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In Soviet Russia, nobody can hear you break the law

Bill Coffin | April 17, 2017

In 1987, when I was a junior in high school, I visited the Soviet Union on a school trip. It was a life-altering experience, one I have written about before, and one I will write about again. Nothing prepared me for exposure to such an alien system of values and of government, but perhaps the greater surprise was just how crumbly the supposed monolith of Soviet rule really was. This was in the final days of the Soviet system, and you could see the signs of it everywhere. The petty corruption among street-level cops and officials, the eye-rolling from everyday Russians themselves over the government, and the willingness of people to engage in black-market trading with foreign visitors all added up to a system that was collapsing under the weight of itself.

One moment that really sticks out to me was early in the trip, when we were in Leningrad (what the Soviets had re-named St. Petersberg). Many of my fellow students were keen to trade on the black market for Russian military jackets, soccer jerseys ... any kind of USSR swag that wasn’t really meant to travel outside of the country. American sneakers, jeans, cigarettes, portable electronics—these were all good as gold, and since we all had them on hand and since Americans stood out like sore thumbs, all we had to do was simply wait for people to offer to trade. It usually took only a few minutes.

One of my friends went after this with much enthusiasm, even going so far as selling some of his trading goods for rubles, which was problematic, since the ruble was a closed currency at the time, worthless outside of the country. His solution? He created a small money laundering scheme among fellow students who had converted dollars of rubles and spent them all, whom he then recruited to create sham transactions of rubles back to dollars on his behalf. He made a lot of money doing this. And of course, he totally got away with it.

When we were in Leningrad, my friend and I roomed together, and he clearly outlined his plans for the day, which included another one of his dealings with the black market. As he spoke about this brazenly, I put my finger to my lips and worriedly pointed to the radio transmitter mounted in clear sight on the wall of our room. My friend laughed, put his mouth next to the bug and said, “Lenin is a weenie.” As my face turned ashen, he said that if anybody was actually listening, they’d be to the room in just a few minutes. Of course, nobody was listening, and nobody came. It was of little comfort to me at the time, as I had—and still have—an acute allergy to gulags. But the episode really opened my eyes to the notion that you can have the most restrictive laws on record, but they are meaningless if nobody enforces them. Time and again, I saw this during my trip, whether it was people bribing cops to let them take photos of government buildings that should not be photographed, smuggling petty contraband outside of the country, whatever. There were the rules as written and the rules as enforced, and they occupied two entirely different worlds altogether.

As we come to the end of the first 100 days of President Trump’s administration, there has been a lot of effort to scale back or dismantle much of the regulatory apparatus of previous administrations. And while those efforts have met with mixed success, the reality is that even in areas where a fullbore dismantling had not yet occurred (the EPA is a good example), maybe blowing these agencies up isn’t necessary. Maybe all that has to be done is to defang regulatory enforcement, which accomplishes the same thing. After all, enforcement trends come and go; some laws are in vogue for use one year, then get dropped in favor of something else. The FCPA has been on the books for some 40 years. It hasn’t been a weapon of choice for regulators until 10 years ago.

My Soviet story really isn’t unique, as any regulatory apparatus inevitably hits two problems: available resources and strength of will. Over a long enough timeline, either or both of these will run out if there is not a sincerely felt need to uphold the law. Right now, we’re not really seeing that among aspects of the federal government that rank low on the new administration’s list of priorities. And while the first 100 days of the Trump administration have been interesting, even more telling will be the next 265, and how the overall levels of enforcement change (or don’t) at bellwether agencies such as the Securities and Exchange Commission, the Justice Department, and the Environmental Protection Agency. Whatever has been promised as a regulatory agenda going forward, what will really matter is how many people are reminded of it in terms of non-prosecution agreements, deferred prosecution agreements, fines, and jail time.

See you in 265 days.