Corruption Scandals and the Quality of Integrity Management: towards a research agenda Paul M Heywood University of Nottingham Paper prepared for the ‘The Quality of Government and the Performance of Democracies’ conference, University of Gothenburg, 20-­‐‑22 May 2015 1 Corruption Scandals and the Quality of Integrity Management: towards a research agenda Paul M Heywood University of Nottingham Introduction Part of the problem with scandal is that it steals up on you and takes you unawares. It then draws a vast media resource into spinning it out and developing it. Meanwhile you are trying to find the facts, work out the line, think of what ground you can legitimately camp on. People’s careers, their lives, depend on decisions taken in an instant, frequently imperfectly informed. When the storm is raging, your senses and decision-­‐‑making capacity are upended, tossed about on the waves of some fresh ‘revelation’, until you fear that you will never get to calmer waters and spot dry land. Scandal is an absolute nightmare in politics. Take my word for it. Tony Blair, A Journey (London: Random House, 2010), p.130. Corruption scandals have become a routine occurrence in virtually all democratic political systems. Arguably, they represent a failure of – or, at the very least, a threat to – a country’s integrity management system. Yet, despite the frequency of corruption scandals and the attention they receive from politicians, the media and public at large, there has been relatively little research on the interplay between scandals and their impact on integrity management (see Thompson, 2000: 5). Scandals demand attention, and a response, from political elites, and whilst ‘live’ can be the single most important political event in a country for both politicians and citizens. In light of this we might expect that scandals would be an important topic of research. However, although there is a body of research on political scandals, much of it focuses primarily on aggregate public reactions and likely electoral impact (see Nyhan, 2015: 435). We lack a detailed understanding of whether and how corruption scandals lead to policy responses, and in particular the impact of such scandals in shaping integrity management systems. Moreover, if integrity management policy is revised in the light of corruption scandals, we have little information about whether such revisions tend systematically to favour any particular type of policy response. Could it be that, because of the need to appear to be responding quickly, scandals may also lead policy makers to favour administrative changes that are faster to implement, and therefore potentially less coherent and robust than would be ideal? Indeed, is it the case that policy responses to scandals privilege formal compliance-­‐‑based regulation, rather than values-­‐‑based approaches, thereby changing the overall shape of integrity management systems? This paper offers a preliminary exploration of how corruption scandals can prompt important changes in integrity management systems. In particular, it asks whether such changes favour formal rules and restrictive laws that are ultimately either inefficient or unworkable in practice. Moreover, if regulatory changes are overly restrictive, can we expect such ‘scandal-­‐‑led reforms’ to be less durable than initially envisaged, and to weaken in their implementation after the fact? The paper is thus not seeking primarily to situate responses to corruption scandals within the policy process literature more generally, whether that be punctuated equilibrium theory and its variants or incremental institutional evolution, but rather to assess how such responses relate to 2 integrity management systems. It proceeds as follows: first, it discusses the meaning of scandals, focusing on what defines a scandal in general, and what is required for a scandal to be designated a corruption scandal. A second section looks at scandals in public life, exploring how they affect legislative response and capacity. In the third section, integrity management systems are discussed in more detail, with a focus on compliance-­‐‑based versus values-­‐‑based approaches, and how post-­‐‑scandal reforms privilege the former. The next section presents three case studies, drawn from the UK and the USA: MPs’ expenses and lobbying scandals in the former, and the Lockheed scandal in the latter, which led to the 1977 Foreign Corrupt Practices Act. The final section concludes and outlines questions for further research. Defining corruption scandals In order to assess the substantive impact of corruption scandals on integrity management systems, we need first to understand what we mean by scandal in general, and by a corruption scandal in particular. This is no simple task. Indeed, ‘scandal’ is a very broad term with many (related) meanings. At a basic level, a scandal is any event that ‘scandalises’ people, that is to say an event that shocks someone because it has violated his or her expectations about appropriate standards of conduct. Within this broad definition are requirements that an actor has broken some norm in a way that has generated publicity. For a corruption scandal to also be a political scandal, the person at the centre of the scandal must be either a political figure, or sufficiently close to a political figure that their behaviour reflects upon them (see also Basinger and Rottinghaus, 2012: 217). In this vein, Thompson (2000: 13-­‐‑14) argued that scandals have five major characteristics: 1) their occurrence or existence involves the transgression of certain values, norms or moral codes; 2) their occurrence or existence involves an element of secrecy or concealment, but they are known or strongly believed to exist by individuals other than those directly involved… 3) some non-­‐‑participants disapprove of the actions or events and may be offended by the transgression; 4) some non-­‐‑participants express their disapproval by publically denouncing the actions or events; 5) the disclosure and condemnation of the actions or events may damage the reputation of the individuals responsible for them (although this is not always or necessarily the case). Marion (2010:11) offers a rather broader conceptualisation of scandals, with three core elements: ‘an action or event, publicity, and a public response’. According to Marion (2010: 11), the action (or, indeed, inaction) ‘must involve a transgression of societal norms, moral codes, or values, or be a behaviour that is disgraceful, shameful, or discredits someone’. Whilst such definitions are helpful in outlining the boundaries of a ‘scandal’, they are too broad in scope to provide a helpful guide for practical research. Indeed, as Basinger and Rottinghaus note (2012: 217-­‐‑8), Marion’s definition is too expansive because it potentially encapsulates too many actions or events that ought properly to be considered policy failures or legitimate changes of policy direction. In this respect, Thompson’s definition of core elements is both more specific and more helpful than Marion’s broader take. By omitting the inclusion of ‘shameful’ or ‘discrediting’ actions, Thompson’s conceptualisation avoids some of the issues of policy failures being included in the discussion of scandals. The requirement for a measure of secrecy again taps into the notion of a societally objectionable action, although again 3 would miss situations in which there was a disconnect between the normative beliefs of a political actor and those of the public. For example, a politician may regard it as entirely appropriate to spend time socialising with major party donors, and so not be secretive about it, but the public may nonetheless be scandalised by such actions. Basinger and Rottinghaus (2012: 218-­‐‑9) take a different approach in their definition, focusing upon ‘allegations of illegal, unethical, or immoral wrongdoing’ (explicitly including sexual impropriety). For non-­‐‑sexual cases, they define ‘an alleged violation of a law or code of ethics’ as a ‘threshold question’ (2012: 218). Whilst the use of a threshold avoids including policy failures as scandals, it makes the definition uncomfortably narrow; indeed, the definition ignores all situations in which political figures act immorally but in a way that is legally permissible. A similar critique can be levelled at Markovits and Silverstein’s classic work on political scandals, in which a political scandal is demarcated not by its effect, reach, or ability to scandalise the public, but instead by ‘the presence of any activity that seeks to increase political power at the expense of process and procedure’ (1988: 6). There thus remains a fundamental difficulty in accurately demarcating between ‘bad news’, ‘poor performance’, and scandals proper without having to fall back upon definitions that are too restrictive to be of practical use. More broad-­‐‑ranging definitions are susceptible to conceptual blurring, whilst more restrictive definitions risk miscategorising genuine scandals as not being a scandal. In this paper, scandal is defined as (1) any action or inaction that results from or includes unethical or immoral behaviour (or allegations thereof), (2) in a situation in which the public is aware of, or suspects, said transgression, and (3) the public responds negatively to this information. Such a definition has the advantage of avoiding genuine policy failures, whilst allowing scandals to be included that were not ‘hidden’. Of course, even with such a definition there remain conceptual challenges: what does it mean for the public to be aware? How many members of the public are sufficient to ‘count’? How do we know if the public has reacted negatively? Such questions are particularly important when there is a highly partisan media. Research by Puglisi and Snyder (2008: 4) on the USA found that ‘the ideological position on the “supply side” is strongly correlated with the partisan coverage of scandals, and with the expected sign. Democratic-­‐‑leaning newspapers – i.e., those with a higher propensity to endorse Democratic candidates in elections – give significantly more coverage to scandals involving Republican politicians than scandals involving Democratic politicians, while Republican-­‐‑leaning newspapers do the opposite. This bias in coverage of scandals is not confined to the editorial page, but also affects the news section.’ Greater concentration of media ownership in recent years, as well as in patterns of news consumption, may have exacerbated such bias. It is therefore important to take into account the ‘spread’ of scandals across the media as a whole, as well as to distinguish between their magnitude. An accusation of corruption that, for example, comes exclusively from one political party and is directed at another will not inherently be a scandal; in strict terms, the public is the final arbiter of when something is – or is not – a scandal. However, even if we restrict our understanding of ‘the public’ to only those people sufficiently knowledgeable about current events that they might be aware of a scandal, that leaves an unmanageably large number of people whose knowledge and opinion of a given action or event would need assessing. Therefore, we have little option but to assess whether an event is or is not a scandal by reference to news media and how it is reported. This at least has the advantage that it does not require detailed public opinion polling to have occurred around the time of a putative scandal for it to be designated as such. 4 The remaining definitional issue surrounds when a scandal is ‘corruption scandal’ and when it is some other kind. Basinger and Rottinghaus (2012: 218), break scandals down into financial corruption, political corruption, personal, and international. The first two types – which are most relevant for a discussion of corruption scandals – are in turn defined in terms of individual benefit from illegal or unethical conduct, with financial corruption leading to direct financial benefits and political corruption leading to non-­‐‑
financial benefits. Personal scandals deal with ‘immoral individual behavior, especially adultery, and also sexual harassment, drug abuse, and employing undocumented house-­‐‑
hold staff’ (Basinger and Rottinghaus, 2012: 219), whilst international scandals relate to the interactions between countries. In a somewhat similar vein, Thompson (2000: 120) breaks down the general category of ‘political scandals’ into: sex scandals; financial scandals, concerning the misuse of financial resources; and ‘power scandals’, concerning the abuse of political power. If corruption is understood in terms of the abuse of power, the latter two types of scandal are properly thought of as corruption scandals. Scandals in public life As noted above, existing research on scandals tends to have a primary focus on public reactions, including whether they make people more or less trusting (for a review of literature, see Rose, 2014: 89-­‐‑96), how they affect the electoral chances of candidates (see, for example, Shaw, 1999), how they affect the popularity of governments (see Dewan and Dowding, 2005), or how they harm system support more generally (see Maier, 2011; Rose, 2014: Chs.5-­‐‑6). The findings of this literature are equivocal: scandals are sometimes harmful to individual candidates, but sometimes not, and they are sometimes harmful to system support more generally, but sometimes not. Such results could suggest that scandals are not particularly significant political events (see also Thompson, 2000: 234-­‐‑5). Such a conclusion would seem counter-­‐‑intuitive, particularly given the attention paid to scandals when they are ‘live’, both by the media and by political administrations. Moreover, it would be hoped that scandals would lead to changes in the integrity management system; scandals often expose flaws in ethical regulations that ought to be fixed. However, it is the manner in which politicians respond to scandals that suggests they may be particularly important. In an ideal system, a government would respond to a scandal by carefully considering its origins, questioning whether it occurred because of flaws in the regulatory environment, and – if that proved to be the case – adapting the existing regulations in a coherent and considered way in order to fix the issue whilst maintaining coherence with the existing integrity structure. Unfortunately, such a model appears to assume too much about the capacity of governments to respond while under the spotlight of a scandal. In practice, of course, policy responses are much more disjointed, reflecting the ‘stick-­‐‑slip dynamic’ of the general punctuation thesis: ‘In a not-­‐‑unfamiliar story line, a problem “festers below the radar” until a scandal or crisis erupts; policymakers then often claim “nobody could have known” about the “surprise” intervention of exogenous forces, and then scramble to address the issue’ (Jones and Baumgartner, 2013: 7). As such, we might expect real-­‐‑world responses to scandals to be haphazard rather than coherent, and unlikely to result in carefully considered policy responses. In a recent article, Basinger and Rottinghaus (2012) suggest that the primary responses of US administrations to scandals have been either ‘cooperation’ (whereby the administration works openly to investigate the cause of a scandal and attempts to rectify the problem), or ‘stonewalling’ (whereby the administration attempts to block 5 any investigation into the cause of a scandal). Such a model implies that there is capacity within an administration facing a scandal to choose between these two responses and act accordingly. However, this assumption is open to question. Scandals often represent a period of crisis for politicians, and so their capacity for coherent action can be dramatically impaired – as noted in the comment by Tony Blair at the top of this paper. In such circumstances, the idea that governments can deliberatively choose a strategy following the emergence of a scandal seems implausible. Moreover, the assumption of a choice between two courses of action is probably too much of an over-­‐‑simplification to be helpful for analytical purposes: in reality almost all government responses to scandals are based upon a mix of cooperation and stonewalling. This is particularly true given the complex and evolving nature of corruption scandals. Moreover, and of particular importance, there is the potential for strategic (and potentially superficial) cooperation, in which administrations concede ground on matters that do not affect their core objectives, whilst systematically seeking to shift focus away from those issues that might threaten their interests. Strategic cooperation could be expressed through a variety of actions, but one of the most important potential areas is policy change. Governments can – and do – respond to scandals by promising, or enacting, policy change (as noted by Tiffen, 1999: 199-­‐‑205). However, because of the need to be seen to respond, such policy changes often take place at great speed; they are therefore also quite likely to be enacted during a period of reduced government capacity in the post-­‐‑scandal scramble. The key question from the perspective of this paper is thus less to do with how we can explain the fact of policy change in response to corruption scandals (punctuated, stick-­‐‑slip, information overreaction, etc.) than with the nature, quality and impact of such policy responses. Furthermore, regardless of whether the policy response takes place in haste or over a longer time period, it is contended that the need to be seen to be taking action leads to the favouring of regulatory actions that shift the emphasis of integrity management systems in a more compliance-­‐‑based than values-­‐‑based direction. Such a shift in turn alters the dynamic of integrity management approaches in ways that could prove to be counter-­‐‑productive. The political problem of rapid integrity management change Individual components of integrity management systems can take many practical forms, including suggestions, recommendations, codes, policies, rules, and laws. Each different formulation of integrity regulation implies different levels of compulsion, and a different relationship between the regulators and the regulated. In the public administration literature, a distinction is drawn by some between values-­‐‑based and compliance-­‐‑based approaches to regulation (Paine, 1994; Roberts, 2009; Scott and Leung, 2012; Bies, 2014; see also Maesschalck, 2004). In essence, compliance based policies make use of formal proscriptive rules and codes that aim to forbid individual corrupt or unethical actions; values-­‐‑based policies, on the other hand, aim to instil an ethical attitude in employees, and to empower them to chose the ethical course of action even when not monitored or under a legal duty. However, at a deeper level, each tradition also differs in terms of how much trust is placed in public officials (for a recent discussion, see Heywood and Rose, 2015; see also Bies, 2014). Values-­‐‑based policies fundamentally require trust; they empower public officials to make ethical choices, and trust that those officials will act ethically. Compliance-­‐‑based policies, by contrast, reflect an explicit lack of trust in public officials; they have a focus upon verification and the restriction of personal authority from officials. Whilst each type of policy has a role to play in a well-­‐‑
6 rounded integrity management system, there are reasons to believe that an integrity management system that relies too heavily on compliance-­‐‑measures may create spaces for unethical behaviour that would not exist otherwise (see Heywood and Rose, 2015). This is a consequence of compliance measures diminishing the role of ethical discourse in public life, and thus reducing ethics to a question of rule compliance. If faced with an ethical dilemma for which specific rules are ambiguous, or absent altogether, officials may find they have very little guidance as to what course of action they should take, and very little training about how to select the most ethical course of action. Given such critiques, it may be asked why policy makers seemingly prefer to favour compliance-­‐‑based rather than values-­‐‑based policy responses to scandals. One reason may be that compliance-­‐‑based policies have a key advantage of almost always being easier to design and quicker to implement. This can be particularly helpful following a corruption scandal, when policy makers face demands that ‘something’ must be done. Politically, being perceived to be responding can often be crucially important: failure to respond risks being interpreted as being out-­‐‑of-­‐‑touch or, worse, complicit. Heywood and Rose (2015: 107) go further, and argue that the tendency towards adopting compliance-­‐‑based policies results in part from the way that corruption has historically been conceptualised. They argue that corruption is frequently seen as being analogous to a physical illness (usually cancer): ‘Yet the analogy of physical disease, which is compelling in many of its applications, has not led to an equally compelling account of corruption prophylaxis. Indeed, if we are to extend the analogy, corruption is primarily treated by critical-­‐‑care approaches, with an emphasis upon short-­‐‑term stabilization rather than longer term recovery’. Under this view, a corruption scandal is akin to the discovery of a tumour, requiring rapid intervention. Given this requirement for quick and specific action, there is a natural tendency to favour some form or regulatory response, usually in the form of legislation to proscribe or constrain certain activities. However, there are two potentially significant problems with such a response. First, as argued above, the tendency towards regulatory compliance-­‐‑based approaches to integrity management has the potential to contribute to an environment in which ethical behaviour actually becomes more, not less, difficult to ensure. Second, the speed of regulatory reactions to corruption scandals can result in poor quality legislation that not only fails to achieve its intended purpose, but may also disrupt existing elements of the integrity management framework and in turn require reform at a future date. Corruption scandals and reform in action: three case studies In light of the discussion above, it is suggested here that when corruption scandals prompt reforms, these will most likely be compliance-­‐‑based and regulatory, and that moreover such reforms will usually be enacted quickly and without appropriate scrutiny. Ideally, in order to explore this argument in more detail, we would want to build a comprehensive database of corruption scandals and policy response to them over time and across various jurisdictions. Lack of time and resource means that must be a task for the future. Instead, here we focus on three case studies in order to explore the relationship between corruption scandals and the quality of integrity management. It is recognised that, in line with a standard critique of policy studies literature, the choice of cases can be questioned on various grounds – but the aim here is to provide an initial exploration of the viability of an argument in order to stimulate feedback, rather than to make a definitive case. 7 The three cases explored here (two drawn from the UK, the other from the USA) can be considered corruption scandals in the broad sense outlined in the definition above, and can also be considered to be financial corruption scandals on the more restrictive definition used by Basinger and Rottinghaus (2012: 218). Additionally, the Lockheed scandal can also be considered an international scandal, on Basinger and Rottinghaus’s classification (2012: 219). All three scandals prompted policy responses of a regulatory nature that reflected a strong sense of urgency, and all three responses were subsequently subject to criticism for being either inadequate or inappropriate, or both. Case study 1 – MPs’ Expenses and the Independent Parliamentary Standards Authority Expenses claimed by Members of Parliament (MPs) had long been an issue of public contention in the UK – both because using public funds for political activities of any kind is often contentious in an age of political distrust and antipathy towards politicians, and also because of minor scandals that emerged periodically in the years leading up to 2009. These scandals were usually limited in scope, usually related to the activities of a single person, and did not raise serious concerns about the operation of the political system. This changed in 2009, first with a series of reports over the course of a few weeks in which the expenses claims of some senior ministers were called into question, and then most dramatically in May 2009 when the Daily Telegraph obtained a complete record of expenses claims made by MPs under the Additional Costs Allowance (ACA), which was the main vehicle for providing MPs expenses. MPs had sought to keep this information secret, and had been engaged in proceedings to prevent claims from being subject to freedom of information (FOI) requests. When the entire list of claims was made available to the Daily Telegraph it quickly became apparent that many MPs had claimed extensively, often in ways that the general public considered illegitimate. Moreover, some claims were straightforwardly illegal, including some MPs and Lords claiming for mortgages that had already been paid in full. The affair was a classic political and corruption scandal: a significant minority of MPs were acting in a way that was deemed unethical and an abuse of their allowances, the public found out despite best efforts to keep it secret, and consequently reacted very negatively. Public reaction was compounded by the timing of the revelations, with the global financial crisis already having an impact on living standards. In this climate, the seeming excess of the expenses scheme and the use that MPs made of it set the stage for the biggest political and corruption scandal for a generation. The scandal also engulfed MPs who were not explicitly acting unethically. Indeed, because of the exceptionally hostile public and media climate, many MPs who were acting entirely within the letter of the law were still affected wherever their claims were viewed as excessive. Given the hostility that MPs faced, there was a desire among all parties to respond to the scandal. Initially, the government had hoped that reforms could be delayed until a report into the expenses system, being conducted by the Committee on Standards in Public Life, had been published. However, the political reality of the scandal meant that waiting from May until the report was published in the late autumn would be impossible. Instead the government and opposition parties began political campaigns that largely sought to distance the parties from the scandal, including a push by the opposition Conservative party for a General Election (for a contemporary discussion, see Kenny, 2009a: 507-­‐‑8; Kenny, 2009b). Parliament was not able, through standard political manoeuvres or diversionary tactics, to assuage public anger. Instead, the government turned to primary legislation in an attempt to end the scandal. On 23 June 2009, just six weeks after the first wave of publications of expenses claims in the Daily Telegraph, the Parliamentary Standards Bill was introduced. Most notably, this Bill 8 would take the responsibility for managing the expenses system away from parliament and give control to a new body, the Independent Parliamentary Standards Authority (IPSA). Passing primary legislation in the UK is usually a slow process, requiring three readings in both houses of parliament and often requiring lengthy committee and parliamentary scrutiny. However, the political reality of the scandal prevented such careful consideration of the Parliamentary Standards Bill. Over the course of just three days, the Bill passed through the entirety of the House of Commons scrutiny stages, including a debate in the House of Commons, two committee stages, a reporting stage, and a third reading. The Bill then moved to the House of Lords, where it passed through the entirety of its scrutiny process in nineteen days before receiving Royal Assent. The whole process, from initial introduction to enactment of the law, was less than a month. After IPSA’s creation, extensive rules were established for MPs claiming expenses (see IPSA, 2013: 7-­‐‑70), formalising and regulating much that had previously been taken on faith. In this sense, the system moved from being open and values-­‐‑based to tightly controlled and compliance-­‐‑based. With such a rapid pace of change, and the dramatic expansion of formal rules that came with it, it is perhaps unsurprising that the changes resulted in sub-­‐‑optimal regulation. Indeed, two years after being established, the costs of the administration of this system exceeded the cost of the claim itself in 38% of cases (Public Accounts Committee, 2011: Ev 4-­‐‑5). This inefficiency was particularly a result of the degree of auditing of claims not being proportional to the risk of fraud (Public Accounts Committee, 2011: 9; for a detailed description of the process of validation, see NAO, 2011: 32). Such a lack of proportionality was very slow to be fixed, in turn because the legacy of the scandal continued to prevent coherent and coordinated reforms of the system. Indeed, it was claimed that the new system was even impeding MPs from doing their job effectively and was also likely to deter people from less affluent backgrounds from seeking to enter parliament (The Independent, 2011). Case study 2 – The United Kingdom: Lobbying scandals and the Register of Lobbyists Much like expenses, lobbying has been an issue that has generated minor scandals for some time. In 2010 David Cameron, while still leader of the opposition, described lobbying as ‘the next big scandal waiting to happen’ (Daily Telegraph, 8 February 2010) and pledged to introduce legislation to reform the system of lobbying MPs (Political and Constitutional Reform Committee [PCRC], 2012: 5). In part because of this commitment, as well as a somewhat more general desire to reform the system of lobbying in the UK, the government published a consultation document in January 2012 that suggested introducing a statutory register of lobbyists to cover third party lobbying, i.e. lobbying done by an individual or company for the benefit of another individual or group (HM Government, 2012: 11). This consultation led the Political and Constitutional Reform Committee (PCRC) to conduct an investigation, that was published in July 2012. As the PCRC notes, it is the convention for the government to respond to committee publications within two months; however in this case the deadline was repeatedly missed and extended (PCRC, 2013a: 2). During this period, it appeared that the government was becoming less keen to introduce reforms of the lobbying system. Indeed, on 22 May 2013 it was reported that the Prime Minister’s advisor, Lynton Crosby, was keen for the plans to be dropped – a report that prompted the Deputy Prime Minister to re-­‐‑iterate that he was committed to introducing a register of lobbyists by 9 20151. However, even at this stage, the Public Relations Consultants Association expressed major concerns about the government’s suggestions2. Following months of delay, a major lobbying scandal emerged, changing the government’s priorities and leading to a dramatic increase in pace on this issue. On 31 May 2013, just 9 days after the Deputy Prime Minister reiterated his commitment to introduce a register of lobbyists by 2015, secret footage filmed by the BBC showed a Conservative MP Patrick Mercer accepting thousands of pounds in order to lobby for Fijian business interests. After being paid, ‘Mr Mercer tabled five Parliamentary questions and an Early Day Motion (EDM), and actively sought to set up an All-­‐‑Party Parliamentary Group (APPG) on Fiji’ (Committee on Standards, 2014: 3). This represented a serious breach of parliamentary rules, and directly contributed to the debate about lobbying in the UK. The Parliamentary Commissioner for Standards, in assessing the seriousness of the breaches, said: I find that in allowing payment to influence his actions in parliamentary proceedings, in failing to declare his interests on appropriate occasions, in failing to recognise that his actions were not in accordance with his expressed views on acceptable behaviour, in repeatedly denigrating fellow Members both individually and collectively, and in using racially offensive language, Mr Mercer inflicted significant reputational damage on the House and its Members. (see Committee on Standards, 2014: 52-­‐‑3) Moreover, at almost exactly the same time as the allegations were emerging about Patrick Mercer, similar allegations were made against three members of the House of Lords, who were accused of taking money in exchange for lobbying for a fictitious energy company. On 3 June 2013, less than a week after the allegations, the government announced that it would introduce a Bill by July 2013 to regulate lobbying.3 The Bill was formally introduced on 17 July 2013, although passage itself took until 30 January 2014. The rapid introduction meant that the Bill received no formal pre-­‐‑legislative scrutiny, a situation that infuriated the Political and Constitutional Reform Committee (PCRC, 2013a: 3): It is utterly unacceptable that the Government took more than a year to respond to our report on introducing a statutory register of lobbyists and that when it finally responded it did so in the form of a letter of a page and a half that does not engage with any of the detailed points made in the report… We are further dissatisfied that we have been denied the opportunity to carry out pre-­‐‑legislative scrutiny on a draft Bill on lobbying. As recently as February 2013, the Deputy Prime Minister referred to his intention to publish a Bill in draft. We are unclear what has changed since then and why the timetable has suddenly become so tight… Bills which do not receive pre-­‐‑legislative scrutiny should be the exception not the rule. There should always be a good reason for dispensing with pre-­‐‑legislative scrutiny. In the case of the Transparency of Lobbying, Non-­‐‑Party Campaigning and Trade Union Administration Bill there is no good reason. 1 See http://www.bbc.co.uk/news/uk-­‐‑politics-­‐‑22623051 (last accessed 30/4/2015) 2 Reported in http://www.bbc.co.uk/news/uk-­‐‑politics-­‐‑22623051 (last accessed 30/4/2015) 3 Reported in http://www.bbc.co.uk/news/uk-­‐‑politics-­‐‑22749803 (last accessed 30/4/2015) 10 However, there was indeed a reason for this dramatic acceleration of pace and tightening of the timetable, and it was of course the political climate created by the lobbying scandals – even though these changes meant that the Bill would not be reviewed in the normal way. Moreover, without proper pre-­‐‑legislative scrutiny, the eventual legislation itself was likely to be of poorer quality than it otherwise would have been. Ultimately, the legislation that was passed – and that sought to establish a regulatory framework for lobbying activity in the UK – has been sharply criticised by a variety of groups. Transparency International UK (2015: 30-­‐‑2) summarised these criticisms as: 1. The Lobbying Act defines lobbyists too narrowly. 2. The Lobbying Act is concerned with only a very narrow group of possible lobbying targets – Ministers, Permanent Secretaries and special advisers. 3. The information that lobbyists are required to disclose is very limited. 4. There is a lack of clarity over what constitutes direct contact with a Minister or Permanent Secretary – the trigger requiring a lobbyist to register. 5. The arrangements for monitoring compliance with the register have not yet been set out. 6. The sanction of £7.5k is unlikely to act as a major deterrent to anyone seeking to evade the law. 7. There is little indication of the expected costs of the Registrar, or how they will be met. Such criticisms reflect serious weaknesses in the regulations, which in turn almost certainly reflects the fact that the legislation to establish the regulation was written very quickly with no pre-­‐‑legislative scrutiny. Importantly, these are not criticisms that arise from unknowable emerging responses to new regulation. In its response to a consultation by the Political and Constitutional Reform Committee, the Chartered Institute of Public Relations had stated in August 2013: 1. Is the definition of “consultant lobbyist” in clause 2 of the Bill likely to lead to a register that enhances transparency about lobbying? No. The Government’s proposed definition of a consultant lobbyist would not only fail to capture many of those who would identify themselves as such, but would also render the vast majority of non-­‐‑consultant lobbyists, including those serving in-­‐‑house and in various other capacities, as non-­‐‑registrable… It would seem unlikely that a limited register of lobbyists could achieve the original stated aim of increasing transparency in lobbying and the current Bill could actively reduce transparency. It also seems possible that such a limited range of registrable activity will not do anything to usefully increase public information on the subject. Also, having first raised this issue as one of ‘lobbying’ the Government has redrawn the problem so tightly that the register will now not cover areas such as lobbying in Parliament, perhaps leading to a gap between the expectations for the register and what it will actually achieve. (cited in PCRC, 2013b). And indeed, in spite of the legislation, lobbying not only remains an issue of concern in the UK, but there is a widespread view that the law will need to be amended as it is not fit for purpose (Transparency International UK, 2015). 11 Case study 3 – The United States: The post-­‐‑Watergate bribery scandals and the Foreign Corrupt Practices Act 1977 The Foreign Corrupt Practices Act (FCPA) 1977 criminalised foreign bribery for business purposes, and was at the time one of the most rigorous acts in the world. The road to the FCPA passage began with the Watergate scandal, which conditioned the political reality of ethics and legislative reform. The Watergate scandal is probably the most famous political scandal in history. Starting in 1972 when seven men were arrested on 17 June 1972 for their parts in burgling the headquarters of the Democratic National Committee (DNC), located at the Watergate complex, in an attempt to wiretap the phone of Larry O’Brien, head of the DNC (Marion, 2010: 87-­‐‑8). These men had connections to the Committee to Re-­‐‑Elect the President (CREEP), and so their arrest was likely to prove politically embarrassing for the then-­‐‑
president, Richard Nixon (Marion, 2010: 88). When Nixon learnt of the connection, three days after the incident, he initiated an elaborate cover-­‐‑up (Marion, 2010: 88). This initial scandal, and the response of attempting to hide the evidence, led to ever greater scrutiny of the president by both Congress and the media, which ultimately uncovered: illegal campaign practices, “dirty tricks” in campaigning, presidential abuses of power in the use of illegal wiretapping, Internal Revenue Service pressure, and other harassments of alleged political “enemies” and the presidentially directed cover-­‐‑up of these and other acts. (Schudson, 2004: 1232) Congressional hearings began in May 1973. Particularly important for future developments was the almost accidental revelation by a former White House aide, Alexander Butterfield, that Nixon had systematically taped recordings of himself in the White House (Marion, 2010: 93). While Nixon strongly fought the release of these tapes, by mid-­‐‑1974 he accepted that he would be forced to reveal them. These tapes would prove pivotal, both in bringing about Nixon’s downfall and in highlighting the need for further investigation into a great many illegal and unethical practices. These investigations led to the arrest and imprisonment of some of Nixon’s inner circle, and the foundation of several committees and task forces to investigate matters arising from the revelations. Taken as a whole, the Watergate scandal brought to light a significant amount of previously hidden information, and raised serious questions about the ethics of very senior people in government and business. Of particular note in this context, the Watergate scandal revealed the existence of corporate slush funds corruptly used to buy influence abroad (Marion, 2010: 105). This revelation, like so many arising from the Watergate scandal, provoked intense media interest. Revelations concerning such corporate slush funds and illicit payments also prompted the Securities and Exchange Commission (SEC) to explore whether these payments violated federal securities laws, by virtue of not publically disclosing their existence to investors (Koehler, 2012: 932). Senator Frank Church, chairman of the subcommittee on multinational corporations, also became interested in these payments as a substantive foreign policy question (Koehler, 2012: 933). Beginning in 1975, Church’s committee held hearings into the actions of several companies, most prominent of which was Lockheed, a company that had recently received a $250 million loan guarantee from the US federal government in order to avoid bankruptcy, and was found to be involved in significant illegitimate payments (Koehler, 2012: 934-­‐‑5). As the Watergate scandal evolved into a separate scandal concerning bribery and the violation of securities laws, hundreds of instances of corrupt, illegal, or illegitimate payments were discovered. The sum total of these revelations, and the uncertain legal situation in which these payments occurred, 12 produced a clear sense in 1975-­‐‑6 that the legislation was necessary to address the problem (Koehler, 2012: 961). Unlike the UK, the US does not have a legislature dominated by the executive. Legislation in the US requires passage through both Houses of Congress, and approval by the President, with each step offering not only scrutiny but also genuine veto points. Because of this, legislation is likely to take longer to pass in the US than the UK, and moreover will generally promote more substantive discussion. The FCPA thus took a somewhat circuitous route through Congress, taking around two years from the main outbreak of the securities scandal to passage. Nonetheless, agreement for legislative change arose quickly, fuelled both by the objective failings of legislation that had not prevented the observed bribery and by a more general ‘post-­‐‑Watergate morality’ (Koehler, 2012: 943). The substantive debate about the final form of the FCPA was ultimately about a choice between a ‘declaration’ approach, in which foreign payments would be declared but not necessarily illegal, and a ‘criminalisation’ approach, which would explicitly criminalise foreign bribery (Koehler, 2012: 994). The ‘declaration’ approach, favoured by President Ford, lost traction with the election of Carter in 1976, leaving an open pathway to criminalisation, starting in 1977 (Koehler, 2012: 996). While the criminalisation approach would eventually be enacted, there remained serious concerns both about the enforceability of the legislation and, moreover, the principle of criminalising acts committed abroad. As Richard Darman, Assistant Secretary for Policy at the Department of Commerce stated The basic question, it seems to us, which one must address in considering the foreign payments direct criminalization provision is this: What reason is there to enact a provision of law which an overwhelming majority of responsible legal scholars, law enforcement officials, and serious analysts of this issue, view to be essentially unenforceable. (cited in Koehler, 2012: 1000). The chairman of the New York City Bar Ad Hoc Committee on Foreign Payments made similar claims, but also raised concerns about judicial procedures and extra-­‐‑
territoriality, stating that they were opposed to criminalisation because: (a) As a general principle, states have been reluctant to extend the reach of their criminal law to acts done abroad. This reluctance arises from considerations of comity and from the potential foreign relations impact of extending domestic criminal laws to acts which have their center of gravity abroad and which, therefore, in most cases concern the foreign state more than the legislating state. (b) It is difficult to investigate and prosecute acts done abroad. The writs of our grand juries and courts do not run as to non-­‐‑United States citizens outside our boundaries. Thus cooperation of foreign individuals or governments would usually be required to investigate and prosecute a crime based on acts done abroad. (c) Extraterritorial application of criminal laws also raises serious questions of fairness and due process. The prosecution may be able to obtain cooperation from a foreign government through diplomatic channels; no such possibility is open to the defendant. Certainly the accused would not enjoy the right to have compulsory process for obtaining witnesses in his favor. Moreover, the accused is placed in a position where he might be tried and acquitted in the foreign state and then tried and convicted in the United States, perhaps because the witnesses for the defense who had been available to the defendant in the foreign trial were not available to him in the trial here. (cited in Koehler, 2012: 1001). 13 Despite such criticism, the FCPA became law in 1977, complete with the criminalisation of foreign bribery. However, even after passing into law, the criticisms that the FCPA was more a grandiose statement by Congress than useful legislation did not go away. Initially, key criticisms included that ‘the FCPA is too vague in its terminology, that the Act is largely rhetorical and that its criminal sanctions are unenforceable in an international context’ (Bader and Shaw, 1983: 632). Other critics charged that the legislative vagueness was a result of the ‘hasty enactment’ of the legislation (see Longobardi, 1987: 442). While the law did take essentially two years to pass, this is not a particularly long time given the substantive purpose of the regulations. And key issues had not been addressed. Shortly after passage of the FCPA it was objected that ‘every major piece of new legislation comes replete with language that will gain definition with time and practice… The difference with the Foreign Corrupt Practices Act is that… these various words and phrases are themselves not going to admit of definition’ (Greanias and Windsor, cited in Longobardi, 1987: 443). This is not an inherent problem with legislation, or even corruption legislation specifically, since even if we cannot exactly define corruption we can still legislate against specific behavior. Instead, the criticism is about the linguistic imprecision in the legislation itself. This imprecision led to the seemingly paradoxical criticisms that the Act was both unenforceable and overly restrictive on business practices (see Salbu, 1997: 243). This, however, was a direct result of the ambiguity in the legislation. In such a situation, a company which is determined to bribe foreign public officials in exchange for business is likely to be encouraged by laws that would be extremely difficult to enforce, while a company that seeks the highest standards of probity will be discouraged from pursuing contracts in countries where legitimate facilitation payments are required, for fear of breaking the law. The practical effect of the FCPA for honest firms is hard to gauge, as is the level of deterrence for dishonest firms, however the concerns were sufficient to lead to substantive reform of the FCPA in 1988 in an attempt to address these issues (Salbu, 1997: 243). Concluding reflections The case studies outlined here have presented clear examples of policy making in response to scandals. They have also shown that these ‘post-­‐‑scandal laws’ were usually hurried, and often poorly thought out. None of this is to suggest that policy makers ought to ignore scandals. A scandal that uncovers information about a regulatory failure must prompt reform, and moreover a responsive government should always pay attention to scandals even if only because they have scandalised the public. Yet the moment a scandal is raging in the media and public hostility is at its zenith is not an ideal time for policy making. In this context, policy makers who wish to produce good laws ought to wait longer and consult more before beginning down the path of legislation. Of course, it is in the nature of scandals that this is extremely hard to do; the media interest that ostensibly defines a scandal also reduces the complexity of the narrative to a question of whether ‘something’ is being done. The political expediency of scandals therefore pushes towards rapid action regardless of the long-­‐‑term consequences. The challenge for public policy is to create an environment in which appropriate reforms can be devised despite such time pressures. Each of the case studies discussed here gave rise to explicitly compliance-­‐‑based legislation. This appears to arise primarily from a desire to respond quickly to a scandal, and compliance-­‐‑based policies are simply quicker and easier to implement. However, notwithstanding that virtue, there are serious questions about whether compliance-­‐‑based policies are always, or even often, the appropriate route for ethical 14 regulation; approaches that inculcate positive values may well lead to higher rates of success. A corrupt actor will merely corruptly avoid laws, a point which can be seen particularly in the case with the FCPA. A properly designed values-­‐‑based approach, perhaps tied both to ethics training within companies and declarations, might be more likely to achieve success. Interestingly, this values-­‐‑based approach is closer to the UK’s Bribery Act (2010), which provides a defence against bribery charges against a company and its executives if they can show that they ‘had in place adequate procedures designed to prevent persons associated with [the company] from [engaging in bribery]’. In this context it might be observed that the Bribery Act was not passed in the aftermath of a major scandal. The arguments presented here, as well as the case studies, represent a very preliminary outline of an area for further discussion and research. In particular, in addition to the creation of a database as indicated above, amongst the issues that need more detailed exploration are: -­‐‑ how do the arguments made here hold across different political systems and cultures? Is this a particularly Anglo-­‐‑centric view, or at least one restricted at best to established democracies? -­‐‑ do changes in integrity management frameworks towards more compliance-­‐‑
based, regulatory approaches undermine the ability to promote or instil effective public sector ethics? -­‐‑ how can we better assess the quality of legislation? Do the perspectives of, for instance, legal scholars, political scientists, policy analysts and historians differ in this regard? -­‐‑ does the role of the media in the identification and dissemination of scandals need to be further problematized, given the far-­‐‑reaching changes in terms not just of ownership, but also of news consumption in a digital age? Do these changes affect the nature and definition of scandal? The answers to these and other questions should help us better understand the complex relationship between scandal and integrity management. Bibliography Bader, M. B., & Shaw, B. (1982). Amendment of the Foreign Corrupt Practices Act. NYUJ Int'l L. & Pol., 15, 627. Basinger, S. J., & Rottinghaus, B. (2012). Skeletons in White House Closets: A Discussion of Modern Presidential Scandals. Political Science Quarterly, 127(2), 213-­‐‑239. Bies, R. J. (2014). Reducing Criminal Wrongdoing Within Business Organizations: The Practical and Political Skills of Integrity. Am. Crim. L. Rev., 51, 225-­‐‑317. Blair, T. (2010) A Journey. (London: Random House). Committee on Standards (2014) Patrick Mercer: Eleventh Report of Session 2013-­‐‑14 HC 1225 (London: The Stationary Office) Daily Telegraph (2010) ‘David Cameron warns lobbying is the next scandal’ (8 February) available at: http://www.telegraph.co.uk/news/election-­‐‑2010/7189466/David-­‐‑
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