The Unexpected Link June 17-18 Center for Network Science, CEU, Budapest Zoltán Szántó –...

The Unexpected LinkJune 17-18

Center for Network Science, CEU, Budapest

Zoltán Szántó – István János Tóth Some typical network configurations

of corruption cases in HungaryPreliminary research results

Topics

Introduction: Our earlier research on business corruption in Hungary

Main results of the earlier research projects (conceptual framework, interview analysis, media content analysis)

The idealtypes of corruption transactions (basic model, bribery, extortion, embezzlement, fraud)

Network configurations of corruption transactions: interpersonal and institutional embeddedness of corruption – some typical corruption cases in Hungary

Conclusion: The evolution of corruption networks – corruption as an institutionalized process?

Topics Introduction Earlier results Idealtypes Networks Conclusions

Introduction


Financial supporters

Transparency International MagyarországTEXTREND [NKFP_07_A2-TEXTREND, OM-

0002/2008]Corruption Research Center of the Institute of Sociology

and Social Policy at Corvinus University of Budapest



Conceptual and theoretical framework of corruption research Misuse of public power for private benefit (J.G.Lambsdorff) Principals, agents, and clients

Media representation of suspected corruption cases in Hungary: pilot research (2007)

Background research studies to the Corruption Risks in the Business Sector (National Integrity System Country Study – Part Two) Transparency International, 2008 (http://www.transparency.hu/part_two) and

Business corruption in Hungary: From various angles – Research summary, In: Szántó Zoltán – Tóth István János (szerk): Korrupciós kockázatok az üzleti szektorban – kutatási háttértanulmányok (http://www.wargo/crc/index.html ) Review of the Hungarian research literature on corruption Interviews with business leaders (qualitative analysis) Media content analysis (2006-2007: 737 articles/news, 176 corruption cases)



Corruption Research Center of the Institute of Sociology and Social Policy at Corvinus University of Budapest (2008)

(Founders: György Lengyel, István János Tóth, Zoltán Szántó)

http://web.uni-corvinus.hu/szoc/intezet_kutatas.php

Suspected corruption cases in the Hungarian media. Content analysis of on-line newspapers. Research report by the CRC, 2009

8 internet news portals and online versions of newspapers between1 January 2001 and 31 December 2007

Keywords: „korrupt” (corrupt), „korrupció” (corruption), „csúszópénz” (slush fund), „kenőpénz” (palm-greasing), „veszteget” (bribe), „pénzmos (money laundering)

Total of 3469 articles/news on 444 corruption cases


Main results of the earlier research projects

Main results of the earlier research projects: conceptual framework Misuse of public power for private benefit (J.G. Lambsdorff: The

Institutional Economics of Corruption abd Reform. CUP, 2007: 16-20)

Private benefit: receiving money or valuable assets, increases in power or status, favors for relatives and friends etc.

Public power is exercised by bureaucrats (appointed to their office) and by politicians (elected to their position)

Public power is exercised in a variety of sectors: judiciary, public procurement, business regulations, granting of permits, privatization, foreign exchange, taxes, police, subsidies, public utility, government services etc.

Misuse: a behavior that deviates from the formal duties of a public role


Interview analysisThe size and scope of business corruption in Hungary Widespread in Hungary Corruption in the business and government sector cannot easily be

separated, often intertwinedBusiness corruption trends in Hungary Corruption on the rise over the past 5-10 years, but not clear about

exact size of increase Increase of corruption between government and business Unclear about reason for increase: Penetration of political influence?Personal experience of interviewees Personal casesPromoters of countering corruption Government and politicians seens as primary promoters Possibly a bottom-up strategy (small institutions and local government

as initiators) Business leaders can have important role


Media content analysis – Number of analysed articles by year


Number of analysed articles by year , 2001-2007, (N=3469)

476

275

602

676629

224

587

0

100

200

300

400

500

600

700

800

2001 2002 2003 2004 2005 2006 2007

Source: BCE Corruption Research Centre, 2009

Media content analysis – Corruption cases by corruption service and bribe types


Suspected corruption cases by advantage and bribe types, 2001-2007(%, N = 444)

9,4

89,2

1,4

93,2

5,11,7

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

100,0

Money Information, permit, positions, etc. Both

Advantage BribeSource: BCE Corruption Research Centre, 2009

Media content analysis – Institutions involved in corruption

Suspected corruption cases by the institutions involved, 2001-2007,(multiple response, %, N = 444)

34,5

3,8

18,7

32,2

5,2

11,0

7,0 6,5

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

Police Courts Localgovernments

Ministries/national

authorities

Tax office Customs andfinancial guard

Localinstitutions

Otherinstitutions



Media content analysis – Procedures involved in corruption

Suspected corruption cases by the procedures involved, 2001-2007 (%, N = 444)

19,3

1,4

15,2

20,0

44,0

0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 50,0

Other

State subventions

Licences, permits

Public, procurements

Inspections



Media content analysis – Share of multiplayer (networked) corruption cases

Share of multiplayer corruption cases, 2001-2007 (%, N=444)

25,028,8

51,6

23,6

55,0

36,6

60,0

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

2001 2002 2003 2004 2005 2006 2007



Main results of the earlier research projects: summary Corruption is widespread and increasing in Hungary

Earlier research results only show perception and judgement but not actual mechanisms and motivations

Corruption has been developed to a systemic – regular, predictable, quasi-institutionalised – transaction

The ratio of multi-player, chain-like, networked corruption is increasing year by year


Idealtypes of corruption

The idealtypes of corruption: basic model

Principal-agent-client triad (Lambsdorff 2007: 18-19)

The agent is entrusted with power by her superior (the principal): The principal delegates a task to the subordinate (the agent), sets up the formal rules as to how this task is to be fulfilled, and pays salary to her/him

The agent is supposed to serve the client in accordance to these rules

Different forms of corrupt behavior: the agent defects some ways from her/his rule bound behavior – the principal’s rules are trespassed and his/her interests are hurt




Principal

Agent Client



Principal

Agent Client



Principal

Agent Client



Principal

Agent Client



Principal

Agent Client



Principal

Agent Client



Principal

Agent Client

The idealtypes of corruption: Bribery

The client acts as a briber, and makes a payment (bribes) to the agent (the bribee)

In return the client obtains an advantage (such as a service or a license) (s)he is not entitled to obtain (for example a tax rebate or a public contract)




Principal

Agent Client



Principal

Agent Briber

Bribe:Advantage:



Principal

Bribee Briber

Bribe:Advantage:

The idealtypes of corruption: Extortion

The agent (as an extorter) uses her/his power to extract money (or other benefit) from the client (the extortee)

The client (the extortee) may have to pay for a service, although (s)he is legally entitled to obtain it without such payment

The agent (the extortee) uses coercion, violence, or threats to obtain this payment




Principal

Agent Client



Principal

Extorter Client

Money:Extortion:



Principal

Extorter Extortee

Money:Extortion:

The idealtypes of corruption: Embezzlement

Theft of public resources by the agent (the embezzler)

The disloyal agent (the embezzler) steals from the principal (the embezzlee)




Principal

Agent Client



Principal

Embezzler Client

Resources:Disloyalty:



Embezzlee

Embezzler

Resources:Disloyalty:

Client

The idealtypes of corruption: Fraud

Information asymmetry: the agent is commomly better informed about details of her/his daily tasks and her/his efforts devoted to their fulfillment

(S)he can benefit from informational advantages (hidden information, hidden action, moral hazard)

The agent can also actively conceal information from the principal (swindle, trickery, manipulation of information, facts etc.) - fraud




Principal

Agent Client



Principal

Agent Client

Resources:Manipulation:



Principal

Agent Client

Resources:Manipulation:

Network configurations & cases

Network configurations of corruption transactions: interpersonal and institutional embeddedness of corruption – some typical corruption cases in Hungary


Relations:Personal relationship: actor actorBusiness relations: actor actorOwnership relation: owner ownedBribe: agent clientAdvantage: agent clientFalse service: „seller” „buyer”False price „seller” „buyer”

Actors

P1: (real) principal

P2: (hidden) principalA: agentC: client

B1, B2 : brokers

1.1. Simple model, two actors, non regular corruption


P1

A C

1. case:

bribery of police officer in the highway Budapest -Miskolc

Personal: Business:Ownership:Bribe:Advantage:



P1

A C

1. case:





P1

A C

1. case:





P1

A C

1. case:



1.2. Simple model, two actors with personal relationship, regular transaction


P1

A C

2. case:

bribery of custom officers at the Hungarian – Rumanian border




P1

A C

2. case:





P1

A C

2. case:





P1

A C

2. case:





P1

A C

2. case:



1.3. Simple model, two actors, resource conversion


P1

A C


3. case:

the „Hunvald’s model” - real estate selling of local government (Budapest, VII. district)



P1

A C


3. case:




P1

A C


3. case:




P1

A C


resource

3. case:




P1

A C

3. case:



false price ( < market price)

1.4. Simple model, two actors, two principals


P1

A C

[P2]


4. case:

political party financing with simple transaction: the Zuschlag-model (HSP)



P1

A C

[P2]


4. case:




P1

A C

[P2]


disloyalty

4. case:




P1

A C

[P2]


4. case:




P1

A C

[P2]

4. case:



1.5. Simple model, two actors, two principals, resource conversion


P1

A C

[P2]


5. case:

political party financing with resource conversion – buying a real estate by local government

(Békés county)



P1

A C

[P2]


5. case:


(Békés county)



P1

A C

[P2]


5. case:


(Békés county)



P1

A C

[P2]


5. case:


(Békés county)



P1

A C

[P2]


resource

5. case:


(Békés county)



P1

A C

[P2]

5. case:


(Békés county)


false price ( > market price)

2.1. Three actors, one broker with A, ownership and business relations


P1

A C

B1


6. case:

Reconstuction of a building – feasibility study - bribery of local government offical



P1

A C

B1


6. case:




P1

A C

B1


6. case:




P1

A C

B1


6. case:




P1

A C

B1


6. case:


false service



P1

A C

B1


6. case:


false service



P1

A C

B1


6. case:


payoff

false service



P1

A C

B1


6. case:

Reconstuction of a building – feasibility study - bribery of local government offical: „countryside case”

payoff

3.1. Three actors, one broker with C, business relations


P1

A C

[P2] B2


7. case:

Political party financing – a complex model

C = media agency B2 = TV channel P1 = ministry P2 = political party



P1

A C

[P2] B2


7. case:





P1

A C

[P2] B2


7. case:





P1

A C

[P2] B2


7. case:





P1

A C

[P2] B2


bribe = service (advertisement)

7. case:





P1

A C

[P2] B2



false price < market price

false price > market price

7. case:





P1

A C

[P2] B2





7. case:





P1

A C

[P2] B2



false price ( > market price)



7. case:



Conclusions

Conclusion: The evolution of corruption networks – corruption as an institutionalized process?

The evolution of corruption networks in terms ofthe number of actorsthe comlexity of network configurationsthe level of interpersonal and institutional embeddednessthe multiplicity of relationships

Corruption as an institutionalized process in terms ofstabilitymixing the reciprocity, redistribution and market forms of

economic integration


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