RETHINKING CORRUPTION RETHINKING CORRUPTION ABDUL GOFUR University College London PhD Thesis I confirm that the work presented in this thesis is my own. Where information has been derived from other sources, I confirm that this has been indicated in the thesis. Abdul Gofur 5 November 2012 ABSTRACT It is generally agreed by policymakers and scholars alike that corruption is a form of misconduct which merits criminalisation. But definitions of corruption vary widely and there is no consensus on what constitutes corruption. Theorising about corruption is therefore a valuable exercise because it promotes greater understanding of this important concept. For example, it enables us to clarify the issues for debates about criminalisation, it assists with fair labelling of wrongdoing, and it helps in establishing coherent penalty regimes through accurate identification of the harms involved in corruption. But in order to theorise about corruption, we must have a complete picture of the harm which results from such conduct, and this in turn requires us to identify the interests being set back and their relationship to the wrongdoing involved. The scholarship on corruption is defective in this respect because it fails to provide a complete account of the harm which results from corruption. The dominant bodies of non-legal literature tend to argue that corruption results in remote harms to public interests. They assume but fail to provide a detailed account of the primary and indirect harms suffered by those innocent actors who are not engaged in corruption. By contrast, the legal literature has tended to focus almost exclusively on the wrongdoing in corruption. But this approach is incomplete because it not only fails to acknowledge that corruption harms innocent actors by setting back their interests, it also fails to emphasise the connection between such harming and the wrongdoing which also results from corruption. This thesis addresses these omissions by articulating a coherent theory of the harm in corruption. Using a three-part analytical framework, it analyses a number of core cases of corruption, and uncovers the harm and wrongdoing caused by such conduct (particularly to those innocent actors who are not engaged in corruption). iv ACKNOWLEDGEMENTS A thesis is a time-consuming and laborious endeavour. When I embarked upon this project in 2006, I did not appreciate the full extent of these demands. As a single man, I welcomed the intellectual challenge. Much has changed since those early days. I am now happily married, and the proud father of a little boy. I am conscious of the sacrifices that they have both made in order to allow me to see this thesis through to completion. I thank my long-suffering wife and my little boy for their love, support, and encouragement. I could not have written this thesis without them. Lastly, I also owe a large debt to my supervisors, Professor Ian Dennis and Professor Riz Mokal, who have patiently nurtured and guided me over the years. All errors are mine alone. v For Marjana and Noah No man ever had a better wife and son vi CONTENTS Abstract iv Acknowledgements v Abbreviations xii I. INTRODUCTION 1 1. The purpose of a coherent theory of harm 8 2. The scope of our project 13 3. Road map 14 The main arguments 14 The remaining chapters 16 Chapter II 16 Chapter III 18 Chapter IV 19 Chapter V 20 II. LITERATURE REVIEW 21 1. Political harm 22 The revisionists 24 The post-revisionists 27 Kleptocracies 31 Bilateral monopolies 36 Competitive corruption 39 2. Economic harm 41 The revisionists 45 The post-revisionists 47 3. Moral wrongdoing 54 Green’s everyday norms 55 Passive bribery: the receipt of an inducement 55 Active bribery: the offer of an inducement 57 Other theorists 57 4. Conclusion 61 vii III. ANALYTICAL FRAMEWORK 64 1. Part One: The 2010 Act 68 Section 1 - Offences of bribing another person 68 Section 2 - Offences relating to being bribed 69 Section 3 - Function or activity to which bribe relates 70 Section 4 - Improper performance to which bribe relates 71 Section 5 - Expectation test 71 Section 6 - Bribery of foreign public officials 72 Section 7 - Failure of commercial organisations to prevent bribery 74 Some observations 75 A working summary 80 Section 1: Offences of bribing another person 80 Section 2: Offences relating to being bribed 81 Section 6: Bribery of foreign public officials 81 Section 7: Failure of commercial organisations to prevent bribery 82 Sections 3 to 5: The interpretation provisions 82 2. Part Two: The law in the USA 83 18 USC § 201: Bribery 84 15 USC § 78dd: the Foreign Corrupt Practices Act 1977 85 15 USC § 1: the Sherman Act 1890 88 15 USC § 78j: the Securities Exchange Act 1934 88 California Penal Code § 641.3 90 3. Part Three: Harm and wrongdoing 91 Interests 93 Private interests 93 Public interests 94 Exceptions 95 Wrongs 95 Exceptions 99 Setbacks 99 Exceptions 99 Mediating maxims 100 Wigmorean analysis 100 Wigmorean chart of the harm principle 102 Primary, indirect, and remote harms 103 Primary and indirect harms 103 Remote harms 105 Analysis of rights 107 The form of rights: Hohfeld’s analytical scheme 109 The function of rights: MacCormick’s theory 113 4. Conclusion 117 IV. CASE STUDIES 118 1. Bribery 119 Bribery of a public official 119 Part 1: The 2010 Act 121 Part 2: The law in the USA 123 Part 3: Harm and wrongdoing 124 Bribery in the private sector 126 Part 1: The 2010 Act 127 Part 2: The law in the USA 129 Part 3: Harm and wrongdoing 130 2. Noble cause 132 Judith Ward 133 Part 1: The 2010 Act 134 Part 2: The law in the USA 137 Part 3: Harm and wrongdoing 139 The Birmingham six 140 Part 1: The 2010 Act 141 Part 2: The law in the USA 143 Part 3: Harm and wrongdoing 144 3. Nepotism 146 The University of Queensland scandal 147 Part 1: The 2010 Act 148 Part 2: The law in the USA 151 Part 3: Harm and wrongdoing 153 A hypothetical example 156 Part 1: The 2010 Act 157 Part 2: The law in the USA 158 Part 3: Harm and wrongdoing 159 4. Match-fixing 161 The Pakistan cricketers’ spot-fixing scandal 162 Part 1: The 2010 Act 163 Part 2: The law in the USA 166 Part 3: Harm and wrongdoing 167 Robert Hoyzer 169 Part 1: The 2010 Act 170 Part 2: The law in the USA 171 Part 3: Harm and wrongdoing 172 5. Facilitation payments 174 The Helmerich & Payne case 176 Part 1: The 2010 Act 177 Part 2: The law in the USA 180 Part 3: Harm and wrongdoing 181 The Dow Chemical Company case 183 Part 1: The 2010 Act 184 Part 2: The law in the USA 186 Part 3: Harm and wrongdoing 187 6. Extortion 189 Santiago Valle 190 Part 1: The 2010 Act 191 Part 2: The law in the USA 192 Part 3: Harm and wrongdoing 193 The Sochi 2014 scandal 194 Part 1: The 2010 Act 195 Part 2: The law in the USA 196 Part 3: Harm and wrongdoing 197 7. Bid rigging 199 The New York Presbyterian Hospital case 201 Part 1: The 2010 Act 201 Part 2: The law in the USA 203 Part 3: Harm and wrongdoing 203 The Virginia real estate scam 205 Part 1: The 2010 Act 206 Part 2: The law in the USA 209 Part 3: Harm and wrongdoing 209 8. Insider dealing 212 The Blue Index case 213 Part 1: The 2010 Act 214 Part 2: The law in the USA 217 Part 3: Harm and wrongdoing 218 The Uberois 220 Part 1: The 2010 Act 221 Part 2: The law in the USA 223 Part 3: Harm and wrongdoing 224 9. Vote buying 226 The Breathitt County vote buying scandal 227 Part 1: The 2010 Act 228 Part 2: The law in the USA 231 Part 3: Harm and wrongdoing 231 The Newton County vote buying case 233 Part 1: The 2010 Act 234 Part 2: The law in the USA 237 Part 3: Harm and wrongdoing 238 10. The harm in corruption 239 V. CONCLUSION 244 Bibliography 249 ABBREVIATIONS the 1889 Act The Public Bodies Corrupt Practices Act 1889 (repealed) the 1906 Act The Prevention of Corruption Act 1906 (repealed) the 2010 Act The Bribery Act 2010 the FCPA 15 USC § 78dd: The Foreign and Corrupt Practices Act 1977 (USA) the old law The law prior to the coming into force of the Bribery Act 2010 on 1 July 2011 xii I INTRODUCTION This thesis seeks to articulate a coherent theory of the harm in corruption. The word “harm” consists of two distinct but overlapping elements.1 The first element refers to a simple sense of the word harm and describes a setback to a person’s interests. The second element refers to the wrong caused to a person by the indefensible violation of their rights. The articulation of a coherent theory is not straightforward and there is considerable uncertainty as to what the harm and wrongdoing in corruption is. As to harm, the general scholarship suggests that corruption is harmful because it results in remote harms. That is to say, it has long-term adverse effects on the proper functioning of government and the efficient operation of the economy. However, it is submitted that this view of harming underestimates the significance of the primary and indirect harms inflicted upon those innocent actors who are not engaged in corruption. This thesis does not seek to argue that primary, indirect, and remote harms are definitional features of corruption.