for rewards, and more robust anti-retaliation protections.

There are many ways to design a whistleblowing program, as demonstrated by the spectrum of existing programs that use whistleblowing to tackle fraud in other domains. We can examine the effectiveness of the proposed legislation through comparison to existing whistleblowing programs:

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Getting the Right People on the Global Magnitsky Sanctions List: A How-To Guide for Civil Society

Last December, pursuant to the 2016 Global Magnitsky Act, President Trump issued Executive Order 13818, which declared that “the prevalence and severity of human rights abuse and corruption that have their source, in whole or in substantial part, outside the United States … threaten the stability of international political and economic systems,” and authorized the Treasury Secretary to impose sanctions against (among other possible targets) a current or former government official “who is responsible for or complicit in, or has directly or indirectly engaged in: (1) corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery; or (2) the transfer or the facilitation of the transfer of the proceeds of corruption.” Pursuant to this Executive Order, the Treasury Department imposed powerful economic sanctions against 37 entities and 15 individuals, including Chechen warlord Ramzan Kadyrov, Israeli billionaire Dan Gertler, and Artem Chaika, the son of Russia’s Prosecutor General.

This was big news, for a couple of reasons. Most obviously, Trump doesn’t exactly have a reputation as a “human rights guy,” let alone a Russia hawk. Given that the 2016 Global Magnitsky Act (unlike its predecessor, the 2009 Magnitsky Act) enables but does not require the imposition of sanctions, it was far from inevitable that the Trump Administration would make use of it. Perhaps just as newsworthy was where the specific names on the list came from: nearly half of those names were provided to the Administration by civil society organizations (CSOs) or by Congress (and in the latter case, it was likely CSO efforts that brought individual names to the attention of Congressional staffers).

The Global Magnitsky Act and EO 13818, then, seem to create promising opportunities for anticorruption CSOs to impose consequences on kleptocrats and their cronies. Because the process is so new, it’s not yet clear how it will develop, yet it is nevertheless useful to draw lessons from the first round of Global Magnitsky sanctions for how CSOs can be maximally effective in using this new tool. The Committee on Security and Cooperation in Europe (also known as the Helsinki Commission) hosted a workshop in early March 2018 to discuss this issue. I was fortunate enough to attend this gathering, and in this post I’ve attempted to distill a handful of key lessons that the participants discussion identified. I’ve framed the lessons as a “how-to” guide addressed to members of a hypothetical anticorruption CSO: that would like to take advantage of this powerful tool.

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A Dangerous Retreat from Anticorruption Aid

The US government’s drive to cut foreign aid in favor of increased military spending is shortsighted, even if one focuses only on national security objectives. This is especially true for aid devoted to supporting anticorruption efforts, which can act as a powerful tool for improving regional stability without direct, overbearing involvement in a region. The past decade has shown how difficult on-the-ground involvement can be, and anticorruption-focused aid can help secure dangerous regions and allow the US to withdraw some of it physical presence abroad.

One striking example of the danger that corruption poses to security and stability can be seen in the context of land use and land rights. When corrupt officials deprive people of their land, destroying both their livelihoods and often their local communities in one move, they may push those affected into a situation where violence may seem like the only option. For example, recent land seizures in the Kurdistan Region of Iraq—with Kurdish members of the community either relying on tribal connections or direct bribery to convince local judges to push through illegal land transfers—have caused an outcry among the primarily Christian and Yazidi victims and partially contributed to the formation of religious minority militia units that now threaten to create more violence if they cannot return to their seized homelands. Similar pairings of violence following land seizures were also found in Zimbabwe in the early 2000s. And in Afghanistan, corrupt land seizures have been a consistent issue throughout the past decade. This danger remains a concern not just for those affected, but for the international community, as violent movements can lead to destabilization. Continue reading

US Courts’ Evaluation of Foreign Judicial Corruption: Different Stages, Different Standards

Last August, a US appeals court may have finally brought to a close a case that the court described as “among the most extensively chronicled in the history of the American federal judiciary”: a lawsuit, initially filed in 1993, seeking damages for adverse environmental and health consequences of oil exploration and drilling by Texaco (later acquired by Chevron) in the Ecuadorian Amazon. Chevron and the plaintiffs each have their own version of the long, complicated, and contentious litigation. (For a concise, relatively balanced summary see here.) For present purposes, the essential facts are as follows: After eight years of US litigation, in 2001 Chevron persuaded a US court to send the case to Ecuador. In 2011, after an additional decade of litigation in Ecuador, the Ecuadorian courts ultimately found in favor of the plaintiffs, ordering Chevron to pay an $18.5 billion judgment (later reduced to $9 billion). Unfortunately for the plaintiffs, Chevron doesn’t have any assets in Ecuador, so the plaintiffs have been trying to enforce their judgment in a number of other jurisdictions, including the United States. In its August ruling, the US appeals court affirmed the district court’s 2014 holding that the Ecuadorian judgment could not be enforced in the United States because it was a product of fraud and corruption—including the shocking finding that plaintiff’s attorneys had bribed the judge with a promise of $500,000, and ghostwrote the multi-billion dollar judgment.

At first glance, there appears to be a contradiction, or at least a tension, between how the US courts treated allegations of judicial corruption in Ecuador at two different stages in the proceedings. After all, Chevron was able to successfully persuade a US court to send the case to Ecuador in 2001 because Chevron had successfully argued that Ecuador’s judiciary was sufficiently insulated from corruption to prevent injustice, yet in the most recent ruling, Chevron convinced the court not to enforce the judgment on the grounds of judicial corruption in an Ecuadorian court. But what might at first glance appear to be a contradictory set of rulings can be explained by the fact that US courts apply divergent standards when assessing judicial corruption at different stages of litigation.  Continue reading

Visa Denial as an Anticorruption Tool: The Need for Clarity and Communication

This past April, the U.S. Department of State denied an entry visa to the Vice President of Afghanistan, Abdul Rashid Dostrum, a notorious warlord and a key regional leader in the broad kleptocratic network of corruption that dominates Afghanistan. (In response, and seeking to avoid an embarrassing public spectacle, the Afghan government cancelled the trip, citing ostensible “security” issues at home.) This is but one recent example of an emerging element of anticorruption strategy: the denial of visas to corrupt officials (along with those who have abused human rights). This strategy is attractive for officials like Dostrum, who are beyond the jurisdiction of U.S. and other nations’ anticorruption statutes. This sort of diplomatic tool is a subtle way of controlling and manipulating working relationships with corrupt officials, and can act as both a sanction and disincentive for corrupt behavior. High-level, publicized meetings and trips to Western countries enhance the status of leaders in developing countries. More broadly, visas for officials’ family members to study in the West are also highly prized in the developing world. Restricting these visas can thus be an effective way of deterring corrupt behavior in lieu of actual jurisdictional authority.

Using visa denials as a tool to fight corruption has received a fair amount of attention in recent years among NGOs and international groups like the G20 (see here, here and here), with discussion focusing on two broad concerns: fairness and effectiveness. In my view the fairness concern—the idea that denying an entry visa absent a formal conviction or fair trial violates basic notions of due process–is overblown. A ban on travel does not implicate the same due process concerns that would arise with, for example, freezing of assets held in a foreign country. States have broad discretion in immigration matters, and no foreign citizen has a pre-existing “right” to enter any country at will. And the due process concerns in the visa denial context could be assuaged fairly easily, for example by establishing procedures by which those denied visas are informed of reasons and offered the possibility to respond.

The more complicated issue is whether visa denials can be made more effective in deterring corrupt behavior. Here, the effectiveness of this promising tool depends on improvements in two areas: clarity and coordination.

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Measurement Brings Action: The Need for a Global Sexual Corruption Index

Sexual corruption is a scourge, to varying degrees, in almost every country–from immigration officials demanding sex for green cards, to U.N. soldiers using their power to force themselves on refugees or the local population they are supposed to be protecting, to police officers who demand sex in exchange for not arresting someone. The International Association of Women Judges has been trying to bring attention to this “sextortion” problem, with some limited success: Transparency International (TI) describes sextortion as a form of corruption, and last September’s International Anti-Corruption Conference devoted a high-profile session to discussing this issue.

Yet despite this increasing recognition that this sort of sexual corruption is indeed corruption–the abuse of public power for private gain–the major international indexes used to measure corruption, such as TI’s corruption perception index (CPI) (and the underlying studies used to generate the CPI), focus overwhelmingly on material corruption–principally monetary bribery and embezzlement–not the abuse of public power to extort sexual favors from victims. This is a problem: As we have seen over and over again (both in the corruption context, and in other contexts such as the Millennium Development Goals (MDGs)), for better or worse, national-level country ratings drive action. Right now, a country that wishes to improve its global standing on corruption currently has little incentive to tackle sexual corruption. And there is no separate, easy-to-understand metric that calls attention to how well (or poorly) countries are doing, relative to one another, in addressing that problem.

It is time for that to change. It is time to create a Global Sexual Corruption Index. Continue reading