2021 Reports

Paying for a World Class Affiliation: Reputation Laundering in the University Sector of Open Societies

Cooley, Alexander A.; Prelec, Tena; Heathershaw, John; Mayne, Tom

Executive Summary
Modern kleptocracy thrives on the ability of kleptocrats and their associates to use their ill-gotten gains in open settings. This often takes the form of investing in high-end real estate or other luxury goods, which serves to both obscure the corrupt origin of the money and to protect it for future use. But there is also a subtler dynamic at play. The use of kleptocratic-linked funding or other forms of engagement in open societies to blur the illicit nature and source of the donation serves to laun- der kleptocrats’ reputations, as well as their cash. This careful cultivation of positive publicity and influence empowers autocrats and their cronies. It also entrenches kleptocrats—and the regimes with which they are associated—in positions of power.

Universities and think tanks in open settings are prime targets for reputation laun- dering. The rapid internationalization of the higher education sector, as well as the swelling demand worldwide for Western education makes academic institutions particularly vulnerable to this form of transnational kleptocratic activity. Indeed, over recent years, there has been a major surge of foreign funding to U.S. and U.K. universities. The composition of fundraising has also changed. Major gifts comprise a growing share of donations, and a relatively small number of wealthy individuals contribute nearly 80 percent of gift-giving to universities.

These challenges also affect other open countries where foreign gifts traditionally have not been a major source of funding but are now actively being offered and sought. Countries like the Czech Republic and Germany have witnessed high-profile scandals involving funding from PRC-connected sources, both in exerting influence through opaque payments to faculty or through the application of Chinese law to donor agreements with the university. Such examples highlight the transnational nature of this challenge.

Key mechanisms by which individuals can launder their reputations in the higher education sector include:
• Endowing university programs and institutes as private citizens to garner legal standing and support in their country of operation, or to influence the academic remit of certain institutions;
• Serving as guest speakers or lecturers at high-profile events, thereby having a platform from which they can garner positive publicity and present themselves as influential philanthropists and leaders;
• Gaining preferential admission to academic institutions for themselves, their family, and associates, conferring prestige to the donor and creating new networks for overseas employment, association, and residence.