Tag Archives: United States

Fighting Corruption Isn’t Rocket Science

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Space, the final frontier, sure is expensive to explore. Every launch, every mission, can cost billions of dollars in research, materials, and overhead. And partly because of this, government space agencies may be especially susceptible to corruption. After all, these agencies are responsible for enormous projects with thousands of moving parts (literally and figuratively), but are monitored principally by committees that lack the scientific knowhow to conduct effective oversight. Embezzlement, overspending, bribery, and other crimes are easy to miss. Not only is corruption easily buried by bureaucratic or technical minutiae, it’s also extremely costly, as mistakes can result in the loss of valuable equipment or even human life. Even when corruption causes things to go wrong, the fact that space missions are inherently risky and complex may make it difficult to recognize when a malfunction is due to malfeasance.

Roscosmos, the Russian state corporation responsible for space flights, serves as a cautionary tale. For years, Roscosmos funds have been embezzled though contracting bids— officials were bribed to make fake deals and artificially inflate costs, allowing hundreds of millions of dollars to evaporate and a few Soyuz rockets to accidentally explode. (In 2014 alone, corruption and other malfeasance caused Roscosmos to lose roughly US$1.8 billion.) After Russian anticorruption activist Alexei Navalny called out the “astronomic” levels of corruption and mismanagement at the Vostochny space center (one of President Putin’s pet projects), multiple criminal investigations resulted in the conviction and sentencing of fifty-eight officials for fraud and abuse of office.

Though the record of the U.S. National Aeronautics and Space Administration (NASA) is not nearly as egregious, neither is it pristine. Suspicions regarding bribes by private contractors to NASA officials have existed for decades. For instance, back in the mid-1990s, a controversial FBI sting operation implicated dozens of contractors that allegedly paid bribes to NASA employees in hopes of determining which commercial experiments would be selected for the International Space Station. Representative John Conyers, who chaired the Committee on Government Operations in the House of Representatives at the time, pinned the blame on “NASA’s dismal record of contract mismanagement and faulty financial controls.” And the problems haven’t gone away: just last year, NASA’s associate administrator for human spaceflight Doug Loverro resigned amid allegations for improper contacts with Boeing regarding the contracts for NASA’s moon lander program. NASA’s Office of the Inspector General (OIG) has raised numerous concerns about NASA’s procurement system, and NASA attributed the Taurus XL launch failures, worth $700 million, to faulty materials provided by a contractor that falsified thousands of certifications for their aluminum products.

Though NASA has since taken some measures to curb against the potential for this sort of corruption (such as the installation of a Chief Financial Officer and the Acquisition Integrity Program), the risks are still significant, especially as NASA ponders a return to crewed missions by way of billion dollar contracts. These risks are further exacerbated by the agency’s even greater reliance on private sector contractors to compensate for the decline in the agency’s budget. There are therefore several additional steps that NASA can and should take to further safeguard integrity in the procurement process.

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Guest Post: Illicit Enrichment Laws and the Presumption of Innocence

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GAB is pleased to welcome this guest post by Andrew Dornbierer of the Basel Institute on Governance, author of the recently released open-access book Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth.

Laws targeting illicit enrichment are increasingly prevalent. To date, at least 98 jurisdictions have some form of illicit enrichment law. While the design and scope of these laws vary—some are criminal laws that can be used to convict individuals who control assets disproportionate to their lawful income, while others are civil laws that allow governments to seize assets whose lawful origins cannot be adequately explained—the common characteristic of all illicit enrichment laws is that they do not require prosecutors to secure a conviction for the underlying criminal conduct that allegedly produced the illicit wealth. Rather, illicit enrichment laws only require that the government show that the person enjoyed an amount of wealth that cannot be explained by reference to their lawful sources of income.

This characteristic serves as the primary point of attack for many critics. They claim that by not requiring a state to prove criminal activity, illicit enrichment laws effectively reverse the burden of proof, requiring the targets of the enforcement action to prove their innocence. And some countries have resisted adopting illicit enrichment laws for this very reason. While the UN Convention Against Corruption includes a specific article recommending that state parties consider adopting illicit enrichment laws, during negotiations “many [national] delegations indicated that they faced serious difficulties, often of a constitutional nature, with the inclusion of the concept of the reversal of the burden of proof.” Similar concerns were raised during the drafting of the Inter-American Convention Against Corruption (IACAC), and while in the end this convention did include a provision calling on states parties to adopt illicit enrichment laws, the United States filed a particularly clear reservation to this provision when it joined, noting that because “[t]he offense of illicit enrichment … places the burden of proof on the defendant,” such an offense “is inconsistent with the United States Constitution and fundamental principles of the United States legal system.” And in Ukraine, in February 2019 the Constitutional Court of Ukraine invalidated the local illicit enrichment law on the basis that it was inconsistent with the presumption of innocence.

Is there any truth to the claim that illicit enrichment laws unfairly place a burden of proof on the defendant, and thus violate the presumption of innocence?

The short answer is no.

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Breaking News without Breaking the Bank: Monetary Rewards for Media Organizations that Expose Corruption

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Investigative journalists play a key role in exposing corruption. In many cases, as a direct result of media exposés, the government has been able to recover substantial sums. To take just a few examples: In 2011, the Los Angeles Times revealed that officials in a small California city improperly paid themselves exorbitant salaries, and the subsequent court cases ordered restitution awards nearing $20 million. In 2012, the New York Times exposed Walmart’s widespread bribery in Mexico, and the company ultimately agreed to pay $282 million to settle the resulting seven-year investigation into whether Walmart had violated the Foreign Corrupt Practices Act (FCPA). In 2017, the International Consortium of Investigative Journalists (ICIJ) shocked the world when its affiliated journalists broke the Panama Papers scandal, exposing extensive fraud and tax evasion by world leaders, drug traffickers, and celebrities alike. As a result of the ICIJ’s investigation, governments around the world have managed to claw back $1.28 billion from perpetrators thus far. A Malaysian-born British journalist’s investigations (prompted by a whistleblower who provided her with more than 200,000 documents) produced the first hard evidence of what became known as Malaysia’s 1MDB scandal, the world’s largest kleptocracy scheme to date, which has produced, among other things, a nearly $2.9 billion settlement for FCPA violations.

But despite the crucial role journalists play in uncovering corruption, investigative journalism is a risky investment for media outlets. For one thing, this sort of investigative journalism is time- and resource-intensive—much more so than straight reporting—and many investigations come to nothing. And when investigative journalism does uncover evidence of wrongdoing by powerful figures, publishing those stories can be legally and politically risky. So, even though media outlets can reap substantial rewards from successful investigations—in the form of clicks, subscriptions, and prestige—media outlets faced with declining revenues and an increasingly hostile environment may not invest nearly as much in investigations into corruption as would be socially optimal.

To mitigate this problem, I propose what may initially seem like a radical way to create stronger incentives for media outlets to invest in this kind of investigative journalism: When media outlets expose corruption or similar wrongdoing, and this exposure leading to monetary sanctions on the culpable entities or individuals, the media outlets responsible for the reporting ought to receive a percentage of the government’s recovery. Such a proposal is inspired by (though distinct from) the whistleblower reward programs that many governments have already adopted. (For example, in the United States, individuals who voluntarily provide the Securities and Exchange Commission with original information pertaining to securities law violations may receive between 10% and 30% of the total penalty collected if their information leads to a successful prosecution.) A similar “media rewards program” could substantially improve the effectiveness of independent investigative journalism in exposing and deterring corruption.

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See Hearing in Kleptocracy Fight Live at 11:30 EST Today

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The anticorruption community rarely has a chance to witness first-hand the fight against Kleptocracy.  Today, Thursday, July 8, at 11:30 US East Coast time it will have a rare opportunity to see the combatants in action. In a Zoomed court hearing, the Department of Justice will ask a federal judge to order Equatorial Guinea’s kleptocratic Vice President, Teodoro Obiang Mangue, to abide by the settlement he reached with the Department in the famously styled action United States v. One White Crystal-Covered “Bad Tour” Glove and Other Michael Jackson Memorabilia.     

One of its first salvos in the U.S war against kleptocracy, the Department filed suit to confiscate the Jackson glove and other Jackson memorabilia, a Southern California mansion worth north of $20 million, and other assets on the grounds Obiang had acquired them with corrupt monies (complaint here).  After a key witness disappeared (under mysterious circumstances), a settlement was reached. Obiang agreed to surrender some of the property and sell the mansion (here) with the funds from the mansion’s sale given to a charity that would see it was used “for the benefit of the people of the Republic of Equatorial Guinea.”   

The settlement provided that should the Department and Obiang be unable to agree on a charity, a three-member panel — one chosen by the United States, one by Equatorial Guinea, and a chair jointly selected — would decide how to use the funds. After years of Obiang’s stalling, so many it prompted Mathew to wonder whatever had happened (here), a panel was finally chosen. An agreement was reached this past May 4 to use $19.5 million of the funds to vaccinate Equatorial Guineans against Covid-19.

Obiang and the EG government are now trying to renege on the deal, prompting the Department to seek an order enforcing it. The Department’s memorandum in support of an enforcement order is here, the affidavit of the U.S. panel member, the American Ambassador to Equatorial Guinea Susan Stevenson, which details the agreement is here, and the e-mail Equatorial Guinea sent backing out of the deal is here.

Click here for the link to the home page of U.S. federal judge George Wu who will preside at the hearing.  At the top will be a Zoom link to the hearing.  

Small Town Corruption: The Cautionary Tale of Jasiel Correia

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Elected at the age of 23 to serve as mayor of Fall River, Massachusetts, Jasiel Correia looked like a wunderkind. A tech entrepreneur who founded his own startup, Correia was the youngest-ever mayor of his hometown, the golden boy who promised to use his technological prowess and puckish energy to bring his aging town into the 21st century

Then it all came crashing down. In 2018, Correia was charged with various personal misdeeds, including tax and wire fraud, related to his tech company. A defiant Correia maintained his innocence and rejected calls for his resignation. Then, a second round of charges hit, this time alleging public corruption. Correia purportedly took over $600,000 in bribes from marijuana business license applicants—including one marijuana business owner who paid the Mayor $100,000 and promised him 2% of his future sales revenue in exchange for a lucrative operating permit. By the time Mayor Correia went to trial, he faced 24 separate criminal charges, and on May 14, 2021, the jury found him guilty of 21 of those 24 counts.

Mayor Correia’s downfall might seem like a relatively minor matter involving local corruption in one small city. (Such stories are, alas, all too common.) But this incident usefully highlights the corruption risks associated with devolving regulatory authority to local governments. While there are certainly virtues of giving local governments power over local affairs, we need to be clear-eyed about the dangers that local control can pose, particularly in the context of regulating lucrative industries like legal marijuana. The Fall River example highlights several such risks:

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President Biden: Fighting Corruption Core U.S. National Security Interest

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Last Thursday President Biden officially declared what corruption fighter have long known:

“Corruption corrodes public trust; hobbles effective governance; distorts markets and equitable access to services; undercuts development efforts; contributes to national fragility, extremism, and migration; and provides authoritarian leaders a means to undermine democracies worldwide.  When leaders steal from their nations’ citizens or oligarchs flout the rule of law, economic growth slows, inequality widens, and trust in government plummets.”

Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest

Biden then did what no corruption fighter could. He issued a National Security Memorandum making “countering corruption . . . a core United States national security interest.”   To that end he pledged “to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities.”

The Biden memo directs the most senior member of his government to develop a presidential strategy to fight corruption both within the United States and abroad that targets precisely the issues the global anticorruption community, including this Blog, have identified as critical. They are measures to: combat illicit financial flows; increase asset recovery efforts and the return of stolen assets to victim states; target grand corruption by leaders of foreign states; strengthen civil society, the media, and other agents of accountability; incorporate anticorruption measures into foreign assistance programs; pressure international agencies and organizations to focus on the demand side of bribery; and enhance U.S. assistance to foreign law enforcement agencies investigating and prosecuting corruption.

That the Biden memo reads like the anticorruption community’s wish list should come as no surprise. Before taking up his post as Biden’s National Security Adviser, Jake Sullivan was a member of the community in good standing (some of his writings on corruption here, here, and here), and in his first interview after being named the president’s top adviser on foreign policy he said his goal was “to rally our allies to combat corruption and kleptocracy, and to hold systems of authoritarian capitalism accountable for greater transparency and participation in a rules-based system.”

The headline on a column on the prospects for success of the Biden initiative by the Washington Post’s leading foreign affairs commentator captures what I suspect are GAB readers’ sentiments: “Biden’s anti-corruption plan appears to have some teeth. Here’s hoping they bite.”

The U.S. State Department’s New International Anticorruption Champions Awards Are a Winning Strategy in the Fight Against Corruption

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This past February, U.S. Secretary of State Anthony Blinken launched one of the first foreign policy initiatives of the new Biden administration: the inaugural International Anticorruption Champions Awards. After receiving nominations from U.S. embassies around the world, the State Department honored a dozen individuals who made significant contributions to combatting corruption in their home countries. The recipients of the International Anticorruption Champions Awards were diverse in every sense of the word. They spanned six continents, represented national and local governments, state-owned companies, and non-governmental organizations. The awardees came from countries big and small, were young and old, and a third were women.

These awards added to a growing movement to provide formal international recognition to those who are leading the fight against corruption in their home countries. Transparency International has recognized such individuals and organizations through their Anti-Corruption Awards semi-annually since 2013, and the United Nations’ Rule of Law and Anti-Corruption Center established the annual International Anti-Corruption Excellence Award in 2016. But, importantly, the International Anticorruption Champions Awards mark the first time that one sovereign country—and a major global power at that—officially recognized and honored anticorruption advocacy in other countries.

While it might be tempting to dismiss these awards as empty symbolism (or worse), this would be a mistake. That the U.S. government has created these awards, and apparently intends to continue to issue them annually, is a significant positive contribution to the global fight against corruption, for several reasons.

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Rethinking Presidential Obstruction of Justice

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One of the greatest powers that can be granted to a national chief executive is jurisdiction over law enforcement. From the French President’s authority over the Ministry of Justice to the American President’s authority over the Department of Justice (DOJ), a number of states entrust their chief executive with significant control over the nation’s top law enforcement bodies. While these oversight powers are often exercised to achieve legitimate aims, problems arise when an executive uses his authority to shield himself or his associates from legal accountability. Such misuse of the chief executive’s authority over law enforcement is itself corrupt—an abuse of the president or prime minister’s public power to protect his private interests—and can foster the culture of impunity that allows other forms of corruption to thrive. But policing this sort of improper interference is challenging.

One possible limit on corrupt presidential interference with law enforcement is the fact that such interference may itself be a crime. In the United States, for example, it is a felony—known as “obstruction of justice”—for a government official to “corruptly” use the power of his or her office to “obstruct” a “pending or contemplated official proceeding” (such as a trial or investigation). But as Special Counsel Robert Mueller’s investigation into former President Donald Trump made clear, the current version of the obstruction of justice statute may be inadequate to check this form of presidential corruption.

For starters, it’s not clear whether the obstruction of justice statute, as currently written, even applies to a sitting president. (Scholars have disagreed on this point, with some arguing that the current statute does not apply to the president—see here and here—and others arguing to the contrary that it does.) That problem, though, has an easy fix: As Bob Bauer and Jack Goldsmith’s recent book has argued, Congress can and should amend the statute to state explicitly that a sitting president can commit obstruction of justice. Another difficulty is that, as Robert Mueller’s report stressed, under current DOJ policy, a sitting president cannot be criminally indicted. This too could be changed. The deeper and harder problem is that because in the U.S. system the president may legitimately seek to influence the conduct of criminal investigations, and because the president’s motives may be ambiguous or mixed, it is very hard, perhaps impossible, to prove that the president’s actions with respect to a pending or contemplated official proceedings were “corrupt.” Take President Trump’s decision to fire FBI Director James Comey. The Mueller Report concludes that President Trump fired Director Comey to save his presidency (which seems like a corrupt motive). Yet some claim that President Trump also had other, more legitimate reasons for firing Director Comey, including concerns about partisan bias in Comey’s investigations. And even if one contests that claim in this particular case, it’s not hard to imagine a situation in which a President moved to impede an investigation that both threatened the president’s personal interests and that the President thought was unwise or improper.

How should the law treat such cases, if the goal is to ensure that a U.S. President is not above the law, while simultaneously giving the President appropriate latitude oversee federal law enforcement?

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The “Big Government Causes Corruption” Zombie Shambles On

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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.

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Recovering Damages for Corruption — Bribery Victims

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There is no longer any doubt that corruption does enormous harm – to individuals, businesses, governments, and whole societies.  Nor is there any dispute that those harmed should have a right to recover damages for their injuries.  In drafting the UN Convention Against Corruption, governments agreed quickly and without dissent upon what is now article 35. It requires parties to ensure their domestic law permit any person or entity harmed by corruption to “initiate legal proceedings against those responsible for the damage to obtain compensation.”

Yet what evidence there is shows article 35’s promise remains largely unfulfilled.

For the UN Office on Drugs and Crime and the StAR Initiative, I am examining just how far there is to go for that promise to be met. With their resources and the help of the International Bar Association, I have reviewed the case law in close to one-third of the 187 UNCAC states parties.  The most common victim recovery cases I find are those where a government agency or state-owned corporation has recovered damages when an employee took a bribe. In a few, courts have also awarded damages to third-parties harmed by the bribery. There are in addition a miscellany of actions I am still digesting covering actions by the competitors of a bribe-payer, consumers, and NGOs.

Below are the bribery victim cases I have located to date. A second post will review the other cases. Reader contributions and comments warmly solicited.

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