The “Big Government Causes Corruption” Zombie Shambles On

I don’t make a practice of responding to opinion columns in mainstream newspapers, especially when they’re not specifically or primarily about corruption. But the opening of Bret Stephens’ piece in yesterday’s New York Times caught my eye, mainly because the column used corruption in the Greek health care system as the “hook” for an argument that President Biden’s ambitious plans for an expanded social safety net will lead to American decline. Here’s how Stephens opens his column:

Years ago, Alexis Tsipras, the party leader of Greece’s Coalition of the Radical Left, surprised me with a question. “Here in the United States,” the soon-to-be prime minister asked me over breakfast in New York, “why do you not have this phenomenon of passing money under the table?”

The subject was health care. Greece has a public health care system that, in theory, guarantees its citizens access to necessary medical care.

Practice, however, is another matter. Patients in Greek public hospitals, Tsipras explained, would first have to slip a doctor “an envelope with a certain amount of money” before they could expect to get treatment. The government, he added, underpaid its doctors and then looked the other way as they topped up their income with bribes.

Take a close look at any country or locality in which the government offers allegedly free or highly subsidized goods and you’ll usually discover that there’s a catch.

What is the point of opening with this anecdote (other than not-so-subtly alerting the reader that the author is the sort of important person who has chit-chats with world leaders)? The implication, so far as I can tell, seems to be that countries that provide free or heavily subsidized social welfare benefits tend to be more corrupt.

There is, however, an important problem with this argument: It’s not true.

Continue reading

Why Won’t Sweden Punish Swedes for Bribing Foreign Government Officials? UPDATE

Last week a Swedish appellate court issued an opinion confirming the anticorruption community’s worst fear. The decision stems from a 2017 U.S. prosecution of Swedish telecommunications giant Telia for bribing the Uzbekistan president’s daughter. The evidence showed Telia’s then CEO and two other executives countenanced the bribery, and Swedish prosecutors promptly charged the three with bribing a foreign official. To the surprise and shock of both prosecutors and observers, all three were acquitted at a 2019 trial (here).  

It was widely assumed the Stockholm Court of Appeals, the nation’s oldest and most prestigious appeals court, would reverse the trial court’s decision.  Instead, in a February 4th opinion it affirmed it.

UPDATE. Chief prosecutor Kim Andrews termed the decision “offensive,” telling OCCRP in a statement that the decision means “Swedish companies can jump queues” by bribing, that Sweden “is failing to live up to its international obligations, . . . and that we leave it up to other European countries and the United States to clean up our mess.”

Former South African MP Andrew Feinstein once asked a senior Swedish official about foreign bribery. His reply:

“All bribes are illegal but if a Swedish company paid bribes in another country, I can’t say we would do anything about it.”  

The Telia acquittal is the latest sign that this attitude continues to prevail. That the anticorruption community’s worst fear about Sweden is true. That to protect the export earnings of Swedish multinationals and to shield the Swedish elites who run them, the government will condone the bribery of foreign public officials no matter how egregious.  Indeed, the first and still most appalling example of the lengths Sweden will go to derail a foreign bribery investigation was in a case that implicated its now prime minister.

Continue reading

Swedish Court’s Stunning Acquittal of ex-Telia Executives for Bribery

A Stockholm District Court’s acquittal of three former executives of Swedish telecom giant Telia of bribery shocked the global anticorruption community and has smirched Sweden’s reputation as a clean government champion (original decision; English translation).  Despite overwhelming evidence, the court refused to find the three guilty of paying Gulnara Karimova, daughter of the then president Uzbekistan, over $300 million in bribes for the right to operate in the country.

E-mails showed defendants directed the money to a Karimova shell company, hid their dealings with her from Telia’s board, and knew paying her violated American antibribery law. (Telia subsidiary’s Statement of Facts in the U.S. prosecution.)  Though defendants argued Karimova had no official role in telecom licensing, the evidence showed her father had given her de facto control of the telecom licensing agency.  Perhaps most damning, the court had the sworn statement Telia made in settling the FCPA case arising from the bribery. It there admitted “Executive A . . . a high-ranking executive of Telia who had authority over Telia’s Eurasian Business Area” and “certain Telia executives” had been the principals behind the bribery scheme (Statement of Facts,  ¶s 12, 17, 19, 26, 30, and 34).

The court defended its acquittal of Tero Kivisaari, apparently Telia “Executive A,” Lars Nyberg, CEO when the bribes were paid, and the lawyer who counseled them on two grounds. One, the prosecutor had not provided “hard evidence” of bribery, and two, even if he had, the law then in effect did not reach defendants’ conduct.

Google’s translation of the decision is rough (mutanklagelser, Swedish for bribery, is rendered as “manslaughter”) but not too rough to see through the court’s skewed findings of fact and flimsy legal reasoning. Continue reading

Guest Post: Is Sunlight Really the Best Disinfectant? Evidence on Procurement Transparency from Europe

GAB is delighted to welcome back Mihály Fazekas, of the University of Cambridge and the Government Transparency Institute, who contributes the following guest post:

Public procurement, which accounts for roughly one-third of government spending in OECD countries and up to 50% in developing economies, is well-known as an area associated with high corruption risk. Hence, it is hardly a surprise that a range of policy recommendations from international organizations (such as the OECD), civil society networks (such as the Open Contracting Data Standard), and research projects (e.g. Digiwhist) have emerged to promote anticorruption in public procurement. And one of the most popular prescriptions for achieving this goal is increased transparency. Transparency, of course, can mean different things. For purposes of the discussion here, we will follow the OECD and World Bank in defining “public procurement transparency” as entailing the timely, free, and accurate publication of public procurement documents in a central e-procurement portal in a machine-readable format, with this publication requirement applying to every major step of the contracting process, and disclosing all key characteristics of the tender and contract. (For a comprehensive data template see here).

Research suggests that this sort of transparency does make a difference in terms of bidder numbers and composition. Yet it remains an open question whether public procurement transparency is necessary or sufficient for controlling corruption in public procurement. Indeed, if one looks at a sample of European countries’ public procurement transparency and their suspected corruption risks, one finds a surprising result: the best governed countries in Europe have the lowest levels of transparency in public procurement. Continue reading