Tag Archives: United States

Cautious Optimism: Leveraging Free Trade Agreements as Anticorruption Tools

Posted on by
Reply

The international trading system has had a dire decade. There has been a stunning drop-off in the growth of global trade, and the most recent World Trade Organization Ministerial Conference did little, if anything, to halt the multilateral trading system’s decline. Yet anticorruption policy’s place in international trade negotiations has never been stronger. Many of the most prominent regional free trade agreements (FTAs) that have either come into force or been the subject of intense negotiations over the last half-decade have featured remarkably strong anticorruption provisions. The United States-Mexico-Canada Agreement (USMCA), which came into force in 2020 as a replacement for NAFTA, included entirely new anticorruption protections alongside only modest, technocratic tweaks to actual barriers to cross-border trade. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the post-2016 replacement for the U.S.-led Trans-Pacific Partnership (TPP), includes almost all of the anticorruption provisions that the U.S. championed in the TPP. The negotiations for an Indo-Pacific Economic Framework (IPEF), though much maligned for their failure to coalesce around meaningful trade liberalization, nevertheless produced a “Fair Economy” pillar that includes substantial initiatives aimed at fighting corruption. And these are not the only examples: Indeed, there has been a general increase in anticorruption provisions in FTAs and bilateral investment treaties.

Of course, lumping all of these different provisions together is a bit misleading, because the “anticorruption” provisions in FTAs take a wide variety of forms. Many, including the anticorruption provisions of the USMCA and the CPTPP, commit members to adopting laws that either directly criminalize certain behavior (bribery, facilitation payments, etc.) or require that firms adopt transparency measures, such as regular financial disclosures. Other FTAs, like the IPEF or the World Customs Organization’s Anti-Corruption and Integrity Promotion (A-CIP) Program, focus on capacity building through information sharing, technical assistance, and training programs. Still others, like the African Continental Free Trade Area (which is still being negotiated), attempt to tackle corruption in trade through measures like simplifying and automating the customs process. Yet despite this diversity, it is fair to say that anticorruption is now firmly part of the international trade agenda—thanks in large part to sustained advocacy by pro-transparency and anticorruption advocates since the 1990s.

While the incorporation of anticorruption provisions in FTAs has obvious symbolic importance, we don’t yet know as much about the practical impact of these provisions. This is partly because it’s just too soon to make such assessments: Other than a few exceptional cases, the inclusion of anticorruption language in FTAs is a relatively recent phenomenon). Very few studies have engaged in empirical assessments of how FTA anticorruption commitments actually fare as anticorruption tools in practice. But the limited evidence we do have appears encouraging:

Continue reading →

Corruption on the Northeast Corridor: Addressing Bribery in Amtrak Procurement

Posted on by
Reply

Under the 2021 Bipartisan Infrastructure Law (BIL), the US federal government plans to allocate upwards of $550 billion to giving America’s infrastructure a much-needed facelift. About one-fifth of these funds have been pledged for public transportation improvements. Few agencies stand to receive more money than Amtrak, which has heralded its $66 billion cash infusion as ushering in “a new era of rail.” The BIL promises to provide sufficient capital to guarantee faster and more reliable rail service in the nation’s congested Northeast Corridor. Amtrak’s track record of project mismanagement, however, raises serious questions as to whether it can execute its vision. Poor financial planning has undoubtedly contributed to Amtrak’s inability to provide service on par with its Asian and Western European counterparts. Yet there is another factor that has that has been overlooked in discussions about Amtrak’s middling quality. In recent years, the agency has been rocked by multiple bribery scandals that have inflated costs and delayed projects. For example, this past March, federal prosecutors charged a contractor with bribing an Amtrak employee to inflate the costs of repairs to Philadelphia’s 30th Street Station—a project whose costs nearly doubled before its completion. A similar corruption scheme resulted in the conviction of a Delaware-based contractor in 2021. More generally, a 2023 report from Amtrak’s internal watchdog, the Office of Inspector General (OIG), estimated that nearly 10% of all infrastructure spending by the railroad could be lost to corruption.

Given the huge infusion of federal grant money under the BIL, it is especially important that the US government gets serious right now about rooting out what appears to be an alarming culture of corruption at Amtrak: Continue reading →

The Quotidian Corruption of the NYPD

Posted on by
2

In April 2024, the New York City Department of Investigation (DOI) released a scathing report on how the New York City Police Department (NYPD) enforces parking laws in New York City. The report found, in relevant part, that the NYPD frequently opts to turn a blind eye to illegally parked vehicles displaying inapplicable or expired parking permits, letting NYPD and other City Government employees park illegally with no consequences. The DOI also found that the NYPD “has no written policies or procedures” for enforcing parking laws in the areas around police precincts and other government buildings in NYC, and Traffic Enforcement Agents told DOI investigators that were subject to internal discipline if they issued parking tickets in sufficiently close proximity to NYPD precinct buildings. This parking permit enforcement problem comes on top of the longstanding problem of “ticket fixing,” in which officers make parking and traffic tickets “disappear” as favors for friends. A favorite technique for helping friends or family (or those willing to pay) get out of tickets (or worse) is the practice of police officers giving out (or even selling) “PBA cards” (named for the Police Benevolent Association, the largest municipal police union in the world); with a quick flash of a PBA card, drivers can avoid a speeding ticket or even arrest. PBA cards have long been identified as a notorious example of petty corruption within the NYPD (see here, here, and here, and here). In fact, an NYPD officer sued the department last year, alleging he was demoted for ticketing a cardholder who was a friend of his supervisor (see here and here).

These are examples of what we might call “quotidian corruption”: officers deciding that low-level civil laws apply to some members of the public but not others, and engaging in this selective non-enforcement to help out friends, family, or those with the right connections. While there are certainly far more important forms of police misconduct, such as racial bias and improper use of deadly force, it would be a mistake not to take quotidian police corruption seriously. As one former NYPD police officer turned prosecutor and law professor commented, in connection with a high-profile ticket fixing scandal, even though the alleged behavior might not be “seriously corrupt,” ticket fixing must stop “for the sake of the public trust[] and the NYPD’s own reputation.” 

The NYPD is unlikely to address these problems itself. Even if the NYPD leadership decided to support more evenhanded enforcement for these low-level offenses, police unions would likely prevent any such reforms from taking place. This leaves the possibility of reform largely in the hands of New York City Government. Here are three potential reforms that City Government could undertake to help combat the quotidian corruption permeating the NYPD, listed in order from least to most challenging:

Continue reading →

The Invisible Front: Russia’s Corruption-Themed Propaganda War Against Ukraine

Posted on by
2

The concept of “strategic corruption”—defined by the U.S. government as “when a government weaponizes corrupt practices as a tenet of its foreign policy”—has recently gained prominence as an important way to understand Russian foreign policy in the former Soviet republics, and elsewhere. The country that has faced the most sustained and systematic Russian state-sponsored strategic corruption campaign is almost certainly Ukraine. For the two decades preceding Russia’s full-scale invasion in 2022, Russia employed a wide variety of corrupt measures to influence Ukrainian politics, including the sale of vast quantities of discounted fossil fuels to bribe pro-Russian Ukrainian oligarchs and create a political class aligned with Kremlin interests (as exemplified by the “outrageously corrupt” tenure of President Viktor Yanukovych after his election in 2010); the cultivation of sympathetic media empires in the country; and money-driven attempts to discredit American officials perceived as obstacles to Russian influence. 

Much has been written on Russia’s use of this sort of strategic corruption. But there’s another aspect of Russia’s strategy that has become especially prominent since the 2022 invasion: using propaganda and disinformation to spread and amplify the narrative that Ukraine is pervasively corrupt. Here lies a paradox: for two decades, Russia deliberately fostered corruption in Ukraine to keep its neighbor firmly under its influence, and now Russia is seeking to leverage Ukraine’s reputation for corrupt practices to undermine Ukraine’s ability to resist Russia’s invasion.

Continue reading →

The U.S. Supreme Court’s Erosion of U.S. Anticorruption Law Continues

Posted on by
4

The U.S. Supreme Court has been chipping away at the federal public corruption prosecutor’s toolkit over the past decade, in cases like McDonnell v. United States, Kelly v. United States, and Percoco v. United States. This past month, the Court heard oral arguments in a case called Snyder v. United States, which may further undermine federal prosecutors’ ability to go after state and local corruption. If the Court finds in favor of the defendant in Snyder, it could create a roadmap for American state and local government officials to profit from private interests at the expense of the public they are supposed to serve.

The specific statute at issue in the Snyder case is codified at 18 U.S.C. § 666. That statute, which happens to be the most prosecuted public corruption statute in the U.S., makes it a federal crime for a state or local official to “corruptly solicit[,] demand[,] …or accept[] … anything of value from any person, intending to be influenced or rewarded in connection with any” federally funded program. The question at issue in the Snyder case is whether this statute criminalizes so-called gratuities—payments made in recognition of actions that a covered official has taken or has committed to take, but without any quid pro quo agreement to take those actions in exchange for the payment. The facts of the Snyder case illustrate this sort of payment: James Snyder, while mayor of Portage, Indiana, accepted $13,000, allegedly for “consulting services,” from a truck company shortly after that company was awarded a contract to sell garbage trucks to the city government. There is no evidence that the company offered or promised Snyder the payments in exchange for the contract. Nevertheless, the federal prosecutors successfully argued at trial that proving such an offer was unnecessary, because as long as the prosecution could show that the alleged “consulting fee” was actually a gratuity—a payment made by the company to thank, or reward, Snyder for the contract—then Snyder’s acceptance of this payment was enough to violate § 666.

It’s true, as Snyder’s lawyers argued to the Supreme Court, that the language of the statute does not explicitly include “gratuities.” But reading § 666 as covering gratuities is the only sensible way to read the statute if we are truly concerned with preventing public officials from being bought.

Continue reading →

Working Smarter, Not Harder: Using Secondary Sanctions to Strengthen the Global Magnitsky Act

Posted on by
4

Arkady Rotenberg, Vladimir Putin’s childhood judo partner, is living large. Despite using his relationship with Putin to facilitate state capture, gaining lucrative contracts for everything from constructing the bridge between Russia and Crimea to hosting spurious “anticorruption trainings” for state employees, and being subject to American sanctions since 2014, Rotenberg maintains extensive links with the global economy. He has used Deutschebank to move millions of dollars out of Russia, channeled investments through a technology firm co-owned with a member of the British royal family, and hired a well-connected Monegasque lawyer to manage his taxes and PR. Rotenberg is not alone: Corrupt officials around the world, and their cronies, use Western professional service providers to facilitate their use of corrupt funds.

The United States has a powerful and under-utilized tool to control connections between corrupt officials and the professionals service providers who enable them: the Global Magnitsky Act (sometimes shortened to “GloMag”), which authorizes the U.S. government to impose targeted sanctions on individuals engaged in serious human rights abuses and/or high-level corruption. To date, the U.S. has imposed GloMag sanctions on 299 persons deemed to have been involved in official corruption. Yet despite some high profile successes (see here, here, and here), critics have pointed out that GloMag remains too limited in scope to seriously impact many of its targets. Sanctions against corrupt officials remain mostly unilateral tools, with governments often failing to coordinate their sanctions, leaving opportunities for evasion (see here and here). And while GloMag has inspired similar efforts by 35 additional countries, many of these governments—and the European Union—use GloMag-inspired programs only to target human rights abusers, not those engaged in grand corruption (see here and here).

There have been proposals to increase the comprehensiveness of GloMag sanctions, ranging from simply listing more corrupt officials to convincing the EU to broaden its sanctions regime to cover those engaged in high-level corruption. While these are worthwhile efforts, the United States possesses an extremely powerful tool that it could use unilaterally to drastically increase the heft of GloMag sanctions, one which is already authorized by statute and executive order: secondary sanctions. Secondary sanctions are sanctions that are imposed on a set of persons or entities that transact with an individual who is subject to primary sanctions under GloMag or a comparable regime. The U.S. can and should impose secondary sanctions on the professional service providers (such as accountants, wealth managers, bankers, and real estate agents) that provide individuals covered by GloMag sanctions with the services they need to launder the proceeds of their corruption. Under such a regime, for example, if Deutchebank helps Arkady Rotenberg (already the target of sanctions) to move his money around the world, then the U.S. would also sanction Deutschebank—restricting its ability to transact using U.S. dollars, a disastrous outcome for many firms.

Continue reading →

Too Nice? Why Canada’s Corruption of Foreign Public Officials Act (CFPOA) Needs Revamping

Posted on by
12

Capping off a series of scandalous events that shook Canadian politics to its foundation, in February 2019, Jody Wilson-Raybould––the country’s then-Justice Minister and Attorney General––resigned from the cabinet and alleged that Prime Minister Justin Trudeau’s office had pressured her to intervene in a criminal case against the Canadian construction firm SNC-Lavalin. Wilson-Raybould claimed the Prime Minister’s office ordered her to arrange a more lenient remediation agreement with the firm, which was facing bribery and fraud charges for its 2001–2011 dealings with the Muammar Gaddafi regime in Libya, because of its economic significance. (SNC-Lavalin employs more than 9000 Canadians).

These revelations brought some much-needed attention to deficiencies in Canada’s enforcement of its laws against foreign bribery. While this scrutiny is welcome, and allegations of political interference are especially troubling, the SNC-Lavalin affair may be a somewhat misleading illustration of the most pervasive problems with Canadian authorities’ anti-bribery efforts. In fact, the SNC-Lavalin affair is anomalous because, notwithstanding the alleged interference from the Prime Minister’s office, the company was actually convicted and punished in the end—to the tune of a hefty $280 million CAD fine. In Canada, such prosecutions and convictions are quite rare—not because of political meddling, but because of structural deficiencies that prevent authorities from even pursuing such investigations in the vast majority of cases.

Read more: Too Nice? Why Canada’s Corruption of Foreign Public Officials Act (CFPOA) Needs Revamping

Canada enacted its federal prohibition on bribing foreign public officials, the Corruption of Foreign Public Officials Act/Loi sur la corruption d’agents publics étrangers (CFPOA), in 1998, shortly after it ratified the OECD Anti-Bribery Convention. Much like the U.S.’s Foreign Corrupt Practices Act (FCPA), the CFPOA prohibits the bribery of foreign officials, and also requires companies to maintain accounting practices and internal controls sufficient to ensure that bribery does not occur.

Unfortunately, Canada’s track record of enforcing the CFPOA does not match the United States’ track record of enforcing the FCPA. Indeed, as early as 2005, Canada’s lackluster anti-bribery efforts attracted scrutiny and criticism from the OECD Working Group on Bribery, which evaluates how well member countries abide by the OECD Anti-Bribery Convention. In response, the Canadian Parliament amended the CFPOA in 2013 to strengthen its anti-bribery provisions. Yet, enforcement of the CFPOA continued to be infrequent, and when enforcement actions took place, the penalties were typically quite low. The 2010s saw slightly more high-profile investigations, with Niko Resources fined $9.5 million CAD in 2011 and Griffiths Energy fined $10.35 million CAD in 2013. And then, of course, there was the SNC-Lavalin case, which involved alleged CFPOA violations, though the company eventually negotiated a plea bargain that removed bribery-related charges in exchange for a fraud conviction. (Doing so avoided triggering the CFPOA’s debarment provisions, which would have prevented the company from doing further business in Canada).

But these few notable enforcement actions did not change the overall picture: As recently as October 2023, the OECD Working Group on Bribery described the Canada’s anti-bribery enforcement activity as “exceedingly low” relative to the strength of the Canadian economy and in comparison to similar countries. A recent Transparency International report similarly gave Canada poor marks in enforcing its laws against foreign bribery, comparing Canada disfavorably to peer countries. As the report noted, Canada did not initiate any CFPOA investigations in 2020 or 2021; during the same time span, the United States initiated 15 foreign bribery cases, and Switzerland initiated 28. In fact, charges have only ever been laid in nine cases in the CFPOA’s entire history, with only two individuals and four companies ever having been sanctioned. Canada’s anemic CFPOA enforcement is particularly worrisome given that Canadian exports and investments are disproportionately in high-risk sectors, such as energy and mining. 

Canadian anti-bribery efforts would benefit greatly from a revised approach that does three main things: Continue reading →

New Podcast Episode, Featuring Richard Nephew

Posted on by
Reply
A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, host Liz Dávid-Barrett speaks to Richard Nephew, the US Department of State’s Coordinator on Global Anti-Corruption. The conversation focuses principally on the US strategy on countering corruption, including the practicalities involved in implementing different pillars of the strategy, such as attempts to strengthen the multilateral anti-corruption architecture. The conversation also touches on the key outcomes to emerge from the recent UN Conference of the States Parties to the United Nations Convention against Corruption (UNCAC). You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

Does Congress Really Want to Relax Corruption Controls on U.S. Arms Sales?

Posted on by
Reply

Today’s Guest Post is by Colby Goodman, a Senior Researcher with Transparency International US and Defence and Security. His research focuses on corruption risks within the international arms trade and other forms of defense sector corruption. 

That corruption permeates the international arms trade is no surprise to readers of Transparency International reports (here), business executives (here), or investigative reporters (here, here, and here). What is a surprise is that the U.S. House of Representatives is considering weakening the measures the U.S. government has put in place over the past decades to prevent U.S. companies from becoming entangled in corrupt dealings.

This Tuesday, February 6, the House Foreign Affairs Committee will discuss a bill to significantly decrease the number of proposed U.S. arms sales that would require congressional review before proceeding. The bill would increase the dollar threshold that require  the Defense and State Departments to notify Congress of a planned sale. It follows a US defense industry lobbying campaign to speed up the process in delivering U.S. weapons and so make their purchase more commercially attractive. But at the cost of weakening key U.S. government efforts to curb corruption in U.S. arms sales.

To its credit, in early 2023 the Biden Administration  updated the government’s Conventional Arms Transfer policy to “ensure that arms transfers do not fuel corruption or undermine good governance, while incentivizing effective, transparent, and accountable security sector governance.”  This policy followed its Countering Corruption Strategy, where  the U.S. government pledged to start “reviewing and re-evaluating criteria for government-to-government [security] assistance, including around transparency and accountability.”  These actions recognized the significant harm to U.S. national security that comes from pervasive corruption in partner countries and the need to mitigate corruption risks within the U.S. defense industry.  

Detailed below are four key critical corruption checks that would be undermined by the proposed bill.

Continue reading →

Addressing the Root Causes of Municipal Corruption in U.S. Cities

Posted on by
1

Nearly a year ago, former Los Angeles City Councilman José Huizar pleaded guilty to racketeering and tax evasion, admitting that he took over $1.5 million in bribes during his tenure. As representative for the rapidly gentrifying Boyle Heights neighborhood and Downtown Los Angeles, Huizar used his office to shape urban development in line with the interests of corrupt real estate investors. Throughout his seven years as Chair of the Planning and Land Use Management Committee, he vouched for developers who paid him bribes, received kickbacks in exchange for favorable votes, and even negotiated with labor unions who threatened to block projects from which he stood to benefit financially. The U.S. Attorney for the Central District of California called the Huizar saga one of the most “wide-ranging and brazen public corruption cases” in the city’s history.

Local-level land use decisions are frequently rife with corruption, even in developed countries such as the United States. The elaborate web of regulations that govern zoning and urban planning practices, combined with relatively weak ethical standards for municipal lawmakers, encourage powerful investors to run afoul of the law. The Huizar case stands out as but one glaring example of the corruption that inhabits the world of variances, special use permits, and environmental impact reviews. Faced with mountains of paperwork and political uncertainty, real estate developers are drawn to corruption’s easy fix. Public officials such as Huizar are well-positioned to offer simple and efficient permitting in engage for generous campaign contributions and personal gifts.

While prosecuting corrupt officials like Huizar is necessary, addressing the root causes of this sort of corruption requires significant structural reforms. Three such reforms are particularly important: a reduction in the discretionary authority of political decision-makers in specific land use decisions, the abolition of councilmanic privilege, and the adoption of a universal municipal code of ethics for local lawmakers.

Continue reading →