Ambassador Beyrle: Remarks at the 3rd Annual American Conference Institute’s Anti-Corruption Summit

It is a great pleasure to be here today. This is the third annual ACI Anti-Corruption summit in Moscow and it seems that every year, the conference attracts greater attention. I would like to thank ACI for providing this opportunity and especially Virna DiPalma for all of the time and effort she put into arranging this year’s conference.  The growth of the ACI Summit is a testament to the importance of the topic of corruption and that is where I would like to start.  

Corruption is of course a very old problem that affects citizens in every corner of the world.  But while previously, corruption scandals might bring down a politician or lead to the liquidation of a local company, in the global economy of the 21st century, such incidents cannot be contained inside national borders.  Corporations are multinational, investors are scattered across the globe and capital markets operate around the clock and react to a click of a mouse on the other side of the world.  In this evolving environment of inter-dependence, the fight against corruption must be global and it must be taken up by governments and society alike.  

Speaking on corruption several years ago in Kenya, President Obama said:

Corruption stifles development – it siphons off scarce resources that could improve infrastructure, bolster education systems, and strengthen public health.  It stacks the deck so high against entrepreneurs that they cannot get their job-creating ideas off the ground.  And corruption also erodes the state from the inside out, sickening the justice system until there is no justice to be found, poisoning the police forces until their presence becomes a source of insecurity rather than comfort.  Corruption has a way of magnifying the very worst twists of fate and makes it impossible to respond effectively to crises. 
Although the speech was given in Kenya, the description is universally applicable. A couple of recent examples from my own country illustrate the point. In 2000, the former Governor of Louisiana, Edwin Edwards was convicted of extorting money from businesses in return for commercial licenses.  In 2006, two New York City police officers were convicted of carrying out multiple contract murders for a Mafia boss.  Just last year, the former Governor of Illinois was convicted of lying to investigators about using his official position to sell President Obama’s old Senate seat. I’m not proud of the fact that there are more than half a dozen high level U.S. officials in jail on corruption charges, but I am proud of the system that put them there. 

Of course, there are many more examples, not just from the United States.  Corruption plagues economic development and the legitimacy of authorities from Afghanistan to Egypt.  And the problem has been recognized as a significant one here in Russia, as well. That’s a big change.  When I was here in 2002 as the Deputy Chief of Mission, the problem of corruption was more underground and less discussed.  President Medvedev echoed President Obama’s sentiments when he noted that Russia is plagued by legal nihilism and a system of deep rooted corruption which allows dishonest businessmen and officials to pocket gigantic sums of money. As a result of corruption, Russian courts often fail to serve as fair and impartial arbiters of commercial disputes, the police are often as much a source of fear as protection and the population’s mistrust of official institutions hampers progress and development.  

As we work to build a stronger partnership with Russia to tackle our shared agenda, it is clearly in the interest of the United States, both its businesses and its people, to see a vibrant and transparent Russian economy and society.  Russia is a key player in global governance and the global economy that we rely on to extend prosperity and stability throughout the world. 

The importance of addressing corruption has been thrown into increasingly sharp relief in recent years, and many countries are beginning to appreciate that stepped up international efforts to catch and punish corrupt officials are narrowing their room for maneuver.

Tackling corruption requires coordinated efforts on the part of governments, business and civil society and I’d like to say a few words about what each of these sectors can do. 

First, governments can ensure a competitive, transparent political environment which facilitates exposure of official wrongdoing.  If  you have political competition, you have an environment in which corruption can be discussed and fought.  History has repeatedly proven the value of democracy in rooting out corruption.  Watergate, probably the worst corruption scandal in U.S. history, was exposed by the basic institutions of a democratic society – a free press, competitive political parties, an independent legislature empowered to investigate executive wrongdoing, and an independent judiciary.  To use an example closer to the topic of this conference, I recently learned that the first Foreign Corrupt Practices Act prosecution, back in 1979, involved bribes paid by an American businessman to the governing political party in the Cook Islands which needed money for upcoming elections.  The bribes were exposed when a rival political party challenged the election results and called for an investigation. As Supreme Court Justice Louis Brandeis said, “sunlight is the best disinfectant; electric light the best policeman.” In the same spirit, I would add that political and legal accountability is the best antidote to corruption. 

Second, governments can prosecute both those who give bribes and those who receive them.   An important part of our anti-corruption efforts is effective enforcement of the FCPA, which is designed to ensure that American businesses do not contribute to foreign corruption. FCPA enforcement is so important to us that two high ranking officials of the US Justice Department, Assistant Attorney General Lanny Breuer and Deputy Assistant Attorney General Greg Andres, have travelled all the way from Washington to talk about it and I can scarcely add to what they have said.   

Third, governments can take measures to prevent corruption. And here I do want to add to what Lanny and Greg have said about the FCPA. The FCPA is not just a weapon to be used against companies that operate internationally.  It can also be a shield to protect them against foreign corruption. Spreading the word about the FCPA among foreign governments helps foreign officials understand, first, why businesses that fall under the FCPA can’t pay bribes and, second, that taking bribes from foreign companies could lead to criminal cases in the country where the bribe was paid. To take but one example, as a result of the Daimler prosecution in the U.S., Russian authorities opened their own investigation of the bribe recipients. The Embassy is doing everything it can to get the word out about the FCPA.  We have organized conferences for Russian lawyers and Russian government officials about the FCPA.  We have translated the FCPA and related materials into Russian and we distribute them far and wide. We hope that these efforts will create a more transparent business environment where foreign companies encounter fewer demands for bribes.

On the subject of government efforts, I want to also say that, despite some perceptions to the contrary, the Russian government also appears to be taking some serious steps to combat corruption and here I want to give the government its due.   Over the last two years, the Duma passed a series of reforms restricting the possibility of pretrial detention in cases involving financial crimes.  These amendments were designed to prevent corrupt officials from fabricating criminal cases and using the threat of pretrial detention to extort bribes from businesspeople.  And they appear to be working.  Last year, the number of pretrial detentions dropped by almost 50,000 or 25%. 

There have also been some serious corruption prosecutions.  In late 2009, a St. Petersburg mob boss who used his corrupt ties to state officials to falsify official records and take over businesses was convicted and sentenced to 14 years.  This past December, a high-ranking prosecutor was sentenced to 13.5 years for taking money from businessmen in order to close criminal cases against them.  Right now, the Investigative Committee is investigating a group of prosecutors suspected of protecting illegal gambling businesses.  

The government is also taking some preventive measures.  In 2010, President Medvedev instituted mandatory anti-corruption training for all government officials.  I understand that one of the directors of that program, Mikhail Mizulin, is going to report on that program here tomorrow, so I won’t discuss it other than to say that we regard it as an important step that could reduce the level of corruption.  Finally, on the legislative front, in February, a new law on bribery was introduced into the Duma.  This law is designed to bring Russian legislation into compliance with the U.N. Convention Against Corruption and the OECD Anti-Bribery Convention and would criminalize transnational bribery, increase the penalties for both domestic and foreign bribery, and introduce a new article in the Criminal Code focusing on intermediaries, or brokers, of corrupt deals.  We were glad to see the Duma action on this last week, and we hope it will be passed by the OECD Anniversary in May.  We look forward to the passage of this law and to sharing our experience with Russian law enforcement in the investigation of such crimes once the law is implemented.  

Of course, much remains to be done.  For example, too often in Russia whistleblowers find themselves the subjects of criminal prosecutions, while those they expose go unpunished.  If President Medvedev’s goals are to become reality, the government must supplement the other measures that I have mentioned by taking stronger steps to protect whistleblowers. We look forward to sharing experience in this area as well.    

But governments cannot do it alone.  Business can also play an important role. Corporate compliance programs which include strict anti-corruption policies, anti-corruption training, mechanisms for reporting misconduct, incentives and protections for whistleblowers and due diligence on third parties can go a long way to reducing the supply side of corruption. There have been another of important new initiatives in this area recently.  For example, with support from General Electric and other multinational corporations, the Center for Business Ethics and Corporate Governance has formed the “Russian Energy Compliance Alliance”.  This is a public-private initiative to increase voluntary compliance with anti-corruption and procurement law in the Russian power generation industry. One of the alliance’s main objectives, as set forth in the joint statement of President Obama and President Medvedev at their June 2010 Summit, is to help create market incentives for companies to sell technology and services to increase energy efficiency. I know that the Energy Compliance Alliance is meeting in Moscow this week as is the International Business Leaders Forum, another industry association that has taken important steps to develop industry standards and to share best practices.  The Embassy supports these initiatives and will continue to do so.  

Finally, I want to say a few words about civil society and NGOs.  I saved the most important part for last.  In the United States, we have found that public watchdog organizations can play a crucial role in exposing corruption.   But this is not just our opinion.   It is a central element of international anti-corruption standards.  Articles 12 and 13 of the UN Convention require state-parties, such as the United States and Russia, to engage with business and civil society to strengthen anti-corruption legislation. In 2009, Presidents Obama and Medvedev created a Bilateral Presidential Commission which includes a Sub-Working Group dedicated to enhancing the role of civil society in combatting corruption. So this is now a sanctioned and protected area for discussion.  In addition, to supporting the presidents’ initiatives, U.S. and Russian civil society leaders have also formed a “Working Group on Anti-Corruption and Institutional Integrity”.  Led by the Center for Business Ethics, Transparency International and the Sunlight Foundation, this Working Group has met 5 times in Moscow and Washington and has launched an action plan to exchange best practices on issues such as freedom of information and protection of whistle-blowers. Such exchanges increase the capacity of citizens to raise standards of institutional integrity across borders and we are proud to support this initiative as well. 

This conference brings together a unique collection of experts in all of the areas that I have discussed – government enforcement and prevention, corporate compliance and civil society – and presents a unique opportunity to develop initiatives in all these areas. It’s not just talk, but a venue for pushing real solutions. So I don’t want to delay this important work any more and want to conclude by again thanking ACI for organizing and all of you for attending.

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