World and the potential effects of corruption in the u. S. Hosted by the Carnegie Endowment for international peace, its 90 minutes. Good afternoon. My name is armando trool, the npr station in washington and the toprated npr station in the country. I would like to we come you to what is sure to be a very interesting and exciting conversation about corruption in Central America, the United States and elsewhere. I will be moderating this conversation and you will have the opportunity to ask questions once the panelists are finished. First, sarah chase, senior fellow here at the Carnegie Endowment for international peace. She is the author of this report when corruption is an operating system and shes using honduras as the case study. To add perspective to this conversation, zephyr is a law professor at the university will school of law. Shes thea author of corruption in america and also an attorney on the emoluments lawsuit filed by donald trump. So corruption as an operating system. What does that mean . Yeah. What am i talking about . Exactly. Would you mind yeah. So we have a picture, but fundamentally what im talking about here is not corruption as some nasty practices that some members of government indulge in in some countries, a lot of government officials might indulge in this, but you know, the way we normally think about it is sort of like i dont know, like a disease, right . That creeps in and infects the tissues of a government. What ive been seeing and honduras turns out to be a really clear example of it is a network, right . And a network that crosses boundaries that we think of as separating different sectors of activity like the private and Public Sector. Here we are, concerns. We like to find which one works for your health and let alone, the criminal sector. As we all know, Central America, unfortunately is famous for criminal activity, but what becomes clear when you look carefully is that youve got a network that is made up of people at the top of the Public Sector, the private sector and the criminal sector and often they overlap or share competences or they have a cutout like a representative that theyll, you know, one brother will be in the Public Sector and the other brother will be running a drug cartel so you span these different sectors and thats what this picture is supposed to, at least, you know, evoke in peoples mind, and i do want to just say well, ill say that later, but david, if you wouldnt mind just giving me the next one . This infographic does try to break it down for you. So the Public Sector members of the work have a responsibility and that is to distort state agencies or institutions, function of government, if you will, to serve the purposes of the network as opposed to serving their stated purpose which is the public good. Exactly. The public good. Im not going to go through them all, but what this infographic does is pick them apart a little bit, but there are a couple of obvious examples that ive seen in a number of other countries and one of them is the Justice Sector because theres a bargain that holds these networks together and its that money flows upward in the network and impunity flows downward. Theres the deal. You get, for the part of the take youre kicking upward, you are guaranteed protection from legal repercussions, and that can take a lot of forms in Different Countries. In honduras its particularly, greejous. You had a midnight firing of four of the five justices of the Supreme Court and this happened a number of years ago, but it can be the actual judges. It can be by capturing public prosecution. In some countries, i havent seen it in honduras, but in some countries where its difficult to actually capture the Justice Sector the network figures out how to work around it. So in egypt, for example, where judges did retain quite a bit of independence, president sisi has been working very hard on expanding the jurisdiction of the military courts so that more and more cases can bypass the relatively independent civil system and be funneled through the much more controllable system. It then, the next thing, just look at the next one and the colors on this infographic are blue for government and green for private sector because thats money, right . At least to us and red for criminal sector because the bad guys, except theyre all bad guys. Anyway, so we looked at the private sector and sometimes this can look like the entire system and you can say who is corrupt . Everyones corrupt, but it makes some sense to try to drill down and look at what are the specific Revenue Streams that are being captured by the network. So some of it back to the Public Sector is private procurement. That is one way, in honduras in particular, infrastructure. Big Infrastructure Projects like road building, ports and things like that. So youll see, you know, construction companies, but the Banking Sector is a classic. In this case, it turns out that the network and networkaffiliated families control about half of the financial sector. Energy is a classic and in honduras its interesting because its not a country that has an extractive industry, right . There isnt oil or gas and its got a mining industry, but no oil or gas. So quite interestingly, its been Energy Generation and Electricity Generation including renewables. That was a big surprise. The Solar Energy Sector has been captured by this network and theyre getting sweetheart rates, very high rates. Palm oil also for biodiesel. A couple others, interesting ones and nonprofit organizations and its one to keep ones eye on because one of the important Revenue Streams, of course, is International Development financing and so if you can situate yourself to capture that flow, its a pretty significant one. And then there is the criminal sector, and i dont think i need to belabor that in the case of honduras and we have case in new york, the son of the former president , is that who it is . I did want to ask you a question. Im not trying to deflect. No, of course. What makes it an operating system as opposed to a whole bunch of crooked people. Thats a great question and partly its you look at the personal relationships so in this case a piece of the private sector element is somewhat selfcontained and culturally uniform to some extent. Its a lot of people that are descendants of immigrants from the middle east and they tend to live together, intermarry, go to School Together and exchange positions on each others boards of directors and that selfcontainness is breaking apart a little bit in were now in the fourth generation and its the exchange of personnel and the clear, whats the word you look at the people who are making decisions and you will see the same names popping up in the Decision Making processes and Decision Making bodies and they exchange the personnel. So you will have this private sector group im talking about. They will have top officials selected at different stages. In the criminal sector, also, you can see. You almost have to do a social networking, and i would have loved to have done enough on the personal linkages which would really be the Network Diagram and thats an important avenue for further research on this top sniek whats the overriding goal in this system . Making money for network revenues. We can get into a conversation of whether its money or power and does money got you power or does power get you money . In this case internationally i think money is the objective and power is more the means to that end than it has been in other times and places in human history, and the reason i say that in the honduran case is the money people are bossing around the political people and the criminals who have access to money and obviously, armed force, are often bossing around the political people, too. You mean theres no idea logical motive. Its really thats increasingly my view and thats a whole conversation we can also have about how money is displacing other, you, like, measures of social value in the period we live in today around world. That money is the exclusive way that we measure our social standing and therefore Competition Among elites is over money, not over and therefore kind of how you make the money doesnt matter as much. So criminal sector is pretty obvious. Its largely the narcotics industry and then just one last two last points id love to make. All right. Go ahead. One is networks are more resilient than individuals, and i think this is true of honduras, but not just of honduras. Youve seen next door in guatemala where some of the individuals committing some of these practices have been removed from office and prosecuted, but thats not enough to really uproot a network like this, and we all need to think about that as we think of how we enter act with this everseases in those trying to effect other policy in countries and also as we think about repercussions here at home. These networks are like a fishing net, right . You can cut one knot out of the fishing net and that does not destroy the whole net so thats pretty significant and therefore, we really have to think about and this was important in honduras was the positive organizations and the people fighting against this, we found were quite networked and we can talk about that further, but they are quite networked and theyre quite holistic in their objectives. Theyre not singleissue organizations because they understand wow, this thing has infected a lot of our public space and we need to, and the effects are in multiple, different domains. So i think its a good time to open it up for questions, right . Well, you know first of all, both sarah and zephyr have agreed to allow me to call them by their first names and now by calling them zephyr and sarah im not disrespecting them in any way. I just want to make that clear. Sarah youve been listening patiently, what do you make of this . I want to the put it in different frameworks and one is the framework of the last 30 years of the Global Anticorruption fight and anticorruption has drifted to the top of the global agenda and we put lots of money and resources into anticorruption so it really matters what we mean when we say corruption, and a few things that happened in that area and one is its been fairly technocratic and theres been a hunch for bockes to catch the corrupt actors or particular strategies that might work. If you think about corruption as this sort of sideline problem, infection on another otherwise healthy body politic then that kind of approach makes sense. Its like we have this discreet problem in one area and we can fight it by a few laws here and a few more prosecutions here. What sarah is suggesting that we should think about corruption in a fundamentally different way and not by looking at number of violations of bank secrecy laws. Numbers of prosecutions on particular kind of bribery statute, but rather when those in power use that power to private ends as opposed to public ends and that changes the way we look at things and i what kind of behaviors are happening and its corrupt and if theyre not. We start by asking are those using public power by selfish ends or not. Then you look at power. One of the important things sarah does in this report is not say we look first at elected officials because to assume that those elected officials are those in power. We start with the assumption that those who get elected and depending on what kind of government system are the source and the issue. Instead you look at who actually controls things and who actually controls things matters. What shes doing then is harkening back to a more a rift olthsian way. As you may recall or may not, its okay if you dont. Aristotle had a sixtier system of government. There were three ideal forms and three corrupted forms. The ideal forms were the monarch, the aristocracy and the democracy although at the time the democracy had a bad name and the quality and the corrupted forms were the tyrant, the oligarchy and, again, he would call it the democracy. Mob rule. Yeah. So whats the difference between these two, the corrupted and uncorrupted forms. Its not the number of people governing. Its tilly who they serve, the difference between the tyrant and the monarch is the monarch is publicly interested and the tyrant is out for his own ends and so what shes describing in the aristotlian sense is the rule of the few, the oligarchic rule, and this may sound like a, you know, everybody understands aristotle, but this is not the way we operate internationally now. We tend to operate by looking at particular crimes and trying to stop those particular crimes. I would also say this has real resonance for our Current Situation in the United States, and we can talk later about the Trump Administration which is a unique in its assault on the rule of law and unique in its disregard for any norms or laws around corruption, but set aside donald trump. Prior to prior to this recent presidency, we have a growing split between elites and the rest of the country especially you d. C. Elites, but a split between what we think of as corrupt and not corrupt and theres an incredible capacity of political elites to understand and rationalize behavior as not corrupt because its not illegal. Whereas, if you talk to most people in most places in the country they look at the way we fund campaigns is profoundly corrupt. Not just the way business is done, but actually leading to those in power serving private ends instead of public ends. I would like to jump in on that and ask sarah, because one of her points that zephyr was making is how you can get to what you call a cleptogracy. Whatdemocracy, a somewhat honest system becomes through legally enacted means. What have you seen that looks like that . If you could talk about some other things, enablers, how all of those people are working to make this operating system reach the max my zation of money. I am going to stray from hon do yo honduras is one of the things they typically use to keep the population down is legalism. A u. S. Example that had my jaw on the ground was the 80 Supreme Court ruling last july that threw out the corruption conviction of governor mcdonald of virginia. I could even have swallowed if it had gone that way on a split ruling. It was the 80 part of it that preelly bl really blew me away. The fact that nobody thought to write a concurring opinion saying golly, given the way the law is written, we had to vote this way and a couple of buts about what the implications are. Let me spell out why that conviction was thrown out. It was thrown out not because there was no clear quid pro quo. There was one. It was the definition of what an official act is. He set up meteings for his business benefactor. He had set up meetings even in the governors mansion. He had certainly used public instruments, like his telephone and things like that. An official act was being defined evermore narrowly that essentially, to the point for something to be considered corrupt in this country, you almost need to sign a contract. At least in virginia. No. Is was the Supreme Court of the United States. Wasnt the ruling based on the virginia law and what the virginia law . This was u. S. Law. We have a Supreme Court who has narrowed the definition of corruption in two distinct areas, the laws that are prophylactic laws, making it less likely, Like Campaign law. What she means by prophylactic, the upstream laws, the laws upstream of an act actually being committed would prevent the series of events that would make corruption likely. What the court says is we dont need these laws, because we have bribery laws to deal with the real prob elems elsehow. In the bribery cases, they are also narrowing the definition as in the mcdonald case making it harder to bring cases. You have this vice in, and the only thing that is left, basically, it is for really criminals. Armando is in office. Please dont use me. We are going to sign a contract. Im going to give you 5,000 and you have to vote the following three ways and lets sign the contract. I think that relates honestly to an elite and cultural approach that the Supreme Court sees people like governor mcdonald as part of a community they recognize and understand. Is it a sense of entitlement . It relates to the incredible class split we have. Mark twain, who you can go to for almost anything, writes about this in his novel the guilded age. The two different languages of corruption where elites start to say, this isnt really corrupt. This is just way we do things. Everybody else says, if it walks like a duck, talks like a duck, it is a duck. In honduras, it is quite clear the league the zation process. To look at the congress building. This thing is clearly devalued. The building is not a dignified building. I almost included a picture of the chamber. It is an issue of the body and the institution. It has been systematically undermined, meaning physically the space. When i wanted to meet with members of conference, they didnt have an office. There are two Conference Rooms in the building of the congress. They had to camp out in the building, in the room, to prevent anyone else from taking our space. Some people might say thats a good thing, actually. I mean, just in terms of how you can conduct your business. So, okay, but then what we were able to do was catalog a series of laws that all cut the same way essentially legalizing in zephyrs kind of terms, legalizing practices that obviously violate any normal persons conception of corruption. For example, they create something called the qualianza, the council for Public Private partnerships. It serves t