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This Week in Markets and Democracy: U.S. Hunts Stolen Uzbek Assets, Bribery Still Pays, Uganda’s Democracy Backtracks

by Shannon K. O'Neil
A man passes by a poster of Uganda's President Yoweri Museveni and a poster of opposition leader Kizza Besigye in town of Kaabong in Karamoja region, Uganda, February 17, 2016 (Reuters/Goran Tomasevic). A man passes by a poster of Uganda's President Yoweri Museveni and a poster of opposition leader Kizza Besigye in town of Kaabong in Karamoja region, Uganda, February 17, 2016 (Reuters/Goran Tomasevic).

United States Hunts Stolen Uzbek Assets
The U.S. Department of Justice (DOJ) is having a hard time collecting foreign officials’ ill-gotten gains. After finding evidence of bribery, the DOJ still needs to physically seize assets. The latest setback comes in the case against the Uzbek president’s daughter, Gulnara Karimova, for accepting bribes from Russian telecoms company VimpelCom. In the current round the DOJ and Uzbekistan are vying for some $114 million stashed in Karimova’s Irish bank accounts. This is just a small part of the $850 million the DOJ believes Karimova hid in accounts across Belgium, Luxembourg, and Ireland. If they get the money the Uzbek government, led by Karimova’s father, is already demanding its “rightful” return to Uzbekistan, the “victim” of corruption.

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This Week in Markets and Democracy: Labor Rights in Supply Chains, Bank Secrecy Act, and the Kimberley Process

by Shannon K. O'Neil
A man displays a rough diamond, from the Boda region, for sale in Bangui May 1, 2014. Despite a 2013 ban on diamond exports by The Kimberley Process, a global watchdog set up to stop the trade in "blood diamonds", rough diamonds are still commonly offered for sale in Central African Republic (Reuters/Emmanuel Braun). A man displays a rough diamond, from the Boda region, for sale in Bangui May 1, 2014. Despite a 2013 ban on diamond exports by The Kimberley Process, a global watchdog set up to stop the trade in "blood diamonds", rough diamonds are still commonly offered for sale in Central African Republic (Reuters/Emmanuel Braun).

Supply Chains Take Center Stage at International Labor Conference
Of the $26 trillion in commerce flowing around the world, over 70 percent are intermediate goods. This reflects the rise of global supply chains. The International Labor Organization (ILO) conference put this dominant means of production on the agenda for the first time this year, addressing working conditions for those within these chains. Government and business leaders from the ILO’s 187 member countries spent the past two weeks debating whether to set official standards to push companies like Walmart, Gap, and Nestlé to address labor violations along their transnational production chains. Though any new rules would be non-binding, historically ILO standards have prompted legislation.

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This Week in Markets and Democracy: Walmart Bribery Case, Myanmar Sanctions, Kleptocracy Archive

by Shannon K. O'Neil
Myanmar's National League for Democracy leader Aung San Suu Kyi leaves after she attended as an observer for opening of the new upper house of parliament in Naypyitaw February 3, 2016. After decades of struggle, hundreds of lawmakers from Aung San Suu Kyi's camp will form Myanmar's ruling party on Monday, with enough seats in parliament to choose the first democratically elected government since the military took power in 1962 (Reuters/Soe Zeya Tun). Myanmar's National League for Democracy leader Aung San Suu Kyi leaves after she attended as an observer for opening of the new upper house of parliament in Naypyitaw February 3, 2016. After decades of struggle, hundreds of lawmakers from Aung San Suu Kyi's camp will form Myanmar's ruling party on Monday, with enough seats in parliament to choose the first democratically elected government since the military took power in 1962 (Reuters/Soe Zeya Tun).

Setback in Walmart Mexico Bribery Case
Four years after a New York Times investigation alleged that Walmart’s board knew about and covered up bribes paid in Mexico, the chances of a civil or criminal conviction are fading. Last week shareholders—including the California teachers’ and New York City pension funds—lost their case against Walmart’s board, with a Delaware judge ruling their complaint was too similar to another dismissed last year. The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) probe seems to have stalled as well, uncovering less than expected as the five-year statute of limitations for Foreign Corrupt Practices Act (FCPA) charges runs out this year. Many expect Walmart to just pay a fine, in addition to over $700 million already spent on compliance and legal fees.

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This Week in Markets and Democracy: UK Anticorruption Summit

by Shannon K. O'Neil
British Prime Minister Cameron is joined by Jim Yong Kim, President of the World Bank Group, (left) Sarah Chayes, a senior associate in the Democracy and Rule of Law Program, (second left) US Secretary of State John Kerry, (third from left) and Nigerian President Muhammadu Buhari, (right), as he opens the international anti-corruption summit on May 12, 2016 in London, England. Leaders from many of the worlds nations are gathering in London for the summit, which is aimed at stepping up action to tackle the problem of corruption (Reuters/Dan Kitwood/Pool). British Prime Minister Cameron is joined by Jim Yong Kim, President of the World Bank Group, (left) Sarah Chayes, a senior associate in the Democracy and Rule of Law Program, (second left) US Secretary of State John Kerry, (third from left) and Nigerian President Muhammadu Buhari, (right), as he opens the international anti-corruption summit on May 12, 2016 in London, England. Leaders from many of the worlds nations are gathering in London for the summit, which is aimed at stepping up action to tackle the problem of corruption (Reuters/Dan Kitwood/Pool).

British Prime Minister David Cameron gathered government officials, civil society advocates, and business leaders in London for a one-day summit on corruption, a global “cancer” hindering economic development and growth. Forty countries signed a Global Declaration Against Corruption, promising to prevent, uncover, and punish corruption “wherever it exists.” Many countries followed up the lofty rhetoric with concrete commitments: twenty-one pledged stronger legislation for returning stolen assets, fourteen will open public contracts to scrutiny for the first time, and the UK and five other countries will jointly launch a new anticorruption center to help investigate and prosecute cross-border cases.

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This Week in Markets and Democracy: Honduras’ Anticorruption Fight, Freedom House Report, Conflict Minerals Setback

by Shannon K. O'Neil
A demonstrator holds a sign that reads "Out JOH", in a reference to Honduras' President Juan Orlando Hernandez, during a march to demand the resignation of Hernandez in Tegucigalpa, August 21, 2015. Thousands of protesters have been continuing demonstrations in Tegucigalpa, calling for the resignation of Hernandez over a $200 million corruption scandal at the Honduran Institute of Social Security (Reuters/Jorge Cabrera). A demonstrator holds a sign that reads "Out JOH", in a reference to Honduras' President Juan Orlando Hernandez, during a march to demand the resignation of Hernandez in Tegucigalpa, August 21, 2015. Thousands of protesters have been continuing demonstrations in Tegucigalpa, calling for the resignation of Hernandez over a $200 million corruption scandal at the Honduran Institute of Social Security (Reuters/Jorge Cabrera).

Honduras’ New Anticorruption Fighter Takes on the President
Last summer allegations that Honduran officials stole more than $200 million dollars from the social security system led to widespread public protests and calls for President Juan Orlando Hernández’s resignation. The scandal spurred the creation of the Mission Against Corruption and Impunity in Honduras (MACCIH), an anticorruption body backed by the Organization of American States (OAS) and modeled after the International Commission Against Impunity in Guatemala (CICIG). Now active, MACCIH officials say they will investigate the case. Given MACCIH’s more limited prosecutorial autonomy and much smaller budget, many wonder if it can match the impressive results of its Guatemalan counterpart, which—working with the attorney general—brought down former president Otto Pérez Molina.

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This Week in Markets and Democracy: Peru’s Elections, Corruption Arrests, and Panama Papers Response

by Shannon K. O'Neil
People walk past campaign electoral signs of Peru's presidential candidate Keiko Fujimori in Cuzco, Peru, April 11, 2016 (Reuters/Janine Costa). People walk past campaign electoral signs of Peru's presidential candidate Keiko Fujimori in Cuzco, Peru, April 11, 2016 (Reuters/Janine Costa).

Peru’s Presidential Candidates Head to Second Round
On June 5, Keiko Fujimori, the daughter of former president Alberto Fujimori, will face former finance minister Pedro Pablo Kuczynski in Peru’s presidential runoff election. Questionable decisions by Peru’s electoral board in the first round—disqualifying two competitive candidates and dismissing charges of vote-buying against Fujimori and Kuczynski—boosted Fujimori and clouded the vote’s legitimacy. Now the question will be the anti-Fujimori vote and whether Kuczynski (not a natural campaigner) can consolidate her opposition—much as current president Ollanta Humala did when he beat her in 2011’s second round. Although Fujimori is popular among the rural poor, many remember the corruption and human rights abuses of her father’s presidency, and fear that she could follow in his footsteps.

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Five Things Washington Should Do to Help Latin America Curb Corruption

by Guest Blogger for Matthew Taylor
Paraguayan prosecutors Hernan Galeano (C), Federico Espinoza (center, R) and Chief Prosecutor Roberto Zacarias hold a news conference in Asuncion, January 8, 2016. Paraguayan state prosecutors on Thursday raided the headquarters of South American soccer confederation CONMEBOL after a request for cooperation from U.S. justice officials probing corruption inside world soccer, the prosecution office said (Jorge Adorno/Reuters). Paraguayan prosecutors Hernan Galeano (C), Federico Espinoza (center, R) and Chief Prosecutor Roberto Zacarias hold a news conference in Asuncion, January 8, 2016. Paraguayan state prosecutors on Thursday raided the headquarters of South American soccer confederation CONMEBOL after a request for cooperation from U.S. justice officials probing corruption inside world soccer, the prosecution office said (Jorge Adorno/Reuters).

This is a guest blog post by Dr. Richard Messick, an anticorruption specialist. It is based on a CFR roundtable discussion on March 24 hosted by Matthew M. Taylor, adjunct senior fellow for Latin America Studies.

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This Week in Markets and Democracy: Brazil’s Crisis Snowballs, Deferred Corruption Prosecutions, U.S. Bets on Cuba

by Shannon K. O'Neil
Brazil's President Dilma Rousseff (R) greets former president Luiz Inacio Lula da Silva during the appointment of Lula da Silva as chief of staff, at Planalto palace in Brasilia, Brazil (Reuters/Adriano Machado). Brazil's President Dilma Rousseff (R) greets former president Luiz Inacio Lula da Silva during the appointment of Lula da Silva as chief of staff, at Planalto palace in Brasilia, Brazil (Reuters/Adriano Machado).

Brazil’s Corruption Crisis Snowballs
Brazil’s corruption investigations expanded to encompass the former and current president. Federal police detained and questioned former President Luíz Inácio Lula da Silva (“Lula”) over whether he personally benefited from the Petrobras bribery scheme. São Paulo state prosecutors then separately filed to arrest him on money-laundering charges. In a plea bargain, Senator Delcídio do Amaral claimed current President Dilma Rousseff knew about Petrobras bid-rigging and tried to stop the criminal probe. Abroad, Argentine prosecutors are investigating if their own officials received kickbacks, and my colleague Matt Taylor predicts the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) could bring FCPA charges against Petrobras. And in what most perceive as a cynical move to defy justice, Lula joined Rousseff’s cabinet as chief of staff, removing him from the jurisdiction of both state and federal courts (only the Supreme Court can now try his case). As millions take to the streets in outrage, the political consequences may come more quickly than the legal ones.

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This Week in Markets and Democracy: Nike’s Bribes in Kenya, Elections in Benin and Niger, and Women’s Anticorruption Role

by Shannon K. O'Neil
A policeman is seen outside the gates of Riadha House the Athletic Kenya (AK) Headquarters during a protest in capital Nairobi November 23, 2015. Dozens of Kenyan athletes stormed the athletics federation headquarters in Nairobi on Monday, locking out officials and demanding that top Athletics Kenya (AK) bosses step down following allegations of graft and doping cover-ups (Reuters/Noor Khamis). A policeman is seen outside the gates of Riadha House the Athletic Kenya (AK) Headquarters during a protest in capital Nairobi November 23, 2015. Dozens of Kenyan athletes stormed the athletics federation headquarters in Nairobi on Monday, locking out officials and demanding that top Athletics Kenya (AK) bosses step down following allegations of graft and doping cover-ups (Reuters/Noor Khamis).

Nike Bribes, Will the United States Prosecute?
Bank records and emails show Nike paid a $500,000 “commitment bonus” to Kenya’s athletics federation, and hundreds of thousands more in “honoraria.” Though allegedly to support poor runners, Kenyan prosecutors say athletics officials quickly transferred the money to their personal bank accounts. Yet the United States cannot use the Foreign Corrupt Practices Act (FCPA) against the mega brand. The law only covers U.S. companies that bribe “foreign officials” and “public international organizations.” Sports associations are private, so outside the FCPA’s jurisdiction. In taking on FIFA, the U.S. Department of Justice (DOJ) worked around the FCPA, indicting foreign and U.S. officials for laundering money through U.S. banks, not bribery. The United States may need to do the same in the Nike case if it wants to follow up on President Obama’s pointed criticisms of Kenyan corruption with legal actions.

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Cleaning Up Global Supply Chains

by Shannon K. O'Neil
Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province May 26, 2010. A spate of nine employee deaths at global contract electronics manufacturer Foxconn, Apple's main supplier of iPhones, has cast a spotlight on some of the harsher aspects of blue-collar life on the Chinese factory floor (Reuters/Bobby Yip). Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province May 26, 2010. A spate of nine employee deaths at global contract electronics manufacturer Foxconn, Apple's main supplier of iPhones, has cast a spotlight on some of the harsher aspects of blue-collar life on the Chinese factory floor (Reuters/Bobby Yip).

The UK’s Modern Slavery Act now requires companies to report efforts to prevent human trafficking and slavery in the making of every part and every process of production, from headquarters down to individual suppliers along production chains. In the United States, the Dodd Frank Act’s disclosure rules for conflict minerals hold mining and technology companies to similar standards. But surveys and reports show companies still fail to monitor their suppliers, let alone prevent abuses.

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