Understanding Corruption: How Corruption Works in Practice

By Robert Barrington, Elizabeth David-Barrett, Sam Power and Dan Hough

Corruption takes many different forms and the systems that enable it are complex and challenging. To best understand corruption, one needs to examine how it operates in practice. Understanding Corruption tells the story of how corruption happens in the real world, illustrated through detailed case studies of the many different types of corruption that span the globe. Each case study follows a tried and tested analytical approach that provides key insights into the workings of corruption and the measures best used to tackle it. The case studies examined include examples of corporate bribery, political corruption, facilitation payments, cronyism, state capture, kleptocracy, asset recovery, offshore secrecy, reputation laundering and unexplained wealth, and actors include businesses, governments, politicians, governing bodies and public servants.

• Language: English
• Publisher: Agenda Publishing
• Release date: Mar 3, 2022
• ISBN: 9781788214469

Robert Barrington

Robert Barrington is Professor of Anti-Corruption Practice in the Centre for the Study of Corruption at the University of Sussex.

Book preview

Understanding Corruption

Also by Dan Hough and published by Agenda

Analysing Corruption

Understanding Corruption

How Corruption Works in Practice

Robert Barrington, Elizabeth Dávid-Barrett,

Sam Power and Dan Hough

© 2022 Robert Barrington, Elizabeth Dávid-Barrett, Sam Power and Dan Hough; individual contributions, the contributors

This book is copyright under the Berne Convention.

No reproduction without permission.

All rights reserved.

First published in 2022 by Agenda Publishing

Agenda Publishing Limited

The Core

Bath Lane

Newcastle Helix

Newcastle upon Tyne

NE4 5TF

www.agendapub.com

ISBN 978-1-78821-443-8 (hardcover)

ISBN 978-1-78821-444-5 (paperback)

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Typeset by Newgen Publishing UK

Printed and bound in the UK by CPI Group (UK) Ltd, Croydon, CR0 4YY

Contents

Preface

Acknowledgements

Contributors

1Corruption in theory and practice

Dan Hough

Part I Bribery

2A world tour of bribery

Robert Barrington

3Bribery case studies

3.1 Alstom and corporate bribery – Tom Shipley

3.2 Odebrecht, corporate bribery and political corruption – Francis McGowan

3.3 Panalpina and facilitation payments – Tom Shipley

3.4 Petty bribes in the developed world – Robert Barrington

4Learning from bribery case studies

Robert Barrington

Part II Political Corruption

5How to make friends, spend money and influence politics

Sam Power

6Political corruption case studies

6.1 The Council of Europe and Azerbaijan: corruption in parliament – Roxana Bratu

6.2 Darleen Druyun, the defence sector and the revolving door – Tom Shipley

6.3 Jacques Chirac and French politics – Liljana Cvetanoska

6.4 Jack Abramoff and the US lobbying industry – Tena Prelec

7Learning from political corruption case studies

Sam Power

Part III Kleptocracy and State Capture

8Accumulating money and power

Elizabeth Dávid-Barrett

9Kleptocracy and state capture case studies

9.1 Angola and the Dos Santos regime – Tom Shipley

9.2 Erdoğan and cronyism in Turkey – Tena Prelec

9.3 Najib Razak and 1MDB in Malaysia: fraud and corruption – Shahrzad Fouladvand

9.4 The Guptas and state capture in South Africa – Tena Prelec

9.5 FIFA: kleptocracy and capture outside politics – Robert Barrington

10Learning from kleptocracy and state capture case studies

Elizabeth Dávid-Barrett

Part IV Corrupt Capital

11The secret world of corrupt capital

Robert Barrington

12Corrupt capital case studies

12.1 Teodorin Obiang and asset recovery – Tena Prelec and Georgia Garrod

12.2 The Panama Papers and offshore secrecy – Ben Cowdock

12.3 Bell Pottinger and reputation laundering in South Africa – Ben Cowdock

12.4 Zamira Hajiyeva and unexplained wealth – Ben Cowdock

12.5 Professional enablers in London – Ben Cowdock

13Learning from corrupt capital case studies

Robert Barrington

Part V Conclusion

14Understanding corruption

Elizabeth Dávid-Barrett and Dan Hough

References

Index

Preface

The case study format used in this volume was developed at the Centre for the Study of Corruption (CSC), based at the University of Sussex. It has been extensively field-tested amongst students and forms the basis for an entire module of our online MA in Corruption and Governance.

Case studies are a widely used tool in campaigning and policy-making, both in relation to corruption and other subjects. In an educational context, they are perhaps most frequently and systematically used in business schools, with the Harvard format being widely recognized as an effective device for practical analysis. The CSC Case Study Template is designed to allow a systematic analysis of a case; a judgement to be made as to whether it is or is not a case of corruption; and the presentation of information in a readable form that has multiple end-uses, including policy-making, advocacy, campaigning and education.

We are not offering a theory about corruption, although readers may tease one or more out from the case studies. Our faculty discussions have many times debated the extent to which rational choice is the nearest it is possible to get to an overarching explanation for corruption, or whether it is merely one of several means of analysing the problem. But we do not approach our case study analysis with a single theory that we are trying to illustrate. Indeed, with contributors from a range of disciplines using the same analytical template, one of our findings is how widely theoretical interpretations can vary.

Although we do not offer a single theory of corruption, we are instead offering an approach to anti-corruption problem-solving. The theory behind this approach is simple: if you have a good understanding or diagnosis of the problem, you are more likely to find a solution, and the diagnosis needs to examine a case from angles that include the harm, the benefits, the enabling environment, systems failures and the effectiveness of penalties. The CSC Case Study Template is designed to give such a description of a corruption problem, combining a concise narrative with a rigorous analysis from all angles, including the problem of how it came to happen.

An underlying observation is that there are plenty of successes in tackling corruption, not just failures. By and large, these cases illustrate where something has gone right, or partly right, even if we have yet to see long-term sustainable solutions to resolve a number of the systemic issues the cases reveal. This is in contrast to much of the academic literature on corruption, which seems to relish enumerating and unpicking failures.

The key messages that run through our text are:

• Corruption is complex and often multi-jurisdictional; it takes place everywhere, often at a vast scale but also frequently in the smallest corners of public life.

• At times corruption is not black and white; solutions to it can therefore be unclear, as can assessment of the public interest and social and economic benefits of tackling corruption.

• Fundamentally, corruption causes a wide variety of harm and damage; it is therefore important to work out what does and does not work in tackling corruption, and why – case studies help to elucidate this.

• Corruption is not limited to politics or the public sector – it is clearly observable in the private sector, as well as in the interface between the public and private spheres.

• In the right circumstances there can be significant advances in tackling corruption – but finding the right way to do so is as important as the will to do so.

We believe that our approach to problem analysis will give the case studies practical applications for campaigners, policy makers and those designing integrity and anti-corruption systems. If nothing else, we hope that a systematic, fact-based analysis of some of the best-known cases of corruption will help to give a secure foundation to future discussion, research and teaching about corruption.

Robert Barrington

Acknowledgements

We would like to thank the past decade’s students from our MA in Corruption and Governance, on whom our case study approach and template have been tested, challenged, retested and refined. Their eclectic mix of backgrounds, ages and nationalities and their enthusiasm for this subject, has helped us develop the CSC Case Study Template as an effective teaching tool, and increasingly a tool for research and analysis.

Our PhD students also contribute to the vibrant intellectual community at the CSC, and we acknowledge their active contribution of challenge and new ideas. To Rebecca Dobson, in particular, our gratitude for helping us to think through the definitions of corruption and how to portray them visually, in our diagrams The Corruption Pyramid and Connected Circles of Corruption.

Alongside our students, we must thank our fellow CSC core faculty members, all of whom have contributed at least one case study to this book. Together, we teach our three MA courses on corruption, undertake joint research and work on policy impacts. It is a pleasure to be part of such a talented and collaborative team.

For contributing their unrivalled expertise to our roundtable discussions on definitions and typologies and related workshops, we thank Paul Heywood, Jonathan Rose, Sue Hawley and Duncan Hames. For commenting on specific country contexts and drafts, Peter van Veen, Maria Fernanda Cruz Chavez and Mthabisi Moyo.

For easing the burden of our other commitments so that we had the luxury of time to research and write, we would like to thank our families.

To Alison Howson and the highly professional team at Agenda Publishing, our thanks for adopting this project and seeing it through from the germ of an idea to a finished publication.

Finally, we owe a considerable debt to Georgia Garrod, who has gone over and above the call of duty to shepherd this project to conclusion through the final phases of editing, undertaking both the detailed work and the project management with skill, patience, insight and common sense.

Robert Barrington

Elizabeth Dávid-Barrett

Sam Power

Dan Hough

Centre for the Study of Corruption

University of Sussex

Contributors

Robert Barrington is Professor of Anti-Corruption Practice at the Centre for the Study of Corruption in the University of Sussex. He was formerly the UK head of Transparency International (TI), the world’s leading anti-corruption non-governmental organization (NGO), and is currently Chair of TI’s International Council. While at TI, Robert led the campaigns to secure the Bribery Act, a national anti-corruption strategy for the UK and the introduction of Unexplained Wealth Orders. He has held a number of private sector and government advisory roles, including the Ministry of Justice’s expert group drafting the official guidance on the Bribery Act and the Cabinet Office’s post-Brexit Procurement Transformation Advisory Panel. He holds a degree from the University of Oxford and a PhD in History from the European University Institute.

Roxana Bratu is a Lecturer in Corruption Analysis at the University of Sussex. She was previously postdoctoral researcher at University College London, School of Slavonic and East European Studies where she coordinated the activity of the FP7 ANTICORRP project. She holds a PhD in Sociology from the London School of Economics and Political Sciences, and an undergraduate degree from the University of Bucharest, Romania.

Ben Cowdock is the Investigations Lead at Transparency International UK, where his research focuses on the UK’s role as a haven for corrupt individuals and their wealth. He has produced reports on dirty money in the UK housing market as well as the role of British professional enablers in global money laundering. He holds an undergraduate degree and MA in Corruption and Governance from the University of Sussex.

Liljana Cvetanoska is a Lecturer in Corruption, Law and Governance at the University of Sussex. Her current research examines the negative impact of corruption on women in central and eastern Europe, and EU anti-corruption policies. Liljana holds a PhD in Politics from the University of Sussex and an undergraduate degree from Ss.Cyril and Methodius University, North Macedonia.

Elizabeth Dávid-Barrett is Professor of Governance and Integrity and Director of the Centre for the Study of Corruption at the University of Sussex, having previously held posts at the University of Oxford. A former journalist with The Economist, Financial Times and BBC, she engages widely with anti-corruption practitioners in governments, the private sector and NGOs. She has written several reports for Transparency International, is Chair of Spotlight on Corruption, works closely with parliamentary select committees and advised the UK Cabinet Office on the 2017–22 National Anti-Corruption Strategy. She holds an undergraduate degree and DPhil in Politics from the University of Oxford.

Shahrzad Fouladvand is a Lecturer in International Criminal Law at the University of Sussex. Her main research interests relate to human trafficking and corruption in the areas of transnational criminal law and international criminal justice systems, particularly the International Criminal Court, where she worked as a legal researcher at the International Criminal Court Office of the Prosecutor/Prosecution Division in The Hague. She holds a PhD in Law from the University of Sussex.

Georgia Garrod has a research interest in the UK’s role in facilitating corrupt capital flows. She has worked at the Centre for the Study of Corruption and with Transparency International UK, where she supported the investigations team looking at UK money laundering risks. She holds an undergraduate degree and an MA in Corruption and Governance from the University of Sussex.

Dan Hough is Professor of Politics at the University of Sussex and the founder of the Centre for the Study of Corruption. He is the author of two books on corruption: Analysing Corruption and Corruption, Anti-Corruption and Governance. His academic research focuses on two main themes: which anti-corruption strategies work and why, and the politics of anti-corruption campaigns, with a particular interest in anti-corruption in China. Alongside his academic work, he is a regular contributor to news outlets, including the Washington Post, South China Morning Post, New Statesman, The Conversation, BBC and CNBC. He holds an undergraduate degree from the University of Newcastle and a PhD in Politics from the University of Birmingham.

Francis McGowan is a Senior Lecturer in Politics at the University of Sussex. After working for the European Parliament, Lloyds of London and the Institute for Fiscal Studies, Francis joined the University of Sussex in 1987 as a researcher in the Science Policy Research Unit, moving to the Department of Politics in 1993. His past research has focused on European energy policy. His current research interests include natural resource governance.

Sam Power is a Lecturer in Corruption Analysis and core faculty member of the Centre for the Study of Corruption at the University of Sussex, having previously held posts at the universities of Exeter and Sheffield. His research primarily focuses on political financing, online campaigning, party politics and corruption. He has published widely on these themes and regularly provides expert commentary to media outlets, including the BBC, LBC, Bloomberg, Financial Times, The Guardian, Washington Post, New Statesman and Vice. Sam holds an undergraduate degree, an MA in Corruption and Governance and a PhD in Politics from the University of Sussex.

Tena Prelec is a Research Associate at the Department of Politics and International Relations at the University of Oxford, having worked at the research unit on the Western Balkans at the London School of Economics and Political Science. Her research has focused on the development of informality and corruption during the economic transition in southeastern Europe, as well as reputation laundering via educational institutions. She holds an undergraduate degree from the University of Trieste and a PhD in Politics from the University of Sussex.

Tom Shipley is a PhD researcher at the Centre for the Study of Corruption at the University of Sussex. He has conducted research on anti-corruption for a range of organizations, including the Natural Resource Governance Institute, the Transparency International U4 Helpdesk, the UK Home Office and the World Bank, and is an editor and contributor of Curbing Corruption.

1

Corruption in theory and practice

Dan Hough

Fashions change: the hula hoop, the lava lamp and the Rubik’s Cube were once the height of coolness. No longer. Some things, however, never seem to go out of fashion. They have an appeal that keeps them relevant. This can be the enduring attraction of popular brands or it can centre on the deeper drivers of human behaviour. Amidst all the ups and downs of life there is still plenty of continuity.

Corruption is a perfect example of that sort of continuity. Types of corrupt practice change, the mechanisms that individuals use when engaging in corruption evolve (at times breathtakingly quickly) and the challenge of working out how to counteract corruption becomes ever more complex. Yet even if the nature, extent, scope and opportunity to be corrupt inevitably wax and wane over time, the corrupt temptation remains an underlying constant.

The extent and scope of academic analysis of corruption has not always been quite so constant. Ancient philosophers such as Plato and Aristotle may well have recognized corruption and indeed condemned it, but for significant periods of time corruption did not really feature on the radars of too many social scientists (Buchan & Hill 2014). It was acknowledged to exist, but a variety of factors prompted scholars to generally look elsewhere for their objects of study. There are plenty of understandable reasons for that. Corruption remains a classic contested concept; we know it when we see it, but pinning down its key attributes remains tricky (Philp 1997; Gardiner 2002). Corruption is virtually impossible to meaningfully measure (Heywood 2015). Corruption is generally a clandestine process that subsequently makes both quantitative and qualitative analysis tricky; what data should we use and how do we ask questions of those who are potentially involved in the process?

All that having been said, the last half century has seen academia wake up to the corruption challenge and indeed start to confront those issues. Corruption may well be hard to define, but so are concepts such as democracy, freedom, justice and a range of other ideas that occupy social scientists’ thinking. Grey areas notwithstanding, corruption remains in essence the deliberate abuse of entrusted power for private gain (Nye 1967). No definition ever incorporates every potentially corrupt act, but this one is still a perfectly acceptable place to start.

Aggregate indices that purport to measure perceptions of corruption have come in for a veritable barrage of criticism (Heywood & Rose 2014; Hough 2016), but clever measures over and beyond those are now in ever more plentiful supply. Attempts to measure experiences (as opposed to perceptions) of corruption have come to the fore, attempts to focus on specific types of corruption have proliferated and there is a growing world of often nuanced proxy indicators out there. They range from public expenditure tracking surveys, often known as PETS, first trialled in Ugandan schools (Reinikka & Svensson 2005) to budgetary monitoring in the Chinese provinces (Stromseth et al. 2017).

The broader methodological challenge of researching an ill-defined and clandestine activity naturally remains and some scholars have been positively scathing in pinpointing some of the deficits of corruption research out there (Heywood 2017). They are right to draw our attention to the problems. But, as many of those researchers would be the first to acknowledge, that is not a recipe for inaction. Doing some research is much more preferable to doing no research at all.

The uptick in modern interest in corruption began when developmental economists started trying to seriously analyse corruption in the 1960s (Leff 1964; Leys 1965; Nye 1967). Anthropologists soon entered the fray, as did a number of pioneering political scientists (Scott 1969; Heidenheimer 1978; Rose-Ackerman 1978). As we moved into the twenty-first century, corruption became more or less mainstream across the whole swathe of disciplines that come under the rubric of social science. The number of publications proliferated and any newcomer to the discipline now may well struggle to know where to start in making sense of it. Corruption research is most certainly now in plentiful supply.

What (might) work and what (probably) will not

Yet nagging questions still clearly remain. First, in real-world terms there is a need to be clear about what works in fighting corruption and how we know that it works. That is not as easy to do as it may sound. There is no anti-corruption toolbox out there for politicians to simply dip their hands into when they want to solve a given problem. Anti-corruption initiatives come in a plethora of different shapes and sizes; some are direct while many others are a more subtle and indirect. All will take time to have an effect. Indeed, the nature of that effect may also be far from constant. What appears to bring about positive change in one setting may have no discernible impact in another. In a third jurisdiction it may even prompt negative policy outcomes. Work on the differential impact of electoral systems on corruption is an excellent example of this (Persson, Tabellini & Trebbi 2003; Kunicova & Rose-Ackerman 2005). If anti-corruption were easy there would be no need for books like this one.

Claims by politicians that they will end or eradicate corruption are also generally unhelpful. They are patently not going to be able to do that so we need other ways of assessing progress. We argue in this book that it is only by establishing what it is that we should be seeking – level playing fields for business; robust integrity standards in public life – that we can then move on to understand what has genuinely worked. Making goals specific and providing information to assess whether they have been achieved lies at the root of assessing whether a given regime is genuinely serious about the anti-corruption undertaking.

One step towards realizing aims like these is to ensure that the best academic research feeds into the thinking of practitioners. While there is certainly evidence that that does happen, it is still not always clear that the world of theoretical reflection interacts particularly well with that of public policy. Some practitioners are certainly interested in learning from academic insight, but the two worlds only infrequently work productively together to face down real-world challenges. There are potentially four conclusions that can be drawn from this and they can be seen in Table 1.1.

Table 1.1 Academic research on corruption and public policy outcomes

Three of those four outcomes should lead us to be rather downbeat about how the world of academia contributes to the world of public policy provision.

First, as is noted in the bottom left quadrant of Table 1.1 (theoretically robust but with less practical application), much of the research that exists is built on widely accepted theoretical assumptions but it remains practically very challenging to translate into policy proposals that have clearly visible, positive outcomes. Modelling corrupt practice remains a growth enterprise and scholars working in that tradition have conducted some fabulous pieces of research that illustrate how, why and where corruption happens. Learning practical lessons from them about prevention or cure is nonetheless far from easy. For example, Fisman and Miguel’s analysis (2007) reveals how more or less corrupt cultures travel when related to the parking practices of United Nations diplomats; while Cohn et al. (2019) demonstrate that people are keener on doing the right thing in terms of returning lost wallets if there is more rather than less money in there. But how does that translate into anti-corruption policy prescriptions? That is not an easy question to answer.

There is another interpretation of that same dilemma. If one assumes that academic research does have something to offer to public policy, then it may well be that the issue is more that policy makers are not particularly receptive to it. The research may be theoretically coherent but it just never gets onto the desks of the relevant movers and shakers. Significant attempts have been made to try to do something about this (Anti-Corruption Evidence Programme 2021), but the nagging doubts still remain; boffins in ivory towers think a lot but either they do not really appreciate the challenges of getting public policy right or policy makers simply do not have enough hours in the day to look in depth at what the academics are doing.

Second, a less generous reading of academic work on corruption is that the research that is produced is theoretically problematic, which points to the upper right of the quadrant in Table 1.1 (theoretically problematic but adopted for practical application). If practitioners implement proscriptions that are built on rocky theoretical foundations, then it will inevitably lead to policy applications that simply do not work. Within academia there has been plenty of debate on precisely this issue. The dominance of the rational choice paradigm (Rose-Ackerman 1999; Rose-Ackerman & Palifka 2016) has often led to nicely coherent research designs, but there have certainly been times when the nuances that complicate real-world life have not been suitably acknowledged. Bo Rothstein and his team of scholars in Sweden (Persson, Rothstein & Teorell 2013) have talked of a significant mis-characterisation of the problem, while Heather Marquette and Caryn Peiffer (2015) have highlighted how different theoretical horses are needed for different real-world courses. Alina Mungiu-Pippidi (2015) has also impressively highlighted how this theoretical confusion has led to misunderstandings about how best to try to move from high to (relatively) low corruption settings. Not everyone, in other words, should strive to be Denmark – they are not like Denmark, and will never become Denmark, so applying the solutions that had worked for Denmark is likely to be a lost cause (Mungiu-Pippidi 2014). In this reading of problematic theory leading to flawed policy, academic work still has much to do in producing material that can make a real-world difference.

Third, there is a notion that goes over and beyond the theoretically problematic = flawed practical outcomes suggestion. As is noted in the lower right quadrant of Table 1.1 (theoretically problematic and with less practical application), if academic work is regarded as theoretically problematic it may simply not be taken seriously at all.

The evidence for this does not seem as widespread as cynics might assume. Regardless of what practitioners think of academics, there is clear evidence that practitioners are at least tentatively willing to listen to academics if they think good practical ideas might be the end point. That the ideas could end up being damp squibs is one thing, but international organizations such as the World Bank and International Monetary Fund (IMF) certainly do engage with academic practice, just as many other organizations do. If an organization is serious about addressing corruption, then, to greater or lesser extent, it does generally tend to be open to ideas that might help to fight it. Politics can certainly trump what would be best practice, and where the interests of those in power clash with what would help in fighting corruption, we will not see much headway. But one thing is clear: there are undoubtedly more organizations that are willing to listen than there were half a century ago.

From academia to public policy

The remaining quadrant of Table 1.1 (theoretically robust with practical application) is nonetheless where real progress can be made. Theoretically nuanced research that is rooted in context can and does come up with specific policy proposals that have the potential to make a difference. We know, for example, that where the rule of law is strong, where the media is (relatively) free and where public institutions are robust, research that is situated in the rational choice paradigm can make a difference. The widely acknowledged success of Hong Kong’s anti-corruption commission is an excellent example of this (Quah 1994). The need to sharpen up legal frameworks, play with the cost–benefit thinking of potentially corrupt actors and hardwire transparency and accountability into the way the public sector works can all be done by buying into assumptions that underpin rational choice thinking.

In places where the key drivers of effective governance are either patchy or bordering on non-existent, different approaches work. Mushtaq Khan, for example, has cleverly illustrated how traditional approaches to tackling corruption may well have destabilizing influences in places such as South Korea and China (Khan 2006). Khan is not making a play for corruption as a facilitator of more effective public policy, but he is raising awareness that dogmatically translating the assumptions that underpin much anti-corruption thinking into different contexts could lead to a whole range of potentially problematic outcomes. Grant Walton (2013) does much the same in a the very different world of Papua New Guinea. The need to use context as a driver of reform does not mean that theory should go out of the window. But it does mean that one should tread carefully before making too many all-encompassing assumptions.

Indeed, in some situations there is a case to be made that fighting corruption effectively requires targeting the underlying forces that produce corruption, even though they may have little overtly to do with directly fighting corruption. In post-conflict states, for example, indirect interventions that aim to bring some sort of stability to public life can be effective in lowering levels of corruption (Zaum & Cheng 2011). However, looking corrupt officials in the eye and telling them that they should do things to limit their own ability to indulge in corrupt practice is most unlikely to work. To misquote Brad Pitt’s character in the 1999 film Fight Club, The first rule of anti-corruption is that you don’t talk about corruption. If you overlook this, then those in power may well think that anti-corruption initiatives are all about limiting their own power. And they would generally be right. Given that turkeys do not usually vote for Christmas, a more roundabout approach is needed to achieve the ultimate objective.

The so-called Fight Club Method