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Implementing Russias Battle Against Corruption


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How is Russia implementing its 2008 Law "On Counteracting Corruption"? This presentation examines this issue and its political implications.

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Implementing Russias Battle Against Corruption

  1. 1. Ethan S. Burger, Esq. Adjunct Professor Georgetown University Law Center [email_address] The Russian Anti-Corruption Campaign: Substance or Politics/Public Relations? Harriman Institute, March 2010
  2. 2. Three Levels of Corruption <ul><li>Vital – ‘high’ stakes (fixing of major court case, governmental approvals where recipient is not entitled to them, awarding of contracts, etc.). </li></ul><ul><li>Functional – ‘medium’ stakes (governmental approvals where recipient is entitled to seek, getting documents notarized, education-related bribery). </li></ul><ul><li>Routine – ‘low’ stakes (e.g. avoid “speeding” ticket; minor health/safety violations). </li></ul><ul><li>Under this framework, the greater the payoff for a corrupt act, assuming </li></ul><ul><li>the risk of detection and punishment are the same, the more persons </li></ul><ul><li>generally are willing to engage in unlawful acts. In most instances, a </li></ul><ul><li>majority of corrupt acts are committed in pursuit of money. To a lesser </li></ul><ul><li>extent, corruption is the result of one’s desire to increase their political </li></ul><ul><li>power – that is the ability to get others (both individuals and </li></ul><ul><li>institutions), to further the primary beneficiary of the corruption. </li></ul>
  3. 3. Consequences of Corruption <ul><li>petty corruption that has only has impact on the briber-payer and recipient (e.g. militiamen extorts bribes from car drivers for allegedly speeding or insider-trading leading to a fraud on the marker); </li></ul><ul><li>individualized public corruption -- bribes are extorted/volunteered by owners of a businesses (e.g. hospitals, hotels, manufacturers, etc.) that might not otherwise pass inspection or licenses are obtain one that to which they are not entitled to receive potentially harming society (users of bribers' services are harmed and potentially others), and </li></ul><ul><li>bribes are paid during tender process for government contracts or privatization leading to the construction of unsafe and/or costly tunnel/building or factory or natural resource is purchased for a fraction of true value that harms society as government gets less than it is entitled – arguably depriving government of funds needed to pay for services (if government would provide services). </li></ul>
  4. 4. Some Comparative Perspective <ul><li>Former French President Jacques Chirac indicted for misuse of public funds for period 1983-95 (became President in 1995). Others French officials indicted in connection to illegal arm sales to Angola. President Nicholas Sarkozy admits mistake to have his son appointed the head of the Paris suburb La Defense. </li></ul><ul><li>Former Illinois Governor Rod R. Blagojevich of Illinois was impeached after his indictment for seek to selling political favors in exchange for campaign contributions. </li></ul><ul><li>In connection with post-Katrina governmental efforts, a special government task force -- at least 1,300 individuals indicted. </li></ul><ul><li>V.P. Cheney’s advisor Scooter Libber convicted of perjury; former Republican congressional leader Tom DeLay (TX) resigned after indictment; his spokesman, Michael Scanlon, pled guilty to bribery charges and cooperated to convict of Republican lobbyist Jack Abramoff. </li></ul><ul><li>Medicare fraud - estimated now to total about $60 billion a year - has become one of, if not the most profitable, crimes in America. </li></ul>
  5. 5. Medvedev’s Best Laid Plans <ul><li>May 2008, Medvedev issued edict creating Presidential Anti-Corruption Council. </li></ul><ul><li>September 2008, Council’s Presidium detailed National Plan for Countering Corruption containing systematic action plan. </li></ul><ul><li>November 2008, Medvedev identifies combating corruption as major priority in his First Annual Address to the Federal Assembly as President. </li></ul><ul><li>December 25, 2008, Law enacted -- milestone or missed opportunity? </li></ul><ul><li>Procuracy, FSB, non-governmental specialists want to leave their imprint on the forthcoming laws. </li></ul><ul><li>Future legislative and administrative changes anticipated as “gap fillers.” </li></ul><ul><li>March 2009, Medvedev in an interview candidly acknowledged that Russia is not ready to implement new anti-corruption laws, but he will declare his income. </li></ul>
  6. 6. Objectives of the 2008 Law “On Counteracting Corruption” <ul><li>Systematize and enforce existing “Black Letter” law dealing with state service and criminal law. </li></ul><ul><li>Some Significant Features of the Law require: </li></ul><ul><ul><li>(i) state officials to declare income & net wealth (existing requirement); </li></ul></ul><ul><ul><li>(ii) state officials to report “ratting” on corrupt colleagues, i.e. inform on others’ unlawful conduct (innovation); </li></ul></ul><ul><ul><li>(iii) observe conflict of interests rules, and </li></ul></ul><ul><ul><li>(iv) tenders for state purchases to be held on a competitive basis (eliminate loopholes and give teeth to existing rules and procedures). </li></ul></ul><ul><li>BUT WITHOUT FOLLOW-UP (E.G., SEEING WHETHER TAXES WERE PROPERLY PAID AND THAT OTHER LAWS HAVE NOT BEEN VIOLATED) THE NEW LAW HAS BEEN CHARACTERIZED BY IRINA GRANIK AS “TOOTHLESS.” </li></ul>
  7. 7. Further Refinement of the Program <ul><li>Edict No. 558 -- presentation of information by persons seeking to become or serving as state officials about their income, property and obligations of a property character (hereinafter “financial data”).– May 2009. </li></ul><ul><li>Edict No. 557 – on the approval of the list of federal positions subject to mandatory presentation of their financial data (as well as spouses and children) – May 2009.. </li></ul><ul><li>Edict No. 559 -- presentation of information by persons seeking or serving in positions with federal state agencies about their financial data – May 2009. </li></ul><ul><li>Edict No. 561 -- on the approval of the procedure for the presentation of financial data of federal state officials on state websites and to means of mass communication for publication – May 2009. </li></ul><ul><li>Edict No. 560 -- presentation of information by persons seeking or serving in positions in state enterprises, foundations, etc. of financial data (as well as spouses and children) – May 2009. </li></ul><ul><li>Federal Law No. 172-FZ , “On the anticorruption expert examination of normative legal acts and draft normative legal acts,” July 7, 2009 . </li></ul><ul><li>Edict No. 208, “On Several measures for reform of the Ministry for Internal Affairs of the Russian Federation,” February 18, 2010. </li></ul>
  8. 8. Night of the Long Knives? <ul><li>President Medvedev replaces two Deputy MVD Ministers and replaces them with 2 persons from his Presidential Administration (Gerasimov & Bulavin – it is rumored that Sergei Stepashin may be returning to Head the MVD). </li></ul><ul><li>16 Generals either fired or transferred (8) to date. Medvedev issues Edicts to reorganize MVD – substantive and structural. What is Putin’s attitude? </li></ul><ul><li>Only time will tell whether Brian Whitmore is correct that we are now witnessing the President replacing siloviki (having a professional background and presumably world view more akin to that of Mr. Putin) with civiliki (i.e. civilians likely to recognize the importance of bring the rule of law to Russia). </li></ul>
  9. 9. Illustrative 2010 MVD Reforms <ul><li>50% reduction in MVD Central Apparatus. </li></ul><ul><li>20% total reduction of MVD personnel. </li></ul><ul><li>New MVD Northern Caucasus District established. </li></ul><ul><li>Foreign Migration Service to handle deportation of foreigners. </li></ul><ul><li>Corruption by MVD personnel to be treated more severely. </li></ul><ul><li>Ministry of Health to handle detoxificiation . </li></ul>
  10. 10. Too Much Optimism? <ul><li>“ A reform of the law enforcement bodies of the country of such scale Russia has never seen before. In a single moment, more MVD officials that during the entire tenure of Vladimir Putin were put into retirement. . . .The head of state has launched a decisive offensive, showing that he may is not only someone who says freedom is better than the absence of freedom, but he is prepared to fight for this important territory.” </li></ul><ul><li>Is Medvedev telling senior governmental officials that the Putin era is over, change or be replaced by Medvedev’s “ civiliki”? </li></ul>
  11. 11. The Executive Control System <ul><li>Control over Natural Resources & Licenses (January 2009 law in contradiction to Constitution eliminates regional/local control over natural resources and environment. </li></ul><ul><li>Control over the Investigative Committee (in theory). </li></ul><ul><li>Control over the Courts (in theory). </li></ul><ul><li>Control over FSB, MVD & Military (in theory). </li></ul><ul><li>How important is Medvedev’s Modernization Program? </li></ul><ul><li>Is the Institute for Contemporary Development [Институт современного развития (INSOR) Report the roadmap being followed? </li></ul>
  12. 12. Russian Bribery Allegedly Up 13% in 2009 <ul><li>According to the MVD Investigative Committee says that in 2009 8-fold increase in economic crime. </li></ul><ul><li>Bribery increased by 13 percent and &quot;one of the most widespread forms of corrupt activity investigated” by MVD. </li></ul><ul><li>President Dmitry Medvedev orders overhaul of the MVD cuts militia by 20 percent and promises salary increases. </li></ul><ul><li>MVD Minister Rashid Nurgaliyev loses his right to nominate the MVD’s investigative committee head, to be now be nominated by the prime minister. He survived the purge, but for how long? </li></ul><ul><li>Audit Chamber Head Stepashin proposed dividing the ministry into 3 departments: (i) regular law enforcement, (ii) serious crimes, including corruption, and (iii) paramilitary forces. </li></ul><ul><li>Stepashin has called for MVD role in the economic sphere to be curtailed – he seems to have gotten his way. </li></ul><ul><li>Alexander Bastrykin, Investigative Committee Head proposed that a separate agency be created to handle economic offences. </li></ul>
  13. 13. Has Procurator General Yuri Chaika’s Wings Been Clipped? <ul><li>In late 2009, Procurator General Chaika fired Anatoly Bagmet, Head of Moscow Investigative Branch of the Procuracy? </li></ul><ul><li>Under the Procuracy Law, only Investigative Committee Head Bastrykin can fire Bagmet, then Chaika was forced to cancel the dismissal order. </li></ul><ul><li>An inter-factional war between Medvedev (Chaika’s patron – until possibly replaced by former Medvedev law school classmate Aleksandr Konovolov now Minister of Justice) and Putin (Bastrykin’s patron). </li></ul><ul><li>Mr Bagmet has investigated many of Russia’s most political cases since taking up his post in 2008. He headed the inquiry into Sergei Storchak, the deputy finance minister and ally of Aleksei Kudrin, finance minister. </li></ul>
  14. 14. Prior High-Level Corrupt Officials <ul><li>Karelian Vice Premier Vladimir Sobinsky - from 2005-07, Sobinsky and his subordinates allocated 40+ bodies of water to commercial fishing operations without conducting a competitive bidding process or charging a fee. </li></ul><ul><li>Kurganskaya Oblast’s Deputy Governor Anatoly Bondarev - violated Criminal Code Art. 285.2 -- Abuse of Official Position to ensure that a company he had ties to won a public tender to construct a communal heat supply system, </li></ul><ul><li>Orlovskaya Oblast’s Deputy Governor Vitaly Kochuev - guilty of illegally withdrawing funds from a government account paying $20,000 to buy a government-owned hotel complex worth $608,000. </li></ul><ul><li>The Procuracy wants the right to seize property in cases where there still are no suspects and to challenge arbitrazh (commercial) court decisions. What would be the implications of expanding the Procuracy’s power? </li></ul><ul><li>Is there a pro-Medvedev shift – watch whether Presidential Administration Head Sergei Naryshkin is replaced. </li></ul>
  15. 15. Federal Districts & The Power Vertical <ul><li>Central District– Moscow </li></ul><ul><li>Southern District - Rostov -on-Don (Caucasus) </li></ul><ul><li>Northwestern District - Saint Petersburg </li></ul><ul><li>Far Eastern District – Khabarovsk /( Vladivostok & Nakhodka) </li></ul><ul><li>Siberian Federal – Novosibirsk /( Omsk) </li></ul><ul><li>Urals Federal – Yekatrinburg </li></ul><ul><li>Volga Federal -- Nizhny Novgorod </li></ul>
  16. 16. Winners and Losers <ul><li>After the onset of the economic crisis, the power of “autonomous oligarchs” has largely ended. </li></ul><ul><li>How should the State’s loans and subsidies be distributed? </li></ul><ul><li>The political leadership can further use the economy for political purposes – but is that “corruption” – what about other goals. </li></ul><ul><li>Reports that some oligarchs who own firms in “one company” towns may be covertly organizing strikes in order to extract money from a central Russian government that is increasingly fearful that such protests could spread. </li></ul><ul><li>The “Dictatorship of Law” that weakened the Oligarchs was carried out by the Siloviki , but now we have a Dictatorship of “Ments” (term popularized by Leonid Nikitinsky]. What about the Civiliki? </li></ul>
  17. 17. Fighting Low-Level Corruption <ul><li>Petty corruption represents “only 10-15% of the problem,” according to Kirill Kabanov of the National Anti-Corruption Committee. </li></ul><ul><li>Fighting low-level corruption impacts the population’s perceptions. </li></ul><ul><li>Concrete Proposal: require the Militia to wear name tags. </li></ul><ul><li>Will requiring militiamen to submit net worth and tax returns to supervisors also have a desired effect? </li></ul>
  18. 19. Programs Not Studies are Required
  19. 20. Institute for Public Projects & and Institute for Comparative Social Research Corruption ‘Price’ List <ul><li>Obtaining a place on State Duma party list $2 million-$5 million.. </li></ul><ul><li>Getting legislation introduced in the Duma for consideration costs $250,000. </li></ul><ul><li>“ Winning a ‘goszakaz’ (state purchase order) of 20% amount. </li></ul><ul><li>Having a line item placed in the federal budget 3% of project’s total value. </li></ul><ul><li>Getting tax arrears written off costs 30-50% of the amount. </li></ul><ul><li>To win a case in court costs 10% of the awarded damages. </li></ul><ul><li>Having a “talking head” criticize an official costs $20,000 a month. </li></ul><ul><li> </li></ul>
  20. 21. A Political Dimension <ul><li>Summer 2009 President Medvedev expands the role of the Russian Audit Chamber in the anti-corruption effort. </li></ul><ul><li>Why? Audit Chamber led by former Prime Minister Sergei Stepashin former Head of MVD. </li></ul><ul><li>Subsequently, President Medvedev enhanced Mr. Stephashin’s responsibilities by placing all audit commissions work under the auspices of the Audit Chamber, assigning it more responsibility in the international area, particularly involvement in the implementation of G-20 decisions, and giving it review plans for the state corporation modernization. </li></ul><ul><li>The “internationalization” of the Audit Chamber’s activities could put it in a position where its interactions with the Financial Service for Financial Monitoring (RosFinMonitoring). </li></ul>
  21. 22. Putin - Stepashin Rivalry Medvedev – Stephasin Alliance? <ul><li>July 1999 – Yeltsin replaces Stepashin as Prime Minister: (i) scope of presidential immunity (Russian Constitution Article 94); (ii) pro-presidential party in State Duma; and (iii) renewing the Chechen Conflict. </li></ul><ul><li>2008 – Putin picks his successor and expands the prime minister’s powers. </li></ul><ul><li>2009 – Putin undermines Medvedev’s domestic and foreign policy initiatives. </li></ul>
  22. 23. Is Medvedev Building His Own Power Base? <ul><li>Psychological & political factors behind Medvedev/Putin tensions. </li></ul><ul><li>Stepashin gives Medvedev way of combating corruption while bypassing the Investigative Committee. </li></ul><ul><li>Can Stepashin embolden Medvedev in curtailing Putin’s power? </li></ul>