Corruption at the Heart of India’s Coronavirus Crisis? Prime Minister Modi Must Answer for the PM Cares Fund

India’s unfathomable Covid tragedy has left the country gasping for breath, and no oxygen can be found. Hospitals are overrun, and are often unable to help even those lucky enough to be admitted. Desperate relatives are turning to social media and the black market for help, as beleaguered crematoriums shift from unprecedented 24/7 hours to the horrors of mass cremation to keep up with demand. In the midst of this appalling tragedy looms the question: Why was the government so unprepared? And, more specifically, whatever happened to the billions of dollars raised last year through the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (known as the “PM Cares Fund”)? 

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Guest Post: Lessons from Moldova’s Covid-19 Vaccine Distribution Scandal

Today’s guest post is from Valeria Ciolac, a member of the National Political Council of Moldova’s Party of Action and Solidarity, and a Youth Delegate of the Republic of Moldova to the Congress of Local and Regional Authorities of the Council of Europe.

Since the prospect of effective Covid-19 vaccines emerged last fall, experts have warned about the risks of corruption in the vaccine procurement and distribution process. Alas, in many countries these warnings proved prescient. My home country, the Republic of Moldova, is reeling from reports that politicians and local officials arranged for certain doses of the Covid-19 vaccine to be provided, in secret, to themselves, their family members, and their associates. Evidence of such corrupt misallocation first emerged last March, in the city of Edinet. But this was not an isolated incident. Over the last several weeks, it has become clear that even though the vaccine supply—which was procured only through donations and considerable effort—is supposed to be allocated first to high-priority groups, a group of seven hundred politicians, bank directors, restaurant owners, and others from around the country jumped in front of the line, leaving seven hundred medical workers behind.

When confronted with this evidence, the officials involved tried to explain away the diversion of the vaccines as legitimate use of excess supply. The Mayor of Edinet, for example, claimed that some medical workers chose not to get their vaccines right away, and the vaccines provided to politicians and their friends were surplus doses that would otherwise have been thrown away. But given the long history of public corruption in Moldova, and the resulting lack of trust in the state authorities, most Moldovan citizens doubt this explanation. It seems far more likely that in this case, as in so many other cases, politicians and well-connected individuals used their influence to secure vaccines that should have gone to those with greater need.

While it is tempting to conclude that such corruption is inevitable in a country like Moldova—the poorest country in Europe, and one that has long been immersed in corruption and negligence by the of public authorities—it is more useful to look closely at the Moldovan vaccine distribution system and ask whether things could have been done differently. And indeed, while there’s probably no way to prevent some degree of corruption in vaccine distribution, there are several measures that Moldova, and other countries in a similar situation, could have adopted, and should still embrace now, to minimize the risk of this sort of corruption. Continue reading

Sunshine or Sunset? The Latest Threat to Freedom of Information in Mexico

In a country beset by extreme and seemingly intractable corruption, Mexico’s National Institute for Access to Information (INAI)—which runs Mexico’s freedom of information system—has stood out as an unusually effective mechanism for promoting transparency, accountability, and integrity. The INAI’s effectiveness stems from its binding legal authority and independence, as provided by constitutional provisions passed in 2013. The Institute can and has compelled other government agencies to improve their information disclosure policies, and, perhaps most significantly, the INAI can override other government agencies’ denial of information access requests. The INAI has substantial leverage to ensure greater government compliance by way of meaningful fines and effective injunctions for noncompliance. The INAI also moves lightning fast; the INAI regularly satisfies its statutory obligations to respond to requests within twenty business days and to deliver documents within thirty. The INAI does not charge search fees, and all uncovered information is available to the wider public. Citizens can challenge decisions to withhold information, and they routinely prevail.

The INAI’s broad freedom of information mandate makes the agency a powerful actor in exposing corruption (see, for example, here, here, and here). Perhaps most notably, the Institute enabled discovery of former President Pena Nieto’s secret mansion (“the White House Scandal”), the diversion of over $400 million allotted to public services, and embezzlement in public-private ventures in Mexico’s vast energy sector. More broadly, despite all the well-known deficiencies of Mexico’s anticorruption institutions, the INAI has been globally lauded for its role in government transparency.

Given this, why is Mexico’s President Andrés Manuel López Obrador (commonly referred to by his initials “AMLO”), who ran and won on an anticorruption platform, so keen on eradicating the agency? In a press conference earlier this year, AMLO proposed decommissioning all of Mexico’s independent agencies, singling out the INAI as an especially egregious example of bloated bureaucracy. His rationale boils down to three main arguments: (1) the INAI hasn’t ended corruption, (2) the INAI costs too much, and (3) the INAI’s functions can be provided by the Secretariat of Public Functions (SFP), a non-independent body that performs federal government audits and reports directly to the president. These arguments are unconvincing, to say the least.

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Let’s Talk About Monaco

Monaco, the sovereign city-state on France’s Mediterranean coast, is many things. It is the second smallest country in the world, following only Vatican City. It boasts the highest GDP per capita of any country. It is a constitutional monarchy, ruled by the same family for over 700 years. It is known for its opulent casino, expensive real estate, and swaggering F1 drivers.

It is also willfully resistant to the Council of Europe’s anticorruption transparency recommendations – or any transparency measures at all, for that matter.

Perhaps due to its small size, Monaco has flown somewhat under the radar in international corruption monitoring. The city-state doesn’t feature in Transparency International’s annual Corruption Perceptions Index, and TI’s web page for Monaco is quite blank. Despite being an international tax haven and banking center, Monaco is conspicuously missing from both the World Bank’s Doing Business rankings and the Heritage Foundation’s index of economic freedom. It’s not that Monaco is a corruption-free paradise. In the few lists in which it does appear, Monaco does not score particularly well: In the RAND Corporation’s Business Bribery Risk Assessment, for instance, Monaco ranked 72nd out of 192 jurisdictions. And a number of recent corruption scandals have involved Monaco, either directly or indirectly. Last year, for example, two brothers who ran a Monaco-based consultancy called Unaoil pleaded guilty in the United States to charges involving millions of dollars in bribes paid between 1999 and 2016. Corruption alarms were also raised in July 2019, when Monaco’s justice minister abruptly blocked term renewal for a judge leading a corruption inquiry that involved a Russian billionaire, a former Monaco justice minister, senior Monaco police officials, and others. More recently, in late November 2020, former French president Nicholas Sarkozy went on trial for attempting to bribe a French magistrate with a prestigious job in Monaco.

These incidents have largely come to light because of involvement outside of Monaco: international companies, legal battles that cross borders, and foreign politicians. Monaco itself remains something of a black box. As a 2017 report from the Council of Europe’s Group of States Against Corruption (GRECO) noted, there are no records whatsoever of criminal or disciplinary proceedings related to corruption in Monaco’s parliament. This lack of reported cases, GRECO concluded, is likely due not to an absence of corruption, but to a lack of oversight. As the report noted, Monaco has “few mechanisms to ensure satisfactory transparency of parliamentary work and consultations,” and lacks a “code of conduct that would govern, among other things, the acceptance of gifts and other benefits, the management of conflicts of interest, or relations with lobbies and other third parties seeking to influence parliamentary processes and decisions.” The GRECO report further observed that although judicial proceedings are typically public, there is a carve-out for holding court behind closed doors where public proceedings “might cause a scandal or serious inconvenience.” Cases “concerning the internal operation of courts” are also not public. In practice, there is even less transparency than the official policies would indicate, as most criminal cases are in fact dealt with in France, behind closed doors.

Without a code of conduct against corruption-related activities, with no mechanisms to provide oversight, with any corruption scandals that do occur likely to be tried in secret, and with little international attention on the issue beyond infrequent GRECO reports, Monaco can keep its corruption well hidden. Although occasional scandals might pop up around Monaco, the country makes it difficult to know the nature and extent of its corruption.

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Nigeria’s Government Assistance Programs for Small Businesses: A Gateway for Corruption

Nigeria’s Small and Medium Enterprises (SMEs) are the backbone of the country’s economy, accounting for 96% of Nigeria’s businesses, 84% of its labor force, and 48% of its GDP. SMEs also provide Nigeria’s oil-dependent economy with some important economic diversification. Nevertheless, difficulties in securing startup or operational funds, among other problems, makes starting and operating a small business in Nigeria remarkably challenging. To mitigate these difficulties, the Nigerian federal government has created an assortment of agencies to support SMEs. In addition, at least 26 of Nigeria’s 36 state governments have established at least one SME development agency or office.

Unfortunately, government funds meant to help small businesses often fail to reach their intended recipients. Instead, the government’s SME programs often function as gateways for corruption, either in the form of misallocation of resources for political patronage, or as outright embezzlement of funds. This corruption problem is well illustrated by two of the most important national-level government programs meant to support Nigerian SMEs:

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A Covid-19 Checkup: How the IMF’s Transparency Measures Have Fared So Far

With a trillion dollars in lending capability, the International Monetary Fund (IMF) is one of the best-equipped institutions to deal with the Covid-19 public health and financial crisis. Since March, the IMF has met an “unprecedented number of calls for emergency financing” with “unprecedented speed and magnitude,” through renegotiations of rapid credit facilities, refinancing initiatives, and debt relief assistance for more than 100 countries, totaling over $100 billion in disbursements so far. In the early days of the pandemic, there was a great deal of concern among anticorruption advocates over the way these emergency funds would be monitored (see collections of pieces here and here). The IMF’s initial approach generally did not impose formal transparency or governance requirements as a condition for receiving emergency Covid relief funds. Rather, the IMF chose to rely more on after-the-fact safeguards: recipient countries were told to spend as needed but to “keep the receipts.”

The IMF’s approach is understandable. As Jason Keene argued on this blog, the IMF at that early stage faced a trade-off between speed and transparency, and may have reasonably concluded that it would not be advisable to bargain over transparency measures if doing so would slow the deployment of much-needed funds. This conclusion, as a May 2020 IMF publication revealed, was influenced by the IMF’s experience with the 2014-2016 Ebola outbreak in West Africa: Many, including a prominent public health journal, blamed the IMF for the lethality of the Ebola epidemic, provoking a backlash against what was seen as unduly burdensome loans, a focus on austerity, and the underfunding of medical systems in vulnerable countries (see here, here, and here). Given this background, it’s understandable that the IMF might, on balance, favor speed over transparency, providing loans for Covid-related public health and budgetary shortfalls without much conditionality.

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Guest Post: Promoting Procurement Transparency During the COVID-19 Pandemic in Brazil

Today’s guest post is from Guilherme France, the Research Coordinator at Transparency International Brazil (TI Brazil), together with TI Brazil researchers Maria Dominguez and Vinicius Reis.

While the new coronavirus has slashed through Brazil at alarming rates since March, an old problem has undermined the government’s response: corruption. A considerable portion of the government money spent to deal with the pandemic may have already been lost to corruption and waste. To give just a few examples: in Amazonas the state government bought inadequate medical ventilators from a wine store; In Santa Catarina, the government spent over US$5 million on 200 ventilators that were never delivered; and in Rio de Janeiro, fraud led to losses of more than 700 million reais in the hiring of a company to construct emergency hospitals, most of which were never delivered.

As many have pointed out, the corruption risk in procurement is heightened during an emergency, because traditional procurement rules are relaxed or circumvented to allow goods and services to be purchased in a timely fashion. In Brazil, the problem is compounded by a lack of centralization—with over 5,000 independent government entities (federal institutions, states, and municipalities) competing with each other and international buyers for the same equipment.

In this challenging context, efforts to increase the transparency of government procurement and to promote social accountability are essential. To promote greater integrity and transparency in COVID-19 emergency procurement, last May Transparency International Brazil (TI Brazil) and the Federal Court of Accounts jointly published a set of Transparency Recommendations in Public Procurement. These recommendations inspired a methodology for assessing how well government entities were implementing transparency mechanisms to make emergency procurement data available in their websites. (The assessment method examines four dimensions: (1) the presentation of detailed information on suppliers and contracts, (2) the publication of data in open formats that allow complex analysis, comparison, and reuse; (3) information on the government’s own legislation regarding emergency procurement and related matters; and (4) the quality and availability of channels for citizens to make Freedom of Information requests and report on irregularities related to COVID-19 procurement, as well as the existence of committees, with civil society organizations, to monitor emergency procurement.) Using this method, TI Brazil has created an index on Transparency Ranking on Efforts Against COVID-19, which ranks government entities on a 0-100 scale and also assigns a designation of Poor, Bad, Regular, Good or Great, depending on how well the entity performs on the four dimensions of transparency described above. The initial index included an assessment of 53 local governments (states and state capitals), and monthly evaluations have been undertaken since.

The results are impressive so far. Between the first and the third rounds, for instance, every local government analyzed improved its score, and in the most recent round, 33 governments (20 capitals and 13 states) earned a transparency grade of “Good” or “Great”. The average scores increased from 46 to 85 (capitals) and from 59 to 85 (states). Continue reading

Heightened Transparency of Stock Trading by Public Officials Could Help Convey Reliable Information in Crises that the Public Deserves to Know

On February 7, 2020, there were 34,876 confirmed cases of Covid-19 worldwide, but none in the United States. On that day, Fox News published a reassuring opinion piece co-authored by Republican Senator Richard Burr, arguing that the US is prepared to face any outbreak. Around February 13, a couple of days before the first confirmed cases in the US were discovered and before the stock markets began to plunge, Burr sold hundreds of thousands of dollars’ worth of stocks, many of which were in the hotel industry. Senator Burr’s stock sale was not public at the time; the sales were first reported by ProPublica only a month later.

We do not yet know whether Senator Burr’s decision to dump his stocks was based on confidential government information to which he had special access. On the one hand, new information on the Covid-19 pandemic was coming out every day, and perhaps Senator Burr was simply one of many investors who changed their minds regarding the outbreak and were lucky to exit the market in time. On the other hand, Senator Burr is the Chair of the Senate Intelligence Committee, which was receiving regular briefings on the coronavirus situation, so the suspicions towards him are understandable. (It also didn’t help matters that a few weeks after the publication of his op-ed Senator Burr told wealthy donors in a closed-door meeting that the Covid-19 outbreak “is probably more akin to the 1918 pandemic,” but never revised his previous public reassurances.) Whether justifiably or not, Senator Burr was harshly criticized (including on this blog), with many calling for his resignation, and he has been sued for insider trading by a shareholder of one of the companies whose stocks he dumped. In addition to the criticism leveled at Senator Burr, several commentaries, including Cristina’s post on this blog, have argued that this incident demonstrates the need to amend the 2012 STOCK Act to impose stricter limitations on the freedom of senior US government officials, including Members of Congress, to trade in stocks.

My perspective is somewhat different. While I acknowledge the legitimate concerns that motivated calls to strengthen prohibitions on stock trading by government officials, in my view regulation should be more focused on ensuring the transparency of those trades, rather than on further limiting or blocking stock trading.

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Guest Post: COVID-19 and Corruption–Two Risks and One Opportunity

Today’s guest post is from Peter Glover, Program officer for the Center for International Private Enterprise’s Anti-Corruption and Governance Center.

The immediate consequences of COVID-19 are visible and visceral for everybody, even as some feel the effects more than others. In addition to reshaping everyday life, COVID-19 will also transform global governance—including with respect to corruption and related issues. In this post I want to emphasize three ways that the COVID-19 pandemic will interact with corruption: Continue reading

High Costs: Corruption Scandals in America’s Legal Marijuana Industry

The movement to legalize marijuana in the United States has been gaining momentum. Thirty-three states and the District of Columbia have currently legalized marijuana to some degree, and of those, eleven states and D.C. have legalized recreational use of marijuana.  (Selling, possessing, consuming marijuana remains illegal under federal law, but the federal laws against marijuana are rarely enforced, which creates a rather odd situation in the states that have legalized marijuana: those who participate in the marijuana market are still technically engaged in illegal activity, even though that market operates out in the open.) In the absence of uniform federal regulation, those states that have legalized marijuana have adopted different regulatory approaches; most states issue a limited number of licenses to sell or supply marijuana, but have capped the number of licenses in order to limit the amount of marijuana on the market. This makes each license extremely valuable, given that the total value of the marijuana market is estimated to be somewhere in the neighborhood of $52 billion. Additionally, in most states the license evaluation criteria, and the evaluation process, are extremely opaque, and local government officials frequently have substantial discretion regarding who receives these licenses.

Given this combination of factors—state and local officials with the power to issue a small number of extremely valuable licenses through an opaque process—it should come as no surprise that the legal marijuana market has become a hotbed for corruption. Consider just a few examples: Continue reading