11

Ethan S. Burger, Esq.Ethan S. Burger, Esq.Adjunct ProfessorAdjunct Professor

Georgetown University Law CenterGeorgetown University Law Center

esb34@law.georgetown.eduesb34@law.georgetown.edu

The Russian Anti-Corruption Campaign:The Russian Anti-Corruption Campaign:Substance or Politics/Public Relations?Substance or Politics/Public Relations?

Harriman Institute, March 2010Harriman Institute, March 2010

22

Three Levels of CorruptionThree Levels of Corruption

VitalVital – ‘high’ stakes (fixing of major court case, governmental approvals – ‘high’ stakes (fixing of major court case, governmental approvals where recipient is not entitled to them, awarding of contracts, etc.). where recipient is not entitled to them, awarding of contracts, etc.).

FunctionalFunctional – ‘medium’ stakes (governmental approvals where – ‘medium’ stakes (governmental approvals where recipient is entitled to seek, getting documents notarized, education-recipient is entitled to seek, getting documents notarized, education-related bribery).related bribery).

RoutineRoutine – ‘low’ stakes (e.g. avoid “speeding” ticket; minor health/safety – ‘low’ stakes (e.g. avoid “speeding” ticket; minor health/safety violations).violations).

Under this framework, the greater the payoff for a corrupt act, assumingUnder this framework, the greater the payoff for a corrupt act, assumingthe risk of detection and punishment are the same, the more personsthe risk of detection and punishment are the same, the more personsgenerally are willing to engage in unlawful acts. In most instances, agenerally are willing to engage in unlawful acts. In most instances, amajority of corrupt acts are committed in pursuit of money. To a lessermajority of corrupt acts are committed in pursuit of money. To a lesserextent, corruption is the result of one’s desire to increase their politicalextent, corruption is the result of one’s desire to increase their politicalpower – that is the ability to get others (both individuals andpower – that is the ability to get others (both individuals andinstitutions), to further the primary beneficiary of the corruption.institutions), to further the primary beneficiary of the corruption.

33

Consequences of CorruptionConsequences of Corruption

petty corruption that has only has impact on the briber-payer and petty corruption that has only has impact on the briber-payer and recipient (e.g. militiamen extorts bribes from car drivers for recipient (e.g. militiamen extorts bribes from car drivers for allegedly speeding or insider-trading leading to a fraud on the allegedly speeding or insider-trading leading to a fraud on the marker);marker);

individualized public corruption -- bribes are extorted/volunteered by individualized public corruption -- bribes are extorted/volunteered by owners of a businesses (e.g. hospitals, hotels, manufacturers, etc.) owners of a businesses (e.g. hospitals, hotels, manufacturers, etc.) that might not otherwise pass inspection or licenses are obtain one that might not otherwise pass inspection or licenses are obtain one that to which they are not entitled to receive potentially harming that to which they are not entitled to receive potentially harming society (users of bribers' services are harmed and potentiallysociety (users of bribers' services are harmed and potentiallyothers), andothers), and

bribes are paid during tender process for government contracts or bribes are paid during tender process for government contracts or privatization leading to the construction of unsafe and/or costly privatization leading to the construction of unsafe and/or costly tunnel/building or factory or natural resource is purchased for a tunnel/building or factory or natural resource is purchased for a fraction of true value that harms society as government gets less fraction of true value that harms society as government gets less than it is entitled – arguably depriving government of funds needed than it is entitled – arguably depriving government of funds needed to pay for services (if government would provide services).to pay for services (if government would provide services).

44

Some Comparative PerspectiveSome Comparative Perspective

Former French President Jacques Chirac indicted for misuse of public funds Former French President Jacques Chirac indicted for misuse of public funds for period 1983-95 (became President in 1995). Others French officials indicted for period 1983-95 (became President in 1995). Others French officials indicted in connection to illegal arm sales to Angola. Presidentin connection to illegal arm sales to Angola. President Nicholas Sarkozy Nicholas Sarkozy admits mistake to have his son appointed the head of the Paris suburb La admits mistake to have his son appointed the head of the Paris suburb La Defense.Defense.

Former Illinois Governor Rod R. Blagojevich of Illinois was impeached after his Former Illinois Governor Rod R. Blagojevich of Illinois was impeached after his indictment for seek to selling political favors in exchange for campaign indictment for seek to selling political favors in exchange for campaign contributions. contributions.

In connection with post-Katrina governmental efforts, a special government In connection with post-Katrina governmental efforts, a special government task force -- at least 1,300 individuals indicted. task force -- at least 1,300 individuals indicted.

V.P. Cheney’s advisor Scooter Libber convicted of perjury; former Republican V.P. Cheney’s advisor Scooter Libber convicted of perjury; former Republican congressional leader Tom DeLay (TX) resigned after indictment; his congressional leader Tom DeLay (TX) resigned after indictment; his spokesman, Michael Scanlon, pled guilty to bribery charges and cooperated to spokesman, Michael Scanlon, pled guilty to bribery charges and cooperated to convict of Republican lobbyist Jack Abramoff.convict of Republican lobbyist Jack Abramoff.

Medicare fraud - estimated now to total about $60 billion a year - has become Medicare fraud - estimated now to total about $60 billion a year - has become one of, if not the most profitable, crimes in America. one of, if not the most profitable, crimes in America.

55

Medvedev’s Best Laid PlansMedvedev’s Best Laid Plans

May 2008, Medvedev issued edict creating Presidential Anti-Corruption May 2008, Medvedev issued edict creating Presidential Anti-Corruption Council.Council.

September 2008, Council’s Presidium detailed National Plan for Countering September 2008, Council’s Presidium detailed National Plan for Countering Corruption containing systematic action plan.Corruption containing systematic action plan.

November 2008, Medvedev identifies combating corruption as major priority November 2008, Medvedev identifies combating corruption as major priority in his First Annual Address to the Federal Assembly as President.in his First Annual Address to the Federal Assembly as President.

December 25, 2008, Law enacted -- milestone or missed opportunity?December 25, 2008, Law enacted -- milestone or missed opportunity?

Procuracy, FSB, non-governmental specialists want to leave their imprint on Procuracy, FSB, non-governmental specialists want to leave their imprint on the forthcoming laws.the forthcoming laws.

Future legislative and administrative changes anticipated as “gap fillers.”Future legislative and administrative changes anticipated as “gap fillers.”

March 2009, Medvedev in an interview candidly acknowledged that March 2009, Medvedev in an interview candidly acknowledged that Russia is not ready to implement new anti-corruption laws, but he Russia is not ready to implement new anti-corruption laws, but he will declare his income.will declare his income.

66

Objectives of the 2008 Law “On Objectives of the 2008 Law “On Counteracting Corruption”Counteracting Corruption”

Systematize and enforce existing “Black Letter” law dealing with state Systematize and enforce existing “Black Letter” law dealing with state service and criminal law.service and criminal law.

Some Significant Features of the Law require: Some Significant Features of the Law require:

(i) state officials to declare income & net wealth (existing (i) state officials to declare income & net wealth (existing requirement);requirement);

(ii) state officials to report “ratting” on corrupt colleagues, i.e. inform (ii) state officials to report “ratting” on corrupt colleagues, i.e. inform on others’ unlawful conduct (innovation); on others’ unlawful conduct (innovation);

(iii) observe conflict of interests rules, and(iii) observe conflict of interests rules, and

(iv) tenders for state purchases to be held on a competitive basis (iv) tenders for state purchases to be held on a competitive basis (eliminate loopholes and give teeth to existing rules and procedures).(eliminate loopholes and give teeth to existing rules and procedures).

BUT WITHOUT FOLLOW-UP (E.G., SEEING WHETHER TAXES BUT WITHOUT FOLLOW-UP (E.G., SEEING WHETHER TAXES WERE PROPERLY PAID AND THAT OTHER LAWS HAVE NOT BEEN WERE PROPERLY PAID AND THAT OTHER LAWS HAVE NOT BEEN VIOLATED) THE NEW LAW HAS BEEN CHARACTERIZED BY IRINA VIOLATED) THE NEW LAW HAS BEEN CHARACTERIZED BY IRINA GRANIK AS “TOOTHLESS.”GRANIK AS “TOOTHLESS.”

77

Further Refinement of the Further Refinement of the ProgramProgram

Edict No. 558 -- presentation of information by persons seeking to become or serving as state 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 officials about their income, property and obligations of a property character (hereinafter “financial data”).– May 2009.“financial data”).– May 2009.

Edict No. 557 – on the approval of the list of federal positions subject to mandatory 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..presentation of their financial data (as well as spouses and children) – May 2009..

Edict No. 559 -- presentation of information by persons seeking or serving in positions with Edict No. 559 -- presentation of information by persons seeking or serving in positions with federal state agencies about their financial data – May 2009. federal state agencies about their financial data – May 2009.

Edict No. 561 -- on the approval of the procedure for the presentation of financial data of 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 – federal state officials on state websites and to means of mass communication for publication – May 2009.May 2009.

Edict No. 560 -- presentation of information by persons seeking or serving in positions in state 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.enterprises, foundations, etc. of financial data (as well as spouses and children) – May 2009.

Federal Law No. 172-FZ , “On the anticorruption expert examination of normative legal Federal Law No. 172-FZ , “On the anticorruption expert examination of normative legal acts and draft normative legal acts,” July 7, 2009acts and draft normative legal acts,” July 7, 2009 . .

Edict No. 208, “On Several measures for reform of the Ministry for Internal Affairs of the Edict No. 208, “On Several measures for reform of the Ministry for Internal Affairs of the Russian Federation,” February 18, 2010.Russian Federation,” February 18, 2010.

88

Night of the Long Knives?Night of the Long Knives?

President Medvedev replaces two Deputy MVD President Medvedev replaces two Deputy MVD Ministers and replaces them with 2 persons from his Ministers and replaces them with 2 persons from his Presidential Administration (Gerasimov & Bulavin – it is Presidential Administration (Gerasimov & Bulavin – it is rumored that Sergei Stepashin may be returning to rumored that Sergei Stepashin may be returning to Head the MVD).Head the MVD).

16 Generals either fired or transferred (8) to date. 16 Generals either fired or transferred (8) to date. Medvedev issues Edicts to reorganize MVD – Medvedev issues Edicts to reorganize MVD – substantive and structural. What is Putin’s attitude?substantive and structural. What is Putin’s attitude?

Only time will tell whether Brian Whitmore is correct Only time will tell whether Brian Whitmore is correct that we are now witnessing the President replacing that we are now witnessing the President replacing siloviki (having a professional background and siloviki (having a professional background and presumably world view more akin to that of Mr. Putin) presumably world view more akin to that of Mr. Putin) with civiliki (i.e. civilians likely to recognize the with civiliki (i.e. civilians likely to recognize the importance of bring the rule of law to Russia). importance of bring the rule of law to Russia).

99

Illustrative 2010 MVD Illustrative 2010 MVD ReformsReforms

50% reduction in MVD Central Apparatus.50% reduction in MVD Central Apparatus.

20% total reduction of MVD personnel.20% total reduction of MVD personnel.

New MVD Northern Caucasus District established.New MVD Northern Caucasus District established.

Foreign Migration Service to handle deportation of Foreign Migration Service to handle deportation of foreigners.foreigners.

Corruption by MVD personnel to be treated more Corruption by MVD personnel to be treated more severely.severely.

Ministry of Health to handle detoxificiationMinistry of Health to handle detoxificiation..

1010

Too Much Optimism?Too Much Optimism?

““A reform of the law enforcement bodies of the country of A reform of the law enforcement bodies of the country of such scale Russia has never seen before. In a single such scale Russia has never seen before. In a single moment, more MVD officials that during the entire tenure moment, more MVD officials that during the entire tenure of Vladimir Putin were put into retirement. . . .The head of Vladimir Putin were put into retirement. . . .The head of state has launched a decisive offensive, showing that of state has launched a decisive offensive, showing that he may is not only someone who says freedom is better he may is not only someone who says freedom is better than the absence of freedom, but he is prepared to than the absence of freedom, but he is prepared to fight for this important territory.”fight for this important territory.”

Is Medvedev telling senior governmental officials that the Is Medvedev telling senior governmental officials that the

Putin era is over, change or be replaced by Medvedev’s Putin era is over, change or be replaced by Medvedev’s ““civiliki”?civiliki”?

1111

The Executive Control SystemThe Executive Control System

Control over Natural Resources & Licenses (January Control over Natural Resources & Licenses (January 2009 law in contradiction to Constitution eliminates 2009 law in contradiction to Constitution eliminates regional/local control over natural resources and regional/local control over natural resources and environment.environment.

Control over the Investigative Committee (in theory).Control over the Investigative Committee (in theory).

Control over the Courts (in theory).Control over the Courts (in theory).

Control over FSB, Control over FSB, MVDMVD & Military (in theory). & Military (in theory).

How important is Medvedev’s Modernization Program?How important is Medvedev’s Modernization Program?

Is the Institute for Contemporary Development [Институт Is the Institute for Contemporary Development [Институт современного развития (INSOR) Report the roadmap современного развития (INSOR) Report the roadmap being followed? being followed?

1212

Russian Bribery Allegedly Up 13% in 2009Russian Bribery Allegedly Up 13% in 2009 According to the MVD Investigative Committee says that in 2009 8-fold increase in According to the MVD Investigative Committee says that in 2009 8-fold increase in

economic crime.economic crime.

Bribery increased by 13 percent and "one of the most widespread forms of corrupt Bribery increased by 13 percent and "one of the most widespread forms of corrupt activity investigated” by MVD.activity investigated” by MVD.

President Dmitry Medvedev orders overhaul of the MVD cuts militia by 20 percent President Dmitry Medvedev orders overhaul of the MVD cuts militia by 20 percent and promises salary increases. and promises salary increases.

MVD Minister Rashid Nurgaliyev loses his right to nominate the MVD’s investigative 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 committee head, to be now be nominated by the prime minister. He survived the purge, but for how long?purge, but for how long?

Audit Chamber Head Stepashin proposed dividing the ministry into 3 departments: Audit Chamber Head Stepashin proposed dividing the ministry into 3 departments: (i) regular law enforcement, (ii) serious crimes, including corruption, and (iii) (i) regular law enforcement, (ii) serious crimes, including corruption, and (iii) paramilitary forces.paramilitary forces.

Stepashin has called for MVD role in the economic sphere to be curtailed – he Stepashin has called for MVD role in the economic sphere to be curtailed – he seems to have gotten his way.seems to have gotten his way.

Alexander Bastrykin, Investigative Committee Head proposed that a separate Alexander Bastrykin, Investigative Committee Head proposed that a separate agency be created to handle economic offences.agency be created to handle economic offences.

1313

Has Procurator General Yuri Chaika’s Wings Has Procurator General Yuri Chaika’s Wings Been Clipped?Been Clipped?

In late 2009, Procurator General Chaika fired Anatoly Bagmet, Head In late 2009, Procurator General Chaika fired Anatoly Bagmet, Head of Moscow Investigative Branch of the Procuracy?of Moscow Investigative Branch of the Procuracy?

Under the Procuracy Law, only Investigative Committee Head Under the Procuracy Law, only Investigative Committee Head Bastrykin can fire Bagmet, then Chaika was forced to cancel the Bastrykin can fire Bagmet, then Chaika was forced to cancel the dismissal order. dismissal order.

An inter-factional war between Medvedev (Chaika’s patron – until An inter-factional war between Medvedev (Chaika’s patron – until possibly replaced by former Medvedev law school classmate possibly replaced by former Medvedev law school classmate Aleksandr Konovolov now Minister of Justice) and Putin (Bastrykin’s Aleksandr Konovolov now Minister of Justice) and Putin (Bastrykin’s patron). patron).

Mr Bagmet has investigated many of Russia’s most political cases Mr Bagmet has investigated many of Russia’s most political cases since taking up his post in 2008. He headed the inquiry into Sergei since taking up his post in 2008. He headed the inquiry into Sergei Storchak, the deputy finance minister and ally of Aleksei Kudrin, Storchak, the deputy finance minister and ally of Aleksei Kudrin, finance minister. finance minister.

1414

Prior High-Level Corrupt Officials Prior High-Level Corrupt Officials

Karelian Vice Premier Vladimir Sobinsky - from 2005-07, Sobinsky and his Karelian Vice Premier Vladimir Sobinsky - from 2005-07, Sobinsky and his subordinates allocated 40+ bodies of water to commercial fishing operations subordinates allocated 40+ bodies of water to commercial fishing operations without conducting a competitive bidding process or charging a fee.without conducting a competitive bidding process or charging a fee.

Kurganskaya Oblast’s Deputy Governor Anatoly Bondarev - violated Kurganskaya Oblast’s Deputy Governor Anatoly Bondarev - violated Criminal Code Art. 285.2 -- Abuse of Official Position to ensure that a 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 company he had ties to won a public tender to construct a communal heat supply system,supply system,

Orlovskaya Oblast’s Deputy Governor Vitaly Kochuev - guilty of illegally Orlovskaya Oblast’s Deputy Governor Vitaly Kochuev - guilty of illegally withdrawing funds from a government account paying $20,000 to buy a withdrawing funds from a government account paying $20,000 to buy a government-owned hotel complex worth $608,000.government-owned hotel complex worth $608,000.

The Procuracy wants the right to seize property in cases where there still The Procuracy wants the right to seize property in cases where there still are no suspects and to challenge are no suspects and to challenge arbitrazharbitrazh (commercial) court decisions. (commercial) court decisions. What would be the implications of expanding the Procuracy’s power?What would be the implications of expanding the Procuracy’s power?

Is there a pro-Medvedev shift – watch whether Presidential Administration Is there a pro-Medvedev shift – watch whether Presidential Administration Head Sergei Naryshkin is replaced.Head Sergei Naryshkin is replaced.

1515

Federal Districts & The Power Federal Districts & The Power VerticalVertical

Central District– Central District– MoscowMoscow

Southern DistrictSouthern District - Rostov-on-Don - Rostov-on-Don (Caucasus)(Caucasus)

Northwestern District - Saint PetersburgNorthwestern District - Saint Petersburg

Far Eastern District – Far Eastern District – Khabarovsk/(Khabarovsk/(Vladivostok & Nakhodka)Vladivostok & Nakhodka)

Siberian Federal – Novosibirsk/(Siberian Federal – Novosibirsk/(Omsk)Omsk)

Urals Federal – YekatrinburgUrals Federal – Yekatrinburg

Volga Federal -- Nizhny NovgorodVolga Federal -- Nizhny Novgorod

1616

Winners and LosersWinners and Losers

After the onset of the economic crisis, the power of “autonomous After the onset of the economic crisis, the power of “autonomous oligarchs” has largely ended.oligarchs” has largely ended.

How should the State’s loans and subsidies be distributed?How should the State’s loans and subsidies be distributed?

The political leadership can further use the economy for political The political leadership can further use the economy for political purposes – but is that “corruption” – what about other goals.purposes – but is that “corruption” – what about other goals.

Reports that some oligarchs who own firms in “one company” towns Reports that some oligarchs who own firms in “one company” towns may be covertly organizing strikes in order to extract money from a may be covertly organizing strikes in order to extract money from a central Russian government that is increasingly fearful that such central Russian government that is increasingly fearful that such protests could spread.protests could spread.

The “Dictatorship of Law” that weakened the Oligarchs was carried out The “Dictatorship of Law” that weakened the Oligarchs was carried out by the by the SilovikiSiloviki, but now we have a Dictatorship of “Ments” (term , but now we have a Dictatorship of “Ments” (term popularized by Leonid Nikitinsky]. What about the popularized by Leonid Nikitinsky]. What about the Civiliki?Civiliki?

1717

Fighting Low-Level CorruptionFighting Low-Level Corruption

Petty corruption represents “only 10-15% of the Petty corruption represents “only 10-15% of the problem,” according to Kirill Kabanov of the problem,” according to Kirill Kabanov of the National Anti-Corruption Committee. National Anti-Corruption Committee.

Fighting low-level corruption impacts the Fighting low-level corruption impacts the population’s perceptions.population’s perceptions.

Concrete Proposal: require the Militia to wear name Concrete Proposal: require the Militia to wear name tags.tags.

Will requiring militiamen to submit net worth and Will requiring militiamen to submit net worth and tax returns to supervisors also have a desired tax returns to supervisors also have a desired effect?effect?

1818

1919

Programs Not Studies are Programs Not Studies are RequiredRequired

2020

Institute for Public Projects & and Institute Institute for Public Projects & and Institute for Comparative Social Research Corruption for Comparative Social Research Corruption

‘Price’ List‘Price’ List Obtaining a place on State Duma party list $2 million-$5 million..Obtaining a place on State Duma party list $2 million-$5 million..

Getting legislation introduced in the Duma for consideration costs $250,000.Getting legislation introduced in the Duma for consideration costs $250,000. ““Winning a ‘goszakaz’ (state purchase order) of 20% amount.Winning a ‘goszakaz’ (state purchase order) of 20% amount.

Having a line item placed in the federal budget 3% of project’s total value.Having a line item placed in the federal budget 3% of project’s total value.

Getting tax arrears written off costs 30-50% of the amount.Getting tax arrears written off costs 30-50% of the amount.

To win a case in court costs 10% of the awarded damages. To win a case in court costs 10% of the awarded damages.

Having a “talking head” criticize an official costs $20,000 a month.Having a “talking head” criticize an official costs $20,000 a month.

http://www.polit.ru/bbs/2008/02/08/corruption.html http://www.polit.ru/bbs/2008/02/08/corruption.html

2121

A Political DimensionA Political Dimension

Summer 2009 President Medvedev expands the role of the Summer 2009 President Medvedev expands the role of the Russian Audit Chamber in the anti-corruption effort.Russian Audit Chamber in the anti-corruption effort.

Why? Audit Chamber led by former Prime Minister Sergei Why? Audit Chamber led by former Prime Minister Sergei Stepashin former Head of MVD.Stepashin former Head of MVD.

Subsequently, President Medvedev enhanced Mr. Stephashin’s Subsequently, President Medvedev enhanced Mr. Stephashin’s responsibilities by placing all audit commissions work under responsibilities by placing all audit commissions work under the auspices of the Audit Chamber, assigning it more the auspices of the Audit Chamber, assigning it more responsibility in the international area, particularly involvement responsibility in the international area, particularly involvement in the implementation of G-20 decisions, and giving it review in the implementation of G-20 decisions, and giving it review plans for the state corporation modernization.plans for the state corporation modernization.

The “internationalization” of the Audit Chamber’s activities The “internationalization” of the Audit Chamber’s activities could put it in a position where its interactions with the could put it in a position where its interactions with the Financial Service for Financial Monitoring (RosFinMonitoring).Financial Service for Financial Monitoring (RosFinMonitoring).

2222

Putin - Stepashin RivalryPutin - Stepashin RivalryMedvedev – Stephasin Alliance?Medvedev – Stephasin Alliance?

July 1999 – Yeltsin replaces Stepashin as Prime Minister: (i) July 1999 – Yeltsin replaces Stepashin as Prime Minister: (i) scope of presidential immunity (Russian Constitution Article scope of presidential immunity (Russian Constitution Article 94); (ii) pro-presidential party in State Duma; and (iii) 94); (ii) pro-presidential party in State Duma; and (iii) renewing the Chechen Conflict. renewing the Chechen Conflict.

2008 – Putin picks his successor and expands the prime 2008 – Putin picks his successor and expands the prime minister’s powers.minister’s powers.

2009 – Putin undermines Medvedev’s domestic and foreign 2009 – Putin undermines Medvedev’s domestic and foreign

policy initiatives.policy initiatives.

2323

Is Medvedev Building His Own Power Base?Is Medvedev Building His Own Power Base?

Psychological & political factors behind Medvedev/Putin Psychological & political factors behind Medvedev/Putin tensions.tensions.

Stepashin gives Medvedev way of combating corruption Stepashin gives Medvedev way of combating corruption while bypassing the Investigative Committee.while bypassing the Investigative Committee.

Can Stepashin embolden Medvedev in curtailing Putin’s Can Stepashin embolden Medvedev in curtailing Putin’s power?power?