Corruption in government purchases during pandemic

In pandemics and other emergencies, public procurement is even more exposed to corruption risks than is normally the case. In this blog post, CSC PhD Researcher Irasema Guzmán explains the risks and discusses key cases of emergency healthcare procurement being abused in the past, in Mexico and elsewhere.

Time is treasure during sanitary crises and pandemics. Many decisions must be made on how and what to spend. Every penny counts as it should be invested for prevention, detection and treatment, under threat of a virus spreading quickly and the potential collapse of the health system. Within this context, governments purchase under emergency conditions; hence, it is mandatory to buy fast, open and smart as there is a big opportunity for corruption to occur, with serious consequences for the treatment of patients.

In emergencies, there is high demand for certain items and as a result, short supply. For instance, many of us have found sanitizing gel to be overpriced; as soon as the population heard about the virus spreading, this item could hardly be found on the market. It also happens with necessary items in hospitals such as ventilators and personal protective equipment. Many companies in the business of producing cars or electronic gadgets have been asked to switch up their production lines to make healthcare items instead. As few companies are able to produce these goods, there is a high risk of bid rigging and collusion, i.e., a few firms colluding to decide who will win a contract. It also means that firms can conspire to set high prices. A lesson from the H1N1 swine flu is related to overpricing. The US pharmaceutical giant Baxter was accused of fraudulently overcharging for medicines as part of the Medicaid health programme which supports the poorest families in the United States. The company was found to have overpriced medicines by as much as 1,300%.

Secondly, an emergency requires purchases in the shortest time possible; for this reason, it is likely governments will purchase items by direct awards to firms instead of using fair competition procedures. In times of emergency, direct awards allow buyers to skip the long procurement procedure that usually involves firms competing with each other. But they also bring potential corruption risks; a direct award may benefit firms close to politicians’ circles that would not have won in more competitive conditions, and may be the subject of much lobbying. In 2009, during the H1N1 outbreak, Mexico acquired the vaccine directly from the laboratory Birmex instead of obtaining it from the firms that produced it, Sanofi Pasteur Inc. or Glaxo Group Limited. As a result, according to the Supreme Audit Institution (SAI), the Mexican government spent much more money than necessary, $118 million pesos (£5.6 billion), by the difference between the unit cost prices offered by the laboratories that produced the vaccine and the one who got the contract, Birmex. Therefore, there was a misuse of public resources and inefficient public spending.

Furthermore, there is a risk that suppliers may provide substandard equipment substituting lower quality components to reduce costs. In 2015, US prosecutors charged a man from Burkina Faso over a USD 12.2 million fraud after he misused international aid by buying 2 million anti-malaria nets at a very low cost and very low quality (without sufficient insecticide) from an unnamed Chinese company. The terrible consequence was to put people’s lives at risk.

Another risk is that supplies may not be delivered to patients. In 2010, the Mexican SAI found, in a revision of direct award contracts to attend the influenza H1N1 pandemic, seven amendments authorising extensions to companies of delivery due dates. That is, through such amendments, up to 160 additional days were granted for the supply of items.

Indeed, public infrastructure necessary to treat patients may not even be completed. After the influenza epidemic in 2009, the Mexican government decided to produce the vaccine in the country to reduce costs. In 2011, the firm Birmex was awarded a contract through an open international tender to adapt a manufacturing plant for the vaccine production. In 2013, the Mexican SAI found that this company spent more than 217 million pesos (£8.5 billion) in the construction of the plant, a cost overrun of 78 million pesos (£3 billion). The SAI also found improper payments authorised by contracting authorities that do not correspond to the aim of the contract. In 2015, Birmex agreed to finish the infrastructure through a public-private partnership (PPP) contract with the government. However, by 2017, the SAI found that the plant did not have the optimal capacity to bear the intended load; hence, it was agreed to demolish it and build a new one. The SAI concluded that these irregularities caused a major delay in the influenza vaccine production project (from 2009 until 2017) and involved a massive social cost with the final price 231.4% higher than had been envisaged when the PPP started in 2015.

Lessons from the past can inform improved policy. Evidence from procurement in pandemics shows that governments may not have purchased wisely and that emergency decisions involve potential corruption risks. The costs are high and clear: misuse of public resources and putting people’s lives at risk. It is possible to overcome this situation by improving accountability and disclosing procurement data. Open data allows tracking emergency spending: how governments decide which resources will be allocated to address the problem, how decisions are taken to purchase, which firms win contracts and whether the items are delivered in hospitals as planned. Furthermore, enforcement is needed. External audits are an ex-post instrument to track irregularities in expenditures and expose potential corruption cases, but we also need to punish actors involved in irregularities and transform ex-post actions to ex-ante policies to prevent corruption.

The Bribery Act 2010: Wider Impacts?

Joseph Sinclair, a lawyer currently enrolled on the Masters in Corruption & Governance, evaluates the success of the Bribery Act on its tenth anniversary by looking at the issues of corporate culture and international impact.

The UK Bribery Act (UKBA) has seen some notable prosecutions and settlements, which have both tested key parts of the law in the courts, and shown that companies of all sizes can be held to account. Ten years on, we can also start to evaluate how the new law has worked beyond prosecutions.

Impact on Business Culture

The Bribery Act contained several innovative approaches, none more so than Section 7, the ‘failure to prevent bribery’ offence. The defence for this would be for a company to have in place adequate procedures to prevent bribery. This, of course, immediately gave rise to the question of what constituted an adequate procedure.

Although it provides a defence, Section 7 has also caused worry within the business community about thresholds and definitions: is corporate hospitality allowed?; can I take my client to Ascot or is this a bribe? This led to a F1 team expressing concern that the Act may drive corporate sponsors away from sport. To this end the UKBA required that the Ministry of Justice (MOJ) publish guidance.

Effective in 2011, it is unlikely to have allayed the fears of the F1 team (the MOJ’s answer is “it depends”). It nevertheless offers 6 practical principles for companies: proportionality, top-level commitment, risk assessment, due diligence, communication and training, and monitoring and review – the cornerstones of effective anti-corruption governance.

A quick search on Google shows there was no shortage of consultants, lawyers and accountants warning companies to get their houses in order. As the then chief criminal counsel at the FSA put it, “…the level of consternation about the Act has no doubt to some extent been fomented by professional advisers who have spotted a lucrative new practice area, and are frightening their clients to death about it”. And to some extent they are right to do so. The Act takes a “no ifs, no buts” approach. It is described as the strictest legislation in the area to date.

But all this is bluster if it does not translate into a different working culture for those engaged in business in the UK and overseas. The authorities cannot prosecute everyone that falls foul of the law. Like a prisoner in Bentham’s Panopticon, the business community should feel the authorities over their shoulder. Both Standard Bank’s and Airbus’s cooperation with Serious Fraud Office (SFO) investigations suggests that this is the case. As the following examples show, the Bribery Act has already achieved a great deal in setting corporate expectations and moderating behaviour.

In their Global Economic Crime Survey 2018, PWC reported that nearly a quarter of respondents had been asked to pay a bribe, compared to 5% in 2016. PWC’s explanation was that, rather than there being a sudden surge in global demands for bribes, there had been improvements in how businesses detected bribery, as the UK was now “…at the forefront of global anti-corruption efforts”. Three-quarters of respondents in the 2018 survey had a formal programme of ethics and compliance in place; 62% said that this included provisions for anti-corruption and bribery (above the 50% global average). Similar trends were identified in a survey undertaken by EY in 2017; 34% of respondents said that corrupt practices happen widely – up from 18% in 2014.

Goldstraw-White and Gill’s study gives further credence to the interpretation that British companies were becoming better at identifying bribery. Their survey showed that the UKBA had imposed additional obligations and raised awareness of anti-bribery good practice. One-third of respondents (64 organisations based in the Middle-East), had introduced some form of anti-bribery and corruption policy. A majority felt that leaders were committed to tackling corruption. Many had reviewed their policies in anticipation of the Act.

LeBaron and Rühmkorf undertook a comparison of the impact of the Modern Slavery Act 2015 and the Bribery Act 2010 on corporate accountability within global supply chains. They analysed the codes of conduct of 25 FTSE 100 companies within several sectors. In respect of the UKBA they found that “…the Bribery Act has achieved traction towards its aim of ‘steering’ company behaviour… companies had clear and strict policies… which they communicated to suppliers”. Bribery was a “genuine compliance issue”, with strict language used that highlighted the consequences with a greater reach in other areas of businesses’ reporting, such as corporate social responsibility and sustainability. Companies pro-actively engaged with bribery in their policies and private contracts with suppliers. This was contrasted with the language used in respect of the Modern Slavery Act 2015 (an area where the UK is considered a forerunner), which was “aspirational” and less stringent.

Collective Action

Since the Bribery Act was passed, entire sectors have entered into collective action initiatives. The combination of the Bribery Act and other legislation, such as the US’s FCPA, have given companies the impression that there is a tightening legal net globally which cannot be ignored.

Shipping is an area exposed to high corruption risks; it operates in corrupt environments, and offers services to high risk sectors, such as defence. It often uses intermediaries and has a lot of contact with public officials. It is an area particularly susceptible to facilitations payments.

An example of this is the Suez Canal, dubbed the “Marlboro Canal”, through which 8% of global sea-borne trade travels. Officials will often request cartons of cigarettes in exchange for safe passage and not imposing fines. A sailor’s Facebook post recounts how “…[a] high-ranking canal official reportedly demanded a bribe of 17 cartons of cigarettes, nuts and dried fruit for Ramadan, fruits, bottled water and on top of that helped himself to a hot meal onboard the ship, all while threatening to impose a fine of $20,000”.

Handing over the cigarettes is an offence under the UKBA with no exceptions (the CPS two-stage prosecution test aside). In response to these risks (of both bribery generally and prosecution under the UKBA and FCPA), a group of ship-owners established the Maritime Anti-Corruption Network (“MACN”) in 2011. The MACN now has over 100 members. It describes itself as “…one of the pre-eminent examples of collective action to tackle corruption”.

In 2015 the MACN launched a “Say No” pilot campaign in the Suez Canal, where ships would reject demands for bribes. Following positive feedback, it became a member-wide campaign. Members have reported a dramatic decrease in the demand for cigarettes and danger to the safety of crew and vessels. Those taking part have been passing through the canal without issue or delay. One company, Höegh Autoliners, found that the campaign made it easier for captains to refuse demands, and the frequency of demands decreased. Other shipping companies have expanded the campaign globally.

Changing the Narrative

Section 7 was described in 2011 by a corporate lawyer as potentially “alarming”. Perhaps rightly so. In essence, the structure of Section 7 shifts the burden to the defendant company to show that they had put in place sufficient measures to prevent bribery. Although each case will turn on the jury’s view, the Skansen case, which was the first Section 7 prosecution, seems to suggest that a company will need to be doing a great deal in order to use this Adequate Procedures defence successfully.

From the preceding sections, we can see that the UKBA is having a positive effect on the business communities’ conduct and attitude to bribery. They are putting measures in place to prevent bribery, and some are self-reporting where things go wrong to avoid prosecution.

It seems that Parliament has realised this because they have extended the Section 7 approach to tax evasion. Enter the Criminal Finances Act 2017. Part Three of this Act creates two offences. The first follows the wording of Section 7, but applies to UK tax evasion (a business facilitates UK tax evasion, irrespective of its location). The second applies to foreign tax evasion by companies incorporated, operating or undertaking the offending conduct in the UK. Both have a defence of having “sufficient procedures”.

To date there have been no prosecutions under the 2017 Act. In a survey conducted by Her Majesty’s Revenue and Customs (HMRC), a quarter of businesses were aware of the law and had made changes as a result. Although this may not make for happy reading at HMRC, it remains a positive development. It is unlikely that these offences would be in place without the Bribery Act as a torch-bearer.

Global impact

The change in narrative applies not only to domestic law, but to other OECD members. Across the Channel, the French national assembly has adopted Sapin II aligning France’s anti-corruption legislation with those of the UK and US. Article 17 draws inspiration from Section 7. It requires the senior or managing directors of specified companies (over 500 employees or part of over 500 employees with a parent company headquartered in France, and an annual revenue of €100 million) to put in place a corporate compliance programme to detect corruption in France and abroad.

Where next?

After ten years, we can see that the UK Bribery Act has had an impact on corporate culture and globally, as well as through prosecutions and settlements. The wider impacts are not solely attributable to the UK Bribery Act, but because it is part of a broader international approach linked to the OECD Anti-Bribery Convention.

However, there have been signals from the US that President Trump does not favour the FCPA; and the global Coronavirus pandemic may fundamentally change the world’s economic and political balance.

This has been a decade of success for the OECD Convention and spin-off national legislation like the UK Bribery Act. It is by no means guaranteed that the next decade will see such progress.

Bribery, black markets and the Covid-19 crisis

Professor Robert Barrington takes a look at the role of bribery in black markets, what might be heading for the UK in the coming months – and which part of the government is in charge of the response. He concludes that like the pandemic, there is a simple message. Get ahead of the curve: start planning now.

What happens when you get a restricted supply of high-demand goods, low levels of transparency about sourcing and pricing, resentment against the government and an easing back of social norms?

No guesses needed: it’s the black market. Alongside that sits a high likelihood of bribe-paying. Bribes help the dealers to obtain goods that are restricted in supply, ensure the authorities turn a blind eye to the dealers’ sourcing and trading in the goods, and allow consumers to access goods and services that they can’t otherwise get hold of.

You don’t have to look far for examples of where the black economy is much larger than the official economy, and it always – yes, that is always – correlates with higher levels of corruption. We are used to seeing that in areas of the world (Somalia, Afghanistan, etc) that are considered fragile states, or elsewhere in times of crisis (Haiti, for example).

But now, the entire world is in crisis; and production and distribution are interrupted by illness, lockdowns and poor planning. Supermarket shelves are empty while wholesale warehouses are full of food that is in the wrong place and wrong packaging for retail distribution, as it was destined for catering outlets which have now closed. There have seldom been better conditions for the global black market.

Not in Britain, surely?
Well, as with so much in the current crisis, look back to the Second World War. The black market was a well-known by-product. Did it coincide with an increase in bribe-paying? I’ve been having a quick look, and my views here are based on a quick trawl through the UK’s excellent Mass Observation archive (conveniently housed at the University of Sussex) and Mark Roodhouse’s fascinating book Black Market Britain: 1939-1955.

The general picture is surprisingly reflective of modern-day corruption in the UK: little evidence of systemic and organised corruption, some high-profile individual cases, and a widespread public perception that corruption is more serious than the establishment admits. Roodhouse quotes a Sheffield housewife whose diary entry for 1948 forms part of the Mass Observation archive: ‘We all know bribery and corruption goes on all the time.’

There were two effects at the time:

1. Tight government control of the market. The government’s objective was fairness, to be achieved through a system of coupons and rationing. It was concerned that a black market would undermine the controls it was trying to place on the supply, designed to ensure that the goods went initially to priority areas (like fuel to farmers and doctors) and then were evenly distributed throughout society.

2. Public discontent at rich people gaming the system. There was a widespread perception that people who had more money were getting a better supply, reinforced by occasional high-profile cases like the prosecution of Ivor Novello. It follows that if you have a black market, those who can afford to pay more will get more. That’s actually how the free market works in normal circumstances – the difference with the wartime black market being that the government’s policy was equal allocation and access for everyone. The advantages of wealth can work in two ways: the prices set in the black market are only affordable for a few; or people start paying (and taking) bribes for goods and services in the official economy.

Is this pandemic really like the War?
How does this relate to today? In the current context, this perception of unfairness could represent the long-term danger for the government. Our last crisis – the 2008 financial crisis – has left an enduring a legacy of public opinion feeling the rich got richer, bankers were bailed out and got away with it, while the poor suffered austerity. The Johnson Government’s reputation would be undoubtedly damaged by a resurgent, ungovernable and blatantly unfair black market. We may not be far away from people paying a supermarket manager for privileged out-of-hours access or paying inflated prices to get special access to the wholesale warehouses whose stock is stranded by the shutdown of schools and pubs. We are perhaps a bit further away from bribing an NHS official to get your child into hospital, but it has become a plausible scenario. Already in the EU before the pandemic, 19% of citizens said they had paid a bribe in the past year to access healthcare.

Alongside the wartime black market – thought of at the time as people doing illegal things and making money – sat a larger ‘grey market’ of people doing small favours for each other which was illegal but considered acceptable (think Corporal Jones the butcher slipping some extra steak to Mrs Mainwaring). Roodhouse describes this as ‘petty evasions that lay in the middle ground between legal dealings that society considered morally acceptable and illegal dealings that it did not.’ During wartime itself, the black market had some important self-regulating features, as both consumers and traders were generally governed by notions of patriotism and fairness. Do these exist today?

Learning from our current black market
It is not inevitable, but what we can certainly say about the current Covid-19 emergency is that the conditions are emerging both for a black market and for a related increase in bribe-paying. Supply is likely to be restricted as the infections and lockdowns affect both production and distribution. A black market is therefore likely to emerge over the next few months.

It’s worthwhile remembering that the UK already has a black market in some clearly identifiable areas – human trafficking (linked both the illegal immigration and the sex industry), counterfeit tobacco products, and – most obviously – the narcotics trade. This can tell us something already: that the UK is no different from other countries in terms of its propensity for black markets. It has benefited from a well-functioning official economy that allows people to buy what they need, and so no black market has been required in many goods.

There is almost no research that I am aware of that looks at the scale and prevalence of bribery within the existing black market in the UK. However, the UK Government’s Anti-Corruption Strategy and Serious & Organised Crime assessment both acknowledge the existence of the problem, and that is a good start.

Elsewhere in the world, the black market sees a thriving trade in illicit and counterfeit drugs. This might be a perfect time for those who peddle them so successfully elsewhere to introduce them into a UK health market whose practitioners and regulators are overwhelmed by the pandemic and whose patients are getting a bit restive. There are already shortages of paracetamol in supermarkets. While you are in lockdown at home, why not buy some online from a respectable looking website, even if you have not used it before? It’s only a short step – one click – away from buying those heart pills you could not pick up due to the queue at the pharmacy.

Who is actually in charge?
Who should we expect to take an overview of the corruption risk related to an expanded black market – and coordinate a response? Er…we don’t know. The UK has no anti-corruption agency; it surely cannot be the Prime Minister’s Anti-Corruption Champion, a part-time role occupied by a backbench MP, however capable he may be. Is he part of Cobra planning? No. Does he have the resources to do a risk analysis? No. Has anyone in government actually even thought about the corruption risk related to the pandemic and the black market? In all honesty, it is very unlikely.

Of course, none of this may come to pass. The pandemic may be brought under control with minimal interruption to supplies (though pictures of empty supermarket shelves give a foretaste of how quickly things can change). The black market may not expand beyond its current niche of organised crime trading in specific goods. Counterfeit and illegal medicines may still be kept out of the UK. The Government can hope for the best, or assess the risks and put in place sensible mitigation plans. Like the pandemic, the message on managing the corruption risks is the same. Get ahead of the curve: start planning now.

Standards in Public Life in the UK: A 2020 vision

It’s 25 years since the UK set up its Committee on Standards in Public Life. As author of the ‘Nolan principles’, the Committee has inspired other countries around the world to introduce codes of conduct for public officials and politicians, but what has become of the UK standards landscape in the meantime? In this post, CSC researcher Rebecca Dobson Phillips maps the landscape.

In the heat of our fast-paced, media-focused culture, it is perhaps inevitable that interest in public standards peaks in the wake of a scandal and then troughs in the quiet in-between when much of the real work is done. The 25-year anniversary of the Committee on Standards in Public Life (CSPL) therefore provides a welcome opportunity to reflect on public standards more broadly, as a public good with a frontline role protecting our democratic institutions from corruption, conflicts of interest and other forms of misconduct.

I was delighted to be commissioned by the Committee to undertake a new mapping exercise of the standards landscape in England and reflect on the key changes over the past quarter-century. The full review, published today, provides an overview of the standards landscape effective in central and local government in the United Kingdom. This offers a vantage point from which to view the landscape’s shape and form over time, its strengths and weaknesses, and challenges to the maintenance of public standards in the context of emerging technological, social and political pressures.

The public standards landscape is conceived broadly. It ranges from Westminster and Whitehall to the judiciary and local government, and also incorporates groups that formerly might not have been considered public entities at all, including political parties and third-party actors such as lobbyists and private sector providers of public services. This broad approach reflects the concerns of the CSPL as it has responded to the demands of a shifting political culture and the take up of governance approaches that have blurred the distinction between the public and private spheres.

The Mapping Exercise charts the embedding of standards through codes of conduct, transparency and accountability mechanisms, ethics training and tailored advice. However, the direction and speed of travel is uneven and there remains significant discretion particularly in political and judicial institutions, which have a preference for self-regulation and case-by-case judgments. These exceptions serve to maintain the sovereignty of political decision-making and the independence and impartiality of the judiciary. However, they also reveal the clear limits of bureaucratic accountability, highlighting the importance of simultaneously supporting democratic processes and the rule of law to ensure our institutions are well governed, responsive to the public interest and provide effective checks on power.

The upholders of public standards have a crucial role in anticipating challenges, whether these originate in society—through changing public attitudes, the role of technology and social media, and the influence of lobbying groups—or from within political institutions, manifest in the policy decisions made by those in power. Success at the ballot box provides governments with the democratic mandate to reform governance arrangements in pursuit of their stated policy aims. However, it is important to recognise that such reforms can compromise existing standards frameworks. The unintended consequences of changing institutional cultures and ways of working in the pursuit of efficiency and effectiveness can have ethical consequences, potentially increasing the risks to high standards along the way.

We have a long tradition of thoughtful and balanced responses to ethical issues, possess a widely distributed system of public standards, and for the most part have well-embedded cultures of integrity in our public institutions. But this is not a moment for complacency. We are experiencing a period of profound social and political change, which will likely test the limits of the standards regime. Public standards are not inalienable; to a large degree they rely on shared principles and trust in others, and this trust can easily erode during periods of change and uncertainty. In this context, the CSPL’s Seven Principles of Public Life are an essential reminder to all—whatever the pressures of the time—of the duty to act with integrity and without bias and in the public interest.

The Committee on Standards in Public Life first published this blog on 24 February 2020.

The Report can be accessed here.

Building public procurement integrity in Jamaica

Public procurement is one of the key ways of corruptly channelling money out of the state, not least because it is one of the few areas of public spending where there is significant discretion. In a well-functioning state, there are many bodies with an interest in controlling and overseeing procurement. Yet it is surprisingly rare to see all the parties together in the same room, talking about how they can work together. As CSC Director Liz David-Barrett explains here, that is exactly what just happened in an intense two-day workshop on analysing procurement data for integrity risks in Jamaica.

Our main partner, and co-organiser of the workshop, is the Integrity Commission of Jamaica. With a mandate to prevent, investigate, and prosecute corruption, one of the Integrity Commission’s core functions is to oversee public procurement. Moreover, it is because they – and one of their predecessor organisations, the Office of the Contractor General – have been collecting and publishing public procurement data since 2006, that we were able to select Jamaica as one of the countries of analysis in our GI-ACE research.

Jamaica was an obvious choice for our follow-on work, in which we are collaborating with the Integrity Commission to develop an online interface that will make it much easier to analyse procurement data. As well as having good data, there are a number of highly competent interested agencies in Jamaica, with various roles in overseeing contracting, and longstanding Department for International Development (UK-DFID) support for local agencies that work to fight grand corruption and organised crime.

The Integrity Commission expertly convened a group of potential users from a range of government agencies to attend our workshop. As well as their own investigators and monitors, and their data collection and analysis team, they invited several other organisations to the table. Over the two days, we learned about the many different ways in which analysis of procurement data could assist their work.

Instead of relying on a random sample, the Auditor General, for example, is interested in running a series of analyses of supplier risk, sectoral risk, and cost over-runs, as a preliminary risk assessment that would help them choose more selectively where to target their audit resources. Another government agency, meanwhile, is interested in matching up how much companies declare in income with the value of the contracts they have been awarded. Yet another wants to improve project implementation throughout the public procurement process.

The Public Procurement Commission, which is responsible for checking the credentials of companies that wish to register to participate in public tenders, is keen to develop a mechanism for evaluating contract performance. They also would like to identify conflicts of interest among public bodies and contractors, and create risk profiles for suppliers. Such information might inform their decisions to deny access to public contracts, or to downgrade or suspend the registration of suppliers.

Policymakers also are keen to build an evidence base that can inform future policy design, using the tool to compare competitive and non-competitive processes, assessing the impact of a change in thresholds, and to tracking efficiency in areas such as framework agreements.

Law enforcement agencies emphasise the generation of evidence about individual cases, which can include tracing conflicts of interest and gaining a sense of contract-level and supplier risk patterns.

There was huge enthusiasm in the room for developing a user-friendly tool to detect corruption in contracting. Our next step is to assess just how many of these needs we can meet in the online portal design. Much of that depends on the underlying data, but where we can’t immediately fulfil a need, we will be able to highlight areas where collecting more data could underpin enhanced analysis in the future.

The workshop has already had one big benefit: It helped create awareness and support networks among these varied agencies on how they can work together. One participant reported, “It was rewarding to get the different views on the challenges faced and the different suggestions and remedies; it also opened the gate for future collaboration,” while another commented, “The information from the other participants served to show the endless connections and the interconnectedness that can be achieved.”

Fighting corruption is partly about having the evidence base to design good policy, but it’s also about having the right teams in place to implement it.

This blog was previously posted by the Global Integrity-ACE programme.

Trump, Corruption and Impeachment

With an impeachment process against US President Donald Trump underway, Dan Hough, Professor of Politics at the University of Sussex, examines whether the actions of President Trump fall under standard definitions of corruption. He concludes that if you are interested in the facts and not partisanship, whichever way you choose to examine them, this is a President who has acted corruptly.

On 18 December 2019 Donald Trump became the third American President to be impeached by the House of Representatives. The House voted 230-197 in favour of the proposition that Trump had abused his office and 229-198 in favour of the notion that he had obstructed attempts by Congress to get to the bottom of what was going on when he infamously spoke to Ukrainian President, Volodymyr Zelenskiy, on 25 July 2019. In effect, the House found Trump guilty of corruption.

In due course, the Senate, the upper chamber of Congress, will likely have its say on the matter. The outcome there is likely to be very different. It will be a major surprise if any of the Republican lawmakers vote against Trump and the staunchness of his support there will ensure that he survives in office. Indeed, the experiences of both Andrew Johnson and Bill Clinton, the two previously impeached American presidents, would indicate that the president has a fair chance of moving on and winning re-election in 2020.

Partisanship on Steroids
Why and how are the two chambers likely to come to such different judgements? It is certainly clear that American politics is suffering from partisanship on steroids. The debates in the House on Wednesday gave the impression that Democrats and Republicans were living in completely different worlds. “Our founders’ vision of a republic” claimed House Speaker (and Democrat) Nancy Pelosi “is under threat from actions from the White House”. She then added that if she had not acted to facilitate impeachment that would be nothing short of a “dereliction of duty”.

Other Democrats queued up to agree with her. Jerrold Naylor, a Democrat from New York, argued that Trump’s actions were an affront to American values and that he “abused the powers of his office” when pressuring Ukraine to help his re-election campaign. Others on the Democratic side of the aisle made much the same case.

Republican Congressmen, meanwhile, saw things totally differently. For many this was nothing short of an attempt to overturn the 2016 presidential election result. Kevin McCarthy spoke for many when he claimed that the ‘Democrats have wanted to impeach President Trump since the day he was elected” before adding that “nothing was going to get in their way, certainly not the truth”.

Clay Higgins didn’t shy away from using particularly colourful language, claiming that “he’d descended into the belly of the beast” and that he was witnessing “the terror within”, inferring that insidious forces were trying to take over America. Barry Loudermilk nonetheless topped off the defence of the president by claiming that even Pontius Pilate “was afforded more rights than the Democrats have afforded this president in this process”. Quite the claim.

Process versus states of affairs
So what of the evidence? Did President Trump behave in a way that could be understood as worthy of impeachment? The literature on corruption offers us plenty of insight. It is nonetheless worth noting that much of the analysis of corruption has traditionally got stuck in a definitional quagmire. This is world that has often been full of shades of grey.

Be that as it may, two distinct approaches exist to making sense of what corruption is. On the one hand corruption is seen as a process. On the other hand some observers tend to look at it more as a state of affairs. Both of these approaches have merit but they also lead analysts to instinctively look for different things.

Process-led definitions of corruption generally centre around four key traits. All of them need to be present for an act to be understood as corrupt. The act in question has to be performed deliberately. Corruption is neither accidental nor a result of incompetence. Actors have to wilfully seek a particular outcome (regardless of whether that outcome actually comes to pass).

Secondly, there has to be a form of abuse involved. Public servants have job specs. There are rules and regulations that stipulate what is and what is not appropriate behaviour. If they go beyond these guidelines then abuse can be said to have occurred.

Thirdly, at least one of the actors involved in corrupt transactions has to enjoy entrusted power. This is nothing more than a statement of the obvious. If none of the actors involved have any power to wield, then they won’t be in a position to engage in a corrupt transaction.

Finally, there has to be some sort of private gain involved. That gain may often be financial, but it could nonetheless come in a range of other forms; bolstering a reputation, saving face, gaining access to other non-financial services. The scope of potential private gains is consequently quite large.

States of Affairs
This transactional definition has come to dominate much of the real-world thinking on corruption. There is, however, a small but powerful literature that looks at what is often known as institutional corruption. This approach to understanding corruption harks back to the thinking of some of the great philosophers. They put morals and ethics at the core of their understanding of corrupt activity.

In this reading corruption happens when those involved move away from a virtuous state of affairs. Corruption is what becomes the norm when leaders are attracted by the twin vices of greed and avarice. It is not about particular sets of actions or indeed one particular person (although given individuals can play prominent roles), it is much more about a move from selfless leadership to immoral behaviour. One powerful analysis within this tradition is Ramsey MacMullen’s 1990 story of how corruption ultimately led to the fall of the Rome. It is well worth a read.

Trump, Ukraine, Congress and Corruption
Given these two distinct approaches to understanding corrupt activity, where does Trump and his phone calls and impeachment bombast fit in? First, the transactional approach;

1. Deliberateness. When Trump made his call to President Zelenskiy it appears abundantly clear that he knew what he was doing. Indeed, Gordon Sondland, Trump’s former ambassador to the European Union, testified on the record that Trump was striking a quid pro quo that involved releasing aid and investigating a potential rival for the presidency in 2020. Zelenskiy, the Ukrainian President may well deny this, but, as the saying goes, he would, wouldn’t he.

That having been said, we can’t get inside Trump’s head to know for sure what he was thinking during that conversation. Zelenskiy’s denial also complicates matters. But these caveats are still not enough to seriously give credence to the idea that this was all one big accident. If that were the case then – unless the person admitted to corruption in public – we’d never be able to illustrate corruption in any case ever.

2. Abuse. The president of the United States has a job spec. It is not a traditional contract of employment (the US Constitution says very little about presidential powers), but the nature of the presidential brief is outlined in a number of places. These ranging from the US constitution to the oath that he/she takes on Capitol Hill when formally taking office. A fundamental part of that job spec involves using his/her judgement to assess appropriate ways forward. The president makes calls, and he/she makes them in line with what he/she judges to be best for the American people in line with what the constitution permits.

Given this, Democrats – and indeed many of those who testified in the meetings that led up to the House’s impeachment hearing – argued that seeking to persuade a foreign country to investigate a political opponent whilst potentially withholding aid clearly overstepped the mark. Nowhere, so they argued, is the president allowed to take decisions solely on the basis of advancing of what appears to be his/her own personal agenda.

As of now, the president’s supporters (and indeed the president himself) have simply refused to engage with this. Trump called the conversation the “perfect phone call” and no one defending him has explained why exactly Trump took the approach that he did. In what way was Trump’s behaviour in the national (rather than the personal) interest? We don’t know. Indeed, Trump’s tubthumpers generally just reject claims of abuse of office out of hand.

It is that out and out rejection that makes those very claims of abuse more persuasive. Putting it another way, I can claim that Shrewsbury Town Football Club are the current Premier League champions. If a critic then points out, say, that Manchester City actually won that crown last season and indeed Shrewsbury Town aren’t even in the same division then a Trumpian response would simply be not to engage, to reject the criticisms out of hand and to double down on what is an outlandish claim. In the cold light of day, this does little to help refute the allegations made.

3. Entrusted Power. All American presidents are entrusted with significant powers. That there are checks on these powers and that other institutions have a say in significant areas of policy is also a given. The president is not (by any means) all powerful, but even if there is disagreement on where presidential powers begin and end it is beyond debate that the president has some power to wield.

Given that, and much as was discussed above, the issue is whether in this case Trump abused the authority that he possesses. The arguments there remain much the same; the president appears to have had discussions with the leader of a foreign state with a view to forwarding his own domestic agenda. Given that the interests of the US state and the domestic interests of Donald Trump are not synonymous, Trump looks like he is on stony ground.

4. Private Gain. Traditionally, private gain has centred around financial interests. Given that Trump is the epitome of a transactional president, money has often been at the centre of allegations of improper conduct that have been made against him. In this case, the claims are different. This is about power. It is about trying to ensure that he gains an advantage over a political rival.

Does Trump or indeed do any of his supporters actually say this? No. But then again they are never going to. To do such a thing would be an open admission of corrupt behaviour. But is there enough evidence to substantiate accusations that Trump is acting for private gain? Certainly.

Denial and dismissal doesn’t equal genuine acquittal
A transactional approach to understanding corrupt activity therefore leaves us with little option but to understand Trump’s behaviour as at best problematic and at worst corrupt. His supporters may well be right that the Democrats have been looking to remove him since day one. They may also be correct that the partisanship that is paralysing American politics is driving much of the behaviour within and around the House (and indeed the Senate).

That, however, cannot render the facts themselves meaningless. Even if one were to prefer to take a non-transactional approach and to invoke the ideas of older philosophical thinking, Trump’s case hardly looks stronger. In that reading, corruption occurs when those involved are governing in their private interest and no longer in the public interest. The particular sets of actions that render something corrupt need not be directly stated, it is much more about a move from selfless leadership to immoral self-serving behaviour. That is hard to illustrate empirically, but that there is a case to be made is certainly true.

Donald Trump and his supporters have summarily failed to engage with the details of the cases to hand. Their approach has been one of outright rejection. That may ultimately prove to be a politically astute way of dealing with the fallout from Trump’s call to Kiev. But it is not a good way of unpacking what looks like a persuasive case illustrating that the American president has behaved in a corrupt manner.

Are UK aid-funded enforcement efforts to end the UK’s role in corruption working?

The UK is unique in using overseas aid money to fund its own enforcement authorities to help fight corruption in which the UK plays a role. Sue Hawley, Director of Spotlight on Corruption, an NGO that holds the UK to account on enforcing its anti-corruption laws, discusses a new evaluation which shows that this is working, albeit slowly

Since 2006, the UK’s Department for International Development (DFID) has given £48.5 million to UK law enforcement agencies to fight UK corruption that impacts on developing countries. Its stated goal in doing so is to reduce incentives:
• For corrupt individuals from developing countries to launder their money in the UK; and
• For UK companies and individuals to pay bribes in developing countries.

The funding is an important recognition of the “outsized role” the UK plays, as a major financial centre, in facilitating global corruption. Back in 2006 when the funding started, there were few UK law enforcement agencies that would touch a foreign bribery or corruption investigation. The UK was facing international opprobrium for dropping the BAE/Al Yamamah investigation, and its role in laundering the funds of former Nigerian Dictator, Sani Abacha’s, through London banks.

There is no doubt that by providing funding for UK enforcement, DFID helped kick-start more enforcement in this area in the UK. But as a major independent evaluation of the funding from 2006 to the present day is published, the question is: does funding enforcement actually reduce incentives for corruption?

Successful “to some extent” – key findings from the evaluation

DFID has always seen investment in enforcement as bringing good returns and the project has consistently met or exceeded its milestones. In 2019, law enforcement reported that £783.3 million in corrupt assets have been restrained as a result of the program. It is also great value for money: the amount restrained has always far exceeded the amount of money invested by DFID.

But the crucial question is whether this is actually deterring corrupt individuals from investing in the UK or UK companies from engaging in bribery. That is more difficult to gauge.

Deciding what has worked because of law enforcement specifically funded by DFID, as opposed to other significant institutional and policy developments in the UK, such as the introduction of the Bribery Act and Unexplained Wealth Orders, or increased enforcement by other non-DFID funded agencies such as the Serious Fraud Office, isn’t easy.

However, the evaluation’s key findings are broadly positive. It finds that:

1. The DFID funded law enforcement has “to some extent made the UK less attractive for Nigerian PEPs (Politically Exposed Persons)” wanting to launder corrupt wealth but not deterred them completely.

The evaluation focused heavily on Nigeria since the UK has historically been one of the most attractive destinations for Nigerian PEPs seeking to launder the proceeds of corruption. The high-profile UK convictions of various Nigerian governors for corruption, including James Ibori, particularly in the early stages of the DFID funding, and the introduction of Unexplained Wealth Orders (UWOs) were seen as key successes making the UK less attractive for laundering money. And the UK’s introduction of UWOs in January 2018 caused the hotline for Nigeria’s Voluntary Assets and Income Declaration Scheme to crash.

However, the review found that the supply of corrupt funds to the UK from Nigeria to the UK “continues to remain very high” and that Nigerian PEPs are resorting to “indirect means and new “tricks”” to launder money into the UK, “including the use of shell companies and routing funds via third countries.” The report also suggests that Nigerian PEPs are using alternative ‘easier’ locations for laundering money including Dubai, the British Virgin Islands, Ghana and the Caribbean islands, as well as keeping cash in Nigeria.

This increased use of new ‘tricks’ has made UK professional enablers “a more important actor” in laundering Nigerian money into the UK, the report finds. And the evaluation is critical of how few prosecutions there have been of UK-based enablers of laundering.

2. British companies are less likely to pay bribes since the DFID funded program came into existence. But that’s not all down to the program.

The review found that the DFID-funded law enforcement has helped create a “sanctions environment” which has reduced incentives for UK companies to pay bribes. Outreach programs and education by enforcement bodies to UK companies have also been very useful, it says.

However, the DFID-funded law enforcement has only resulted directly in bribery convictions for seven individuals and one corporate. A bigger impact on driving corporate behaviour change has been the introduction of the Bribery Act and enforcement by the Serious Fraud Office (SFO) – which has notched up nine successful criminal actions against companies in the same time frame.

While the SFO is meant to focus on the large players, the DFID-funded NCA’s International Corruption Unit has yet to conclude a successful bribery prosecution against a medium-sized or small company. The report concludes that just one successful case against a medium-sized UK company paying bribes in a developing country “would be highly impactful.”

Lessons for the future

The UK government has announced that it will continue, and increase, aid funding to law enforcement bodies from 2020 to 2025. So, what are the key lessons from the evaluation going forward?

The report makes no bones about its central conclusion in relation to both PEPs and companies, which is that while the threat of enforcement action may have some impact, “the evidence indicates that actual prosecutions are a more powerful catalyst for behaviour change.” Tellingly, the evaluation cites some evidence that companies waited until the first prosecution under the Bribery Act (in 2016) before committing to properly implementing their Anti-Bribery policies. The 2012 conviction of Nigerian governor, James Ibori, also sent major ripples through the Nigerian PEP community.

Overall, the evaluation recommends increased enforcement at all levels: more intense use of UWOs, more prosecutions of medium-sized companies for bribery and increased enforcement action against UK enablers of corruption.

The message is: keep going. Aid-funded law enforcement is working – at least to some extent. But more convictions are crucial to long-term success.

Addition 12 Dec 2019: In order to ensure a fair comparison between the SFO’s overseas corruption efforts and those funded by DFID, the correct figures are that the SFO has brought 9 corporate convictions and 19 individual convictions compared to one corporate conviction and 7 individuals for DFID funded enforcement.