Zoltán Szántó – István János Tóth Some typical network configurations of corruption cases in Hungary Preliminary resea

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

2. Topics Introduction  Earlier results  Idealtypes  Networks  Conclusions 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?

3. Introduction

4. Topics  Introduction Earlier results  Idealtypes  Networks  Conclusions Introduction: Our earlier research on business corruption in HungaryFinancial 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

5. Topics  Introduction Earlier results  Idealtypes  Networks  Conclusions 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) 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)

6. Topics  Introduction Earlier results  Idealtypes  Networks  Conclusions 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 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

7. Main results of the earlier research projects

8. Topics  Introduction Earlier results Idealtypes  Networks  Conclusions 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

9. Topics  Introduction Earlier results Idealtypes  Networks  Conclusions 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

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

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

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

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

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

15. Topics  Introduction Earlier results Idealtypes  Networks  Conclusions 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

16. Idealtypes of corruption

17. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions 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

18. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: basic model Principal Agent Client

19. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: basic model Principal Agent Client

20. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: basic model Principal Agent Client

21. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: basic model Principal Agent Client

22. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: basic model Principal Agent Client

23. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: basic model Principal Agent Client

24. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: basic model Principal Agent Client

25. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions 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)

26. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Bribery Principal Agent Client

27. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Bribery Principal Agent Briber

28. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Bribery Principal Bribee Briber

29. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions 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

30. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Extortion Principal Agent Client

31. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Extortion Principal Extorter Client

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

33. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions 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)

34. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Embezzlement Principal Agent Client

35. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Embezzlement Principal Embezzler Client

36. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Embezzlement Embezzlee Embezzler Client

37. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions 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

38. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Fraud Principal Agent Client

39. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Fraud Principal Agent Client

40. Topics  Introduction  Earlier results Idealtypes Networks  Conclusions The idealtypes of corruption: Fraud Principal Agent Client

41. Network configurations & cases

42. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions Network configurations of corruption transactions: interpersonal and institutional embeddedness of corruption – some typical corruption cases in Hungary • Relations: Personal relationship: actor actor Business relations: actor actor Ownership relation: owner owned Bribe:agentclient Advantage: agentclient False service: „seller” „buyer” False price „seller” „buyer” • Actors P1: (real) principal P2: (hidden) principal A: agent C: client B1, B2 : brokers

43. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 1.1. Simple model, two actors, non regular corruption P1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

44. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 1.1. Simple model, two actors, non regular corruption P1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

45. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 1.1. Simple model, two actors, non regular corruption P1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

46. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 1.1. Simple model, two actors, non regular corruption P1 A C 1. case: bribery of police officer in the highway Budapest -Miskolc

47. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 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

48. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 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

49. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 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

50. Topics  Introduction  Earlier results  Idealtypes Networks Conclusions 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