Rule of Law Makes Good Business





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Four billion people, more than half of the Earth’s population, live outside of the rule of law according to a 2008 report by the United Nations Development Program.  Lack of rule of law is connected to human rights abuse, crippled democracies, and wasted national resources, a nexus that activists, NGOs and governments call attention to every day, often achieving significant change.

But the voice of the business community, one of the most powerful advocates for improving the rule of law in emerging markets, often goes unheard, left out of traditional coalitions for reform despite natural synergies on a range of issues. One of the most obvious is corruption. Corruption not only corrodes the institutions key to the functioning of a democratic state but it also perpetuates inefficient systems for conducting business and trade. It impedes starting a business, purchasing property, settling disputes, and managing risk. It spooks potential foreign investors and business partners.  Read More...

Ukraine Needs to Privatize its State-Owned Companies — But Rushing It Would Repeat the Mistakes of the Past


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Storied aviation company Antonov, makers of the world's largest cargo plane, is in no position to be privatized.

Storied aviation company Antonov, makers of the world’s largest cargo plane, is in no position to be privatized.

By Eric Hontz

The stakes for reforming Ukraine’s state-owned companies are high: these companies are the lifeblood of a corrupt, sclerotic crony capitalist system that scares away potential investors, drives off international donors, and robs the Ukrainian government of legitimacy. But  privatizing them as quickly as possible is not the solution.

Even after mass privatization in Ukraine in the 1990s, the government still owns a large portfolio of companies in a variety of sectors – from heavy industry to banking — that employ over 900,000 employees, far more than any private firm.  Reforming these state-owned enterprises (SOEs) has been a slow process and remains incomplete due to weak corporate governance, unmotivated management, and a near-total lack of transparency. None of these problems will be solved by simply speeding up the process.

The demand for rapid privatization is a familiar tune. Western “expert” advice in the early 1990s led to a huge transfer of wealth from the former Soviet Union to a handful of connected insiders, particularly in Russia: first through voucher privatization and later through the disastrously corrupt loans-for-shares schemes in the run-up to Russia’s 1996 election.

To get an idea of the scale involved, a 1993 paper by several Western economists who worked directly on the voucher privatization program estimated that most of the Russian Federation’s civilian industrial base – nearly every plant, factory, and mine in the country – was effectively sold off to insiders for between $5 and $10 billion, less than it would have cost to buy a single mid-sized Fortune 500 company (and roughly equal to the market capitalization of Whole Foods today). Still, at the time they regarded this program as a great success.

Unfortunately, the corrupt and predatory “oligarch” elite, created practically overnight, proved to be more interested in asset-stripping than in transforming their new firms into firms that could compete on world markets. What followed was the largest peacetime economic collapse of any country in recorded history. The sheer volume of banditry surrounding state assets during the 1990s led many average citizens in post-Soviet countries to believe that lower standards of living and a complete lack of justice were a natural part of living under democracy. Read more…

How Kenya’s Private Sector is Addressing the “Supply Side” of Corruption




Photo Credit: Citizen Digital

A recent report by Kenya’s Ethics and Anti-Corruption Commission (EACC) paints a rather grim picture of the extent of corruption in Kenya. In the top 10 counties by average bribe size, bribes range from KSH 80,000 (about $800 US) to about KSH 6,000 ($60 US) — in a country where the average monthly wage is just $76. Situations where bribes are most commonly solicited include obtaining basic services such as medical attention or a national identity card. Not surprisingly, Transparency International puts Kenya at 139th out of 168 countries in its latest corruption ranking.

Even a cursory review of Kenyan daily news coverage shows that corruption at all levels (from county to national) and in all its forms (from bribes to graft) is a major issue of concern for the country. Many commentators express frustration at the extent of the problem and the dearth of constructive solutions.  Read More...

You’re the new compliance chief. Now what?


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Screen+Shot+2016-03-18+at+9.45.48+AMThis blog first appeared in The FCPA Blog on March 18, 2016. It is posted here with permission.

By Worth MacMurray

Heads up: The six-month anniversary in your new position will arrive in a flash.

If you were hired as part of your organization’s response to a serious corruption allegation, you may still be in fire-fighting mode at this point, but starting to emerge for air.

If you were hired to design and implement your organization’s first compliance program, and basically to create your own role, you may be starting to encounter some obstacles.

Regardless of the circumstances of your hiring, you’ll arrive at the six-month point having likely accomplished more and laid better groundwork for the future if you ponder the following — both before you assume office and during your first few weeks on the job.

1. Manage your own expectations. The CCO role can be engaging and satisfying, particularly if one enjoys applying a variety of skills to challenging situations and issues.  Read More...

Leave it to the Ladies: Addressing Corruption Head-on to Attract Foreign Investment in Africa


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Photo Credit: U.S. Department of State

Despite the thick Lagos air and long journey 60 women entered the The Moorhouse hotel on a recent Saturday morning, exchanging excited greetings and fresh ideas. Women business leaders adorned in brightly colored fabric and empowered with strong ambitions went around the room introducing themselves and their businesses. It was the inaugural meeting of the Lagos chapter of the African Women’s Entrepreneurship Program (AWEP), launched by the U.S. Department of State in July 2010 to assist women entrepreneurs across sub-Saharan Africa. The program supports African women entrepreneurs to promote business growth, increase trade both regionally and to U.S. markets, create better business environments, and empower African women entrepreneurs to become voices of change in their communities. Although AWEP in Nigeria initially started as a group of women’s businesses in agriculture, the members now represent a variety of sectors including fashion, textiles, professional services, cosmetics, and home decor.  Since AWEP’s inception, chapters such as the Lagos chapter have started all over Africa bringing together 1,600 women entrepreneurs and 33 business associations across the continent creating over 17,000 jobs. Read more…

Countering Procurement Corruption with Integrity Pacts: The Indian Experience


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Photo Credit: Partnership for Transparency Fund

This blog appeared originally on March 4, 2016 on The Global Anti-Corruption Blog. It is re-posted here with permission.

by Nayana RenuKumar

Corruption in government procurement is a massive problem worldwide, especially in developing countries. In an ideal world, measures to combat procurement corruption would include structural changes that would open up monopolies, break cartels, and enact rational, uniform, and effective procurement laws. Sadly, the potential effectiveness of these measures is matched only by the near impossibility of their implementation any time soon. We should continue to push for comprehensive structural solutions to the procurement mess, of course. But in the meantime, are there other measures that can be implemented in countries struggling with widespread procurement corruption, which can at least help alleviate the problem?

One possible solution, heavily promoted by Transparency International (TI), is the use of so-called “Integrity Pacts” (IPs). An integrity pact is a voluntary agreement between a government agency and the bidders entering into a procurement contract, where both sides agree to refrain from corrupt practices.  Read More...

Q&A with Laura Alakija: Compliance for Mid-Sized Businesses in Nigeria



Alakija Laura Sterling Partnership 1.

Laura Alakija supports Nigerian businesses in establishing anti-corruption compliance programs. She is the Lead Counsel for the corporate law group within Nigeria’s Sterling Partnership law practice, which provides regulatory compliance advice and company secretariat support. Alakija advises local and international clients on business start-ups, licensing, permits and regulatory compliance requirements and has provided support to foreign investors from different jurisdictions including China, Kuwait, Italy, USA, Kenya, Canada, Switzerland and India on business entry into Nigeria. Alakija is a Barrister and Solicitor of the Supreme Court of Nigeria and a member of the Nigeria Bar Association and International Bar Association. Alakija received her LLM Transnational Oil, Gas and Energy Law for the University of Derby, United Kingdom. In a recent interview in Lagos Nigeria, CIPE program officer Laura Van Voorhees discussed Alakija’s experience supporting the compliance operations of small- and mid-sized businesses in Nigeria. 

  • What advice would you give to a business owner starting their business in Nigeria?

Keeping up with the Karimovs


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Photo Credit: Uzbekistan on Political Map Today

Late last week, one of the world’s largest integrated telecommunications services operators, VimpelCom, agreed to pay a $835 million settlement to U.S. and Dutch authorities.

The company is accused of paying $114 million to Uzbek president Islam Karimov’s relative, widely believed to be his daughter, Gulnara Karimova. The U.S. Department of Justice (DoJ) claims that VimpelCom used a network of shell companies and phony consulting contracts to funnel bribes to Karimova in exchange for access to Uzbekistan’s telecommunications market.

VimpelCom will pay $167.5 million to the U.S. Securities and Exchange Commission (SEC), $230.1 million to the DoJ, and $397.5 million to the Dutch public prosecution service. U.S. Assistant Attorney General Leslie R. Caldwell, stated that “the FCPA resolution in this case is also one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA, and demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”

The case is part of a wider investigation into alleged corruption involving Gulnara Karimova.    Read More...

When Corruption and Development Collide


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American University’s Washington School of Law is known for innovation. It was founded by two women in the late 19th century, a time when conventional views held that women lacked the temperament to practice law. Since then, the school has been a pioneer on gender issues, as well as launching programs on human rights and war crimes. So it was fitting that as the Washington School of Law marked the mid-February opening of a new Tenley campus in Washington, DC, attended by the city’s mayor and a Supreme Court justice, the celebrations included a nod to one of the school’s most recent innovations: the U.S. and International Anti-Corruption Summer Program.

The program is perhaps the only one of its kind globally based in a law school. It features practitioners as instructors, and has an international scope reaching beyond the traditional U.S. preoccupation with the Foreign Corrupt Practices Act. The second day of Washington Law School’s celebration, February 13, featured a series of panel discussions including one on “Recent Developments in International Anti-Corruption Law and Practice,” organized and moderated by Program Director Nancy Boswell.

“I find this issue engaging because it raises not only legal issues, but, more fundamentally, hits at our core values as individuals. It leads us to ask what we believe is right and fair, regardless of whether it’s legal,” said Boswell in framing the event for some 30 attendees. Read more…

Corruption: It’s Just Unattractive


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In early January, Norway’s sovereign wealth fund decided to divest its entire stake — approximately $11.37 million — in the Chinese company ZTE because the company is facing corruption allegations in 18 countries, 11 of which have launched formal investigations.

The move by the world’s largest sovereign wealth fund followed an assessment by the Council of Ethics, the body that advises oil-rich Norway’s central bank on investments. “The Council has concluded that the company has failed to demonstrate satisfactorily that internal anticorruption procedures are being effectively implemented,” a statement said. “There is an unacceptable risk that the company may once again become involved in gross corruption.” Read more…