Session 3: The Law and Politics of Fighting Corruption

 

This session investigates why traditional legal approaches often fall short in the fight against corruption—and what it takes to shift both institutional behavior and social norms. From billion-euro tax fraud in Germany to legal loopholes in the U.S. and entrenched power dynamics across Africa, the conversation reveals how corruption adapts and thrives within supposedly strong systems.

Moderator:  Luigi Zingales, University of Chicago Booth School of Business

Panelists:

  • Kevin Davis, New York University School of Law
  • Gerhard Schick, Finanzwende, Germany
  • John Githongo, Kenya

Discussant:  Vikrant Vig, Stanford Graduate School of Business

 

Key Takeaways:

Germany’s Tax Scandals Expose Systemic Complicity:  Gerhard Schick detailed how the CumEx and Cum-Cum scandals cost Germany over €10 billion, implicating hundreds of bankers, lawyers, and officials, yet faced years of political and legal inaction.

Local Capture and Complicity Shielded Tax Fraud: Schick argued that decentralized tax offices in Germany, vulnerable to political influence, enabled evasion while media outlets and universities remained silent—or were co-opted—by financial interests.

U.S. Anti-Corruption Law Is Being Eroded: Kevin Davis warned that federal enforcement is backsliding, citing the dismantling of key initiatives like the Kleptocracy Asset Recovery Initiative and weakened application of the Foreign Corrupt Practices Act (FCPA).

Supreme Court Rulings Have Weakened Bribery Statutes: Davis explained how landmark cases like McDonnell and Snyder narrowed the definition of bribery and gratuity, making it harder to prosecute public officials even in egregious cases.

Imported Anti-Corruption Models Don’t Always Work:  John Githongo reflected on African institutions modeled after Western anti-corruption agencies, noting that they often lacked real power and became disconnected “institutional orphans.”

Geopolitical Competition Fuels Corruption: Githongo emphasized that foreign powers—including China and Gulf nations—now use corruption as a tool of influence, undermining democratic reform in places like Africa and Latin America.

Education Builds Long-Term Resistance to Corruption:  Vikrant Vig pointed to India’s investments in public education and civil service exams as foundational to preserving institutional integrity and enabling democratic resilience.

Reform Must Account for Local Contexts: Vig cautioned that one-size-fits-all legal frameworks often fail when transplanted into countries with different institutional histories, urging a deeper focus on informal norms and political economy.

Slide Deck from This Session: