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The Unexpected Link June 17-18 Center for Network Science, CEU, Budapest Zoltán Szántó – István János Tóth Some typical network configurations of corruption.

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Presentation on theme: "The Unexpected Link June 17-18 Center for Network Science, CEU, Budapest Zoltán Szántó – István János Tóth Some typical network configurations of corruption."— Presentation transcript:

1 The Unexpected Link June 17-18 Center for Network Science, CEU, Budapest Zoltán Szántó – István János Tóth Some typical network configurations of corruption cases in Hungary Preliminary research results

2 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

3 Introduction

4 Introduction: Our earlier research on business corruption in Hungary Financial supporters Transparency International Magyarország TEXTREND [NKFP_07_A2-TEXTREND, OM- 0002/2008] Corruption Research Center of the Institute of Sociology and Social Policy at Corvinus University of Budapest Topics Introduction Earlier results Idealtypes Networks Conclusions

5 Introduction: Our earlier research on business corruption in Hungary 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) andhttp://www.transparency.hu/part_two 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 )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) Topics Introduction Earlier results Idealtypes Networks Conclusions

6 Introduction: Our earlier research on business corruption in Hungary 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 between 1 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 Topics Introduction Earlier results Idealtypes Networks Conclusions

7 Main results of the earlier research projects

8 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 Topics Introduction Earlier results Idealtypes Networks Conclusions

9 Interview analysis The size and scope of business corruption in Hungary Widespread in Hungary Corruption in the business and government sector cannot easily be separated, often intertwined Business 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 cases Promoters 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 Topics Introduction Earlier results Idealtypes Networks Conclusions

10 Media content analysis – Number of analysed articles by year Topics Introduction Earlier results Idealtypes Networks Conclusions

11 Media content analysis – Corruption cases by corruption service and bribe types Topics Introduction Earlier results Idealtypes Networks Conclusions

12 Media content analysis – Institutions involved in corruption Topics Introduction Earlier results Idealtypes Networks Conclusions

13 Media content analysis – Procedures involved in corruption Topics Introduction Earlier results Idealtypes Networks Conclusions

14 Media content analysis – Share of multiplayer (networked) corruption cases Topics Introduction Earlier results Idealtypes Networks Conclusions

15 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 Topics Introduction Earlier results Idealtypes Networks Conclusions

16 Idealtypes of corruption

17 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 principals rules are trespassed and his/her interests are hurt Topics Introduction Earlier results Idealtypes Networks Conclusions

18 The idealtypes of corruption: basic model Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

19 The idealtypes of corruption: basic model Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

20 The idealtypes of corruption: basic model Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

21 The idealtypes of corruption: basic model Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

22 The idealtypes of corruption: basic model Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

23 The idealtypes of corruption: basic model Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

24 The idealtypes of corruption: basic model Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

25 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) Topics Introduction Earlier results Idealtypes Networks Conclusions

26 The idealtypes of corruption: Bribery Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

27 The idealtypes of corruption: Bribery Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentBriber

28 The idealtypes of corruption: Bribery Topics Introduction Earlier results Idealtypes Networks Conclusions Principal BribeeBriber

29 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 Topics Introduction Earlier results Idealtypes Networks Conclusions

30 The idealtypes of corruption: Extortion Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

31 The idealtypes of corruption: Extortion Topics Introduction Earlier results Idealtypes Networks Conclusions Principal ExtorterClient

32 The idealtypes of corruption: Extortion Topics Introduction Earlier results Idealtypes Networks Conclusions Principal Extorter Extortee

33 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) Topics Introduction Earlier results Idealtypes Networks Conclusions

34 The idealtypes of corruption: Embezzlement Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

35 The idealtypes of corruption: Embezzlement Topics Introduction Earlier results Idealtypes Networks Conclusions Principal EmbezzlerClient

36 The idealtypes of corruption: Embezzlement Topics Introduction Earlier results Idealtypes Networks Conclusions Embezzlee EmbezzlerClient

37 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 Topics Introduction Earlier results Idealtypes Networks Conclusions

38 The idealtypes of corruption: Fraud Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

39 The idealtypes of corruption: Fraud Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

40 The idealtypes of corruption: Fraud Topics Introduction Earlier results Idealtypes Networks Conclusions Principal AgentClient

41 Network configurations & cases

42 Network configurations of corruption transactions: interpersonal and institutional embeddedness of corruption – some typical corruption cases in Hungary Topics Introduction Earlier results Idealtypes Networks Conclusions Relations: Personal relationship: actoractor Business relations: actoractor Ownership relation: owner owned Bribe: agentclient Advantage:agentclient False service:sellerbuyer False pricesellerbuyer Actors P 1 : (real) principal P 2 : (hidden) principal A: agent C: client B 1, B 2 : brokers

43 1.1. Simple model, two actors, non regular corruption Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

44 1.1. Simple model, two actors, non regular corruption Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

45 1.1. Simple model, two actors, non regular corruption Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

46 1.1. Simple model, two actors, non regular corruption Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

47 1.2. Simple model, two actors with personal relationship, regular transaction Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 2. case: bribery of custom officers at the Hungarian – Rumanian border

48 1.2. Simple model, two actors with personal relationship, regular transaction Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 2. case: bribery of custom officers at the Hungarian – Rumanian border

49 1.2. Simple model, two actors with personal relationship, regular transaction Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 2. case: bribery of custom officers at the Hungarian – Rumanian border

50 1.2. Simple model, two actors with personal relationship, regular transaction Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 2. case: bribery of custom officers at the Hungarian – Rumanian border

51 1.2. Simple model, two actors with personal relationship, regular transaction Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 2. case: bribery of custom officers at the Hungarian – Rumanian border

52 1.3. Simple model, two actors, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 3. case: the Hunvalds model - real estate selling of local government (Budapest, VII. district)

53 1.3. Simple model, two actors, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 3. case: the Hunvalds model - real estate selling of local government (Budapest, VII. district)

54 1.3. Simple model, two actors, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 3. case: the Hunvalds model - real estate selling of local government (Budapest, VII. district)

55 1.3. Simple model, two actors, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C resource 3. case: the Hunvalds model - real estate selling of local government (Budapest, VII. district)

56 1.3. Simple model, two actors, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C 3. case: the Hunvalds model - real estate selling of local government (Budapest, VII. district) false price ( < market price)

57 1.4. Simple model, two actors, two principals Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 4. case: political party financing with simple transaction: the Zuschlag-model (HSP)

58 1.4. Simple model, two actors, two principals Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 4. case: political party financing with simple transaction: the Zuschlag-model (HSP)

59 1.4. Simple model, two actors, two principals Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] disloyalty 4. case: political party financing with simple transaction: the Zuschlag-model (HSP)

60 1.4. Simple model, two actors, two principals Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 4. case: political party financing with simple transaction: the Zuschlag-model (HSP)

61 1.4. Simple model, two actors, two principals Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 4. case: political party financing with simple transaction: the Zuschlag-model (HSP)

62 1.5. Simple model, two actors, two principals, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 5. case: political party financing with resource conversion – buying a real estate by local government (Békés county)

63 1.5. Simple model, two actors, two principals, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 5. case: political party financing with resource conversion – buying a real estate by local government (Békés county)

64 1.5. Simple model, two actors, two principals, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 5. case: political party financing with resource conversion – buying a real estate by local government (Békés county)

65 1.5. Simple model, two actors, two principals, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 5. case: political party financing with resource conversion – buying a real estate by local government (Békés county)

66 1.5. Simple model, two actors, two principals, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] resource 5. case: political party financing with resource conversion – buying a real estate by local government (Békés county)

67 1.5. Simple model, two actors, two principals, resource conversion Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ] 5. case: political party financing with resource conversion – buying a real estate by local government (Békés county) false price ( > market price)

68 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical

69 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical

70 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical

71 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical

72 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical false service

73 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical false service

74 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical payoff false service

75 2.1. Three actors, one broker with A, ownership and business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C B 1 6. case: Reconstuction of a building – feasibility study - bribery of local government offical: countryside case payoff

76 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

77 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

78 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

79 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

80 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 bribe = service (advertisement) 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

81 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 bribe = service (advertisement) false price < market price false price > market price 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

82 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 bribe = service (advertisement) false price < market price false price > market price 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

83 3.1. Three actors, one broker with C, business relations Topics Introduction Earlier results Idealtypes Networks Conclusions P 1 A C [P 2 ]B 2 bribe = service (advertisement) false price ( > market price) false price < market price false price > market price 7. case: Political party financing – a complex model C = media agency B 2 = TV channel P 1 = ministry P 2 = political party

84 Conclusions

85 Conclusion: The evolution of corruption networks – corruption as an institutionalized process? The evolution of corruption networks in terms of the number of actors the comlexity of network configurations the level of interpersonal and institutional embeddedness the multiplicity of relationships Corruption as an institutionalized process in terms of stability mixing the reciprocity, redistribution and market forms of economic integration Topics Introduction Earlier results Idealtypes Networks Conclusions

86 Thank you for your attention!


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