The Struggle Against Corruption: A Comparative Study

The Struggle Against Corruption

Also by Roberta Ann Johnson Puerto Rico: Commonwealth or Colony? (1980) Whistleblowing: When It Works—And Why (2003)

The Struggle Against Corruption: A Comparative Study

Edited by Roberta Ann Johnson

THE STRUGGLE AGAINST CORRUPTION © ROBERTA ANN JOHNSON, 2004. All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles or reviews. First published 2004 by PALGRAVE MACMILLAN™ 175 Fifth Avenue, New York, N.Y. 10010 and Houndmills, Basingstoke, Hampshire, England RG21 6XS Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 1–4039–6268–5 hardback ISBN 1–4039–6269–3 paperback Library of Congress Cataloging-in-Publication Data The struggle against corruption : a comparative study / [edited by] Roberta Ann Johnson. p. cm. Includes bibliographical references and index. 1. Commercial crimes. 2. White collar crimes. 3. Globalization. I. Johnson, Roberta Ann. HV6768.S77 2004 364.1⬘323—dc22

2004046073

A catalogue record for this book is available from the British Library Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition November 2004 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

Dedicated to the Memory of my Parents, Louis and Jean Johnson

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CONTENTS

Series Editor Foreword Preface and Acknowledgments 1. About Corruption Roberta Ann Johnson and Shalendra Sharma

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2. The United States: In Search of the Perfect Law Roberta Ann Johnson

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3.

White Corruption in Israel Chaim Kalchheim

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4.

Russia and Her Ghosts of the Past Jasmine Martirossian

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5.

India: Between Majesty and Modernity Maya Chadda

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6.

Corruption in Four Countries Roberta Ann Johnson

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About the Authors

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Index

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SERIES

EDITOR

FOREWORD

The Struggle against Corruption:A Comparative Study offers a new perspective on a very old subject: How can corruption in government office be eliminated, or at least reduced and made subject to punishment, without endangering those who reveal its presence? By bringing together studies of this complex problem in the United States, Israel, Russia, and India, Roberta Ann Johnson offers an outstanding example of the kind of books now being published in the Palgrave series Perspectives in Comparative Politics. Its topic is of great and obvious importance, its scholarship is up to date and comprehensive, its style is clear and persuasive, and, perhaps most important of all, it is fully and consistently comparative. All books in this series are designed to be scholarly, topic-oriented studies of a particular problem, accessible to upper-division students as well as to graduate students and professors. They begin with an introductory chapter, covering the relevant literature and laying out the problem, and end with a concluding chapter, summarizing what has been learned about the problems in the three or more nations covered, and elucidating the important comparative lessons learned. The Struggle against Corruption meets the guidelines for books in this series perfectly. The introduction is erudite yet absolutely clear, and the four case study chapters bring out the truths about the level of corruption—and attitudes toward corruption—in each nation. No effort is made to force similarities to emerge—comparison means recognizing difference as well as finding points in common from case to case. Nonetheless, similarities do emerge, and these are brought out in the final chapter. An additional and very important strength of Dr. Johnson’s conclusion is her determination to bring out, in no uncertain terms, the moral case against corruption. Arguments others have made for the pragmatic value of “a little bit” of corruption are carefully weighed and cogently disposed of. Corruption does far more harm than any passing good obtained, and Johnson provides the evidence and the argument we need to remind ourselves and others that this is so.We live in a time when students (and their teachers) can easily become overwhelmed by the level of public dishonesty apparent in nation after nation, including our own. Johnson

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never rants, rages, or preaches; she simply points out, in detail, the serious moral and economic costs of corruption. The Struggle against Corruption is written in a lively and interesting style, even as Johnson makes subtle and complex distinctions, explaining the most esoteric theories of others in this field. She knows how to keep her language simple and straightforward while maintaining comprehensive treatment of her topic. I am very proud to have this book join the series Perspectives in Comparative Politics. It is an important contribution to the literature of political science and will, I feel sure, be recognized as such. KAY LAWSON

PREFACE AND ACKNOWLEDGMENTS

Corruption is a hot topic. It has been studied, measured, and monitored by academics and analysts at universities, in public and nonprofit agencies, and in banks and businesses. Corruption has been approached from a moralistic point of view, addressed with a legalistic perspective, defended in terms of its nation-building functions, and condemned in terms of its consequences. Anticorruption has been the theme of countless political campaigns in cities and states around the world. It has also been a theme for the World Bank, the Organization for Economic Cooperation and Development, and the International Monetary Fund. By the 1990s, production and markets were becoming part of a world economy where participants were so interrelated that there was pressure on them to accommodate to worldwide standards and modes of operation. International norms included assumptions about contracts, trade, and fiduciary responsibility. The global economy held out a promise of enormous wealth for participants. Now, experts who wrote about corruption saw it as negative not because of its moral implications but because it stood in the way of participation in the world’s large and lucrative market. This book is written in the context of a beckoning global economy but it is not a cheerleader for the eradication of corruption for that reason. Corruption is worth reducing because it demoralizes the human spirit and it wastes opportunity, energy, and resources. The book examines the nuances, the compromises, the complexities, and the complexion of corruption and its remedies, as it operates in four very different countries. The inspiration for this book comes from my work on whistleblowing and from my participation in international ethics conferences, where I met practitioners and scholars and learned from them first hand. I would like to acknowledge them and acknowledge colleagues and friends closer to home. My study was enhanced by suggestions from my University of San Francisco colleagues Professors Brian Weiner, Patrick Murphy, and Rick Kozicki (Emeritus) in the politics department; from Professors Michael Lehmann and Hartmut Fischer in the economics department; Associate Dean Denis Neilson; and Professors Richard Puntillo, John Koeplin, and

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Anthony Martinez in the School of Business and Management, and from conversations with Professor Emily Stoper, California State University, Hayward; Professor Robin Lakoff, University of California, Berkeley; and Paul Viotti, University of California, Santa Cruz. I appreciate the encouragement from our comparative politics series editor, Professor Emeritus Kay Lawson, San Francisco State University; the feedback and editing suggestions from my sisters, Nikki Feit and Suellen Johnson, and brother, Alan Johnson; the insider insights of businessman Isaac Yomtovian; and, at the University of San Francisco, the typing skills of Norma Washington who is program assistant in Business Affairs, and the technical assistance and patience of Shona Doyle, program assistant, politics department. My student assistant,Venu Bhakhri, labored long and hard and was an enormous help with book details. And of course, there are never just the right words available to thank my partner, San Francisco State University Professor Robert C. Chope. He was patient and supportive throughout the project. His insights and editing suggestions made the final product better and he complained only occasionally about how it took time away from travel, dancing, and movies.

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CHAPTER

1

About Corruption Robe rta Ann Johnson and S hale ndra S harma

Corruption is a major problem worldwide. In recent years, in the streets of Jakarta, corrupt police officers stood by unwilling to intervene while vigilante groups burned alive men accused of petty crime. In Russia, corrupt officials depleted the state treasury by stealing huge sums of money and gems; they went unpunished. In India, when foreign entrepreneurs setting up factories refused to give illegal bribes to city officials, the foreigners’ own residences were burglarized and stripped of valuables in retaliation. Corruption is “shameless” (Caiden, Dwivedi, and Jabbra 2001: 1). Corruption as a Global Problem Understanding and responding to corruption is a widespread challenge. In 1999, Penuell Maduna, the South African minister of justice and constitutional development, boldly declared to a global audience, “It is now widely agreed that corruption, wherever in the world it is occurring, is one of the greatest challenges societies face as we enter the third millennium” (Maduna 1999). She could make this statement confident that her audience of administrators and academics from around the world shared her alarm and concern. In the 1990s, with the end of the cold war, there occurred what has been called “an eruption of corruption” (Galtung 2001: 191). Many factors contributed to this explosion.They include (1) state failure in many parts of the world that tended to aggravate already existing problems of corruption (World Bank 2002); (2) deregulation and privatization of the markets in the former Soviet bloc countries without a simultaneous strengthening of state institutions to ensure accountability; (3) growth of and access to “information technology” that increased opportunity for everyone and anyone to do business; and (4) technology enabling everyone to communicate and move money instantaneously. The world now had more corruption and “corruption without frontiers” (Galtung 2001: 192).

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Roberta Ann Johnson and Shalendra Sharma Examples and Patterns of Corruption

Although the practice of outright bribery has probably received most attention, political corrupt practices encompass more than bribery. Gerald Caiden presents an exhaustive list of “recognized forms” of corruption that captures the “sleazy side of public life.” The following list of political corrupt practices includes examples from Caiden and from others. ● ● ● ● ● ● ● ● ● ● ●

●

●

Bribery and graft (extortion and kickbacks) Kleptocracy (stealing and privatizing public funds) Misappropriation (forgery, embezzlement, misuse of public funds) Nonperformance of duties (cronyism) Influence peddling (favor brokering and conflict of interest) Acceptance of improper gifts (“speed” money) Protecting maladministration (cover-ups and perjury) Abuse of power (intimidation and torture) Manipulation of regulations (bias and favoritism) Electoral malpractice (vote buying and election rigging) Rent seeking (public officials illegally charging for services after creating artificial shortage) Clientelism and patronage (politicians giving material favors in exchange for citizen support) Illegal campaign contributions (giving unregulated gifts to influence policies and regulations). (Caiden 2001: 17, Mauro 1997: 3, Hellman, Jones, and Kaufman 2000, Rotberg 2004,Tanzi 1998)

Corrupt practices vary in other ways. They can be systemic, pervasive, and routine or they can be petty, sporadic, trivial, and rare. Corruption can also be rated in terms of the community’s level of tolerance toward it. That is the basis of Arnold J. Heidenheimer’s corruption scale. Black, Gray, or White Arnold J. Heidenheimer created a three-part, color-coded classification that reflects the community’s tolerance toward a questionable practice. His scale classifies the degree of community tolerance as black, gray, or white. For him, black corruption signifies that “a majority consensus of both elite and mass opinion would condemn” the practice on principle and want to see it “punished.” Gray corruption “indicates that some elements, usually elites, may want to see the action punished, others not, and the majority may well be ambiguous.” And white corruption, according to Heidenheimer, is accepted and regarded as tolerable. With white corruption, the majority of both elite and mass opinion probably would not vigorously support an attempt to punish it (Heidenheimer 2002: 152).

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One Feature but Differing Interpretations Although corruption comes in many shapes, shades, and sizes, and with different degrees of tolerability, as we will see, corruption is always defined with one feature—the inappropriate mix of public and private. It is corrupt for officials to profit personally from public office.1 This essential feature prohibiting public officials from personally profiting from public office is reflected in all the definitions of corruption offered by the experts. M. J. Balogun argues there is corruption (an ethical violation) when “approved codes or rules have been ignored to attain personal ends or manipulated to frustrate public intentions” (Balogun 2003: 129). For James Q. Wilson, “corruption occurs whenever a person in exchange for some private advantage, acts other than as his [sic] duty requires” (Wilson 1968: 55); and Andrew Stark says corruption refers to “private gain from public office” (Stark 1997: 108). While the general prohibition against private gain from public office seems straightforward enough, as Chaim Kalchheim suggests in chapter 3, there are still disagreements concerning what is corrupt. There are some situations that not everyone considers corrupt even though a public official enjoys “private gain” from public duty. Cases like these are worth exploring.We will briefly examine two of them. The first situation is when the public official is not seeking his/her own personal profit but is seeking benefits for political supporters; the second situation is when the public official actually enjoys personal gain but it does not significantly affect the policy outcome. When we explore the rationale for these corruption “exceptions,” we begin to understand two points: first, there isn’t always an obvious, clear, and rigid line separating what is legitimate from what is corrupt; and second, we begin to understand how different people, as well as different countries, can legitimately understand and define corruption differently. Who Benefits? What does it mean to reap personal gain when serving in a public office? “Most observers would, for example, agree that when a customs official demands a bribe for letting a product into the country duty free, this is corruption,” but they may not call it corrupt, “when a politician decides whether or not to devalue [currency] based on whether it will suit . . . political supporters” (Goudie and Stasavage 1997: 11). When it puts extra money in your family’s pocket or your own pocket, clearly, the public official has personally gained from office, and that is usually considered corrupt. But politicians can benefit in ways other than pocketing a bribe.What if the money goes to their clan, ethnic group, political party, or district constituents? Depending on where you live, that act may or may not be seen as an abuse of power (Gardiner 1993: 112). Those in the field of political economy actually begin with the “basic assumption” that politically benefiting a party or constituency is not a bribe

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and that officials are expected to use their office “to serve their individual interests” (Goudie and Stasavage 1997).2 They point out that public officials continually make decisions to keep themselves in power. While acting in ways to remain in office achieves a kind of “private gain,” political economists do not consider that corrupt; only using the office for personal pecuniary gain is corrupt. It is for this reason that Shleifer and Vishny recommend clarifying the various definitions of corruption to exclude such items as patronage service (1993) and Goudie and Stasavage redefine what is meant by a corrupt act; they restrict the concept of corrupt “personal gain” to refer only to “direct financial benefit accruing to the government officials or politicians” (italics added) (Goudie and Stasavage 1997: 11). This clarification of what is acceptable private gain is important not only in developing countries but also in modern countries like the United States, where congress members are routinely asked by their constituents to intervene in their official capacity on their constituents’ behalf. In fact, they act on behalf of special interests all the time and do not see it as corrupt. Political economists agree. Honest Graft? There is more controversy around the second kind of situation, where a gift of direct financial benefit is actually given to a public official. In this situation, the accepted gift appears not to have an effect on public policy. Is the gift still considered a bribe? Is the situation corrupt? James Q. Wilson, in 1968, distinguished between “harmful and not so harmful varieties” of corruption. He recommended focusing on consequences, rather than on moral and legal issues, when evaluating situations. Referencing none other than George Washington Plunkitt of Tammany Hall, Wilson borrows from Plunkitt’s distinction between “honest” and “dishonest” graft and uses it to examine consequences. Honest graft is not so bad, he concludes. It “entails a money benefit for the recipient but no money cost to the public” (italics added). Wilson illustrates “honest graft” with an example.The city, he points out, has to purchase insurance and has to deposit its city funds in banks. The premiums and interest rates offered by all banks are about the same,Wilson proposes, so it does not cost the city more money if the city official receives a gift from one of the banks or one of the insurance companies (p. 57). John Gardiner offers other examples. He asks, “is it acceptable for a contractor to take the government purchasing officer and his family on a twoweek vacation on the Riviera?” and “Can the Minister for Highways award a construction contract to a company of which he is part owner?” The answer, he says, often depends on the country in which the arrangement takes place (Gardiner 1993: 112) and the answer can also depend on how the arrangement is publicly described (how the politicians or the media spin it).3 What Plunkitt calls “honest graft” is acceptable behavior in some places (Leys 2002: 62). It is not in others. But there are those who would argue

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that honest graft is not really corrupt at all wherever it takes place, when the public consequences are not changed by the gift. Corrupt Business Practice The reports of dealings leading to the collapse of Enron and WorldCom illustrate that corruption can also be rife in the private business sector. When businesses purposefully ignore rules and laws governing auditing, contracts, stock trading, public disclosure, and other legal requirements, they are considered guilty of illegal practice and are called corrupt. Corrupt business practices also include undercutting competition through unfair bidding, creating contracts that are tailored to enhance the chances of favored groups, and overlooking cost overruns in exchange for bribes. Companies of all sizes, from small businesses to huge multinational corporations, have engaged in all these practices. But as in politics, so, too, in business: What is understood as “corrupt” can change from country to country. Disagreements on What Is Bribery While the most frequent corrupt practice is bribery (Gardiner 1993: 113, Heidenheimer 2002: 141), Judge John T. Noonan’s book Bribes demonstrates how ambiguous the term “bribe” can really be (Noonan 1984).4 In fact, the answer to, “Is it a bribe or a gift?” can primarily depend on your country, cultural context, and historic period. While what we mean by “bribe” can change, currently in Western culture, “bribe” is often used as if it had a stipulative meaning, a definition that, at first glance, seems fixed. Joseph S. Nye’s articulation of just what is corruption and bribery has been widely used (Caiden 2001: 20). Nye defines bribery as “the use of reward to pervert the judgment of a person in a position of trust” (Nye 2002). But, should one definition of “bribe,” for example this one, be used as a fixed definition and a universal standard in all countries? Mark Philp aptly points out that it may be fruitless to try to apply a definition of bribery in countries without using “some reference to accepted standards of behavior within the community” (italics added) (Philp 2002: 47).What is labeled and experienced as “bribery” can be part of a cultural landscape. In Lagos, Nigeria, for example, in 1952, the practice of bribery or “fee for service” was so widespread that it included hospital patients who were expected to pay ward servants to get a bed-pan! (Leys 2002: 62). Nye’s definition of bribery might be widely used in academic circles, but it might seem irrelevant in some non-Western contexts, and its imposition might even seem arrogant.This issue is explored in Maya Chadda’s chapter on India. Even within Western culture, interpretations of Nye’s definition of bribery, “the use of reward to pervert the judgment of a person in a position of trust,” can vary.“In different western cultures, different understandings will exist as to when something meets” the definition’s criteria—“what things

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count as rewards, what sorts of influence are held to pervert judgment . . . what defines what counts as positions of trust” (italics added), and how extensive are the constraints associated with the responsibilities of being in a position of trust (p. 47).As Peters and Welch reflect,“What may be ‘corrupt’ to one citizen, scholar, or public official is ‘just politics’ to another, or ‘indiscretion’ to a third” (Peters and Welch 2002: 156). Prohibiting Bribery Disagreement over the precise definition of bribery did not stop countries from trying to prohibit it. In the mid-1990s, an ambitious multination worldwide effort to try to put an end to the practice of bribery in all of the world’s exporting countries was launched. It was an effort that had its origins in the 1970s, when the U.S. Congress passed the American Foreign Practices Act. Stimulated by the public exposure of American companies’ use of bribery, this law represented the first time anywhere that national legislation criminalized corruption abroad (Heidenheimer and Moroff 2002: 943). During the summer of 1997, representatives of 33 of the wealthiest countries met and agreed to a “no-bribery” principal. The convention against bribery created the Organization for Economic Cooperation and Development (OECD) and committed the countries to expanding the nobribery rule to all exporting countries.The agreement “entered into force” in 1999 and was followed by conferences to publicize and educate other countries about the new edict ( Johnson 2003: 120, 121; Goudie and Stasavage 1997: 10). It helped that early on, large, international,“brand-name” companies like Siemens and Asea Brown Boveri “proclaimed their support.” These firms had been involved in scandal, and now were “repentant” (Heidenheimer and Moroff 2002: 950) and were effectively rallying companies and governments to support the anti-bribery convention. Political Economy and Corruption The term “political economy” refers to the relationship between politics and economics, or state and market relationships. Political economists do not focus on discrete acts of corruption but on the relationships that produce them.This perspective opens the way for analysis on how poor governance, state failure, and excessive government involvement connect with a whole array of economic consequences, including corruption. Political economist have observed that an environment characterized by state failure and poor governance offers greater incentives and more scope for corruption (Myint 2000, Dornbusch 2000, Shleifer and Vishny 1993, Rose-Ackerman 1999). “Poor governance” is the absence of some or all of the qualities of “good governance.” According to the World Bank (1994), “Good governance is

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epitomized by predictable, open and enlightened policy making; a bureaucracy imbued with a professional ethos; an executive arm of government accountable for its actions; a strong civil society participating in public affairs; and all behaving under the rule of law.” In addition, for political economists,“good governance” also includes the creation, protection, and enforcement of property rights as well as a regulatory regime that supports market competition. Good governance, they believe, should allow individuals to participate in the market economy without incurring heavy transaction costs associated with corruption. In contrast, “poor governance” is where there is either no protection of private property, or where the government may protect the property rights of some, while simultaneously abrogating or reducing the property rights of others.This environment creates greater opportunities for public officials to manipulate rules for their own benefit. In addition, in this environment, a weak legal and judicial system cannot provide a credible threat of punishment when official misconduct is discovered. Poor governance in many parts of the world has tended to aggravate the problem of corruption, nepotism, and arbitrariness. Evidence from “failed states” like Liberia, Afghanistan, or Somalia is unequivocal: unrestrained predatory behavior in the face of worsening governance and economic collapse. Corruption is also endemic in many “weak states” that are underdeveloped and have fragile political and administrative institutions. In such settings, capricious behavior and policies often become the norm, and the embezzlement of public funds, tax evasion, and petty theft and graft are routine. Political economists also see the connection between excessive government involvement and corruption.They point to the former Soviet Union as an example of a country where corruption thrived and was rooted in excessive government regulation and intervention in the economy (Easterly 2001, Schleifer and Vishny 1993). Jasmine Martirossian’s descriptions in chapter 4 are very informative. But just removing excessive government does not automatically reduce corruption. Political economists recognize that there is an appropriate role for government to play. Deregulating, privatizing, and reducing the role of the government in the economy, without simultaneously strengthening institutions to provide checks and ensure accountability, increases opportunities for corruption. Chapters 4 and 5 illustrate this. Like other economists, political economists frequently use the term “rent-seeking” when describing corrupt practices. The term rent is short for “economic rent” and refers to the extra amount paid to somebody for something useful when the supply of that item is limited. People seek economic rent by creating artificial limits on supply. “Throughout the world bureaucrats and people in authority are indefatigably maneuvering to position themselves in a tiny monopoly where they [realized a rent] can be bribed for issuing a license, approving an expenditure, or allowing a shipment across a border” (Mauro 1997: 3).

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Rent-seeking is another way of conceptualizing the abuse of public office for private gain. Rent-seeking is when government officials abuse their position to extract or accept bribes and kickbacks from the private sector for personal benefit. It can be called “grand” (in chapter 5 it is called “grand larceny”) when it involves senior politicians and government officials, and it is called “petty” when it involves lower-level state functionaries. The economic costs of corruption tend to be mitigated in law-based societies. Jagdish Bhagwati makes an important point when he contrasts corruption and cronyism in the United States and in the developing world. He notes that the rewards to Washington cronies are constrained by the institutional bounds of the rule of law and a vigilant press in a democracy. A Clinton crony is rewarded by a stay in the Lincoln bedroom whereas a Suharto crony gets monopoly rights in manufacturing industries in Indonesia ( Bhagwati 2000). Chapter 6 includes a discussion of how corruption is constrained with legal arrangements in less-corrupt, more law-based countries.

Defending Corruption In the late 1960s, corrupt practices were explained and widely defended by academics, practitioners, and politicians.5 Robert O. Tilman, for example, defended administrative corruption as “exhibiting many of the pricing characteristics of the economic free market.” He illustrated with the Federation of Malaya (1948–1963), where the government departments provided services more expeditiously because bribes induced the bureaucrats to put out the extra effort (Tilman 1970: 62–64). Using India as his database, David Bayley also described many positive features of corruption. He sought to demonstrate that in developing countries, corruption was “not an inherently defective means of arriving at decisions among competing claimants.” He argued that kickbacks can result in increased investments, that the opportunity for corruption can improve the quality of public servants, and that nepotism in government hiring might be viewed as a substitute for a public works system (Tilman 1970: 528–531). James C. Scott, reflecting on the experience of the new states of Africa and Asia, suggested that because group influence and input were absent when laws were being written, corrupt practices at the enforcement stage played an important role; they functioned as a substitute for interest-group politics (Scott 1970). And in 1968, Samuel Huntington, in his influential essay “Modernization and Corruption,” described how corruption provided “concrete benefits to groups which might otherwise be thoroughly alienated from society.” He noted that corruption was more prevalent during phases of modernization, and he suggested that corruption could strengthen political parties, reduce revolutionary pressure, and enhance stability (Huntington 2002: 257). Much of the early political economy literature argued that corruption had potentially beneficial effects for the newly emerging nations of the

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Third World by enabling civil society to escape the unrestrained predations of state regulation and intervention. According to Nathaniel Leff, for example, a direct payment to corrupt officials not only allowed entrepreneurs to avoid red-tape and bureaucratic delays, but also reduced the transaction costs and the distortionary effects of government policies (Leff 1964). There were other analysts at this time, however, who disagreed.They were less sanguine, questioning the so-called efficiency of bureaucratic corruption. Gunnar Myrdal (1968), for example, argued that corruption often induced politicians and bureaucrats to deliberately introduce measures, or manipulate existing ones, to facilitate their drive for self-aggrandizement. To Myrdal, the more deeply embedded and egregious the level of corruption, the more severe the levels of economic underdevelopment and poverty. The Cost of Corruption Today, political economists, policymakers, as well as international financial institutions such as the World Bank and the International Monetary Fund (IMF) generally agree that corruption is detrimental to both political development and economic growth. Studies by Mauro (1996, 2002) and Tanzi (1998) use data from a large sample of countries to illustrate that corruption and the related red tape are negatively correlated with economic growth. Mauro finds that in corrupt societies, government functionaries tend to devote much of their time to competing for positions of economic power and in the pursuit of rents. This perennial rent-seeking activity not only erodes the capacity of state institutions but greatly undermines economic development. For example, Mauro shows that corruption is negatively associated with government expenditure on education. An increase in corruption by one unit (on a scale of 0 to 10) lowers the ratio of public spending on education by 0.2 percentage point of GDP. Therefore, the harmful effects of corruption are especially severe on the poor, who are most reliant on the provision of public services and are least capable of paying the extra costs associated with bribery, fraud, and the misappropriation of economic privileges. The financial cost of corruption has been called “stunning” (Rosenberg 2003: 30). Mexico City represents a “classic example of a city where corruption moves everything.” Fully 69 percent of people surveyed who had been stopped by a transit cop said they had had to pay a bribe (p. 32). Francisco Barrio, once Mexico’s anticorruption czar, estimated that “graft” costs Mexico “9.5 percent of its G.D.P.—twice the education budget” (p. 30). Chapter 5 also provides many examples of the high cost of corruption. Corruption is costly even to those who can afford it. In the mid 1990s, the World Bank calculated that the average annual cost of bribery for international corporations was about $80 billion and this figure did not even include many American firms because, by the terms of the 1977 U.S. Corrupt Practices Act, U.S. companies were not legally allowed to bribe foreign nationals. (The U.S.Treasury Department and the U.S. Department of

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Commerce estimated that American businesses lost at least $30 billion per year because of this prohibition [Galtung 2001: 192]).6 Other Effects of Corruption The consensus today is that corruption demoralizes citizens and rampant corruption can stunt economic growth, especially in poor countries (RoseAckerman 1999). As M. J. Balogun describes it, “Depending on its form and gravity, corruption is capable of rewarding indolence and penalizing hard work, undermining morale and esprit de corps, compromising a nation’s external security, threatening internal order and stability, and generally slowing down the pace of economic growth and sustainable development” (Balogun 2003: 130). Corruption touches more than just the people involved in the corrupt transaction. When traffic controllers illegally sell drivers’ licenses, everyone is exposed to the “risks of reckless driving,” and when applicants buy a place on a police force, police officers are “beholden” to these “benefactors” and law enforcement goes to the “highest bidder” (Balogun 2003: 131). There are many examples of the effect of corruption on people’s spirit. Among the most memorable are literary reflections in the Ghanian novel by Ayi Kwei Armah, The Beautyful Ones Are Not Yet Born: Even collecting a small win in the Ghana lottery required paying large police bribes. The International Response There have been many transnational responses to global corruption, but the efforts of Transparency International and the World Bank probably have had the most worldwide impact by bringing the problem of corruption out into the open. In fact, the World Bank has identified corruption as the single greatest obstacle to economic and social development because it undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. The International Bank for Reconstruction, commonly called the “World Bank,” was created after World War II by the “major Western nations” to use public loans for economic development (Lawson 2003: 556, 557). Its goals were to establish “an open international trading system” and “global financial stability” ( Johnson 2003: 127). By the early 1990s, the World Bank was finding that much of the money that was supposed to go for economic development in the Third World was being corruptly diverted to personal profits. Corruption was impeding development as well as tarnishing all the countries (and parties) involved in the illegal transactions. But the bank, at first, did not address the problem because its charter required that it “abstain from political considerations in lending decisions.” World Bank representatives stationed in Africa met in Swaziland in 1990 to discuss a study recommending that the bank make “good governance”

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a condition for economic development loans. At that time, this sort of political requirement was thought to contradict the World Bank charter. This frustrated the conferees. One of those attending was Peter Eigen, and this Southern African meeting set the stage for the creation of Transparency International. Unable to change policy, Peter Eigen retired early from his job as World Bank’s regional director for East Africa, and in 1993, in Berlin, Germany, he worked with others to found a new nongovernment organization, Transparency International (TI). Much of the TI “start up seed money was supplied by the German Ministry of Development Aid” (Heidenheimer and Moroff 2002: 948). The organization was amazingly successful in putting corruption on the agenda for important international meetings and organizations, and TI soon became a consultant on ethics issues for the World Bank, Eigen’s old employer (Galtung 2001: 195). TI’s approach was to build coalitions, “capture the attention of the mass media” with “public diplomacy” (Heidenheimer and Moroff 2002: 948), and educate rather than criticize ( Johnson 2003: 135). Worldwide,TI has 80 national chapters. As part of their effort to raise consciousness and move corruption out into the open,TI began conducting corruption surveys around the world, widely publicizing the results. In 1999, they were able to rank 99 countries with a Corruption Perceptions Index based on how corrupt these countries appeared to businesspeople, risk analysts, and the general public. Nations were scored from “10” (highly clean) to “0” (highly corrupt). By 2002,TI’s Corruption Perceptions Index scored and ranked 102 countries. Finland, Denmark, and New Zealand were rated by TI as the least corrupt of all countries, Nigeria and Bangladesh, the most corrupt. The TI Index, however, is not without its critics.7 Maya Chadda, in chapter 5, describes the way TI produces its ratings and she critiques some of the controversial features, including the implications of such an index for the more traditional societies that are in transition. How are the four countries in this book ranked using the TI index? Two countries, the United States and Israel, were relatively uncorrupted: The United States was ranked as sixteenth, Israel as eighteenth. Russia and India, however, were ranked at the more corrupt end of the scale, both at 71 and among the bottom 30 most corrupt countries of the world. In 1996, The World Bank announced a change in their policy toward corruption. Under new leadership, the World Bank modified their operating standard and very publicly joined the fight against corruption. James D. Wolfensohn, the bank’s new president, labeled corruption a “cancer” and vowed to fight it (The World Bank Group 2000: 1). During the next four years, the World Bank engaged in over 600 anticorruption programs and initiatives involving 95 borrower countries. According to John McCormick, senior counsel at the World Bank Investigation Unit, in 1998, the bank established an ethics helpline for providing ethics advice to bank staff and it also established a 24-hour

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international hotline (called an AlertLine) for people to use to report corrupt practice at the bank or corruption related to contracts financed by the bank. From October 1998 to January 2002, the 24-hour World Bank AlertLine received 469 calls. The names of those found guilty of fraudulent activity were posted on the World Bank website. Guilty firms and individuals became temporarily or permanently ineligible for World Bank finance contracts ( Johnson 2003: 127, 128).

Individual Nations Confront Corruption How corruption is seen, experienced, and ultimately defined varies from country to country. In some countries, outright bribery, office buying, and other gross forms of malfeasance are expected and accepted. In other countries, corruption is more subtle and presents itself more ambiguously as forms of quid pro quo and conflicts of interest (Stark 1997). Governments responding to corruption programmatically respond differently.They have created anticorruption agencies to investigate wrongdoing, ombudsman offices to hear citizen complaints, internal anticorruption units within public agencies, and independent public accounting offices.Through education and publicity, the promise of reward, the threat of investigation and punishment, or the use of monitoring, governments have instituted different policies in an attempt to reduce corruption. Governments have also used codes and ethics commissions to try to teach employees and the public new ethical standards. In fact, there are some who argue that educating the public and changing the character of people is the only real road to reducing corruption and creating public regarding values (Lynch and Lynch 2003, Balogun 2003). This is the position of Gerald Caiden, who argues that in “today’s globalized, democratized, informatized [sic] world, incorruptible governments can be constructed only using incorruptible citizens as their bricks and mortar” (italics added) (Caiden et al. 2001: 1). Balogun also believes that “[c]haracter formation,” not leaders and monitoring agencies, “is the causative factor in public integrity” (Balogun 2003: 143). Often, in recent years, it has been “foreigners” teaching the ethics lessons in the hopes of leading others to the desired “character formation.” For example, the OECD-sponsored conferences, described earlier, were designed to “educate” countries in the developing world about good governance, transparency, and transactions without bribery. Many nonprofit organizations like Transparency International, Government Accountability Project (GAP), the Ethics Resource Center (ERC) and the American Bar Association (ABA) are also involved in trying to change the values of people in other countries in order to reduce corruption. From 1998 to 2001, GAP’s Washington, D.C. office hosted visits from representatives of 50 countries interested in “advice, information, counseling, support, and inspiration” for fighting corruption ( Johnson 2003: 117, 118).

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Working cooperatively with the U.S. State Department, TI, and the ABA, GAP has provided good-governance workshops and help with international agreements, and has offered technical assistance to dozens of countries, especially in the former Soviet states. The Ethics Resource Center has engaged in ethics training and mentoring in an effort to change the culture of businesses and governments in Eastern Europe and in parts of Latin America and Africa. ERC has worked with TI and has been supported in their global efforts by the U.S. Department of Commerce (pp. 117–126). The ABA has been involved in global anticorruption activities. In the 1990s, ABA members created the Central and Eastern European Law Initiative (CEELI), establishing programs in 23 countries.Their innovative programs made anticorruption, accountability, and transparency a priority. CEELI helped draft new laws, train prosecutors and judges, and helped create law libraries. By 2000, the ABA created similar programs in other regions of the world, including Africa, Latin America, and Asia (Leventhal 2001). The Importance of the Individual One of the most powerful ways corruption is exposed is when government or corporate employees themselves step forward to report corrupt practices. When they do so, they are commonly called “whistleblowers.” Accordingly, many countries have passed statutes to encourage and protect those who step forward. Meanwhile, regional organizations such as the Asian Development Bank, and international organizations like the World Bank, as part of their anticorruption programs, encourage individuals to expose corruption. Agencies make the reporting of wrongdoing easier by creating special investigative units and 24-hour hotlines. In fact, in many cases, the struggle against corruption not only depends on official government action but often rests on the shoulders of courageous individuals who take a stand and expose the wrongdoing. TI, GAP, ERC, and ABA have encouraged the development of whistleblower protection as part of their anticorruption work. For these groups and others, whistleblowing is seen as an essential ingredient to good governance and Transparency International’s guiding principles captures this. According to TI, “For . . . measures to be effective, it is important that arrangements which allow employees to ‘blow the whistle’ . . . clearly express the underlying purpose—which is to enable an individual to raise a concern so that those in authority are able to investigate it.” In fact, Transparency International calls whisteblowing a “fundamental principle of accountability” that “underpins the design” of a good governance system (Transparency International 2000: chapter 25). In this comparative study, what will become clear is that it is each nation’s cultural context that encourages or discourages whistleblowing and determines the public’s response to it. Observing how, in each of our four countries,

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whisteblowers fair will offer an important perspective on the complex relationship between culture, government, and individual responsibility. Summary of Chapters Chapter 2,“The United States: In Search of the Perfect Law,” focuses on the United States, where exactly what is corrupt is defined by laws and rules. When the law’s intent is hijacked because of legal loopholes, this can sometimes stimulate the passage of “improved” laws and rules and more effective monitoring. Many practices that “look” corrupt but are not technically illegal are tolerated. An active media and an engaged public can produce effective public condemnation of blatant corruption, and from time to time, there are scandals. But law enforcing institutions like the courts are seen as neutral and the bureaucracy is generally considered free from corruption. In the United States, there are more whistleblowers who come forward to expose corrupt practices than anywhere else in the world.They are frequently protected by laws, called “heroes” by the media, and often play an important role in opposing corruption. They are seen as independent, sometimes even “brave,” and as serving the public. Chapter 3,“White Corruption in Israel,” focuses on Israel, whose international reputation is not one of gross corruption and abuse of public office. Nevertheless, there exist various political and administrative arrangements as well as certain “technical” irregularities that are widespread and tolerated.When one of these practices goes too far it becomes a scandal that is publicly condemned, addressed, and rectified. In Israel, law enforcement agencies such as the state comptroller, the police, and the courts are generally seen as neutral and not corrupt. Surprisingly, although there are laws protecting whistleblowers and Israelis are generally not shy about complaining, Israel has proportionately fewer whistleblowers than one might expect coming forward to expose corrupt practices. The fourth chapter,“Russia and Her Ghosts of the Past,” tells a very different story. In Russia, it would be hard to find a place untainted by corruption. The political institutions and the law enforcement agencies are corrupted; criminal elements seem to be unchecked; economic activities are riddled with bribery and illegal exchanges of favors; and business practices are often personally dangerous. In Russia, individuals almost never come forward to expose corrupt practices. There is a legacy of informancy carried over from the former Soviet regime. With informancy, people who came forward alleging wrongdoing didn’t do so for the good of the community.They were actually working with the government to advance themselves.This legacy stigmatizes whistleblowing. Chapter 5, “India: Between Majesty and Modernity,” also focuses on a country where corruption seems to be everywhere.The chapter describes two patterns of corruption in India—petty bribes and grand larceny. Daily corruption is experienced by millions of Indians forced to participate in

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exchanges of kickbacks, bribes, and grease money, called “petty bribes.” This first category of petty corruption involves exchanges of small amounts of money but produces “horror stories” and affects everyone. The “grand larceny” category of corruption is secretive and involves political parties, the government bureaucracy, and businesses where the stakes are high and the costs are great. Here, money changes hands to ensure the victory of a political party or the awarding of a lucrative contract. In the background, criminal organizations and a black money market can launder the funds. If the corruption is exposed, the story becomes a scandal covered by the press and prosecuted in the courts. Investigations, special commissions, and new laws may experience small victories but seem powerless to break the pattern of grand larceny.Whistleblowers, we will see, play an important role in exposing corrupt practices even though whistleblowers in India are not officially encouraged or legally protected. Notes 1. Gerald E. Caiden and Naomi Caiden suggest that the distinction between public and private standards of behavior is relatively new. This distinction, they say, “came into being in Western Europe at the end of the 18th century,” emerging from the ideas of the French Revolution. In their 1977 essay “Administrative Corruption” (in Public Administration Review) they describe the significance of “monarchy” being swept away and replaced with representative government: “Office became a public trust, and officials servants of the community.” That meant that qualifications for public office replaced privilege and hereditary tenure; nepotism was abolished and officeholders no longer had private rights in their office; public officials were paid by salary, not from private profits. Bureaucrats did not serve at the pleasure of the king but were public servants. 2. This is in sharp contrast to the perspective of people like Carl J. Friedrich in Constitutional Government and Democracy and Daniel H. Lowenstein in Political Corruption: A Handbook. They see a government official’s commitment to the public interest as an essential ingredient and a defining feature for the “public official.” 3. For over 20 years, Oakland California’s city towing contract had been awarded without competitive bidding to A&B Auto. Oakland’s City Council president, Ignacio de la Fuente, was described as being an A&B “representative.” Formally and informally, Fuente defended the arrangement with the towing company, even when it was being questioned by the city auditor, according to San Francisco Chronicle staff writer Rick DelVecchio in “Oakland Towing Contract Faulted,” San Francisco Chronicle, August 26, 2003, pp. A15 and A19. 4. John T. Noonan’s 700-page book on bribery, Bribes, distinguishes four separate definitions of “bribe”—moralist, written law, law enforcement, and common practice. 5. The wave of articles defending corruption might have been a response to the initial rash of harsh moral judgements about the newly independent countries. Midtwentieth century, a moralistic tone dominated most discussions of corruption. Wraith and Simpkins’s description of West African corruption as a “jungle of nepotism and temptation” is representative of this tone, according to Robin

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Theobald in his essay,“So What Really Is the Problem about Corruption?” In fact, at that time, “the discussion of corruption . . . had tended to become the preserve of moralists,” according to Theobald (1999). 6. Not every U.S. company complied. According to Fredrik Galtung, in “Transparency International’s Network to Curb Global Corruption” data suggest that American companies did not always follow the anti-bribery law and so they did not completely lose out on these corrupt opportunities. 7. Richard D. White, in his study “Corruption in the United States” (p. 42), calls the Transparency International country rankings “intriguing,” but reminds us that they are not based on a “solid empirical foundation” but instead on ratings from the international business community. Their ratings may misrepresent vast sociocultural differences. “Can the corruption rates of the United States, Denmark, and Nigeria, for example, truly be measured and compared,” he asks, “and if so, is the comparison meaningful?”

Bibliography Armah, Ayi Kwei. 1988. The Beautyful Ones Are Not Yet Born. London: Heineman. Balogun, M. J. 2003.“Causative and Enabling Factors in Public Integrity: A Focus on Leadership, Institutions, and Character Formation.” Public Integrity 5, no. 2 (spring): 127–147. Bayley, David H. 1970. “The Effects of Corruption in a Developing Nation.” In Political Corruption: Readings in Comparative Analysis, ed. Arnold J. Heidenheimer. New York: Holt, Rinehart and Winston. Blechinger, Verena and Halger Moroff. 2002. “Corruption Terms in the World Press: How Languages Differ.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ: Transaction Publishers. Bhagwati, Jagdish. 2000. The Wind of the Hundred Days: How Washington Mismanaged Globalization. Cambridge, MA: MIT Press. Caiden, Gerald E. 2001.“Corruption and Governance.” In Where Corruption Lives, ed. Gerald E. Caiden, O. P. Dwivedi, and Joseph Jabbra. Bloomfield, CT: Kumarian Press. Caiden, Gerald E., and Naomi J. Caiden. 1977.“Administrative Corruption.” Public Administration Review (May/June). Caiden, Gerald E., O. P. Dwivedi, and Joseph Jabbra, ed. 2001. Where Corruption Lives. Bloomfield, CT: Kumarian Press. Dornbusch, Rudi. 2000. Keys to Prosperity: Free Markets, Sound Money, and a Bit of Luck. Cambridge, MA:The MIT Press. Easterly, William. 2001. The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. Cambridge, MA.: MIT Press. Elliott, Kimberly Ann. 2002. “Corruption as an International Policy Problem.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Etzioni-Halevy, Eva. 2002. “Exchanging Material Benefits for Political Support: A Comparative Analysis.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ: Transaction Publishers.

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Friedrich, Carl J. 1950. Constitutional Government and Democracy. Boston, MA: Ginn and Company. ——— 2002. “Corruption Concepts in Historical Perspective.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Galtung, Frederik. 2001.“Transparency international’s network to her global corruption.” In Where Corruption Lives, ed. Gerald E. Caiden, O. P. Dwivedi, and Joseph Jabbra. Bloomfield, CT: Kumarian Press. Gardiner, John A. 2002.“Defining Corruption.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. ——— 1993. “Defining Corruption.” In Coping with Corruption in a Borderless World, ed. Maurice Punch et al. Boston: Kluwer. Goudie, W. Andrew, and David Stasavage. 1997. “Corruption: The Issue.” Organisation for Economic Cooperation and Development (OECD).Technical paper no. 122. Produced as part of the research programme on political economy and development in Africa. Heidenheimer, Arnold J. 2002.“Perspectives on the Perception of Corruption.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Heidenheimer, Arnold J. and Holgor Moroff. 2002. “Controlling Business Payoffs to Foreign Officials: The 1998 OECD Anti-Bribery Convention.” In Political Corruption: Concepts and Contexts. 3rd ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Heidenheimer, Arnold J., Michael Johnston, and Victor LeVine. 1997. Political Corruption: A Handbook. New Brunswick:Transaction Publishers. Hellman, Joel, Geraint Jones, and Daniel Kaufman. 2000.“Seize the State, Seize the Day: An Empirical Analysis of State Capture and Corruption in Transition.” World Bank Paper, April. Available at www.worldbank.org/wbi/governance. Huntington, Samuel P. 2002. “Modernization and Corruption.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Johnston, Michael. 2002.“Measuring the New Corruption Rankings: Implications for Analysis and Reform.” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ: Transaction Publishers. Johnson, Roberta Ann. 2003. Whistleblowing: When It Works—And Why. Boulder, CO: Lynne Rienner Publishers. Klitgaard, R., R. MacLean-Abaroa, and H. L. Parris, Jr. 2000. Corrupt Cities: A Practical Guide to Cure and Prevention. Oakland, CA: ICS Press. Lawson, Kay. 2003. The Human Polity, 5th ed. Boston, MA: Houghton Mifflin Company. Leff, N. 1964. “Economic Development through Bureaucratic Corruption.” Reprinted in 1979. Bureaucratic Corruption in Sub-Saharan Africa:Towards a Search for Causes and Consequences, ed. M. U. Ekpo.Washington: University of America Press. Leventhal, Robert. 2001. Interview by the Author, December 20. (Leventhal is Central and Eastern European Country Director Criminal Law Reform Program, American Bar Association Central and Eastern European Law Initiative [CEELI]).

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Leys, Colin. 2002.“What Is the Problem about Corruption?” In Political Corruption: Concepts and Contexts. 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Lowenstein, Daniel. 1989. “Legal Efforts to Define Political Bribery.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor Levine. New Brunswick, NJ:Transcaction Books. Lynch,Thomas D. and Cynthia E. Lynch. 2003. “Corruption, Reform, and Virtual Ethics.” Public Administration Review 63, no. 3 (May/June): 370–374. Maduna, Penuell. 1999. “Invitation Letter to the 9th Annual International AntiCorruption Conference” (IACC). Durban, South Africa, October 10–15. Mauro, Paolo. 1996. “The Effects of Corruption on Growth, Investment and Government Expenditure.” IMF Working Paper.Washington, D.C.: International Monetary Fund. Mauro, Paolo. 1997. “Why Worry About Corruption?” IMF Working Paper no.6. Accessed from International Monetary Fund web site, September 20, 2000. Available at www.imf.org/external/ pubs/ft/issues6/index.html ———. 2002.“Corruption and the Composition of Government Expenditure.” In Governance; Corruption and Economic Performance, ed. G. T. Abed and S. Gupta. Washington, D.C.: International Monetary Fund. Myint, U. 2000. “Corruption: Causes, Consequences and Cures.” Asia Pacific Development Journal 7, no. 2 (December). Myrdal, Gunnar. 1968. Asian Drama:An Inquiry into the Poverty of Nations, vols. 1–3. New York: Pantheon. Noonan, John T. 1984. Bribes. New York: MacMillan. Nye, Joseph S. 2002. “Corruption and Political Development: A Cost-Benefit Analysis.” In Political Corruption: Concepts and Contexts, 3rd ed. Ed. Arnold J. Heidenheimer and Michael Johnston, New Brunswick, NJ: Transaction Publishers. Peters, John J. and Susan Welch. 2002. “Gradients of Corruption in Perceptions of American Public Life.” In Political Corruption: Concepts and Contexts, 3rd ed. Ed. Arnold J. Heidenheimer and Michael Johnston, New Brunswick, NJ: Transaction Publishers. Philp, Mark. 2002. “Conceptualizing Political Corruption.” In Political Corruption: Concepts and Contexts, 3rd ed. Ed. Arnold J. Heidenheimer and Michael Johnston, New Brunswick, NJ:Transaction Publishers. Rose-Ackerman, S. 1978. Corruption: A Study in Political Economy. New York: Academic Press. ———. 1999. Corruption in Government: Causes Consequences and Reform. New York: Cambridge University. Rosenberg,Tina. 2003.“The Taint of the Greased Palm.” New York Times Magazine, August 10, pp. 28–33. Rotberg, Robert I., ed. 2004. When States Fail: Causes and Consequences. Princeton, NJ: Princeton University Press. Scott, James C. 1970. “Corruption, Machine Politics, and Political Change.” In Political Corruption: Readings in Comparative Analysis, ed.Arnold J. Heidenheimer. New York: Holt, Rinehart and Winston. Shleifer,A. and R.W.Vishny. 1993.“Corruption.” Quarterly Journal of Economics 108, no. 3. Stark, Andrew. 1997. “Beyond Quid Pro Quo: What’s Wrong with Private Gain from Public Office?” American Political Science Review 91, no. 1 (March).

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Tanzi,Victor. 1998. “Corruption around the World: Causes, Consequences, Scope and Cures.” IMF Staff Papers 45, no. 4 (December): 559–594. Theobald, Robin. 1999.“So What Really is the Problem about Corruption?” Third World Quarterly 20, no.3 ( June): 491–502. Tilman, Robert O. 1970. “Black-Market Bureaucracy.” In Political Corruption: Readings in Comparative Analysis, ed. Arnold J. Heidenheimer. New York: Holt, Rinehart and Winston. Transparency Internatonal. 2000. TI Sourcebook 2000. Accessed December 20, 2000. Available at Transparency International web site www.transparency.org/ sourcebook/index.html White, Richard D. Jr. 2001.“Corruption in the United States.” In Where Corruption Lives, ed. Gerald E. Caiden, O. P. Dwivedi, and Joseph Jabbra. Bloomfield, CT: Kumarian Press. Wilson, James Q. 1968. “Corruption Is Not Always Scandalous.” New York Times Magazine, April 28, pp. 54, 55, 57, 59, 62. World Bank. 1994. Governance:The World Bank’s Experience.Washington, D.C.:The World Bank. ———. 2002. World Development Report, 2002: Building Institutions for Markets. New York: Oxford University Press. The World Bank Group. 2000. “The World Fights Corruption.” April, pp. 1–3. Accessed July 24, 2000. Available at the World Bank Group web site www.worldbank.org/html/extdr/pb/pbcorruption.htm Wraith, R. and E. Simpkins. 1963. Corruption in Developing Countries. London:Allen and Unwin.

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The United States: In Search of the Perfect Law Robe rta Ann Johnson

Introduction Carolyn Carpeneti was tall and blonde, a high school dropout with ambition. In 1995, while going through a hotly contested divorce, she met the mayor of a popular medium-sized American city. Although he was still married, she soon became his girlfriend and his fundraiser, and in 2001 they had a child together, a little girl named Sydney. Carpeneti’s close connection with the mayor made her a huge financial success as a fundraiser. It was reported that she was able “to obtain the donations of corporations and high-wealth individuals beholden to . . . [the mayor,] including city commissioners, lobbyists, contractors and developers with business at City Hall” (Williams and Hoge 2003: A1). According to political observers, a “cadre” of “favored lobbyists and developers have prospered” under the Mayor’s reign. And so has Carpeneti, who gets to keep 15 percent of all the money donated to her fund-raising efforts on his behalf (p. A19). In 1999, the mayor gave Carpeneti another formal responsibility—to run the annual “Summit for Women.” Since then, she produced five events, for which she was paid $987,000. Ostensibly, for these summits, she was given a spacious rent-free office in the city-owned civic auditorium. According to public records, however, she has also used this city office for her fundraising.This may violate state laws prohibiting “officials from making unauthorized public expenditures ‘solely for the private benefit’ of an individual or an entity” (p. A18). In this popular American city, not only is there an expectation of a direct relationship between the money you donate to politicians and city contracts you can expect to get (influence peddling?), but there is a

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somewhat irregular, lucrative, and, as we have seen, very public relationship between the city’s mayor and his girlfriend (misappropriation?). Is this a description of New York City’s Tammany Hall in the nineteenth century? No. This describes the city of San Francisco in the twenty-first century and these are among the well-publicized everyday practices of Mayor Willie Brown (Williams and Hoge 2003: A1, A18, A19). San Francisco politics may seem sexier than politics in other American cities, but in many respects, they are not all that different (Banfield and Wilson 1965, White et al. 2001, Steffens 1957, Meier and Schlesinger 2002). Across the country, reports of questionable practices in Washington, D.C. and in other American cities and states appear on the front pages of local morning newspapers every day (Caiden and Caiden 1977: 301). Nevertheless, even with all this eyebrow-raising activity and wrongdoing, Transparency International gives the United States a fairly respectable Corruption Perceptions Score. The United States is rated by TI as sixteenth among nations; certainly not a perfect ranking, but a rating that is close to the top, placing the United States among the least corrupt countries. Why, with so visible an amount of suspicious practices, is the United States considered to be among countries with the least amount of corruption? The answer lies in the careful way corruption is defined in the United States and in the integrity of the American legal approach. This chapter will focus on U.S. corruption in the political, bureaucratic, and economic arenas.

Patterns of Corruption in Politics In the United States, the public tolerates certain questionable behaviors that seem to contain in them quid pro quo (“If I give you something, you’ll do me a favor”) and self-serving elements. But it is also true that in the United States, there are rules and laws prohibiting blatant and serious forms of corruption. These rules and laws specifying and prohibiting corrupt acts are enforced in a neutral way by public institutions, like the courts, Congress, and regulatory agencies. Furthermore, in the United States, the rules and laws as well as public sentiment about corruption continually change.What today may be called unacceptable behavior keeps getting re-examined with new cases and changing mores and keeps getting redefined by the passage of newer laws and revised guidelines. But not all problems of wrongdoing in the United States are addressed. In the United States, violations can go unnoticed and loopholes can continue uncorrected.The media and the public are involved in the process of identifying which violations are most seriously in need of being addressed, punished, and corrected. Examples of well-publicized problem areas include campaign finance reform, and reform of business practices. These will be described more fully later in the chapter.

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Appearances Are Important Sometimes, questionable actions that are actually legal can nevertheless create public outcry because they “look” corrupt.1 A well-publicized example of this cost the chairman and chief executive officer of the New York Stock Exchange (NYSE), Richard Grasso, his job. Grasso had started as a listing clerk with NYSE in 1968 and with only a high school diploma, in 30 years, he was its head. But in August 2003, Richard Grasso’s “salary” as chairman and chief executive officer was set at $139.5 million in deferred pay and retirement benefits. The pay package came from the 27-member board of directors of the NYSE. Grasso broke no laws nor did the board that was setting his pay. However, the remuneration was being set by people from companies he would, as NYSE head, regulate (Morgenson and Landon 2003: A1) because the board was “made up almost entirely of people from . . . brokerage firms and public companies” (Pender 2003: B5). Appearances are important.This exorbitant pay package made front-page news and seemed to shock the public and to outrage state treasurers, public pension fund officials, and members of the stock exchange. Grasso’s story quickly “morphed from success to excess,” according to Newsweek (Sloan 2003: 43). Although he broke no laws, because of the appearance of a questionable arrangement, Grasso was forced to resign a month after his pay package was made public, amid calls for investigation and reform.2 There are many political practices that are now called corrupt that used to be accepted practice. For example, with current conflict of interest laws, famed nineteenth century orator and legislator Daniel Webster would not today be able to be “on retainer from the Bank of the United States and at the same time . . . [be] one of its greatest defenders in the Congress” (Drew 1999: 61). The laws have changed to prohibit that. In fact, American laws and practices defining corruption change with shifts in public sentiment. Public Sentiment According to John Peters and Susan Welch, public opinion can help us understand what is considered politically corrupt in the United States (Peters and Welch 2002). They surveyed state senators in 24 states with a questionnaire describing 10 actions by public officials that might or might not be considered corrupt.When asked if they considered these ten actions corrupt, the participants saw differences in seriousness among them.While in general participants didn’t describe as corrupt some minor forms of influence peddling, nevertheless, over 90 percent of the respondents described four of the ten survey examples as corrupt. Nearly all respondents demonstrated consensus about which were the worst violations.3 The same was true for a survey conducted by Michael Johnston. His respondents also produced a spectrum of “fine gradations of judgment” reflecting “a variety of equivocations, mitigating circumstances, and attributed motives” ( Johnston 2002: 177). When given a list of 20 hypothetical examples

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of rule breaking, some were seen by most as being only “moderately corrupt,” but there was consensus on what comprised serious corruption. Nearly all respondents rated the same five examples as more corrupt than the rest.4 Americans make distinctions about corrupt acts; they can tolerate some but judge others as more serious. For the respondents in both the Peters and Welch, and the Johnston studies, what makes an act seriously corrupt are factors like the size and immediacy of the payoff, the nature of the public office, and motives and circumstances. Thus, Americans believe that some practices are more serious and presumably deserve to be addressed more strictly than others.

Lobbyists and Candidates Not only in the city of San Francisco but all over the United States many political activities look a lot like influence peddling and favoritism. The enormous amount of money spent on elections and in the pursuit of policies creates the conditions for suspect activities, excess, and abuse. The search for money by politicians creates conditions for quid pro quo– looking arrangements. Philip M. Stern refers to these arrangements as a “sophisticated . . . minuet performed by givers and receivers,” and Senator Russell B. Long suggests there’s only a “hairline’s difference between a large campaign contributions and a bribe” (Stern 1988: 146). Critics like Elizabeth Drew blame the “expanding corruption of money” for creating a system of intimacy between lobbyists and politicians (Drew 1999: vii). Drew calls the American system of moneyed influence “corrupt.” However, while money may be tempting us and influencing behavior, technically and legally, if contributions are made in accordance with the rules, America’s political money chase is not considered corrupt. Money is continually (and legally) used to achieve disproportionate influence with politicians and policymakers. Peter Kobrak calls it “cozy politics” (Kobrak 2002: 1) and Thomas and Cynthia Lynch, reviewing Kobrak’s book (Lynch and Lynch 2003: 372) are struck with how similar “U.S. political favoritism” is to the “economic favoritism” of Third World countries. In the United States, money influences the outcome of elections and buys entré for lobbyists. American candidates need a lot of money to succeed and the amount rises with each new election.“It has been estimated that a U.S. senator must raise $10,000 a week on average throughout the entire six year term in order to raise the $3 million or so that it takes to run a competitive Senate campaign in most states” (Patterson 2002: 239). Furthermore, although there are usually legal limits to the amount political action committees (PACs) can contribute, they are generous funders.Their contributions account for about a third of all contributions made to congressional campaigns (Drew 1999). Money buys access (Stewart 2001: 218), fuels the system, but limits participation. In 1999, the Democratic senator from New Jersey explained

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that the high cost of campaigning was the reason he would not run for office again. Senator Frank Lautenberg . . . stepped before reporters gathered in his Newark office and announced that he wouldn’t run for a fourth term. He said,“A powerful factor in my decision was the searing reality that I would have to spend half of every day between now and the next election fund-raising. . . . I would have to ask literally thousands of people for money. I would have had to raise $125,000 a week, or $25,000 every working day.That’s about $3,000 an hour.” (Drew 1999: 265) The exorbitant cost of getting elected is a fact of life in America. The stakes are highest and the cost is greatest for the presidential campaign. Because of early state primaries, the race starts years before the election actually takes place. This forces candidates who want to be viable to have plenty of money to compete in the many early state primary elections.The presidential electoral system is called “front loaded,” and candidates need a lot of money early on (Busch and Mayer 2004: 2). George W. Bush broke records when it came to raising money for his run for the White House. Sixteen months before the 2000 election, “the Bush campaign stunned the political world by announcing that it had already raised $36.3 million in contributions. This figure was almost six times as much as had been raised by the 11 other Republican presidential candidates combined” (Mayer 2001: 26). Although perfectly legal, to critics, the process has been called “the selling of the presidency,” and for some, the practice looks a lot like “influence peddling.” Public funding of American elections does not seem to be an answer unless it is mandatory for all candidates. In 2000, if presidential candidates wanted to accept public funds for their campaigns, they needed to also accept a limit on their campaign spending of $25.6 million. They would be disadvantaged competing with candidates like George W. Bush, who waged a privately financed campaign and could spend as much as he wanted campaigning. Bush raised a record amount of money for his 2000 campaign, “more than $94 million during the primary season” (Corrado 2001: 98) using his own and his father’s fundraising base.“The Bush family Christmas card list alone consisted of 35,000 people, and his father’s network included an estimated 50,000 donors” (p. 99). In fact, Bush had so much money so early that he “clearly established” himself “not just as the front runner in the race, but as the prospective nominee long before a single vote was cast” in the state primaries (p. 100). George W. Bush was even better funded in the 2004 presidential race. With fundraisers, he could collect as much as $20 million in two weeks, nearly matching the total sum raised in three months by nine Democratic candidates! (“Bush Sets Fund-raising” 2003). No wonder a New York Times editorial called Bush’s incumbency “the golden ATM.” Individual donations poured “into an overflowing war chest,” and “donor heavyweights

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talk[ed] of being granted ‘a seat at the table’ ” (“President Bush’s Run” 2003: A28). Money alone does not guarantee a U.S. electoral victory. Billionaires Ross Perot, reform candidate in the 1992 election, and Steve Forbes, Republican hopeful in 2000, used millions of their own dollars and did not succeed. But money can give the edge to an already competitive candidate. The same is true for other elected offices. Money and Officeholders Elections are just the first place where money affects public officials. Once the candidate is in office, interest groups that have contributed to the campaign presume that they now have some access (Patterson 2002: 269). Expectations are built into the contributions. That is why lobbying and funding campaigns have been called the “Siamese twins of American politics” (FFH #10135). As Justin Dart, a businessman and friend of President Ronald Reagan remarked,“talking to politicians ‘is a fine thing but with a little money they hear you better’ ” (Sabato 1985: 122). A hundred years earlier, a Republican senator described what was for him the essence of the Congress-lobbyist relationship. Senator Boies Penrose (R-PA) was being quite candid when he offered this reflection to campaign contributors: “I believe in the division of labor.You send us to Congress; we pass laws under which you make money . . . and out of your profits, you further contribute to our campaign funds to send us back again to pass more laws to enable you to make more money” (“President Bush’s Run” 2003: 3). And there’s no dearth of examples. In the late 1970s, Time magazine wrote about the “swarming lobbyists” and their legislative influence: Tax law reform. Killed. Labor law reform. Dispatched to die in committee. Consumer protection agency. Killed. Hospital cost containment. Gutted. The crude-oil tax in the energy bill. Stalled. “. . . in these five instances, and others like them,” Time magazine reported, “the force that proved decisive in blocking passage . . . arose out of the startling increase in the influence of special interest lobbyists” (“The Swarming Lobbyists” 1978: 14). But it is not just lobbyists who swarm legislators. Stephen S. Smith suggests that many congress members themselves take the initiative and use their positions in committees and as congressional leaders “to extract contributions from PACs. . . . Incumbents strong-arm PACs far more often,” he argues, “than PACs strong-arm incumbents” (Smith 1999: 96). In the late 1980s, a reporter for the Christian Science Monitor provided an example of how lucrative a committee position can be. He began a review

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of Phillip Stern’s The Best Congress Money Can Buy with remarkable descriptions from the book demonstrating why congress members from “safe seats” can, nevertheless, “stuff ” their war chests with large contributions from banking PACs. Rep. Ronnie Flippo has a “safe seat” in Congress. Yet in 1986 this small-town Democrat from Alabama stuffed his war chest with more than $25,000 from big New York banks and banking PACs. . . . Why would bankers in New York lavish such favor on a relatively unknown congressman? . . . Flippo, a member of the tax-writing Ways and Means Committee, had proposed that the panel vote to enlarge a tax loophole the Reagan administration was trying to close. “It would have meant $7.6 billion in tax benefits to the banking industry.” (Kirkwood 1988: 20) Another example of what looks very much like “funds for favorable votes” concerns the National Association of Automobile Dealers. It is especially interesting because the lobbyists’ campaign so clearly overrode the public’s preference, as Thomas E. Patterson describes it: Consider the case of the federal law that required auto dealers to list the known defects of used cars on window stickers. The law was repealed after an extensive lobbying campaign financed by contributions of more than $1 million by the National Association of Automobile Dealers to the reelection campaigns of nearly 200 members of the U.S. House of Representatives. Although an overwhelming majority of the general public surely have favored retention of the law, the car dealers’ view prevailed. (Patterson 2002: 273–274) Is this kind of money influence corrupt? Although it may seem corrupt, legally it is not. In their defense, congress members claim that they are not unduly influenced by campaign contributors. But while evidence does suggest that individual lobbyists often contribute to legislators who are already in their camp “because of an agreement on political issues” (Stewart 2001: 218), PACs tend to contribute in order to get access. Considering these examples of acceptable practice, it is obvious that not everything that looks like “influence peddling” is illegal. The public complains about but tolerates and accepts most American lobbying practices and distinguishes them from out-and-out bribery. The way abuse is addressed is through laws and rules that are supposed to control excesses and provide transparency. For example, campaign finance laws do not stop the flow of money from individuals or from PACs to congress members, but they enable the public to regulate donations and to see who is giving and who is taking. Just how well these laws can curb influence is limited in two ways. First the reforms designed to regulate contributions to politicians are being written

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and voted on by the politicians themselves. Second, the courts can limit implementation of laws if the courts believe provisions are unconstitutional. Reforms and Court Decisions During the 1970s, in the era of Watergate and as a reaction to the huge contributions of unregulated campaign money, Congress passed five federal election campaign reform laws.The new laws imposed limits on contributions, required disclosure, started public funding of presidential elections, and set up the Federal Election Commission as an enforcement agency. Ultimately, the new reforms were able to limit the amount of money individuals and groups contribute to candidates. But because of the Supreme Court’s intervention, they were not able to limit the amount of money candidates spend on their campaigns. The Court struck down this provision in their 1976 landmark decision Buckley v.Valeo (424 U.S. 1). According to the Buckley decision, the Constitution prevented Congress from limiting what candidates could spend on their campaigns.To cap how much candidates were allowed to spend, the Court said, was to restrict candidates’ free expression, guaranteed by the First Amendment. In addition to the Court’s decision, loopholes further limited the laws’ reach. Two major loopholes allowed contributors to get around limits on how much they could give to candidates. Donors could use “soft money” and they could use issue advocacy. Although the 1970s laws successfully limited the amount of money individuals and groups could contribute directly to candidates, those limits did not apply when the contributions were made directly to a political party. There were no limits if you gave to the political party instead of to a candidate.The political party could then spend the money any way it liked . . . including on behalf of candidates.This unregulated money flowing to political parties was called “soft money.” The second loophole in the provisions of the campaign reform measures of the 1970s also allowed groups to avoid the contribution restrictions to candidates. Contributors could spend an unlimited amount of their money on issue advocacy where their issue ads clearly would benefit or hurt particular candidates (and it worked like a contribution to a candidate).The laws did not restrict that kind of spending, either. During the 1980s and 1990s, the cost of running for office continued to skyrocket. Candidates spent as much as they wanted and donors made full use of the legal loopholes.The American public was described as “growing increasingly cynical” (Sandalow 2002: A19). There was public pressure building for reform. A bipartisan bill, the McCain-Feingold campaign finance reform legislation, struggled through Congress in 2001 and then emerged and was signed by President George W. Bush in March 2002. It sought to close the major loopholes of the prior reforms. Some saw the measure as a way of restoring faith in the system; others believed it would create its own “monsters” (Sandalow 2002: A19).

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The 2002 campaign finance reform “was seven years in the making” (Coile 2002b: A1). The law addressed the prior laws’ loopholes. It prohibited candidates from raising soft money and prohibited political parties from using “soft money” on behalf of federal candidates. It also capped campaign donations to state and local parties and prohibited issue ads on behalf of federal candidates when they would have the most impact— within 60 days of the general election or 30 days of the primary. In April 2003, a federal district court panel struck down as unconstitutional both the Campaign Reform Law’s ban on “soft money” and the limit on contributions to state parties.The court did, however, preserve the law’s prohibitions on “issue ads.” It was a 2-1 decision and one of the majority judges echoed the Buckley decision’s reliance on the First Amendment. Once again equating speech with spending, he “derided the law” for breaking faith with the founding generation’s “fundamental principle” that “debate on public issues should be uninhibited, robust and wide open” (Coile 2003a: A1). The case was appealed directly to the U.S. Supreme Court and in September 2003, they met in special session to decide the constitutionality of the campaign reforms.Would they use Buckley? Was the new law unconstitutional, as the lower court argued, because it restricted the expenditure of money and therefore limited free expression? The Court would decide the campaign rules. The U.S. Supreme Court Justices interrupted their vacations to hear the case before their regular fall court term even started. The campaign rules would have to be made clear for the presidential candidates (and their supporters) in the upcoming 2004 presidential race. Defending the law’s constitutionality, during this special Supreme Court session, Theodore Olson, U.S. solicitor general, argued about how important it was for Congress to be able to set limits on campaign contributions. “For a century,” he said, “with the overwhelming support of the public, Congress has struggled to curb the corrupting influence of corporate, union, and large unregulated contributors in federal elections” (Brown 2003). But even if the Campaign Reform Law’s provisions were left intact, they were likely to be circumvented with legal loopholes.“Like throwing a large boulder in the gushing stream,” a newspaper reporter commented, “most experts agree that the reforms will alter the flow of money into political campaigns.There is great dispute, however, about whether the obstacles will stem the flow of money, or merely divert it in new directions” (Sandalow 2002: A19). On December 10, 2003, the U.S. Supreme Court announced its decision. It was close. With only a 5-4 margin, they upheld all the major provisions of the 2002 Campaign Finance Reform Bill. The court majority rejected the free speech challenges that they had upheld in the past and recognized “that money can buy influence and corrupt democracy” (Egelko and Epstein 2003: A1).

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Their decision plugged the soft-money loophole and upheld the ban related to campaign ads but also “acknowledged that the battle against the multi-headed forms of checkbook politics had been waged for many years and that . . . [their] ruling fell far short of an airtight bulwark against influencebuying” (p.A19). In fact, groups supporting the political parties had already started “bundling” individual contributions made in 2003 to be used the next year.This was a way of getting around the law’s $5,000-per-candidate limit on PAC contributions. The groups had already found and were using a loophole. Recognizing the likelihood that this would happen, the Court’s majority opinion opined, “Money, like water, always finds an outlet. . . . What problems will arise, and how Congress will respond, are concerns for another day” (p. A19). Americans like to fix things. James Bowman has pointed out how our scandals led to renewed interest in ethics and reform (Bowman 1990: 345). As we have seen in the area of campaign reform, political abuses produce laws that try to curb them. U.S. solicitor general Olson described this pattern. Arguing in defense of campaign reform, he quoted what the Court had itself observed: “The history of campaign finance reform has been a cycle of legislation, followed by the invention and exploitation of loopholes, followed by more legislation” (Greenberg 2003). This is the American pattern—concern and scandal followed by new laws. Each cycle of laws and reforms tries to accomplish two things. First, they outlaw specific abusive practices; second, they redraw the ever-moving line that separates what is considered corrupt from what is allowable. The following California example illustrates how complex the rules are, how ingenious the law’s circumvention can be, and how likely it is that the disputes will wind up in the courts. The California Recall Election In the fall of 2003, a somewhat obscure California law enabled California voters to initiate a recall election of California Governor Gray Davis. The ballot measure included a vote on the recall and a vote on a possible replacement.The election would test a new state campaign finance law that limited contributions to candidates to $21,200 per donor. Hollywood film star and candidate Arnold Schwarzenegger received the most money and won the election to replace Governor Davis. He was “the single largest donor of the race, giving his own campaign $10 million in ‘donations and loans.’ And, in addition, he accepted approximately $9.2 million in cash contributions from special interests. The three largest donor groups to his campaign were real estate development and construction, financial services, and transportation/equipment sales” (Berthelsen 2003c: A13). All the major candidates in the recall election found ways to get around the state law’s spending limits.While the law capped donations to a candidate, there were no limits on donations to ballot measure committees. All major candidates used ballot measure committees to get around the

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$21,200 donor limits. One critic commented on California’s failure at campaign finance reform as a “vivid illustration” of the law’s “ineffectiveness.” “It perpetuates the unfortunate pattern,” he said, “in which the only way to get elected governor is to be independently wealthy or willing to become beholden to special interest campaign contributors” (p. A13). Candidates collectively received $80 million in contributions in a campaign that took only 75 days. Although candidate Schwarzenegger contributed and received the most money in the campaign, the biggest controversy swirled around another candidate, Lt. Governor Cruz Bustamante. Cruz Bustamante was the serious Democratic candidate in the recall election. With a month of campaigning left to go, electoral rivals blasted him for accepting campaign contributions of $2 million from the Viejas Band of Kumeyay Indians.Accusing him of accepting money for favors, the donations from that tribe, and other tribes, they said,“put him in the pocket of the Indian casinos” (Coile and Feist 2003: A1). The presumption made by his critics was that, as a result of the contributions, if he were elected, Indians would benefit from favorable decisions on state tax policy and the expansion of Indian casinos. It looked to many like it was an exchange with the tribes of “favors for money” and in fact it was labeled “legalized bribery” by one candidate and described as “on the shady side of the law” by another (“Race to the Recall” 2003). Bustamante, in his defense, explained that he had a 20-year relationship with the tribes that had started when the tribes were impoverished. More importantly, he pointed out that he was campaigning against other candidates who were millionaires while he himself had risen from poverty and did not have the enormous amount of money needed to personally fund his campaign (“Race to the Recall” 2003). What was startling was that the large amount of money, well beyond 2003 campaign limits, was perfectly legal because of a loophole in the California Campaign Finance Law. The 2003 state campaign reform limited contributions to $21,200. But Bustamante put the tribal donations, which by the end of September totaled $3.8 million, into his 2002 campaign fund, which was established before the election law went into effect.5 After public disclosure of the loophole, there were calls to change the rules.The day after California Lt. Gov. Cruz Bustamante was criticized during a televised debate for accepting these campaign contributions, the state’s Fair Political Practices Commission was being pressured to close the loophole that allowed candidates to circumvent finance law restrictions. The morning newspaper’s story headline read,“State Is Urged to Shut Loophole in Campaign Law: Tribe’s Donation to Bustamante at Issue” (Simon and Coile 2003: A10). But the Commission did not act; the courts did. With the threat of losing the tribal money, Bustamante transferred the 3.8 million to a ballot measure committee established to oppose the controversial Proposition 54, to be voted on on the same recall and election ballot. Bustamante began using the money to produce and air campaign ads that featured him opposing Proposition 54.6 Although he had moved the

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political contribution out of his personal campaign funds, State Senator Ross Johnson (R-Irvine) sued Bustamante for violating campaign finance laws. While a county superior court judge considered the case, “[t]hree Southern California Indian tribes” announced plans “to spend nearly $3 million on television ads in the recall campaign” to support not only Democrat Bustamante but Republican candidate State Senator Tom McClintock (p. A10). The policy interest of the Indians became more apparent. Bustamante and McClintock were both running against the well-funded lead Republican candidate, Arnold Schwarzenegger. Schwarzenegger’s supporters, it was alleged, included Las Vegas gambling interests opposed to the growth of tribal casinos, and he was on record questioning some of the tribal arrangements. It was in the tribes’ interest to prevent Schwarzenegger from becoming Governor. The Indian tribes could legally pay for campaign ads (advocacy ads) on behalf of candidates. It was another campaign law loophole; it was considered an independent expenditure and not a direct contribution to the candidates. Meanwhile in the courts, on September 23, Sacramento Judge Loren McMaster ordered Bustamante to stop using his 2002 campaign accounts to get around the 2003 campaign contribution limits. He ordered Bustamante to return the unspent money—but Bustamante claimed he had already spent the $3.8 million on ads and airtime (Berthelsen 2003b: A12). A few days later, the judge ordered Bustamante to cancel those TV ads not yet aired (Berthelsen 2003b: A18) but because of the law’s loopholes, the judge could not stop the California tribes from continuing to underwrite, to the tune of millions, their own campaign ads on behalf of candidates Bustamante and McClintock (Coile 2003b: A18). This state example is used to illustrate how in the United States the struggle to curb undue influence becomes a fight over technical rules and legal maneuvers. Laws and loopholes and court decisions make the process of addressing corruption “a work in progress.” No matter how well-intentioned the laws are in the area of campaign practices, they do not and cannot address every possible abuse and foresee and prevent every possible loophole. This is also true when it comes to officeholders. There remain a wide variety of activities related to officeholders that raise eyebrows and suspicion and seem seedy, although they are not technically illegal.

Awarding Military Contracts Corruption is an exception when it comes to U.S. government contracting (Fesler and Kettl 1996: 306). Nevertheless, there is a pattern emerging in which government employees steer business to familiar firms. Experts call it the “new patronage” (p. 306).

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The no-bid contract awarded to the Houston-based company Halliburton by the U.S. Army Corps of Engineers is a case in point. Because of cutbacks in the military following the end of the cold war, the U.S. federal government contracts to outsource support operations overseas. In 1992, while Dick Cheney was secretary of defense, the Pentagon commissioned a subsidiary of Halliburton to study and help design privatization of military support responsibilities.When Cheney left the Defense Department, he became CEO of Halliburton (Nelson 2003). In August 2003, Cheney, no longer at Halliburton, was vice president of the United States, and Halliburton was the biggest single government private contractor in postwar Iraq. Halliburton had contracts for reconstruction work, oilfield rehabilitation work, the operation of U.S. base camps, logistical support for intelligence officers, mail delivery, and the production of hot meals.The “classified” no-bid contracts, worth more than $1.7 billion, were all the more suspicious because of the Cheney-Halliburton connection. The provocative connection and the lucrative Halliburton contracts made their way onto the popular David Letterman nighttime TV show, where the host quipped,“President Bush is asking Congress for $80 billion to help rebuild Iraq. . . . And when you make out that check, remember there are two L’s in Halliburton” (Faler 2003: A15). Even though it looked like influence peddling, it violated no laws. Critics cried foul and cartoonists had a heyday, but no contracts were cancelled (Dobbs 2003: A16, “Halliburton’s Iraq Contract” 2003: A8). Provoking comment, but somewhat less controversial, was the military contract awarded to URS. California Senator Dianne Feinstein’s husband, Richard Blum, is director of URS and is a member of its board of directors, and he controls 24 percent of its stock. In April 2003, this company was awarded an army contract worth hundreds of millions of dollars “to help with troop mobilization, weapons systems training and anti-terrorism efforts” in Iraq. San Francisco Chronicle reporters said that this contract was “the latest in a string of plum defense jobs snared by URS” (Baker 2003: A3).While critics decry “the political connections of firms winning lucrative jobs,” this five-year contract was also perfectly legal (p. A3). “The opportunities for misbehavior have increased tremendously as governments have gone to contracting out as a way to save money.” A federal attorney reflected,“You make more money rigging bids then robbing banks — more than you could dealing drugs” (qtd. in Fesler and Kettl 1996: 306). The line that separates what is and is not acceptable behavior is not always clear, either to the public or to the participants. The case of the “Keating 5” represents public officials who did, in the judgement of their colleagues and peers, cross the line by providing too much service to their constituents and receiving too many perks.7 But they themselves did not think they crossed the line. During the early 1980s, the banking industry was deregulated in a way that allowed savings and loan associations (“S&Ls,” also called “thrifts”) to invest in commercial as well as residential real estate. The Federal Home

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Loan Bank Board regulated the thrift industry and began to uncover risky loan practices. In 1989, as the California Lincoln Savings and Loan Bank collapsed, it was investigated for faulty banking practices by the Federal Home Loan Bank Board. When the House Banking Committee investigated the bank’s collapse, they learned that Charles Keating, chairman of Lincoln S&L’s parent company, had provided (directly and indirectly) campaign contributions of over $1 million to five senators. The senators, in turn, were involved, to varying degrees, in inappropriate advocacy on behalf of the bank. In fact, the chair of the Federal Home Loan Bank Board said he had been approached by a number of senators to stop his government investigation of Lincoln Savings and Loan. What is interesting about this case is not that the Senate Ethics Committee, in 1991, recommended to the full Senate that one of the senators be censured for reprehensible conduct and the other four senators be cited for questionable conduct.What is interesting is that none of the senators thought they had crossed the line into corrupt behavior. Senator Alan Cranston, who received the strongest “rebuke,” “insisted that he had done nothing which the vast majority of other senators had not done on previous occasions, and that his activity was nothing more than the normal process of politics in which campaign support is traded for a willingness to help contributors with their problems” (Philp 2002: 43, Lewis 1998: 17). The relationship between public servant and interest group and the separation between public and private interest becomes even murkier when you consider career paths. Becoming one of the more than 12,000 registered lobbyists in Washington, D.C. represents a lucrative career move. But when public servants become lobbyists, the line between the two worlds becomes more porous.The popular career pattern has a name—“revolving door.” Approximately 15 percent of Senate and House aides left Congress to become lobbyists themselves from 1991 to 1996. Many sought access to what Charles Lewis calls “money committees,” such as the Commerce Committees in the House and Senate, whose decisions hold the promise of potentially lucrative rewards (Drew 1999: 64). These former aides are just following politically established, perfectly legal practice. Not just legislative aides but many well-known public servants have followed the same path. Consider that a Washington law firm has used Bob Dole, Lloyd Bentsen, and Ann Richards to lobby on behalf of Latin American enterprise “to drum up business.”“So a former presidential candidate, a former vice presidential candidate, and a former governor became, without apparent embarrassment, hustlers exploiting a new target of opportunity” (Drew 1999: 64). Lobbying:The Movie It was only a matter of time before lobbyists would become American movie stars. K Street, a television program about “power brokers, lobbyists, and consultants who shape Beltway politics” premiered on American

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television in September 2003. (K Street in Washington, D.C., is where large numbers of consultants and lobbyists have offices.) The line between real and fiction was purposely blurred by the show’s creators. Actors portraying advisers of a fictional public relations firm actually interact with real (unscripted) politicians, including former Governor Howard Dean and Senators John McCain, Hillary Rodham Clinton, and Orrin Hatch. The idea for the show was hatched by Michael Deaver former aide to President Ronald Reagan. Deaver himself was interested in appearing in some episodes. “Poised on the border between fiction and documentary,” there was no script, even for the actors. Each show revolved around the week’s politically “hot subjects.” Watching the maneuvers of the lobbyists and the consultants, the audience is invited to see, and presumably admire, the players as the actors improvise and the politicians play themselves.The public will see “how influence gets peddled, who gets rich off of it and how ideology and public service is affected by this process” (Hart 2003: D1, D6).The fact that lobbyists and “influence peddlers” are idealized in a Hollywood made-forTV series reflects how much they are an integral and accepted part of the American political system. Bureaucratic Corruption In general, government bureaucracy is thought to be part of the political process. The relationships between public agencies, interest groups, and elected officials have been described by political scientists as ingredients for “Iron Triangles” (Lowi and Ginsberg 1998: 321–323) and “issue networks” (Heclo 1978). As Peters points out, “the artificial dichotomy between politics and administration has been eroded in both the scholarly and the popular literature” (Peters 1989: 4). Although in the United States, bureaucracy does have its unique features, operating in an “entrepreneurial setting” that makes the bureaucratic culture more pragmatic than that of most Western democracies (pp. 41–43, Wilson 1989: 306–307), still, like in other Western bureaucracies, U.S. civil servants in government administration usually seem quite separate from the more partisan political arena.This is because the bureaucratic organization is a somewhat self-contained institution, and, at least theoretically, government bureaucracy is a rational and rule-applying system. Currently in the United States,“most observers do not see corruption of the professional public service as endemic or widespread” (White et al. 2001: 43).This is true even though, for a significant period of time, a spoils system operated the American bureaucracy and newly elected officials filled nearly all government posts with their own people. Inspired by President Andrew Jackson’s idea of rotation in office, “to the victor went the spoils” (Barton and Chappell 1985: 94). Jackson’s idea was that those who worked in the public service could be replaced by each new president. But Jackson did not implement the

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plan; the patronage system was not adopted until a decade later (Schuman and Olufs 1988: 145). Widespread use of patronage on all levels “resulted in . . . significant corruption.” Because “tenure of office would be short,” some appointees were able to “enrich themselves” and get out before they were found out. There are many examples from this period, including the collector of the Port of New York, who “enriched himself ” to the tune of $1 million! (Barton and Chappell 1985: 194). Political party machines in the cities also used patronage, offering jobs to their supporters. They “lost no time organizing the new armies of voters” (Schuman and Olufs 1988: 145). In the process, the political machines helped the poor by offering them philanthropy as well as patronage jobs and, as Plunkitt of New York’s Tammany Hall said, “the poor are the most grateful people in the world” (Riordan 1963).The jobs the party machine was able to control and use as rewards were basic service jobs (Schuman and Olufs 1988: 149). The spoils system has been called patrimonial or personalistic rule (Wilson 1989: 309, 310). With each new election or new political machine, new cronies, relatives, and supporters would be selected to fill the ranks of government officeholders. “During the Civil War,” for example, “at least one relative of each Lincoln cabinet member was on the federal payroll” (White et al. 2001: 40).8 This did not go on forever. On the national level, the Pendleton Act of 1883 set in motion significant changes in America’s federal government bureaucracy. The act was passed because the spoils system “had gotten out of hand” and resulted in the assassination of the president (Schuman and Olufs 1988: 147). Charles Guiteau, a supporter of James Garfield for president, did not get the patronage job he expected. As a result, he shot and killed President Garfield. The Pendleton Act began the process of creating a merit-based bureaucracy. Over a period of time, it produced a civil service system of permanent employees hired for their skill not their connections. Originally, it only covered ten percent of federal employees but “by 1908 almost twothirds of those in the federal service were under a merit system. More than 90 percent are covered now” (Schuman and Olufs 1988: 148, 149, Barton and Chappell 1985: 95). Although the Pendleton Act was passed at a time when graft, payroll padding, and other corrupt city practices were well known, “City governments were the first to follow the federal example” of merit hiring (Barton and Chappell 1985: 95). Albany, New York, in 1884, was the first American city to adopt a merit system. By the mid-1980s, 84 percent of American cities had adopted merit systems and 95 percent of municipal employees were covered by it. Currently, on the state level all U.S. states have at least partial merit systems in place (Barton and Chappell 1985: 96).Thus, over time, the bureaucracy of the United States “has taken steps to reduce personal and patrimonial rule in favor of impersonal and rationalistic standards” (Wilson 1989: 312). Along with the Pendleton Act, there were other forces contributing to reform. The idea of a neutral and efficient bureaucracy was attractive to a

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growing middle class who supported reform and were not tempted by the low-paying patronage jobs (Schuman and Olufs 1988: 149); it was supported by the industrialization of the late nineteenth century, which needed efficient government services; and the idea of a neutral and efficient bureaucracy was championed by the Progressive movement, which took aim at dismantling political machines (Hofstadter 1955: 257). The Progressives preached civic responsibility as opposed to self-interest.“Their ultimate aim was the transfer of power to a professional administrative elite” (Cooper 1991: 107). The adoption of a merit system has by no means kept American bureaucracy corruption free. Over the years, many U.S. government agencies large and small have been rocked with scandals. In 1987, for example,“New York City had a scandal of such a magnitude regarding the purchase of handheld computers to write parking tickets that Donald Manes, a former borough President of Queens, committed suicide rather than face charges.” About the same time, New York state municipal officers accepted 105 out of 106 offers of bribes in an FBI sting operation;“the 106[th] was rejected as too small” (DeLeon 1993: 3, 4). Corruption is more likely to occur in local and state bureaucracy than at the federal level. The local level is where people live, where most services are delivered, and where there is most opportunity. “Corruption in state and local contracts has a rich history” (Fesler and Kettl 1996: 306), and state and local government is where the legacy of political party machines may still exert a small but lingering effect. Still, when you look at the big picture, the American bureaucracy is relatively free from corrupt practices. U.S. bureaucracies provide services smoothly and predictably. Passports, driver’s licenses, fishing permits get issued, and Social Security checks and tax returns get sent, without bribes. That is what Americans expect and get every day. Economic Corruption All around the world, in every country, the goal of business is not to serve the public; it is to make money.9 When that drive for profit produces corrupt behavior and erupts in major scandals, it can have a demoralizing effect. That seems to happen periodically in the United States. For example, after an eruption of scandals in the 1970s, James Bowman wrote of a “new skepticism,” the deepening of “suspicions of large organizations,” and “a widespread and profound loss of confidence in societal institutions” (Bowman 1976: 48). He could have written the same words during the business excesses of the nineteenth-century’s “Gilded Age,” during the “roaring ’20s,” or after early twenty-first-century revelations and indictments of corporate “accounting errors” and fraudulent activities at WorldCom, Qwest, Tyco, Adelphia Communications, ImClone, and Global Crossing. The twenty-first century’s series of revelations and scandals started with one of the world’s largest electricity and natural gas traders, the Enron

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Corporation. But “Enron,” said one commentator,“dwarfs the momentous insider infamies of the Gilded Age and the Jazz Age.” It is “the Big Kahuna, the tsunami of modern corruption scandals” (Wilentz 2002: 1). In 2000, Enron’s reported revenues made it the seventh largest company in America.The natural gas pipeline company was able to “exploit deregulating markets for energy, water, weather derivatives, broadband capacity and anything else that could be turned into a commodity.” The strategy “spawned explosive growth” until 2001, when the technology bubble burst (Morse and Bower 2002: 55). Enron’s financial statements seemed unaffected until November 2001, when they suddenly announced a thirdquarter loss of $618 million. This prompted a Securities and Exchange Commission (SEC) investigation and an admission by Enron that it had been overstating earnings by nearly $600 million since 1997. Many investigations exposed Enron’s fraudulent accounting methods— method’s signed off on by Arthur Andersen, Enron’s auditor. Basically, Enron created “byzantine dealings” (Eichenwald 2002b: A1), complicated off-balance sheet partnerships and arrangements with artificial companies, called special purpose entities (SPEs), that masked financial losses and funneled huge personal gains to select Enron executives.The reality had been hidden by fraudulent bookkeeping. The SEC also investigated Enron’s auditor, Arthur Andersen. In the two years that followed, as Enron imploded, its investors lost $6 billion. In December 2001, Enron filed for chapter 11 bankruptcy protection and announced the layoff of 4,000 employees. Bankruptcy caused a $1 billion loss in pension and retirement funds. It was a financial catastrophe.The FBI investigated and Congress held hearings and “Enron went bankrupt without ever reporting a poor quarter relative to recurring earnings,” according to former Enron vice president Sherron Watkins (Watkins 2003: 10). The exposé rocked the business world as the fallout expanded. Predictions were that eventually, there would be at least 25 indictments related to Enron, including jail time for some (p. 16). Long before these more current corporate scandals began with the revelations concerning Enron and Arthur Andersen, many American businesses were guilty of similar misrepresentations, what Howard Schilit calls “financial shenanigans,” record-keeping tricks that boosted net income and misrepresented company finances (Schilit 1993, Cassidy 2002). “[A]ctions or omissions intended to hide or distort the real financial performance or financial condition of an entity” (Schilit 1993: 1) are examples of corrupt practice. In the early 1990s, one expert suggested the reasons why American businesses have been corrupt in this way: “(1) it pays to do it, (2) it’s easy to do, and (3) it’s unlikely you’ll get caught” (p. 3).10 But some do get caught, and their financial shenanigans become scandals. The American response to the corporate scandals and corporate failures of the past had been to pass laws that addressed the problems and strengthened regulations. For example, after the stock market crash of 1929, followed by a staggering economic depression, the United States put in place a series

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of reforms. Arguably the most important of these was the establishment, in 1934, of the Securities and Exchange Commission.The SEC’s responsibilities would address the fraudulent behavior that contributed to the stock market crash (Schilit 1993). It could regulate exchanges, brokers, and overthe-counter markets. The SEC could also oversee company financial disclosures and fraudulent stock manipulations. The formal response to the corporate scandal that began in the fall of 2001 was predictably the same—to investigate and punish and to pass new and stronger laws. In 2001 and 2002, the exposure of corporate wrongdoing had the feel of an ongoing confessional—with one company after another admitting misrepresentations and questionable behavior. The impact was powerful. The corrupt practices of dozens of companies had ruined more than their own reputations. Because of the numbers of companies involved, they damaged the public’s confidence in corporate America. The stock market fell precipitously. Less than a year after the Enron revelations, Congress passed a new corporate fraud and accounting bill, the Sarbanes-Oxley Act (H.R. 3763).The bill increased penalties and prison terms for fraud and document shredding, improved the transparency of financial reporting, increased Securities and Exchange Commission resources, strengthened the independence of auditing firms, protected the independence of securities analysts, and created a new oversight board, the Public Company Accounting Oversight Board, to enhance professional standards, ethics, and confidence. Lawmakers realized that serious, not just symbolic action would be the only thing that could help reduce corrupt practices and build public confidence in publicly traded companies. Enron the Movie It is so typically American that the experience and lessons of Enron would be turned into a Hollywood film. Ex-Enron employee and casualty of the economic bubble burst Brian Cruver wrote a book, Anatomy of Greed, about his Enron experiences. Although he spent less than a year with Enron, Cruver used his nonfiction book pitch to find an agent and had a book contract within two weeks (Hart 2003: D10).“Even before the book was published, story rights were snapped up by TV producers” (p. 10). Individual Responsibility When it comes to addressing corruption, Sean Wilenz makes a persuasive case that laws and regulations are the answer. Corrupt business practices are allowed to happen, he believes, because strong and clear regulations are not in place to curb, detect, and punish the behavior. He blames deregulation (lack of strong laws and regulations) for the Savings and Loan debacle of

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the late 1980s and for the more recent avalanche of scandals, starting with Enron and Andersen. Clearly, harsh enforcement of strong regulations can help change American corporate behavior. When senior executives of WorldCom and Adelphia Communications were “paraded before the cameras in handcuffs . . . they sent a salutory message to other senior executives: public companies are social organizations with social responsibilities” (Cassidy 2002: 77). But it is not just laws and courts that are expected to be the anticorruption tools for reforming U.S. business practice. Americans have always encouraged and often expected insiders to speak up. In 2002, for the first time, as part of the Sarbanes-Oxley legislation, Congress passed a provision protecting private-sector employees who are whistleblowers. Section 806 called for the “protection for employees of publicly traded companies who provide evidence of fraud.” Congress was interested in encouraging and protecting whistleblowers in publicly traded companies. Their actions addressed the fact that no other Enron insider besides Sherron Watkins openly questioned Enron’s fraudulent behavior. Before the corporate scandals became public, the silence was deafening. Watkins herself reflected on the absence of criticism from inside Enron. She also noted an absence of criticism from the outside accountants, the outside lawyers, and the Wall Street analysts, and from credit rating agencies and traditional bankers who kept lending Enron money. This pattern changed. The public exposure of unscrupulous corporate practices at Enron and Arthur Andersen and the financial damage and public judgments that followed seemed to inspire large numbers of whistleblowers to call company hotlines and to e-mail the Securities and Exchange Commission reporting questionable business practices at other publicly traded companies (Fairbanks 2002, Chaddock 2002, Mayer and Joyce 2002). Sarbanes-Oxley sought to further encourage this kind of individual responsibility by protecting whistleblowers. And Congress also protects whistleblowers when they come to them with insider information ( Johnson 2003: 11). After all, whistleblowers make star witnesses in congressional investigations. The Senate Finance Committee, chaired by Senator Charles Grassley (R-IA), offers a good illustration.The committee held a public hearing in October 2003 on the widespread abuse of tax shelters. Whisteblowers provided damning insider information. The exposed tax shelter schemes included arrangements in which major companies bought city subway systems and foreign air traffic control systems and then leased them back to the cities for large tax benefits.“A report by the General Accounting Office released at the hearing, said that as of Sept. 30 abusive tax shelters had cost the government $85 billion” ( Johnston 2003: C7). Company whistleblowers, as well as whistleblowers from the accounting firms involved in these schemes, provided Congress with compelling details in their testimony (pp. C1, C7).

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Whistleblowing Americans blow the whistle on waste, fraud, and abuse more than anywhere else in the world. At least seven factors help explain this phenomenon: (1) the changing government bureaucracy; (2) laws encouraging whistleblowing; (3) laws protecting whistleblowers; (4) news media and organizational support; (5) institutional checks and balances; (6) cultural values; and more recently, (7) “September 11” ( Johnson 2003: 5–20). First, the nature of U.S. bureaucracy, what it does and who it employs, can stimulate whistleblowing. Bureaucracy is large and often involved in complex decisions in whole new jurisdictional arenas (Wakefield 1976). This can create ambiguity and differences in judgment. Further, bureaucracy is involved in areas that affect the public’s daily life and well being. The safety of water and food, nuclear power, automobile standards, and airline travel and other high-stake areas make the consequences of bureaucratic decisions very important. Add to high stakes and ambiguity the fact that bureaucracies in all sectors employ an increasing number of well-educated professionals who are guided by professional standards. Professionals may be less prone to compromise on questionable practices and are more likely to be whistleblowers (Parmerlee et al. 1982, Frome 1978, Elliston et al. 1985,Westman 1991), especially when the decisions relate to public health and safety. An essential second factor is that United States laws actually encourage whistleblowing. Codes of ethics, federal law, even an executive order ( Johnson 2003: 6) all require federal public employees to disclose “waste, fraud, and abuse” to appropriate authorities. Hotlines in all federal agencies were set up decades ago to encourage whistleblowing. Furthermore, many businesses have hotlines for reporting wrongdoing, and the SEC invites e-mail disclosures.These avenues for reporting are well used. The majority of American whistleblowers are in the public sector, and the Department of Defense (DoD) gets the most whistleblower calls of any public agency.11 During a six-month period of time, for example, beginning October 2001, the DoD received 9,472 calls made to its hotline and 12,733 total contacts reporting department and department contractor wrongdoing (Department of Defense Hotline 2002). In addition, the False Claims Act encourages whistleblowers to come forward by promising them 15 to 20 percent of the money they save the government if their claims prove true in court (Helmer, Lugbill, and Neff 1999, Westman 1991, Johnson 2003). Large false claims settlements in the defense area have been overshadowed in recent years by even larger settlements in the health sector—for example, reports of Medicare fraud. The third reason why there are so many U.S. whistleblowers is that there are so many laws protecting them, despite how imperfectly they work (Devine and Ruch 1993, Government Accountability Project 1992, Johnson 2002). Many federal laws relating to public health and safety contain provisions protecting whistleblowers in the private as well as the

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public sector ( Johnson 2003: 97–99). The Federal Whistleblower Protection Act, revised in 1989 and 1994 ( Johnson 2003: 100–106), offers protection from retaliation and has been used by thousands of federal employees. By 2003, all 50 U.S. states had passed laws protecting whistleblowers (Callahan and Dworkin 2000,Vaughn 1999,Westman 1991). And, as already described, the Sarbanes-Oxley Act promises protection against retaliation to whistleblowers in publicly traded companies. Fourth, news media and nonprofit organizations support whistleblowers. Newspapers, magazines, and television news tell their stories, establish their credibility, and stimulate public interest. Hundreds of informal organizations support, fund, and “help make the whistleblower feel less isolated and more empowered” ( Johnson 2003: 12). Professional organizations, agency distinct organizations, and specialized organizations offer whistleblowers financial, psychological, legal, and social support (pp. 12–14). The fifth reason for the high number of U.S. whistleblowers is “checks and balances.” Most countries do not have the divided power arrangement of the United States. The U.S. legislative branch competes with and rivals the executive branch (on the state level as well). Whistleblowers help the legislature to exercise their oversight responsibilities because whistleblowers can provide them with insider information about the agencies they fund and monitor. Legislators personally act to protect whistleblowers who are their witnesses in hearings. No surprise that Congress usually unanimously passes legislation protecting whistleblowers against retaliation (pp. 10–12). Sixth, U.S. cultural values support whistleblowing. Strong belief in individualism connects with the highly individualistic undertaking of blowing the whistle. Public cynicism and skepticism about government has also made Americans more sympathetic and receptive to whistleblower exposés (pp. 14–17). And there is a final, more current reason why Americans support whistleblowing—September 11. After the September 11, 2001 attack, the American public has become more concerned with the safety of U.S. borders, airplanes, public arenas, nuclear power sites, and the country’s food supply. There has been a significant increase in the number of whistleblowers coming forward because of homeland security concerns (Morrison 2001).They have been dubbed “patriotic whistleblowers.” The following demonstrates American public acceptance and admiration for individuals who publicly oppose corrupt practices. It is also an illustration of the importance of the media in encouraging whistleblowers by celebrating them as heroes. Whistleblowers as “Persons of the Year” At the end of each December, Time magazine names a “Person of the Year.” The honor has gone to peacemakers, presidents, and popes, but in December 2002, Time named three whistleblowers. The faces of Cynthia Cooper of WorldCom, Coleen Rowley of the FBI, and Sherron Watkins of Enron were on Time’s cover and at newsstands all across America.

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Time’s reason for choosing three whistleblowers was simply stated. The women had taken “huge professional and personal risks to blow the whistle on what went wrong at WorldCom, the FBI and Enron—and in so doing helped remind Americans what courage and values are all about” (“Persons of the Year” 2002: 5). Cooper, Rowley, and Watkins were, according to Time magazine reporters Richard Lacayo and Amanda Ripley, “three women of ordinary demeanor but exceptional guts” (Lacayo and Ripley 2002: 30). The historic context was of course, a big factor in Time magazine’s decision. U.S. confidence had been shaken. First, after September 11, 2001, Americans were fearful and feeling insecure in an unsafe world filled with security breaches and terrorists.And second, starting with Enron in fall 2001, Americans were also reeling from the shock brought on by the seemingly endless exposés of corrupt business practices and greedy business leaders, plummeting stocks and lost jobs and pensions. As Time described it, two dark moods entered the room . . . after September 11 . . . we all struggled to regain something like the more secure world we lived in before the Towers fell. And all the while there was the black comedy of corporate fraud. . . . Enron and WorldCom turned out to be Twin Towers of false promises. They fell. Their stockholders and employees went down with them. So did a large measure of public faith. (p. 32) For the editors of Time, what restored America’s faith were three whistleblowers. “These women,” they said, “were . . . what New York City firefighters were in 2001 . . . they were people who did right just by doing their jobs rightly” (p. 32). Whistleblowers were honored. But the exposure and publicizing of wrongdoing by insiders is only one way corrupt practices become part of the public’s agenda to be confronted and corrected.The general pattern, as we have seen in the political as well as in the business arena, has been to use laws and rules and different kinds of enforcement agencies whose job it is to monitor, police, and punish those who break the law. Summary and Conclusion The term “whistleblower” was first penned in the United States in the 1960s, and through the decades that followed, whistleblowing was encouraged and whistleblowers were protected with ethics codes and antiretaliation laws.Whistleblowers have become an important American ingredient and an anticorruption weapon. They have publicized fraud and waste in public agencies and private companies. They have warned of serious public threats and have saved taxpayers billions of dollars. They are the heroes of news stories and films. And yet, they are not America’s first line of defense against corruption, nor should they be ( Jos 1991). The United States depends on laws and their enforcement to define and correct corrupt practice.

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Americans tolerate some questionable practices but condemn and try to outlaw and punish those that are considered egregious. Public sentiment on just what is serious corruption keeps shifting, and new pronouncements, new laws, and new court decisions continually redefine the line separating what’s legally considered wrong from what’s not. The reputation of American bureaucracy is that it is not seriously corrupt, and daily, millions of agency decisions and actions are taken without fanfare and in accordance with rules and regulations. Further, law enforcing institutions like the court system are generally seen as neutral.This contributes to a confidence that serious corruption is rare and could be corrected. In the United States the battle to stop corruption is fought with laws and in courts. In the battle, the question is not what is in the corporate heart or in the lobbyist’s briefcase.The question is what rules or laws have been bent or broken.12 After scandals and exposure of serious corrupt practices, new laws are sometimes passed. It’s not the intent of the law but the terms of the law that are expected to be followed. When these laws are found to be inadequate to the task and it is well known that their loopholes have been taken advantage of, new sets of laws may be passed to close the loopholes.This is illustrated in this chapter by each new campaign finance reform bill. All the campaign reforms purportedly tried to even the playing field by setting limits on the influence of donors and lobbyists. But each new law, while closing some known abuses, produced unforeseen consequences.They produced new loopholes with whole new sets of problems and inequities. For example, campaign finance reform in the 1970s prohibited donors and lobbyists from contributing unlimited amounts of money to candidates but left them free to give all the campaign contributions they wanted directly to political parties (this is called “soft money”). And they did. Political parties, in turn, spent the money on the candidates—thus defeating the whole purpose of the reform. A new campaign finance reform law to address these, and other, problems was passed in 2002. As we have seen, however, it created a new set of abuses and inequities, as well. In the future, these problems will probably be addressed with still more laws. The post-Enron period is a great illustration of how serious corruption, exposed in a scandal with wide fallout, produces new laws. Before Enron, there were some laws available defining and outlawing corrupt business practices but they were not adequately enforced. Scandal and economic catastrophe prompted stronger standards and a new law (Sarbanes-Oxley). It also stimulated better SEC enforcement, promised serious punishment, and it created the Public Company Accounting Oversight Board, which had its own oversight responsibilities for monitoring and policing. Also contributing to the reform impulse are shifts in public sentiment driven by the media, the public’s sense of justice, new rules, and new court decisions. Plaguing it all are wonderful inconsistencies. Some behaviors that are perfectly legal, like a high salary for the head of the NYSE, suddenly may

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be seen as tainted and tantamount to corrupt. Others that look suspiciously corrupt are considered perfectly legal, like the Halliburton Iraq contracts and the huge war chest raised by President Bush from “special interests” for his 2004 reelection campaign. Occasionally, the public gets involved, but most of the time, the technical rules of what is corrupt are fought over in cases argued by lawyers. Meanwhile, the American public continues to expect their votes to count, the fire department to respond to emergencies, and the mail to come on time. Notes 1. Mark Philp, in “Conceptualizing Political Corruption” (2002), boldly states that just because an act is technically legal “does not always mean that it is not corrupt.” 2. While you might feel sympathy for someone forced to resign for doing something that was not illegal, Kathleen Pender reported in the San Francisco Chronicle, September 25, 2003, that, although deprived of his job, Richard Grasso managed to negotiate a termination package that entitled him to $57.7 million in severance pay, in addition to the $139.5 million “salary package” he had received. 3. The following are Peters and Welch’s (2002) ten actions that might or might not be considered corrupt. The four acts considered corrupt by over 90 percent of their respondents were numbers 3 (TRAVEL), 6 (DRIVEWAY), 7 (LAND SALE), and 9 (RIGHT WAY). 1. A presidential candidate who promises an ambassadorship in exchange for campaign contributions (AMBASSADOR). 2. A Member of congress using seniority to obtain a weapon contract for a firm in his or her district (WEAPONS). 3. A public official using public funds for personal travel (TRAVEL). 4. A secretary of defense who owns $50,000 in stock in a company with which the Defense Department has a million-dollar contract (DEFENSE STOCK). 5. A public official using influence to get a friend or relative admitted to law school (LAW SCHOOL). 6. The driveway of the mayor’s home being paved by the city crew (DRIVEWAY). 7. A state assembly member while chairperson of the public roads committee authorizing the purchase of land she had recently acquired (LAND SALE). 8. A judge with $50,000 worth of stock in a corporation hearing a case concerning that firm ( JUDGE). 9. A legislator accepting a large campaign contribution in return for voting “the right way” on a legislative bill (RIGHT WAY). 10. A member of congress who holds a large amount of stock (about $50,000 worth) in Standard Oil of New Jersey working to maintain the oil depletion allowance (OIL).

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4. The first 5 items on Michael Johnston’s (2002) list of 20 actions were seen by his respondents as examples of the most serious corruption: They were: Treasurer embezzles $10,000 Official keeps 5 percent cut for self Treasurer embezzles $500 Official takes 5 percent cut, gives to party Higher supermarket prices on welfare days

The other items were: Official falsely claims management degree Driver offers cop $20 Officer asks driver for $20 Official takes 5 percent, pays child’s hospital bills Purchasing agent accepts gifts Councilman gives city job to political supporter Long-distance calls on office phone Person bounces a check Councilman gives city job to son Concealing remodeling from tax assessor Bouncing check to buy kids’ clothes Employee calls in sick, goes to game Offer trash collectors $20 Babysitter asks for cash Free food for cops

5. What Cruz Bustamante did was to transfer money in his 2002 lieutenant governor reelection campaign committee to his 2003 campaign for governor campaign coffers. He thus was able to avoid the campaign limits imposed by law and newly in effect in 2003, according to Mark Simon and Zachary Coile, writing for the San Francisco Chronicle.“ ‘I could do the same thing,’ state Sen. Tom McClintock said to Bustamante during Wednesday’s televised debate among replacement candidates for governor. . . .‘Our people believe it’s illegal. If it’s not illegal, it’s certainly on the shady side of the law’ ” (2003). 6. Appearances are important, especially during a campaign. Cruz Bustamante was so “pummeled in the press by his opponents” for accepting “the six- and seven-figure donations” that he pledged to use the money on ads to defeat Proposition 54, “a controversial racial privacy initiative also on the . . . ballot,” rather than on his own election campaign, according to reporter Mark Martin in the San Francisco Chronicle, 7 September 2003, pp. A1, A20. 7. The U.S. Senators who were called “the Keating 5” were Alan Cranston ((D-CA); Dennis DeConcini (D-AZ); John Glenn (D-OH); John McCain (R-AZ); and Donald Riegle (D-MI). The Senate Ethics Committee found that Senators Glenn and McCain were not extensively involved but that the others had interfered. Only Senator Cranston was censured by the Senate. 8. It appears that Abraham Lincoln was an unenthusiastic participant in the spoil system, according to Rayburn Barton and William Chappell in Public Administration: The Work of Government (1985). When Lincoln was sick with

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smallpox, he instructed an aide to “tell all the office seekers to come in at once for now I have something I can give to all of them.” Adam Smith, in The Wealth of Nations (1776), is often quoted in support of this idea. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, it from their regard for their own interests. We address ourselves not to their humanity, but to their self love, and never talked to them of our necessities, but of their advantage.” Howard M. Schilit, in chapter 13 of Financial Shenanigans (1993), makes an effective case that American business has been involved in gross financial wrongdoing throughout the twentieth century. In fact, he says that such wrongdoing contributed to the great stock market crash of 1929. In the Department of Defense semi-annual report to Congress, March 31, 2002, their inspector general’s office reported on the number of “senior official cases,” that is, whistleblower allegations, that were formally investigated. In 1999, it reported that 401 cases were opened; in 2000, 455 cases were opened; in 2001, 488 cases were opened; and in the first half of 2002, 230 cases were opened for formal investigation. The reliance on technicalities was exquisitely demonstrated by the U.S. Pentagon in November 2003. According to Stephen Labaton (2003) the Pentagon’s finding was that Richard Perle, who headed the Defense Policy Board Advisory Committee, an important White House advisory board to President George W. Bush, did not violate conflict of interest rules even though Perle simultaneously was a lobbyist on behalf of two private companies. According to the Pentagon’s inspector general, there would have been a conflict of interest violation if Perle had served in government for more than 60 days a year. But they calculated that he only served for eight.Their findings were contained in a report that had been requested by a member of Congress.

Bibliography Baker, David R. 2003. “Army Contract for Feinstein’s Husband.” San Francisco Chronicle. 4 April, A3. Banfield, Edward C. and James Q. Wilson. 1965. City Politics. Cambridge, MA: Harvard University Press. Barton, Rayburn and William L. Chappell. 1985. Public Administration:The Work of Government. Glenview, IL: Scott, Foresman and Company. Berthelsen, Christian. 2003a. “Bustamante Told Not to Use Loophole.” San Francisco Chronicle. 23 September, A1. ———. 2003b. “Judge Orders Bustamante to Cancel TV Ads.” San Francisco Chronicle. 27 September, A18. ———. 2003c. “$80 Million in Contributions in 75-day Recall Campaign.” San Francisco Chronicle. 11 October, A1, A13. “Billionaires for Bush.” 2003. Editorial. The Nation 277, no. 13 (21/28 July): 3. Bowman, James S. 1976.“Managerial Ethics in Business and Government.” Business Horizons. October: 48–54. ———. 1990. “Ethics in Government: A National Survey of Public Administrators.” Public Administration Review (May/June): 345–366.

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Busch, Andrew E. and William G. Mayer. 2004. “The Front-Loading Problem.” In The Making of the Presidential Candidates, ed. William G. Mayer. New York: Rowman & Littlefield Publishers. “Bush Sets Fund-raising Juggernaut in Motion.” 2003. New York Times, San Francisco Chronicle. 15 June: A2. Caiden, Gerald E and Naomi J. Caiden. 1977. “Administrative Corruption.” Public Administrative Corruption (May/June). Callahan, Elletta Sangrey and Terry Morehead Dworkin. 2000.“The State of State Whistleblower Protection.” American Business Law Journal 38 (fall): 99–175. Cassidy, John. 2002. “The Greed Cycle.” The New Yorker. 23 September. Chaddock, Gary Russell. 2002.“Enron Changes Climate for Whistle-blowers.” The Christian Science Monitor. 1 March, 3. Chiang, Harriet. 2002. “Female Whistlebowers Play by Outsider Rules.” San Francisco Chronicle. 17 June, A1, A17. Coile, Zachary. 2002a. “U.S. Issues Blistering Andersen Indictment.” San Francisco Chronicle. 15 March, A1, A15. ———. 2002b. “Soft-money Ban in Bush’s Hands.” San Francisco Chronicle. 21 March, A1, A15. ———. 2003a.“Court Kills Ban on ‘Soft Money’.” San Francisco Chronicle. 3 April, A1, A16. ———. 2003b. “Tribes add Millions to McClintock, Bustamante.” San Francisco Chronicle. 27 September, A18. Coile, Zachary and Paul Feist. 2003.“Tribe Plans $2 Million Campaign Donation.” San Francisco Chronicle. 3 September, A1, A9. Cooper,Terry L. 1991. An Ethic of Citizenship for Public Administration. Upper Saddle River, NJ: Prentice Hall. Corrado, Antony. 2001.“Financing the 2000 Election.” In The Election of 2000, ed. Gerald M. Pomper. New York: Chatham House Publishers. DeLeon, Peter. 1993. Thinking about Political Corruption.Armonk, NY: M.E. Sharpe. Department of Defense Hotline. 2002. Telephone Number for Department of Defense Hotline: 703–604–8545, 24 October. Hotline can also be accessed at 1-800-424-9098 or [email protected]. Department of Defense Inspector General. 2001–2002. Semiannual Report to the Congress. October 1, 2001–March 31, 2002. Devine, Thomas, and Jeff Ruch. 1993. Government Accountability Project Testimony Before the House Committee on Post Office and Civil Service Subcommittee on Civil Service on Oversight of the Whistleblowers Protection Act. 31 March. Dobbs, Michael. 2003. “Halliburton’s Iraq Contract Exceeds $1.7 Billion.” San Francisco Chronicle. 28 August, A16. Drew, Elizabeth. 1999. The Corruption of American Politics:What Went Wrong and Why. Secaucus, NJ: Carol Publishing Group. Egelko, Bob and Edward Epstein. 2003.“High Court Upholds Limit on Campaign Financing.” San Francisco Chronicle. 11 December, A1, A19 Eichenwald, Kurt. 2002a. “Enron Report Savages Officers.” New York Times in San Francisco Chronicle. 3 February, A1, A19. ———. 2002b.“Ex-Enron Executive Admits to Kickbacks.” New York Times in San Francisco Chronicle. 22 August, A1, A12. Elliston, Frederick, John Kennan, Paula Lockehart, and Jan van Schaick. 1985. Whistleblowing Research: Methodological and Moral Issues. New York: Praeger.

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Fairbanks, Katie. 2002. “Enron Sets Nation to Whistleblowing.” Dallas Morning News. 27 February. Faler, Brian. 2003. “Letterman’s Halliburton Joke in Ad Bashing Bush.” San Francisco Chronicle. 20 September, 15. Fesler, James W. and Donald F. Kettl. 1996. The Politics of the Administrative Process. Chatham, NJ: Chattam House Publishers. FFH #10135. “The Unelected:The Lobbies.” Films for the Humanities and Sciences. Box 2053, Princeton, NJ 08543-2053. Frome, Michael. 1978. “Blowing the Whistle on Waste,” Center Magazine (November–December): 50–58. Government Accountability Project. 1992. Whistleblower Protection: Determining Whether Reprisal Occurred Remains Difficult. Report to Chairman, Subcommittee on the Civil Service, Committee on Post Office and Civil Service, House of Representatives. October. Greenberg Jan Crawford. 2003. Public television Interview. Jim Lehrer NewsHour: 8 September. “Halliburton’s Iraq Contract Bigger Than First Reported.” 2003. Associated Press. San Francisco Chronicle. 7 May, A8. Hart, Hugh. 2003.“Road to Washington Is Paved with Lobbyists in ‘K Street.’ ” San Francisco Chronicle. 13 September, D1, D6. Hays, Kristen. 2003. “Enron Whistle-blower Rethinks: Watkins Says Telling Board of Directors Might Have Had an Effect.” San Francisco Chronicle. 25 March, C1, C5. Heclo, Hugh. 1978.“Issue Networks and the Executive Establishment.” In The New Political System, ed. Anthony King. Washington, D.C.: American Enterprise Institute for Public Policy Research, pp. 87–124. Helmer, James B., Jr., Ann Lugbill, and Robert Clark Neff, Jr. 1999. False Claims Act:Whistleblower Litigation. Charlottesville,VA: Lexus Law Publishing. Hofstadter, Richard. 1955. The Age of Reform. New York:Vintage Books. Ivins, Molly. 2002. “Just Bidness.” San Francisco Chronicle. 6 November, A33. Johnson, Roberta Ann. 2003. Whistleblowing: When It Works—and Why. Boulder, CO: Lynne Rienner Publishers. Johnston, David Cay. 2003. “Wide Range of Tax Shelters Draws Senate Inquiry.” New York Times. 22 October, C1, C7. Johnston, Michael. 2002. “Right and Wrong in American Politics: Popular Conceptions of Corruption.” In Political Corruption: Concepts and Contexts, 3rd. ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ: Transaction Publishers. Jos, Philip H. 1991. “The Nature and Limits of the Whistleblower’s Contribution to Administrative Responsibility.” American Review of Public Administration, 21, no. 2 ( June). Kirkwood, Cort R. 1988. “Congressmen,War Chests and the Influence of PACs.” The Christian Science Monitor. 28 September, 20. Klein, Alec. 2002. “WorldCom Deals With AOL Focus of Investigation.” San Francisco Chronicle. 22 August, B4. Kobrak, Peter. 2002. Cozy Politics: Political Parties, Campaign Finance, and Compromised Governance. Boulder CO: Lynne Rienner. Labaton, Stephen. 2003.“Pentagon Finds No Ethics Breach by Key Advisor.” New York Times. In San Francisco Chronicle. 15 November, A5.

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Lacayo, Richard and Amanda Ripley. 2002. “Persons of the Year.” Time (30 December/6 January): 32–33. Landon, Thomas, Jr. 2003. “Former CEO of Citicorp to Head NYSE.” New York Times. In San Francisco Chronicle. 22 September, A3. Lewis, Charles and the Center for Public Integrity. 1998. The Buying of the Congress. New York:Avon Books. Lochhead, Carolyn. 2002.“Enron Fiasco Warms Bush to Regulation.” San Francisco Chronicle. 20 January, A18. Lowi,Theodore J. and Benjamin Ginsberg. 1998. American Government: Freedom and Power. New York:W.W. Norton and Company. Lynch,Thomas D. and Cynthia E. Lynch. 2003. “Corruption, Reform, and Virtual Ethics.” Public Administration Review 63, no. 3 (May/June): 370–374. Maney, Kevin, Andrew Backover, and Paul Davidson. 2002. “Prosecutors Target WorldCom’s Ex-CEO.” USA Today. 29 August, 1B. Martin, Mark. 2003. “Under Fire, Bustamante Will Part with Funds. Campaign to Give $3.8 million to Fight Prop 54.” San Francisco Chronicle. 7 September, A1, A 20. Martin, Mark and Christian Berthelsen. 2002. “Enron Lawyers Laid ‘Road Map’ for Prosecutors.” San Francisco Chronicle. 1 December, A1, A21. Mayer, Caroline E. and Amy Joyce. 2002. “Blowing the Whistle.” Washington Post. 29 April, H4, H6, H7. Mayer,William G. 2001. “The Presidential Nominations.” In The Election of 2000, ed. Gerald M. Pomper. New York: Chatham House Publishers. Meier, Kenneth J. and Thomas J. Schlesinger. 2002. “Variations in Corruption among the American States.” In Political Corruption: Concepts and Contexts, 3rd. ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ: Transaction Publishers. Morgenson, Gretchen and Thomas Landon Jr. 2003.“NYSE Chief Grasso Resigns Overplay.” New York Times. In San Francisco Chronicle. 18 September, A1, A5. Morrison, Blake. 2001.“Whistle-Blowing on Rise,” USA Today. 24–25 December, p. 1. Morse, Jodie and Amanda Bower. 2002. “The Party Crasher.” Time (30 December/6 January): 53–56. Nelson,Trevon. 2003. “All in the Family.” 60 Minutes. 21 September. Parmerlee, M.A., J. P. Near, and T. C. Jensen. 1982.“Correlates of Whistle-Blowers’ Perception of Organizational Retaliation.” Administrative Science Quarterly 27 (March): 17–34. Patterson,Thomas E. 2002. We the People: A Concise Introduction to American Politics, 4th ed. New York: McGraw-Hill. Pender, Kathleen. 2003. “Treasurers Call for NYSE Reform.” San Francisco Chronicle. 25 September, B1, B5. “Persons of the Year.” 2002. Time, 30 December/6 January: 5. Peters, Guy B. 1989. The Politics of Bureaucracy. New York: Longman. Peters, John G. and Susan Welch. 2002.“Gradients of Corruption in Perception of American Public Life.” In Political Corruption: Concepts and Contexts, 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ: Transaction Publishers. Philp, Mark. 2002. “Conceptualizing Political Corruption.” In Political Corruption: Concepts and Contexts, 3rd. ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers.

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Pincus, Walter and Christopher Lee. 2003. “Top Rumsfeld Adviser Resigns in Ethics Flap.” San Francisco Chronicle. 28 March, A1, A11. Pomper, Gerald M. 2001. The Election of 2000. New York: Chatham House Publishers. “President Bush’s Run for the Money.” 2003. Editorial. New York Times. 16 October, A28. “Race to the Recall.” 2003. Televised political debate with major gubernatorial candidates, KTUV-TV: 3 September. Riordan, William L. 1963. Plunkett of Tammany Hall: A Series of Very Plain Talks on Practical Politics. Dutton: New York. Romero, Simon and Alex Berenson. 2002. “WorldCom Admits Huge Fraud in its Accounting.” San Francisco Chronicle. 26 June, A1, A16. Sabato, Larry J. 1985. PAC Power: Inside the World of Political Action Commitees. New York: Norton and Company. Said, Carolyn. 2002. “Bush Can’t Sign Fraud bell Fast Enough.” San Francisco Chronicle. 31 July, A1, A23. Sandalow, Marc. 2002. “Surprises Lurking in Finance Overhaul.” San Francisco Chronicle. 20 March, A1, A19. Schilit, Howard M. 1993. Financial Shenanigans. New York: McGraw Hill. Schuman, David and Dick W. Olufs. 1988. Public Administration in the United States. Lesington, MA: DC Health and Company. Simon, Mark and Zachary Coile. 2003. “State Is Urged to Shut Loophole in Campaign Law.” San Francisco Chronicle. 4 September, A10. Sloan,Allan. 2003.“Here’s the Real Grasso Scandal.” Newsweek (29 September): 43. Smith,Adam. 1776. The Wealth of Nations (Complete title: An Inquiry into the Nature and Causes of the Wealth of Nations). London and Edinburgh: F.R.S. Available at the Adam Smith website www.adamsith.org/smith/won-intro.html. Smith, Steven S. 1999. The American Congress. New York: Houghton Mifflin Company. Steffens, Lincoln. 1957. The Shame of the Cities. New York: Hill and Wang. Stern, Christopher. 2002. “WorldCom Off by another $3.8 Billion.” San Francisco Chronicle. 9 August, A1, A23. Stern, Philip. 1988. The Best Congress Money Can Buy. New York: Pantheon Books. Stewart III, Charles. 2001. Analyzing Congress. New York: W.W. Norton and Company. “The Swarming Lobbyists.” 1978. Time (7 August): 14–18, 21, 22. Tsai, Catherine. 2002. “Qwest Reports $1.14 Billion 2nd—quarter Loss.” San Francisco Chronicle. 9 August, B3. Wakefield, Susan. 1976. “Ethics and Public Service: A Case of Individual Responsibility.” Public Administration Review 36 (November–December): 661–666. Wallack, Todd and David R. Baker. 2002. “Bush Promises Investigation of WorldCom.” San Francisco Chronicle. 27 June, A1, A10. Watkins, Sherron S. 2003. “Ethical Conflicts at Enron: Moral Responsibility in Corporate Capitalism.” California Management Review 45, no. 4: 6–19. Westman, Daniel P. 1991. Whistleblowing: The Law of Retaliatory Discharge. Washington, D.C.: Bureau of National Affairs. White, Richard D. Jr., Gerald E. Caiden, O. P. Dwivedi, and Joseph Jabbra, eds. 2001. “Corruption in the United States.” In Where Corruption Lives,

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ed. Gerald E. Caiden, O. P. Dwivedi, and Joseph Jabbra. Bloomfield, CT: Kumarian Press. Wildermuth, John, Carla Marinucci, and Mark Simon. 2003. “Burlingame Visit Draws 600 Paying at Least $2,000 for a Fast Lunch.” San Francisco Chronicle. 28 June, A1. Wilentz, Sean. 2002.“A Scandal for Our Time.” The American Prospect 13 no. 4 (25 February). Available at http://prospect.org/print/v13/4/witenz-s.html, accessed September 18, 2002. Williams, Lance and Patrick Hoge. 2003. “Mayor’s Fund-raiser Got Millions.” San Francisco Chronicle. 13 October, A1, A18, A19. Wilson, James Q. 1989. Bureaucracy:What Government Agencies Do and Why They Do It. New York: Basic Books. Vaughn, Robert G. 1999. “State of Whistleblower Statutes and the Future of Whistleblower Protection.” Administrative Law Review 51, no. 2 (spring): 581–625. Zuckerman, Sam. 2002. “Business’ Bad Apples Taint Economy’s Core.” San Francisco Chronicle. 30 June, A4.

CHAPTER

3

White Corruption in Israel Chaim Kalchheim

Introduction Toward the end of the summer 2003, the following story appeared in a popular Israeli weekly. Inspired by a taxi ride, the article was written by Eran Bar-Tal, a reporter who simply exposed a common “illegal” practice. He wrote: I entered the taxi and with great courage I made a terrible request from the driver’s point of view—“Put on the taximeter.” “Why do you need it,” he asked,“there is heavy traffic now and you won’t gain anything from it.” Although I knew from experience that he was not concerned with my benefit I said sheepishly: O.K. He smiled quite pleased and began rushing towards the destination. “By the way, it’s 90 Shekels,” he said. All along the ride he kept moaning how hard it is to make a living in Israel and how his brother is making nice money in New York selling clothes.We arrived.As usual, I asked for a receipt.Without hesitation he pulled out three old receipts and gave them to me saying, you have here more than 100 Shekels. “I don’t want them,” I said,“give me a real receipt for this trip.” “Darling, the ink in the machine is used up” he stated. “Give me a handwritten receipt,” I retorted. Realizing that he can’t continue with his smart aleck tactics he pressed a button and lo and behold a real receipt popped up. Later on I realized that his hatred of the taximeter does not stem “only” from his will to charge a higher price but from the “strategy” of tax evasion. (Bar-Tal 2003) The reporter’s story continues with his demonstrating through calculations that by falsely reporting a lower fare, the taxi driver saved on his income, Social Security, and health taxes (called V.A.T.). What is more, he

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went on to argue that what the taxi driver did was a common form of tax evasion and is practiced in other Israeli professions. “How many more professionals act like the taxi driver? 10 percent of them? 50 percent or 70 percent?” he asked. Maybe all? Is there one righteous man in Sodom? Obviously there are professionals who render services to other businesses that need the receipts for their tax exemptions. But plumbers, electricians, lawyers and others who serve “private customers,” how many of them pay the full income tax? Logically the number of those who register all their income is a drop in the ocean.What could possibly motivate a person who has to pay 1,000 shekels for repairing his busted water pipeline to pay an additional 180 shekels V.A.T? At the same time, what is the plumber’s motivation to collect those 180 shekels and debit himself with income tax and social security payments? “There is nothing new in this description. It is no secret that tax evasion in Israel is one of the highest in the world,” his article concludes (Bar-Tal 2003: 16). Even so, as we shall see in the following chapter, although this sort of tax cheating as well as other forms of cheating may be rampant, Israel is reputed to have a low level of corruption. Corruption in Israel Students of corruption are aware of the difficulty in defining and studying it in a comparative way. In the first place, the word “corruption,” in English as well as in other languages, has many different meanings (Heidenheimer 1970: 3). Samuel Huntington views political corruption as “behavior of public officials which deviates from accepted norms in order to serve private ends.” He observes that “corruption obviously exists in all societies, but it is also obviously more common in some societies than in others and more common at some times in the evolution of a society than at other times” (Huntington 1989: 377). The problem is that Huntington’s seemingly precise definition and observation often suffer from limitations in operational terms.This may not be true in the case of outright bribery, which can be defined succinctly and is often used as a model for illustrating corruption. But the transactions in many other corrupt acts may be too vague and complicated to be easily labeled corrupt (Heidenheimer 1989a: 149). Other definitions that encompass forms of corruption beyond bribery also may not provide the necessary framework for a clear definition (Nye’s included in Heidenheimer 1989b: 573–574 and note 1; Friedrich 1989: 15). Indeed, Colin Leys describes how futile it is to compare attitudes toward corruption in developing countries to the kind of public morality found in a more developed country, like Britain.We are dealing here with different social systems and historic experiences (Leys 1970: 52–53).

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Similarly, Heidenheimer claims that “any discussion of political corruption is by nature deeply grounded in values and much of the problem of potential analysis has consisted of disentangling the value systems manifested and expounded by the actors, intermediaries, monitors and observers of the actions deemed corrupt” (Heidenheimer 1989b: 573). Kenneth Gibbons even predicts that “agreement as to a reasonable definition of political corruption seems, at best, a distant and improbable goal” (Gibbons 1989: 165). Consequently some may even doubt whether there is ground for conducting effective comparative studies of corruption over time and across political cultures (Gibbons 1989: 165, Friedrich 1989: 21, Leys 1970: 59, Scott 1989). Even later studies, at the end of the 1990s, have not produced sharper tools to deal with these issues (see: Rose-Ackerman 1999, Meny and Rohdes 1997: 95, Bicchieri and Duffi 1997: 477, Heywood 1997: 422, Philp 1997: 441).1 This, of course, creates great challenges for this book and this chapter. Transparency International, described in chapter 1, was founded in 1993 as a global movement against corruption. They publish the Corruption Perceptions Index (CPI), an annual index of countries ranked according to their perceived level of corruption (Eigen 2002). According to the 2002 CPI, of the 102 countries surveyed—more than half of the world’s nations—Israel ranks 18, in the upper quarter of the least corrupt countries (Transparency International 2002b).This high rank seems inconsistent with our “taxi example” but is consistent with an Israeli history of opposing unjust and corrupt leaders. Disobedience to corrupt kings and rulers has a long tradition in Jewish history. Beginning in ancient Israel and continuing through the two millennia of life in the Diaspora and through the post-nineteenth-century restoration of the Israeli homeland, individuals and groups have defied unjust or corrupt rulers and leaders (Elazar 1989: 21–31, Encyclopaedia Judaica 1971: 1171–1173).Thus, it was natural even in the 1950s, when the fledgling state of Israel was struggling for survival, that Shurat Hamitnadvim (the volunteers rank)—a nonpolitical civil organization—saw its mission in exposing corruption. One of the best-known cases was against the deputy inspector-general of police,Amos Ben Gurion (son of the prime minister), who had to resign from his post (Rolef 1989: 270). Business Corruption Two aspects of Israel’s economy are relevant to the subject of business corruption—the depth of government involvement in Israeli economic life and the involvement of political institutions in economic activities (Aharoni 1991: 24).These involvements blur in many cases the dividing line between business and political corruption. In fact, most of the corrupt activities in Israel are political, or indirectly political, while very few are about “ordinary” business corruption. When a public figure directs illicit money to finance political activities, it is clearly an act of political corruption. But even when he or she funnels it to their own pocket, the corruption would likely be labeled “political” because of their political position or

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because, as it often happens, they prefer to justify the act as political rather than criminal. Questionable business arrangements get characterized as political.There have been various economic scandals that resemble the following model: An investor or entrepreneur receives legally favorable terms (state loans, grants, rights, etc.) against promises of accomplishments, like new jobs or increased exports. When these promised benefits are not accomplished, and the enterprise has caused great losses of government funds, the investor, nevertheless, has reaped great personal profits. Not always is such an arrangement defined as corruption. In fact, in such a case the relevant government department involved in the matter is most likely blamed not for being corrupt but for being negligent, although not without suspicion of having an illicit interest connected to the deal. Business corruption occurs in Israel at a lower scale than political corruption. During a four-decade period, starting in the 1960s, very few episodes of business corruption captured Israeli headlines for any sustained length of time. In the 1960s three of Israel’s smaller banks were closed down by the Bank of Israel (the equivalent of the Federal Reserve Bank in the United States) due to mismanagement or business corruption by their owners. As a result, a 1969 law was enacted to give the Bank of Israel more authority in preventing irresponsible financial behavior (Wallach, Lissak, and Shamir 1980: 100). In the 1970s another bank was closed down and its manager was sentenced to 12 years in jail for the disappearance of $47 million. In 1975 a known business personality was sentenced to serve 15 years in prison for embezzling $18 million. The former was a Likud Party supporter and the latter a former senior government official and close associate of Labor leaders, but neither of them was a political activist. In the 1980s the public was shocked to learn about the exorbitant compensations and pension payments granted to the chairman of the board of Leumi Bank, who had to resign following recommendations of a state inquiry commission (the Beisky Commission) with regards to the bank’s shares crisis of October 1983. His pension and compensation were reduced after it had been revealed that in fact he determined his own financial settlement with the bank. In 1990 Brigadier General Rami Dotan, involved in business as chief procurement officer of Israel’s Air Force, was sentenced to 13 years in prison and was demoted to the rank of private for taking bribes from American supply companies. By far the largest example of business corruption took place in 2002. A senior Commerce Bank official admitted to the police, in April 2002, that for more than five years she had siphoned more than $50 million from deposit accounts in order to help her brother, a compulsive gambler. On July 1, 2003 she received a heavy sentence of 17 years and a fine of $1.2 million (Izenberg 2003: 4). The description above does not cover smaller thefts in commercial companies. It covers the most significant examples of business corruption that

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have captured the public attention during the four decades since the 1960s. In all of these cases, the law enforcement authorities and the courts did what was expected of them and the guilty were punished. Political Corruption The experience and international reputation of Israel is not one of gross corruption and abuse of public office. However, as will be discussed later, there seems to be a general acceptance of certain irregularities or behaviors concerning political and administrative arrangements connecting resources and public appointments.When this sort of irregular practice goes too far, it becomes a scandal that is condemned, addressed, and rectified. For decades, Israel’s dominant political party used patronage and policy to maintain power and influence. There is no question that until 1977, during the time that the Labor Party was in power, “the net of the elites” was formed by the interrelationship between government, the Histadrut (The General Federation of Trade Unions), a large section of the economic enterprises, and most of the local authorities. In all of these four arenas the Labor Party was the dominant player.This net operated through subsidies, tax exemptions, and other extraordinary benefits in the welfare sphere (health services, housing, etc.) as well as in the economic bodies (financial institutions and industries) both of which were to a large extent within the domain of the Histadrut and the Labor Party. In exchange, the heads of these organizations, who owed their appointments to their political affiliation, made sure that their organization supported the Labor Party, which included financial contribution. The mutual transactions are often in the gray area that can be defined as “legal but with bad odor” (Etzioni-Halevy 1997: 111–112, 123–128). Political appointments are still a familiar feature in Israel’s administrative culture, although when compared to the 1950s the phenomenon has been reduced (Aharoni 1991: 215).The Israeli history shows that company managers were obliged to employ workers because of partisan reasons but it is difficult to assess the magnitude of the phenomenon. Often these accusations of corruption came from sources tainted with political or other interests. The 1977 election victory of Likud to the Knesset ended the threedecades-long rule of the Labor Party in Israel (not counting two more decades of the Labor Party being at the helm in the pre-state period during the British Mandate of Palestine).There were many causes for this shattering fall. Some of the factors were cumulative and related to shortcomings in party leadership and responsiveness. However, two traumatic events—the Yom Kippur War (October 1973) and a series of corruption scandals in the early part of 1977—played a major role in toppling the party from power. In fact, polls revealed that the great majority of Labor Party voters referred to the corruption in the elite of the party as a reason for changing their vote in 1977. The public scandals reached their peak with the conviction of Asher Yadlin, who headed Kupat Holim HaKlalit (general sick fund health services, which then catered to about 80 percent of the

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population) and was the party’s candidate for governor of the Bank of Israel. Yadlin was sentenced to five years in prison and fined IL250,000 (about $28,000) for accepting bribes and making false income tax declarations. During his trial he implicated several national Labor leaders in illegal fund raising, but the accusations were not proven (Aronoff 1979: 141–145, Boim 1979: 221–225). The ascent of the Likud to power signals one of the cracks in the previous almost monolithic party structure and the diluting of its concentration of power. Nevertheless, the economic system still appears essentially to function under the shadow of the political system. One of the major changes that took place over the years in Israel’s social culture is the development of pluralism in Israel’s public sources of information.The state comptroller and the media report about many cases of maladministration.“Today it is difficult to grant benefit to this or that entrepreneur without an eventual publication of it.” However, publicity doesn’t yet seem to have reduced the old practices. “The ‘spoils system’ via government departments is after all part of written” government coalition agreements (Aharoni 1991: 85, 256–257). Especially since the early 1990s, more than two dozen top political leaders (three prime ministers, several government ministers, members of the Knesset, mayors, and other public figures) have stood trial or have been linked to corrupt affairs under investigation. However, only one of those whose case was brought to court was found guilty. These cases have caused many to question the motivation and credibility of the accusers.The fact that so many politicians were cleared in court aroused public criticism against the accusers concerning the easy way in which anyone can block a political figure running for office by providing the police with little more than half-baked suspicions. While an investigation takes place, the accused has to stay out of the political process and by the time he or she is cleared, the election or the appointment to office has been decided. Many of the pending corruption cases have to do with violations of the “Law for the Financing of Parties, 1973.” The political parties tainted with these violations, as well as broad segments of the population, do not consider them as grave sins due to the long tradition of contributions to political parties and election campaigns on the one hand, and the “strict” rules of the law in recent years, on the other. In a similar way, irregularities in the Israeli elections in the Druze and other patriarchal communities are seen as accepted norms (Margalit 2002). However, the results of the primary held in December 2002 at the Likud Central Committee for the party’s list of candidates to the Knesset did not raise the usual issues of treatment of party faithfuls. Instead, it aroused suspicions of vote buying. In a Parliamentary multiparty system, candidates don’t run individually; political parties compete. The parties prepare lists of candidates and the higher one is on the list, the more likely they are to get a seat. The fact that some senior political leaders were positioned in unsure places while several unknown young novices jumped into front seats with

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a rather secure entry to the Knesset caused a lot of eyebrows to be raised. After some charges of influence peddling—thousands of shekels in exchange for hundreds of votes—were leveled by some of the candidates, the police opened investigations (Hoffman 2002: 15). Another investigation into the Labor Party’s recent primary was initiated following allegations that voters “cast multiple ballots using other people’s identification cards” (Haas 2002: A16). Most of these and a dozen other cases alleging political corruption of this sort are still under investigation and still in the courts. It is likely that some of them will produce evidence of corruption. Past experience in Israel leads us to assume that the laws and regulations deemed necessary to address this corruption will indeed be formulated and implemented. Both major parties, Likud and Labor, face an important decision that has implications for democracy and corruption. In a primary, do you opt for a system that allows a few to make the decisions or do you allow all party members to vote, which creates disadvantages for poorer and less-known candidates. The elections to Israel’s Knesset are based on proportional representation in which the entire country is a single constituency. The number of each party’s candidates entering the Knesset is determined by the percentage of the votes the party receives in the ballots. For years each party entrusted a small “arranging committee” to set up its list of candidates. Although the arranging committee was set up in a democratic way, it had the deficiency of entrusting a handful of party activists with the power to shape the list of the Knesset team. Because of that and other political reasons, most of the parties were moved to adopt a more democratic selection system (Goldberg 1994: 42–45). In the 1990s the two largest parties—Labor and Likud—and some other parties introduced primary election systems to produce the party list of candidates (Hazan and Rahat 2001: 53–54). The old system of a small arranging committee lacked the democratization aspect but it was devoid of some negative traits when compared with the latter-day innovations.A primary among 100,000 or more party members gives an added advantage to familiar faces and prevents new aspirants who are not rich (or who don’t have access to the rich) from entering the political arena.Thus, in 1999 the Likud changed from using a primary system where all the party members vote to a primary vote of only the central committee. For the Likud, and some other parties as well, the determining vote is made by a committee of 2,000 to 3,000 members (who are elected by the party members). This system seems more democratic than decisions by the original small arranging committee. However it appears that this system is prone to manipulations and penetrations, as seems to have happened in the 2002 Likud primary, though this is not yet proven.Within an electing body of a few thousand, organized groups have significant power to place a candidate on the list. This situation encourages dependence on interest groups, and, even more, it houses the potential for groups with ulterior motives to have access to the seat of power.These new intermediaries can have a narrower

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view than that of the political party and at times may even have no connection to the party’s policy (Rahat and Sher-Hadar 1999: 215–216). Most likely the newly elected Knesset will address the problem with a new law. From the above description of the political system, it can be deduced that the public and the mass media do raise a loud voice against political corruption, that the law enforcement authorities don’t hesitate to investigate persons even at the very top echelons, and that above and beyond punishing the violators, steps are taken to prevent future recurrence. Anticrime Institutions The state organs in Israel that are supposed to combat crime and corruption— the police, the attorney general, and the court system—on the whole are not contaminated with corrupt behavior. There are isolated examples of policemen’s misconduct or corrupt acts, and such cases are investigated by a special unit in the Ministry of Justice and not in the Ministry of Public Security (the police). Another state institution that is charged with an anticrime, anticorruption function is the state comptroller. This institution was established by law at the inception of the state of Israel to assure public accountability. The state comptroller performs state audits and in that capacity, examines “the legality, moral integrity, orderly management, efficiency and economy of the audited bodies, and any other matter which he deems necessary,” according to section 2(b) of “Basic Law: The State Comptroller.” In addition, the state comptroller investigates complaints from the public, since he is also vested with the powers of ombudsman (Basic Law, sec. 4). In his capacity of ombudsman2 he is also authorized to protect whistleblowers, as will be discussed later. Many state comptroller and ombudsman investigations have contributed to the containment of deviation and corruption in government and public organizations. Since the early 1950s the state comptroller has published more than 100 reports relating actions that break with community standards. Many of these reports resulted in the passage of preventive laws and regulations. For example, there is a law limiting public employees from participating in professional activities within two years after leaving public service and a law prohibiting senior government officials from being members of a political party’s central committee. Many reports on payments to individuals or institutions in violation of budgetary laws and regulations have resulted in measures to restrain such phenomena (Geist and Friedberg 1995). In addition, every year the state comptroller brings several findings that arouse “suspicion of criminal act . . . to the knowledge of the Attorney-General” (Sec. 14 (c),The State Comptroller Law; hereafter, the Law). The annual report by the ombudsman also contains a chapter entitled “Effecting Change beyond the Individual Case.” From time to time the ombudsman’s investigation of a complaint reveals that, beyond the individual case, there is in fact a general defect to be rectified so that the problem

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will not continue to be the basis for future complaints. Indeed, a significant number of such general defects have been corrected through the activities of the Ombudsman Office (Ombudsman 2002: 17). Though most of the cases relate to administrative and bureaucratic processes, they also include directives about norms in public ethics. In his role as protector of whistleblowers, the ombudsman is also involved directly with fighting corruption. Another trusted anticrime institution is the examiner of banks. It is an arm of the Bank of Israel and it supervises the banking system, inter alia, in the realm of proper internal audit systems. Also, the registrar of nonprofit organizations, in the Interior Ministry, inspects nonprofit organizations for compliance with regulations applied to them, including the legality of their financial transactions. Similarly there are other authorities operating in various areas related to the prevention of corrupt deeds. As is well known in countries with even the lowest rate of corruption, there is no way of achieving a perfect score. The road leading to this goal must be paved with wide public awareness and pressure. Thus, even a net of proficient inspecting bodies cannot do the job without alert public opinion expressed against all forms of corruption. In Israel, the political parties, the free media, and the various organizations for civil rights and anticorruption sound the alarm separately or in various joint actions so that the law enforcement authorities must respond satisfactorily. Anticorruption Civic Organizations There are several civic organizations fighting for clean government and citizens’ rights.Two of these organizations stand out for their roles, each one in a different sphere of public ethics. One of the most active groups in the public arena is the Movement for Quality Government in Israel (MQG). It was formed in 1990 following the breakup of the coalition government.The break up has been referred to in political slang as “the stinky maneuver” because of the amount of partisan manipulation it involved. In December 1988, the National Unity Government was formed. This coalition was headed by the Likud leader Yitzhak Shamir, and it included the Labor Party as the senior partner. Shimon Peres, the Labor leader, in collusion with the Shas Party, succeeded in causing the government to fall after a no-confidence motion in the Knesset. Peres planned to form a new coalition with a few small parties, after promising them various favors. Unsuccessful attempts by Peres to form a Labor-led government made Labor the opposition party until 1992, when Yitzhak Rabin became, once again, the Labor leader and prime minister (Korn and Shapira 1997: 332, Inbar 1995: 27). The political deals and betrayals during the three months of crisis in 1990 disgusted the public. In that atmosphere MQG was founded to fight political corruption. MQG is an autonomous, nonpartisan organization that is funded by private donations. Its proclaimed aim is “the strengthening of a political

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culture, based on democratic values, the rule of law, sound public administration, integrity and quality of government” (the Movement for Quality Government in Israel 2002: 1). MQG has left a noticeable imprint on the political and administrative life in Israel. Its petitions to the High Court of Justice have produced more exact definitions of proper governmental norms through many decisions taken by the court concerning appointments of persons to high positions in government ministries and boards of directors. Most of the cases have related to issues of conflict of interests, integrity, transparency, and accountability. The following are some examples of famous petitions that sought to expose or prevent private gain from official public policy or arrangements (p. 3): ●

●

●

●

●

Determining of a ruling that obliges exposure of the coalition agreements and the political arrangements in relation to the state budget, annually. Decision stating that senior directors in government corporations and companies cannot be members of political party bodies. Petition against the special pensions that the Knesset members arranged for themselves. Petition calling for the institution of an inquiry committee against the President of the State of Israel, Mr. Ezer Weitzman, in the matter of the “gifts” he received from Edouard Serrousi. Petitions demanding personal liabilities of heads of local authorities. (The Movement for Quality Government in Israel 2002)

In addition, MQG operates a hotline for public complaints on corruption and improper administration that receives yearly more than 700 written complaints (p. 3). Since MQG has a small staff, it cannot handle a complaint unless it is supported with prima facie evidence of the corrupt acts. Consequently, most of the complaints do not get any further treatment. In about 200 of the cases each year, however, MQG asks the agencies to give explanations of the questionable acts and in many of them, their inquiry seems to prompt the administration to take concrete steps to address the problem. This is the impression MQG has based on feedback they receive from sources in various agencies. In 2003, there were about half a dozen whistleblowers to whom MQG extended legal and other aid in order to rehabilitate them after they had experienced extreme retaliation (Calev 2003). Oggen, the Association for Ethics and for the Eradication of Corruption in Israel, a nonpartisan and nonprofit organization, was established in 1989 to assist individual whistleblowers as well as to advance legislative and administrative regulations protecting whistleblowers. The Oggen association also promotes various projects to spread public awareness of ethics and proper administration. Mia Koch, one of the founders of Oggen and at present its chairperson, herself was a whistleblower who fell victim to painful mistreatment by her employer and even was falsely “diagnosed” by a government psychiatrist as mentally ill. Koch was employed by Tnuva, the largest dairy company in

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Israel. When she discovered that checks had disappeared she reported to her superior. As a result she was transferred to a different department and then was asked to resign altogether. Tnuva initiated a procedure to prove that Mia was mentally disturbed and fired her in 1984. After consulting with the Citizen’s Rights Association she reported to the police and in 1985 three people who were involved in the embezzlements were sent to jail and had to pay large fines. In her controversial court case against Tnuva in 1987 she won large sums in compensations. Story of a Whistleblower The successful outcome for Mia Koch represents an exception.The efforts by whistleblowers to expose government corruption are, in most cases, doomed to failure (Bok 1981: 209, Caiden and Truelson 1988: 120, 124) and the situation in Israel is no different. The case of Eli Amar involves one of the rare instances of a public worker who exposed acts of corruption and not only kept his employment but eventually even attained the position of chairman of the workers’ committee (the trade union branch at his place of employment). Even though Amar’s journey ended favorably for him, the various stages he passed through are also typical for whistleblowers who are not as lucky. In 1982, as an employee in the Haifa district of the Israel Lands Administration (hereafter: the Administration), Eli Amar came across acts of corruption such as false work reports by employees, about which he informed the internal auditor of the Administration.When the complaints were found to be substantiated by prima facie evidence, the internal auditor brought them to the police. Consequently, Amar was treated as an outcast by his peers and the Administration transferred him to the central district in order to calm the turbulent atmosphere. However, there, too, he was excommunicated by the other employees as a result of collusion between the workers’ committees of the northern and central districts, with the support of the representatives of the Histadrut (the general federation of labor) in both districts.The director of the Administration, Moshe Lipke, dismissed Amar on the grounds that his presence produced a restless and turbulent situation at work. The dismissal was reversed. The ombudsman,Yitzchak Tunik, issued an order nullifying Amar’s dismissal. Furthermore, additional mistreatment was also halted after his story was published in detail in the media and three members of the Knesset supported him in his fight and even brought the matter before the Knesset. In the interim, one of the senior employees who had been brought to trial based on Amar’s complaint was convicted; another employee who was the target of a full police investigation fled the country. In November 1988, the workers’ committee was replaced and Eli Amar was chosen as the chairman (Yefet 1988). This case illustrates the rare example of a public employee who blows the whistle on acts of corruption and is exonerated. It also contains features common to whistleblowers who are not as lucky.

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1. His colleagues at work mistreat him and even marshal the support of the larger organization, in this case the labor union, for their position. 2. The employer dismisses him and blames him for the dismissal. 3. An investigating government office (the ombudsman) issues an order, and the employee is restored to his position. 4. The mass media bring the matter to the attention of the public at large. 5. Some members of the Knesset support the whistleblower. 6. The rare “happy end”—the “wicked” are punished in court and the whistleblower is rewarded with a promotion. Most whistleblowers in Israel do not experience such a happy end to their efforts.The fact that most people hesitate to blow the whistle is common knowledge ( Jos, Thompkins, and Hays 1989) and the reasons may range from fear of reprisal to “secret money for silence” settlements ( Johnson 1993). Every country has its own variety of factors that tend to limit or encourage the spread of whistleblowing. For example, the United States had witnessed an increase in the spread of whistleblowing during the last quarter of the twentieth century (Micely and Near 1985: 525; Johnson 2003: chap. 3). Israel, on the other hand, has a surprisingly low rate of using governmental channels for whistleblowing. In general, whistleblowing is an enormously important vehicle for individuals who struggle against the experience of corruption they face in their work. In recognition of this, there are formal and legal measures created by Israeli law to protect the whistleblower. One would think that such protections might stimulate whistleblowers to use official channels. But it is the salient social norms, values, and political traits in Israeli society that may explain the limited incidence of “official” whistleblowing in that country. Legal Protection of Whistleblowers in Israel On May 27, 1981, the Knesset enacted Amendment No.11 to the State Comptroller Law, which empowered the ombudsman to protect whistleblowers. It was enacted on the basis of a private bill by M. K. Amnon Rubinstein, who was inspired by the U.S. 1978 Civil Service Reform Act. Ten years earlier, in 1971, the Knesset had vested the state comptroller with the function of ombudsman. The 1981 amendment gave the ombudsman the right to investigate the complaint of an employee against his or her employer regarding an injury sustained by the employee as a result of a reaction to his exposure of corruption in the body in which he is employed (Ombudsman 1981: 14–15).The complaint is to be acceptable for investigation if the complainant claims that “he reported in good faith and in accordance with proper procedure acts of corruption committed in the body in which he is employed” (section 45A of the Law). Good faith is interpreted liberally. It has been defined by the ombudsman to be an honest, subjective feeling by the complainant that the charges

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that he is leveling and the facts upon which he is relying are true (Ben-Porat 1991: 19). Furthermore, the law provides needed flexibility. The lawmakers took into account a situation in which an employee would be fearful of reporting acts within the organization employing him and, therefore, the decision to investigate a complaint was left in the hands of the ombudsman when the employee reported “acts of corruption not in accordance with proper procedure” (section 45B of the Law). The amendment also embodies a significant constitutional principle as it authorizes the ombudsman to issue orders of binding legal force:“to make any order he deems right and just, including a provisional order” (section 45C (a) of the Law). The order, which is issued by the ombudsman, “is binding on any superior of the employee and on the employee himself and a person who contravenes it commits a disciplinary offense” (section 45C (d) of the Law). M. K. Rubinstein, who initiated the legislative proposal for the protection of whistleblowers and who also served as a member of the committee whose recommendations constituted the basis for the amendment to the Law, was aware of the legislative limitations when he stated that the legislature cannot intervene in preventing unfriendly behavior by the public at large toward the whistleblower and that “a certain role is also placed on society, on the educational system, on the media, and on all the bodies which design and mold our lives” (Rubinstein 1982: 28). On February 11, 1997 the Knesset enacted “The Protection of Employees Law (Exposing Crimes and Unethical Behavior or Maladministration), 5757–1997.” This law came into being through unrelenting efforts and lobbying campaigns by Oggen (Oggen 1996: 14). The law authorizes the Regional Labor Court to punish an employer who harmed an employee whistleblower.The court can extend its protection only if the case complies with three conditions: 1. The whistleblower (or whoever assisted him or her) submitted the complaint in good faith; 2. the whistleblowing is related to an unlawful act in the workplace or to activities of the employer or to his/her business (in public bodies— also about unethical behavior or maladministration); 3. the whistleblower submitted his or her complaint to an authority charged with powers to examine or investigate the subject at issue (superiors, internal auditor, state comptroller, police etc.). The court can decide on granting the whistleblower compensation even when no damages were claimed.The court can reinstate the whistleblower if it considers that financial compensation alone is unjust. In reaching the verdict the court must consider the decision’s effect on labor relations in the workplace. The unique feature of this law is that it extends its protection also to private businesses and to public bodies, which are not under the regular

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jurisdiction of the ombudsman. After this enactment a whistleblower employed in a government agency has a choice to lodge his or her complaint with either the ombudsman or the Labor Court. In 2002 an amendment to the law shifted the burden of proof to the employer, who has to show that his action against the employee was not due to the employee blowing the whistle (Sefer HaHukim 1997 and 2002). The Labor Court’s track record appears to make it a less-inviting office than the ombudsman office for whistleblowers. Sixteen whistleblower legal claims against their employers processed in the Labor Court in the 1990s resulted in 2 cases being settled out of court; 13 were rejected; and 1 had unclear results (Ilan 2003: 36–37, 56). Some whistleblowers, although it is hard to know their exact number, contact the state comptroller’s office.While the ombudsman is also the state comptroller (one person wears both hats), the state comptroller’s office (SC) has a separate set of responsibilities and is in charge of reviewing government performance, like the General Accounting Office (GAO) in the United States. The SC receives many complaints and some of them get written up in their annual report. No doubt, some complaints are from insiders (whistleblowers). Insider communications are part of the pile of complaints that also include those sent from clients, suppliers, and others who are familiar with the system. The complainants almost always succeed in remaining anonymous even if their issue is investigated and addressed. Whistleblowers get no special commemoration and their complaints get no special treatment. Whistleblowers and the Ombudsman There were a small number of whistleblowers who complained about retaliation against them in their work place before the 1981 enactment authorizing the ombudsman to protect whistleblowers.The number continued to be low even after the enactment.The passage of the legislation was important, but the fact is that more than 20 years after the enactment of the law protecting the whistleblower, only a handful of complaints of this type are submitted every year. In Israel, the official number of people claiming to be whistleblowers and using government procedures is surprisingly low. The following data reflect this quite clearly. Each year, the ombudsman receives less than a score of complaints from alleged whistleblowers claiming retaliation against them. Even more astounding is the fact that throughout the years only a few complaints were found to be justified—on average, less than one justified whistleblower case a year. The annual reports of the ombudsman published between 1982 and 2002 contain 18 cases of whistleblowers’ complaints. In addition to these, the ombudsman also handled the case of Eli Amar of the Israel Lands Administration, as recounted earlier in this chapter (making the total number of cases 19). The following two whistleblower cases, which are included

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in the 2001 and 2002 annual reports, are typical of most of the cases handled by the ombudsman in the two decades of protecting whistleblowers: 1. An accountant in a development company was removed from his recent temporary appointment as deputy director general for finance in reaction to his whistleblowing. He reported to the Chair of the Board of Directors and to the internal auditor about many improper acts; most of them were related to the director general of the company. The company complied with the ombudsman’s order to reinstate the whistleblower, who was dismissed while the case was under investigation (Ombudsman 2001: 58–61). 2. An employee in a hospital administrative unit was told that his contract would not be renewed after September 1999 due to budgetary constraints. In his letter to the ombudsman he claimed that the real reason behind his dismissal was his reporting of corrupt acts to his superiors. After his dismissal, he reported to the police and a charge sheet was presented in court against the manager and other employees. Although in this case there was mere nonrenewal of a contract (and not an ordinary dismissal), the ombudsman considered that the hospital’s decision was not made “in good faith” but rather in view of the employee’s whistleblowing. Due to the strained relations that developed between the two sides, however, the ombudsman did not see it as practical to enforce a reinstatement in the same place. Therefore he ordered the Ministry of Health, on May 21, 2001, to employ the complainant on “a contract, in place, for a period of time and under terms suitable to the complainant and to the needs of the Ministry.” (Ombudsman 2002: 29) The 19 whistleblower cases included in the ombudsman reports fall into three categories of outcome: (1) the employee is reinstated; (2) the employee is reinstated but has problems or is not interested in staying; (3) no grounds are found for reinstatement. 1. Reinstated: In 12 cases, the ombudsman ordered the reinstatement of the employees to their former positions and indeed they were back at work: One of these 12 was not merely restored but after some years was even chosen by his fellow employees to be chairman of the workers’ committee; 4 others out of the 12 were employed on a short-term contract or were on the threshold of retirement age, and therefore it is assumed that their integration back at work was not a problem—both sides, and particularly the employers, were able to adjust themselves to the outcome of the order in view of the short period of continued service actually involved. Another case, not included in the 12, did not relate to reemployment but to getting a driving instructor’s license, which was granted to the whistleblower following the ombudsman’s order.

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2. Reinstated but Chose to Quit: In three instances, when the ombudsman issued an order for reinstatement and the orders were carried out, there were problems. In one instance, the employee was not satisfied with the placement solution and he left the service; in the second instance, the employee did, in fact, return to his position but found himself working in isolation because his fellow employees refused to cooperate with him. A third case concerned a reinstated employee who chose not to return to his place of work. 3. Claims Rejected: In three cases the ombudsman did not find the claims of the complainants to be justified.There were several other cases of complainants who claimed to be whistleblowers, but the ombudsman rejected their claim and did not investigate. Despite the limited number of whistleblower cases in which orders were given to return the employee to work (only 15 over a twenty-year period), one is tempted to draw the following tentative conclusion about the factors that determined this outcome. Status and time left to serve seem to make a difference.Whistleblowers who were of lower status or those who had very few years left to serve were more easily reinstated. In addition, two salient facts emerge from a review of cases investigated by the ombudsman with regard to whistleblowing: 1. The legislature has given the ombudsman the legal means to protect the public employee who exposes corruption and the ombudsman office seems to have used these means wisely and in an effective manner, whether through protection of injured employees or rejection of false charges against government bodies. Even so, the whistleblower is not completely protected from retaliation.This sad fact does not seem to be connected to any deficiency in the law or omission by the ombudsman. Primarily, this outcome is due to the social norm that prompts others in their agency to reject the whistleblower as if he or she were a dangerous, foreign element. That social response is not unique to Israel. The typical situation in the United States is that when a whistleblower exposes wrongdoing, he or she becomes the focus of attention and is even considered “the problem” ( Johnson 2003: 92, Glazer and Glazer 1986: 42). 2. There are no precise data about the number of whistleblowers in Israel in recent years. However, if we take the number of cases reported in the media, together with the relevant statistics on complaints submitted to the ombudsman and claims dealt with by the labor courts, we may conclude that the number is low. And if we include the number of complainants whose cases have gone to the state comptroller, the number is still small. They make up a fraction of those complaints. Considering that Israeli society is imbued with Western democratic values and that its administrative culture is not without blemish, the question is why are the numbers of whistleblowers proportionately so low.

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Israelis Are Not Shy about Complaining The rate of complaints from the public in Israel is one of the highest, if not the highest, in the world (Danet 1978: Table 1). In the ten-year period ending on December 31, 2001 the ombudsman received around 7,000 nonwhistleblower complaints a year (Ombudsman 2002: 100).These figures do not include the many thousands of complaints submitted to sectional ombudsmen and quasi-ombudsmen in various public organizations (General Federation of Labor, municipalities, and the like). Sam Lehman-Wilzig (1992: 64) in his pioneering study on public protest in Israel found that of the states researched in the western democracies Israel has the highest rate in public participation in protest activity, per capita. Considering that complaint-handling systems are well developed in Israel and that the public makes extensive use of them and is active in public demonstrations, the wonder is even greater as to why there are proportionately so few whistleblowers. Let us attempt to answer this question by presenting and analyzing certain norms and attitudes prevalent in Israel. What will be described is wrongdoing so subtle that first, it is well under the radar that detects corruption, such as the corruption tests scored and used by Transparency International, and second, it may look corrupt but it reflects general behavior patterns and mainstream values, a unique feature of the political-administrative culture of Israel. Compartmentalized Ethics Hide Deviance It is plainly accepted that stealing, for example, is the act of taking without permission someone else’s property and that this is a crime.Yet there are many situations when the very same person who condemns thievery as such might condone or even be active in taking someone else’s property under circumstances considered by the perpetrator to be something other than stealing.This double standard gives the individual a “permit” to steal, but once he or she is brought to court they have to convince the judge that they acquired the property with the consent of the owner or an authorized official. When people accept common definitions of what is moral and ethical but also enjoy a consensus about excluding certain modes of questionable behavior from these standards, then the case shifts into a different category. Such a situation could be described as compartmentalized ethics, as opposed to the ordinary double standard whereby individuals or closed groups attach to themselves the status of being outside the sphere of a certain rule or set of rules. In contrast to other double standards, “compartmentalized ethics” may involve widespread attitudes common to very broad segments of society. The result is that certain unethical and illegal behavior is practiced openly or at least is known to large sections of the public. Such behavior may be termed “gray” or “white” corruption according

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to the well-known observation of Arnold J. Heidenheimer, who classifies corruption into the following three categories: The evaluation “black corruption” indicates that in that setting that particular action is one which a majority consensus of both elite and mass opinion would condemn and would want to see punished on grounds of principle. “Gray corruption” indicates that some elements, usually elites, may want to see the action punished, others not, and the majority may well be ambiguous.“White corruption” signifies that the majority of both elite and mass opinion probably would not vigorously support an attempt to punish a form of corruption that they regard as tolerable. This implies that they attach less value to the maintenance of the values involved than they do to the costs that might be generated as the result of a change in rule enforcement. (Heidenheimer 1989a: 161) White corruption nurtures the growth of compartmentalized ethics in society. By being widespread and going unpunished, an act of white corruption signifies to the individual that it is not his personal sin and that indeed it is not even a sin when the leaders in society—in politics and administration— and the public at large do not enforce the rule.Therefore, white corruption paves the road to living with comfort in a setting of compartmentalized ethics by establishing norms that define certain actions as acceptable. White Corruption in Israel As mentioned above, corruption can be a matter of cultural definition. What is “black” corruption in one country may be practiced freely in another, whether as “white” corruption or even as a legitimate custom. Therefore, Heidenheimer’s distinction is useful because it helps us to draw back from value-laden connotations of corruption as bad or immoral (Danet 1989: 13).With this approach as a backdrop, let us now look at four well-known phenomena of white corruption in Israel: patronage practices, protektzia, patriotic illegalisms, and “as though” arrangements. Patronage Practice Israelis have grown to tolerate and are accustomed to “minor” ethical infractions. Among them are “patronage practices.” This phenomenon thrived mainly through the political machines that operated among the masses of new immigrants streaming to Israel between 1948 and the early 1960s.“New immigrant votes became a commodity, transferred to the highest political bidder” (Werner 1989: 259). Another aspect of politicization involved the recruitment of party loyalists to positions in the public service; in the pre-state years this included the various Jewish Agency3 departments and party-backed social and economic organizations from local communities.

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With statehood, recruitment was extended to government, municipal, and other state institutions. Some of this occurred as a result of formal agreements, which allocated jobs based on percentages reflecting party strength, and some was based upon the makeup of coalition partnerships in state and local government and allocated under the aegis of government ministers and mayors who were often also national and local party leaders, respectively. More and more party members were appointed to civil service positions in this way during the 1950s. But by 1959 and 1961, legislation was enacted that required merit-based criteria for appointments and promotion of civil servants and imposed limitations on their political activities. Nevertheless, these measures, while improving the situation, did not eradicate politicization in government bureaucracy. In other public organizations, such as the Histadrut and the Jewish Agency, politicization has remained more pervasive (Danet 1989: 106).These gray areas are addressed by MQG, the Movement for Quality Government in Israel. But their well-publicized concern has resulted only in reducing, but not eliminating, the practice. On the whole, positions in public organizations seem quite open to free competition, but the patronage practice continues. In the 1950s and early 1960s one needed some patronage backing even for low-ranking jobs (clerical work, etc.) while from the 1980s patronage was mainly in the form of quid pro quo appointments of political activists in government and public organizations. A typical example is of a party activist who aided a Knesset member or a government minister in securing their seats and in return is rewarded with an appointment to the board of directors of a government company or another public position.The reports of the state comptroller in recent years attest to the continued existence of many forms of politicization (State Comptroller 1989: 627, 1991: 525, 1993: 732, 1994: 917, 1998: 418, 871, 1999: 122, 492). Protektzia Protektzia in Israel, in plain words, is “pulling strings” (Danet 1989: 16–17) and can be described as bypassing established procedures and regulations through the use of personal or political connections. Based on several definitions (see Werner 1989: 259 and Danet 1989: 16–17), the following definition conveys a more comprehensive understanding of this phenomenon: Protektzia is the granting of preferential treatment through the bypassing of official rules as a result of personal or political contacts made between the receiver and an official in the relevant office, excluding all reference to graft, bribery, or exchange of money. Brenda Danet makes a clear distinction between violations of formally enacted laws and protektzia, which: is merely a violation of administrative regulations, not punishable by law. . . . It is also worth noting that there has never been a serious attempt to eliminate protektzia, and no serious sanctions, even

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administrative ones, have ever been applied, either to those granting it or to those seeking it. . . . Israel has never once launched a campaign to stamp out protektzia. Is it any wonder, then, that it flourishes? (Danet 1989: 118) This form of corruption is quite mild when we consider that most of the Jews who settled in Palestine (and later in Israel) grew up in autocratic regimes, whether in the Middle East and the Mediterranean basin or in Eastern Europe, where to survive economically, or sometimes to survive at all, one had to resort to circumventing the law and even to bribery. This behavior may represent a milder version of an expected and accepted practice. Patriotic Illegalisms For the Jews who lived in British Mandate Palestine a more collectivistic patriotic corruption flourished mainly from the 1930s to 1948, when the state of Israel was established.The Arab riots against the Jews, coupled with unsatisfactory British behavior, left the Jews practically unprotected, and they built means of self-defense through illegal acts (Werner 1989: 259). In similar ways, British restrictions of Jewish immigration to Palestine and the forbidding of establishing new Jewish settlements intensified undercover and illegal “patriotic corruption.” These modes of behavior, which were morally untainted when practiced under hostile regimes, were transferred to the state of Israel in the form of idealistic corruption: For the sake of the party, the community, the kibbutz, etc., circumventing the law was justified. Circumvention did not remain solely in the realm of protektzia but it expressed itself also in outright illegal acts. Illegalism is defined by Ehud Sprinzak as: an orientation which does not view respect for the law or respect for the idea of rule of law as a basic value . . . a form of behavior governed by considerations of utility. . . . A citizen or ruler guided by this orientation will not necessarily be hostile to the legal system. . . . Rather, he will be characterized by an instrumental attitude toward law when it is in his interest to do so—unless there is a clear danger of efficient sanction—[and] will ignore it whenever possible. (Sprinzak 1986: 22; translated into English by Danet 1989: 115) In contemporary Israel, acts of illegalism manifest themselves in ideological groups as well as in individuals with material motives. For example, in the 1970s Gush Emunim (a movement for settling Jews in the West Bank) initiated and organized settlements not always with government approval. These illegal acts were accepted as part of the Israeli norm and later even sanctioned by the government, albeit by a different political coalition. On individual and nonideological grounds we find every year that thousands of contractors and private-dwelling owners build without the proper permit and contrary to town planning regulations. Instead of enforcing the law,

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where in most cases demolition would have been the suitable punishment, compromises are reached whereby the violators pay an “appreciation tax” to the municipality (Hurewitz 1987). “As Though” Arrangements The above three examples of illegalism represent acts that are clearly against regulations or prohibited by law, but that are not enforced by government authorities for ideological or other political reasons. “As though” arrangements represent a very mild or diluted form of illegalism that, in fact, is made up of legal acts. Many, if not most, of these arrangements are formulated due to wage policy considerations. One of the perennial problems in this area is the existing linkage in wage increases among the various labor unions. For example, if the engineers’ union achieves a certain wage increase in its collective bargaining agreement, then the university graduates’ union will demand the same, followed by the social workers and, in a chain reaction, the rest of the unions. The result is that after the cycle is completed, the engineers will reopen their demands for a wage increase in order to maintain a differential between them and the other unions. Some formulas avoid this vicious cycle by increasing the income of the union member without increasing the wage scale itself.This is done by designating the additional payment as specifically as possible in a manner that makes it difficult for other professions to claim the same benefit. For example, special pay or a raise in pay for night shift nurses is not likely to be followed by similar demands from most other unions since night shifts are not required in most professions. However, certain “specific payments” do not remain specific and in the course of time they are adopted or adjusted to fit the agreements of other unions. Here are two out of many examples of “as though” arrangements: 1. Professional Literature Allowance According to collective wage agreements signed in the 1960s, members of university-trained professions were entitled to receive an allowance for purchase of books in the field of their profession, upon the presentation of proper receipts. Eventually, a receipt for any book was sufficient, and later on, any receipt from a bookstore was good enough (even though the item purchased could have been stationery or even a toy). No wonder, then, that the time became ripe for unskilled workers to also receive a “professional literature allowance,” although their field of work was not blessed with literature and some workers were even illiterate. 2. Fund for Professional Training Another way to increase income without increasing the wage scale involves the fund for professional training, to which the employee contributes 2.5 percent of his monthly salary and the employer adds

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Chaim Kalchheim a sum equivalent to 7.5 percent of the employee’s salary. The money in this fund can be either used for study, including participation in training programs; or saved for a six-year period at the end of which the money can be drawn upon by the employee for any purpose.The money used in either form is exempt from income tax. An employee interested in using the money for training has to submit the full details of his program of studies (what, where, and how much) to a special committee with the authority to release the money upon presentation of the proper documentation. The fact is that the relevant union (almost every union has set up such training funds) organizes “study tours” abroad that are recognized as “eligible for coverage” by the funds. In reality, these study tours are no different in essence from any other pleasure trip except that they are sprinkled with some visits to plants or organizations whose activities are related to the profession (public-sector employees would visit a few government or municipal departments; lawyers would visit court systems, etc.). In fact, those who seemingly opt to spend their fund money on training spend it on touring, while those who withdraw the money after waiting the six-year period find many good causes other than training on which to spend the money. Thus, an employee’s account in the training fund—composed mainly of the employer’s contribution (75 percent)—which is designated for further studies or professional training, is nothing more than additional income, and in most cases is tax free.

This allowance, as well as the professional literature allowance, are granted “as though” for added training and education. There are many more benefits that are “as though” arrangements in employment agreements everywhere in Israel. For example, in mid-level and higher positions, in addition to a salary, the employer grants a car upkeep allowance. The rationale is that the employee uses his private car for calls of duty. The fact is that the payment is not conditioned on the furnishing of data on real performance and it is not uncommon to find employees receiving car allowances even though they may not own a car. All these “as though” arrangements are so deeply rooted in Israeli practice that nearly all employees and employers are involved with one or more “as though” arrangements. When Does White Corruption Turn Gray or Even Black? Once in a while an individual case crosses the line separating white from gray or even black corruption. For example, an employee reports that he worked overtime on a certain date when in fact he was absent from work altogether (taking a sick leave or vacation). In general, overtime payments are part of the “as though” understanding and employers do not attempt verification. Only unrealistic situations call for a process of clarification.The circumstances determine whether the personnel department will accept

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the explanation that it was a slip of the pen or suspect the explanation to be an intended false claim. As a false claim, it moves into a disciplinary (gray) or a criminal (black) violation. Whistleblowing in an Atmosphere of White Corruption Most people hesitate to be whistleblowers for various reasons that seem to be universal, such as fear of reprisal. But there are also unique social and political circumstances that may vary from one country to another that affect whistleblowing. In addition to work-related factors, there is certain basic and widespread social behavior that is relevant. I have pointed to four questionable patterns that penetrate throughout Israeli society—patronage practices, protektzia, illegalisms (patriotic/ideological as well as materialistic), and “as though” arrangements. Although each represents a different type of rule/law-breaking, there are interconnections among them. Patronage practices and protektzia are often implemented through the political network and the beneficiaries are themselves party members and activists. Many acts of illegalism are connected with patronage practices. “As though” arrangements sometimes are simply illegal acts covered over by the proper formalities to avoid possible charges of illegality. The act of protektzia can take the form of an “as though” arrangement, and it might end with a legitimating process. Protektzia and “as though” arrangements are widespread in Israel. Brenda Danet reports that they are flourishing and more entrenched than ever (1989: 17).“As though” arrangements are of two types—collective and individual.The “collective” arrangements encompass practically the entire labor force, because every union’s collective agreement contains ingredients of “as though” arrangements, mostly implicitly. The extent of individual arrangements cannot be estimated, for obvious reasons, but they are assumed to be prevalent. Patronage practices and illegalism are part of the sociopolitical culture of Israel, but by their nature do not involve everyone as do the other two. However, all four practices are known and familiar to almost everyone. In the context of such phenomena, it is difficult to expect people to officially blow the whistle for the following reasons: 1. When so many rules and regulations are not adhered to, including some that can be termed legal violations, then the attitude of many individuals who come across administrative irregularities and even corruption is to accept and be resigned to them. 2. When “as though” arrangements are nationwide, a potential whistleblower may ask himself: “Am I not myself already an accomplice to some kind of circumvention of the law?” 3. When society distinguishes between formal collective agreements (or other labor relations understandings) that include “as though” clauses as legitimate acts and individual illegal acts that society labels as corrupt, a person may hesitate to blow the whistle exposing these

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Summary and Conclusion Israel does not have a reputation of gross corruption. However, there are patterns in the political and administrative spheres that are legal but seem ethically questionable. When such patterns go too, far most likely one of the following situations will occur: political adversaries, directly or via the media, will do their utmost to provide the attorney general or the police with information to start an investigation with the hope of bringing the issue to court. The state comptroller will investigate and resolve the situation through administrative, legislative, or judicial measures; a civic organization like the Movement for Quality Government will raise the issue of corruption, stimulate public discussion, and also petition to the High Court of Justice against the accused government body or agent for disregarding public ethics. The Israeli state organs have a good reputation for fair investigations and for holding agents accountable. But it is not only law enforcement authorities and civic organization that take anticorruption action.Whistleblowers, are protected by Israeli law against retaliation by their superiors or peers in their workplace. Given the fact that Israelis are not shy about complaining to administration about other matters, it is surprising that there are proportionately so few official whistleblowers, especially since they are protected from retaliation by law since 1981. Research in the United States shows that for many reasons whistleblowing exposes only a fraction of corruption known to employees. One can assume that this is true in Israel. But in Israel, the proportionately low numbers have an additional explanation. Considering that certain sociopolitical and administrative behaviors in Israel—in particular protektzia and “as though” arrangements, which encompass practically every household—are widespread and recurring, it is likely that they act as additional factors to inhibit whistleblowing.

Notes 1. In addition to the references mentioned in this chapter, the reader may be interested in the following sources: International Social Science Journal XLVIII, no. 149,

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September 1996, devoted to “Corruption in Western Democracies”; the Special Issue “Political Corruption” of Political Studies 1997; The Politics of Corruption, a four-volume series published in 2000 by Edward Edgar in Cheltenham, UK that includes Explaining Corruption (R. Williams, ed.), Corruption in the Developing World (R.Williams and R.Theobald, eds.), Corruption in the Developed World (R. Williams, J. Moran and R. Falnary, eds.), and Controlling Corruption (R.Williams and A. Doig, eds.). 2. The literal translation from Hebrew of the ombudsman title is “public complaints commissioner,” and in that form it was used in the English publications of the office. Since 1998 the universal term “ombudsman” has been applied. In this chapter, for the sake of uniformity,“ombudsman” was substituted for “public complaints commissioner,” even in direct quotations from earlier publications in English. 3. The Jewish Agency is the executive branch of the World Zionist Organization and of other Jewish organizations. Its main activities are in the areas of immigration absorption and rural settlements in Israel.

Bibliography Aharoni,Yair. 1991. The Political Economy of Israel.Tel Aviv: Am Oved (in Hebrew). Aronoff, Myron J. 1979. “The Decline of the Israeli Labor Party: Causes and Significance.” In Israel at the Polls—The Knesset Elections of 1977, ed. Howard R. Penniman. Washington, D.C.: American Enterprise Institute for Public Policy Research. Bar-Tal, Eran. 2003.“Gone Down the Drain.” Makor Rishon. August 15, 16–17 (in Hebrew). Basic Law: The State Comptroller [Passed by the Knesset on February 15, 1988 (The full text of the law is appended to any annual report in Hebrew—or in English, when the reports are also translated—published by the State Comptroller, Jerusalem)]. Ben-Porat, Miriam. 1991. “The Experience of the Ombudsman in Israel.” Paper presented at the International Congress of Ombudsmen, Mexico City, November. Bicchieri, Cristina and John Duffi. 1997.“Corruption Cycles.” Political Studies (special issue) 45, no. 3: 477–495. Boim, Leon. 1979. “The Financing of Election.” In Israel at the Polls—The Knesset Elections of 1977, ed. Howard R. Penniman.Washington, D.C.:American Enterprise Institute for Public Policy Research. Bok, Sissela. 1981. “Blowing the Whistle.” In Public Duties: The Moral Obligations of Government Officials, ed. Joel L. Fleishman, Lance Liebman, and Mark H. Moore. Cambridge, MA: Harvard University Press. Caiden, Gerald E. and Judith A.Truelson. 1988.“Whistle Blower Protection in the USA: Lessons Learned and to be Learned.” Australian Journal of Public Administration 47 ( June 2): 119–129. Calev, Barak, director of the Legal Department of the Movement for Quality Government in Israel (MQG). 2003. Interview by the author, August 24, 2003. Central Bureau of Statistics. 1994. Statistical Abstract of Israel 1994. Jerusalem. Danet, Brenda. 1978. “Toward a Method to Evaluate the Ombudsman Role.” Administration and Society 10, no. 3 (November): 335–370.

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———. 1989. Pulling Strings—Biculturalism in Israel Bureaucracy. Albany, NY: State University of New York Press. Eigen, Peter. 2002. “Introducing the Global Corruption Report 2001.” From the Transparency International website: transparency.org/cpi/index.html. Accessed October 2002. Elazar, Daniel J. 1989. People and Polity:The Organizational Dynamics of World Jewry. Detroit:Wayne State University Press. Encyclopaedia Judaica. 1971. “Prophets and Prophecy.” Vol. 13. Jerusalem: Keter. Etzioni-Halevy, Eva. 1997. A Place At the Top—Elite and Elitism in Israel. Tel Aviv: Tcherikover (in Hebrew). Friedrich, Carl J. 1989.“Corruption Concepts in Historical Perspective.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Geist, Benjamin and Asher Friedberg. 1995.“State Audit and Moral Standard in the Public Service.” Iunim BeVikoret HaMedina 53: 34–49 (in Hebrew). Gibbons, Kenneth M. 1989. “Toward an Attitudinal Definition of Corruption.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Glazer, Myron Peretz and Penina Migdal Glazer. 1986. “Whistleblowing.” Psychology Today (August): 36–43. Goldberg, Giora. 1994. The Israeli Voter 1992. Jeruslem: The Magnes Press (in Hebrew). Haas, Danielle. 2002. “Scandal of alleged vote-buying taints Sharon’s Likud party,” San Francisco Chronicle. 19 December, A16. Hazan, Reuven Y. and Gideon Rahat. 2001. “Representation, Electoral Reform and Democracy:Theoretical and Empirical Lessons From the 1996 Elections in Israel” Medinah VeHevra 1 (December): 51–78 (in Hebrew). Published originally in English in Comparative Political Studies 33, no. 10 (December 2000): 1310–1336. Heidenheimer, Arnold J. 1970. “Introduction.” In Political Corruption: Readings in Comparative Analysis, ed. Arnold J. Heidenheimer. New Brunswick, NJ: Transaction Publishers. ———. 1989a. “Perspectives on the Perception of Corruption.” In Political Corruption: A Handboook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. ———. 1989b. “Problems of Comparing American Political Corruption.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Heywood, Paul. 1997. “Political Corruption: Problems and Perspectives.” Political Studies (special issue) 45, no. 3: 417–435. Hoffman, Gil. 2002. “Attorney-General orders probe of Likud primary.” Jerusalem Post. 15 December, 15. Huntington, Samuel P. 1989. “Modernization and Corruption.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Hurewitz, Yair. 1987. “Enforcement of the Planning and Building Law— Demolition Orders.” HaPraklit 37: 387–405 (in Hebrew). Ilan, Daniel. 2003. Whistleblowers and the Labor Courts: Is the Whistle Heard? Jerusalem: Jerusalem Institute for Israel Studies (in Hebrew).

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Inbar, Efraim. 1995. “Labor’s Return to Power.” In Israel at the Polls, 1992, ed. Daniel J. Elazar and Shmuel Sandler. Lanham, MD: Rowman and Littlefield Publishers and The Jerusalem Center for Public Affairs. Izenberg, Dan. 2003. “Etti Alon gets 17 Years, fined NIS 5m.” Jerusalem Post. 2 July, 4. Johnson, Roberta A. 2003. Whistleblowing: When It Works—And Why. London: Lynne Riener Publishers. ———. 1993. “Government Whistleblowers: How Protected Are They?” Paper presented at the Third International Conference on Ethics in the Public Service, Jerusalem, June. Jos, Philip H., Mark E.Thompkins and Steven W. Hays. 1989.“In Praise of Difficult People: A Portrait of the Committed Whistleblower.” Public Administration Review 49, no. 6 (November/December): 552–561. Korn, Dani and Boaz Shapira. 1997. Coalition Politics in Israel. Tel-Aviv: ZmoraBitan Publishers (in Hebrew). Laframboise, H. L. 1991. “Vile Wretches and Public Heroes: The Ethics of Whistleblowing in Government.” Canadian Public Administration 34, no. 1 (spring): 73–77. Lehman-Wilzig, Sam. 1992. Public Protest in Israel 1949–1992. Ramat-Gan: BarIlan University Press (in Hebrew). Leys, Colin. 1970. “What Is the Problem About Corruption?” In Political Corruption: Reading in Comparative Analysis, ed. Arnold J. Heidenheimer. New York: Holt, Rinehart and Winston. Margalit, Dan. 2002. “HaBusha Ne’elma” [The Shame Disappeared]. Available at www.maariv.co.il. Accessed December 17 (in Hebrew). Meny, Yves and Martin Rohdes. 1997. “Illicit Governance: Corruption, Scandal and Fraud.” In Developments in West European Politics, ed. Martin Rohdes, Paul Heywood, and Vincent Wright. London: Macmillan. Micely, Marcia P. and Janet P. Near. 1985. “Characteristics of Organizational Climate and Perceived Wrongdoing Associated with Whistleblowing Decisions.” Personnel Psychology 38 (autumn): 525–544. The Movement for Quality Government in Israel. 2002. Available at www.mqg.org.il: 3–4. Oggen. 1996. Report, Oggen—The Association for Ethics and for the Eradication of Corruption in Israel, Ramat-Gan,Tel Aviv (in Hebrew). Ombudsman. 1981. Annual Report 10, Office of (the State Comptroller and the) Ombudsman, Jerusalem (in Hebrew). ———. 1996. Annual Report 23, Office of (the State Comptroller and the) Ombudsman, Jerusalem (in Hebrew). ———. 2001. Annual Report 27, Office of (the State Comptroller and the) Ombudsman, Jerusalem (in Hebrew). ———. 2002. Annual Report 28, Office of (the State Comptroller and the) Ombudsman, Jerusalem (in Hebrew). Philp, Mark. 1997. “Defining Political Corruption.” Political Studies (special issue) 45, no. 3: 436–462. Rahat, Gideon and Neta Sher-Hadar. 1999. Intraparty Selection of Candidates for the Knesset List and for the Prime-Ministerial Candidacy 1995–1997. Jerusalem: The Israel Democracy Institute (in Hebrew). Rolef, Susan H. 1989. “Shurat HaMitnadvim.” In Political Dictionary of the State of Israel, ed. Susan H. Rolef. Jerusalem: Keter (in Hebrew).

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Rose-Ackerman, Susan. 1999. Corruption and Government: Causes, Consequences, and Reform. Cambridge, UK: Cambridge University Press. Rubinstein, Amnon. 1982. “The Struggle for Protecting Internal Auditor—Public Employees Exposing Acts of Corruption.” HaMevaker HaPnimi 79: 23–28 (in Hebrew). Scott, James C. 1989. “Handling Historical Comparisons Cross-Nationally.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Sefer HaHukim [The Book of Laws]. 1997. Jerusalem: The Government Printer (in Hebrew). ———. 2002. Jerusalem:The Government Printer (in Hebrew). Sprinzak, Ehud. 1986. Every Man Whatever Is Right in His Own Eyes—Illegalism in Israeli Society.Tel Aviv: Sifriat Poalim (in Hebrew). State Comptroller. 1989. Annual Report 39. Jerusalem: Office of the State Comptroller (in Hebrew). ———. 1991. Annual Report 41. Jerusalem: Office of the State Comptroller (in Hebrew). ———. 1993. Annual Report 43. Jerusalem: Office of the State Comptroller (in Hebrew). ———. 1994. Annual Report 44. Jerusalem: Office of the State Comptroller (in Hebrew). ———. 1998. Annual Report 48. Jerusalem: Office of the State Comptroller (in Hebrew). ———. 1999. Annual Report 49. Jerusalem: Office of the State Comptroller (in Hebrew). State Comptroller Law, 5718-1958 [consolidated version] (The full text of the law is appended to any annual report in Hebrew—or in English, when the reports are also translated—published by the State Comptroller, Jerusalem). Transparency International. 2002a. “Press Release: Transparency International Releases the Year 2002 Corruption Perceptions Index.” From the Transparency International website, www.globalcorruptionreport.org. Accessed October 2002. ———. 2002b. The 2002 Corruption Perception Index. From the Transparency International website, www.transparency.org/cpi/index./html or www.gwdg. de/~uwvw/2002Data.html. Accessed September 24. Wallach, Jehuda, Moshe Lissak, and Shimon Shamir, eds. 1980. Carta’s Atlas of Israel: The Second Decade 1961–1971. Jerusalem: Carta (in Hebrew). Werner, Simcha B. 1989. “The Development of Political Corruption in Israel.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Yefet, Ze’ev. 1988. “Eli Amar Did Not Give In.” HaAretz, December 14 (in Hebrew).

CHAPTER

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Russia and Her Ghosts of the Past Jasm i ne M artiro s s ian

Introduction In 1992, shortly after the break-up of the Soviet Union, I made arrangements for a fellow graduate student to visit Russia to conduct research for her doctoral dissertation on the country’s black market, which in Russian is more accurately referred to as the shadow economy (tyenevaya ekonomika).When my American friend, Lauren, arrived in Moscow, she was met by one of my acquaintances, Galina,1 who was fluent in English, owed me a favor or two, and had promised to show Lauren around and to help her navigate the unknown terrain for her research. So, Galina, a minor yet well-connected government official, met Lauren at the airport, whisked her through the customs, got her registered at the hotel, and took her out to dinner at a fashionable restaurant. On the way, they stopped to fill up her car with gas. When they finally relaxed at a restaurant with all the trappings of a Western establishment, Lauren, with puzzled naivete, asked Galina where the black market was.To Lauren, as soon as she had stepped on the Russian soil, everything had been handled with Western efficiency, and she was having a hard time reconciling her cold war stereotypes of shortage, deprivation, and gridlock with the reality that she had encountered in such a short time. Galina paused, took a hard, intent look at Lauren and responded, “What do you mean, where is the black market? Where is it not? What do you think has happened so far?” And then, one by one, Galina recounted everything that the two of them had done during the day, explaining where she had pulled a favor, where she had snuck a bribe, and how at each step of the way she had gone around the system.To make a long story short, but for Galina having been closely tied into the machinations of the shadow economy, read corruption, nothing would have been as easy as it seemed to Lauren. Corruption in Russia is so pervasive, and the tentacles of corrupt practices are so densely intermingled with every day activities, that trying

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to describe and analyze corruption in Russia is akin to attempting to describe the oceans, with their depths and vastness.

The Nature of Corruption in the Soviet Union In his definition of corruption, Carl J. Friedrich argues that “Corruption is a kind of behavior which deviates from the norm actually prevalent or believed to prevail in a given context, such as the political. It is deviant behavior associated with a particular motivation, namely that of private gain at public expense.” Friedrich goes on to emphasize that in defining corruption, regardless of what the motivation is “it is the fact that private gain was secured at public expense that matters” (Friedrich 1990: 15). In attempting to apply this standard definition of corruption to Russia, a question begs to be asked.What if the deviation from the norm is so pervasive that the deviation itself becomes the norm? This seems to be the case with corruption in Russia. In his work on political corruption in the former Soviet Union, John M. Kramer must certainly have taken this pervasiveness and seeming acceptance of corrupt practices into consideration, when he suggested that “corruption as behavior diverging from the formal duties of a public role does not necessarily mean that large segments of the population condemn such behavior.” On the contrary, he believes that this very divergence between what is publicly called corrupt and what is privately accepted “is often an important factor fostering political corruption in a society” (Kramer 1990: 450). Indeed, it is impossible to discuss modern-day Russia without properly understanding its recent past as the centerpiece of the former Soviet Union, which was undeniably the largest experiment in social engineering known to humanity. During its seven-decade existence, the Soviet Union was boldly putting its best foot forward, plastering both the outside walls of buildings and inside walls of public establishments with slogans singing the virtues of the Soviet regime. According to the official propaganda and dictums of the Soviet authorities, honesty was the only policy, and the Soviet order had zero tolerance for any acts of corruption. Of course, the criminal code did concede that corrupt practices existed, but the apologists of the Soviet regime explained these away as atavisms of the tsarist, imperialist past, or outside capitalist influences. In Friedrich’s view, the Soviet regime inevitably explained corruption by tracing it “to a preceding ideological corruption of which it [the corruption] is the result. The total bureaucratization which the socialist ideology has tended to promote in practice has made the problem of corruption particularly central to these regimes, and each case is apt to appear as a flagrant case of betrayal of the trust that had been placed in the offending functionary. Thus treason and corruption become intertwined and the language of the Soviet criminal code demonstrates it” (Friedrich 1990: 22).

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Based on his research into Soviet corruption, John M. Kramer concluded that there were two broad all-encompassing types of corruption in the country. The first type was corruption undertaken for private gain, while the second type was corruption undertaken for bureaucratic gain. More specifically, individual public officials would profit from the former, while the fruits of the latter would serve to further the purposes of the corrupt officials’ organizations and their employees (Kramer 1990: 450). Shortages Corruption undertaken for private gain was easily fueled by the systemic shortages so pervasive in the Soviet society, especially in areas of consumer goods and real property. Considering that there was no private ownership of real property, and the state was the all-encompassing owner of all housing units, housing allocation became an easy source for corrupt officials’ illicit gains. Likewise, the limited output of the Soviet automotive industry fed widespread corrupt practices when it came to the distribution of cars to citizens.The same was true of limited quantities of consumer goods and even food supplies throughout the country. Those who were more apt to partake in the corrupt practices of the Soviet system were more successful in securing both the scarce consumer goods and the extra finances that would most certainly help procure those goods. Some of the sources and places of corrupt practices might strike the Western reader as most unconventional. Among those listed by Kramer were institutions of higher education, popularly referred to in Russian as VUZy (“VUZ” stands for vissheye uchebnoye zavedeniye, or institution of higher education). Following the dictum of supply and demand economics, officials and faculty members at such institutions had tremendous muscle and pull in the Soviet system. As Kramer writes, “official policy restrict[ed] enrollment to approximately 20 percent of high school graduates, almost all of whom wish to pursue higher education. Hence, many parents attempt to enhance their children’s admission prospects by pressuring VUZ administrators through illegal means” (pp. 452–453). Illegal means translated into bribes, barter arrangements, or similar profit mechanisms for the decision-makers that could enable applicants to gain access to the educational institution. It is remarkable that while over a decade has passed since the breakup of the former Soviet Union, this corrupt practice for entrance to public universities continues unabated, even though in the new economy there are numerous private institutions of higher education. Entrance to the state institutions is sought because those schools continue to enjoy higher levels of prestige and, at the same time, they offer either tuition-free education or reduced fees. Hence, both the applicants to those institutions and their parents deem it a worthwhile enterprise to offer bribes to secure a spot in these institutions.The most unfortunate fallout of this practice is that often much-less-qualified applicants take up spots that should have gone to more

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deserving students. These individuals then become marginally competent professionals, further fueling the country’s corrupt practices. A popular Soviet joke demonstrates this point:A peasant climbs on a plane bound for Moscow dragging a turkey on a leash behind him. The flight attendant comes up to him and says that turkeys cannot travel on the plane. The man shakes his head and responds emphatically, “No, no, no, this is not a turkey, this is baksheesh [bribe]; the turkey is in graduate school in Moscow.” Corruption in the Bureaucracy In the former Soviet Union, corruption for bureaucratic gain was manifested in two primary ways: “(1) use of illegal influence; (2) false reporting of enterprise data” (Kramer 1990: 454). According to Kramer, “To understand this corruption, one must first appreciate the milieu in which production personnel function. First they confront great uncertainties not only because plan targets are sometimes changed during the plan period, but especially because of the frequently erratic flow of supplies to the enterprise. Second, these officials are under heavy pressure to increase enterprise production and efficiency” (p. 454). As a child growing up in the former Soviet Union, I remember vividly the government focus on increasing production and efficiency:These topics were the predominant feature of the state-controlled media programs. Indeed, this obsession with allegedly improved efficiency and increased production levels often became absurd, for example, five-year plans (pyatiletka) were almost always expected to be fulfilled in four-year, or even three-year terms.2 Hence, slogans would go up proclaiming “Pyatiletka v Chetire Goda,” which means that the five-year plan would be accomplished in four years.The real or alleged achievements on this front by many workers would be the staple of Soviet television news features and radio broadcasts. Official propaganda aside, directors of Soviet enterprises often had to become “creative” in order to ensure the continued operations of their organizations. In fact, Soviet central planning was often so haphazard, so illogical, and so disorganized that without the creative undertakings (i.e., corrupt practices) of enterprise directors, the pyatiletka (five-year) obligations would have never been fulfilled. Obviously, they often were not fulfilled, and the many reported economic achievements were just figments of corrupt public officials’ imaginations transposed as numbers onto paper. Whatever real achievements were actually accomplished were achieved largely through the use of blat and tolkachi. Blat is the use of personal influence to obtain certain favors to which production units are not legally entitled.While blat may be based on personal acquaintance, it also frequently involves a quid pro quo difficult to distinguish from bribery. . . . The premier practitioner of blat is the tolkach. He is the plant’s representative who travels the country searching for needed supplies or unsnarling bureaucratic bottlenecks. Some officials are so proficient at

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the art that they become “professional” tolkachi and simultaneously represent several firms. (Kramer 1990: 454) It becomes obvious that despite official public propaganda about the atavistic and unacceptable nature of corruption in the former Soviet Union, it was precisely through corrupt practices that both public officials and the general population at large could survive.This explains the historic growth of a widespread black market that continues today. As noted above, the concept of the black market is more appropriately referred to in Russian as tyenevaya ekonomika, that is, the shadow economy. In effect, the inefficiencies of the official Soviet system had given rise to a parallel economy that was successful precisely because of its contravention of the Soviet legal system and of the existing rules. Hence, what the West thinks of as black market, or underground, activities was very much the center stage of the Soviet economy. Numbers often speak for themselves. In fact,“in 1992, the estimated size of the shadow economy—that is, goods and services for which no taxes were paid—was 2.5 trillion rubles (then worth about 1.3 billion dollars)” (Handelman 1995: 71). At least three other factors contributed and sustained the Russian black market. First, it was a form of corruption that helped partially redistribute power so that “low priority groups and individuals have a better chance of competing with more powerful actors for society’s goods and services” (Kramer 1990: 458–459). Second, it was a system of corruption that did not attach moral stigma to the corrupt acts. And third, “for many officials the potential benefits of corruption outweigh the possible costs because of the relatively small chance of detection and small punishment” (458–459). As was noted earlier, the Soviet government viewed all corruption as an atavistic remnant of its preceding social order and had coercive measures in place to combat it. The majority of these measures were represented by legal sanctions, decrees, and propaganda pronouncements of the Communist Party. All levels of the Soviet government, including “the Party Central Committee, the U.S.S.R. Council of Ministers, and the U.S.S.R. Supreme Court . . . [had] issued anticorruption resolutions” (p. 459). However, when it came to the implementation of these resolutions, there were ways to get around the system once again.And once again, those ways meant resorting to bribery or similar corrupt practices. While it would have been reasonable to expect that the “big brother” monitoring system that the Soviets had in place would have been instrumental in exposing and punishing corruption, the opposite is true. Under the Soviet system, “Soviet officials charged with exposing corruption, frequently collaborate in perpetrating and/or concealing it. The Soviets recognize this circumstance and give it such labels as ‘krugovaya poruka’ (mutual involvement) or ‘semeistvennost’ (familyness)” (p. 461). Even individuals charged with the direct responsibility to expose corruption often would recognize that corrupt practices were necessary to ensure that they meet their production quotas or achieve the results mandated by the

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Communist Party. Also, given the Soviet history of Stalinist persecutions, which will be described later in this chapter, some officials would refuse to fight “corruption too vigorously because higher authorities might interpret this as laxity in permitting the corruption initially to occur” (p. 462). In effect, the widespread use of corruption necessitated by the inefficiencies of the Soviet economic system resulted in the erosion of the rule of law and in total disrespect toward the country’s legal system. Law was viewed not as a tool for serving justice but as a mechanism for personal enrichment. To this point, entry into the law departments of higher institutions of learning in the Soviet Union commanded one of the highest unofficial entrance fees (bribes or in-kind considerations) because of the promise of high earnings in the future. These future high earnings, of course, would be accomplished not through the state salary system but through the procurement of bribes. Hence, the young and aspiring practitioners of law were lured into the profession by the promise of being corrupt. I can hardly think of a better example to demonstrate the Soviet system’s moral bankruptcy. Corruption and Organized Crime in Post-Soviet Russia Given the deep entrenchment of corrupt practices in the Soviet system, it is not surprising that the post-Soviet period of so-called democratization has been marked by widespread corruption.What is remarkable about this period is that reporters and scholars alike couple the problem of corruption with that of organized crime. The issue is whether the breakup of the Soviet Union gave spontaneous rise to organized crime or whether it had been there all along. In his book titled Comrade Criminal: Russia’s new Mafiya, Stephen Handelman attributes this tidal rise in criminal activities associated with corruption to the so-called “vorovskoy mir” or “Thieves World,” which for decades had operated out of Soviet penitentiaries, but had emerged into the open only after the breakup of the Soviet regime. Historically, the Thieves World’s enemy had been the Communist Party. The collapse of the former Soviet Union allowed the emissaries of the Thieves World to operate more openly. In fact, throughout the Soviet period, no one had fully recognized or officially acknowledged how strong the bonds of the shadow economy had been with the criminal world. Thus, when decrees were issued to liberalize the economy and permit free enterprise, nobody had “counted on the power of criminal groups that had invested heavily in many of those companies and now exploited the liberalized rules to smuggle enormous amounts of goods abroad” (Handelman 1995: 22). Attempts to clamp down on these activities seemed only to stimulate “a closer alliance between crime groups and local authorities who were profiting from the smuggling trade.” According to Handelman, “The converging interests of criminals, bureaucrats, and local politicians . . . undermined efforts to extend the rights of private ownership.” For instance, Magadan, a

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northern Russian city, evaded paying taxes on the 30 percent of the gold it produced that was sold in foreign markets (p. 22). Hence, what the post-Soviet efforts of democratization and economic liberalization accomplished was to allow the Russian underworld to float to the surface of the country’s sociopolitical landscape. In fact, the foundation of an organized criminal underworld tradition has been traced back many centuries. According to Handelman, “the faint beginnings of organized crime in modern Russia can be seen in the outlaw peasant bands of the early seventeenth century. In a society where land and all who labored on it were the property of the czar [and the select few members of the landed gentry], political resistance and criminal activity were nearly indistinguishable. Highwaymen who robbed government functionaries were admired for striking a blow against state authority. Systematic plunder often turned into organized rebellion” (1995: 31). The indistinguishability between political resistance and criminal activity in the minds of Russians may be another explanation for what seems to be acceptance by the general population of criminality and corruption surrounding them. Historically, Russia’s criminal underworld, vorovskoy mir, had its undisputed leaders, who were called vori v zakone, or thieves in law. These “thieves” were granted that honorific title by their fellow inmates in prisons.They were expected to follow a strict code of rules, vorovskoy zakon, or thieves’ law, with special emphasis being placed on loyalty and, odd as it may sound, honesty. Of course, this is a special brand of honesty. For instance, according to the vorovskoy mir code of honor, one must be particularly forthcoming within the tight circle of fellow vory, thieves.The idea is to honestly own up to all the acts of dishonesty within the tight circle of fellow thieves. While the Soviet Communist Party’s official rhetoric condemned all criminal activity, it was criminal activity that may have helped sustain the longevity of the Soviet economy, and, consequently, the Soviet system. In fact, “bosses of the Soviet underworld had enjoyed a unique relationship with the mandarins of Communist society. No one in the government could openly admit it, but the clandestine smuggling networks saved the state’s industrial machine from choking on red tape. Circulating goods and services freely around the country, they were the Soviet Union’s closest equivalent to a service industry. The paralysis of the command-administrative economy after the 1970s made their role as free economic agents increasingly important” (p. 29). Gorbachev’s policies of perestroika, or reconstruction, and the later breakup of the Soviet Union, disrupted all political and economic relationships, including those in the Soviet criminal underworld. The state of flux endemic to change at such a grand scale upset the balance of power that the Soviet criminal underworld had been quietly enjoying. In the past, “the vory had been able to count on setting up mutual arrangements with police and government officials. Criminal life was predictable. Changes that eroded central authority also allowed new criminal groups from bases outside Russia—in particular from the Caucasus region—to move into territories once considered

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exclusive by the vorovskoi mir. Chechens,Azeris, and other armed gangs from the south challenged the cozy black-market monopolies held by the vory in Moscow and other large cities. They opened new fields of lucrative criminal activity, such as drug trafficking and gun-running” (p. 29). The new gangsters did not ascribe to the old code of honor.They took greater risks, moved into more commercial areas, and “commanded wealth beyond the dreams and ambitions of the old vory” (p. 42). It is important to emphasize that the overwhelming proportions of organized crime in Russia would not have been possible without the complicity of the government structures at all levels, starting with top Communist Party officials and ending with minor bureaucratic functionaries.What is remarkable is that the very initiatives associated with privatization and transfer of public property into private hands that were expected to bring freedom and liberalization to Soviet people became additional fodder for nourishing and strengthening the omnipresent tentacles of corruption. James Finckenauer and Yuri Voronin argue that “because of its connections to officialdom and to the shadow economy, organized crime took part in what has become the enormously lucrative scheme of privatization. As a result, the assets controlled by organized crime give it enormous economic power, and hence political power as well.These assets allow criminal organizations (in various guises) to deal directly with the state—on behalf of their own economic interests—from a position of parity” (Finckenauer and Voronin 2001: 7). Thus, organized crime has become a power unto itself in Russia, and it has the muscle to suppress any possible government initiatives that might counter or curb its free reign in the country. Of course, the greatest blow has been dealt to the justice system in Russia. Historically, Soviet judges were either on the take, just like other government officials, or were intimidated by their Communist Party superiors because the Soviet judiciary was first and foremost expected to meet the needs of the Communist Party. The break-up of the former Soviet Union created a unique historical moment for the Russian judiciary to establish its independence.That did not happen. Instead,“the failure—often deliberate— of the state to impose its authority left mobsters free to sabotage what had been the most inspiring promise of the second Russian revolution: to create a new society based on the rule of law” (Handelman 1995: 25). Indeed, post-Soviet Russia has been characterized by a massive tidal wave of corruption and organized crime. Louise I. Shelley argues that organized crime in post-Soviet Russia is so pervasive and oppressive that it is itself the new authoritarianism. This new authoritarianism supplanted weak government structures that at best were unable to fight organized crime and at worst colluded with it. According to Shelley, other features of this “authoritarianism of post-Soviet organized crime” include domination of the economy and ruling structures, intimidation of citizenry as well as the press, and the privatization of state coercion (Shelley 1997: 123). Examples of organized crime activity abound, yet there do not seem to be very many convictions of the perpetrators. For instance, the Russian

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Ministry of the Interior suspected that brothers Lev and Mikhail Chernoy participated “in an unsolved 1992 nationwide bank fraud that bilked the central bank out of as much as two hundred twenty-five million dollars, [yet] no charges were ever brought against the Chernoy brothers in Russia” (Brzezinski 2001: 173). Similarly, despite the disappearance of 600 million dollars, no charges were ever made against Boris Berezovsky, Russia’s biggest tycoon, who made “his money primarily by managing the cash flow of state-controlled companies like ORT-TV or Aeroflot” (p. 229). Coincidentally, Yeltsin’s daughter Tatyana and his son-in-law were both closely associated with Berezovsky (p. 229). In an interview, Umar, a close friend of Moscow’s mayor and one of Moscow’s crime cum enterprise lords, complained about the absence of a rule of law in Russia. He suggested that the unstable judiciary forced entrepreneurs to protect themselves, since no formal means of conflict resolution existed. Matthew Brzezinsky, who was interviewing him, concluded that “it was unfortunately easier to settle disputes with a gun than through the courts. It was cheaper, too. Of the eighteen hundred people murdered in Moscow in 1997, nearly a third were the victims of contract killers— who were almost never caught” (p. 246). Once again, numbers speak for themselves.According to the estimates of Russia’s Interior Ministry,“53,000 crimes were committed by government officials alone in 1999—an increase of 36 percent over 1998. Corrupt politicians and bureaucrats as well as crooked businessmen and organized crime syndicates are left alone by the police and prosecutors. So it is hardly surprising that 85 percent of Russians believe most officials are corrupt and that 89 percent think that a small group of super-rich run the country” (Webster 2000: XVI). As recently as 2002, Slavneft, a major crude oil concern, was sold off by Russian government officials to a favored private conglomerate without competitive bidding.While Slavneft was officially sold off at an auction, the machinations around the deal scared off all potential bidders so that in the end the auction was a purely pro forma undertaking (Amirov 2003: 1, 3). Hence, it is not surprising that ordinary Russians can at best be cynical about their prospects of socioeconomic advancement in a society so deeply engulfed in corruption. It is common knowledge among Russians that one cannot go into business without some sort of formal protection, referred to as krysha, that is, “roof ” in Russian (Brzezinski 2001: 237). Needless to say, this formal protection would come from informal sources, such as organized crime units. However, given the notorious flight of capital out of Russia, it is reasonable to argue that no one, including the crime bosses or top-level government officials, feels safe and protected in post-Soviet Russia. By some estimates, flight of capital out of Russia in the 1990s has “ranged from one hundred fifty to three hundred billion dollars—the equivalent of nearly four times Russia’s entire federal budget” (p. 299). The West has been unwittingly complicit and has unknowingly fed the criminal activities in Russia. According to some knowledgeable Russian

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government officials, “65 percent of all Western aid to Russia has made its way into foreign bank accounts” (Webster 2000: xvi). In fact, William Webster argues that the West was an accomplice for neglecting to monitor the aid provided and for supporting “the very individuals involved in abusing this aid” (p. 9). How has the Russian government officially responded to this level of corruption? First, many anticorruption decrees have been issued both by President Yeltsin and his successor, President Putin. However, it is fair to comment that both the law enforcement authorities and the Russian population are so inured to the symbolic nature of such decrees that no measurable results have been attained. In addition to being little more than empty promises, these decrees may, in fact, be illegal because they may contradict preceding judicial and legislative decisions or sanctions (p. 25). Since the December 25, 2001, break-up of the Soviet Union, many changes have been introduced to the Russian criminal code. “Among the changes relevant to organized crime are increased sanctions for crimes committed by groups (and especially for their leaders) and new provisions on extortion. As with other legal changes, however, there has been a continuing problem of weak law enforcement and an overall weakness of governmental authority. As a result, the law in the books is not the law in practice” (Finckenauer 2001: 9). When it comes to the governance of Russia, outside observers as well as millions or Russians themselves believe in the “strong arm” theory, which postulates that Russia needs an almost totalitarian leader to prosper. Indeed, throughout its history Russia has had many such leaders, from Ivan the Terrible to Peter the Great to Josef Stalin to Yuri Andropov. Hence, when Vladimir Putin, the former chief of FSB, Russia’s successor to KGB, succeeded Yeltsin as President on New Year’s Eve in 1999, many thought that perhaps his advent to power would signal an end to both government corruption and to the unbridled reign of organized crime. In fact, President Putin has made pronouncements that he favors “a dictatorship of laws” (Webster 2000: xiii). Ten of Putin’s first 24 high-level appointments were drawn from the pool of his former KGB and FSB colleagues, and Putin praised Yuri Andropov, the former head of the KGB who became the Communist Party chief succeeding Leonid Brezhnev in 1982 (p. 14).3 Former President Yeltsin’s reputation has been tarnished and he, in turn, has affected the reputation of President Putin. Indeed, Yeltsin proposed Putin for the presidency. Upon becoming interim president, Putin’s first official decree granted immunity to President Yeltsin and his family members. Putin’s grant of immunity from prosecution to Yeltsin is important because, earlier in 1999, prior to Yeltsin’s resignation, Yuri Skuratov, the prosecutor general of the Russian Federation, had been cooperating with Swiss authorities, investigating capital flight out of Russia. This investigation heavily implicated Yeltsin, his family, and their inner circle. Yeltsin’s administration tried to pressure Skuratov to resign. However, the Duma, Russia’s Parliament, turned down Skuratov’s request for resignation

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(p. 29). But, “by April 2000, the new Federation Council, under Putin’s direction, gave Skuratov his walking papers.” Putin’s challenge is to oppose corruption “without undermining his own power base. If he takes on the oligarchs, does he not run the risk that they would then blow the whistle on Putin’s own collusion with the Yeltsin family?” Those who were corruptly involved with moving billions of dollars out of the country during the 1990s “are also the same people who picked Putin from Yeltsin’s entourage as the most likely to protect their entrenched position” (p. xv). Since Putin’s ascent to power, the proposed drafts of anticorruption legislation in Russia have been highly controversial because of their conflict with and encroachment of personal privacy and individual rights issues. This is because the proposed new laws are focused on the detection of corruption rather than punishment. Meanwhile, “official corruption remains rampant. There is no witness protection program” and the “legal apparatus and law enforcement resources for fighting organized crime remain undeveloped and inadequate” (Finckenauer 2001: 9, 10).

Whistleblowing In the West, whistleblowing is often encouraged and is one of the more widely used responses in combating corruption. However, whistleblowing is relatively rare in present-day Russia. One might argue that perhaps Russians are so profoundly disillusioned by their government and are so fearful of the criminal entities that they would not venture to blow the whistle. However, the explanation for the lack of whistleblowing has more to do with its historic role in Russia. Throughout the course of Russian history, including the periods of imperial, Soviet, and post-Soviet rule, whistleblowing has had a profound influence on Russian sociopolitical culture. However, in contrast to the more positive spin whistleblowing has in other countries, it has a distinctly negative meaning in Russia. The closest and widely used words that approximate the meaning of “whistleblowing” in Russian are “donos” or “donoschik,” which stand for “the act of informing” and “informant,” respectively. Both of these words have the somewhat negative connotation of turning someone by acting like a snitch, as opposed to the more neutral or positive interpretation given to the mere act of communicating information or exposing wrongdoing. This more negative connotation of the Russian terms is confirmed by the availability of a wide array of derogatory slang words denoting the same meaning of turning someone in. Indeed, donos was so widespread during the period of Stalinist repressions that the year 1937, a year when donos was most viciously practiced, is actually used in the Russian language as a substitute word for donos-related activities. For instance, a modern-day Russian whose boss told him to keep an eye on his coworkers’ activities might say with indignation, “He thinks it’s 1937 all over again.”

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The following whistleblower case reflects both the realities of modern-day Russia and the attitudes of the Soviet period. Past experiences of whistleblowing have thoroughly discouraged the practice. It is risky business for the rare individual who opposes corruption, as the next example illustrates. Zhirov’s Whistleblowing Case Aston Martins, luxury yachts, millions of carats of diamonds, tons of gold coins, and other looted treasures, along with beaten police officers, corrupt public officials, fake passports, and fleeing individuals are all elements appropriate for a riveting suspense or mystery novel, or an action-packed movie. However, all of them are facts involved in a recent whistleblowing case in Russia. The major events of this drama surfaced in February 1994, when the elite of San Francisco society, including Mayor Frank Jordan, the chief of police, and many other politicians convened at a party celebrating the opening of Golden ADA, a diamond-cutting and polishing operation from Russia that promised to turn San Francisco into a world-class diamondprocessing center. To thank San Francisco for its hospitality, Golden ADA owners presented the city police with a Kamov Ka-32 Russian helicopter designed for military transport (Kaplan 1998: 28). The majority owner of ADA, Andrei Kozlenok, had only recently appeared on the San Francisco scene from Moscow, “boasting of connections to high-ranking officials and wielding an apparently bottomless checking account” (p. 28). Kozlenok’s mentor in Moscow was Yevgeni Bychkov, who was chairman of Russian Federation’s Committee on Precious Metals and Gems, a position at the ministerial level (equal to a cabinet appointment in the U.S. administration), which provided him with access to “the Closet,” shorthand for the “handful of underground repositories that hold the national treasury of the Russian Federation” (p. 29). Separately, Kozlenok had been involved in a “series of money-making ventures with the Moscow police department,” where in one instance he “had hired top police officials and some of [the business] funds had mysteriously disappeared” (p. 28). It is noteworthy that Bychkov, Kozlenok’s mentor, who had earlier been head of the Soviet State Treasury, had repeatedly been investigated for wrongdoing and “twice he [had] lost his job for apparent misconduct, including the 1990 loss of $22 million in expected revenues from secret diamond sales” (p. 29), a fact that did not deter Yeltsin from appointing him to his new position in the Russian Federation’s Committee on Precious Metals and Gems. In 1992, in his new capacity, Bychkov and his agency came up with a plan allegedly aiming to undo the monopolistic control of De Beers in the diamond market. According to this plan, Moscow would set up a diamond center in the United States and ship the firm—Golden ADA—a half-billion dollars of goods from the State

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Treasury . . . [as] collateral to obtain a line of credit from the Bank of America—enough capital to finance the firm’s entry into the world diamond trade. But even Bychkov could not single-handedly authorize the transfer of so much national treasure. He obtained the agreement of the state budget director, officials from the foreign trade and customs bureaus and, ultimately, Finance Minister Boris Fyodorov, one of Yeltsin’s top “reformers.” . . . In San Francisco, Kozlenok and his men soon were opening pouch after pouch of polished Siberian diamonds . . . 26,000 carats in all— enough to fetch $20 million on the market. . . . Crates arrived packed with fine silver: antique plates, tableware and rare coins. . . . The gold arrived not by the pound, but by the ton. . . . Bychkov and company were just getting started. (Kaplan 1998: p. 29) Instead of using this shipment, worth $90 million, as collateral for a bank loan, Kozlenok went on a shopping spree. For instance, while the asking price of the building wanted for the Golden ADA was $6 million, Kozlenok offered nearly $11 million, almost double the asking price, in order to close the deal within a week. He spent over $1 million for a Rolls-Royce and two Aston Martins, $1.2 million for a trio of luxury yachts, $3.8 million for three posh homes in San Francisco, and $18 million for a Gulfstream twin engine corporate jet. Additionally, he acquired a 40-foot high-speed cigarette boat and some 15 other vehicles, along with five Lake Tahoe luxury condo sites worth $4.4 million (p. 30). It is noteworthy that despite this extravagant shopping spree, certain steps were taken to ensure the appearance of legitimacy in the functioning of Golden ADA. Overall, there were no signs of concern from Moscow. However, the American customs officials became suspicious and tipped Interpol. Eventually, Major Victor Zhirov, a member of the Moscow police force, learned about the operations of Golden ADA from FBI’s Moscow agents, and he took on the case. Ordinarily, at least by Western standards, a police officer investigating criminal activities is doing his job. However, in Russia a cop who takes on the challenge of uncovering a scheme of looting the national treasury, a scheme “abetted by corruption that reached the highest levels of the Russian government, perhaps into the office of President Boris Yeltsin” (p. 28), is more like a whistleblower (as will be more fully explained in the analysis to follow). As Zhirov worked the case—largely alone—he found the going tough. Again and again, officials assured him that the diamonds were in good hands.Worse, Zhirov couldn’t gain access to key documents. Finance Minister Fyodorov, who had signed off on the deal, had classified everything tied to the company—contracts, correspondence, customs declarations. (p. 30) Determined to further pursue the case, Zhirov contacted his FBI counterparts requesting to visit Golden ADA in San Francisco, where he found

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documents not available to him in Moscow and verified how much had been looted from the Russian state treasury. As a result, Zhirov uncovered a “conspiracy to loot the national treasury” (p. 36). A de facto whistleblower by choice, Zhirov was conducting the investigation at his own peril. Right before he departed for Moscow, a thug pulled a knife on one of his aides in the Moscow subway, saying “Stay away from Golden ADA” (p. 36). Upon his return from San Francisco,“while walking his dog, Zhirov was jumped by two men and savagely beaten. ‘Stop the Golden ADA investigation,’ one yelled,‘or next time we’ll kill you!’ Zhirov ended up at the hospital, bloodied and with a concussion.” As a result of Zhirov’s investigation it was uncovered that $178 million worth of goods had been shipped to Golden ADA. $40 million was wire transferred to Moscow, of which “some $400,000 was headed to a presidential book fund to finance the printing of Yeltsin’s autobiography, but somehow the cash disappeared along the way. . . . Some Moscow press accounts claim the money was funneled into Yeltsin’s re-election campaign” (p. 39). The fallout of Zhirov’s investigation included the following: of the plundered $178.00 million in treasure, the American IRS seized $40 million, of which only about $25 million went back to Russia; Kozlenok fled the United States and was arrested in Greece with a fake Greek passport; he was extradited to Russia, where, according to his testimony to the Greek court, he feared that he would be killed; and only days later one of Kozlenok’s business partners was found hanged by his sweater in a prison cell: Bychkov was arrested for “criminal negligence” and violating foreign exchange law and was summarily fired by Yeltsin. Bychkov’s entire agency was disbanded, and control of the national treasury was turned over to the Finance Ministry. Thirteen others were indicted, including top officials on Bychkov’s staff and in the Ministry of Foreign Economic Relations. Facing a 10-year sentence, Bychkov admitted his guilt when, weeks later, along with eight others tied to the case, he was pardoned under a general amnesty that marked the 50th anniversary of the end of World War II. The ever resourceful Bychkov is now vice president of one of Russia’s largest banks and remains a power in the nation’s diamond industry. (p. 40) Notably, for his efforts on the case, Victor Zhirov was promoted to colonel in 2000. And when his investigation moved into its fifth year, he suspected that his case would be prosecuted by people who would cave under political pressure . . . and he was right (p. 40). In the end, while Kozlenok was arrested, and Bychkov was arrested, convicted, freed by amnesty, and removed from his government post, no major shake up took place within the government of Russia. Many individuals clearly must have had complicity in the Golden ADA affair, because Kozlenok and Bychkov could not have pulled a scam of such monumental

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proportions on their own without the support of other high-ranking government officials. Whistleblowing in the Context of Russian History Why does the story of Victor Zhirov deserve to be reported as a whistleblower case? To demonstrate how unpopular, unhealthy, and unrewarding exposing wrongdoing is in contemporary Russia, even for a police officer. But this was not always the case. In his analysis of the sociophilosophical experience of informancy in Russia, Sergei Korolyov concludes that it had become a national pathology whereby everyone informed at all times on everyone else, often breaching sacrosanct ties, for instance, when children informed on their parents and parents informed on their children (Korolyov 1996: 29). The historical roots of informancy in Russia run deep. Even in pre-imperial Russia of the seventeenth century, the population often resorted to sending letters turning people in for a variety of sins. According to Korolyov, informancy in Russia turned into a means of survival and into a form of social control. “In other words, informancy became a natural means for the mechanics of governance dominating the society ” (p. 33).Yet because it was an integral part of the fabric of Russian society, Korolyov concludes that “for centuries, informancy was not considered to be something deplorable in Russia, rather, informancy can be viewed as a norm of mutual relationships between an individual and the state” (p. 35). In fact, as Kristjan Kristjansson (1996: 65) would argue from the perspective of moral responsibility, informancy in Russia came to represent a perfect responsibility, that is, a social expectation that an individual had an absolute duty to fulfill. Not surprisingly, for a long time in the history of Russia’s legal establishment the act of failing to inform on someone was viewed as a crime (Korolyov 1996: 35). The act of noninformancy was criminalized in Stalinist Russia as well. Then came a short period, in the post-Stalinist Khrushchev era, when this was not so. At the beginning of the twentieth century, as the Russian society evolved, for the “best off ” informancy came to be viewed as a deplorable act (p. 40).This was not true for the less well-off. While the more educated strata of the Russian society turned away from informancy, informancy retained its lure only for the lowest, least powerful segments of the society, which were most dependent on the government and could resort to informancy to gain favors (p. 41). In Russia, this social dependency on the government, coupled with the expectation of possible rewards from the latter, often bred the type of informancy or “whistleblowing [that is] grounded in opportunistic self-interest, where the whistleblower fabricates a problem for self-protection or gain” (Perry 1993: 81). Informancy was again in favor after the Great October Socialist Revolution of 1917. The newly forming Soviet regime adopted the practice of informancy with a vengeance.The major shift in the regime’s use of

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informancy was in the change of the incentive system supporting the informants. Instead of paying out monetary rewards to the informants, the new Soviet state instituted the practice of potential expropriation, thus endangering the already paltry property of the lower classes (Korolyov 1996: 47). The Soviet state further cemented the practice of informancy by making failure to inform an illegal act. Article 58-12 of the Russian Federation’s Criminal Code allowed for severe penalties, up to and including capital punishment, for failing to inform (p. 49). The wide application of this statute allowed for further fusion between informancy and the controlling power of the Soviet totalitarian regime. Informancy was encouraged in Russia not only through the legal system but through engineering sentiment. An elaborate campaign on the part of the government helped to create and foster a sentimental cultural value glorifying informancy. Stories supporting informancy became legend.The case of Pavlik Morozov is illustrative. Pavlik was a boy, a young pioneer, who turned his father in for refusing to give up all the food he possessed to the state, and for instead hiding and storing food supplies that had been meant to feed his family. As a result, Pavlik’s father was executed. Pavlik’s story was glorified, became part of the mandatory state-approved curriculum in elementary schools, and was used as an honorable example of youthful dedication to the state, as the embodiment of patriotism. The Soviet government realized the power of the school system in shaping young minds and capitalized on it to build a system of values that would orient children toward total acceptance of informancy as part of their patriotic dedication to the state. Peter Veil and Alexander Genis (1996: 118) argue that in the Soviet system “the school [taught] that the duty of an informant supersedes the mercy of the person who covers up. . . . The child is faced with the alternative to betray his friends or his motherland, which has secured a happy childhood for him. The child must remember that failure to inform is a crime” (p. 118). In fact, this was one of the cornerstones of the Soviet rhetoric. Veil and Genis rightfully conclude that in the Soviet system “the school [tried] to replace [children’s] sense of morality with civic duty” (p. 118), which inevitably required informancy. Thus, informancy became a perfect responsibility for Soviet citizens (Kristjansson 1996), a duty to be fulfilled at all times and at all costs. Sergey Korolyov (1996: 50, 51) argues that Soviet Russia returned to the values of the pre-civic feudal society by demanding that people constantly prove their dedication to a higher authority, and “informancy turned into one of the forms of that type of civic duty.” In the period following the Great October Socialist Revolution of 1917 the incidence of informancy grew steadily, culminating in the mid to late-1930s. As evidenced by the hurricane of informancy that swept the nation in 1936–1937, the Soviet state was quite successful in inculcating its population with the idea that civic duty equaled informancy. In this period, informancy spread like the plague. From the accounts of the time, one gets the impression that people seemed to be in a race trying to outnumber and outdo one another in their efforts of informing on others.

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Often, the nature of allegations bordered on insanity. Perhaps, they are best typified in Tengiz Abuladze’s famous film Repentance, which depicts the horrors of the era. It is noteworthy that this film was shelved by the Soviet government until Mikhail Gorbachev’s ascent to power and his institution of the policy of glasnost—openness in expression. In one of the film’s scenes, a gentleman subjected to multiple cruel and atrocious beatings by the authorities confesses that he had indeed ordered an underground tunnel to be dug between Bombay and Berlin in an effort to overthrow the Soviet state. Unfortunately, the grotesque sound of this confession was all too real at the time and in line with many of the allegations that ultimately sealed people’s fates and resulted in their being sent off to the GULAG (Gosudarstvennoye Upravleniye Lagerey—State Management [or Authority] of [Labour] Camps) or straight to the death squad. In that era, the terror and the state’s hold over the psyche of the people were so powerful that the public mentality morphed into a new form of informancy—informing on oneself. Sergey Korolyov argues that in reaction to widespread informancy, people attempted to save their souls and to earn the state’s leniency by trying to inform on themselves before others got to do it (p. 56). Also, the Soviet government started using the statecontrolled media to further instigate fear and terror among the people. Korolyov notes that informancy became a public phenomenon, whereby lists of heroic informants were published in newspapers along with the names of those sinners that had been turned in (p. 58).This publicity campaign contributed to the further inculcation of the population with the idea that informancy was a positive sociopolitical value to be emulated by all civic-minded citizens. Most importantly, a civic-minded citizen had to put the needs and ideology of the “collective,” the group, above any personal beliefs, ideals, and morality. This rhetoric was crystallized in the policy of “us versus them,” with “them” being the “enemies of the people.” The implementation of this socially polarizing policy was achieved through the unrestrained practice of informancy, which had a solid network of institutional and popular support. The population was urged by the government to constantly seek and find the “enemies of the people” in their midst. There were no official rules on who and what constituted being an enemy of the people.While the Soviet constitution guaranteed the freedom of speech, invoking that freedom, especially to criticize the government, was often enough to get someone into trouble, and an unsuspecting individual making an innocuous comment could end up being labeled an enemy of the people and facing all the dire consequences entailed by that label. People soon learned not to question any of the government’s acts, especially not to ask what a given individual might have done to become an enemy of the people (Bobkov 1995: 111). However, it is clear that the process of uncovering the “enemies of the people” was fueled solely by the reports of the informants. In the meantime, the number of the enemies of the people in the Soviet Union grew substantially, and people who were

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related to or otherwise associated with the enemies of the people themselves were often implicated, or at least their reputations were “stained” (p. 118). The institutional support for informancy was provided primarily by such organizations as Natsional’nyi Komitet Vnutrennikh Del (National Committee of Internal Affairs, NKVD) the predecessor of KGB, and by the Communist Party apparatus. These institutions drew on millions of paid informants within all social strata. Although the Soviet Union never released the official statistics on the numbers of agents working for the state in the capacity of informants, it has been estimated that at least 2,800,000 people worked as official informants (Korolyov 1996: 68). This number does not include the hordes of volunteers who wholeheartedly embraced informancy with their actions. In his book KGB and Power, Filipp D. Bobkov, a Soviet army general whose 45-year career culminated in his appointment as vice-chairman of the KGB, wrote, “Pondering over the nature of a phenomenon such as informancy, I conclude that there were many ‘volunteers’ who were borne by the atmosphere reigning over the society” (1995: 130). Remarkably, neither the professionals within the NKVD and the Communist Party apparatchicks, nor the unofficial volunteer informants and agents drawn from the masses were immune from the terror of informancy themselves. Bobkov recounts a story in which an agent informed on a group of people who were allegedly planning to attack Stalin, a very serious charge. However, as a young NKVD operative, Bobkov was able to establish that this agent’s charges were false. Upon being discovered, the agent casually mentioned,“I regret that you are not interested in information on terrorism” (p. 129), a thinly veiled threat aimed at Bobkov himself. Needless to say, Bobkov found himself in the dilemma of having to either wrongfully punish an innocent group of people or become a victim himself. It follows from this example that while in the West “the whistleblower is at a disadvantage when compared to other dispute contexts” (Perry 1993: 80), the Soviet model of whistleblowing or informancy put the informant in a rather powerful position. However, that power might have been fleeting because, ultimately, nobody was immune from the rant of the informant. According to one account, even Yuriy Andropov, the head of the KGB in the Brezhnev era, was concerned that he was being watched and that an informant might communicate to the Communist Party head, Leonid Brezhnev, Andropov’s possible failings in performing his duties (Korolyov 1996: 62). In reviewing the records of the past, especially of the Stalinist era, it becomes apparent that the only limits on the often false charges being fabricated by the informants were imposed by the boundaries of their imagination. For instance, Bobkov cites a story of an informant who reported a crime would be discussed at a meeting (p. 131). Unbeknownst to this informant, a recording device was planted in the meeting spot by NKVD.While the recording did not reveal any evidence of a crime being planned, the informant came back with an even more heinous story. Confronted with the facts contradicting him, the informant refused to

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explain his motives. Pondering over the nature of this informant and informancy in general, Bobkov concludes that people had begun fabricating lies, even without incentives, just for the sake of turning people in (p. 131). Thus, informancy in Russia in the late thirties had a tight grip over the psyche of the population and had turned into a force serving to fortify the foundations of the totalitarian Soviet regime.This unrestrained terror bred by informancy continued until Stalin’s death in 1953. In 1956, Stalin’s successor, Nikolai Khrushchev, the new Communist Party premier, criticized the repressive policies of Stalinism at the XX Congress of the Communist Party. Because informancy was at the heart of the Stalinist repressions, it was now expected that informancy would be renounced and would wither away. Indeed, certain changes did result following the XX Party Congress. This historic Congress ushered in the era that came to be known as the “thaw” in the Soviet Union, with somewhat greater openness and freedoms permitted in society, especially in areas of artistic expression and freedom of speech.As far as whistleblowing is concerned, the phenomenon of informancy was no longer widely publicized or glorified. Nevertheless, because it had become so firmly enshrined in the bureaucratic systems of many institutions, informancy persisted, but now it was practiced anonymously. Anonymous informancy, which existed since the inception of the Soviet Union, became the most prominent form of informancy from the late 1950s until 1985, when Gorbachev issued a decree outlawing any state or legal investigative or punitive actions pursuant to anonymous informancy and whistleblowing. Until then, any anonymous case of informancy or whistleblowing would impose the burden of proof on the accused, thus making it, as already described, a wide open field for people to hurt or destroy those they disliked. Filipp Bobkov states that “Any ‘smart-ass’ could write an anonymous note, however, to get rid of the accusations, the accused had to expend enormous efforts and had to show immense courage. Not every bureaucrat would be willing to throw away an anonymous complaint” (p. 233). The practice of anonymous informancy became especially important in restricting people’s ability to travel abroad. The Soviet system had to issue a permit, akin to an exit visa, to people wishing to travel abroad. Foreign, especially Western, countries were alluring to the Soviet people, whose government tried to restrict their access to information in any way possible. Hence, trips abroad became a desperately sought prize for Soviet people. At the same time, anonymous informancy was a potent hindrance in the way of that coveted prize. In counting the numbers of informants in Russia, one must make a distinction between anonymous informants and agents that were officially functioning for the state to collect information.The agents employed many methods of collecting information. Among other things, sometimes they would stand in the long lines for food or other products and eavesdrop on people’s conversations. Since anonymous informancy would impose the

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burden of proof on the alleged wrongdoer, complicating his or her life, millions of people resorted to anonymous informancy either to even scores or to produce results that the legal system had failed to resolve.As was mentioned earlier, it is estimated that during the Soviet period, over 2,800,000 people were enlisted by the Soviet authorities to serve as informants. James Perry argues that the definition of whistleblowing assumes “that the whistleblower is not a passive participant or bystander who merely initiates the process by reporting a claim of wrongdoing” (1993: 81). However, it is exactly this passive model of whistleblowing, or informancy, that prevailed in Russia. All an anonymous whistleblower had to do to put the wheels of the Soviet bureaucracy in motion was to, in James Perry’s words, “merely initiate the process by reporting the claim of wrongdoing.” Such a passive mode of whistleblowing completely liberated the potential anonymous whistleblower from shouldering the subsequent burden of social and public exposure that is so strongly associated with whistleblowing in the West. In the end, until the collapse of the Soviet Union, informancy remained one of the most prominent features supporting and associated with the Soviet regime. With the end of Soviet power and with the advent of the post-perestroika era in Russia, the Russian people went through a difficult transition. One significant result of the post-Soviet changes was that the public rejected purely Soviet forms of social relations. Informancy, which continued to retain a strong association in the minds of people with purely Soviet forms of repression, withered away. Modern-day whistleblowing practiced and often praised in other countries is primarily concerned with exposing wrongdoing. But it is impossible to blow the whistle without turning someone or some practice in to one’s superiors or authority. As a result, in Russia whistleblowing is equated with informancy, and, consequently, whistleblowing is now viewed as a negative and undesirable phenomenon. Informancy is perceived as an unacceptable phenomenon even when it comes to such basic concepts as upholding the honor code in schools. As a Moscow State University professor says, “Our students don’t understand why American professors are so angry when students are supposedly cheating. We have a sort of collectivist mentality. If someone reports that he saw a student cheating, it would be considered a very bad thing. His business is to support his friend, not report on him” (MacWilliams 1999: B4).Additionally, when the cultural reluctance to blow the whistle is coupled with the reign of fear inflicted by organized crime, whistleblowing becomes an impossible proposition for the average Russian. Thus, people in modern-day Russia may be interested in exposing wrongdoing in principle, but they are reluctant to take the steps of informancy that whistleblowing requires. This may result in a classic conflict between an espoused theory and a theory in use (Argyris 1992: xxviii), which means that certain beliefs held by people may not readily translate into actions.This is the case with the Russians’ present-day attitudes toward exposing wrongdoing.They may have a desire to act, but they fail to blow the whistle since to do so symbolizes the evils of the Soviet era.

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This uniquely Russian attitude is illustrated in a recent study of corporate crime. Two social scientists sought to understand “how citizens judge individual actors who participate in wrongdoing within a corporation’s organizational hierarchy” (Hamilton and Sanders 1996: 514).To attain this goal, they conducted a cross-cultural study by presenting vignettes of corporate wrongdoing to people in the United States, Japan, and Russia.Their findings showed that, “at least in theory, [Russians in the sample vignettes were] highly critical of unthinking obedience and highly supportive of whistleblowing” (p. 534). Russians are, indeed, bothered by unpunished acts of wrongdoing and want to see that the wrongdoing is exposed. But Russians are unwilling to trust their government to help expose and punish organizational wrongdoing. Consistent with not trusting the government, 65 percent of Russians but only 26 percent of Americans agreed with the statement that there should be less government regulation of corporations. In part, “Russian respondents may have been reacting to what they perceive to have been a society in which the state was overly intrusive” (p. 534). This negative feeling toward government action, felt by many Russians, reduces whistleblowing.After all, government action is necessary for carrying out a successful act of whistleblowing. For example, whistleblowers frequently rely on government action for formal protection against retaliation, and government action is often required to address and correct the problems the whistleblower exposes. Widespread and systemic government corruption needs to be addressed by knowledgeable insiders. But a situation of widespread corruption least invites whistleblowing. In the Golden ADA example, the pilfering of Russia’s treasury involved a variety of state agencies and a wide web of individuals. Presumably, there were or might have been some who believed the corruption to be wrong. The pervasiveness of the corruption combined with lack of trust in government helps explain why not a single person came forward to try to expose the massive criminal wrongdoing that was occurring. With Golden ADA, red flags on the case were raised by the American police force, but even then, the Americans got very little support from the Russian side. Indeed, as already described, only Victor Zhirov, a top brass Moscow police officer, embraced the investigation of the Golden ADA’s case. And he acted alone, not receiving any support or cooperation from other Russian governmental agencies. Instead, he was beaten and hospitalized while his aides were threatened. Ultimately, no major punishment was meted out as a result of his investigation. Zhirov had exposed a scheme involving top government officials, and, hence, it is not surprising to observe that his investigation was hampered. This case reveals the degree of corruption that has engulfed today’s Russia. Corruption prevents people from acting. Even the Russian press was unable to stimulate action against the pervasive corruption. Zhirov’s investigation was indeed covered in major Russian publications, yet no massive public action followed.

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The analysis of Russia’s historical approaches toward informancy, anonymity, and whistleblowing makes it easy to understand why there is relatively little whistleblowing in modern-day Russia despite reports of rampant corruption. Whistleblowers are stigmatized and run the risk of serious retaliation, facing the triple jeopardy of being crucified by the court of public opinion, being persecuted by organized crime, and tried within the formal legal system that often relies on arcane or, better yet, secret laws that are atavisms from the Soviet period.As a result, the number of whistleblowers in Russia is negligible. Even individuals whose job is to expose wrongdoing are branded as whistleblowers if they go about their responsibilities with a sense of duty and zeal. However, despite all the hurdles facing whistleblowers in Russia, a new breed of whistleblowers appears to have evolved there over the past decade. The representatives of this new breed of whistleblowers have one thing in common—reliance on support from outsiders, especially foreign foundations, international organizations, and human rights groups. Also, they have blown the whistle on issues that potentially extend far beyond the borders of Russia proper, because of serious consequences for the environment. They are often referred to as “environmental whistleblowers.” Despite solid support from foreign organizations and massive international publicity, these individuals have had to show distinct courage because of the very real consequence of the security police knocking on their door. That is exactly what happened to Aleksandr Nikitin and Grigory Pasko. Aleksandr Nikitin was a former naval officer who was working as a researcher for the Bellona Foundation, a Norwegian environmental group that was established after the 1986 Chernobyl nuclear plant disaster. The foundation was able to support him and keep his case in the public eye, worldwide. Nikitin simply reported radioactive contamination. “It was in the best tradition of the KGB,” as Nikitin’s wife Tatyana put it in an interview with the New York Times, when she recounted the incident of her husband’s early morning arrest (Gordon 1996:A1).When they came after Nikitin on February 6, 1996, his apartment’s telephone line had been disconnected, so neither he nor his wife would have an opportunity to immediately alert anyone about his arrest. In fact, Nikitin “was charged with treason for helping to publicize radioactive contamination caused by the Russian Northern Fleet. Denied bail, he [was held] in a former KGB prison for nine months” (p. A1). Over the next five years, Nikitin was in and out of prisons, as his case was bounced between many Russian courts. He attained final victory only on September 13, 2000, when a final and irreversible decree was issued by the Presidium of the Russian Supreme Court in response to the appeal of Russian prosecutors requesting that Nikitin’s acquittal be reversed. Grigory Pasko, currently editor-in-chief for Bellona Foundation’s Russian language magazine, Ecology and Rights, who reported on the

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Russian Pacific Fleet and its mishandling of nuclear waste, met a fate similar to Nikitin’s. Pasko was arrested on November 20, 1997. Unlike Nikitin, Pasko was never acquitted. He maintained his innocence through two military trials.When one of the military trials handed down a sentence of four years in a hard-labor camp in December 2001, the sentence “brought him the support of international environmental and human rights groups and he was named the third Russian prisoner of conscience—after Andrei Sakharov and Bellona’s Alexander Nikitin—by Amnesty International” (Digges 2002: 1). According to Charles Digges, who covered the story, when Grigory Pasko was working as a reporter for Boyevaya Vakhta, a newspaper for the Pacific Fleet, he took notes of a meeting with top navy officials. Subsequently, he was charged for passing those notes on “secret naval manoeuvres” to the Japanese press. In December 2001, Pasko was acquitted of those charges by the Pacific Fleet Court. However, he was found guilty of allegedly intending to pass the notes on to the Japanese media. Earlier, in 1999, the very same court had found him not guilty of treason, but “convicted him of abuse of his official authority for his supposedly negligent contacts with the Japanese media, which included passing Japanese television a videotape made in 1993 that showed Pacific Fleet ships illegally dumping nuclear waste in the Sea of Japan. Pasko was immediately amnestied, but he appealed the conviction to the Supreme Court” (Digges 2002: 1). As a result of his appeal to the Supreme Court of Russia, a new trial was set for Pasko on the same treason charges of which he had been found not guilty earlier.This time, Pasko was found guilty of treason.The unanimous opinion of the Bellona Foundation, human rights groups around the world, and Pasko’s own attorneys was that these treason “charges were fabricated by the FSB and relied heavily on two now-defunct secret Defense Ministry decrees—Nos. 010 and 055” (Digges 2002: 1). The secret decree 055 was invoked most often by Soviet and Russian courts. It prohibited servicemen from revealing information listed as classified but it affected “any user of information,” including civilians (Digges 2002: 1). Pasko appealed to the European Union Court of Human Rights “to address prosecutors’ violations of the Human Rights convention. Among those rights spelled out by the convention that were violated in the Pasko case are the right to determination of criminal charges within a reasonable time; the right to a fair trial; the right not to be tried retroactively and under too extensive an interpretation of existing legislation; and the right to freedom of expression” (Digges 2002: 1). It is obvious that in blowing the whistle both Aleksandr Nikitin and Grigory Pasko may have been emboldened by their association with and support by Bellona Foundation, a prominent and powerful environmental group capable of capitalizing on the reach of the world media. Nonetheless, both Nikitin and Pasko encountered stiff resistance from the Russian state, which exercised its full powers, often drawing on arcane laws and legal constructs in the spirit of best Soviet traditions.

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The immense difficulties that Nikitin and Pasko lived through demonstrate how public or government officials who expose wrongdoing in effect become whistleblowers, even though exposing wrongdoing may be part and parcel of their job descriptions. Such was the case of Colonel Victor Zhirov as well as the more recent trials of Russia’s prosecutor general,Yuri Skuratov. In his official capacity, Skuratov was cooperating with Swiss authorities in his efforts to investigate capital flight out of Russia and demonstrated that he too, by just doing his job, was acting as a whistleblower. Hence, while corruption may be rampant in today’s Russia, given the accompanying stigma and difficulties associated with whistleblowing, it will not easily become a mechanism to expose corruption and wrongdoing. Those few whistleblowers who dare to step forward help redefine whistleblowing in Russia, albeit incrementally. It is possible that acquainting the Russian legislators and the Russian public with Western whistleblower experiences might encourage Russia to revisit its approach and assumptions about whistleblowing in practice. But the history of whistleblowing and informancy in Russia also offers a lesson for the West. Russia reminds us of the dark side of whistleblowing. Russian history exposes the evil and social terror that can be unleashed by the unrestrained practice of informancy, especially when it is carried out anonymously. Modern posters encouraging anonymous tips or advertising hotlines to report misdeed trigger historic memories in Russia where anonymous tips were turned into tools of oppression. Summary and Conclusion While the official Soviet propaganda denounced corruption as an atavistic remnant from the pre-Soviet tsarist era, the entire Soviet system rested and operated on corrupt practices. These practices thrived primarily because of the use of illegal influence to attain goals inconsistent with formal meritocracy, and because of the need to meet exaggerated production quotas established by the Communist Party apparatus. Sometimes, even individuals charged with the responsibility of combating corruption would engage in further cover-ups, fearing that exposing the true extent of corrupt practices would endanger their livelihood.Thus, the wheel of corruption kept turning and turning, pulling the society into an entangled web of corrupt practices. Corruption in Russia was closely tied to the Russian criminal underworld, which grew out of the Russian prison culture, where so-called “thieves-in-the-law” were coronated. These thieves commanded immense power, despised the Soviet authorities, yet simultaneously had many Communist Party apparatchiks on the take and within their control. Eventually, the economic mechanism of the Soviet Union became so dependent on the corrupt practices that the so-called shadow economy, or black market, became the country’s dominant economic force. With postSoviet privatization, these criminal elements were best positioned to take over the new privatized enterprises.

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Russia, today, has been likened to America’s “wild west.” Criminal elements seem to be unchecked and it appears that people believe that efforts to expose wrongdoing are fruitless because corrupt public institutions and agencies will fail to act upon complaints, or, if they are acted upon, that the apparatus of corrupt practices will spring into action, bribes will change hands, favors will be exchanged, and no punishments will be meted out. Presently, there are no new Russian laws on whistleblowing in place, just as there are no witness protection programs.There is only a legacy of informancy. It is reasonable to expect that it will take a long time for whistleblowing to attain legitimacy in Russia. In the meantime, someone like Colonel Victor Zhirov, who does his job as a criminal investigator, actually refusing to be ensnared in the corrupt system of bribes, barter arrangements, and mutual obligations, takes on a role of a whistleblower just by doing his job. In fact, any instance of speaking truth to power in Russia can be construed as an act of whistleblowing. The state, corrupt and complicit with organized crime as it is, inspires such a lack of confidence that it encourages criminality. In attempting to explain the actions of the characters involved in the Golden ADA venture, Zhirov himself reflected on the greedy motivations of the characters he had been pursuing:“People worry the state could seize assets again, they believe it is not enough to steal for you and your children. You must steal for your children’s children’s children” (Kaplan and Caryl 1999: 1). Russians are so weary and suspicious of the state’s integrity and motivations, and are often so leery of the state intervention, that even something as seemingly benign as the recent 2002 census was cause for popular consternation. Mark MacKinnon documented that many Russians were planning to refuse to answer the door when the record takers came knocking. Others were prepared to lie in order to shield themselves from the prying eyes of the government and to protect their privacy. There was also much fear that the information they provided would make its way into the hands of criminals. According to MacKinnon, the days when the KGB would come knocking on the door “are gone, but a deep mistrust of government lingers in Russia, making the first post-Soviet census . . . an even more daunting task than it already was in the world’s largest country” (2002: A12). Notes 1. To protect these individuals’ privacy, their names have been changed. 2. Additionally, each pyatiletka would be given a qualifier to separately stand out, such as Pytiletka Dostizheniy (Five Years of Achievement).When between 1982 and 1985 three Communist Party general secretaries died, the people unofficially christened that period as Pyatiletka Pishnikh Pokhoron, or the Five Years of Luxurious Funerals. 3. During Yuri Andropov’s rule, I was a high school student in the Soviet Union. A chill went through the Soviet society because Andropov’s orders were that

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the country had to pull itself up by its bootstraps and become disciplined.As far as appearances were concerned, many changes were introduced. For instance, high school students skipping school and going to a movie theater would likely be apprehended and sent back to school.Tourists would be stopped in the middle of Moscow or other major cities and asked to show proof that they had legitimate reasons to be vacationing. In a word, oversight was increased, and the sense of fear was palpable.

Bibliography Alimov, Rashid. 2003. “Russian Supreme Court Refuses to Reverse Pasko Verdict—Again.” 8 September.Accessed October 5, 2003.Available at the Bellona website: http://www.bellona.no/en/international/russia/envirorights/pasko/ 31114.html. Amirov, Anvar. 2003. “ ‘Slavneft’ Prodali Po Deshyovke: Chinovniki Postaralis— Konkurentsii Ne Bilo (‘Slavneft’ Was Sold on the Cheap: The Bureaucrats Tried—There Was No Competition).” Russkaya Misl (La Pensee Russe), no. 4437 (Paris). December 26, 2002–January 2, 2003: 1, 3. Argyris, Chris. 1992. Theory in Practice: Increasing Professional Effectiveness. San Francisco: Jossey-Bass. Bobkov, Filipp Denisovich. 1995. KGB y Vlast’ (KGB and Power). Moscow: Veteran MP. Bourtin,Yuriy, et al. 1989. Surovaya Drama Naroda (The Harsh Drama of the People). Moscow: Izdatelstvo Politicheskoy Literatury. Bourtsev,V. L. 1989. V Pogone za Provokatorami (Chasing the Provocateurs). Leningrad: Molodaya Gvardiya; 1928 (Reprinted—1989). Brzezinski, Matthew. 2001. Casino Moscow: a Tale of Greed And Adventure on Capitalism’s Wildest Frontier. New York:The Free Press. Cohen, Stephen F. 2001. Failed Crusade: America and the Tragedy of Post-Communist Russia. Updated ed. New York:W.W. Norton and Company. DiFranceisco,Wayne and Zvi Gitelman. 1990.“Soviet Political Culture and Modes of Covert Influence.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. Levine. New Brunswick, NJ: Transaction Publishers. Digges, Charles. 2002.“Supreme Court: Rejects Complaint against Secret Decree.” September 9. Accessed October 5, 2003. Available at the Bellona website: http://www.bellona.no/en/international/russia/envirorights/pasko. ——— . 2002 “Defence Ministry Cancels Secret Decree That Jailed Pasko.” September 26. Accessed October 5, 2003. Available at the Bellona website: http://www.bellona.no/en/international/ russia/envirorights/pasko/26086.html. Enderle, Georges, Brenda Almond, and Antonio Argandona, eds. 1990. People in Corporations: Ethical Responsibilities and Corporate Effectiveness. London: Kluwer Academic Publishers. Finckenauer, James O. and Yuri A.Voronin. 2001. The Threat of Russian Organized Crime. NCJ 187085. Rockville, MD: National Institute of Justice. June. Frederickson, H. George, ed. 1993. “Ethics and Public Administration.” Bureaucracies, Public Administration and Public Policy Series. New York: M.E. Sharpe.

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Friedrich, Carl J. 1990.“Corruption Concepts in Historical Perspective.” In Political Corruption: a Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. Levine. New Brunswick, NJ:Transaction Publishers. Goldman, Marshall. 2003. The Piratization of Russia: Russian Reform Goes Awry. New York: Routledge. Gordon, Michael R. 1996.“In Russia,Whistle-Blowing Can Still Be Treason.” New York Times. 28 November, pp. A1, A10. ——— . 1999. “Moscow Court Backs Treason Charge for Atom-Waste Exposer.” New York Times. 5 February, p. A15. Hamilton,V. Lee and Joseph Sanders. 1996. “Corporate Crime through Citizens’ Eyes: Stratification and Responsibility in the United States, Russia, and Japan.” Law and Society Review 30, no. 3. Handelman, Stephen. 1995. Comrade Criminal: Russia’s New Mafiya. New Haven: Yale University Press. Heidenheimer,Arnold J., Michael Johnston, and Victor T. Levine, eds. 1990. Political Corruption: A Handbook. New Brunswick, NJ: Transaction Publishers. Johnson, Roberta Ann. 2002. Whistleblowing: When It Works—And Why. Boulder, CO: Lynne Rienner Publishers. Kaplan, David E. and Christian Caryl. 1998. “The Looting: An FBI Agent and an Honest Moscow Cop Stop the Plundering of the National Treasury.” The U.S. News and World Report. 3 August. Kaplan, David E. and Christian Caryl. 1999. Report on 1999 Finalists. United States International Consortium of Investigative Journalists: Washington, DC: The Center for Public Integrity. Available at http://www.icij.org/about/1999finalists.html, p. 1. Klebnikov, Paul. 2000. Godfather of the Kremlin: The Decline of Russia in the Age of Gangster Capitalism. New York: Harcourt Publishers. Kokh, Alfred R. and Marshall Goldman. 1998. The Selling of the Soviet Empire: Politics and Economics of Russia’s Privatization—Revelations of the Principal Insider. New York: SPI Books. Korolyov, Sergei Alekseyevich. 1996. Donos v Rossiyi (Informancy in Russia). Moscow: Progress-Multimedia. Kramer, John M. 1990.“Political Corruption in the USSR.” In Political Corruption: A Handbook, Arnold J. Heidenheimer, Michael Johnston, and Victor T. Levine, eds. New Brunswick, NJ:Transaction Publishers. Kristjansson, Kristjan. 1996. Social Freedom: The Responsibility View. Cambridge: Cambridge University Press. MacKinnon, Mark. 2002. “Russians Cast a Cool Eye on Census.” The Globe and Mail (Toronto, Ontario, Canada). 9 October, p. A12. MacWilliams, Bryon. 1999. “A Clash of Cultures at Moscow State U.: Russians Studying America.” The Chronicle of Higher Education. 24 September, B4. Murrel, G. D. G. 1997. Russia’s Transition to Democracy. Brighton: Sussex Academic Press. Perry, James L. 1993. “Whistleblowing, Organizational Performance, and Organizational Control.” In Ethics and Public Administration in the Bureaucracies. Public Administration and Public Policy Series, ed. H. George Frederickson. New York: M.E. Sharpe. Reddaway, Peter and Dmitri Glinski. 2001. The Tragedy of Russia’s Reforms: Market Bolshevism against Democracy.Washington, DC: United States Institute of Peace.

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Remnick, David. 1998. Resurrection: The Struggle for a New Russia. New York: Vintage Books. Sachs, Jeffrey D. and Katharina Pistor, eds. 1997. The Rule of Law and Economic Reform in Russia. 2d. ed. Boulder, CO:Westview Press. Shelley, Louise I. 1997. “Post-Soviet Organized Crime: A New Form of Authoritarianism.” In Russian Organized Crime: the New Threat? Phil Willaims, ed. Portland, OR: Frank Cass. Veil, Peter and Alexander Genis. 1996. 60-iye: Mir Sovetskogo Cheloveka (The 60s: the World of the Soviet Person). Moscow: Novoye Literaturnoye Obozreniye; Moscow. Vinten, Gerald, ed. 1994. Whistleblowing: Subversion or Corporate Citizenship? New York: St. Martin’s Press. Webster, William, H. 2000. Russian Organized Crime and Corruption: Putin’s Challenge (a Report of the Center for Strategic and International Studies Global Organized Crime Project).Washington, DC: Center for Strategic and International Studies. Wedel, Janine R. 2001. Collision and Collusion: The Strange Case of Western Aid to Eastern Europe. New York: St. Martin’s Press. White, Stephen, Richard Rose, and Ian McAllister. 1996. How Russia Votes. New York: Chatham House Publishers. Willaims, Phil, ed. 1997. Russian Organized Crime:The New Threat? Portland, OR: Frank Cass. Zinovyev, Alexander. 1994. Kommunizm Kak Realnost’: Krizis Kommunizma (Communism as Reality: the Crisis of Communism). Moscow: Tsentrpoligraf.

CHAPTER

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India: Between Majesty and Modernity M aya C hadda

Introduction In the August issue of the Chronicle of Higher Educations, Ann Overland reported on the dismal state of access to higher education in India. She wrote,“Until the admissions season for the fall session ends in July, the principal of Tolani College of Commerce is virtually a prisoner in his own office. He barricades himself behind his door and doesn’t answer the phone. He watches outside his window for local politicians and their thugs who appear at the gate, demanding seats for their constituents’ children.” Mr. Doctor, who is the principal of the “government Tolani College,” confided to Overland, “letters keep pouring in. Phone calls keep coming, but we don’t answer,” he said. “[W]e never return any of the calls. People used to barge into our offices, talking in a menacing way. That’s why we had to call the police” (Overland 2002). Overland subsequently revealed the reasons for the principal’s refusal to answer the telephone calls.“In this country of more than a billion people,” she commented, “where there is a huge shortage of educational resources and an insatiable demand for degrees, people also do everything they can to work the system to gain admission into college.” “In India, higher education has come to be seen as a commodity that can be bought or sold like anything else. Corruption appears in every element of higher education, and in every form: kickbacks, graft, bribes.” Although somewhat rare, it is not unknown for an enterprising professor to get a job through bribery, collect a regular salary, and show up only infrequently to the class. Occasionally, examinations are leaked in exchange for a few hundred rupees. Such leaks usually occur at a much lower level, from clerks and the ever-ubiquitous peons who demand bribes for permitting access to those in power and office. A new graduate student who had helped a few friends gain admission and was later interviewed by Overland said, “I take

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papers of the students who cannot get admitted into the university because of either bad marks or late submission and give it to the man who sits in the college office.” The student continued. “After a few days, the job is done. If you know the right people, it is not very hard.” Admissions for medical and engineering colleges cost even more than college admissions. According to some reports, they are close to $20,000 per admission. Such a bribe is well beyond the reach of a lower-middle-class family. If such family members are then in a position to collect bribes of their own, they might be tempted since there is no other way they can educate their young. Families that have political influence can get their children the muchcoveted admissions to choice schools. India’s democratic state sets aside seats and admission quotas for individuals belonging to lower social strata— lower castes and classes—for the declared purpose of promoting social justice. Five percent of the total number of seats are, however, at the discretion of government bureaucrats and ministers. A substantial number of these seats are handed out based on political connections supplemented by bribes, which frequently become a ready source for graft and illegal funds for those in power. There are some who defend this exchange of money for favors. Overland reported that Ketan Shah, who heads a charitable trust that administers a half dozen colleges in Mumbai, “argues that giving special preference is not the same thing as corruption.”The colleges he runs were founded by residents of the nearby Gujarat state. He justified the ethnic bias by arguing that many Gujarati families that had donated the land and huge sums of rupees to build these colleges had a right to expect special privileges and admissions for their children. Was “this any different from what happens at Oxford or Harvard?” asks Mr. Shah. Corruption in India Bribery is a common occurrence in India. Millions of citizens across the country tell horror stories of daily harassment for bribes by the police, health care professionals, court officials, and government bureaucrats—for delivering standard services for which they are hired and paid in the first place (Paul and Shah 1997: 152). While petty corruption is widespread, scandals over kickbacks, bribes, and the use of “grease” money to obtain government contracts are legion. But India presents a dramatic contrast. On the one hand, it is mired in both petty and grand larceny types of corruption; on the other hand, it has an impressive record of achievements as a functioning democracy. India has managed to consolidate itself as a modern, single, sovereign nation-state and lift millions out of destitution, although it has by no means eradicated poverty. As it enters the new millennium, India is the secondfastest-growing economy in the developing world. These are no mean achievements when we compare them to the baseline from which India started in 1947.

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Indeed, we see expansion of the economy (slow though it was in the first four decades) and democracy as parallel trends in post-independence history. Corruption has been an integral part of these two developments largely because of the way in which it has come to be rooted in the Indian soil. It is then possible to argue that while corruption may have undermined India’s potential to become a more equal and just society, it facilitated the expansion of India’s bourgeois democracy. This chapter focuses on the phenomenon of corruption itself, with some discussion of the context to enable readers unfamiliar with Indian politics to gain a better understanding of the connections between development, democracy, and corruption. I will first provide a broad context within which to place the incidence of corruption, followed by a brief description of different categories of corruption. Next, I will examine the differing perspectives on meaning and causes of corruption, and a brief account of the measures to contain it.Although scholars divide corruption into several different categories, here, I examine broadly two categories: petty corruption and grand larceny type of corruption.The “petty bribes” variety is usually used to smooth the delivery of standard service to millions across India. The sums involved in the petty corruption are usually small, though they might not be insignificant for the payers of the bribe. A range of actors—public and private—are responsible for corrupt practices in India, but in this chapter I focus mainly on political corruption. Corrupt business practices are examined only insofar as they relate to government offices. Some attention is devoted to the role of whistleblowers and to the engagement of nongovernment organizations (NGOs) that have attempted to root out corruption. I have already provided a vivid description of the petty category of corruption in education. The following section begins by constructing the political context within which to view the grand larceny type of corruption. The Context for Grand Larceny The early years of Indian democracy—the 1950s and 1960s—were not free of corruption, but by all accounts, corruption was not widespread (Noorani 1973: 8–9). In 1955, India had decided to establish a mixed pattern of economic growth combining private and public ownership in which the latter, the public sector, would retain most control. A huge bureaucracy controlling the public sector and regulating the private sector had emerged to take a central place in the life of the nation. The late 1960s and 1970s saw serious economic setbacks, high levels of inflation, scarcities, rising public debt, and all manner of bottlenecks in the implementation of planned economic development (Brass 1994: 67–116, Rudolph and Rudolph 1987: 127–178).The 1967 election was a turning point.The Congress Party had held monopoly power but several factions within the Congress Party had separated and established independent state-level political parties. The decade of the 1970s saw Indira Gandhi and her Congress Party (Congress

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(I)), which had split off from the old guard, become the dominant party on the Indian scene. For the Congress Party, the key objective was to retain control of the central government and of as many states as it could, to form a government at the center. The objective of the growing number of opposition parties was to thwart the Congress from obtaining these goals.With the exception of 1977 to 1979, the state-level political parties proved more successful in wrenching control of states’ assemblies from the Congress than in winning national elections, at least until 1989. In 1977, a coalition of opposition parties had managed to win the election and oust the Congress from power. Although this was a short-lived victory, it was the harbinger of the coalition politics that were to characterize the 1990s (Rudolph and Rudolph 1987: 165). Throughout the 1980s, the Congress Party faced fierce competition in all arenas, local and national (Pai 2000: 10).The Congress Party was weakened, but while state elections increasingly returned opposition parties to rule, the lack of unity among the opposition parties kept the Congress in place well up to 1989.The older generation of leaders had passed from the scene and the new leaders that had replaced them were chosen for their loyalty to the reigning leadership, which was obsessed with retaining Congress’s control of India’s electoral politics. The Indira Congress Party used its power of incumbency to arbitrarily dismiss elected state governments, appoint chief ministers in Congress governments that did not represent the choice of the local Congress parties, and stuff the party organization with loyalist who were expected to deliver elections and represent the interests of the party’s high command in New Delhi (Corbridge and Harris 2000: 77, Kohli 2001: 137). The opposition parties followed a parallel course; they, too, concentrated on winning elections, indulged in blatant appeal to communal and ethnic identities to garner votes, and enlisted all manner of antidemocratic elements to this end.While the public had become savvy about throwing out the incumbents, public anger was neutralized by distribution of patronage to key constituencies, and it therefore never became intense enough to result in an overhaul of the system (Bardhan 1984: 70). During the same decades, although the economy grew, it had not kept pace with popular expectations. Economic competition, whether for jobs, education, housing, social services, telephones, railway tickets, or utilities such as power had become intense. Small and big business faced a maze of regulations. Their investments were largely dependent on the state, which required firms and agencies to obtain permission and licenses from politicians and bureaucrats. Unable to escape the heavy hand of the state, businesses found a way to manipulate it.They learned to thrive in the protected market, extend bribes and get around the rules, gain licenses and secure quotas that provided them with a captive market (Hardgrave 1993: 366–367). In fact, for a large number of corporations and businesses a protected market became important for survival.The public sector projects in power, infrastructure, and industries, of course, faced no competition or

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punishment for underperformance and losses. India’s political class got what it coveted most: a control over the economy and over the pace and direction of national and local development. Patronage in turn enabled it to please special interest, subsidize home constituencies, and build a strong political base for future contests. The 1980s marked the beginning of the end for Congress Party preeminence. Although reelected in 1970, the Congress and Indira Gandhi were besieged by separatist violence in Punjab, Kashmir, and the northeast, which was largely the outcome of centralization of power and decision making under Indira Gandhi and the Congress government she headed (Chadda 1997: 102–123). The India economy needed to be unshackled from the stranglehold of planning and state control. The growing middle classes in rural and urban India demanded quality consumer goods, social services, utilities, and modern infrastructure. None of these had been delivered by the previous 40 years of investment in planned development. The growth in the middle class was undoubtedly a result of agricultural growth made possible because of the implementation of the “green revolution.” There was an urban counterpart to agricultural growth as a result of expansion in industry and manufacture. Both had been possible because of availability of cheap credit, raw material, and labor under the regulated economy (Corbridge and Harris 2000: 123, Rudolph and Rudolph 1987: 335–54). But India could not compete in the world markets and could not produce enough and of the quality to satisfy its own rural and urban middle class.The popular discontent frequently fed the opposition parties and election chests. It was abundantly clear by the mid-1980s that drastic changes were required to reverse India’s course. It was also necessary to recapture the moral high ground that had characterized the Congress Party of the earlier decades. A failure to do so would make India economically irrelevant in the international economy. Indira Gandhi’s death in a revenge killing by Sikh militants in 1984 dramatically underscored the political mismanagement and the economic failures of the besieged Congress Party. Rajiv Gandhi did not reform the party when he succeeded his mother as party head (Corbridge and Harris 2000: 99). He, too, fell victim to an assassination plot in 1991, hatched by zealots of yet another ethnic movement that had gained a dangerous foothold in Tamil Nadu, India—the Liberation tigers of Tamil Ealam based in Sri Lanka—but his decision to abandon party reforms spelled the end for the Congress era in Indian politics. Rajiv Gandhi had, however, begun the process of economic liberalization, eased some controls and provided many incentives to Indian business for investment in industries hitherto reserved for the government such as power and utilities (Corbridge and Harris 2000: 102).The Indian economy posted higher rates of growth, carrying it well beyond the barriers of what the well-known economist Raj Krishna had characterized as the “Hindu Rate of growth” (Virmani 2004, M. Singh 1997). Although estimates have varied, by most counts the economic growth since the 1980s ranged between 5 to 6 percent per annum. Even more impressive, by some

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estimates, by the end of the 1990s the number of Indians who were considered middle class was between 200 to 300 million (Chidambaram 2004). The end of the Congress Party’s preeminence coincided with the birth of the new economy. New policy broke with the past policies and liberalized and privatized the Indian economy. The state had to be rolled back, business given greater leeway, and bureaucratic regulations eliminated to allow freer market and competition. At the same time, there were two new developments that had been incubating throughout the previous decade and a half: the rise of organized lower-caste/backward-class power in politics and the rise of Hindu nationalism led by Rashtriya Swayamsevak Sangh (the RSS) and its political party, the Bharatiya Janata Party (BJP), supported by a whole slew of Hindu nationalist organizations (commonly called the Sangh Parivar). The first was an outcome of the four previous decades of economic and democratic expansion, reservation of jobs and educational opportunities for the lower castes, and general spread of education and incomes. The rise of lower caste/class demands, however, threatened the precarious position of the rising middle class in India’s cities and villages. One might also add to this the emergence of intermediate castes represented in the vast new constituencies of well-organized prosperous agriculturalists, who had assumed control of state level and regional politics. The decline of the Congress Party and its loss of middle-class constituency (previously its solid backbone) was a result of perceptions that the party espoused the minorities’ and lower castes’ interests at the expense of middle-class interests. The Congress’s loss was the BJP’s gain. In fact, the 1990s were marked by pluralism and a decentering of Indian politics.There were definite gains in the economy as the 1990s came to an end.The percentage of poor had declined, although they were still large in absolute numbers. India had emerged to be the eleventh largest industrial country in the world, able to produce nuclear weapons, missiles, as well all manner of consumer goods, many of which could compete effectively in international markets. But these developments contrasted with considerable political instability, frequent changes in national governments at the center, and heightened communal tension that spilled over into violence in the state of Gujarat in 2002. India presents a mixed record of achievements and failures. India’s democracy has not only taken firm root but has the flexibility to accommodate the entry of many new segments of the population mobilized by elections and economic growth. Indeed, the Indian system shows the remarkable ability to absorb political collapse, disarray, political assassinations, wars, and endemic violence and yet retain its democratic framework. Along with this achievement has come corruption. In the past decade, most Indian political parties have been implicated in corruption. Standard types of political corruption usually involve payments to arrange political defection of members of one party to another, collection of campaign funds through illegal means, payments to party bosses by candidates seeking political appointments, and other favors.

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Political Corruption Ironically, reform measures stimulated political corrupt practices. Political parties needed money to compete. But as P. S. Jha comments, the ban on company donations introduced by Indira Gandhi—ostensibly a measure to separate politics and business—had the opposite effect. For the opposition parties, it dried up their access to corporate money, compelling them to collect campaign contributions through illegal means. For the Congress Party (which maintained control of the central government) it created an incentive to milk its government contracts to generate funds. In reality, the ban on company donations opened up vast new opportunities for corruption in India.The Bofors scandal that monopolized headlines in the late 1980s was a payoff for political and pecuniary favors of the Congress Party under Rajiv Gandhi. It is evident that defense contracts for the purchase of high priced sophisticated weapons from abroad have been a preferred method for collecting the huge sums required to fight elections. This scandal and others briefly described here will be discussed later with more detail. Anxious to keep the Congress at bay, the BJP (when it formed a government at the center) also worked the system to gain what pecuniary advantage it could for future elections. The Jharkhand Mukti Morcha ( JMM) case was the result of Narasimha Rao’s minority government’s disparate measures to retain majority in the parliament. The Tehelka case underlines the BJP’s ambitions to expand its political war chest. Both are examples of political corruption. The outstanding example of politicalcum-bureaucratic corruption is the Hawala case, involving the corrupt network of Jain brothers, who operated as political fixers for over a decade in New Delhi.The fodder scam and sugar scams were instances of bureaucratic corruption with serious political fallout in respective province states, while two scams involving the Stock Exchange were instances of businessrelated cases of corruption in the post-liberalization years.These cases highlight the “grand larceny” type of corruption involving huge sums of money exchanged in anticipation of or for favors granted. The Bofors Case In April 1987, India had signed a contract with Bofors, an affiliate of Noble Industries, for the purchase of four hundred 155 mm, FH-77 Howitzers at the cost of $1.3 billion (Ram 1999). It was stipulated by the Indian government that no agent would be involved in the deal. But Bofors secretly paid Rs. 64 million to at least four agents in violation of the agreement. (See note for conversion from rupees to dollars.1) There were two questions at stake: whether the Bofor gun was the best buy India could make and whether any politicians had been paid off to clinch the deal. According to the Central Bureau of Investigation (CBI), “between 1982 and 1987, certain public servants entered into a criminal conspiracy with W. N. Chadha, Martin Ardbo, G. P. Hinduja and others in India and

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abroad, . . . Committed offences of criminal conspiracy, bribery, . . . for the purpose of cheating and using as genuine a forged document in respect of the contract dated March 24, 1986 entered into between Government of India and M/s. AB Bofors.” A massive order of illegitimate and unacknowledged payments, termed “commissions” and calculated on a percentage basis, were made by the Swedish firm from whom the gun had been purchased. These payments were deposited in secret Swiss bank accounts after the Indian howitzer contract was signed on March 24, 1986. Had the Bofors lost the contract to its French rival, Sofma, or to any other bidder, there would have been no question of paying these “commissions” to the contracted parties.The millions in payoffs were justified as essentially “winding up costs” for Bofors to execute the deal.This explanation was repeated to the press by the Rajiv Gandhi government, even after the documentary evidence gained by journalists had shown the “winding up costs” story to be false. More evidence of wrongdoing surfaced with the publication of the 1987 diary and “daily notes” kept by the Bofors chief executive (Ram 1999).This offered dark hints that the top echelons of Indian government and influential lobbyists were involved.2 The second question is whether the “commission” had influenced the choice of Bofors over another, more superior gun. Here experts remain in disagreement. S. S. Gill writes that there was unanimous agreement that the Bofor gun was “a first rate weapon . . . and cheaper than its nearest rival, Sofma of France” (Gill 1998: 88). Other sources are not so sanguine about the choice. According to N. Ram, who broke the story of the Bofors cover-up in the Frontline and Hindu, India’s two leading newspapers, out of the seven evaluations that the Indian army did of the howitzer systems, the first six proved the French system, the Sofma 155 mm TR howitzer, to be superior to the Bofors gun. Financial considerations also made the French manufacturer more attractive (Ram 1999). “It became clear subsequently that Prime Minister Rajiv Gandhi and a small coterie that knew his thinking had made up their minds from the start to award the contract to the Swedish arms manufacturer and to no one else.When General A. S. Vaidya’s retirement neared and even before General K. Sundarji formally took over as Army chief, they moved swiftly to clinch the decision for Bofors. With Army Headquarters reversing in February 1986 a succession of earlier professional judgments that had gone against Bofors, the stages of final decision-making were finalized, resulting in the decision to purchase from Bofors on March 24, 1986.” Investigation also revealed the modus operandi employed by the promoters of the deal. It was carried out with utmost secrecy, to protect the names of Bofor agents and promoters. The Petrol Pump, Sugar, Urea, and Housing Authority Scams Arbitrary use of a discretionary quota by Satish Sharma, the Petroleum Minister in the Rajiv Gandhi government, attracted considerable notice.

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Under the provision of the quota, the minister could allot petroleum dealerships, cooking gas agencies, and kerosene oil depots to specially deserving cases on grounds of hardship and compassion. Sharma used the power to distribute favors to influential politicians, bureaucrats, and judges, while the truly needy were left out in the cold (Press Trust of India 2002). Similar scandals surfaced in the allotment of government housing units by the Ministry of Housing and Urban Development. According to Gill, “under Sheila Kaul this became a regular racket and money was demanded for out-of turn allotments.” Shiela Kaul was charged in 1996. The sugar and urea import scam similarly cheated the public treasury of huge sums of money. The sugar scam is estimated to have cost the treasury $600 million, while the urea import scam, which involved shipment of 9,000 tons of poor-quality urea, added up to $4 million in illegal commissions (Mahallingam 1998a). These were paid to Prabhakar Rao, son of former Prime Minister Narasimha Rao, although no documents had been filed listing him as an agent.The charges of illegal payments came to light in 1995. The JMM and Jain Hawala Scandal In July 1993, Rao’s minority government was facing a no-confidence motion.“As it was fifteen short of the absolute majority, the usual game of defection and bribery started. Seven MPs of Ajit Singh’s twenty-member Janata Dal faction broke away to support Rao. Four MPs of JMM also voted for the Congress and Rao to defeat the non-confidence motion moved by the opposition in parliament. There were serious allegations of large amounts having been paid to these MPs to buy their support” (Gill 1998: 119).The CBI filed four separate cases against the JMM MPs, but the manner in which these were framed acquitted them of conspiracy charges and left Rao out of the equation. The Delhi high court reprimanded the CBI, which was then compelled to file a fresh document, which named Rao and eleven others in the JMM case. The CBI charged Rao in June 1996, though the sums involved were small in comparison to other cases. The Jain Hawala case, first reported in 1991, stands out as the blatant face of a corrupt nexus between business, politicians, and bureaucrats (Mahallingam 1998b, Kapoor 1996). Hawala transactions are now more familiar to the world because international terrorist operations have used this method to transfer funds across nations. Hawala is, however, an old and traditional system of banking based on word of mouth, with promises honored by a personal and private network in the transfer of monies across borders. A great deal of black money, money made illegally (by under invoicing or over invoicing, price gouging, or secret transactions on which no taxes are ever paid), is frequently transferred from one country to another through the Hawala banking system. Restrictions on the transfer of hard currencies or conversion, artificial dampening of prices for scarce goods, or very high rates of taxation invariably encourage accumulation of wealth through black money.Throughout the first five decades of strict government

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regulations, the Indian economy sunk more and more into black money transactions involving foreign exchange scams (Mahallingam 1998c, UNDP India News September 1999, Arun Kumar 1999b). Rough estimates suggest that the black market economy was as large as the legitimate economy. The Jain brothers—two enterprising businessmen—were Hawala dealers.They used their wealth and black money to cultivate politicians and influential bureaucrats. For instance, the Jain brothers got Arif Mohammad Khan, the energy minister, to issue an order in favor of GEC Alshom, a company they represented, for a project in the state of Gujarat. The Jains got a subcontract for fabrication plus a hefty commission, against which they transferred close to Rs. 6 million to Arif Mohammad Khan as compensation. As their influence network widened, a large number of political leaders and officials became a part of the web.When the scandal broke, the Hindi daily Jansatta published a complete list of 115 individuals who had received Hawala money from the Jains. In his long statement to the CBI on March 11, 1995, Surendra Jain gave details of the payments made to fiftyseven politicians. The list covered R.Venkatraman, the President of India, and Prime Ministers Rajiv Gandhi and P. V. Narasimha Rao. Between 1988 and 1991, the Jain brothers are said to have paid out Rs. 65 million to several politicians (Gill 1998: 107–109). Corruption in the Federal States:Tamil Nadu and Bihar The above-mentioned cases of corruption involved mainly the political class in the central government. Regional governments are, however, even more blatantly corrupt. In December 1996, when the Tamil Nadu Chief Minister Jayalalitha was arrested on charges of corruption and her residence searched, the CBI hauled out 29 kilograms of diamond-studded gold jewelry, 700 pairs of bracelets, 800 kilos of silverware, 10,500 sarees, 750 pairs of shoes, and 91 designer watches. In addition, she possessed 19 cars and documents relating to the purchase of properties amounting to Rs. 15 million (Noorani 2001). Five years previously, when she began her career as a chief minister, Jayalalitha was a woman of modest means. In the coal import case registered against her, Jayalaitha is estimated to have siphoned off Rs. 117 million.There were eight cases pending against her. The fodder scam in Bihar resulted in the defrauding of the exchequer of Rs. 900 million and was perpetrated by officials of the Animal Husbandry Department (AHD). It was first exposed in 1994 by the opposition party in the state of Bihar assembly. The scandal had a large serious political fallout. Officials at the AHD, in collusion with district collectors, prepared false allotment and withdrawal orders (Burns 1997).These documents were submitted to the state treasury supported by forged bills representing the supply of fodder and medicines from a network of supplier-contractors. The treasury and banks paid the contractors. The money was then shared with the officials and politicians who protected the network.

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According to India Today (15 July 1996),“despite the ban on withdrawals from the treasury in 1993–94, at least Rs. 1,147 cores [million] . . . was withdrawn by officials.” On a humorous note, the itemized bill submitted to the treasury listed expenditures for moving “buffaloes on scooters, motor cycles and mopeds.” A parallel scheme that defrauded the Bihar government of Rs. 500 million was in operation in the Bihar health department. The Tehelka.com Exposé Among the recent scandals, the Tehelka exposé created the greatest public furor and shook up the central government led by the BJP. Tarun Tajpal, a young journalist, had established a website called Tehelka.com on only a shoe string budget. He used it to start a sting operation with a bogus company called West End International. The company sought to sell an equally fictitious thermal camera to the Ministry of Defense; a Tehelka journalist posed as the official of the company.Tajpal captured the exchange on videotape. This video caught in excruciating detail the president of the Bharatiya Janata Party (the lead party in the current National Democratic Alliance [NDA] government), Bangaru Laxman, accepting a bribe of Rs. 100,000 (about $2,200). It also showed Jaya Jetly, the president of the Samata Party, which is part of the ruling NDA coalition, accepting payment on behalf of the party at the residence of the defense minister, known to be her close friend (Singh 2002).The scandal reached the prime minister’s office, implicating Brajesh Mishra and N. K. Singh, both close advisors to Prime Minister Vajpayee. As the video hit the headlines and was screened on national TV, Laxman and the defense minister, George Fernandes, were forced to resign. Fernandes is back in the government although the case continues to proceed in the courts. While the above are examples of scandals involving political figures and government officials, the corporate sector does not escape the taint of corruption. We have already seen how defense contractors, trading agencies, and manufacturers routinely pay off and bribe the politicians for favorable consideration, for securing contracts and making deals.

Corrupt Business Practices The MS shoes scandal, made public in April 1995, is an example of how the Indian stock market can be manipulated through fraudulent banking practices. The MS shoes company, owned by Pawan Sachdeva, wanted to expand MS shoes to hotel and yarn manufacturing. It therefore advertised a composite public-cum-rights issue of Rs. 428 million. Before the issue opened on the market, the company signaled its brokers to push up the price of its shares from Rs. 268 to Rs. 414 (Gill 1998: 153–154). The company then launched an intense but misleading TV campaign that gave the impression that the fully convertible debentures were being sold at Rs. 199,

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although the market price was Rs. 505.The Securities and Exchange Board of India (SEBI) ordered the company to clarify the mistake two days before the issue was to open on the market. This led to a panic among investors; subscribers withdrew funds and banks pulled out. The resulting disarray forced the stock exchange to be closed for three days. The MS shoes company was deceiving the investors in two ways: by rigging the share of the company to a false high price and by misleading the public through a false TV campaign. Subsequent investigations revealed that SEBI officials were also complicit in the defrauding scheme. In April 1995, Sanchdeva was arrested on charges of creating a criminal conspiracy. The largest stock exchange scam was pulled off by Harshad Mehta in 1991 (Sampathkumar 2001).The State Bank of India (SBI) uncovered a sum of Rs. 500 million outstanding against the name of its prominent securities broker Harshad Mehta. Mehta had obtained, with the help of friendly bank officials, unlimited access to bank funds, which he used for the purpose of pushing up stock prices and then profiting from the surge. For instance, he was able to jack up the price of an ACC share from Rs. 500 to Rs. 10,000. The liberalization of the market by the Rao government in the early 1990s, initiated in response to the balance of payment crisis, had greatly benefited Mehta. When the SBI discovered the outstanding account of Rs. 500 million they called it in. Mehta borrowed money from the National Housing Board to square the account.Two features of this episode are important. First, the National Housing Board was a subsidiary of the Reserve Bank of India, and second, the check of Rs. 500 million was issued by the National Grindleys Bank without any collateral. Evidently, this was not an uncommon practice among banks and brokers. But by any norms of sound financial transactions, the practice was corrupt and fraudulent.The Inter-Disciplinary Group set up by the government to investigate the fraud estimated that the banks and other financial institutions lost Rs. 3,854 million in the scam and the investors lost Rs. 100,000 million. Also, it is noteworthy that foreign banks such as ANZ Grindleys, Citi Bank, and Standard Chartered played a lead role in this scheme. Petty Corruption and Public Perception While these examples of scandals, big and small, that routinely rock India, suggest the depth and scope of corruption among India’s political and bureaucratic elite, the incidents of petty corruption are legion. In 2002 Transparency International India (TII) and another well-known organization, the ORG-Marg, put out the first ever measure of “petty corruption,” based on surveys and predictions (Transparency International India 2002). Petty corruption is the kind people feel. As already described, this kind of corruption involves small sums of cash changing hands to facilitate things like moving a file, getting a ration card, jumping a long line, dodging petty misdemeanors for which the policy can arrest and harass you, obtaining records from public officials. Added up, petty corruption is not all that

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small. It amounts to nearly Rs. 27 billion spread across ten different sectors of the economy in a year. In 2002, that would represent about 1.5 percent of the gross national product (Baru 2002).The ten sectors included in the study were: police, health, power, education, ration, land administration, the judiciary, taxation, railways, and telecom. But not all sectors are equally corrupt. Indeed, computerization in railways and economic liberalization in the telecom sector has reduced corruption in those sectors, although before the 1990s, they were notoriously corrupt. Prior to the 1990s, the government had a monopoly on India’s telecommunication.This permitted its workers a huge number of opportunities to collect a bribe every time a telephone user interacted with the operator. The railway sector also used to be a den of corruption till computerization and improved working conditions for staff made them an area of low corruption. But these improvements are merely a drop in the ocean. According to the survey of petty corruption, the police are the “most corrupt” sector, followed closely by the public health care system. In the public health area, doctors and nurses, in collusion with chemists and pharmaceutical companies, regularly demand bribes for treatment and care. In addition, patients are frequently overcharged for medicines that are supposed to be free.They are also directed to purchase medicine from specific chemists and companies, are given unnecessary diagnostic tests at preferred pathology laboratories, and are forced to pay bribes in order to extend proper care by doctors and nurses in public sector hospitals.These corrupt practices are alone estimated to have generated 28 percent of all the bribe money transacted in India in a year. In December 2003, the Indian government proposed the death penalty for selling fake medicines, a law that is likely to pass with large margin of support in the parliament. The sector next in line in terms of the amount of corruption is the power sector, where bribes to power utility staff account for 22 percent of petty corruption. Thus, the public health care and power sectors together account for 50 percent of all petty corruption that flows in India. Computerization competition, which reduced corruption in the railways and telecom sectors, cannot be used to advantage in the area of health care, where “consumers,” the patients, are highly vulnerable and health givers are in control of the services and quality of services rendered. The education sector ranks third in terms of corruption. The introduction section of this chapter described how that occurs. Perspectives on Corruption: Measure and Meaning Unlike the petty variety of corruption just described, the grand larceny type of corruption remains shadowy since most of these transactions are secret. In 2002 Transparency International’s (TI) Corruption Perception Index (CPI), described in chapter 1, ranked 102 countries according to the degree to which corruption is perceived to exist among public officials and

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politicians. It is a composite index derived from 15 different polls and of 9 independent institutions carried out among business people and country analysts. The CPI defines corruption as the abuse of public office for private gain. This index provides an annual snapshot of the views of business people and analysts on bribing of public officials, kickbacks in public procurement, or embezzlement of public funds. India measured among the most corrupt countries on this index, with a score of only 2.7 out of 10, and ranked seventyfirst among 102 countries in 2002. India’s score has declined from 2.9 in 1999 to 2.7 in 2002 (Transparency International Index 2002). It is important to bear in mind that the CPI is not based on hard data, nor does it measure the level and extent of corruption, or where corruption occurs.What it does is underline country’s ranking in terms of perception, and hence, it provides an overall picture of where India stands in comparison to other countries. However, even in India the CPI is highly disputed and controversial. Several scholars argue that TI’s perspective on corruptions is blind to the ground realities of a developing society, especially one in the process of rapid transition from tradition to modernity (Sengupta 2003). Coexisting in developing societies, like India, are two kinds of institutions and processes—one is traditional and the other belongs to the modern rational order.To judge transactions originating in the traditional sphere as corrupt because they clash with the requirements of the legal rational order can be seen as simply an ideological argument for the rapid destruction of the traditional sphere. For some, this is the problem with the Transparency International Index. It does not capture the social reality of a country in the midst of a transition, like India. Rooted in Judeo-Christian values and a history that is specific to the western industrial nations, the IT perspective is a misleading guide for understanding corruption in territorially unconsolidated poor countries that may be attempting to build a modern state and a modern market society. Consider some of the leading scholars of our time and their definitions of corruption. Samuel Huntington believes that corruption is mostly the “behavior of public officials, which deviates from accepted norms in order to serve private ends” (Huntington 1989). In the same vein, Joseph Nye defines corruption as “behavior which deviates from formal duties of a public role” (Nye 1978: 564–578). Clearly, both scholars are deeply influenced by the notion of authority made popular by German sociologist Max Weber, in which legal-rational bureaucracy equals the right kind of modernization.This is particularly true in regard to the notion of equality before law. Such a concept applied without consideration to the traditional reality of segmented society might in fact reinforce inequality. Also, within the Weberian perspective, public officials are required to reflect the common good. But the notion of common good remains elusive in a society that is both diverse and segmented.This is the dilemma Ketan Shah reflects when he rationalizes the bias for the Gujaratis who had paid heavy donations to create educational facilities. (This situation is presented as a petty

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corruption example in the introduction of this chapter.) In most open societies, groups compete for power, office, and resources, but in India and perhaps elsewhere, the competing groups are frequently quasinational entities. They are large in numbers and, more often than not, concentrated in a particular region.This gives them the numerical advantage to claim autonomy and rights. If denied, they can mobilize cultural cohorts to launch violent protests that can wreck havoc on the economy and political stability. In the absence of social consensus about fairness and common good, competing groups demand that the notion of public good should reflect their particular expectations, especially if they have invested in it. The narrow notion of “public interest” that Nye and Huntington use ignores the politics of collective identities. It also ignores the network of interpersonal relations that require an individual to regard his/her clan and community as an extended family. Nepotism and corruption therefore have different meanings in India than they do in the industrialized, modern Western societies. If the Weberian conceptualization of corruption—which is based on notions of individual rights and obligations—does not fit India’s social reality, how does Heidenheimer’s definition, based on public perception, work? Heidenheimer rejects the “objective” definition of corruption and argues that corruption is whatever the public believes it to be (Heidenheimer 1989a). He observes that the public discourse on corruption is mostly an attempt to sort out values as reflected by different actors, intermediaries, and monitors of action believed to be corrupt (Heidenheimer 1989b: 573). Heidenheimer’s relativist stance acknowledges the need to consider distinctive histories and cultures of societies—or even the same society—at different junctures in history. Heidenheimer’s value-sensitive approach identifies three types of corruption: black corruption, which is condemned by everyone, gray corruption which is condemned by some groups, and white corruption, which no group sees as worthy of punishment. While this typology helps us distinguish the ways in which a society may respond to different types of corruption, it does not tell us which acts belong in a particular category. Heidenheimer’s categories (based on public perceptions) do not address the issue of motives or impact. Nor do they it take into account prior circumstances, which may make an act of corruption seem desirable at least from the perspective of a segment of the public. These caveats become relevant as we place what may be considered corrupt practice by political parties in India in the context of the history of democratic evolution described earlier. Commenting on the vast mobilization of backward castes in the 1980s in India, Gurharpal Singh writes, the “mobilization of lower castes since 1989 has been accomplished mainly by extending state patronage.” By expanding the “scope of affirmative action programmes for lower castes, . . . as these lobbies have become politically powerful their demands for other types of patronage have also increased. In some states the response . . . has been a form of fiscal and caste populism— general subsidies, weak financial regulation, oversight indifference to scams,

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and officially sponsored hostility to higher castes who have traditionally controlled the structures of government” (Singh 1997: 626–638). The fodder scam and Bihar State Chief Minister Lalloo Prasad Yadav’s involvement, mentioned earlier, is a good example of the aggressive ascent of lower castes that have used state patronage to create opportunities for claiming a larger share of office, power, and resources.When charged with corruption, the lower caste public officials have argued that the “establishment” has been eating at the public trough for over 45 years and it was now their turn to gain some benefits from the state. Gurharpal Singh observes that the charges have “helped unite and mobilize poorer groups whose influence has often been negligible, and they have created a new breed of underprivileged political activists who facilitate crucial links between government and interest groups” (1997: 635).The issue of corruption then becomes an issue of equal rights to corruption, or, said in a more neutral way, equal access to the resources of the state. Seen in this light, the issue of corruption moves quickly away from courts and police and reemerges in the discourse on equality and social justice, oppression and domination, and hegemony of those who were first to gain access as opposed to those who came later. It is certainly possible to point to the violation of the law and argue that earlier practices of corruption can by no means justify the subsequent practice. But it may be argued that while both the Congress government and backward caste parties or organizations have indulged in corrupt practices, the backward parties’ corruption at least provided power and influence to a vast segment of the population that had been denied it for centuries. In this context, Heidenheimer’s notion of public perception is not easy to use.There are many publics in the segmented society of India. If we consult the opinions of those benefiting from the corruption, as Heidenheimer might have us do—and there are likely to be a significant number of poor in any particular region of India—their answer would be to deny that there was any wrongdoing.As Singh observes,“there is little support among them for the idea of political corruption as a legal or moral concept. The corruption of the poor and their leaders is a necessary ‘strategy of survival’ ” (Singh 1997: 635). In India individual identity seems overshadowed by the reality of segmented communities. The Indian society is divided in terms of caste, ethnicity, and religion, not to mention income and locality. Each segment has the potential for political mobilization. Each ethnic and religious community has accumulated a past studded with stories of battles, sacrifice, heroic deeds, and great artistic and intellectual achievements.These ethnic histories are the foundation of what we might call quasinationalities that claim and demand equal treatment. An individual belonging to a particular group might be conditioned to regard individuals in other ethnic communities as rivals for access to the resources of state. In India no large studies of public perceptions of corruption have been done in which the survey group is divided according to self-defined boundaries of culture.

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As Singh comments, the newly emerging lower castes are likely to see their leaders not as corrupt men but as champions of their community. Their efforts to channel state resources, even though unethical, are regarded as “breaking through” a system loaded against the lower castes. This does not mean that the idea of individual identity and responsibility is foreign to a post-independent India. The expansion of electoral democracy has certainly made inroads into collective identities based on family, village, and clan. Collective and individual identities, however, coexist and confuse the issue of corruption when what is considered corrupt is defined in terms of public consensus. Causes of Corruption The debate about the definition of corruption is closely related to that about the causes of corruption. Surveys show that professional groups in India differ in their views of what causes corruption. For example, a small study by Paravala explores the opinions of five elite groups in India: politicians, journalists, bureaucrats, industrialists, and judges (Paravala 1996).The first three saw corruption as a natural and negative consequence of privatization and capitalism, while the industrialists and judges were more concerned with blaming individuals and indigenous values. Some scholars blame corruption on the character of political leaders or their personalities. A book by S. S. Gill traces the evolution of corruption in India in terms of leadership. His chapters divide the history of corruption under the names of successive Indian prime ministers: Jawaharlal Nehru, Indira Gandhi, and Rajiv Gandhi. Nehru was said to have been lax about controlling his cabinet members and he ignored their misdemeanors: Krishna Menon had been implicated in the Jeep scandal, T. T. Krishnamachari in the Mundhra affair, and K. D. Malavia for accepting bribes in exchange for granting licenses. In Gills’s view, Nehru had laid the precedent and subsequent governments had expanded and refined the nexus between the state, bureaucracy, and business (Gill 1998: 53). Nehru is also charged with not having paid sufficient attention to the various commissions of enquiry appointed to uncover corruption: The Gorwala commission of 1951, the J. B. Kriplani inquiry in railways, and the Santhanam commission report in 1962 were all cast into the dustbin of history. Other observers see structural causes for corruption and they de-emphasize personalities. For Christopher Jefferlot, the growth in corruption is a result of the uneven distribution of political and economic power combined with rapid expansion of regulatory mechanisms, public sector ownership, and state management of the economy. These developments created artificial scarcities and aggravated those that already existed. Scarcity justified the creation of a huge bureaucracy and a maze of laws that only the bureaucrats and public officials familiar with it could navigate. These structures became more rigid under Indira Gandhi ( Jefferlot 2002: 80).

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Jefferlot argues that “on behalf of Socialism,” Indira Gandhi “enacted the Monopolies and Restrictive Trade Practices Act (MRTP) in 1970, and the Foreign Exchange Regulation Act in 1973. . . . These new rules” he says, “enabled the Congress to receive additional bribes from the corporate sector.” The situation created opportunities for activities described as rent-seeking in chapter 1. For example, the Indian Cotton Mills Association was allowed to import 100,000 tons of cotton, provided it gave Rs. 30 per bale to the ruling Congress ( Jefferlot 2002: 81) Jefferlot also describes that, “Among Indira Gandhi’s fund raisers,” L. N. Mishra, her minister of State for Commerce, “made full use of the ‘license-quota-permit raj’ and attached a price tag to every license” ( Jefferlot 2002: 81). According to this perspective, if the state regulations and its natural corollary, the “license permit raj” were responsible for the enormous growth of corruption, liberalization should reverse the trend. Elimination of regulations and dismantling of the license—permit— quota system, they believed, should set India free from corruption. Liberalization as a remedy for corruption resonated with the World Bank and the IMF ideology on the value of free trade and the reduction of the role of the state. In fact, under pressure from the global institutions, India did initiate economic reforms, liberalize the market, and reduce state involvement and bureaucratic controls in the early 1990s. However, the earlier section detailing various scams—the sugar, urea, and fodder scams, the Hawala and stock exchange scams—suggests, there was no letup in the incidence of corruption. Liberalization has not proven to be the remedy its advocates expected it to be. In fact, India’s corruption ranking sank lower and amounts involved become larger. Arun Kumar comments, “when the nineties are compared to the eighties, the amounts involved in the scams have grown exponentially.The biggest scam of the eighties was Bofors involving a sum of Rs. 65 crores [$650 million] . . . in the nineties . . . the largest . . . [was] the securities scam involving Rs. 3000 crores [30 billion]” (Kumar 1999a: 243–244). In fact, Jefferlot argues that the securities scam, and the large-scale corruption revealed in the telecommunication sector, as well as the “Hawala” episode were directly a result of India’s liberalization policy. The liberalization policy provided a justification and a cover for ministers to bypass institutional procedures and checks and make quick decisions on contracts and purchases. Jefferlot argues that privatization and liberalization has offered new opportunities for corruption and cites the Hawala Telecom scam and Harshad Mehta securities scam as evidence to support his conclusion ( Jefferlot 2002: 83–84). Elections Whether corruption is a matter of individual greed or a result of systemic compulsions, it appears that in the public mind, politics and corruption have become synonymous. The reasons for this are not difficult to see. To begin with, election campaigns have become increasingly expensive and

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political parties have to collect huge sums to put up candidates at the state and national level (Mehta 2002). The election commission, established to ensure fair and clean elections, has increased the spending ceiling permitted for elections each year. In 1997 it authorized Rs. 600,000 for an assembly seat and Rs. 1.5 million for the parliament. According to Jefferlot, a hotly contested seat could cost a candidate anywhere in the range of Rs. 1.5 million to Rs. 8 million. And, according to Arun Kumar, of 14 parliamentary contests, the costs averaged about Rs. 12.9 million per campaign. Expenses were incurred for paying political activists and organizing close to 20 meetings a day—each costing, depending on the size, from Rs. 5000 to Rs. 200,000. In addition, candidates distributed gifts just before the polls. Frequently “dummy” candidates were put up to undercut the opposition candidates.The dummy candidates also cost enormous sums ( Jefferlot 2002: 86). Increase in party competition has further driven up the amounts of funds needed to contest elections. Until the 1960s, the Congress Party remained dominant. But the 1969 split in the Congress Party profoundly affected the political system. First, Indira Gandhi, who was the leader of the new Congress, needed to collect huge sums of money to put up a whole new slate of candidates against the old Congress Party bosses who had controlled the money collection system. Second, since the old Congress machine and organization was unavailable to her, she had to appeal directly to the people. That, too, necessitated establishing a new nexus for campaign funds with business and bureaucracy. We have already noted the adverse impact of the ban on company donations. In the post-1967 period and throughout the 1970s, many factions split off from the Congress Party and became the foundation for new regional parties.The increase in competition meant greater reliance on those who could produce the necessary money. Three major developments in the post-1990s have further deepened and widened the scope of political corruption. First, the politics of single-party dominance was replaced by a more “equal opportunity” system of coalition politics. This meant that regional and local parties and their leaders were required to nurture the business–politics–bureaucrat links all the way from their local constituencies to foreign contacts. Second, greater competition made electoral contests not only intense but more frequent. Parties often failed to complete their term in office and had to be prepared to languish for periods in the political wilderness. They could not, however, neglect their patronage base and that required the continued procuring of funds. Gurharpal Singh comments,“As political parties have become less centralized, less corporate and more provincial, their traditional sources of funding—business, foreign contacts, ‘black money’— have also become less secure.” He observes, “In the last few years the minority and coalition governments—at the center and in the states—have used funds either to build patronage-based support or to bribe opposition MPs at critical junctures” (1997: 634).

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The corrupt electoral processes were bound to affect the voters. Wade observes,“People [in India] vote for whom they think can give them most favors in a particular way” (Wade 1985: 487). Wade’s comment underlines what I have repeatedly encountered in many Indian national elections.The dominant sentiment was that since all leaders were corrupt, people were better off choosing the one who could deliver on promises, however corrupt he or she may be. The Underground Economy and Criminalization Bribery has given rise two categories of money in common parlance: black money, consisting of undeclared hoards of money accumulated through all manner of illegal means, and white money, consisting of legitimate money that can be accounted for and taxed. “Black money can be defined as unaccounted income which is concealed” (Frey and Schneider 2000: 1). It is believed that as much as one half of all income is underground.“In 1973–74, it was estimated at Rs. 58 billion, . . . by 1980–81 the amount rose to Rs. 183 billion.The compound rate of growth is estimated to be 18 percent with noncorporate tax evasion at around Rs. 53 billion. By the 1990s, it was estimated that annually Rs. 400 billion is generated as black money” (Kabra 1986). Black money represents a loss of tax revenue to the government (Kumar 1999a).The enormous size of the black economy means that whatever the government development policies, the real economy is beyond the government’s control. No doubt, black money goes to reinforce influence peddling, vote buying, engineering defections in parties, and influencing policy decisions. In fact, black money provides the crucial link between political corruption and the criminalization of politics (Mitra 1998). Several scholars have argued that the establishment of the systematic connection among criminal elements, aspiring politicians, elections, and violence is the most alarming recent development in Indian politics ( Jefferlot 2002, Singh 1997, Mitra 1998). Black money is the lifeblood of these linkages. Black money is generated and required to fund other criminal activities such as racketeering and trafficking in arms and gold as well as illicit liquor and drugs. But that in itself is not unusual. Most countries in the world are plagued by mafia-like criminal organizations that indulge in such activities. What makes the Indian situation so alarming is this underground’s growing links with politics.As a consequence, criminals are less vulnerable to the law and to arrests and prosecution.The entry of criminals into the political foray has also led to violence, kidnapping, and intimidation. Jefferlot notes that in Mumbai, which is both the economic and, increasingly, the criminal capital of India, a close link was forged between the film industry and organized crime. Crime made “early inroads because the Bombay producers, not content with large-scale tax evasion, habitually accepted ‘donations’ from local godfathers, who in this way managed to recycle ‘black money’ and make huge profits.”

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In addition to the film industry, “land and real estate procurement is a lucrative area for the Bombay mafia” ( Jefferlot 2002: 92). In Mumbai, land is scarce and real estate is expensive. Criminals therefore sell their services of intimidating tenants, businessmen, and slum dwellers. Soon gangsters became real estate developers, and from there the road to municipal seat contests and up the tiers of state and national government is an easy climb. Criminal gangs, having acquired considerable assets, need politicians to protect their activities. In Mumbai, writes Jefferlot, “the Chief Minister in the mid 1980s was alleged not only to have protected gangsters operating in the building business. The Shiv Sena after its victory at the Mumbai Municipal corporation in 1985, reportedly did the same.” Politicians use criminals for a variety of purposes, such as booth capturing (illegal confiscation of voting booths, usually through coercion), imposition of poll boycotts, and electoral fraud. A repoll was ordered in 265 polling booths in 1984, and in 1,670 booths in 1989. In addition, politicians frequently use gangs for communal riots.This has been a common practice by the Bharatiya Janata Party. Candidates and parties that fear losing elections frequently seek to communalize their defeat and use village toughs or lumpen elements in the urban slums to incite riots. According to Jefferlot, in “the Bhagalpur (Bihar) riots in 1989 which caused a thousand deaths, . . . the violence was initiated by Hindu nationalists trying to polarize voters along communal lines some weeks before legislative elections.” Criminalization of politics is most evident at the local and state level.The central parliament is relatively free of criminals parading as representatives of the Indian masses. For instance, out of the 425 members of the 1993 legislative Assembly in Utter Pradesh (UP), 126 had a criminal record or connections with the local mafia. Subsequent elections expanded the role of criminals in UP politics (Hardgrave 1993: 342). Jefferlot and others argue that while the declaration of national emergency and the suspension of democratic process by Indira Gandhi in 1977 marked the entry of criminal elements in politics, their subsequent entrenchment has been facilitated by the fierce competition for votes and seats triggered by the demise of the Congress dominance, increasing costs of elections, communal polarization (based on religious loyalties) of elections, and businesses’ need for political protection by criminal elements (Halankar, Chakravarti, and Koppikar 1997: 14).These are also the reasons for the exponential growth of political corruption in India. Anticorruption Measures and Remedies While the definition of corruption may be disputed among scholars, and disagreement exists over the causes of corruption, no one disputes that corruption needs to be controlled. For decades, since India’s independence, many inquiry commissions were appointed and several other investigations set up to curb corruption. More often than not, these measures came in wake of scandals that shook the public’s confidence in the ruling parties and

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in government. Frequently, commissions were appointed in response to public pressure, to regain confidence, or to undermine opposition parties and their leaders. Although it shouldn’t be overemphasized, the spread of education and electoral democracy has also generated public awareness of corruption, making it difficult for politicians to ignore it. Some scholars argue that political corruption is endemic to Indian society and prevailed even in ancient India. As evidence they point to the writings of Kautilya’s Arthashastra in 300 B.C. (Shama 1967: 71, Thakur 1979). Others argue that it became more rampant in the post-independent period and that British India was largely free of corruption. The Indian Penal code (IPC) was created in 1860, three years after the British crown assumed responsibility for India and removed the East India Company as the legal governing agency. The IPC defined corruption as “acceptance by public servants of any gratification, other than legal remuneration, in exchange for an official act” (Shunglu 2000).The code contains offenses relating to elections, while the 1944 ordinance, which was added later, has provisions to punish those who acquired wealth through corrupt practices. It is noteworthy that the penal code did not encompass legislators, only civil servants and bureaucrats. The Prevention of Corruption Act of 1947 narrowed the requirements for corruption to proven motives. The First Five-Year Plan in 1952 emphasized integrity of public life and warned that government needed to maintain continuous vigilance against corruption. The administrative Vigilance Commission was created within the Ministry of Home Affairs in 1955 with responsibility to provide directions and coordinate efforts of various ministries to deal with corruption. In 1962 the Santhanam Committee was appointed to look into the growing problem of corruption. By this time the Krishna Menon jeep scandal, the license scandal implicating K. D. Malaviya, and T. T. Krishnamachari’s involvement in the Mudhra affair (all three were cabinet ministers in the central government) had produced pressure on the Nehru government to take remedial steps. The Santhanam Committee Report had recommended establishment of a Central Vigilance Commission (CVC) that would operate free of ministerial control. The report also laid the grounds for an amendment to the earlier Prevention of Corruption Act of 1947 that was passed specifically to deal with corruption offenses. In 1963, a Central Bureau of Investigation (CBI) was created (Tummala 2002: 48).The CBI had a special division to investigate charges of corruption. But in the following two decades, the CBI’s responsibilities expanded to include investigation of conventional and economic crimes in addition to the charges of government and political corruption. In 1987, the Bureau was, therefore, divided into an anticorruption division and a special crimes division. The potential targets for investigation were also expanded. In the 1988 amendment to the Prevention of Corruption Act, the definition of public servant came to include elected officials (Shunglu 2000). Recent

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extensions have expanded jurisdiction to include public sector enterprises, banks, and insurance companies. Today, there are basically three agencies that deal with corruption at the central government level: the Administrative Vigilance Commission (AVC); the Central Bureau of investigation (CBI) and the Central Vigilance Commission, which has a Vigilance Officer in each ministry or department, including public sector enterprises. The structure of investigation is replicated at the state level with anticorruption bureaus and vigilance responsibilities. But with each new tightening of the investigative framework, more loopholes became evident, leading to further expansion and revisions of the Prevention of Corruption Act. Until recently, the government could appoint officials in the CBI and could control its investigations. For instance, it was widely believed that Joginder Singh, the former chief of the CBI, was removed because he was pursuing cases against persons close to the prime minister. But in 1997 the Supreme Court created a procedure that checks the government’s power of appointment. Thus, the CBI now directly reports to the Central Vigilance Commission, which is independent of ministerial control.3 Similar procedural changes have taken place at the state level. Today, corruption-related complaints to the CBI can be made on the world wide web, by post, or in person. In fact, there is a great deal of discussion on the India-related web and in Internet discussion groups about the need to eliminate corruption. Citizens’ forums and the media play an increasingly important role in exposing corruption at all levels in society. The Tehelka scandal, in which the president of the BJP was seen taking a bribe from journalists posing as businessmen, is a case in point. Every other scandal—the suger scam, the telecommunications scandal, the Bofors and Hawala—have been reported in excruciating detail in the press. The Tehelka exposé led to the resignation of the National Democratic Alliance’s defense minister. Jayalalitha was barred from assuming the chief minister’s position because of charges of corruption in Tamil Nadu. Because of corrupt activities, Lallo Prasad Yadav, the chief minister of Bihar, was similarly banned from assuming public office. Numerous civil society groups have also taken up the cause of mobilizing the public and generating pressure to create a more robust law enforcement mechanism against corruption. For example, the Foundation for Democratic Reform, a “non-partisan people’s movement for reforms in the governance structure” is working to improve anticorruption laws and procedures (Lok Satta 2004). Bhatia and Dreze write about an interesting case of exposure and orderly handling of corruption at the the grassroots level (Bhatia and Dreze 1998). In a small village in Rajasthan’s Ajmer district, a public hearing was held about management of funds for development projects, followed by a puppet show used to dramatize the corruption of public officials and politicians. Hundreds participated in the public scrutiny. Bhatia and Dreze observed that the creative use of modern and traditional strategies—the provisions of the Right to Information Act and the folkloric puppet show

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highlighting the system of corruption—can be effective instruments to shake public apathy and curb corruption at the local level. In fact, the Public Affairs Center in Bangalore has developed a report card method to invite the public to become active in exposing and eradicating acts of corruption. This can serve as a model for other cities to follow (Gopakumar 1998). Some NGOs demand that the election commission be made more powerful and that candidates contesting elections disclose their assets and liabilities, including their criminal record, if any (Lok Satta 2004). In fact, an internet search revealed a huge number of citizens’ websites and discussion groups pertaining to the problem of corruption in India. They advocate a whole spectrum of reforms—ranging from changes in the electoral system to education projects that will inform the public of the means available for complaints and redress. Public interest litigation (PIL) has been another tool in the hands of citizens to bring cases to the courts when policy and public officials have failed. Arvind Verma writes, “the mechanism of PIL became a handy tool to hold ruling party members and senior public officials accountable for their actions or its omission. A petition by Ravindra Kumar led the courts to inquire into allegations of vote purchasing by the ruling party” (Verma 2002: 160).To gain a majority, Prime Minister Narasimha Rao had bribed several members of the parliament to vote in his favor.The courts directed the CBI to inquire into the complaint.When it became clear that the CBI was dragging its feet, the courts took over the investigations.This led to the prosecution of Rao in what came to be called the JMM bribery case. Another petition by a reputed public litigation lawyer, Prashant Bhushan, opened the Hawala inquiry.The proactive practices by the court have led to many more complaints by individuals involving prominent politicians. In December 1996, the Supreme Court delivered a key judgment in response to the discovery of policy interference in cases and directed that the CBI be made into an autonomous body. However, it is also important to bear in mind that state-level courts are not free of the taint of corruption and public interest litigation is a reflection of the government’s failure to deliver on promises and enforce the law. Whistleblowers and Corruption The establishment of vigilance commissions, regulating agencies, the media, civil society, and courts have no doubt played a role in deterring government and corporate transgressions to some extent. But their investigative skills would not have born any fruit had individuals not come forward to provide initial inside information.That is the role of the whistleblower.4 The term “whistleblowing” is a relatively recent entry into the vocabulary of public and corporate affairs, although the phenomenon itself is not new. It refers to the process by which insiders “go public” with their claims of malpractice, by or within organizations, usually after having failed to remedy the matters from within, and often at great personal risk to themselves.

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It is this willingness to stand up for a principle and to court risk openly that distinguishes whistleblowing from in-house criticism. In India, there are no statutes protecting whistleblowers. In fact, the Civil Service Conduct Rules prohibit civil servants from speaking publicly against government policies.The Official Secrets Act thwarts whistleblowing and the ombudsman institutions also do not offer protection. When physically threatened, however, whistleblowers are protected by the police (Sangita and Vaidya 1998: 17, 18). Despite the hardship, India has had its share of prominent whistleblowers, from V. P. Singh to Manoj Prabhakar to P. Dinakar.This hardly matches the extent of corruption and legal transgression detailed earlier, but whistleblowing has increased public awareness, led to investigations and exposés, led to the establishment of commissions of inquiry, and also led to the resignation of ministers and high-level political leaders.5 During the Nehru years,T.T. Krishnamachari, the finance minister, and the defense minister, Krishna Menon, were forced to resign. In the 1970s, Karunanidhi, Chinna Reddy, and R. Antulay, the chief ministers of Tamil Nadu,Andhra, and the Maharashtra states, respectively, resigned under pressure. During the Narasimha Rao years, the Hawala exposé led to the resignation of many cabinet ministers and party leaders. The Tehelka tapes forced the BJP to demand resignation of its own party chief, Bangaru Laxman, and the defense minister, George Fernandes. Whistleblowing in India has also generated public reactions, which have in turn led to a change in government.The exposure of excesses and corruption in 1975 to 1977 when Indira Gandhi had declared a state of emergency had catapulted the Janata-led coalition to power after 25 years of dominance by the Congress Party. An exposé of the details of Bofors cost Rajiv Gandhi the 1989 election and brought a V. P. Singh–led coalition to power.The 1995 elections in Maharashtra led to the defeat of the Congress Party and particularly chief Minister Sharad Pawar, who was charged by insiders with egregious acts of corruption. In India, whistleblowing by civil servants and public officials has even prevented the looting of public land, the abuse of the environment, and the use of substandard materials in public housing. S. N. Sangita amd Vaidya Vibhavati, at the Institute for Social and Economic Change (ISEC) in Bangalore, list 64 cases of whistleblowing between the years 1975 and 1996. These include whistleblowing by both politicians and administrators. The relentless exposure of systemic corruption in the Bofors case, in the late 1980s, and the Tehelka exposé, referred to previously, are the two most spectacular instances of whistleblowing’s far-reaching impact on government and society in India. Whistleblowers take great risks in coming forward. They are invariably subject to reprisals, harassment, suspension, and dismissal (Sangita and Vaidya 1998: 19). The most likely response to the whistleblowers by their agency administrators is to transfer them to remote parts of India and remove them from ready access to the press and the media.

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Sangita and Vibhavati provide a detailed account of the G. R. Khairnar case, illustrating both the popularity and the vulnerability of the whistleblower. Khairnar, a deputy commissioner of the Mumbai Municipal Corporation, made public the illegal occupation of land by Pawar, then chief minister of Maharashtra. Khairnar was enthusiastically supported by the media and the public. Public meetings were arranged for him to speak, and he addressed large crowds, sometimes as many as 50,000. India Today reported that some people “walked eight kilometers to stop and garland him on the highway,” that men “lunged to touch him,” and that women wanted him “to bless their babies.” Khairnar shot to fame, was regarded as a hero, and opposition parties rallied around him, hoping to capitalize on his anticorruption popularity. But Khairnar also suffered retaliation from the powerful figures he was accusing. He was transferred to the most unimportant position in the administration, overseeing slaughterhouses, and subsequently, he was suspended on petty grounds. His cohorts in the bureaucracy were divided in their views about whistleblowing. Most thought he was seeking the limelight.While the public and the media admired his courage, a survey administered by Sangita and Vaidya revealed that 76.7 percent of his fellow bureaucrats opposed his conduct. However, Khairnar had made excellent use of the media, he mobilized the public, and he exposed the entrenched links between corrupt politicians and criminals.The stubborn opposition from these corrupt politicians and criminal elements and the sabotage of his proposed measures by fellow bureaucrats ultimately undermined the campaign he had launched (Sangita and Vaidya 1998: 12–13). There is growing demand for an act that would protect the whistleblower from such reprisals. It is clear that no case of whistleblowing will complete the full circle—exposure, investigation, and punishment—unless other factors are in place: a supportive political environment and backing by the public and the media. Exposure of corrupt actions when a ruling party is firmly in power will not work, nor will it work if the opposition is in disarray and unwilling or unable to make the charges stick. In other words, whistleblowers need political champions and a willingness on the part of political actors to launch a sustained campaign for redress.There is, of course, danger in this in that the case of corruption might become a political football, as was the case with Bofors, and the public might lose interest.What India then needs is both legislation that will protect whistleblowers as well as institutional structures to process the complaint without taint of political bias. But beyond this narrower change, fundamental reforms are needed to reduce, if not eliminate, corruption from India. Debate over Remedies There is no consensus among students of India about the appropriate remedies needed to reduce corruption. Some advocate public education, others emphasize an establishment of watchdog agencies, nongovernmental

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organizations, and a vigilant media.What is also recommended are a whole range of legal and judicial as well as administrative procedures, such as the Freedom of Information Act, protection for whistleblowers, the creation of a “Citizen’s Charter” along the lines of that established in England, the creation of special courts to provide a speedy disposal of complaints about corruption and the prevention measures of computerization of services (as in railways). The strengthening of existing legislation and procedures for complaints, redress, and punishment will certainly diminish petty corruption. But without fundamental reforms, large-scale corruption based on the nexus of business, bureaucracy, politicians, and crime will not diminish. The debate about the grand larceny–type corruption revolves around two theses. One might be called the culturalist thesis, which is basically pessimistic about institutional reforms and argues that real change in citizen behavior requires education as the remedy. The institutionalists, on the other hand, advocate a whole range of reforms in the political system, such as separation of legislative and executive foundations of government, replacement of the single past the post system of elections, to some version of proportional representation, a strengthening of the election commission with greater enforcement powers, and decentralization of financial and legislative powers to elected village and district level bodies.They also advocate public financing of elections, the democratizing of party organization, and the creation of consensus among all parties to impose a “proper ethical standards” on its members.This would include an absolute ban on the nomination of those charged with criminal activities, even if they were never indicted. The above remedies flow from the assumption that decentralization of power and greater transparency will reduce corruption. However, it is important to distinguish between mere administrative decentralization and real popular empowerment. The former will simply move downward the windows of opportunities for corruption. On the other hand, popular control combined with accountability and transparency of procedures can go a long way in checking corruption. The 1992 Punchayat Raj Act, which required an election for the formation of village Panchayat (assembly of village elders), is seen by the advocates of popular empowerment as a positive development. However, the village panchayats need the power to control budgets and expenditures, which at present they do not have. It is also clear that no single strategy or piecemeal measure, in itself, will effectively check corruption, given its magnitude and scope in India. Both institutional and educational reforms are required if petty bribery as well as grand larceny–types of corruption are to be checked. Above all, it is important that the measures adopted address the corrupt linkages among the different segments of India.At the same time, it is important to develop an Indian, not an outsider, perspective on the problems of corruption and governance. Accepting the taxonomy and corruption categories put forward by international agencies that are unfamiliar with India’s situation can only reinforce stereotypes and mislead. In this regard, the findings by Srivastava,

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Corbridge, Vernon, and Williams, published in a recent issue of Contemporary South Asia, are particularly important because they challenge many settled assumptions about corruption in rural India (2002).The theoretical context of their arguments is as important as their findings. They point out that at least two dominant Indian perspectives on the problems of governance and corruption in India exist currently: the rational choice model and cultural/institutionalist model. In the first model, excessive rent-seeking is the culprit. But rent-seeking behavior, Srivastava et al., explain, assumes that all actors—irrespective of caste, ethnicity, or class—will seek to maximize the rents they seek. This is in line with the epistemology of the rational choice theory. Neo-classical economists who argue in its favor advocate reduction in the role of the state and liberalization as well as privatization of public property to stamp out corruption and improve governance. Demands for civil service reform also flow from these assumptions about the motives and reasons for corruption. The second thesis, Srivastava et al. explain, rejects the idea of a rational agent whose approach disregards class, caste, and gender or location and instead makes their cultural biases a part of the analysis. In line with this thinking, represented in the writings of Sudipta Kaviraj and Partha Chatterjee, India is divided by a growing gulf between the local vernacular culture and the English-speaking political class that has access to the ideologies of development, to planning and democracy. The ordinary Indian does not understand nor share in the objective goals of the state as conceived by its English-speaking elite. According to this thesis, Srivastava and others explain, the failures of the state are largely the result of failure of the vernacular society to know or participate in the development goals and strategies conceived by the English-speaking elite. Srivastava and his coauthors challenge both theories on the basis of their 1993 field research and findings in bloc-level development schemes for employment generation in the states of Bihar and Bengal. In 1993 the ministry of rural development started a program named Employment Assurance Scheme (EAS) that was geared to “provide gainful employment during lean agricultural season in manual work to all able-bodied adults in rural areas who are in need and who are desirous of work, but who cannot find it” (Dingra 1993: 1). The scheme would assure 100 days of paid employment for a maximum of two adults per household.The Srivastava study admitted that rent-seeking was entrenched in both Bihar and Bengal but they found that public officials at lower levels did not seek to maximize rent-seeking (an assumption that is key to the rational choice theory). They found that there were many honest civil servants and that those who were dishonest did not choose maximization. Second, the gulf Kaviraj and Chatterjee talk about between the vernacular and English-speaking classes in Indian society is highly exaggerated. The Srivastava study found that the district-level public officials fully understood the intent and strategy of the employment creation scheme but sought to modify it in view of local conditions. They created durable

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instead of temporary assets for the district and the villages. They did not indulge in excessively predatory behavior partly from fear of being found out (the Fodder scam had had a widespread impact on public officials) and partly because they doubted that the central and state governments would continue to support the unemployment schemes for any length of time. In addition, fearing that this seasonal but labor-intensive project (creating mud banks and impermanent, or kaccha, irrigation schemes would open new opportunities for panchayat-level corruption, the district-level managers modified the scheme with support and cooperation of key elements in the vernacular society. The Srivastava et al. study found that the poor wanted development in whatever shape it came.The study concludes that “it is a mistake to assume that the poor are opposed to development, or that officers think only of maximizing rents, . . . it is a mistake to suppose that an English-speaking elite speaks with one voice or that it cannot share a vocabulary with key elements in vernacular society” (2002: 267). In view of Srivastava et al. “government is what government does or is made to do, and it is important that the complexity of these doings is taken into account” when we discuss corruption and failures of governance. This study provides evidence against simplistic explanations of causes and effects of corruption. To assume every scheme and an entire bureaucracy to be corrupt, or to apply rational choice models of human behavior as a key to understanding developing and enormously diverse countries like India, is simplistic as well as wrong. Summary and Conclusion We began this chapter by noting the debate over the definition of corruption, its causes and remedies.Whatever the definition, there is no doubt that India is plagued by a high incidence of corruption and attendant evils. It is nevertheless important to bear in mind that the widening scope of corruption is a reflection of good and bad: good, in that democratic rights have been made available in a real sense to millions who have gained access to power through political parties and political organizations. Such a process need not have been corrupt and probably might have been cleaner had the political, judicial, and law enforcement institutions been strong and responsive to public need.The weakening of these institutions was to some extent inevitable given the reversal of historical processes in India: achievement of democracy before development. Burdened with the historic task of territorial consolidation, economic development, and democracy, India’s leaders and institutions have had to choose between difficult tradeoffs.This does not, of course, excuse the illegal accumulation of personal wealth at the expense of the public exchequer, or the use of criminals and vote buying or bribing public officials for profit and power. Underdevelopment is not an alibi for corruption. But it does explain the political compulsions under which the system and its operators function. It also explains why it is important to examine the

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arguments for and against corruption when issues of social justice and equal rights are at stake, as we saw in the case of backward caste and class political parties. In the real world of public policy, leaders have to frequently choose between the lesser of two evils: political survival for constituency and party with corruption or political suicide in pursuit of honesty. One can hardly expect a political leader to choose the latter. While many anticorruption measures, laws, and institutions have been created, none have been effective. The argument that state control (the license-permit raj) created corruption might be true, but reducing state control has failed to reduce corruption. In fact, liberalization and market reforms have created more corruption. This is largely because no corresponding laws and regulations have been put in place to supervise the freemarket practices. Finally, it is clear that no single remedy will work, given the scope and incidence of corruption in India. The Srivastava study offers a ray of hope, as do the ideas of Bhatia and Dreze.The latter point out that the Public Information Act can be used by local governments and bodies to mobilize the public around an anticorruption drive. The former study suggests that perhaps the public perceptions of corruption, recorded by the TI survey, are misleading and overly exaggerated. Every scheme of development, every welfare measure is not necessarily driven by selfish motives. Many civil servants seek to promote development and refrain from rent-maximizing behavior. There is no disagreement, however, that the costs of corruption are forbiddingly high. According to the World Bank, corruption has the potential to flourish where rents are high, discretion extensive, and reporting and monitoring are poor.This is where attention should be focused, rather than on prosecution of corrupt individuals. Prosecuting the guilty is important but can do little to reduce the opportunities and incentives for corruption “upstream.” It is also useful to ask why there have not been more successful prosecutions of corruption. This highlights the importance of scrutinizing the judicial, prosecutorial, and police bodies. Corruption undercuts the macroeconomic, efficient, equitable, and institutional functions of government. It is helpful to distinguish these four types of costs imposed by corruption: (1) Macrofiscal: lost revenues (from tax, customs duty, and privatization) and excessively high expenditures (through corruption loadings on state contract); (2) Reduction in productive investment and growth: through abuse of regulatory powers, misprocurements, and other costs imposed by corruption; (3) loss of investments and (4) costs to the public for substandard services. International evidence indicates that countries with a higher incidence of corruption have lower investment and growth rates and that public safety can be compromised by unsafe infrastructure. According to the United Nation’s 1999 Development Program Report for South Asia, India’s GDP would go up by 1.5 percent and its foreign direct investment would go up by 12 percent if India’s corruption levels were down to that of Scandinavian countries.The costs of corruption to the public and to the

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poor in particular are significant and can be measured: via higher taxes than necessary, bribe extraction in delivery of services, and in the poor quality of, and access to services. Bribes, frequently comprise a higher proportion of the poor’s income, even though the poor do not pay the highest bribes. Other costs of corruption include more intangible effects, such as the loss of confidence in public institutions. Corruption can also undermine the rule of law, tax compliance, respect for contracts, civil order and safety, and ultimately the legitimacy of the state itself. Add to this other costs, such as the degradation of public life, maldistribution of resources, unequal access to office and redress, distorted priorities of the state, and the undermining of democracy and hence the rights of people, not to mention the violation of human rights because of the of public life. The communalization (religion-based political identities) of public discourse is particularly important in South Asia given the salience of religious conflicts, particularly among India’s majority Hindus and minority Muslims. The pattern of Hindu–Muslim riots and their repeated eruption in particular parts of India suggest a nexus among community leaders, politicians, police, and criminal gangs. Such a nexus became evident in the recent communal riots in Ahmedabad and Mumbai. Corruption permeates and aggravates this and all social and economic conflicts in India. Its connection to violence and crime is specially debilitating to India’s future stability and prosperity.

Notes 1. The term crores represents 10 million rupees.The exchange rate for converting rupees to dollars is the following: In the 1980s, the rate fluctuated from Rs. 7.91 to the dollar, to Rs. 16.65 to the dollar; the average for the decade was approximately Rs. 12 to the dollar. For the 1990s through the end of 2002 the exchange rate averaged Rs. 33 to the dollar.Through the decade, it ranged from approximately Rs. 18 to Rs. 48 to the dollar with the following fluctuations: Rs. 18 (1990–1991); Rs. 24 (1991–1992); Rs. 31 (1993–1994); the rupee then gradually fell 4 percent per year until 1999, when it reached an exchange rate of Rs. 40; it was Rs. 48 at the end of 2002 and was Rs. 45 in 2003.The Source used for these conversion rates is The Center for Monitoring the Indian Economy, August 1994,Table 18.13, p. 101. 2. Those involved included Rajiv Gandhi (“R” of Ardbo’s handwritten record) and Olof Palme (“P”), respectively the Prime Ministers of India and Sweden; Arun Nehru (“Nero” and “N”), Rajiv Gandhi’s cousin and confidant; the Hindujas (referred to variously as “Hanssons,” “G.P.H.,” “H,” and “S.P., G.P.”); Ottavio Quattrocchi (“Q”), an Italian businessman and cousin to Sonia Gandhi; and several others, according to Sukumar Murlidharan in Frontline, November 23–December 6, 2002. Sonia Gandhi is the widow of Rajiv Gandhi and is currently the president of the Congress Party and slated to become the next prime minister should her party win the national elections in 2004.

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3. According to Arvind Verma, in his article on judicial activism in the May 2002 The Howard Journal, “the order radically changed . . . the CBI parent Act . . . taking away power of superintendence from the central government.” It is noteworthy that court judgments have led to the fall of the Congress government in 1996 and brought in the United Front government headed by V. P. Singh, who was identified with “clean politics.” 4. Even a powerful Freedom of Information Act, which allows for disclosure of information without the need for leaking, offers only a partial solution. Users would have to specify what they wanted to know. But if there seems to be no reason to be suspicious, no one may bother to ask for information. 5. For instance, whistleblowers have led to the appointment of the Chagla Commission on the Mundhra case, The Shah Commission and the Jagmohan Reddy Commission on Emergency Excesses, the Joint Parliamentary Committee on Bofors and on the Bank scam, and on others mentioned throughout the chapter.

Bibliography Bardhan, Pranab. 1984. The Political Economy of Development in India. Oxford UK: Blackwell. Baru, Sanjaya. 2002. “A First Estimates of Petty Corruption.” Financial Express. 20 December. Accessed December 19, 2003. Available atwww.financialexpress. com/fefull story.php?contentid ⫽ 24163. Bhatia, B. and J. Dreze. 1998. “Freedom of Information is Key to Anticorruption Campaign in Rural India.” Transparency International Newsletter. September; p. 3. Accessed November 8, 2003. Available at www.transparency.org/newsletter/98,3/ third.html. Brass, Paul. 1994. Politics of India Since Independence. 2d. ed. Cambridge, UK: Cambridge University Press. Burns, John. 1997. “Fodder Scam Could Bring Down a Shaky Indian Government.” New York Times. July 2. Accessed December 19, 2003. Available at www.nytimes.com/learning/general/specials/ india/970702india-politics.htm. Chadda, Maya. 1997. Ethnicity Security and Separatism in India. New York: Columbia University Press. Chidambaram, P. 2004. “India is Shining for 250 Million People Only.” Financial Express, March 14. Accessed May 8, 2004. Available at Financial Express website www.fecolumnists.expressindia. com/full_column.php?content_id⫹54706. Corbridge, Stuart and John Harris. 2000. Reinventing India. Oxford, UK: Blackwell Publishers. Dingra, B. S. 1993. “Employment Assurance Scheme Guidelines.” Government of India, Department of Public Information Office, Press Information Bureau, New Delhi. Accessed December 19, 2003. Available at http://rural/nic.in/book0001/ch6.pdf. Frey, Bruno and Fredrich Schneider. 2000. “Informal and Underground Economy.” In International Encyclopedia of Social and Behavioural Science Bd. 12 Economics, ed. Orley Ashenfelter. Amsterdam: Elsevier Science Publishing Company. Gill, S. S. 1998. The Pathology of Corruption. New Delhi: Harper Collins Publishers.

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Gopakumar, K. 1998. “Citizen Feedback Surveys to Highlight Corruption in Public Services: The Experience of Public Affairs Center Bangalore.” Transparency 43. International. Accessed November 6, 2003. Available at http://www.totransparency.de/documnets/work-papers/kgopakumar.html. Halankar, S., S. Chakravarti, and S. Koppikar. 1997. “Fear in the City.” India Today. 6 October, 13–14. Hardgrave, Robert. 1993. India: Government and Politics in a Developing Nation. New York: Harcourt, Brace and Jovanovich College Publishers. Heidenheimer,Arnold J. 1989a.“Perspectives on the Perception of Corruption.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. ———. 1989b. “Problems of Comparing American Political Corruption.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Huntington, Samuel P. 1989. “Modernization and Corruption.” In Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. LeVine. New Brunswick, NJ:Transaction Publishers. Jefferlot, Christopher. 2002. “India Democracy: The Rule of Law on Trial.” India Review 1, no. 12 ( January): 77–121. Kabra, Kamal Nayan. 1986. India’s Black Economy and Maldevelopment. New Delhi: Patriot Publishers. Kapoor, S. 1996. Bad Money, Bad Politics: The Untold Hawala Story. New Delhi: Haranand. Kohli, Atul. 2001. “Political Change in a Democratic Developing Country.” In Democracy in India, ed. Jayal Niraja Gopal. New Delhi: Oxford University Press. Kumar, Arun. 1999a. The Black Economy in India. New Delhi: Penguin Books. ———. 1999b.“The Black Economy, Missing Dimension of MacroPolicy Making in India.” Economic and Political Weekly, March 20, 681–94. Lok Satta. 2004. “Lok Satta (People Power):What is Lok Satta?” Accessed January 9, 2004. Available at www.loksatta/abt_whyloksatta.html. Mahallingam, Sudha. 1998a. “Dairies as Evidence.” Frontline 15, no. 6 (March 21). Accessed December 18, 2003. Available at www.flonnet.com/fl1506/ 15060270.htm. ———, 1998b. “Dealing with Dirty Money,” Frontline 15, no. 7: 4–17. Accessed December 20, 2003. Available at www.flonnet.com/fl1507/1507920/htm. Mehta, Pratap Bhanu. 2002. “Debating Election Finance.” The Hindu. 17 July. Accessed December 19, 2003. Available at thehindu.com/2002/07/17/stories/2002071700081000.htm. Mitra, Chandan. 1998. The Corrupt Society, The Criminalization of India from Independence to the 1990s. New Delhi:Viking. Noorani, A. G. 1973. Minister’s Misconduct. New Delhi:Vikas Publishing House. ———. 2001. “Tansi Cases on Shaky Political Ground: Some Larger Questions.” Frontline 18, no. 19 (September): 15–28. Accessed December 18, 2003. Available at www.flonnet.com/fl1819/ 18190150.htm. Nye, J. S. 1978.“Corruption and Political Development: A Cost Benefit Analysis.” In Political Corruption: Readings in Comparative Analysis, ed. A. J. Heidenheimer. New Brunswick:Transaction Press. Overland, Martha Ann. 2002. “In India, Suitcases of Money Buy Admission to College.” Chronicle of Higher Education 48, no. 47 (August 2): 36–37.

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Pai, Sudha. 2000. State Politics, New Dimensions. New Delhi: Shipra Publications. Paravala,V. 1996. Interpreting Corruption: Elite Perspective in India. New Delhi: Sage Publication. Paul, S. and M. Shah. 1997.“Corruption in Public Service Delivery.” In Corruption in India, Agenda for Action, ed. S. Guhan and S. Paul. New Delhi:Vision Books. Press Trust of India. 2002.“Petro Pump Issue Rocks Parliament.” Outlook. 2 August. Accessed December 19, 2003. Available at www.outlookindia.com/ptinews.asp?id ⫽ 73426. Ram, N. 1999.“Know Your Bofors,The Facts, Issues and What Lies Ahead.” Frontline 16,no.24 (November):13–26.Accessed December 19,2003.Available at www.flonnet.com/fl1624/fl162400.htm. Rudolph, Lloyd and Susanne Rudolph. 1987. In Pursuit of Lakshmi; The Political Economy of the Indian State. Chicago: Chicago University Press. Sampathkumar. 2001. “Insider Trading—Legal Fallout in the Starlite Case.” Businessline, 19 December. Accessed December 18, 2003. Available at www.bloonnet.com/iw/2001/10/28/stories/ 0828h151.htm. Sangita, S. N. and Vibhavathi Vaidya. 1998. “Whistleblowing in India.” Institute for Social and Economic Change (ISEC), unpublished paper. Nagarbhavi P.O. Bangalore-560072. Sengupta, Arjun. 2003. Interview by Maya Chadda. October 23. Shama, Sastri. 1967. Kautilya’s Arthasastra. 8th ed. Mysore: Mysore Printing and Publishing House. Shunglu,V. K. 2000. “India’s Anticorruption Strategy.” In Combating Corruption in the Asian and Pacific Economics, Asian Development Bank. Manila, Phillipines. Accessed November 8, 2003. Available at http:/www.adb.org/documents/conference/combating corruption/chap_01.pdf. Singh, Gurharpal. 1997. “Understanding Political Corruption in Contemporary Indian Politics.” Political Studies 45: 634–45. Singh, Manmohan. 1997. “Handling a Modern Economy.” Frontline 14 no. 16, August 9–22.Accessed May 7, 2004.Available at Frontline website www.flonet. com/f11416114160380.html. Singh,Tavleen. 2002.“The Cameras’ Doesn’t Lie but Govts Do.” The Indian Express. January 12. Accessed December 17, 2003. Available at www.indianexpress.com/ full_story.php?content_ id⫹14005. Srivastava, Manoj, Stuart Corbridge, Rene Vernon, and Glyn Williams. 2002. “Making Sense of the Local State: Rent Seeking,Vernacular Society and The Employment Assurance Scheme in Eastern India.” Contemporary South Asia 11, no. 3: 267–289. Sukumar, Murlidharan. 2002. “Towards Trial.” Frontline 19, no. 24 (November 23). Thakur, Upendra. 1979. Corruption in Ancient India. New Delhi: Abhinava Publications. Transparency International India (TII). 2002. Corruption in India: An Empirical Study. Accessed December 19, 2003. Available at www.ti-bangladesh.org/ti-india/documents/corrind.htm. Tummala, Krishna. 2002. “Corruption in India: Control Measures and Consequences.” Asian Journal of Political Science 10, no. 2 (December): 44–69. United Nations Development Program. 1999. “Highlights of Human Development Report.” India News. Accessed December 2003. Available at www.undp.org/in/undpnews/sep 99/pg 04.htm.

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Verma, Arvind. 2002. “Taking Justice Outside The Courts: Judicial Activism in India.” The Howard Journal 40, no. 2 (May): 148–165. Virmani, Arvind. 2004. “A Far Cry from the Hindu Rate.” Financial Express, net edition, April 8. Accessed May 8, 2004. Available at Financial Express net edition website www.financialexpress. com/fe-full story.php?contnt id⫹56585. Wade, Robert. 1985. “The Market for Public Office,Why the Indian State Is Not Better at Development.” World Development 13, no. 4: 467–95.

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CHAPTER

6

Corruption in Four Countries Robe rta Ann Johnson

All four of the countries in this book are rated as corrupt. What distinguishes them is whether corruption is experienced as systemic, pervasive, routine, or relatively rare. Seen in this light, there are two pairings. In India and Russia, corruption appears to be everywhere. In the United States and Israel, its presence and impact are far more subtle. As described in chapter 1, Transparency International’s Corruption Perception Index (with lower numbers being least corrupt) ranks the United States at sixteenth, Israel at eighteenth, and Russia and India both at seventy-first. That we have close rankings on an international corruption perception measure seems, at first, surprising because of the enormous differences between these four countries.Though they wind up coupled, it is important to remember that each reaches its Transparency International score by traveling along its own unique historic path. This book tries to respect each country’s complex history while exploring the common features and explanatory factors related to corruption that they share. This last chapter has five sections. In the first section, we will review the pattern of corruption and responses to it in each of the countries. The second section, “Comparative Whistleblowing,” will use cultural context to explain why in some countries whistleblowers are able to play an important role in opposing corruption while in others they are not. In the third section, “Comparative Corruption,” we will consider variables that might explain the big differences in corruption levels. Our focus will be the two significant areas—(1) laws and law enforcement and (2) civic sense and public service. Building on our knowledge of corruption in four countries, in the fourth section,“Controlling Corruption with Legal Arrangements,” we will explore the use of devices to legalize arrangements that elsewhere might be considered corrupt, in the fifth section, “Defending Corruption Revisited,” we will evaluate some popular defenses of corruption.

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An American city’s morning newspaper may include stories about how a police department covered up an investigation of “one of their own,” how an election campaign ignored legal fund-raising limits, and how a business executive enriched himself at the company’s expense. But the typical U.S. citizen reading about these scandals might also feel a certain degree of comfort knowing that at least these corrupt activities were uncovered, publicly disclosed in the press, and might possibly be investigated and even prosecuted and punished. In stark contrast to India and Russia, these scandals reported in the morning newspaper or on the nightly news may be the only evidence of corruption during an average American’s day. The large American public bureaucracy is generally free from corrupt practices. In the United States there is not a lot of what Maya Chadda in chapter 5 calls “petty corruption,” when small sums of cash are illegally changing hands in exchange for favors or service. But large sums of money are exchanged in the American political arena. In the United States, there is an overly close relationship between politician, donor, and lobbyist. What makes their quid pro quo–looking exchanges acceptable is that they are not boorish backroom examples of out-and-out bribery.They are legal.The contributions are transparent, the favors given are on record, and it is all done consistent with technical rules that restrict who can give and how much can be given. Still, it astonishes that in a country that so vigorously prides itself on being democratic, only people with access to a lot of money are able to be viable candidates for most political offices. Americans live with the inconsistency that patterns of questionable practice are allowed to be called legal. Surveys also suggest that Americans have learned to distinguish examples of serious wrongdoing from those with which they can live. And the line drawn separating what is considered corrupt from what is not isn’t permanent. In some cases, media coverage and public sentiment can turn a questionable behavior into a political liability and eventually change the practice. The Halliburton defense contracts for work in Iraq are a particularly visible case in point. The awarding of lucrative government contracts by the U.S. Defense Department to the Halliburton company was widely criticized for its suspect procedures—insider influence and lack of competitive bidding. The Defense Department denied “cronyism” and defended the decision. But the public’s judgment seemed unmoved and threatened to tarnish the George W. Bush administration’s reputation. Interestingly, the Halliburton response to the criticism was to try to change public opinion.They launched a public relations campaign. In midOctober 2003, Halliburton’s CEO urged employees to write to newspapers

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and lawmakers describing the useful contribution Halliburton was making to the troops in Iraq. The CEO named it a “Defending Our Company Campaign” (Margasak 2003: A3). But the important U.S. “court of public opinion” may not have been sufficiently swayed by the public relations effort. By mid-November 2003, the Pentagon announced it was revamping its method of awarding contracts.The Los Angeles Times reported that “Under pressure to be faster and fairer, U.S. officials unveiled a new system . . . for reconstruction work in Iraq. . . . U.S. authorities would answer critics’ charges of cronyism by offering regular public disclosures and would hire private project managers to help ensure efficiency in the rebuilding effort.” The head of the Pentagon office overseeing the process promised “maximum transparency from beginning to end” (“U.S. Changing” 2003: A19). Public suspicion and criticism of the awarding of Halliburton contracts seems to have made a difference and had an impact on future Defense Department contracting procedures. The level of business corruption in the United States is controlled imperfectly. The waves of twenty-first-century business scandals, starting with Enron, are evidence of that. In theory, U.S. businesses are supposed to be restricted to activities consistent with general expectations of what constitutes fair business practice and fiduciary responsibility. Behavior is supposed to be self-monitored by the industry and controlled by appropriate and neutral public institutions, such as the courts and the Securities and Exchange Commission. In recent years, the New York Stock Exchange has been publicly criticized and subjected to litigation for its failure to regulate its industry.1 The regulatory and enforcement agencies have also been criticized for lack of oversight effectiveness. Admittedly, regulators have many challenges. Overseeing agencies need to be independent in judgment and capable of investigating and punishing wrongdoing.They are faced with the problem of modern financial mechanisms so new and complex, and practices so esoteric, that external control may at times seem close to impossible. They are also faced with the problem that punishing wrongdoers with fines, even enormous fines, for violations may not provide a sufficient incentive for companies to be law-abiding. Although new laws are passed with more specificity and greater penalties, monitoring agencies don’t have nearly the resources needed to investigate more than a fraction of their industries. As with the Halliburton case, public opinion can also play a role in curbing business corruption. Periodically, when corrupt practices are publicly exposed, it becomes clear to corporate managers that financial shenanigans can destroy the public’s trust in their business and may help destroy the business itself. The exposure of corrupt business practices in congressional hearings, whistleblower testimony, and newspaper stories influences public opinion and can stigmatize companies, corporate leaders, and entire industries. Without confidence in businesses, the public may be less likely to

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invest in or support them.There is some evidence of this as it relates to the mutual fund industry. Following a “widening mutual fund scandal” during fall 2003, outflows (money withdrawn) from stock funds exceeded inflows by $2.1 billion. Since the stock market was rising, not declining, at the time, many analysts believed that it was likely that the withdrawal of funds was due to the widely publicized scandal over “improper and illegal trading at some prominent fund groups” (Pender 2003: I1) Thus, public opinion may, on occasion, indirectly contribute to curbing corporate corruption. But it is the law that seems to be the key to corruption control for Americans. In the United States, a legalistic approach drives anticorruption activities. It relies on specific and detailed proscriptions of outlawed practices; it relies for enforcement on various agencies, like the Federal Election Commission and the newly established Public Company Accounting Oversight Board. While there is an understanding that people may cheat, there is also an American optimism that these laws, with appropriate enforcement, will catch the crooks, and by example, will prevent others from cheating. Never mind the loopholes and the sometimes inadequate oversight. Never mind that what is actually allowed by law often looks very much like corrupt practice. Laws prohibit practices, articulate limits on influence, and require transparency. This creates order, predictability, and the feeling that corruption is under, or soon will be under, control. Israel In the Israeli political arena, there is a wide range of irregularities that are practiced in the open with a large number of people participating. Many are quid pro quo–like arrangements. The foundation of these practices is the democratically organized political parties. The powerful Labor Party set a pattern. The same people who were leaders in the Labor Party were leaders in unions, in business, and in local governments. In power, Labor’s policies and party appointments benefited their affiliated groups.The practices were legal but smelled foul. From time to time, when the political arrangements crossed the line and were too big and too bold to be considered acceptable—too much personal profit, illegal fundraising, candidates buying party support—the actions were exposed and became public scandals. As in India, accusations of wrongdoing can become effective campaign rhetoric that inspires campaign promises. The Israeli media freely reports about suspect activities, while laws, regulations, and the judgement of courts curb and punish the most egregious excesses, including business scams and bank embezzlement. Like the United States, law enforcement institutions are generally considered untainted.The Israeli state comptroller, for example, audits, investigates, and addresses suspect practices in the public bureaucracy. In the ombudsman capacity, the office can recommend administrative changes to correct wrongdoing.

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Supporting these anticorruption efforts are civic grassroots organizations, for example, the Movement for Quality Governments (MQG). Like citizen efforts in India, MQG has petitioned the courts to become more attentive and involved with transparency, accountability, and conflict of interest issues. MQG also operates a hotline for complaints, and Israelis are not shy about complaining and protesting. But there are minor corrupt practices in Israel that remain unpunished. They are widely and openly practiced and are tolerated by large numbers of people—patronage practices, protektzia, patriotic illegalisms, and “as though” arrangements. While civil service positions are, by law, expected to be filled based on merit, the political patronage system of appointments (patronage practices) continues to operate in Israel. While established administrative procedures and regulations are supposed to be followed, people use personal influence (protektzia) to get special treatment. While laws are supposed to be respected, people circumvent laws (patriotic illegalisms) and act illegally out of patriotism or in the interest of the party, community, and kibbutz. For these illegal practices, people look the other way.They are tolerated. There are also corrupt practices that are not only tolerated by Israelis but are called legal. They are “as though” arrangements. They originated as devices to avoid pay increases for one union escalating into increases for other workers. A practice arose of camouflaging an increase in pay with formulas that are not easily transferred out. But the formulas were adopted by other workers anyway and they are now misused by everyone. For example,“study tours” have become pleasure trips, illiterate workers receive “professional literature allowances,” and training funds have become little more than “tax-free income.” The special arrangements are connected to patronage practices, and while interest groups are usually the beneficiaries, sometimes individuals can also negotiate their own deals. This widespread behavior implicates everyone—the beneficiaries and the others who tolerate the costly charade. The consequences of these questionable arrangements affect the integrity of the system. Its countless participants and silent witnesses are resigned to a system of widespread corrupt practices. But the wrongdoing seems contained and predictable and does not seem to affect the general quality of government programs. Amidst the special deals, Israel still has the reputation of providing a high level of public service. Russia Corruption is a part of everyday experience in Russia. Under the former Soviet regime, people used corrupt practices for personal gain and to advance themselves professionally in the bureaucracy. In the Soviet statecontrolled economy, officials had a monopoly over the limited supply of valued goods. Shortages of scarce consumer resources like cars, housing units, food, and even places at the university stimulated the practice by

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corrupt officials of illegally selling these goods. A system in which officials distributed goods to the highest bidder was pervasive. Bureaucratic corruption was also widespread under the Communist, state-run system. Unreasonable production goals and an expectation that those goals would be surpassed invited falsification of reports and the breaking and bending of official rules. Bureaucrats used personal influence, exchange of favors, and public lies to achieve their agency goals and to look good. So unfair was the monopoly hold of state officials and so inefficient was the official system at distributing goods and services that a black market, or shadow economy, emerged. A whole new set of brokers made goods available illegally. The black market was widespread and extensively used with very few penalties. Thus, all Russians under the Soviet regime, office-holders and consumers alike, were involved in corrupt activities in the process of getting and supplying the goods and services everyone needed for daily life. Officials collaborated with and concealed from official view this far-reaching corrupt activity. Corruption intensified in the post-Soviet “democratization” period.The Soviet shadow economy had already been tied to the criminal world.When state controls were lifted and free enterprise was introduced in Russia in the early 1990s, criminal elements began openly operating with bureaucrats and politicians, who were eager to enrich themselves. For political economists, inappropriately weak state controls are characteristic of poor governance.This, in turn, offers greater incentives and more opportunities for corruption. Political economists have called these corrupt patterns of activity “unrestrained predatory behavior.” It is an apt description of Russia at this time. Members of Russia’s shadow economy expanded their activities into drug trafficking and gun running. They smuggled gold and other valued resources to foreign countries for great personal profit. Under this new economic system, criminals continued to collaborate with officials, politicians, and police. But because free enterprise undermined the now weak power of government officials, criminals were elevated into an even more prominent role in the new economy. Armed gangsters were powerful, corrupt, and able to become very, very rich.They dominated the economy and intimidated the citizenry, unchecked. Russia’s elected top officials have also been connected to corrupt activities. For example, President Boris Yeltsin was implicated in a money exporting scheme. Yeltsin’s handpicked successor, Vladimir Putin, granted Yeltsin immunity from prosecution upon taking office and very soon afterward dismissed the prosecutor in the case.2 In general, the courts are also corrupt. The Russian court system was neither independent nor free of corruption during the Soviet period, and this has been true for the more recent post-Soviet period as well. While new anticrime and anti-extortion laws

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were passed, courts remained incapable of enforcing laws that might curb organized crime. In one year, 1997, in the city of Moscow alone, 600 people were killed by contract killers. India In India corruption is also a very real part of everyone’s daily life. India, the second most populous country in the world, is plagued by petty bribes and grand theft. “Petty bribes” refers to the small exchanges of money paid to get everyday goods and services. “Grand larceny” or “theft” refers to the illegal, secretive, and lucrative deals and arrangements made by bureaucrats, bankers, business people, politicians, and gangsters. Corruption in India grew as a result of the development of government policies and political institutions. India gained independence from Great Britain in 1947. By the mid-1950s, India adopted a program of public ownership. A huge state bureaucracy grew a maze of regulations that required businesses and agencies to obtain permission and licenses for just about everything. Similar to the experience of the Soviet state-controlled economy, this monopoly hold made rent-seeking by bureaucrats and politicians easy and led the way to a system of bribery and corruption. Responding to economic pressures to relinquish state control and engage in the benefits of a free market, in the mid-1980s India adopted a policy of economic liberalization, and by the 1990s, India’s economy had been privatized. Like Russia, privatization brought even more opportunities and larger rewards for corrupt practices. Without a state presence, decisions on lucrative contracts and policies were made in private (without transparency) and without regard to the larger public interest. Regional governments were even more corrupt than the central government and fraudulent business and banking practices were common. The political parties contributed to India’s corruption. The Congress Party and, later on, other political parties built a strong base by using patronage and the profits of office holding. In a corrupt exchange, a political party in power was able to reward special interests, collect from office-seekers, make deals with government contractors, and subsidize party supporters in order to win party recruits and pay for expensive campaigns. Newer parties succeeded in bringing the lower caste and classes into this corrupt process. A wide variety of agencies and industries participate in, and a thriving black money market also facilitates stealing from, the public treasury. The mix of politics with a black money market and with criminals and thugs brought Indian politics new opportunities but also brought it to a new low, especially on the local and state levels. In India, petty corruption may not make the newspaper, but it is experienced by everyone. Multibillions of dollars each year are spent on petty bribes. It is estimated that they represented 1.5 percent of India’s gross

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national product in 2002.That the areas of policing and public health care are the most bribe-riddled arenas speaks volumes about the hardship of corruption. Millions of poor people in need of police assistance, or in need of medical care from public health facilities, may have those services denied because they can’t pay the bribes. Although corruption is widespread, there have been a surprising range of efforts made to counter corruption in India. For decades, India has had anticorruption laws on the books and has created commissions to investigate, address, and correct corrupt practices. A free press has helped to publicize anticorruption efforts, which include nongovernment organizations demanding more transparency in elections. Citizens have also successfully used public interest litigation to involve courts in holding leaders accountable, and some villages have had limited success with innovative anticorruption programs. Comparative Whistleblowing Why are there large numbers of people in some countries who risk career, reputation, sometimes even their lives to confront and expose wrongdoing, while in other countries there are very few, or none, who come forward? Why are whistleblowers change-makers and heroes in some countries, while in other countries they have little impact? The answer to why there are large numbers of whistleblowers in some countries is not the level of corruption.The United States, with the lowest level of corruption in our group, has the highest number of whistleblowers. The answer to why, in some countries, whistleblowers are important in exposing corruption to the public is not the presence of whistleblower protection laws. Whisteblowers have a far more powerful impact in India, where whistleblowing is prohibited, than in Israel, where it is protected. What makes the difference in numbers and impact is the cultural context. It is not the amount of corruption; it is not protective legislation. It is the country’s unique history, values, and institutional experience that stimulates (or stifles) whistleblowing and determines whether those who expose wrongdoing are considered heroes. A comparative study helps us understand the impact of a country’s culture and closely held values on the phenomenon of whistleblowing. The United States Chapter 2 describes how, in the United States, more people than anywhere else in the world “blow the whistle” on waste, fraud, and abuse. Here, laws protecting those who blow the whistle on wrongdoing are extensive. Protection laws cover federal employees and all state employees as well as many private sector workers whose responsibilities relate to environmental, health, and safety issues or who work in publicly traded companies. But it

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is not the protective legislation alone that explains the large number of whistleblowers. Cultural factors become important ingredients and the essential explanation. American values have shifted during the last four decades so that, in general, the employee who exposes corruption may be seen by the general public less as a snitch and more as someone providing a public service. Public distrust of government and America’s deep-rooted individualism allow Americans to remain open to the whistleblower’s message. Organizations and institutions also support whistleblowing in the United States. Hundreds of organizations, and even more websites, have sprung up to support whistleblowers with information, legal advice, technical assistance, and emotional support. Media and legislative attention also help whistleblowers. U. S. whistleblowers easily become the subject of newspaper articles and television news programs, and they occasionally become star witnesses in bureaucratic investigations and congressional hearings. In a small number of cases, whistleblowers have been eligible to collect a portion of the money they have saved the government by exposing corrupt activity, and from time to time, American whistleblowers are even the subject of Hollywood films. Although they are far from perfect, U.S. laws protect whistleblowers and the culture (values and institutions) supports their efforts. Whistleblowers are important contributors in the struggle against corruption in the United States.The government hotlines alone have resulted in billions of dollars in savings to the American taxpayer, and the Securities and Exchange Commission daily receives over 1,000 contacts to report wrongdoing. Israel Chaim Kalchheim’s chapter describes how Israeli whistleblowers are legally protected from retaliation. Laws modeled after U.S. laws and passed by the Knesset in the early 1980s encourage and protect whistleblowers. Nevertheless, despite the availability of whistleblower protection, there are proportionately few complaints filed by “insiders” each year. Furthermore, those who step forward are not placed center stage and celebrated as heroes by the public. In contrast to whistleblowers in the United States and India, Israeli whistleblowers do not get star treatment and regular newspaper coverage; they also do not generally have a political impact. The chapter suggests that a common Israeli cultural experience is the answer to why there are so few whistleblowers in Israel making contributions, while in general, the Israeli public is not at all shy about complaining.The experience in common is that of minor corruption. Apparently, large numbers of Israelis are involved in minor but widespread rule-breaking behaviors that hamper, it is argued, an enthusiasm for whistleblowing. These activities include patronage practices, protektzia (pulling strings), patriotic corruption (not enforcing laws), and “as though”

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arrangements (falsely entitling people to benefits). When most of the population are beneficiaries of these or other political and administrative loopholes and bypasses, the potential whistleblower might hesitate to expose corruption for fear of being a target for scrutiny. In Israel, there does not seem to be the cultural and institutional environment needed to support whistleblowing. Protective laws are not enough. Russia Jasmine Martirossian, in chapter 4, describes how Russia has a unique history of government-encouraged whistleblowing, which, for decades, benefited the regime and its ability to control its citizens. The system created complicit arrangements between citizen and government, and the public was familiar with the details of the most notorious cases. Donos referred to the act of informing; donoscik was the term for an informant; and the whistleblowers’ acts were generally recognized by the public as being selfserving. Indeed, the negative reputation of donos was well-deserved. When free enterprise and the dismantling of the state-controlled market system transformed Russia’s economy, and the one-party system gave way to perestroika and multiparty competition, there emerged a new system that was so much more corrupt as to make Russian life even more dangerous. But individuals were precluded from stepping forward to expose wrongdoing as whistleblowers. Donos and the role of the whistleblower were historically tainted. In present-day Russia, even the police, whose official job is to investigate wrongdoing, are blocked from exposing corruption.The chapter on Russia documents the frustrations and dangers encountered by Major Victor Zhirov, a member of the Moscow police force who was involved in a highprofile international investigation of the looting of the Russian National Treasury. His efforts to expose corruption were thwarted at every turn. Only with witnesses and help from outside the country can a Russian whistleblower even survive. A few courageous souls in Russia have attempted to blow the whistle on environmental problems and radioactive hazards. They experienced harsh retaliation but succeeded in publicizing these issues because of international attention and pressure, and because of support from foreign and international organizations. India In chapter 5, Maya Chadda describes the widespread pattern of corruption both petty and grand in India. There are no statutes protecting whistleblowers who expose these corrupt practices. In fact, whistleblowing is technically illegal, according to civil service rules, and might even be personally dangerous.And yet, the Indian culture supports individuals coming forward to expose wrongdoing. Against all odds, Indian whistleblowers make a difference. Indian newspapers champion their causes as does the Indian public.Whistleblowers are

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consistently and enthusiastically supported as reformers fighting corruption, injustice, unemployment, and gangsterism. In India, there is grassroots support for whistleblowers who expose corruption.Tens of thousands might gather to hear a whistleblower speak, and political parties sometimes make whistleblower revelations a part of their party platforms. Even though exposing government wrongdoing is technically illegal and may be physically dangerous, it is on the rise in India and many who do it are considered larger-than-life heroes. Our comparative study suggests that in the struggle against corruption, whistleblowers are an important ingredient. Sometimes, they can publicize issues long before problems have been detected by other kinds of inspection and monitoring. In fact, in some cases it is only an insider who is able to expose the corruption, for example, in the U.S. mutual funds scandal in 2003.3 And it is the cultural context, not the amount of corruption or degree of protection, that determines how successful a country’s whistleblowers might be as agents of change.

Comparative Corruption These countries differ widely and it is a challenge to pinpoint the most important variables for explaining their different levels of corruption.They all hold elections with more than one political party; they have market economies and media outlets that, to varying degrees, report on corruption scandals.Why do Russia and India have a much higher level of corruption than the United States and Israel? Poverty and level of development are obvious differences and must play a contributing role.4 Clearly, if you are a poor nation, there aren’t the resources to pay the level of salary that would certainly help reduce the need to take bribes. Additionally, developing countries might not have the economic and political infrastructure necessary to effectively control rentseeking in business and government. In fact, the political economist would point to what chapter 1 calls “poor governance,” the absence of an appropriate state controlling presence in India and Russia as a major explanation for high levels of corruption. Based on the detailed description of our four countries, two particular variables seem to be especially significant and worth exploring as contributors to reduced levels of corruption: (1) the presence of independent, fair, strong, and effective laws and law enforcement agencies and (2) the value and practice of community interest and public service.

Laws and Law Enforcement In Israel, when it comes to serious corruption, there are well-publicized laws and offices to complain to. The state comptroller, the ombudsman office, and the courts are ready to investigate, punish, and make changes.

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In the United States, where the system is often fragmented, the same thing is nevertheless true—serious corruption is addressed. In the United States, cases of corruption are investigated, often by more than one agency—by special, or ad hoc, city, state, or executive investigative bodies; by Congress, with public hearings; by state attorney offices; or by industry-monitoring agencies like the Securities and Exchange Commission. Punishment is meted out with fines, and through the court system with lawyers and trials. The multiple and overlapping jurisdictions represent a wider net that strengthens the U.S. law enforcement system (Wallack 2003: B1). Anticorruption efforts are less successful in India and are a sham in Russia, although there is no dearth of proclamations against corrupt practices in both countries. In the case of India, political parties have campaigned on anticorruption platforms and numerous commissions have been established to recommend solutions. Starting with India’s First Five-Year Plan in 1952, which emphasized the integrity of public life and committed India to vigilance against corruption, proclamations and commissions have been an important part of India’s history as an independent country. In 1962, the Santhanam Committee was appointed to look into the problem of corruption. In 1963, a Central Bureau of Investigation (CBI) was created to investigate government corruption. By the twenty-first century, India had three anticorruption agencies on the ministry level and the capacity to receive complaints by mail, in person, or on the web. But commissions, studies, laws, and a website are not enough. India’s court system is deficient. The problem is not the high courts—they are helpful in combating corruption. But there are many instances of corrupt practices in lower level courts and some state level courts because the judges are too closely connected to politicians.5 Credible law enforcement, essential to fighting corruption, is frustrated by an uneven system of justice. Government officials responsible for monitoring corruption require neutrality; but they also need more resources.They must be able to not only investigate and prosecute corrupt officials whose scandal-filled stories are reported in the press; they need the resources to unearth the scandals that remain hidden. The problem is that there is so much corruption in India that there are not enough resources to monitor and investigate and have more than a symbolic impact. In Russia, when it comes to law enforcement, the situation can only be described as bleak. Throughout the twentieth century, under both Communism and a free-market system, laws were passed that prohibited corrupt practices. With Communism came strong, official, rhetorical condemnation of corruption, but there was widespread corruption and these laws were ignored. And today, as well, anticorruption laws and political promises are hollow. Enforcement appears to be nonexistent. Throughout the past century, Russia has not experienced independent law enforcement. Judges have not been able to function independently.

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Under the Soviet system, like other government bureaucrats, judges were either “on the take” or subservient to party superiors. In the post-Soviet era, the rule of law seems to be completely absent. In fact, entrepreneurs provide their own protection because the courts offer no effective formal means of conflict resolution. In 1999 alone, an estimated 53,000 crimes were committed by government officials. Few charges were filed against any of them and there have been few convictions of even the well-known perpetrators. With corruption rampant, with no effective law enforcement, and with the need for order, it is no surprise that Russian politicians campaign with promises to curb corruption. In 2003, in a stupendous exercise of executive power “against corruption,” President Vladimir Putin arrested the richest man in Russia. He accused him of embezzlement and tax evasion,“crimes” that had occurred a decade earlier.The arrest had all the drama of a James Bond movie. At the end of October 2003, “in a dramatic pre-dawn raid . . . masked Russian commandos snapped the country’s richest man, Mikhail Khodorkovsky, from a jet in Siberia” and jailed him, charging him with $1 billion worth of embezzlement, fraud, and tax evasion (Badkhen 2003a: A14). Khodorkovsky was probably guilty of a range of corrupt activities, possibly even connected to murders. He had engaged in insider deals in the early and mid-1990s that he parlayed into ownership of the Yukos oil company and control of much of his country’s economy. He became a billionaire (p. A14). Nevertheless, his arrest did not represent evidence, as President Putin claimed, that no one, no matter how rich, was above the law in Russia. It signaled something else—that the surprise anticorruption arrest was politically self-serving. Khodorkovsky was in some sense an easy target for Putin. Khodorkovsky was a tycoon who was disliked by a majority of the Russian people. But more importantly, Khodorkovsky was Putin’s target for more self-promoting reasons—Khodorkovsky was using his wealth to bankroll political parties who opposed Putin. Putin’s action against corruption could easily be seen as a façade and as arbitrary. It was, therefore, another illustration of the failure of Russian institutions, especially the failure of the courts, and more evidence of the absence of neutrally applied rules (Badkhen 2003b: A1, Dixon 2003: A3). Public Service and Civic Culture In the United States and Israel, public bureaucracies operate and provide services efficiently without the kind of corruption evident in Russia and India. In these less corrupt countries citizens generally do not have to “work through an influential intermediary” (bribe) to “get the benefits of the laws and administrative programs.” Heidenheimer calls this condition a “civic-culture-based system” (Heidenheimer 2002: 147). In it, government

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officials are expected to serve the public and government services are expected to be provided without favoritism. What Theobald calls the “standard explanation” for clean administration focuses on “the existence of a deeply rooted ethic or culture of public service in Western public administration” (Theobald 1999: 498). A culture of public service does not happen overnight or in a vacuum. It is thought to be the product of a sustained period where there is stability, specialized training, and successive waves of public servants who are inculcated with the ethic. Clearly this describes perfectly what happened in the United States after the passage of the Pendleton Act in 1883. As described in chapter 2, in the United States in the early 1880s, the Pendleton Act replaced the patronage spoils system with a merit system. The change took place slowly and was not complete until nearly 50 years later.The transformation took time and money.What the system in transition needed in order to evolve successfully into a bureaucracy with a professional ethic of service was not just determination but resources to pay stable salaries and pensions. Theobald queries, “one wonders how long it [the ethic of public service] could be sustained were Western public servants to remain unpaid for months on end as is often the case” in lessdeveloped countries (1999: 498). In Israel, public service ethics was a part of the British administration over Palestine. After Israeli independence, the perspective continued. The state bureaucracy was funded most adequately and many of those who filled the ranks of the new bureaucrats were people who had migrated from Europe and were familiar with a professional service ethic. Services are provided efficiently in Israel, a country that now ranks among the world’s most highly developed in providing education and health services. Ironically, for much of the twentieth century, Russia preached the idea of public service but it was far from the standard used in day-to-day practice by bureaucrats. Under Communism, although corrupt practices were viewed as treasonous, people looked the other way. Bureaucrats filed false reports, used influence peddling, and cheated to get scarce goods and services for themselves. While the state-controlled media spewed idealistic goals, public officials were less than public serving. When the Soviet Union was dissolved, and the market economy began operating in Russia, the country moved even further away from an ethic of public service. Now everyone felt they had free license to serve themselves. The descriptions of lawlessness, of gangsters and black markets, are not only frightening but are testimony to the absence of a sense of public good. Chapter 1 describes the efforts of a variety of agencies to import good governance and public-serving values into countries like Russia. Efforts have been made in Russia by nonprofit organizations like Transparency International, the Government Accountability Project, and the Ethics Resource Center. The American Bar Association, the U.S. State Department and Department of Commerce, and the World Bank have also contributed resources and support. In addition, nonprofit groups have aided

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Russian scientists and fledgling organizations that are working to prevent environmental and radioactive catastrophes from happening in Russia and the other former Soviet Union states ( Johnson 2003: 118). The idea of public service is a European idea. Its codification can be seen in the essays by the German sociologist Max Weber. The value of public service may have been a part of the British administration when they ruled India, but Britain was a colonizer, and the concept and practice of public service did not get rooted in India except perhaps on the ministerial level with the elite Indian Administrative Service. There is a wide gap between the vernacular society and the English-speaking elite. For the majority of Indians, the abstract concept of public service remained just that, a foreign concept. Nevertheless, in India, the value of service to a community is widely shared. India is a segmented society where particular community interests may be pitted against other community interests. The political system supports the separate communities by encouraging and capitalizing on segmented identification in political campaigns and by distributing opportunities and resources by regional and religious identification, caste, and ethnic membership. These groups—caste, religious, regional—are very real, much more so than the celebrated, foreign, and largely theoretical idea of an abstract public interest. Thus, the idea of bureaucratic neutrality in the interest of serving an abstract public seems foreign to the India experience. However, Indians do value and can act on behalf of the community good. Loyalty to region and caste, clan and religion, seen as traditional and Indian, helps motivate and consolidate group identification and power.This has been the source of public-regarding behavior. There are examples of public projects being introduced to communities in ways that engage those communities. The result is that the integrity of the community can be harnessed to support these efforts. When this happens their activities are imbued with a sense of public mission and, at the same time, the corruption level goes way down.The bloc level development schemes for employment generation in the states of Bihar and Bengal, described in chapter 5, are good examples. India also has well-celebrated and home-grown examples of individuals who demonstrate a commitment to the greater good. Indian whistleblowers act on behalf of the larger community, sometimes against gangsterism, corrupt politicians, or in the interest of the environment. They are heroes and role models, their stories are well publicized by the media, and their act of courage resonates with thousands of others.Their vision of a larger public good is not foreign; it is Indian and it reminds us that Indians may be able to move on their own terms, with their own issues, toward a more public-service orientation. Public issue groups exemplify another homegrown example of activities in India that reflect public-serving values. For instance, India has produced civil society groups that are part of a “people’s movement” against corruption. The Foundation for Democratic Reform is one such example.

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They, and others like them, can be important for modeling networks and norms that are focused on public issues, not on traditional groupings.These new networks might be a model for other activities. Sometimes,“networks of civic engagement . . . can serve as a cultural template for future collaboration” (Putnam 1993: 3). Controlling Corruption with Legal Arrangements Arnold J. Heidenheimer has argued that in countries with low levels of corruption, where the polity expects fair political behavior, creative devices can be used to accommodate certain political expectations and quid pro quo–like arrangements. Instead of out-and-out bribery and behind-thescenes deals, these payoffs “assume sophisticated and respectable new forms” (Heidenheimer 2002: 147). For example, people can be rewarded for favors and paid off with testimonial dinners, consultant contracts, and with “legal” campaign contributions (p. 147). In Israel, widespread use of such devices includes protektzia (pulling strings),“as though” arrangements, and some forms of patronage practice.Thus, even in countries not considered especially corrupt, there are “arrangements.” In his focus on U.S. political practices, Philip Stern explores one kind of “arrangement,” the accepted lobbyist-legislator relationship. Stern examines the similarity between this arrangement and real corruption (outlawed behavior) by comparing the legal description of a real bribe with what lobbyists do. In the process, he illustrates the “difficulty of distinguishing between campaign contributions and bribes.” Using the following statutory definition of bribery, Stern challenges us to find significant differences between legal lobbying and bribery. In general, the U.S. definition of bribery subjects to criminal prosecution a “public official,” who directly or indirectly, corruptly demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally or for any other person or entity in return for being influenced in the performance of any official act. (Stern 1988: 146, 147) Stern provides a series of cases of congressional actions where, following a large contribution from an interest group, a member of Congress or senator acts on behalf of that interest, sometimes implementing a dramatic shift in their vote or policy position. Why is this not seen as out and out corruption? What purpose is served by legalizing this relationship? From Stern’s vantage point, this legalized influence peddling represents the height of cynicism, and democracy loses in these arrangements. From his perspective, lobbying looks like legalized bribery, legalized by the wealthy to benefit themselves. It is a perspective shared by many, many others.6

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But seen from the perspective of comparative corruption, legalizing influence peddling functions in another way.When the lobbying relationship has to conform to rules, actions can be controlled, limited, and transparent, and will be known and will be stable and predictable. Defending Corruption Revisited Some have argued that corruption in some circumstances can play a useful role. In fact, chapter 1 outlines many of the arguments in defense of corrupt practices. Decades ago, extravagant claims were made on behalf of corruption, especially as it related to newly independent states. Corruption was believed to support national unification and stability, introduce efficiencies, and strengthen political institutions (Caiden 2001: 31–32). Maya Chadda in chapter 5 presents some of the most persuasive defenses of political corruption. Political parties in India, using patronage and cronyism, energized and absorbed into the political system many groups of people who had been left out of politics. The parties’ corrupt political practices mobilized the poor and lower caste, turned them into political participants, and made them beneficiaries of the state’s political bounty. Corrupt practices achieved democratic ends. Prestigious American historians have offered similar defenses of corruption in their analysis of the nineteenth-century political party machine and Boss Tweed. But William Marcy “Boss” Tweed “ruled and plundered” New York City “so shamelessly in the years right after the Civil War that his name became synonymous with corruption and chicanery” (Kandell 2002: 84).Tweed multiplied New York City’s debt and hid the costs of city development. “Contractors doing jobs for the city were asked to hand in vastly inflated invoices for their work and then allowed to collect 35 percent of the total. Tweed . . . kept 25 percent and the remaining 40 percent was doled out to associates” (p. 87, 88). Yet, a revised way of looking at this politician, who everyone freely agrees was a crook, is that Tweed’s political machine performed important functions. He provided food at Christmas and found jobs for supporters. He gave public funds to Catholic schools and charities and improved water supplies, sewage disposal, and streets. He built parks and helped build the Metropolitan Museum of Art and the American Museum of Natural History (p. 87). Historians, including the former president of the New York Historical Society, sing his praises, but Tweed’s own defense seems just as insightful as those offered by contemporary historians.7 Tweed, in his own behalf, testified to an investigating committee that “New York politics were always dishonest,” explaining about New Yorkers that “this population is too hopelessly split up into races and factions to govern it . . . except by the bribery of patronage and corruption” (p. 84). Tweed and his defenders use the same arguments as those used to defend the corrupt party patronage system in India—the machine absorbed those who had been excluded and it made things work.

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We are in complicated territory when we explore corruption. Respected academics and experts use arguments that turn notorious crooks into heroes and public servants. In a world so complex and nuanced, it may seem hard to condemn corrupt practices, especially when experts argue about their value. But clearly, these arguments in defense of political corruption are being made on behalf of a system in transition (Huntington 2002). They are not a defense of a permanent way of governing. Some of the practical arguments on behalf of economic corruption also seem flawed (Bardhan 2002: 324–325). As we have seen, in the case of countries like Russia and India, corruption has been used to grease “the wheels of commerce by allocating goods ‘according to willingness and ability to pay’ ” (Balogun 2003: 131). Such bribery, called “speed money,” used in the public and private sectors, is found in many places and is defended by participants. Describing experiences in Mexico City, Rosenberg reflects, “when bribery is the only way to get services without taking a week off work, people bribe” (Rosenberg 2003: 32). Efficiency arguments have been used to defend “speed money,” but the practice is not always that efficient and its defense misses the bigger picture. Economist Pranab Bardhan argues that even though the system may have some “redeeming features,” the “arguments in favor of the efficiency effect of corruption are fraught with general problems.” Sometimes, instead of circumventing an inefficient system, “speed money” can aggravate and increase the problem, and sometimes it can cause administrative delays. Other economists have pointed out how unpredictable queues (a system where you can bribe to get ahead) are as an allocating mechanism. And of course, an important element of uncertainty is introduced by using “speed money” because a contract between a briber and a bribee is not enforceable in court (Bardhan 2002: 325). Even more important than economist arguments is the fact that as a principle to live by, defending this kind of corruption seems woefully shortsighted, when compared to its larger social costs. In the case of the principle of using willingness and ability to pay as the basis of operation, the practical implications are alarming. Imagine willingness to pay as the basis of law enforcement—homicide could be redefined by forces of supply and demand. And if the ability to pay is the decisive factor, the poorest would have little or no access to police protection (as is the case in India). Corruption may appear to have a function but its negative implications are serious and extensive. While much attention goes to the price that is paid for corruption by the people who pay the bribes, those who receive bribes pay a price as well. The police offer an important illustration. If they are in a corrupt environment, police officers will use their office for collecting bribes, or “rentseeking.” But in a less corrupt environment, police are able to serve the community and develop pride in their work. William Muir studied 28 officers in a California police department and saw them as “street corner politicians.” His careful analysis of the patrolman’s

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role in the community allows us to appreciate that most of them operate with a code of honor and use their office to express personal objectives, working toward their own “moral milestones” and toward their “moral destination.” Their level of integrity was surprising and memorable (Muir 1977). Muir appreciated that “The basic condition of patrol work was that it was lonely, dangerous, and preoccupied with human suffering.” Performance, therefore, depended on an “extraordinarily high level of personal morale.” It wasn’t “punitive supervision” or economic rewards that got the officer to risk his life assisting people. What Muir found was that “No policemen worked at his utmost unless he felt that what he was doing was both effective and right.”As for dangers,“a morally compelled policemen willingly risked sacrificing himself ” (Muir 1977: 263). The opportunity for police officers to feel pride in policing is not likely to be available if the officers primarily see their work as participating in a corrupt system. In a system where rent-seeking is expected, graft and undue political influence can instill a sense of meaninglessness and misdirect energy (p. 268).Thus, the cost of rent-seeking is that the police officers are denied the opportunity to use their profession to be moral agents, making the community safer and better because they are there. Indeed, seen in this light, it is clear that the quality-of-life costs in a corrupt system are paid not just by those who bribe the police but by those who receive the bribe.

Notes 1. Phil Angelides, the California state treasurer, openly criticized the New York Stock Exchange on PBS’s television program The Nightly Business Report, December 16, 2003. He was suing them on behalf of the California Public Employment Retirement System because they neglected to monitor the mutual funds industry, which for years was involved in extensive fraudulent activity. 2. President Yeltsin proposed Vladimer Putin to succeed him as president.Yeltsin, his family, and his inner circle had been implicated in illegally moving money to Switzerland. Putin’s first official decree was to grant Yeltsin immunity from prosecution. Soon after, President Putin dismissed the prosecutor general, who was cooperating with the Swiss authorities in the investigation of the Yeltsin case. 3. Todd Wallack’s December 23, 2003 San Francisco Chronicle article “Anonymous Tip Helps Mutual Fund Regulators Find Where to Dig Up Bodies,” describes the importance of whistleblowers. Whistleblower communication started the story. In March 2003, a whistleblower contacted the Massachusetts securities regulators about wrongdoing, related to mutual funds, at Morgan Stanley; in April, a whistleblower warned the Securities and Exchange Commission that Putnam Investments were involved in prohibited practice related to mutual funds; and in May, a whistleblower provided information to the New York State attorney’s office that Canary Capital Partners hedge funds were engaged in illegal agreements with mutual funds. 4. “Poverty and level of development” does not tell the whole story.While Russia and India are poorer and not as economically developed as the United States and

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Israel, there are many poor developing nations that are much less corrupt than Russia and India (on the Transparency International Corruption Perception scale) such as Botswana, Slovenia,Taiwan, Malaysia, and Trinidad. 5. For example, in the Best Bakery case in Gujarat, the Supreme Court ordered criminal cases moved out of Gujarat because of the close connection between the judges and the chief minister, Narendra Modi. Modi was complicit in the riots that killed over 1,000 Muslims in Gujarat. The Supreme Court did not think that the victims of the riots could get justice in the Gujarat court. 6. See, for example, Elizabeth Drew, The Corruption of American Politics (Secaucus, NJ: Carol Publishing Group, 1999); and Peter Kobrak, Cozy Politics (Boulder, CO: Lynne Rienner Publishers, 2003). 7. The list of Tweed “supporters” includes Professor Kenneth Jackson, Columbia University; Professor Leo Hershkowitz, Queens College; Professor Seymour Mandelbaum, University of Pennsylvania; Professor Mike Wallace, John Jay College of Criminal Justice; and Professor Thomas Bender, New York University.

Bibliography Badkhen,Anna. 2003a.“Russia Charges Oil Tycoon With Tax Fraud.” San Francisco Chronicle. 26 October, A14. ———. 2003b. “Kremlin Concocts Own Rule of Law.” San Francisco Chronicle. 6 November, A1, A11. Balogun, M. J. 2003. “Causative and Enabling Factors in Public Integrity: A Focus on Leadership, Institutions, and Character Formation.” Public Integrity 5, 2: 127–147. Bardhan, Parnab. 2002. “Corruption and Development: A Review of Issues.” In Political Corruption: Concepts and Contexts, 3rd ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Caiden, Gerald E. 2001.“Corruption and Governance.” In Where Corruption Lives, ed. Gerald E. Caiden, O. P. Dwivedi, and Joseph Jabbra. Bloomfield, CT: Kumarian Press. Dixon, Robyn. 2003.“Oil Stock Serve Splits Putin’s Cabinet.” Los Angeles Times. In San Francisco Chronicle. 1 November, A3. Drew, Elizabeth. 1999. The Corruption of American Politics:What Went Wrong and Why. Secaucus, NJ: Carol Publishing Group. Heidenheimer, Arnold J. 2002.“Perspectives on the Perception of Corruption.” In Political Corruption: Concepts and Contexts. 3rd ed. Ed. Arnold J. Heidenhemier and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Huntington, Samuel P. 2002. “Modernization and Corruption.” In Political Corruption: Concepts and Contexts, 3rd ed. Ed. Arnold J. Heidenheimer and Michael Johnston. New Brunswick, NJ:Transaction Publishers. Johnson, Roberta Ann. 2003. Whistleblowing:When It Works and Why. Boulder, CO: Lynne Rienner Publishers. Kandell, Jonathan. 2002. “Boss.” Smithsonian Magazine (February): pp. 84–90. Kobrak, Peter. 2002. Cozy Politics: Political Parties, Campaign Finance, and Compromised Governance. Boulder, CO: Lynne Rienner. Margasak, Larry. 2003.“Halliburton’s CEO Urges Employees to Defend Firm.” San Francisco Chronicle. 25 October, A3.

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Muir, William Ker, Jr. 1977. Police: Streetcorner Politicians. Chicago: University of Chicago Press. Pender, Kathleen. 2003. “Growing Scandal Hurts Sales.” San Francisco Chronicle. 5 October, I1, I15. Putnam, Robert D. 1993. “The Prosperous Community.” The American Prospect 4, no. 13 (March 21). Accessed October 31, 2003. Available at http://www. prospect.org/print-friendly/print/V4/13/putnam-r.html. Rosenberg,Tina. 2003.“The Taint of the Greased Palm.” New York Times Magazine. 10 August, 28–34. Stern, Philip. 1988. The Best Congress Money Can Buy. New York: Pantheon Books. Theobald, Robin. 1999.“So What Really Is the Problem about Corruption?” Third World Quarterly 20, no. 3. ( June). “U.S. Changing How It Awards Iraq Contracts.” 2003. Los Angeles Times. In San Francisco Chronicle. 20 November, A19. Wallack, Todd. 2003. “Anonymous Tip Helped Mutual Fund Regulators Find Where to Dig Up Bodies.” San Francisco Chronicle. 23 December, B1, B3.

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ABOUT THE

AUTHORS

Maya Chadda is professor of political science at William Paterson University of New Jersey, a research fellow at the Southern Asian Institute, Columbia University, and a member of the Council on Foreign Relations. She is author of Indo-Soviet Relations, Paradox of Power: The United States Policy in Southwest Asia, Ethnicity Security and Separatism in South Asia, and Building Democracy in South Asia: India, Pakistan and Nepal. Roberta Ann Johnson is professor of politics and director of the public service program at the University of San Francisco. She is the author of numerous journal articles and book chapters and author of Whistleblowing: When It Works—And Why, and Puerto Rico: Commonwealth or Colony? She was the recipient of the College Service Award in 2003. Chaim Kalchheim is senior lecturer at the Department of Political Studies and former director of the institute for local government, Bar-Ilan University, Israel. His articles and books, mainly on local government, have appeared in Israeli and foreign publications. In the 1980s he served as the deputy director of the ombudsman office. Jasmine Martirossian is a graduate of the Law, Policy and Society doctoral program at Northeastern University. She has written numerous trade articles on communities and group decision making and is author of the book Decision-Making and Communities: Why Groups of Smart People Sometimes Make Bad Decisions. Shalendra Sharma is professor of politics at the University of San Francisco. He is the author of Democracy and Development in India (Choice Outstanding Academic Title for 1999), The Asian Financial Crisis: Crisis Reform and Recovery, and editor of Asia in the New Millennium: Geopolitics, Security and Foreign Policy. He was the recipient of the University Distinguished Teaching Award for 1996/1997 and the Distinguished Research Award for 2002/2003.

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INDEX

Abuladze,Tengiz, 97 accountability, 1, 7, 13, 60, 135 Adelphia Communications, 37, 40 Administrative Vigilance Commission (India), 130, 131 AlertLine (international hotline), 12 Amar, Eli, 63–64, 66 American Bar Association (ABA), 12, 13, 158 American Foreign Practices Act (U.S.), 6 Anatomy of Greed (Cruver), 39 Andropov,Yuri, 98, 105–106 Animal Husbandry Department (India), 118 anonymous informancy, 99–100, 104. See also informancy in Russia; whistleblowing anti-corruption programs, 11, 12; in India, 129–132, 152, 156; in Israel, 61–63; in United States, 39–40, 43 anticrime institutions, in Israel, 60–61 Ardbo, Martin, 115 Armah, Ayi Kwei, 10 arms trafficking, 88, 128, 150 Arthur Andersen (accounting firm), 38, 40 Asea Brown Boveri corporation, 6 Asian Development Bank, 13 “as though” arrangements, 73–74, 75, 76, 149, 153, 160 authoritarianism in Russia, 88. See also totalitarian regime ballot measure committees, 30–32, 31 Balogun, M. J., 3, 10, 12 Bank of Israel, 56, 61 Bank of the United States, 23

bank scandals: in India, 117–118, 119–120, 132, 133; in Israel, 56, 61; in Russia, 89; in United States, 33–34, 39–40, 148, 155, 163n3 Bardhan, Pranab, 162 Barrio, Francisco, 9 Bar-Tal, Eran, 53–54 Bayley, David, 8 Beautyful Ones Are Not Yet Born,The (Armah), 10 Bellona Foundation, 102–103, 104 Ben Gurion, Amos, 55 Berezovsky, Boris, 89 Best Congress Money Can Buy,The (Stern), 27 Bhagwati, Jagdish, 8 Bharatiya Janata Party (BJP, India), 114, 115, 119, 129, 131, 133 Bhatia, B., 131, 138 Bhushan, Prashant, 132 Bihar (India) fodder scam, 118–119 black corruption, 2, 70, 74–75, 123 black market, 104; Indian money market, 15, 117–118, 128, 151; Russian shadow economy, 81, 85, 86, 88, 104, 150 Blum, Richard, 33 Bobkov, Filipp D., 98, 99 Bofors scandal (India), 115–116, 126, 133, 134 Bowman, James, 30, 37 Brezhnev, Leonid, 98 bribery, 3, 72, 86, 127; defined, 5–6, 54; in India, 109–110, 126, 139; lobbying as, 160; rent-seeking, 7–8, 9, 126, 136, 162–163; in Russia, 83–85, 86; in

170

Index

United States, 24, 27, 31–32, 37. See also petty bribes/corruption Bribes (Noonan), 5, 15n4 Brown,Willie, 21–22 Brzezinsky, Matthew, 89 Buckley v.Valeo, 28 bureaucracy, 7, 9, 122; Israeli, 71, 148, 158; Russian/Soviet, 1, 83, 84–86, 99, 149–150, 158; U.S., 35–37, 41, 44, 157–158. See also India, bureaucracy in; public officials Bush, George W., 25–26, 28, 45, 146 business corruption, 5, 6, 9, 65, 162; in India, 8, 112, 115, 117, 119–120; in Israel, 55–57; in Russia, 89, 92–95; in United States, 22, 37–40, 101, 147. See also bank scandals Bustamante, Cruz, 31–32, 46n5 Bychkov,Yevgeni, 92, 94 Caiden, Gerald E., 2, 12, 15n1 California Recall Election, 30–32 Canada, 76 capital flight from Russia, 89, 90 Carpeneti, Carolyn, 21–22 caste populism in India, 123–124, 125, 128 Central and Eastern European Law Initiative (CEELI), 13 Central Bureau of Investigation (CBI, India), 115, 117, 118, 130–131, 132, 140n3, 156 Central Vigilance Commission (India), 130, 131 Chadha,W. N., 109, 115 Chatterjee, Partha, 136 Cheney, Dick, 33 Chernoy, Lev and Mikhail, 89 Christian Science Monitor, 26 Chronicle of Higher Education, 109 Citizen’s Rights Association (Israel), 63 civic culture, 157–160 civic duty, 96. See also under public civil organizations, in Israel, 61–63 civil service: Indian, 136, 138; Israeli, 71, 149; U.S., 35. See also bureaucracy Civil War (U.S.), 36 coalition politics, 127 code of honor, 87, 88, 100 collective identities, 124–125, 159

collective ideology, 97. See also social culture Commerce Bank (Israel), 56 Commerce Department, U.S., 158 Committee on Precious Metals and Gems (Russia), 92 common good, 122, 123, 159 communications technology, 1 Communist Party (Soviet Union), 88, 98, 104, 156; and bureaucratic corruption, 85–86, 150, 158 computerization of services, 121, 135 Congress, U.S., 4, 6, 22, 23, 38; and campaign finance, 28, 29, 30; and lobbyists, 24, 26–27, 34; SarbanesOxley Act, 39, 40, 42, 44 Congress Party (India), 111–114, 115, 126, 129, 133, 151; and patronage, 112, 113, 123–124, 127 Constitution, U.S., 28, 29 consumer goods, 83, 113, 114 Contemporary South Asia (magazine), 136 Cooper, Cynthia, 42–43 Corbridge, Stuart, 136 corporate corruption, 9, 39, 101. See also business corruption Corruption Perceptions Index, 11, 22, 55, 121–122, 145 Corrupt Practices Act (U.S.), 9–10 courts. See judicial system (courts) Cranston, Alan, 34, 46n7 crime, 139. See also organized crime criminalization, 6, 128–129 cronyism, 8, 146–147, 161 Cruver, Brian, 39 cultural context, 135, 157–160; in India, 124, 154; in Israel, 70, 153;Western, 5, 89–90, 122; and whistleblowing, 13–14, 153, 154. See also social culture Danet, Brenda, 71–72, 75 Dart, Justin, 26 Davis, Gray, 30–32 Deaver, Michael, 35 Defense Department (U.S.), 33, 41, 47n11, 146–147 democracy: in India, 110–11, 114, 123, 125, 136, 137; in Israel, 59; in post-Soviet Russia, 86, 150 deregulation, 1, 39

INDEX developing countries, 4, 8–9, 12, 54, 155. See also specific countries diamond market. See Golden ADA Digges, Charles, 103 Dotan, Rami, 56 Drew, Elizabeth, 24 Dreze, J., 131, 138 drug trafficking, 88, 128, 150 economic corruption, 56, 162; in United States, 37–41. See also bank scandals; business corruption economic costs, 8, 9, 138–139 economic growth: in India, 110–111, 112–114, 137;Third World, 9, 10 economic liberalization, 113, 121, 126, 138, 151 economic policies, 7; Soviet Russia, 84, 86, 87, 154 economic rent. See rent-seeking education, 9, 12; in India, 109–110, 135; in Israel, 73–74; in Soviet Russia, 83–84, 86, 100 Eigen, Peter, 11 election campaigns, 115; in India, 112, 126–128, 129, 132, 135; in Israel, 58–60; U.S. financing of, 21–22, 24–32 embezzlement, in Israel, 56, 63 Employment Assurance Scheme (India), 136 English-speaking elite, 136, 137, 159 Enron scandal, 5, 37–38, 39, 44, 147; whistleblower (Watkins) in, 38, 40, 42–43 entrepreneurs, 1, 9 environmental whistleblowers, 102–104, 159 esprit de corps (morale), 10 ethics, 11–12, 43; Israeli double-standard of, 69–70. See also morality Ethics Resource Center (ERC), 12, 13, 158 ethnic communities, 124 European Court of Human Rights, 103 failed states, 1, 6–7 Fair Political Practices Commission (California), 31 False Claims Act (U.S.), 41 favoritism, 24. See also influence peddling

171

Federal Bureau of Investigation (FBI), 37, 38, 42–43, 93 Federal Election Commission (U.S.), 28 Federal Home Loan Bank Board (U.S.), 33–34 Federal Whistleblower Protection Act (U.S.), 42 fee for service, bribery as, 5 Feinstein, Dianne, 33 Fernandes, George, 119, 133 film industry, 35, 39, 128–129 financial benefit, 4. See also private advantage Finckenauer, James, 88 First Amendment (U.S. Constitution), 28, 29 Flippo, Ronnie, 27 Forbes, Steve, 26 foreign entrepreneurs, 1, 9 foreign travel, 99 Foundation for Democratic Reform (India), 131, 159 fraud, 40, 43 Freedom of Information Act (India), 135, 140n3 freedom of speech, 28, 29, 97 free market, 8, 114, 138, 150, 151, 156 free trade, 126 Friedrich, Carl J., 82 FSB (Russian secret police), 90, 103 Fyodorov, Boris, 93 Gandhi, Indira, 111, 113, 115, 125–126, 127, 133. See also Congress Party (India) Gandhi, Rajiv, 113, 115, 118, 126 Gardiner, John, 4 Garfield, James, 36 General Accounting Office (U.S.), 40, 66 Genis, Alexander, 96 Ghana, 10 Gibbons, Kenneth, 55 Gill, S. S., 116, 117, 126 Golden ADA (Russian diamond scam), 92–95, 101, 105 good faith, 64–65, 67 good governance, 6–7, 10–11 Gorbachev, Mikhail, 87, 97, 99 Goudie,W. Andrew, 4 government, 9, 12, 13; Indian, 124, 129–130; Russian, 88, 90, 95, 101,

172

Index

105; state failure, 1, 6–7; trust in, 101, 105, 129–130. See also political corruption Government Accountability Project (GAP), 12–13, 158 government officials, 101, 156–157; and Israeli bank scandal, 56. See also bureaucracy; public officials graft, 4–5, 9, 110 grand larceny, 8; in India, 14, 15, 110, 111–114, 135 Grassley, Charles, 40 Grasso, Richard, 23, 45n2 gray corruption, 2, 69, 70, 123 Great Britain, 51, 54, 159 green revolution (India), 113 group identification, 159. See also social culture Guiteau, Charles, 36 GULAG (Soviet prison), 97 gun running (arms sales), 88, 128, 150 Gush Emunim (Israeli settler movement), 72 Halliburton (contractor), 33, 45, 146 Handelman, Stephen, 86 Hawala banking scandal, 117–118, 132, 133 health sector, 41, 121 Heidenheimer, Arnold J., 2, 55, 69–70, 123, 124, 157, 160 High Court of Justice (Israel), 62, 76 Hinduja, G. P., 115 Hindu nationalism, 114, 129, 139 Histadrut (Israeli labor federation), 57, 63, 71 honest graft, 4–5 honor code in Russia, 87, 88, 100 hotline, for complaints, 11–12, 41, 62, 153 Human Rights convention, 103 Huntington, Samuel, 8, 54, 122, 123 illegalism, in Israel, 72–73, 75 income tax evasion, in Israel, 53–54 India, 1, 8, 11, 14–15, 159–160; anticorruption remedies in, 129–132; black money market in, 15, 117–118, 128, 151; business corruption in, 8, 112, 115, 117, 119–120; caste populism in, 123–124, 125, 128; causes of corruption in, 125–129; debate over remedies in, 134–137; democracy in, 110–111, 114, 123,

125, 136, 137; economic growth in, 110–111, 112–114, 137; economic liberalization in, 113, 121, 126, 138, 151; election fraud in, 126–128; English-speaking elite in, 136, 137, 159; grand larceny in, 14, 15, 110, 111–114, 151; Hindu nationalism in, 114, 129, 139; organized crime in, 128–129; parliament in, 117, 127, 132; patronage in, 112, 113, 123–124, 127, 161; petty bribes in, 14–15, 110, 120–121, 135, 151–152; scandals in, 115–118, 126, 132, 133, 134;Tamil Nadu and Bihar corruption, 118–119; Tehelka.com exposé, 119, 131, 133; whistleblowing in, 15, 132–134, 140n3, 154–155. See also public, in India India, bureaucracy in, 110, 115, 117, 125, 134, 151, 159; civil service, 136, 138; and economic growth, 111, 114 Indian Administrative Service, 159 Indian Cotton Mills Association, 126 Indian (Native American) casinos, 31–32 Indian Penal code (IPC), 130 India Today (newspaper), 119, 134 individual and whistleblowing, 14, 41–43, 153 influence peddling: in Israel, 58–59; in United States, 24, 25, 27–28, 33, 35, 160. See also lobbying/lobbyists; personal influence informancy in Russia, 14, 95–100, 154; anonymous, 99–100, 104; and cultural values, 91, 95, 96, 100. See also Russia, whistleblowers in information technology, 1 Institute for Social and Economic Change (India), 133 interest groups, 4, 8, 124, 149, 160. See also lobbying/lobbyists international corporations, 9 International Monetary Fund (IMF), 9, 126 investigations. See ombudsman investigations; police investigations Iraq, 33, 45; U.S. invasion of, 146–147 Israel, 11, 53–77, 148–149; anticorruption civic organizations in, 61–63; anticrime institutions in, 60–61; “as though” arrangements in, 73–74, 75,

INDEX

173

76, 149, 153, 160; bureaucracy in, 71, 148, 158; business corruption in, 55–57; compartmentalized ethics in, 69–70; Lands Administration, 63, 66; law enforcement agencies in, 14, 60, 61, 155; ombudsman investigations in, 60–61, 63, 64–65, 148; patriotic illegalisms in, 72–73, 149; patronage in, 57, 70–71, 149; pluralism in, 58; political corruption in, 57–60, 61, 70–71; protektzia in, 71–72, 75, 76, 149, 153, 160; social culture of, 58, 68, 75; whistleblowing in, 14, 62–69, 75–76, 153–154; white corruption in, 14, 69, 70, 75–76 issue advocacy, 28–30, 32, 35

Knesset (Israeli parliament), 58–60, 61, 153; and whistleblowers, 62–65 Kobrak, Peter, 24 Koch, Mia, 62–63 Korolyov, Sergei, 95, 97 Kozlenok, Andrei, 92, 94 Kramer, John M., 82, 83, 84 Krishna, Raj, 113 Krishnamachari,T.T., 125, 130, 133 Kristjansson, Kristjan, 95 K Street (television program), 34–35 Kumar, Arun, 126, 127 Kumar, Ravindra, 132 Kumeyay Indians,Viejas Band, 31–32 Kupat Holim HaKlakit (Israeli health fund), 57

Jackson, Andrew, 35 Jain Hawala scandal (India), 117–118, 132, 133 Jakarta, Indonesia, 1 Japanese media, 103 Jayalalitha, 118, 131 Jefferlot, Christopher, 125–126, 127, 128, 129 Jetly, Jaya, 119 Jewish Agency, 70, 77n3 Jha, P. S., 115 Jharkhand Mukti Morcha (JMM), 115, 117, 132 Johnson, Ross, 32 Johnston, Michael, 23, 46n4 Judeo-Christian values, 122 judicial system (courts), 7, 13; in India, 131, 132, 152, 156, 164n5; in Israel, 62, 65–66, 76; in Russia, 88, 103, 150–151, 156–157; in United States, 22, 28, 29, 32 justice, social, 110, 138

Labor Party (Israel), 57–59, 61, 148 labor relations in Israel, 73–74; and whistleblowing, 65–66, 67, 68, 75 Lacayo, Richard, 43 Laframboise, H. L., 76 Lagos, Nigeria, 5 Latin America, 13, 34 Lautenberg, Frank, 24–25 law enforcement agencies, 43, 155–157; in Israel, 14, 60, 61, 155. See also under police Laxman, Bangaru, 119, 133 Leff, Nathaniel, 9 legal arrangements, 160–161 legal loopholes, 14, 148; in United States, 22, 27, 28–32, 44 legal system, 4, 7, 13; Russia, 86, 102; U.S., 22, 39–40, 41–43. See also judicial system; rule of law Lehman-Wilzig, Sam, 69 Letterman, David, 33 Leumi Bank (Israel), 56 Leys, Colin, 54 Liberation Tigers of Tamil Ealam, 113 Likud Party (Israel), 57–59 Lincoln cabinet, 36, 46n8 Lincoln Savings and Loan Bank (California), 34 Lipke, Moshe, 63 lobbying/lobbyists, 44, 123, 146, 160–161; and U.S. Congress, 24, 26–27, 34, 35. See also influence peddling; interest groups

Kaul, Shiela, 117 Kaviraj, Sudipta, 136 Keating 5, 33–34, 46n7 Keating, Charles, 34 KGB and Power (Bobkov), 98 KGB (Soviet secret police), 90, 98, 102 Khairnar, G. R., 134 Khan, Arif Mohammad, 118 Khodorkovsky, Mikhail, 157 Khrushchev, Nikolai, 99 kickbacks, 8. See also bribery

174

Index

Long, Russell B., 24 loopholes. See legal loopholes MacKinnon, Mark, 105 Maduna, Pennuell, 1 Malavia, K. D., 125, 130 Malaya Federation, 8 Manes, Donald, 37 market economy, 7, 158. See also black market; economic liberalization; free market Mauro, Paolo, 9 McCain-Feingold bill, 28–29 McClintock,Tom, 32, 46n5 McCormick, John, 11 McMaster, Loren, 32 media, 22; Indian, 134; Israeli, 58, 60, 63, 64, 148; Japanese, 103; Russian/Soviet, 84, 97; and whistleblowers, 14, 41–43, 153 Medicare fraud, 41 Mehta, Harshad, 120, 126 Menon, Krishna, 125, 130, 133 merit system, 36, 37 Mexico City, 9, 162 middle class, 37, 113, 114 military contracts, 32–33. See also Halliburton; URS Ministry of the Finance (Russia), 94 Ministry of the Interior (Russia), 89 Mishra, Brajesh, 119 Mishra, L. N., 126 modernization, 8, 122 “Modernization and Corruption” (Huntington), 8 money market, in India, 15, 117–118, 128, 151 morale, 10 morality, 54, 85, 96, 113. See also ethics Morozov, Pavlik, 96 Movement for Quality Government (MQG, Israel), 61–62, 71, 76, 149 MS shoes scandal (India), 119–120 Mudhra affair (India), 130 Muir,William Ker, Jr., 163 Mumbai, India, 128–129 murder rate, Russian, 89, 151 Muslims, in India, 139 mutual funds scandal (U.S.), 148, 155, 163n3 Myrdahl, Gunnar, 9

National Association of Automobile Dealers (U.S.), 27 National Committee of Internal Affairs (Soviet Union), 98 National Democratic Alliance (India), 119 National Housing Board (India), 120 Nehru, Jawaharlal, 126, 130 nepotism, 8 Newsweek (magazine), 23 New York City (Tammany Hall), 4, 22, 36, 161 New York Stock Exchange (NYSE), 23, 44 New York Times, 25 Nigeria, 5, 11 Nikitin, Aleksandr, 102–104 nongovernmental organizations (NGOs), 111, 132 nonprofit organizations, 12, 42–43, 61, 158–159 Noonan, John T., 5, 15n4 Nye, Joseph S., 5, 122, 123 Oggen (Association for Ethics and for the Eradication of Corruption in Israel), 62–63, 65 Olson,Theodore, 29–30 ombudsman investigations (Israel), 60–61, 64–69, 77n2, 148; and good faith, 64–65, 67; and whistleblowers, 63, 64–65, 66–69 Organization for Economic Cooperation and Development (OECD), 6, 12 organized crime: in India, 128–129; in Russia, 86–90, 91, 104–105, 150–151 ORG-Marg (Indian organization), 120 Overland, Ann, 109 Paravala,V., 125 Pasko, Grigory, 102–104 patriotic illegalisms, 72–73, 149, 153 patriotism, 42, 96 patronage: in India, 112, 113, 123–124, 127, 161; in Israel, 57, 70–71, 75, 149, 153, 160; in United States (spoils system), 35, 36, 37, 46n8, 158 patterns of corruption, 2–5. See also black corruption; gray corruption; white corruption Patterson,Thomas E., 27 Pawar, Sharad, 133

INDEX peer consensus and whistleblowing, 76 Pendleton Act (U.S.), 36, 158 Penrose, Boies, 26 Pentagon, 33, 147. See also Defense Department (U.S.) Peres, Shimon, 61 perestroika (Soviet restructuring), 87, 154 Perot, Ross, 26 Perry, James, 100 personal influence: protektzia (pulling strings), 71–72, 75, 76, 149, 153, 160; Soviet blat, 84. See also influence peddling; spoils system Peters, Guy B., 35 Peters, John J., 6, 23–24, 45n3 Petrol Pump scandal (India), 116–117 petty bribes/corruption, 8, 146, 153; in India, 14–15, 110, 111, 120–121, 135, 151–152 Philp, Mark, 5 Plunkitt, George Washington, 4, 36 police corruption, 121, 162–163 police investigations: in Israel, 58, 63; in Russia, 92–95, 101, 154 political action committees (PACs), 24, 26–27, 30 political connections, 71, 75, 110, 146. See also patronage political corruption: in India, 111–115, 127, 129; in Israel, 54–60, 61, 70–71. See also United States, political corruption in political economy, 3, 6–8 political parties: in India, 15, 137–138, 151, 155, 161; in United States, 28, 29. See also specific parties political reform, 135 politics, criminalization of, 128, 129 poor countries, 10, 155. See also developing countries poor/poverty, 9, 36; in India, 110, 137, 139 popular empowerment, 135 positions of trust, 6 presidential election funding, 25, 28, 29 press, 15. See also media Prevention of Corruption Act of 1947 (India), 130, 131 private advantage, 3–4, 8, 54, 83 privatization, 1; in India, 114, 126, 151; in Russia, 88, 104

175

production quotas, Soviet, 84, 85–86, 104 professionalism, 7, 41, 158 professional literature allowance, 73 professional training fund, 73–74 Progressive movement (U.S.), 37 propaganda, Soviet, 84, 85 property rights, 7, 69. See also privatization Proposition 54 (California), 31, 46n6 protected market, 112. See also free market protection, 89; for whistleblowers, 95, 152 Protection of Employees Law (Israel, 1997), 65 protektzia (pulling strings), 71–72, 75, 76, 149, 153, 160 public, 4–5, 13, 82; education of, 12; and Israeli corruption, 60, 61, 64, 69, 70; morality of, in Britain, 54; in Russia, 100, 101, 102, 105 public, in India, 120–121, 125, 129–130, 131–133, 134; and patronage, 112, 123–124; trust of, 139 public, in United States, 146, 147–148, 153; and political corruption, 22, 23–24, 25, 34, 44 Public Affairs Center (India), 132 Public Company Accounting Oversight Board, 39, 44 Public Information Act (India), 138 public interest litigation (PIL), 132 publicity campaign, 97 public officials: Indian, 121–122, 130, 131, 136, 137; private advantage of, 3–4, 8, 54, 83; Russian, 1, 83, 85; United States, 26–28. See also bureaucracy public policy, in Israel, 62 public property, privatization of. See privatization public services, 9; and civic culture, 157–160; in India, 159; whistleblowers in, 41. See also bureaucracy Punchayat Raj Act (1992), 135 Putin,Vladimir, 90, 150, 157, 163n2 quid pro quo, 22, 24 Rabin,Yitzhak, 61 railway sector, India, 121, 125, 135 Ram, N., 116 Rao, Narasimha, 115, 117, 118, 132, 133 Rao, Prabhakar, 117

176

Index

Rashtriya Swayamsevak Sangh (RSS), 114 Reagan, Ronald, 26, 27, 35 real estate developers, 129 regulatory agencies, 22. See also specific agencies rent-seeking, 7–8, 9, 126, 136, 162–163. See also bribery Repentance (film), 97 Right to Information Act (India), 131 Ripley, Amanda, 43 Rosenberg,Tina, 162 Rowley, Coleen, 42–43 Rubinstein, M. K. Amnon, 64, 65 rule of law, 7; in Israel, 58; in Russia, 86, 88, 89, 156–157. See also legal system Russia, 11, 81–106, 149–151; authoritarian/totalitarian regime in, 88, 96, 99; bureaucracy in, 1, 83, 84–86, 158; capital flight from, 89, 90; higher education in, 83–84, 86, 100; honor code in, 87, 88, 100; housing allocation in, 83; organized crime in, 86–90, 91, 104–105; pervasiveness of corruption in, 81–82; production efficiency in, 84, 85–86, 104; rule of law in, 86, 88, 89, 156–157; shadow economy in, 81, 85, 86, 88, 104, 150; shortages in, 83–84; Stalinist era, 98–99 Russia, whistleblowers in, 13, 14, 91–104; as enemy of the people, 97–98; environmental, 102–104, 159; and social culture, 91, 95, 96, 100; Soviet era informancy, 14, 91, 95–100, 104; Zhirov case, 92–95, 101, 104, 105, 154 Sachdeva, Pawan, 119 Samata Party (India), 119 San Francisco, 21–22, 24 San Francisco Chronicle, 33, 45n2, 46n5, 163n3 Sangita, S. N., 133–134 Santhanam Committee (India), 125, 130, 156 Sarbanes-Oxley Act (U.S.), 39, 40, 42, 44 savings and loan associations (S&Ls), 33–34, 39–40 scandals, 14; in India, 15; in Israel, 56, 57; in United States, 37, 38, 40, 44. See also bank scandals

Schilit, Howard, 38, 47n10 Schleifer, A., 4 Schwarzenegger, Arnold, 30–32 Scott, James C., 8 Securities and Exchange Board of India (SEBI), 120 Securities and Exchange Commission (SEC, U.S.), 41, 44, 147, 153, 163n3; and Enron, 38–39, 40 Seimens corporation, 6 Senate, U.S., 34, 40. See also Congress, U.S. September 11 (2001), 41, 42–43 Serrousi, Edouard, 62 shadow economy (Russia), 81, 85, 86, 88, 104, 150 Shah, Ketan, 110, 122 Shamir,Yitzhak, 61 Sharma, Satish, 116–117 Shelley, Louise I., 88 Shurat Hamitnadvim (Israeli civil organization), 55 Singh, Gurharpal, 123–124, 125, 127 Singh, Joginder, 131 Singh, N. K., 119 Singh,V. P., 133, 140n3 Skuratov,Yuri, 90–91, 104 Slavneft (Russian oil company), 89 Smith, Stephen S., 26 smuggling, in Russia, 86, 87, 150 social culture: Indian, 122, 123, 124–125; Israeli, 58, 68, 75; Russian, 91, 95, 96, 100 socialist ideology, 82, 97 social justice, 110, 138 Sofma (French weapons manufacturer), 116 soft money, 28–30, 44 Soviet Union, 1, 7, 13, 82–84; Communists in, 85–86, 88, 98, 104, 150, 156, 158; informancy in, 14, 91, 95–100, 104; shadow economy in, 81, 85, 86, 88, 104, 150. See also Russia spoils system, 35, 36, 46n8, 58. See also patronage Sprinzak, Ehud, 72 Srivastava, Manoj, 135–137, 138 Stark, Andrew, 3 Stasavage, David, 4 State Bank of India (SBI), 120 state comptroller (Israel), 60, 71, 76, 148; and whistleblowing, 64, 66, 68

INDEX State Department, U.S., 158 state failure, 1, 6–7 stealing, 69. See also embezzlement Stern, Philip, 24, 27, 160 stock exchange scams, 23, 44, 119–120 stock market crash of 1929, 38–39 sugar scam (India), 117, 131 Suharto, Mohamed, 8 Summit for Women, 21 Sundarji, K., 116 Supreme Court (India), 131, 132, 164n5 Supreme Court (U.S.), 29 survey on corruption, 23–24 Tajpal,Tarun, 119 Tamil Nadu, 118 Tammany Hall (New York), 4, 22, 36, 161 Tanzi,Victor, 9 tax evasion: in India, 128; in Israel, 53–54; in Russia, 85, 87; U.S. shelters, 40 Tehelka.com exposé, 119, 131, 133 telecom sector (India), 121, 126 Theobald, Robin, 16n5, 158 Thieves World, 86. See also organized crime Third World, 9, 10. See also developing countries Tilman, Robert O., 8 Time magazine, 26, 42–43 tolerance of corruption, 3, 24, 44 totalitarian regime, 96, 99. See also Soviet Union transparency, 135, 148, 152 Transparency International (TI), 10, 12, 13, 16n7, 68; Corruption Perceptions Index, 11, 22, 55, 121–122, 145; founding of, 11; in India, 120; in Russia, 158; on whistleblowing, 13 Truva (Israeli dairy company), 62–63 Tunik,Yitzhak, 63 Tweed,William Marcy “Boss,” 161 underdevelopment, 7, 9, 137. See also developing countries underground economy, 128. See also black market United Nations Development Program Report for South Asia (1999), 138 United States, 11, 21–47, 146–148; bank scandals in, 39–40, 49–50, 148, 155, 163n4; bureaucracy in, 35–37, 41, 44,

177

157–158; business corruption in, 37–40, 101, 147; cronyism in, 8, 146–147, 161; Defense Department, 33, 41, 47n11, 146–147; legal prohibitions in, 9–10; State Department, 13; whistleblowers in, 14, 40–43, 64, 68, 152–153, 163n3. See also Congress, U.S.; public, U.S. United States, political corruption in, 22–35; California recall election, 30–32; and campaign finance reform, 27–30; and elections, 22–26; and lobbying, 24, 26–27, 34–35, 160–161; and military contracts, 32–34; and officeholders, 26–28;Tammany Hall, 4, 22, 36, 161 university admissions: in India, 109–110; in Russia, 83–84, 86, 100 urea import scam (India), 117 URS (U.S. company), 33 U.S. Army Corps of Engineers, 33 USSR. See Russia; Soviet Union Vaidya, A. S., 116 Vajpayee, 119 value systems, 54–55, 122. See also cultural context Veil, Peter, 96 Venkatraman, R., 118 Verma, Arvind, 132, 140n3 vernacular society, Indian, 136, 137 Vernon, Rene, 136 Vibhavati,Vaidya, 133–134 Vishny, R.W., 4 Voronin,Yuri, 88 Wade, Robert, 128 wage policy, Israeli, 73–74 Watkins, Sherron, 38, 40, 42–43 Weber, Max, 122, 123, 159 Webster, Daniel, 23 Webster,William, 90 Weitzman, Ezer, 62 Welch, Susan, 6, 23–24, 45n3 Western culture, 5, 89–90, 122 whistleblowing, in general, 13–14, 43, 132–133, 152, 155 whistleblowing, in India: effectiveness,15, 132–134, 140n3, 154–155, 159; grassroots support, 134, 155

178

Index

whistleblowing in Israel: 14, 62–69, 153–154; and labor relations, 65–66, 67, 68, 75; legal protections for, 64–66; ombudsman role in, 60, 61, 63, 64–65, 66–69; and white corruption, 75–76 whistleblowing in Russia: 14, 91–104; as enemy of the people, 97–98; environmental, 102–104; and social culture, 91, 95, 96, 100; Soviet era informancy, 14, 91, 95–100, 104, 154; Zhirov case, 92–95, 101, 104, 105 whistleblowing in United States: admiration for, 14, 42–43; corporate, 40; legal protections, 40–43, 152; numbers, 41, 64; reasons for, 41–42, 152–153 white corruption, 2, 70, 123; in Israel, 14, 69, 70, 75–76

white money, 128. See also black market; soft money Wilenz, Sean, 39–40 Williams, Glyn, 136 Wilson, James Q., 3, 4, 35 Wolfensohn, James D., 11 World Bank (International Bank for Reconstruction), 6–7, 9, 10–12, 13; and India, 126, 138; and Russia, 158 WorldCom scandal, 5, 37, 40, 42–43 world market, 113 Yadav, Lalloo Prasad, 124, 131 Yadlin, Asher, 57–58 Yeltsin, Boris, 90, 93, 94, 150, 163n2 Yom Kippur War (1973), 57 Yukos oil company, 157 Zhirov,Victor, 93–94, 95, 101, 104, 105, 154