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Thursday
Jun082017

Stephen Zimmermann: The importance of administrative remedies in the fight against corruption

Responding to persistent corruption in countries around the world takes more than a commitment to a Convention and adoption of sweeping legislation to achieve meaningful progress. A broad view, an innovative approach and a willingness to look across a wide spectrum of solutions are all critical.

When we hear of corruption, we think a criminal offense. And indeed there is no stronger deterrent than fear of losing one’s freedom and spending quality time behind bars. But criminal justice is hard. The stakes are high and the commensurate legal protections provided criminal defendants are justifiably strong. And then you have the crime itself. It is  -- by its very nature -- extraordinarily hard to prove and at times even to detect.

As a result, using the sledge hammer of criminal justice as the primary tool to combat corruption leads too often to frustration and very unsatisfying resolutions. The culpable do not get their just desserts. Worse yet, prevention, always based on deterrence and a well-founded fear of punishment, may be undermined. If history shows that you are likely going to get away with it, then carry on.

We don’t have to look far for some compelling examples. Recently, the United States Supreme Court overturned the conviction of Governor of the Commonwealth of Virginia, Bob McDonnell, on the grounds that, although the Governor received loans and lavish gifts from a local businessman, the quid pro quo he received did not, in the view of the Court, involve official acts, that is there was no promise to help secure a favorable decision from the government. As a result, the conviction was overturned.

Another example emanates from a World Bank investigation into allegations that SNC-Lavalin was negotiating to pay bribes to officials in Bangladesh for a $50 million contract in connection with the construction of the Padma Bridge. Based in part on information supplied by the World Bank, Canadian authorities got judicial authorization for a wiretap and search warrants. The investigation culminated in charging several senior SNC Lavalin employees with criminal violations. 

At a preliminary hearing the prosecution presented evidence of the corrupt acts by those charged. The transcript of that hearing, now publicly available, confirms that substantial evidence of the corrupt scheme had been collected by Canadian authorities. But the criminal case hit procedural challenges.

First, the Supreme Court of Canada upheld the applicability of the World Bank’s privileges and immunities and reversed the trial court’s order that the Bank open up its internal files for review. Then the trial court concluded that an earlier court decision to permit the wiretaps had been improperly granted on procedural grounds. That resulted in the exclusion of the critical evidence of corruption that had been described at the Preliminary Hearing;including the notes of the meetings with government officials. Facing a substantially weakened case without this evidence, the prosecutors dropped their criminal charges. Although the technical challenges of a criminal prosecution proved to be too high, the bountiful evidence of corruption remains.

While we must ensure criminal defendants rights are protected and they get the process they are due, we must also make sure that when evidence points to corruption there are appropriate consequences, be they criminal or administrative. In the case of SNC-Lavalin, the administrative process of the World Bank did ultimately succeed in adjudicating the misconduct. Long before the wiretap evidence was thrown out, SNC-Lavalin voluntarily agreed to a ten-year debarment for the company for corruption.

These cases demonstrate that reliance on criminal prosecutions is simply not enough. While it may be the sharpest of arrows in the quiver, it is too likely miss the mark or simply fall short. Thus, it is critical that we look to alternative outcomes and innovative mechanisms to keep raising the cost of corruption.  A range of administrative penalties can often be imposed with greater efficiency and face fewer obstacles while still creating huge disincentives for corruption.

The World Bank’s sanctions system is but one example. The World Bank has created the first global administrative mechanism, designed to investigate and adjudicate violations of the Bank’s own anti-corruption policies in order to help mitigate integrity risks, while still helping our member countries fight poverty.

The most severe sanction that can be imposed is debarment but resolutions can also include conditional non-debarment whereby a party can remain eligible to receive Bank-financed contracts -- but only if they fully meet certain conditions. In our experience, conditional non-debarment is extremely useful for making Bank sanctions proportionate to both a firm’s misconduct, while also addressing risks still facing the Bank. But it is reserved for select cases; that is where a company chooses to voluntarily reform and proactively disclose misconduct that would otherwise go undiscovered.

To tackle corruption effectively, we must expand our toolkit of alternative remedies that can work in parallel or as alternatives to the traditional criminal justice system. Fortunately, there are a growing number of examples of the use of administrative systems, in addition to the World Bank.

For example, this year Mexico’s new law on Administrative Accountability will go into effect. It requires public servants to make public declarations of assets; creates a hiring protocol and an integrity policy that imposes administrative sanctions for administrative violations that include bribery, influence peddling, use of false information, obstruction and collusion.

Criminal convictions for corruption are notorious and usually much more well publicized than administrative remedies that remain the poor step-sister, often known only to the parties and the administrative agency that has gone to the trouble of imposing the penalty.

But were these administrative penalties more widely known they can create just as much of a ripple in the pond as a criminal conviction. Procurement officers would certainly be interested in learning of penalties imposed by colleagues around the world for integrity shortcomings on a firm being considered for a public contract.

To this end, the Bank is creating a “Global Information Sharing Mechanism on Administrative Remedies against Corruption (ARC).” We are collecting and organizing a range of data relating to nationally imposed administrative penalties for corruption. Our intention is to make this database a global good, available to any that are interested. A team of data scientists is now developing a methodology and algorithm for collecting and aggregating the data from around the world, and a prototype will be ready for testing later this year.

To take the fight against corruption forward in an era where technology has given us the tools for radical transparency, we must look outside the box and continue to add new arrows to our quiver. Broadening the use and impact of administrative remedies is just one idea among many, but shows great promise in promoting proper incentives and raising the bar of integrity. 

_____

Stephen Zimmermann is the Director of Operations at the World Bank Integrity Vice Presidency.

Reader Comments (4)

Great article and ARC is a great idea Steve! I hope the Bank will also support efforts to create ARC's of varying kinds in the developing countries where it does business. These countries need to rely more on administrative mechanisms and sanctions more than anyone given the reality that many of their justice systems are either systemically corrupt, captive by governments, big business or the elites or too weak to render fair and impartial justice. We also have learned that imposing anti-corruption conditionality in some cases is a necessary incentive and strategic guidepost that promotes more transparency, accountability and citizen action.
June 8, 2017 | Unregistered Commenterkeith henderson
Terrific article Steve! I look forward to the ARC. Convincing investigators and prosecutors of the value of administrative remedies has always been a challenge, particularly as these remedies are outside of their control and are not as public. Nonetheless, their impact is often more substantial than any criminal or civil action, and longer lasting. Keith's comment is right on point as to some foreign judicial systems. Statistics regarding enforcement of the OECD Convention on Combating Bribery indicate that while many countries have signed up to the anti-bribery convention, enforcement still lags, for many of the reasons you both point out.
June 8, 2017 | Unregistered CommenterRuss Geoffrey
I fully agree with the fundamentals your article. In the case of my country, I am particularly concerned about Argentina's current bill (in Congress since October 2016), which relies entirely on the criminal justice system to sanction legal entities for corruption-related crimes. Thank you for putting it so clear!
June 9, 2017 | Unregistered CommenterRoberto Bauzá
Stephen,

I agree completely with your thesis - but in many countries the problem is that no such administrative remedies exist or if they do, they are not timely - and therefore, for practical purposes, irrelevant. My article in the recent Columbia Law School-sponsored American Journal of international Arbitration focuses a lot of effort to zero in on that point. I will try to e-mail it to you. if you have comments, please let me know.

thanks,

Judd Kessler
June 9, 2017 | Unregistered CommenterJudd L. Kessler
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