Tag Archives: UNCAC

Eliminating Barriers to Compensating Corruption Victims  

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StAR yesterday held six panels on asset recovery issues as part of the meeting of the Conference of State Parties to UNCAC. I participated in the one on compensating corruption victims along with Costa Rican prosecutor Greysa Barrientos, Kate McMahon, Chair the International Bar Association’s Anticorruption Asset Recovery Subcommittee Kate McMahon, and Juanita Olaya Garcia of the UNCAC Coalition.

Panel moderators Yara Esquivel of StAR and Felipe Falconi from UNODC asked that I discuss what avenues of relief were available to corruption victims, the main challenges they face in recovering damages, and what reforms are needed to overcome those challenges. My remarks follow.   

Avenues of relief. Corruption victims generally have two options for obtaining compensation – as an adjunct to a criminal prosecution of the perpetrators by the state or by bringing a private civil suit against them.

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Civil Society to the CoSP: Corruption Victims Are Entitled to Compensation

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The Council of State Parties to the United Nations Convention Against Corruption, the governments of the now 188 nations that have ratified the Convention, meets this week to review its implementation.  

When it comes to prosecuting bribery, embezzlement, and other corruption crimes, progress has been made. The UN Office of Drugs and Crime reports that “[i]n a considerable number of countries, legislative amendments and structural reforms have produced coherent and largely harmonized criminalization regimes, tangible results in terms of enforcement capabilities and action.”

But the Convention’s “enforcement capabilities and action” extend beyond criminal prosecution.  Article 35 requires state parties to ensure those injured “as a result of an act of corruption” can enforce a claim for damages against the perpetrators.

Here little progress has been made.  The UNODC, Transparency International, academics (here and here), and this writer have all found that few corruption victims have recovered damages. 

The UNCAC Coalition, a global network of over 350 civil society organizations in 100 plus countries, urges the CoSP to address this gap in implementation.  In a formal submission, the coalition offers a series of recommendations to see that victims, either individually or through a class or representative action, can recover full compensation for the harm caused by corruption. It’s timely and important submission is here.

A Breaththrough in Recognizing Who is a Corruption Victim

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A decision of the U.S. District Court for the Eastern District of New York ruling shareholders of a company damaged by bribery are “corruption victims,” and its order affirming $135 million in damages establish an important precedent. The decision and order were handed down in a case arising from the prosecution of OZ Africa Management for violating the Foreign Corrupt Practices Act. OZ, a subsidiary of a U.S. hedge fund, had pled guilty to participating in a bribery scheme Israeli billionaire Dan Gertler engineered to gain control of the Democratic Republic of the Congo’s mineral resources.  As the case was about to close, shareholders in Africo, a Canadian company whose mining rights had lost value thanks to the bribery, filed a claim for damages under the Mandatory Victim Restitution Act, a statute requiring criminal defendants to compensate victims of their crimes.    

OZ and the prosecutors in the case both opposed the shareholders’ claim. Under the act, those claiming they were injured by a criminal offense must show they were “directly and proximately harmed” by it. Several events occurred between OZ’s bribes and the injury Africo’s shareholders sustained that blurred the causal link between the two. Both the government and OZ asserted that these intervening events made the shareholders at best indirect victims of corruption. And in any event the injuries were so far removed from the bribery that it could not be said the bribery proximately caused them.  Finally, OZ argued the damage the shareholders suffered, loss of the chance to develop the mine, could not be readily quantified, making any award “speculative” and “hypothetical.”

The difficulty in showing the harm from corruption is “direct” and “proximately” caused, and the challenge of precisely calculating the damage are not just hurdles to those seeking compensation for corruption under American law. They are commonly cited as reasons why, though virtually all nations permit corruption victims to sue for damages in accordance with article 35 of the UN Convention Against Corruption (here), virtually no one has (here, here [21ff], and here). While the court in OZ Africa Management was only construing a U.S. law, its reasoning offers courts in other jurisdictions precedent for awarding damages when their citizens are injured by corruption.  

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Will Hosting the UNCAC Meeting Prompt the UAE to Comply with the Convention?

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The largest, most important anticorruption conference of the year is underway this week in the United Arab Emirates. Formally known as the eighth session of the Conference of States Parties to the United Nations Convention Against Corruption, the 186 nations that have ratified UNCAC are convening to examine how they can strengthen the fight against corruption.  They have not said why they chose to meet in the UAE, a collection of seven tiny, wealthy monarchies.  Perhaps it is because the Emirates’ location on the eastern end of the Arabian Peninsula makes it an easy place to reach from anywhere on the globe. Or perhaps it is because of its top-notch conference facilities and first-rate restaurants and hotels.

Or perhaps something more subtle is at work.

It’s no secret that the UAE and the governments of its seven federated emirates, especially Abu Dhabi and Dubai, have repeatedly flouted their UNCAC obligations.  In researching The Despot’s Guide to Wealth Management, author Jason Sharman was told by staff from the World Bank/UNODC Stolen Asset Recovery Initiative, the IMF, and the governments of Switzerland and the United States that “the UAE and particularly Dubai . . . were the leading haven for international corruption funds,” a conclusion Susan Hawley confirmed on this blog, writing that an “increasing numbers of corrupt money trails lead” to the UAE. Mozambique’s Prosecutor General reports that the UAE has stonewalled her request for help in prosecuting the accused in the “hidden debt” scandal, and evidence presented in the recently concluded U.S. trial of one of the accused revealed numerous violations of its anticorruption laws that the UAE has ignored.

Perhaps the other 185 parties to UNCAC hope that holding the meeting in the UAE will persuade its government to finally meet the nation’s obligations as an UNCAC party. Five indicators of whether their stratagem is succeeding: Continue reading →

The Importance of Public Relations in the Fight against Corruption

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It’s long been recognized that public relations (PR) is a crucial tool in the fight against corruption. (For a recent exposition of that argument on this blog, see here.) This recognition is codified in the United Nations Convention Against Corruption (UNCAC), Article 13 of which requires state parties to “[u]ndertak[e] public information activities that contribute to non-tolerance of corruption, as well as public education programs,” and Article 6 of which calls on state parties to “increase[e] and disseminat[e] knowledge about the prevention of corruption.” Governments fulfill their UNCAC obligations in a variety of ways, and examples of anticorruption public awareness campaigns are as diverse as they are numerous. A famous example of how PR can be used effectively comes from Hong Kong’s Independent Commission Against Corruption, which spends millions of dollars annually on thousands of workshops to educate public employees and private citizens about the effects of corruption and how to combat it. New York City has likewise deployed large-scale educational programming with similar success. In addition to government-run campaigns such as these, multilateral organizations such as the UN Office on Drugs and Crime (UNODC) and NGOs like Transparency International also regularly engage in efforts to raise public awareness around corruption issues (see here, here, here, and here). These campaigns deploy tools as varied as video, music, and drawing to convey their anticorruption messages.

Critics sometimes contend that these PR campaigns consume scarce anticorruption resources that would be better devoted to investigation or enforcement efforts. This criticism is misguided and shortsighted. Of course a badly-designed PR effort can waste resources. Yet effective anticorruption PR helps accomplish several goals that other, “harder” anticorruption measures are incapable or ineffective at achieving on their own:

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Who Owns a Bribe? And Why It Matters

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A public servant who accepts a bribe can do with it as he or she pleases. Put it in a bank, sell it, give it away, or even bet it at the roulette table.  What if the bribe-taker is caught, though, and government wants to recover the bribe?  Does it matter what the bribe-taker did with it? It does, and greatly, especially for large bribes stashed in another country — precisely the cases the U.N. Convention Against Corruption addresses.

Article 57(3) of the convention requires the state where the proceeds of a bribe are discovered to return them to the state seeking them if the requesting state “reasonably establishes its prior ownership” of the bribe. If the recipient stashed the bribe in Singapore, the United Kingdom, or another common law country, the requesting state is in luck. If, on the other hand, it was squirreled away in a civil country, the requesting state is likely not so lucky.  It all depends upon the quirky national laws governing who owns the proceeds of a bribe. Continue reading →

Corruption Damages: Options UNCAC Offers Mozambique to Recover “Hidden Debt” Losses

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Mozambique continues to suffer from the “hidden debt” scandal, loans a U.S. indictment alleges employees of Credit Suisse, Lebanese shipbuilder Privinvest, and others foisted off on it for dodgy projects through bribery.  Damages include not only the several billion dollars that, thanks to accrued interest and penalties, the government now owes on the original loans of $2.2 billion, but the enormous harm caused by a halt in donors’ disbursements and the resulting slowdown in growth when the scandal was revealed. The whole sorry affair could cost the people of Mozambique upwards of $10 billion, a staggering sum for a country with a total GDP in 2017 of little more than $12 billion. 

Fortunately, Mozambique does not have to absorb the loss. As party to the United Nations Convention Against Corruption, the government can directly recover much if not all of it through article 53.  Article 53(a) requires the other 185 Convention parties to grant it the right to file a civil action to recover property acquired through the offences defined in the Convention.  Article 53(b) directs the other 185 to establish procedures permitting their courts “to order those who have committed offences [established in accordance with the Convention] to pay compensation or damage” to another party injured by the offence.  

Based on the allegations in the U.S. indictment, Mozambique could likely initiate or prompt proceedings to recover assets or recover damages in at least six nations, all parties to UNCAC: France, Lebanon, the Netherlands, Switzerland, the United Kingdom, and the United States. Indeed, thanks to a precedent setting decision by its highest court, Mozambique civil society might itself be able to recover damages in a French case independent of any action by the Mozambican government.  

These options were discussed at a May 14 conference sponsored by the Centro de Integridade Pública.  They are elaborated on in this follow up paper I prepared for CIP after the conference.   

Why the WTO Should Tackle Border Corruption

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When a state systematically fails to suppress bribery in its customs service, should that be an actionable violation of international trade law? More broadly, to what extent do anticorruption provisions have a place in the law of the World Trade Organization? In a 2014 post on this blog, Colette van der Ven squarely addressed these questions and concluded that the answer is no: the WTO, in her view, is not well suited to handling complaints of corruption.

I disagree with Colette’s well-reasoned analysis. While she is right to point out substantial challenges to grappling with anticorruption through the WTO, these challenges are surmountable—and the importance of a WTO remedy counsels in favor of surmounting them. Continue reading →

In Memoriam: Dimitri Vlassis (1959 – 2019)

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The international fight against corruption lost one of its most steadfast and determined warriors with the passing in early April of Dimitri Vlassis, Chief of the Corruption and Economic Crime Branch of UNODC’s Division of Treaty Affairs.  Many in governments, international organizations, and civil society who, over the last two decades, enlisted in the fight against corruption will immediately recognize the loss. They will have fought in the trenches with Dimitri at some point during these years in the long-struggle to draft, ratify, and implement the UN Convention Against Corruption.  For recent recruits, who had yet to meet or hear of him, it is sufficient to say that he served as Secretary of the Ad Hoc Committee on the Negotiation of a Convention Against Corruption during the last, critical phase of the negotiations and was, at his passing, Secretary of the Conference of the States Parties to the Convention.

UNCAC represents the collective efforts of many of the world’s citizens, and a monument to their efforts would credit hundreds if not thousands.  But surely at or near the top Dimitri’s name would feature prominently. The true measure of his contribution to global welfare, however, is the continuing difference UNCAC is making to the lives of people everywhere.  For this we can all say, as UNODC Yuri Fedotov did in his note of condolence, “Thank you, Dimitri.”

I know all those in the global anticorruption community will join in expressing their condolences to Dimitri’s widow and two children.  With permission, Director Fedotov’s condolence note is below. Continue reading →

Presidential Power Grab: Corruption and Democratic Backsliding in Mongolia

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Mongolian democracy is in trouble. On March 26, President Khaltmaa Battulga proposed emergency legislation that would grant the presidency unprecedented powers to dismiss members of the judiciary, the prosecutor general, and the head of the state anticorruption agency (the Independent Authority Against Corruption, or IAAC). One day later, parliament approved this legislation by a vote of 34-6 (with 36 members of parliament either absent or abstaining), despite the fact that President Battulga hails from the Democratic Party (DP) while the rival Mongolian People’s Party (MPP) controls parliament. Technically the law doesn’t grant the dismissal powers directly to the president, but rather to a three-member National Security Council (NSC) composed of the president, prime minister, and speaker of parliament, and an oversight body called the Judicial General Council. But President Battulga dominates the NSC and personally appoints the members of the Judicial General Council, giving him effective authority to remove Mongolia’s judges and chief law enforcement officials at will. Sure enough, promptly after the law was passed, Battulga dismissed the head of the IAAC, the Chief Justice of the Supreme Court, and the prosecutor general.

This new legislation, a crippling blow to Mongolian democracy, has its origins in corruption, and corruption is likely to be its effect. President Battulga induced parliament to grant him such extraordinary powers by claiming that he alone can really take on Mongolia’s severe corruption problem. In his statement to parliament introducing the new legislation, Battulga alleged that the country’s law enforcement leaders were “part of a conspiracy system” that “fabricat[ed] criminal cases with a political agenda” while covering up others. The president pointed to Mongolia’s numerous unresolved corruption scandals to argue that the institutions of justice were “serving the officials who nominated and appointed them” rather than the public, and he argued that reducing the independence of the judiciary, the prosecutorial apparatus, and the IAAC would make those institutions more responsive to the popular will to fight corruption.

President Battulga is correct when he asserts that Mongolia has a corruption problem of serious, perhaps epidemic, proportions. Mongolians regularly list corruption as one of the country’s biggest issues (second only to unemployment in a 2018 survey) and political institutions such as parliament and political parties as among the most corrupt entities. The past few years have been especially scandal-plagued. During the 2017 presidential campaign, all three candidates faced accusations of corruption; most egregiously, the MPP candidate—who, until January 2019, served as speaker of the Mongolian parliament—was caught on video discussing a plan to sell government offices in a $25 million bribery scheme. Further, late in 2018, journalists discovered that numerous politically-connected Mongolians, including somewhere from 23 to 49 of the 75 sitting members of parliament, had been treating a government program designed to provide funding for small- and medium-sized enterprises (SMEs) as a personal piggy bank, taking out over a million dollars in low-cost loans. Beyond these scandals, Mongolia’s poor enforcement record compounds its corruption problem. For example, in 2015, only 7% of cases investigated by the IAAC resulted in convictions, and in 2018 public approval of the IAAC reached an all-time low.

But is there any reason to believe that President Battulga is right that giving him greater personal control over law enforcement and the judiciary will lead to less corruption? All the evidence points to no:

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