Tag Archives: United States

The U.S. Approach to Corruption in Ukraine: Change or Continuity?

Posted on by
1

[A quick note: I drafted the post below last week, before the horrific events in Israel over the weekend. I have nothing useful to say about that tragedy–I have no expertise in military or security policy, Middle Eastern politics, terrorism, or anything along those lines. But I wanted to express my deepest sympathy to those who have been affected by Hamas’s horrific and inexcusable attack on innocent civilians. I will continue to write posts on assorted corruption-related issues, like the one below, because that’s what I know and that’s what I do. But this is one of those moments when other things seem so much more important. Am Yisrael Chai.]

Last week, a piece in Politico discussed the contents of a confidential (but not classified) U.S. State Department’s “integrated country strategy” for Ukraine; a shorter public version of that strategy document was released last August, but the version Politico obtained was longer and more detailed. The big headlines coming out of the Politco story (both literally and figuratively) concern corruption. The U.S. strategy document, Politico notes, “sees corruption as the real threat,” and “warns Western support may hinge on cutting corruption.” The Politco story made a bit of a splash among some of the people who follow these issues closely, but I don’t think it tells us much that we didn’t already know, and the new material from the confidential version of the report, so far as I can tell from Politico’s reporting, mainly concern political calculations that are basically common knowledge, though perhaps a bit sensitive for the U.S. government to declare formally in a public document.

Let me start out by noting one thing that I think the Politico piece gets exactly right, and that poses a general, and by now familiar, challenge to those who both support Ukraine’s resistance to Russian aggression and believe anticorruption reforms are vital for the country’s future success. As the Politico story puts it:

The [Biden] administration wants to press Ukraine to cut graft … [b]ut being too loud about the issue could embolden opponents of U.S. aid to Ukraine, many of them Republican lawmakers who are trying to block such assistance. Any perception of weakened American support for Kyiv also could cause more European countries to think twice about their role.

This is indeed a real issue, and a rhetorical and political challenge. Having said that, I think the Politico story, perhaps inadvertently, may simultaneously (1) understate the extent to which the U.S. government has already been willing to publicly raise the need for serious anticorruption reforms in Ukraine, and (2) overstate the extent to which the U.S. is relying on a coercive approach (mainly express or implied aid conditionality) to press for such reforms. A few thoughts on each: Continue reading →

When Do Partisans Turn on One of Their Own? Reflections on the New Menendez Case

Posted on by
Reply

The biggest corruption-related political news in the United States over the past couple of weeks is the decision by the Department of Justice (DOJ) to indict Senator Bob Menendez (Democrat of New Jersey) for allegedly taking bribes (including cash, gold bars, and a luxury car) from several businessmen, in exchange for using his influence to help these businessmen in various ways. If you’re having a sense of déjà vu, it’s because we’ve seen this movie (at least the beginning) before: Back in 2015, the DOJ indicted Senator Menendez for accepting lavish gifts from a wealthy friend and campaign donor, allegedly in exchange for using his influence to help advance that donor’s personal and business interests. That prosecution was unsuccessful: The DOJ pursued the case, but although the prosecutors prevailed on some important issues of law, the trial, which took place in 2017, ended in a hung jury—presumably because some of the jurors did not think that prosecutors had proved, beyond a reasonable doubt, that the luxury trips and gifts bestowed on Senator Menendez were bribes, rather than personal hospitality offered by a close friend.

It remains to be seen whether the legal outcome will be different in this case (and of course, it should go without saying, Senator Menendez is entitled to the presumption of innocence in a court of law, though he is entitled to no such presumption in the court of public opinion). But there is already one notable difference between the current case and the 2015 case: the reaction of Senator Menendez’s colleagues in the Democratic party. As I write this (several days before the post will likely be published, so forgive me if this is a bit out of date), a number of prominent Democrats, including New Jersey Governor Phil Murphy, several Democratic Senators, and numerous Democratic House Members, including former Speaker Nancy Pelosi, have called on Menendez to resign. To be sure, as a critics have noted, several leading Democrats—including President Joe Biden and Senate Majority Leader Chuck Schumer—have not called on Senator Menendez to resign. But this is still a marked contrast from 2015, when to the best of my recollection (and readers should feel free to correct me if I’m wrong) no prominent Democrats called on Senator Menendez to resign. Why the difference? Continue reading →

Judicial Integrity and Judicial Independence: A Clash of Values?

Posted on by
Reply

This past spring, the investigative journalism site ProPublica broke a major story about ethically questionable—and previously undisclosed—relationships between ultra-wealthy (and politically active) individuals and Supreme Court justices. The reports focused in particular on Justice Thomas and Justice Alito, two of the Court’s most conservative members. According to ProPublica’s reports, in 2008 Justice Alito accepted a luxury fishing trip—which involved flights on a private jet and a stay at a lodge that charges more than $1,000 a day—from billionaire Paul Singer, whose hedge fund often had cases before the Court, including a 2014 case in which Justice Alito did not recuse himself and voted in the hedge fund’s favor. With respect to Justice Thomas, ProPublica revealed that for years—starting shortly after he joined the Court—Justice Thomas has received substantial benefits from billionaire “friends,” including private plane flights, luxury vacations, VIP passes to sporting events, and private school tuition for his nephew (whom Justice Thomas has raised like a son). Most of these gifts came from right-wing billionaire Harlan Crow, who also purchased from Justice Thomas (in a previously undisclosed deal) the house where Justice Thomas’s mother and other members of his family lived, but Justice Thomas received substantial benefits from other billionaires as well.

Many critics denounced these gifts and other transactions as evidence of blatant corruption (see here, here, here, and here). Some even drew a connection  between the Court’s jurisprudence in corruption cases—which has embraced an ever-more-restrictive definition of corruption, often limiting it to quid pro quo deals—and the Justices’ own proclivity for accepting gifts, perks, and other benefits from people with a strong ideological (and sometimes personal) stake in the Court’s decisions (see here and here). Justice Thomas and Justice Alito vigorously defended their conduct (see here and here), though they did ultimately update their financial disclosure forms for 2022 (though not earlier years) to show additional benefits they had received, and to proffer some explanations. And the Justices’ supporters have accused the accusers of using these alleged ethical issues as a pretext for attacking Supreme Court Justices whom they dislike on ideological grounds (and overlooking similar ethical lapses by Justices whose ideology they prefer).

I have my own fairly strong views about this specific controversy, but I don’t want to go into that right now. I’m not sure I have anything to add—and I’m acutely aware that, whether or not one buys the charges of pretext and selective outrage—it is very difficult to talk about this issue without being influenced by (or perceived as influenced by) one’s views on Justice Thomas’s and Justice Alito’s jurisprudence and ideology. But even putting the specifics mostly to one side, I do think the fallout from ProPublica’s reporting implicates a more general issue—one that is very difficult, and that is relevant not only in the United States but in many other countries as well: To what extent can or should the other branches of government (the executive, the legislature, or—in the countries where such entities exist—an independent anticorruption commission) impose and enforce ethical rules on the highest court (the Supreme and/or Constitutional Court)? Continue reading →

Would the Foreign Extortion Prevention Act Help the U.S. Counter China?

Posted on by
2

The U.S. Foreign Corrupt Practices Act (FCPA) makes it a criminal offense for U.S. domestic concerns, firms that issue U.S. and any anyone acting in U.S. territory from offering or paying bribes to foreign government officials. The FCPA does not, however, apply to the foreign officials who receive those bribes. (On occasion some prosecutors have advanced the theory that a foreign government official who takes a bribe can be convicted for aiding and abetting, or conspiring in, an FCPA violation, but courts have generally rejected these theories.) Additionally, while U.S. criminal law prohibits domestic government officials from soliciting or accepting bribes, the relevant statutory provisions do not apply to foreign officials who engage in comparable conduct.

Many U.S. anticorruption activists believe that U.S. law ought to target the demand side of foreign bribery transactions (that is, the bribe-takers), not just the supply side, and have therefore advocated for the adoption of the so-called Foreign Extortion Prevention Act (FEPA). These advocacy efforts appear to be paying off: In late July, the Senate adopted FEPA as an amendment to the Senate’s version of the National Defense Authorization Act. This does not guarantee that FEPA will become law, as the House of Representatives has yet to vote on a comparable bill, and there is no guarantee that the FEPA language will remain in the bill after final negotiations conclude. But the odds have gone up significantly.

Would FEPA be a good idea? I think the answer is probably yes, though the impact is likely to be modest, and probably somewhat less than FEPA’s proponents hope. I may post again later about my own assessment of FEPA’s likely impact, should it pass in something like its current form. But for now, I want to focus on a striking argument in favor of FEPA that appeared in an op-ed a couple of weeks ago. That op-ed, coauthored by Elaine Dezenski (Senior Director at the Foundation for Defense of Democracies) and Scott Greytak,(Director of Advocacy at Transparency International’s US office), argued that FEPA would “blunt China’s malign economic influence” by countering the practice of Chinese government or government-affiliated entities using bribes to secure access to valuable resources and to expand China’s political sway over developing countries.

There are many good arguments in favor of FEPA, but I’m not sure that this is one of them. I don’t want to dismiss it outright, as it’s entirely possible that I’ve missed something. But it seems to me that FEPA would have little to no impact on corrupt overseas bribery by Chinese entities, and at least in the short term might make that problem (slightly) worse. So let me lay out the source of my confusion: Continue reading →

Trump Indictment’s Lesson for Prosecutors Charging Senior Political Figures

Posted on by
Reply

At long last federal prosecutors have filed charges against former President Donald Trump for crimes arising from his unlawful possession of classified documents. The charges are contained in what is called an indictment in the United States.

One aspect of the indictment merits the attention of prosecutors everywhere. Or at least for those considering charging senior government officials or ex-officials who, like Trump, can be expected to try to sway public or elite opinion by any means to escape convictions.

The Trump indictment is what American prosecutors call a “speaking indictment.”

Continue reading →

Supreme Court to Congress: Your Fault Corrupt Officials Getting Off

Posted on by
Reply

Two recent unanimous Supreme Court decisions overturning federal convictions for blatantly corrupt conduct again emphasize the need for Congressional action. The one case arose from bid rigging on a New York state contract, the second from the acceptance of a $35,000 “fee” by the manager of then Governor Andrew Cuomo’s reelection campaign to “fix” a problem the payor had with a state agency.

In both prosecutors charged defendants under the statute making it a federal crime to use the mail or telephones or other means for communicating across state lines to cheat an individual of money or property.* For, by my count, the fifth time in recent years (here), the Court rejected prosecutors’ efforts to stretch a law originating in claims “eastern city slickers” were using the mail system to swindle naïve Midwesterners to cover state and local corruption.

The Court also again put the blame for allowing corruption to go unpunished on Congress, reiterating that if it wants federal prosecutors to police the conduct of state and local officials, it must write a law that says so in clear and uncertain terms. Congress took a stab at doing so once, making it an offense to deprive citizens of the “honest services” of a public official.  But as the Court held in acquitting the Cuomo aide, legislators forgot the term “clear” in the Court’s injunction, failing to provide any definition of what conduct was honest and what dishonest. The law was thus unconstitutionally vague, for it did not, as all criminal statutes must, give defendants fair notice of the conduct that was unlawful.

Justice Gorsuch summed up the current situation in a concurring opinion in the Cuomo aide case.  Because Congress won’t say with the precision required of all criminal statutes what conduct by state and local officials violates federal law, it: 

“leaves prosecutors and lower courts in a bind. They must continue guessing what kind of fiduciary relationships this Court will find sufficient to give rise to a duty of honest services.” 

Every time a prosecutor and a court guess wrong, as they did in the New York cases, we get a highly publicized acquittal, leaving citizens to wonder why, if their government is serious about curbing corruption, it is letting crooked pols and their pals off the hook. For reasons to obvious to state, this is no time to be undermining citizen confidence in the government’s commitment to fighting corruption. Isn’t it time Congress seriously considered the metes and bounds of federal power to prosecute state and local corruption?

  • *The law is found in title 18 of the United States Code, sections 1343 and 1346. The operative language: “Whoever … devise[s] any scheme… to defraud… for obtaining money or property … causes to be transmitted by means of wire, radio, or television communication …any writings… for the purpose of executing such scheme… shall be … imprisoned not more than 20 years….” In 1988 Congress added “The term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”

The Hidden System of Legal Kickbacks Shaping the U.S. Prescription Drug Market

Posted on by
Reply

In the United States, as in most other countries, it is illegal for pharmaceutical companies to bribe doctors or hospitals to prescribe their products. Those who get caught engaging in this sort of corruption can suffer severe penalties. For example, in 2020, the pharmaceutical giant Novartis agreed to pay the U.S. government almost $700 million to settle a case involving allegations that the company had violated the federal Anti-Kickback statute by offering “cash payments, recreational outings, lavish meals, and expensive alcohol” to doctors to induce them to prescribe Novartis drugs. Yet when pharmaceutical companies offer financial inducements worth billions of dollars to Pharmacy Benefit Managers (PBMs)—not the meager thousands spent on doctors—to promote use of their drugs, the conduct is entirely legal.

What, you may ask, are PBMs? Good question. Most laypeople outside the health care field are unfamiliar with PBMs, and may not even know they exist. But PBM’s play a crucial, if underappreciated and extremely complex role in determining prescription drug prices and insurance coverage decisions. Simplifying somewhat, PBMs’ primary function is to manage insurance companies’ prescription drug plans, a role that includes, among other things, negotiating with drug companies to determine which drugs insurance will cover, and which will be favored. Given that just three PBMs control over 80% of the prescription drug market, PBMs can have an enormous effect on pharmaceutical sales, as drugs that lack insurance coverage are significantly less attractive to consumers than those with coverage. Additionally, PBMs also reimburse pharmacies on behalf of insurance providers for the costs of filling beneficiaries’ prescriptions.

In short, PBMs, which stand in between many of the transactions in the pharmaceutical supply chain, play a major role determining the prices paid by insurers, pharmacies, and patients for prescription drugs. And although kickbacks to doctors, hospitals, insurance companies, and other actors in the system are strictly prohibited, drug companies can and do take advantage PBMs’ complex payment structures to discreetly offer financial inducements in order to gain PBMs’ favor during insurance coverage determinations. There are two main ways in which this de facto bribery occurs: Continue reading →

FinCEN’s Beneficial Ownership Proposal: Invitation to Evasion

Posted on by
5

GAB welcomes this guest post by Gary Kalman, Executive Director of Transparency International U.S.

The Financial Crimes Enforcement Network (“FinCEN”), the bureau charged with implementing our nation’s anti-money laundering laws, is underfunded. They do not have enough staff and significant staff turnover has left the bureau with less institutional knowledge and memory. On top of this, the agency has an Acting rather than permanent Director, undercutting its leaders’ ability to set a clear vision and direction for the bureau.

None of that, however, can explain the agency’s remarkable lapse in judgement in publishing  this proposal to collect beneficial ownership information from U.S. companies.

Let me explain.

Continue reading →

The FDA Drug Approval Process Has Problems—But It Is Not Corrupt

Posted on by
2

Is the US drug approval process corrupt? Many critics say that it is, leveling the charged rhetoric of corruption at the Food and Drug Administration (FDA) (see, for example, here, here, and here). Yet there have been few, if any, credible allegations of illegal bribery or the exchange of quid pro quo benefits in relation to FDA drug approvals. Rather, when critics speak of “corruption” at the FDA, they are alluding to a perhaps all-too-cozy relationship between the FDA and the pharmaceutical companies it regulates. That is indeed a source of concern: Big business likely has too much sway in Washington, D.C. on a whole range of issues, and the FDA is not immune to the powerful influence of powerful lobbies like Big Pharma. Yet the casual deployment of the rhetoric of “corruption” in this context, though offering attractive click-bait, is both misleading and potentially counterproductive. Continue reading →

Making Corruption a National Security Issue: How Will it Change Enforcement Dynamics?

Posted on by
Reply

Today’s Guest post is by Nedim Hogic. Nedim advises clients in the private and public sector on environmental, social, and governance issues. Author of many articles on corruption, international law, and the rule of law and development, he is currently writing a book on judicial anti-corruption campaigns.

Since becoming an important policy goal in the 1990s, global anticorruption efforts have gone through three phases. In the first, anti-corruption policies were considered important for economic development, driven by the belief that successful anticorruption programs would make global borrowing and spending and financial aid more efficient. In the second, spanning the first two decades of this century, it was central to the protection of the rule of law and democracy.

The current phase, and particularly that part denominated “kleptocracy,” is animated by the threat it poses to global security. The Biden Administration’s national security strategy, which followed its memorandum calling the fight against corruption a core U.S. security interest, is not the first American or indeed international document to suggest corruption is a national security threat. But it is the first to state the premise clearly and straightforwardly, thus marking a sharp change in thinking about transnational corruption. Indeed, in my view the change is significant enough to be labelled a paradigm shift.

Continue reading →