On June 3, 2021, U.S. president Joe Biden announced that fighting corruption would be a key objective of his administration. Soon after, various U.S. government departments and agencies began to quickly expand their efforts to combat corruption at home and abroad. President Biden’s anti-corruption strategy could very well color his country’s relationship with President Xiomara Castro’s administration and determine whether Honduras can become a strategic partner for the U.S. in the region.
By Jennifer Avila Reyes
At the U.S.-led Summit for Democracy last December, President Joe Biden presented a comprehensive strategy to combat corruption domestically and internationally by partnering with governmental and non-governmental actors to prevent, limit, and respond to corruption and corruption-related crimes. Former Honduran president Juan Orlando Hernández was not invited to this summit, and on January 28, 2002 ─ the day he left office ─ the U.S. requested his extradition on drug trafficking charges. With the deterioration of the U.S’s relationship with Guatemala and El Salvador, incoming Honduran president Xiomara Castro is now seen as the only avenue for the U.S. to preserve its influence in this troubled region.
The Biden administration’s strategy focuses on the transnational dimensions of corruption, and the ways corrupt actors have used the U.S. financial system and state institutions to launder their illegal proceeds. According to the National Anti-Corruption Council (NACC), Honduras loses US$3 billion annually to corruption, and its justice system is so compromised that it relies on the U.S. justice system to prosecute high-level political criminals. Thus, the U.S. strategy could fit well with the anti-corruption flag that President Castro has waved.
But Honduras carries heavy burdens, and its interactions with the United States in combatting drug trafficking and curbing migration have not always been positive. There was the coup d’état in 2009, followed by the failed Mission to Support the Fight Against Corruption and Impunity in Honduras (Misión de Apoyo para Combatir la Corrupción e Impunidad – MACCIH) sponsored by the Organization of American States that the Hernández administration undermined from day one. Years of U.S. support for the autocratic Hernández culminated in drug trafficking charges against him in a U.S. court. Consequently, the anti-corruption fight has become a high-risk diplomatic endeavor.
In a virtual tour of the U.S. State Department that Contracorriente attended, Harvard Law Professor Mathew C. Stephenson said that it can be counterproductive to expect that a deus ex machina can come in and solve a given problem. He was referring to the international commissions that are often called for in Central America. There are calls for such a commission right now in Honduras, due to widespread distrust in the local justice system.
“I think the experience of the [CICIG] commission in Guatemala shows that they can be very useful in some contexts, but they are not magical silver bullets. When political support erodes, [these commissions] can be shut down fairly quickly. That’s one of the problems we saw in El Salvador and with the original [MACCIH] commission in Honduras. I gather there have been discussions, and Honduras is making another attempt with a different approach. But if not well designed and given the proper authority, [a commission] can end up being nothing more than window dressing. With proper attention to details, I think these kinds of international bodies can conduct investigations that are simply not politically viable to conduct internally,” Stephenson responded when Contracorriente asked what is needed for the installation of a new anti-corruption commission in Honduras.
Stephenson spoke about the roles of civil society, academia, and independent journalism in investigating and uncovering corruption networks, and how the United States should collaborate with other countries.
“If oligarchs or kleptocrats have assets in the United States, and if U.S. authorities can prove that these assets are the proceeds of crime, then they can freeze and seize them. There is a special unit in the U.S. Department of Justice focused on this called the Kleptocracy Asset Recovery Initiative. Some of these people could be prosecuted for money laundering, but proving a money laundering case can be very difficult,” he said.
Proof of Stephenson’s point is the Honduran Social Security Institute (IHSS) embezzlement case. Almost seven years after the crime was discovered, the International Money Laundering Unit and the U.S. Department of Justice’s asset recovery unit are finally ready to return US$1.3 million to Honduran coffers. The recovered assets were purchased in New Orleans by former IHSS Director Mario Zelaya’s brother with embezzled money. This asset recovery unit has seized more than US$1.7 billion in assets around the world and has enabled the repatriation of more than US$1.6 billion.
In 2015, the Honduran public took to the streets in protest and demanded the resignation of President Juan Orlando Hernández, as well as the deployment of an international anti-corruption commission like one in Guatemala that ultimately ended the two-party stronghold on power. Some in the media called this a Central American “spring” that augured a new era for the region’s weak democracies. Instead, we saw more entrenched autocracies and narco-states, and anti-corruption systems stripped of almost all authority.
While it was still operational, MACCIH collaborated with the Special Prosecution Unit Against Corruption Impunity (Unidad Fiscal Especial Contra la Impunidad de la Corrupción – UFECIC) in bringing 13 cases to the Honduran courts. Yet only one resulted in a conviction, two are still in process, and all the defendants in the remaining seven cases ─ mostly government officials ─ were acquitted or had their cases dismissed. Because the institutional setbacks in the fight against corruption have been so enormous, public discussion regarding corruption has focused almost exclusively on external solutions.
“While I think it’s great to learn from foreign models, one should always take care to not assume that it’s going to work the same way [in your country] because the bad guys have learned the same lessons from other experiences as the good guys. One needs to be constantly adapting and updating strategies to deal with this,” Professor Stephenson said.
When she took office, one of President Castro’s first actions was to deliver a letter to the United Nations (UN) requesting the deployment of an international commission against corruption and impunity, thereby fulfilling one of her most significant campaign promises. Yet as of this publication, the UN has not yet taken the first step in the process, which is to send a technical mission to Honduras to obtain input and analyze the scope and viability of such a commission.
Edmundo Orellana heads the Transparency Ministry, created by Juan Orlando Hernández in the waning days of his administration and heavily criticized at the time for eroding the functions of the Institute of Access to Public Information (Instituto de Acceso a la Información Pública – IAIP). Orellana says that his ministry will spearhead the Castro government’s anti-corruption strategy with the support of international agencies and countries such as the United States.
“Regarding transparency and accountability,” said Orellana, “We are about to launch the National Council for Transparency and Anti-Corruption, which will be commissioned and chaired by the president. It will include representatives from government, civil society, and academia, and its mission will be to develop a national transparency strategy for a unified and comprehensive effort to attack corruption. This is a preventive measure that will benefit from international support, as the United Nations Office on Drugs and Crime (UNODC) is helping us prepare this strategy that we intend to present to the council of ministers.”
The U.S. strategy to counter corruption
The Biden administration’s anti-corruption strategy has five pillars: modernizing, coordinating, and resourcing U.S. government efforts to fight corruption; curbing illegal finance; holding corrupt actors accountable; preserving and strengthening the multilateral anti-corruption architecture; and improving diplomatic engagement and leveraging foreign assistance resources to achieve anti-corruption policy goals.
Chandana T. Ravindranath, anticorruption director of President Biden’s National Security Council, says that the U.S. strategy prioritizes a better understanding and improved response to the transnational, cross-border nature of corruption by international actors.
“To that end,” she says, “we are addressing deficiencies in our own system and making it more difficult to hide the proceeds of the U.S’s ill-gotten wealth. For example, we are increasing transparency in real estate transactions to make it more difficult for corrupt actors to launder their funds, and we will be effectively implementing the federal law requiring U.S. companies to divulge their ultimate or real owners. This will make it harder for corrupt actors to hide behind opaque corporate structures. The strategy also seeks to protect and strengthen independent media, civil society, and other anti-corruption actors, as well as promote collaboration with the private sector through public-private partnerships.”
The practice of hiding money in murky corporations has been reported extensively by investigative journalists around the world. The International Consortium of Investigative Journalists (ICIJ) has released millions of documents and published exposés such as the Panama Papers and the Pandora Papers about corporations in the U.S. and around the world, revealing deficiencies in the financial system that have been exploited by corrupt actors.
Read: The financial shield that hides pandemic fraud
Ravindranath says that they will emphasize at-risk sectors such as construction, transportation, and natural resource extraction, and promises to fund rapid response capabilities that will allow expert advisors to consult, advise, and assist anti-corruption partners around the world. “We understand that U.S. leadership in the fight against corruption is critical to addressing the global problem,” she said.
In Honduras, several officials have been sanctioned under the Global Magnitsky Act, which allows the U.S. government to sanction foreign government officials implicated in human rights abuses anywhere in the world. Others have been named to the so-called Engel List under the Northern Triangle-United States Enhanced Engagement Act, which imposes sanctions such as denying entry to the U.S.
Honduran politicians such as former legislator Oscar Najera and former president Porfirio Lobo Sosa, have downplayed the impact of these sanctions and have not suffered any major consequences as a result.
Read: The US’s “Engel List” polishes the rough edges of the Northern Triangle
“Our authorities are focused on the U.S., but there are updated tools that can be used to hold corrupt actors accountable both here and abroad,” said Ravindranath, adding, “And a lot of that is already working. The Foreign Corrupt Practices Act, for example, is a U.S. law that we use to help our partners and allies hold corrupt actors accountable in their own countries. The president has repeatedly stated that collaborating and working multilaterally is the most effective way to go about this so that every country uses all its tools and powers to get after this problem.”
James Walsh, Principal Deputy Assistant Secretary in the U.S. State Department’s Bureau of International Narcotics and Law Enforcement Affairs says that internal government coordination mechanisms are improving. “For example, in December 2021, the Secretary of State announced a new position, the Coordinator on Global Anti-Corruption, who will integrate and elevate the fight against corruption across all aspects of U.S. diplomacy and foreign assistance, working closely with international agencies and partners,” said Walsh, adding that they are working with external partners in academia, the private sector, civil society, and the news media.
“The department also continues to support reforms to make information about the true ownership of legal entities more transparent and accessible to law enforcement, as well as other anti-money laundering preventive measures undertaken by the Financial Action Task Force,” he said.
Most criminal actors are interconnected and their illegal activities easily traverse borders. In May, Jeffrey Coleman, Supervisory Special Agent in the Federal Bureau of Investigation’s (FBI) International Corruption Unit, will become the FBI’s representative at the International Anti-Corruption Coordination Centre (IACCC) in London. Coleman says that combatting international corruption requires “building relationships with law enforcement in other countries. The FBI has 70 or 80 legal attachés posted abroad that cover every country in the world. Some cover a single country, while others cover several. But at least we have some FBI presence in every country looking for opportunities to collaborate on investigations ─ that’s what we try to do.”
The message sent by the Hernández extradition
The extradition of former president Juan Orlando Hernández, indicted by the U.S. Attorney for the Southern District of New York, marks a judicial milestone in the history of Honduras. Hernández governed for eight consecutive years, protected by an autocracy that enabled him to enjoy complete impunity within the country. In contrast, President Castro has ordered Security Minister Ramón Sabillón to execute more than 30 arrest warrants in response to extradition requests that were not processed during the previous administration, thereby demonstrating the political will to collaborate with the U.S. government and its accountability strategy.
During a Twitter Space hosted by Contracorriente, Eric Olson, the Seattle International Foundation’s (SIF) Director for Central American Affairs, claimed that Honduran courts and prosecutors have been so severely undermined that despite all the evidence, it would be impossible to prosecute the former president in Honduras.
“In general, the control held [by the autocracy] over the Supreme Court from the time [Hernández] was president of Congress through his two terms as president [of Honduras], resulted in a breakdown of Honduran justice in this case,” said Olson, adding, “In addition to seeking justice in the Hernández case, I think it’s extremely important to focus on the government control mechanisms and counterbalances that are vital for any democracy because, in Honduras, the democratic constitutional mechanisms that can control this type of illicit power don’t exist.”
Olson maintains that the United States’ relationship with the Hernández administration took a wrong turn because, “It repeated past mistakes by believing that while the president of an ally may not be perfect, it is still an ally to be protected and supported no matter what. That decision was clearly wrong in this case.” He believes that it is important for the Biden administration to recognize that mistake and make decisions to not only go after Hernández but also his collaborators.
“Let this send a message that the U.S. government is willing to fight corruption,” said Olson.
In May, President Castro will complete 100 days in office during a social and economic crisis that has triggered massive layoffs and protests in the health care and transportation sectors. Clientalism continues to be the norm, and dozens of people from all over the country can be seen every day in front of the Presidential House, waiting for Castro’s husband, Manuel Zelaya, to sign a letter of recommendation for a government job as a reward for their loyalty to the ruling party, despite the president’s own declaration of a budget crisis and freeze on government hiring.
During the Contracorriente-hosted Twitter Space, attorney and political analyst Rafael Jerez said that the widespread clientelism of the existing political party system leads to a high risk of corruption and that the system must be reformed before the corruption problem can be effectively addressed.
“The Hernández phenomenon, if we can call it that, is significant, but it’s not the only concern,” said Jerez. “I mean, many of our institutions are still led by two or three representatives from the political parties. As long as we fail to overcome this culture of clientelism, I believe that it will be very difficult for us to fight the most important aspect of corruption ─ the structural aspect. That’s where the political parties currently operate ─ within the structures of our public institutions.”
