Backstage Democracy: The Dynamics of Business-Politics Nexus in Lithuania 9783031255304, 9783031255311

Citation preview

Backstage Democracy The Dynamics of Business-Politics Nexus in Lithuania

Ainius Lašas

Political Corruption and Governance

Series Editors Dan Hough, University of Sussex, Ascot, UK Paul M. Heywood, University of Nottingham, Nottingham, UK

This series aims to analyse the nature and scope of, as well as possible remedies for, political corruption. The rise to prominence over the last 20 years of corruption-related problems and of the ’good governance’ agenda as the principal means to tackle them has led to the development of a plethora of (national and international) policy proposals, international agreements and anti-corruption programmes and initiatives. National governments, international organisations and NGOs all now claim to take very seriously the need to tackle issues of corruption. It is thus unsurprising that over couple of decades, a significant body of work with a wide and varied focus has been published in academic journals and in international discussion papers. This series seeks to provide a forum through which to address this growing body of literature. It invites not just in-depth single country analyses of corruption and attempts to combat it, but also comparative studies that explore the experiences of different states (or regions) in dealing with different types of corruption. We also invite monographs that take an overtly thematic focus, analysing trends and developments in one type of corruption across either time or space, as well as theoretically informed analysis of discrete events.

Ainius Lašas

Backstage Democracy The Dynamics of Business-Politics Nexus in Lithuania

Ainius Lašas Kaunas University of Technology Kaunas, Lithuania

ISSN 2947-5449 ISSN 2947-5457 (electronic) Political Corruption and Governance ISBN 978-3-031-25530-4 ISBN 978-3-031-25531-1 (eBook) https://doi.org/10.1007/978-3-031-25531-1 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © John Rawsterne/patternhead.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To my wife, who was kind and patient enough to see this manuscript through. To the Research Council of Lithuania, whose experts were not kind and patient enough to see this manuscript through.

Preface

The origins of this book can be traced back to Oxford where, in 2011 I joined an EU-funded research project on media and democracy in Central and Eastern Europe led by Prof. Jan Zielonka. At the time, I was a fresh-faced International Relations scholar focused on the role of moral emotions in political decision-making. The project had a number of pillars and one of them honed in on culture, or to be more exact, political culture. It was here that I started learning and thinking about the state–business relations. At the time, the research scope was quite limited and focused exclusively on a media–politics nexus. However, as the research progressed, it became increasingly clear that media was a key part of something much bigger. Interviewee after interviewee talked about media both as an object and as a subject of corrupt practices. Interviewee after interviewee pointed out a complex multiangular structure of relations among political elites, civil society, media, law firms and other businesses. Ignoring one of these angles came with the price of potentially missing and misinterpreting the day-to-day dynamics of media and political life. As this understanding matured, I felt that yet another project was on the cards, one whose primary goal was to dig deeper into different business and politics segments and, through a series of anonymous interviews, get closer to events that shape daily democratic practices of a state. In this case, the state of Lithuania. Why Lithuania? The most obvious answer relates to my own background, to the knowledge of the language, culture and especially people.

vii

viii

PREFACE

It’s one of those “playing to your strengths” arguments, often encountered by newly starting Ph.D. students. Having access to high-level information sources was absolutely critical to this research project. But the reasons for examining state-business relations in Lithuania go well beyond that. Most scholars agree that, with the exception of the Baltic states, former Soviet Union republics have had a rather mixed record of democratic transition. Like its neighbors to the North, Latvia and Estonia, Lithuania is often viewed as an exemplary pupil of democratization and democratic stability over time. Of course, Hungary and Poland also once belonged to the category of consolidated democracies, but the last decade has demonstrated the vulnerabilities of their transformation. In fact, many scholars have been sounding alarm bells about the deterioration or retrieval of democracy in Central and Eastern Europe1 . The Baltic states have largely escaped this trend, but vulnerabilities were and are present to a much greater extent than might initially seem so. While this case study does not directly focus on the topic of democratic consolidation, it touches upon daily practices, which are a lifeblood of a political regime. Furthermore, this work offers insight not only about the case study at hand, but also provides useful building blocks for other researchers. Lithuania can be treated as a case of a moderate success in political and economic consolidation. The “and” part is crucial here because too often one encounters CEE cases, where the political component of the equation remains highly fragile or has simply unraveled. Does Lithuania exhibit similar vulnerabilities? What is the nature of political consolidation here? I will try to answer these and other questions, though whether I succeed or not in my endeavor, is for the readers of this book to decide. The process and especially conversations with interviewees were the most enjoyable and rewarding part of the project. I was pleasantly surprised by how many of my interviewees were willing to open up and talk candidly about things that they’ve personally encountered, experienced or heard about. It is because of these experts that I was able to put analytical puzzles together

1 Bánkuti, Miklós, Gábor Halmai, and Kim Lane Scheppele. “Hungary’s Illiberal Turn: Disabling the Constitution.” Journal of Democracy 23, no. 3 (2012): 138–46. Rupnik, Jacques. “The Specter Haunting Europe: Surging Illiberalism in the East.” Journal of Democracy 27, no. 4 (2016): 77–87. Attila Ágh (2019) Declining Democracy in East-Central Europe: The Divide in the EU and Emerging Hard Populism. Cheltenham, UK: Edward Elgar Publishing.

PREFACE

ix

and provide my perspective on the nature of state–business relations in Lithuania. The story presented here is far from complete. There are many more interviews that are awaiting their turn, and many more stories that remain untold. I hope this book will serve as an inspiration for more work in this interdisciplinary academic field. Kaunas, Lithuania

Ainius Lašas

Acknowledgements This work was supported by the Research Council of Lithuania [grant number P-MIP-17-410].

Praise for Backstage Democracy

“A welcome and relevant study with an innovate approach, this book provides a sharp insight into processes of business-politics relations within Lithuanian society and does so from a wide perspective. A well-designed research that gives the ability to grasp the depth of the problems and makes a useful reading both for researchers and international policy makers.” —Laurynas Pakštaitis, Mykolas Romeris University, Lithuania “A gripping tour behind the curtains of day-to-day politics, with the deconstructed case of Lithuania offering a trove of insights for good governance and transparency advocates worldwide.” —Sergejus Muravjovas, CEO of Transparency International Lithuania, Visiting Fellow at University of Pennsylvania, USA

xi

Contents

1

Introduction

1

2

Concepts

7

3

Context and Methodology

25

4

Practices in Practice

37

5

Drivers of Continuity

109

6

Drivers of Change

139

7

Evaluating Exclusive Situationalism and Its Broader Horizons

163

Conclusions

181

8

Exhibit A: List of Interviewees

185

Exhibit B: MPs and Their Private (Business) Interests as Declared to Chief Official Ethics Commission for 2003

189

Index

193

xiii

Abbreviations

CEE CEO EBRD EIB EU EVS FDI FIBA GDP GVA IO JMVAC KGB LBC LNG LRT MEP MP NATO NGO OECD PHARE PPO PPP PR SIS

Central and Eastern Europe Chief Executive Officer European Bank for Development and Reconstruction European Investment Bank European Union European Values Survey Foreign Direct Investment International Basketball Federation Gross National Product Gross Value Added International Organization Jonas Mekas Visual Arts Center Komitet Gosudarstvennoy Bezopasnosti Lithuanian Business Confederation Liquified Natural Gas Lithuanian National Radio and Television Member of European Parliament Member of Parliament North Atlantic Treaty Organization Non-governmental Organization Organization for Economic Co-operation and Development Poland and Hungary: Assistance for Restructuring their Economies Public Procurement Office Public-Private Partnership Public Relations Special Investigative Service of the Republic of Lithuania xv

xvi

ABBREVIATIONS

TI UNESCO VAT VST

Transparency International The United Nations Educational, Scientific and Cultural Organization Value Added Tax Vakaru˛ skirstomieji tinklai

List of Figures

Fig. 3.1

Fig. 3.2 Fig. 3.3 Fig. 4.1 Fig. 4.2 Fig. 5.1

Extra Euro area, non-resident non-banks deposits in the Baltic States’ banks, 2008–2019 (ECB, Luminor and Marcobond data) Justification of exclusive practices (EVS Data, 1999–2017) Gave a bribe during the last 12 months (Lithuania’s map of corruption, 2007–2018) Key players in the political–business nexus Media advertisement share in Lithuania (2002–2019) Total receipts from taxes and social contributions (percentage of GDP, 2019). Eurostat

28 31 32 39 97 131

xvii

List of Tables

Table 2.1 Table 2.2 Table 2.3 Table 3.1 Table 4.1 Table 4.2

Dynamics of exclusive situationalism in former Eastern bloc countries Intensity levels of business–politics relations Power dynamics in business–politics relations Inward FDI stock by country of origin, percentage of GVA of the recipient country Typology of situationism-driven business-politics practices Municipality support for local basketball clubs in 2018 as a percentage of its income

18 21 22 30 45 73

xix

CHAPTER 1

Introduction

Abstract The state–business nexus represents not only the ultimate concentration of wealth and power in any state, but also sheds light upon the daily functioning of the political regime. In the case of Lithuania, democracy was the “only game in town” since the reestablishment of independence, but only in terms of formal rules and procedures. A closer look reveals the parallel existence of a different set of games attempts to overpower the rule of law and create your own system of laws. The analysis of such gamesmanship helps to understand democracy in its daily practice and to think in a more systematic way about the dynamics of state-business relations on a sub-state level. Keywords State–business nexus · Central and Eastern European countries · European Union · Daily democracy · Polyarchy

When evaluating the extent of informal practices among the former Eastern bloc countries, many authors assume that Central and East European countries, including the Baltic states, have made significant progress over the last twenty-plus years due to Europeanization, while the former non-Baltic Soviet republics continue to struggle (Ledeneva 2006: 11;

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_1

1

2

A. LAŁAS

Aliyev 2016: 209).1 This assumption is reasonable and can be ascertained from various indexes, but the understanding of this change and its dynamics presents a much more formidable intellectual challenge. As it turns out, membership in the European Union influenced CEE democracies in contrasting ways. It not only provided opportunities for increased transparency and stronger formal institutions, but also for the expansion of exclusive practices due to the influx of EU structural funds (Beblav´y and Siˇcáková-Beblavá 2014; Fazekas and King 2019).2 More detailed and clearer rules and procedures significantly shrunk space for blunt bureaucratic discretion, but also provided new and sometimes even legally safer routes for exclusive decision-making. In the words of Bourdieu (1990: 62–63),3 both businesses and politicians developed a practical feel for the evolving rules of the game and readjusted accordingly. One of the interviewees aptly summarized this evolutionary dynamic with a cynical smile on his face: “human creativity is endless.” In this book, political “creativity” is often linked to the story of another institution—particularism (O’Donnell 1997: 41).4 I utilize the case of Lithuania and the dynamics of its state–business relations from 2000 onwards in order to delve deeper into actual rules and practices guiding this post-Soviet democracy and their evolution over time. Why state– business relations? One possible answer comes from a notorious Russian oligarch and politician Boris Berezovsky, who saw politics as the most

1 Ledeneva, Alena V. 2006. How Russia Really Works: The Informal Practices That Shaped Post-Soviet Politics and Business. Culture and Society after Socialism. Ithaca: Cornell University Press. 2 Fazekas, Mihály, and Lawrence Peter King. 2019. “Perils of Development Funding? The Tale of EU Funds and Grand Corruption in Central and Eastern Europe.” Regulation & Governance 13 (3): 405–430. https://doi.org/10.1111/rego.12184. Beblavý, Miroslav, and Emília Siˇcáková-Beblavá. 2014. “The Changing Faces of Europeanisation: How Did the European Union Influence Corruption in Slovakia Before and After Accession?” Europe-Asia Studies 66 (4): 536–556. https://doi.org/10.1080/09668136.2014. 899767. 3 Bourdieu, Pierre. 1990. In Other Words: Essays Towards a Reflexive Sociology. Stanford, Calif: Stanford University Press. 4 O’Donnell, Giullermo. 1997. “Illusions about Consolidation.” In Consolidating the Third Wave Democracies: Themes and Perspectives, edited by Larry Diamond, Marc F. Plattner, Chu Yun-han, and Tien Hung-mao, 40–57. Baltimore: The John Hopkins University Press.

1

INTRODUCTION

3

significant and profitable business (Mezrich 2015: 85).5 Whether one agrees or not, this nexus clearly represents not only the ultimate concentration of wealth and power in any state, but also sheds light upon the daily functioning of the political regime. From my point of view, this is a key question, which needs to be asked and explored in regard to such democracies as Lithuania. Dahl’s test of polyarchy as defined by seven key attributes (Dahl 1989: 221)6 had been passed by many Central and Eastern European countries long time ago, but this was far from “the end of history” in the region. Democracy was the “only game in town” (Linz 1990: 156),7 but only in terms of formal rules and procedures. The study of interactions between business and state unveils the parallel existence of a different set of games: attempts to utilize politics as a tool for material gains or the protection of material gains (Winters 2011)8 ; attempts to create or maintain gaps between formal rules and actual practices; or even attempts to bluntly and openly ignore legal guidance. In other words, these are attempts to overpower the rule of law and create your own system of laws. Such gamesmanship is by no means limited to relatively new CEE democracies, it also applies to long-enduring polyarchies. Italy, Greece, Colombia or India are only a few stereotypical examples, where exclusive situationalism, the term explicated in the next chapter, is widespread both in terms of geography and frequency of use. Lindblom (1977) argued some time ago that business people and government officials are among the most powerful groups in market-oriented societies.9 In fact, according to Lindblom, businesses may even have structural superiority as they can imprison any policy and demand politicians to pay the ransom, i.e. to offset any negative policy consequences with new privileges

5 Mezrich, Ben. 2016. Once Upon a Time in Russia: The Rise of the Oligarchs: A True Story of Ambition, Wealth, Betrayal, and Murder. First Atria Paperback edition. New York: Atria Paperback. 6 Dahl, Robert Alan. 1989. Democracy and Its Critics. Nachdr. New Haven: Yale University Press. 7 Linz, Juan J. 1990. “Transitions to Democracy.” The Washington Quarterly 13 (3): 143–164. https://doi.org/10.1080/01636609009445400. 8 Winters, Jeffrey A. 2011. Oligarchy. Cambridge: Cambridge University Press. 9 Lindblom, Charles Edward. 1977. Politics and Markets: The World’s Political Economic

Systems. New York: Basic Books.

4

A. LAŁAS

(1982: 330).10 Their power is grounded in the “control” of investments and the workforce. While subsequently, a number of authors introduced scope conditions and differentiation among businesses (see e.g. Marsh, 1983; Culpepper, 2011),11 the dynamics of the politics–business nexus remains one of the central defining features of any liberal democracy. By the way, such terms as state–business relations, politics–business nexus, state–business nexus are used interchangeably here and considered as mere synonyms. Focusing on these relations helps to understand democracy in its daily practice, arguably at least as important an issue as elections, and a typical area of interest for many democracy scholars. In fact, one can make a persuasive argument that such practices, when present, have little to do with the fundamental democratic principle of equality before the law, but can routinely take place in an electoral democracy. They also shape daily experiences and perceptions of democracy by its citizens, who in turn have a direct impact on electoral outcomes. It is not accidental that democracy became a swear word among many Russians,12 the result of extremely poor performances by democratically elected politicians, who ran the country into the ground. Thus, it is crucial to understand what kind of (backstage) games are being played, under what rules and with what kind of consequences (O’Donnell 1997: 49). That is one of the key aims of this work. However, in contrast to O’Donnell, I argue that all polyarchies (not just some) are informally institutionalized, but they differ in the extent and nature of exclusive situationalism. Furthermore, I seek not just to tell another story of informal practices or corruption, but more importantly to think in a more systematic way about the dynamics of state–business relations on a sub-state level. I seek to provide analytical tools that help to draw systematic insights about the interactions between power and wealth, which could be used for comparative research. The findings point to a number of factors that

10 Lindblom, Charles E.. 1982. “The Market as Prison.” The Journal of Politics 44 (2): 324–336. https://doi.org/10.2307/2130588. 11 Culpepper, Pepper D. 2010. Quiet Politics and Business Power: Corporate Control in Europe and Japan. 1st ed. Cambridge University Press. https://doi.org/10.1017/CBO 9780511760716. 12 Spiegel Online. 2017. “Mikhail Khodorkovsky: ‘Freedom Is a Swear-Word in Russia,’” August 14, 2017. https://khodorkovsky.com/mikhail-khodorkovsky-freedomswear-word-russia/.

1

INTRODUCTION

5

either stimulate change or stimulate the status quo, but they also bear witness to the crucial importance of the establishment of meta-motivation for moving towards more transparent and inclusive institutional practices. Without it, Lithuania is likely to have made only limited progress in fighting exclusive situationalism. With it, systemic transformation took place at the level of local principals and agents, resulting in the evolution of daily (backstage) practices over the last 20-plus years. Before I switch gears and discuss key concepts, let me first provide you with “a plan of attack.” I will first map out key concepts and analytical frameworks used in the monograph. The list of discussed concepts in Chapter 2 is far from complete, but it offers some guideposts for subsequent analysis. Next, I turn to the broader context of the case study and methodological discussion. Because I rely on a single country case, it is crucial to understand where it sits in relation to other countries within the region and beyond. Having provided relevant background in Chapter 3, I move on to the case study itself, which encompasses the next two chapters. Chapter 4 specifies core agents in the politics–business nexus and discusses a list of encountered practices in greater detail. Special attention is paid to the temporal dynamics of the practices since change and continuity is at the core of this research project. The subsequent two chapters examine reasons for stasis (Chapter 5) and change (Chapter 6). They contain key analytical insights of the book, pointing to the underlying drivers of observed dynamics. Finally, in Chapter 7, I broaden the horizons of exclusive situationalism and discuss its relevance beyond state–business relations. After all, there is no reason to expect that situationalism is only limited to this particular area of societal exchanges. The section also discusses the limitations of the project and points to future research avenues. The conclusion revisits key insights of the book and calls for further research in these areas. Clearly, this work represents only a fragment of the necessary and a snippet of the possible.

CHAPTER 2

Concepts

Abstract When analyzing discrete business–politics relations, there is a tendency to approach this nexus, drawing a contrast between formal and informal rules and practices. However, this divide can be misleading since it is not unusual for corrupt practices to get formalized. In the same way, not all informal rules and practices are corrupt. And that is where the concept of situationalism provides a broader analytical lens for understanding the nature of actor discretion. Next, turning to the scope of actor discretion, the suggested conceptual models of intensity and power distribution in business–state relations provide means to test the case of Lithuania. Keywords Exclusive situationalism · Westernization · Rule of law · Informality · Political corruption

There are a number of key terms that provide a conceptual backbone for any discussion of discretion in political and/or socioeconomic contexts. The purpose of this chapter is both to discuss these terms and to evaluate their limitations. Instead of separating the two and leaving an evaluation for the end of the book, I merge the two tasks in this chapter. The main focus of the chapter is to provide a conceptual foundation for the analysis of business–state relations. I begin with the concept of © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_2

7

8

A. LAŁAS

the rule of law, which has been the metapolitical goal of EU accession specifically and CEE democratic transition more generally. Its problematization relates both to the adherence to the so-called Western standards and the issue of formal vs. informal rules. By exploring the nuances of informality, one of the dominant concepts in related academic literature, I seek to demonstrate its inadequacy for the stated task. Instead, I offer the concept of situationalism in order to better capture the nature of the business–state nexus through the continuous choice-related tensions of agents (actors) in relation to structure (laws and norms) and agents (actors) in relationship to principals (owners of project/policy initiatives). Inevitably, I also bump against the concept of corruption and delineate differences and overlaps. In other words, this section carves out a distinct space for the concept of situationalism. The second part of the chapter makes a transition from discussing the nature of actor discretion to delineating the scope of actor discretion. Specifically, I seek to explicate the dynamics of business–state relations in terms of their intensity and power distribution. In other words, I identify various contexts and constellations of these relations that enable or disable the specific forms of situationalism at national and organizational levels.

Actor Discretion I open the discussion of concepts with the notion of the rule of law. It is essential to any debate about the quality and dynamics of a state regime because of the inevitable daily interaction between actual practices and legal prescriptions and proscriptions. Due to its popularity and fundamental relevance for political and economic transformations, Thomas Carothers designated the rule of law as “an elixir for countries in transitions” (1998: 99).1 The CEE region received plenty of this medicine during its accession to NATO and especially to the EU. Usually, its definition turns around two key themes—the quality and clarity of laws on the one hand and their equal and prompt application for all, including those in power, on the other. However, power weighs in here not only on the receiving but also on the dispensing end. This is because legal “content and application is largely (like the state of which it is a part) a dynamic

1 Carothers, Thomas. 1998. “The Rule of Law Revival.” Foreign Affairs 77 (2): 95. https://doi.org/10.2307/20048791.

2

CONCEPTS

9

condensation of power relations” (2004: 43).2 In other words, politics is also a struggle for (a) the definition of legal rules and loopholes, and (b) the nature and extent of their application. Not just any rules, but first and foremost rules structuring economic, business and financial exchange, which is essential for economic and political elites.3 This is where the state-business nexus emerges as a core element determining the nature of rule-making and the extent of the rule of law. Many scholars go further and talk not only about the rule of law, but about the democratic rule of law, linking it with the quality of democracy.4 Though democracy in the case of Central and Eastern Europe is not just any democracy, but specifically Western-Northern European versions of it. The menu range of democratic models was quite wide and most parties could pick their own ideal visions of Westernization. The concept of Westernization here implies two related processes: societal and political instincts to mimic more successful countries to the West and North of Central and Eastern Europe, and growing similarity between these regions in terms of the dynamics of state–business relations. The former precedes the latter, but not necessarily presupposes its stability or durability in the long term. Westernization is understood here as a relational rather than substantionalist notion (Jackson and Nexon 1999).5 It is always in flux and the sentiments can change, as we have seen in the case of e.g. Hungary. Westernization is preferred to modernization because the former is more precisely focused on the countries that acted as emulation models.

2 O’Donnell, Guillermo A. 2004. “The Quality of Democracy: Why the Rule of Law

Matters.” Journal of Democracy 0076.

15 (4): 32–46. https://doi.org/10.1353/jod.2004.

3 Domingo, Pilar. 1999. “Judicial Independence and Judicial Reform in Latin America.” In The Self-Restraining State, edited by Pilar Domingo, Andreas Schedler, Larry Diamond, and Marc F. Plattner, 151–176. Boulder: Lynne Riener. 4 Carothers, Thomas. 2009. “The Rule of Law Temptations.” The Fletcher Forum of World Affairs 33 (1): 49–61. O’Donnell, Guillermo A. 2004. “The Quality of Democracy: Why the Rule of Law Matters.” Journal of Democracy 15 (4): 32–46. https://doi.org/ 10.1353/jod.2004.0076. 5 Jackson, Patrick Thaddeus, and Daniel H. Nexon. 1999. “Relations Before States:: Substance, Process and the Study of World Politics.” European Journal of International Relations 5 (3): 291–332. https://doi.org/10.1177/1354066199005003002.

10

A. LAŁAS

Krastev and Holmes (2018)6 point out that “for two decades after 1989, the political philosophy of postcommunist Central and Eastern Europe could be summarized in a single imperative: Imitate the West!” (p. 118). And this was not a compulsory, but a voluntary choice in order “to become ‘normal,’ which meant like the West.” (Ibid.). In contrast to some Central European countries, the Baltic states did not get disillusioned or fundamentally skeptical of this course of action. To this day, a significant amount of proposed reforms and legislative amendments are publicly justified drawing on Western-Northern European experiences. However, justification and actual imitation are two different things. Often day-to-day political practices and norms distort the intended processes of Westernization, contrasting official rhetoric with less glamorous reality. Corruption and other forms of informal governance are often perceived as the principal culprits. Informal network is one of the more widely used terms to describe a set of people covertly involved in the regular and mutually beneficial exchange of services/favors among themselves.7 They are often presented and understood as rather static in nature. In other words, members may change over time, but their internal dynamics remain constant. Even in the case of membership, Grødeland (2007: 2218 ) implies a kind of path dependency because network benefactors are interested in creating a sense of in-group obligation and maintaining this informal system over time. Such a conceptualization starts to resemble a closed “clan-like” structure (Ledeneva 2013: 225)9 with its own rules and premeditated plans

6 Krastev, Ivan, and Stephen Holmes. 2018. “Explaining Eastern Europe: Imitation and Its Discontents.” Journal of Democracy 29 (3): 117–128. https://doi.org/10.1353/jod. 2018.0049. 7 According to Bojicic-Dzelilovic and Bojkov (2005: 76), personal informal networks (at least during privatization era in Bulgaria) had three core elements, upon which they relied in day-to-day operations: ownership or control of a bank, ownership or control over a national media, and ownership of football clubs. Banks provided financial resources, media offered informational leverage and protection, and football events—convenient opportunities for meetings and deal making. 8 Grødeland, Åse Berit. 2007. “‘Red Mobs’, ‘Yuppies’, ‘Lamb Heads’ and Others: Contacts, Informal Networks and Politics in the Czech Republic, Slovenia, Bulgaria and Romania.” Europe-Asia Studies 59 (2): 217–252. https://doi.org/10.1080/096681306 01125551. 9 Ledeneva, Alena V. 2013. Can Russia Modernise? Sistema, Power Networks and Informal Governance. Cambridge: Cambridge University Press.

2

CONCEPTS

11

of action. While these informal networks may well exist, the term does not adequately capture the wide spectrum of possible informal practices. This limitation is resolved by drawing a distinction between informal networks and contacts. The categories are differentiated by the levels of social capital: while the former is a long-term arrangement with high levels of social capital, the latter represents more ad hoc and shallow social connections for solving a problem at hand. Though these two categories—informal networks and contacts— provide useful conceptual anchors, they seem to miss a vast space between them. Informal networks may not require defined organizational structures or membership lists. They might be overlapping and flexible sets of connections (nodes) based on loose personal arrangements and alliances. Here obligations have less to do with exclusive membership rights and more with the ability to deliver particular transactions/favors at stake and to avoid prosecution or publicity. Thus, these strategic alliances are much more than just contacts, but they can evolve and change very quickly, depending on the anticipated winning formula of the day. Like European medieval empires (Zielonka 2006),10 the membership “borders” of such loose networks are fuzzy and fluctuating. There is no need to assume the stability of members or contacts (connections to powerful individuals). Instead, these loose organizational and individual networks point to the culture of informality, which in turn indicates the presence of societal norms conducive to various informal practices. Here trust plays a limited role because corruption is normalized and expected (Jiang et al. 2015: 500).11 However, even then, political culture-driven arguments often focus on societal attitudes rather than particular practices and schemes employed by the participants of the system or the distribution of power relations within it. If the primary research focus zooms in on practices, as is the case here, the conceptual distinction between formal and informal networks is not particularly helpful. Leaving aside the normative question of the positive or negative nature of networks, the implication that formal networks act in a formal way and informal networks stick to informal activities (Aliyev 10 Zielonka, Jan. 2006. Europe as Empire: The Nature of the Enlarged European Union. Oxford: Oxford University Press. 11 Jiang, Ting, Jan Willem Lindemans, and Cristina Bicchieri. 2015. “Can Trust Facilitate Bribery? Experimental Evidence from China, Italy, Japan, and The Netherlands.” Social Cognition 33 (5): 483–504. https://doi.org/10.1521/soco.2015.33.5.483.

12

A. LAŁAS

2014: 20) does not hold water. Formal networks, like business associations or advocacy groups, may engage in various informal activities. In the same way, individuals or companies, representing informal alliances, may take up formal actions like e.g. challenging a particular governmental decision or procedure in court. Such flexibility complicates the analysis of practices but also makes them highly adaptable and resilient. Furthermore, when defining and analyzing informality, it is necessary to draw a distinction between informal, illegal and unethical practices. After all, not all informal practices are illegal or unethical. While the idea of “relieving (…) institutions of informality” (Aliyev 2016: 208)12 is widespread in the literature, the underlying assumption of this necessity is questionable. Whether it is EU informal governance and built-in flexibility mechanisms for sustenance of international cooperation (Natalia Shapovalova 2016; Christiansen and Piattoni 2003; Kleine 2013),13 community management in a post-conflict setting (Koutkova 2016),14 women’s informal networking activities to implement gender quota laws in Mexican elections (Piscopo 2016)15 or informal planning procedures in urban politics (Papamichail and Peri´c 2018),16 a wide range of described practices not only fall within the limits of legality and ethics, but also seem to be functionally useful. As, for example, argued by Kleine (2013:

12 Aliyev, Huseyn. 2016. “End to Informality? Examining the Impact of Institutional Reforms on Informal Institutions in Post-Euromaidan Ukraine.” Journal of Contemporary Central and Eastern Europe 24 (3): 207–221. https://doi.org/10.1080/0965156X. 2016.1260206. 13 Shapovalova, Natalia. 2016. “The Power of Informality: European Union’s Engagement with Non-State Actors in Common Security and Defence Policy.” European Security 25 (3): 326–345. https://doi.org/10.1080/09662839.2016.1193487. Christiansen, Thomas, and Simona Piattoni, eds. 2009. Informal Governance in the European Union. Cheltenham Northhampton, MA: Edward Elgar. Kleine, Mareike. 2013. Informal Governance in the European Union: How Governments Make International Organizations Work. Ithaca: Cornell University Press. 14 Koutkova, Karla. 2016. “Informality as an Interpretive Filter: Translating Ubleha in Local Community Development in Bosnia.” Journal of Contemporary Central and Eastern Europe 24 (3): 223–237. https://doi.org/10.1080/0965156X.2016.1262227. 15 Piscopo, Jennifer M. 2016. “When Informality Advantages Women: Quota Networks, Electoral Rules and Candidate Selection in Mexico.” Government and Opposition 51 (3): 487–512. https://doi.org/10.1017/gov.2016.11. 16 Papamichail, Theodora, and Ana Peri´c. 2018. “Informal Democracy in Patras, Greece: A Mechanism for Improved Planning?” Cities 74 (April): 334–342. https:// doi.org/10.1016/j.cities.2017.12.023.

2

CONCEPTS

13

3), EU informal governance, based on a norm of discretion, ensures the organization’s legitimacy by integrating societal interests. However, for more general informality-related theory building, the norm of discretion is too blunt to capture the observed variation of informal practices. Helmke and Levitsky (2004)17 bring in more nuance into informality debates by differentiating among complementary, accommodating, competing and substitutive informal institutions. While this categorization is illuminating, the formal–informal divide contributes little to the fundamental question of the distribution of power in a politics–business nexus. Echoing the divide between particularism vs. universalism (O’Donnell 199718 ; Mungiu-Pippidi, 2006), limited vs. open access orders (North et al. 2009), extractive vs. inclusive institutions (Acemoglu and Robinson, 2012) and patrimonialism vs. rule of law (Fukuyama, 2014), this book argues that the division between formal and informal practices is problematic because the divide is superficial. Whether practices are formal or informal is largely irrelevant, if one seeks to understand the nature of institutions. The formality of institutions does not prevent them from being extractive in nature. As Philp (2015: 22) notes, some of the worst cases of corrupt activities “can be institutionalised in the laws of state or economy.” World Bank chief economist Daniel Kaufmann talked about legal corruption conceptualized as corporate influence on state legal and regulatory systems.19 In the same way, as many scholars have noted, informality can be regarded as functionally useful and even as strengthening institutions’ democratic legitimacy. For the purposes of understanding state–business relations, I find it more productive to divide the analysis into two levels. At a macro or state level, I build an analytic framework on the notion of situationalism, a concept with a long and rich tradition in the field of ethics. 17 Helmke, Gretchen, and Steven Levitsky. 2004. “Informal Institutions and Comparative Politics: A Research Agenda.” Perspectives on Politics 2 (04): 725–740. https://doi. org/10.1017/S1537592704040472. 18 O’Donnell, Giullermo. 1997. “Illusions about Consolidation.” In Consolidating the Third Wave Democracies: Themes and Perspectives, edited by Larry Diamond, Marc F. Plattner, Chu Yun-han, and Tien Hung-mao, 40–57. Baltimore: The John Hopkins University Press. 19 Kaufmann, Daniel. 2008. “Daniel Kaufmann’s Farewell Lecture: Governance, Crisis, and the Longer View: Unorthodox Reflections on the New Reality.” Washington, DC: World Bank.

14

A. LAŁAS

Joseph Fletcher’s Situation Ethics: The New Morality (1966) is sometimes approached as a foundational text for the theory of situational ethics. He proposed four working principles underlying the theory, but we are primarily interested in only two of them: personalism and relativism. The former emphasizes a person’s welfare over adherence to the law, while the latter is an open-minded and contingent (rather than legalistic) approach to situational judgment. This is a stripped-down version of Fletcher’s classical theory of situational ethics without its normative components of love and justice. Once transposed into the realm of politics, situationalism represents a relationship between individual/collective actors (agency) and law/legal norms (structure), where actors tend to put themselves above the law and approach it as subservient to their interests. On the opposite end of the spectrum is legalism, where the principle of strict adherence to law puts agency and its interests in a subordinate position to law. In other words, we are talking about the rule of law, but in a more narrow and direct sense than is often used in popular media. Thus, this is a kind of power relationship that conceptualizes agents’ ethical positions and orientations to action. Conceived in this way, the situationalism-legalism spectrum can provide valuable insights into the underlying logic of agent behavior in the politics–business nexus. Situationalism plays a role in both formal and informal settings, where it may prevail due to a flexible approach to law/norms, exploitation of existing legal/normative contradictions and loopholes, selective application of laws (selective legalism) or simply due to limited legal/normative scope. Still, the concept of situationalism is too broad for the purposes of this project. If, echoing Acemoglu and Robinson’s (2012) division of institutions, one approaches situationalism as being divided into inclusive or exclusive varieties, then one gains more fundamental insights into the processes underlying state–business relations and the key role of actors in making ethical choices. Here the question of whether a practice is formal or informal is secondary. The intent of the practice, however, is crucial, i.e. whether it is intended to exclude others and restrict access to resources or to include others and open up access to resources and opportunities. We use the term exclusive rather than extractive because the latter is too narrow and does not subsume practices that are simply meant to sideline others without an extractive motive. This can take place in political competition, where for example leaking secret information about a particular politician to the media is meant to eliminate a potential political competitor. The leaker may not have any subsequent extractive motives

2

CONCEPTS

15

and a political post may be simply a vanity project, as it seems to be the case with some US oligarchs (Steen 2006; Winters 2011).20 By now it should be rather obvious that exclusive situationalism encompasses political corruption with the latter representing a narrower category of practices, and often is defined as the abuse of public office, (most often) for private gain (e.g. Della Porta and Vanucci 1999: 16; Funderburk 2012: 1; Johnston 2005: 11–2).21 The definition is problematic on many counts because corrupt acts may take place not just for private gain, but for the gain of one’s party or constituency, or the conditions specified might be present in the case of treason (Philp 2015: 21). Here the abuse or betrayal is highly contextual and depends on cultural norms concerning the roles and responsibilities of the principals and agents involved (Philp 2015: 18).22 In other words, the understanding of corruption and its dynamics depend upon the social-cultural order of a given society. The nature of the social order empowers and constraints particular forms of discretion, which in turn implies the existence of social standards as anchors for evaluation. Kurer (2015: 39) argues that “corruption, at its most general, is a deviation from a standard – physical, personal, social, political, cultural.” According to him, the standard may be derived from the public interest or public opinion standards. This position echoes Heidenheimer (2002), who draws a distinction between white, gray and black corruption, with this distinction drawn on the basis of punishment. For black corruption, the public supports punishment, while in the case of white corruption they would not vigorously support

20 Steen, Jennifer. 2006. Self-Financed Candidates in Congressional Elections. Ann Arbor, MI: University of Michigan Press. https://doi.org/10.3998/mpub.90192. 21 Della Porta, Donatella, and Alberto Vannucci. 2012. Corrupt Exchanges: Actors, Resources, and Mechanisms of Political Corruption. Social Problems and Social Issues. New York: Aldine de Gruyter. Funderbruck, Charles. 2012. “Political Corruption: Causes and Consequences.” In Political Corruption in Comparative Perspective, edited by Charles Funderbruck, 1–17. Burlington, VT: Asghate. Johnston, Michael. 2005. Syndromes of Corruption: Wealth, Power, and Democracy. Cambridge, UK; New York: Cambridge University Press. 22 Philp, Mark. 2015. “The Definition of Political Corruption.” In Routledge Handbook of Political Corruption, edited by Paul Heywood, 17–29. Milton Park, Abingon, Oxon; New York, NY: Routledge.

16

A. LAŁAS

punishment and instead would tolerate it.23 So the public seems to differentiate corruption from other acts, but it has different approaches to punishment. Still the label of corruption carries a negative connotation (Philp 2015: 18–9), which is not the case for the preferred term here—situationalism. As mentioned earlier, the opposite of situationalism is legalism. It denotes strict adherence to rules and regulations, while situationalism emphasizes individual choice and flexibility. Just to highlight the terminological differences and similarities, Rothstein and Teorrell (2008)24 suggest that the concept opposite of corruption is impartiality in the implementation of laws and policies, or what O’Donnell and Mungiu-Pippidi call universalism and North (2009)—the impersonal enforcement of rules. The key nuance here is that situationalism may also be universalistic and impartial in regard to the object of a policy or business decision, but always personal in connection to the subject or an actual decision-maker. The decision-maker chooses to ignore, bend, circumvent or come up with their own rules and regulations for whatever reason at hand. Thus, only exclusive situationalism comes closest to problematic practices because here partiality is exhibited on both the sending and receiving ends of the decision-making process. This is despite the fact that, as Kurer (2015: 33) points out, corruption may have positive social consequences.25 He offers a case of an innocent Jew bribing his way out of a concentration camp, but it can relate to, for example community projects, where bureaucratic red tape and delays prevent citizens from reaping social benefits. To illustrate the difference between situationalism and corruption, a few years ago around the Christmas season time, I bought a ticket to a theater play. It so happened that I mixed up the time and showed up at the theater one hour late. According to the letter of the law, I missed a performance and was fully responsible for my absent-mindedness. So, I

23 Heidenheimer, Arnold J. 2002. “Perspectives on the Perception of Corruption.” In Political Corruption: Concepts & Contexts, edited by Arnold J. Heidenheimer and Michael Johnston, 3rd ed, 141–153. New Brunswick, NJ: Transaction Publishers. 24 Rothstein, Bo, and Jan Teorell. 2008. “What Is Quality of Government? A Theory of Impartial Government Institutions.” Governance 21 (2): 165–190. https://doi.org/ 10.1111/j.1468-0491.2008.00391.x. 25 Kurer, Oskar. 2018. “Definitions of Corruption.” In Routledge Handbook of Political Corruption, edited by Paul Heywood, 30–41. London New York: Routledge, Taylor & Francis Group.

2

CONCEPTS

17

was ready to go home, but the ticket lady looked at my ticket, considered the matter for a few seconds and offered an alternative of going to another play (Anna Karenina) starting soon, which was closed for the public. A private company had bought out a play performance as a Christmas gift for its employees and the ticket lady offered me an opportunity to join them for free. If she had asked for a bribe, that would be considered an act of corruption, but in this case she didn’t and thus it falls under situationalism, more specifically inclusive situationalism. By considering my ticket as still valuable and expanding access to a limited resource, she breached the rules and “abused” office for my private gain, but at the same time remedied an unfortunate situation which she was not even responsible for. Thus, the concept of situationalism is able to capture a broad spectrum of agents’ ethical choices and make sense of changing practices along this spectrum. In other words, it can better capture the culture of state–business relations as a whole and track its dynamics over time. Situational choices as a form of bureaucratic autonomy do not necessarily lead to increased exclusive practices but may even lead in the opposite direction—to more efficient and desirable outcomes.26 After all, even in rule-saturated environments, individual values and choices matter. And they can make use of or break rules.

Scope of Discretion The concept of inclusive-exclusive situationalism is an initial building block, but the overall picture necessitates specifying not only the nature but also the scope of actor discretion. After all, the spread of such practices defines the nature of state–societal relations in general and state– business relations in particular. As specified in Table 2.1, I argue that the dynamics of exclusive practices in business–state relations depend on existing broader pressures for change. Drawing on ideal types suggested by North et al. (2007)27 and other scholars, former Eastern bloc countries are conceptualized as having been under very different degrees of 26 Bandiera, Oriana, Michael Carlos Best, Adnan Qadir Khan, and Andrea Prat. 2021. “The Allocation of Authority in Organizations: A Field Experiment with Bureaucrats.” The Quarterly Journal of Economics 136 (4): 2195–2242. https://doi.org/10.1093/qje/ qjab029. 27 North, Douglass C., John Joseph Wallis, Steven B. Webb, and Barry R. Weingast. 2007. “Limited Access Orders in the Developing World: A New Approach to the Problems

18

A. LAŁAS

pressure to transit in the 1990s from the natural state of limited access to open access social order. The “naturalness” of the limited access order is key here because it represents a kind of gravitational force towards the status quo in the region and beyond. Without counterveiling pressures and later sufficient institutional and cultural safeguards, societies should drift towards the limited access order. Since former Eastern bloc countries in the late 1980s were part of this order, only substantive pressure for change could pull them out their existing condition. This pressure can come from external (e.g. IOs, neighboring states or international NGOs) and internal sources (e.g. local media, societal organizations or anti-corruption agencies) to plug judicial, legislative and policy gaps and introduce new practices. In such transitional societies under substantive and sustained “duress,” the control of politics and the economy begins to open for competition. Powerful individuals can gain privileged access to some resources, but this access is usually limited in scope and timeframe. The political system can also be partially manipulated in order to increase rents, but too much manipulation can backfire if elections provide functional means for kicking the rascals and their allies out. This fusion of elements from two social orders represents a rather unstable and unpredictable environment, a critical juncture, where various future development scenarios are still possible in a short-term period. An ongoing power struggle indicates a limited ability of both camps—autocrats/oligarchs and democrats—to fully impose and sustain their rules of the game, but a genuine power struggle for voters itself is already a Table 2.1 Dynamics of exclusive situationalism in former Eastern bloc countries

Controlled/manipulated elections Free and fair elections

Substantive and sustained pressure mechanisms for broader institutional change

Limited pressure mechanisms for broader institutional change

Towards segmented exclusive situationalism Towards isolated exclusive situationalism

Towards system-wide exclusive situationalism Towards segmented exclusive situationalism

of Development.” Policy Research Working Paper No. 4359. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/7341.

2

CONCEPTS

19

sign of minimalist democracy in place. This is the second relevant dimension for understanding the dynamics of situationalism. Adam Przeworski defines minimalist democracy as “a system in which rulers are selected by competitive elections.”28 Here competitiveness implies not only a realistic chance of rotation, but also a sufficient degree of procedural fairness, which ensures a truly open-ended electoral game. I draw a distinction between free and fair elections on the one hand and manipulated ones on the other. While elections can be considered an integral part of the institutional setup, they usually function separately and become the first sign of a willingness to consider a broader and long-term shift towards a more open political and business culture. Whether one takes the example of Poland in 1989, the Baltic states in 1990, South Africa in 1994 or Tunisia in 2011, competitive elections tend to precede more substantial legislative and policy changes (if they take place at all). This interaction of the nature of elections and the degree of intensity and sustainability of day-to-day pressure mechanisms generates varying opportunities for exclusive situationalism. It is at a maximum (top right corner of the table) when political and economic elites manage to reduce the possibility of rotation and operate in an environment with substantial legal and policy gaps favoring the elites. In such a case, a country drifts towards or already exhibits a system-wide exclusive situationalism. The other side of the continuum (bottom left corner of the table) represents a hostile societal and legislative-cultural environment for exclusive situationalism. Free and fair elections coupled with sustained pressures for broader institutional change significantly shrink opportunities for exclusive situationalism and push the state beyond the critical juncture. The movement occurs in the direction of isolated exclusive situationalism, where only separate individual actors occasionally test the possibilities for personal gain at the expense of society. However, if there exists a clear disconnect between electoral and broader institutional rules, we end up in the territory of segmented exclusive situationalism. Because of ongoing friction, this equilibrium can be relatively unstable as pressure builds to either maintain power through the manipulation of elections or to open up further elements of the social order to competition. In the case of segmented exclusive situationalism, particular areas of the economy might 28 Przeworski, Adam. 1999. “ Minimalist Conception of Democracy: A Defense.” In Democracy’s Value, edited by Ian Shapiro and Casiano Hacker-Cordon, 23–55. Cambridge: Cambridge University Press.

20

A. LAŁAS

be vulnerable to abuse and extraction, especially in highly state regulated business sectors. This is where I pause and descend another set of conceptual stairs to the sub-state level. Moving from the state to the sub-state level, the question of state– business relations requires a different analytical lens. I am asking not how and why one state differs from another, but how and why one business or state agency differs from another. Before doing that for our case study, I will first provide the ranges of intensity in state–business relations, which vary depending upon three factors: the extent of resources commanded by public agencies; the intensity of state regulation in business sectors; and the market orientation of businesses (export vs. local). All other things being equal, we expect export-oriented businesses to have lower levels of engagement with state institutions because they have limited exposure and needs at a local level. On the other hand, locally oriented businesses should seek more intense contacts with state institutions because their fortunes depend upon the state to a greater degree. If state institutions of interest (and/or public companies under them) command substantial centrally managed resources, then the incentives for engagement are further enhanced. The emphasis on centrally managed resources relates to the fact that some ministries, for example, might get a substantial allocated budget, but for the most part it is automatically distributed down the chain of command and relatively little is left at its own disposition. In the same way, the intensity of relations increases if a business operates within a highly state-regulated sector. Thus, the most intense state–business relations are expected in the upper left corner, where locally oriented firms function within a highly regulated business sector and engage public agencies with substantial investment funds. On the other side of the spectrum are export-oriented firms functioning in a business sector with limited state interference and, if necessary, engaging public agencies with limited investment resources. Two adjectives used in Table 2.2—substantial and limited—are idiosyncratic because the perception of the significance of funding depends on the size of a company. For some companies, 30,000 euros is pocket change, while for others it represents their total annual income. Given this variation, I emphasize the importance of subjective perception, which, as I argue, drives companies’ or public officials’ behavior and their willingness to take risks. In addition to the question about the intensity of relations, one has to also ask about power relations in the state–business nexus because of

2

CONCEPTS

21

Table 2.2 Intensity levels of business–politics relations

Public agencies with substantial state and/or EU investment funds Public agencies with limited state and/or EU investment funds

Business sectors with substantial state regulation

Business sectors with limited state regulation

Locally oriented businesses

Locally oriented businesses

Export-oriented businesses

Export-oriented businesses

High Medium intensity area of business–politics relations

High Low intensity area of business–politics relations

Medium Low intensity area of business–politics relations

Medium Low intensity area of business–politics relations

its ubiquity in social interactions (Dahl 1957: 201).29 Here I am particularly interested in the causal nature of power, i.e. one’s ability to force another to do something or to prevent from doing. Engaging this dual face of power (Bachrach and Baratz, 1962),30 we can start to make sense of observed outcomes. After all, the question of levels of intensity informs us about about the differentiated presence of interest, but it says nothing about the likely results of this interaction. Still, power is always grounded in a particular context as noted in Table 2.1. In our case study at hand, Lithuania represents a state in transition from segmented to isolated exclusive situationalism with varying degrees of legal-institutional gaps. Because of that, it still “offers” opportunities for exclusive practices, although this space seems to contract over time—at least that’s the fundamental claim of this book. With this contextual information in mind, Table 2.3 specifies the distribution of power as a function of actors’ size and its resources. A private actor with large resources can sustain a long and sophisticated effort to advance its interests, while a very small one is usually forced to rely on the limited network of personal

29 Dahl, Robert A. 2007. “The Concept of Power.” Behavioral Science 2 (3): 201–215. https://doi.org/10.1002/bs.3830020303. 30 Bachrach, Peter, and Morton S. Baratz. 1962. “Two Faces of Power.” American Political Science Review 56 (4): 947–952. https://doi.org/10.2307/1952796.

22

A. LAŁAS

Table 2.3 Power dynamics in business–politics relations

National/large municipality agencies and public companies Small municipality agencies and public companies

Large private companies

Small-Medium size private companies

Very Small private companies

Asymmetry favoring business

Symmetry

Asymmetry favoring public management

Asymmetry favoring business

Asymmetry favoring business

Symmetry

connections. The difference between large, small and very small companies can be derived from national regulation, which classifies very small as meeting two of three criteria: the value of company assets not exceeding 350,000 euros, annual income below 700,000 euros and/or the having 10 or less employees. By contrast large companies have to exceed at least two of three criteria for medium size companies: company assets over 20 mil. euros, annual income above 40 mil. euros, and employing more than 250 people.31 While such specific criteria are too restrictive, I approach them as a rough proxy for thinking about the ability of businesses to leverage their power. Power here is primarily understood in materialistic terms—as human and financial resources available for mobilization. While ideas and agenda-setting abilities can be approached as a distinct form of power, I view it as largely derivative from material resources. Resourcerich actors can hire top lawyers, lobbyists, PR companies or creative agencies in order to generate necessary ideas. These resources do not always have to be deployed in order to make it count. The very prospect (threat) of potential deployment may also have substantial psychological and behavioral effects upon another actor. Examples abound, but international relations have one of the most vivid ones: this is the crux of the classic security dilemma, where the uncertainty of intentions coupled with capabilities may lead to an arms race and a conflict escalation.32

31 Lietuvos Respublikos I˛ moniu ˛ Atskaitomybes ˙ I˛ statymas. n.d. http://www.infolex.lt/ ta/30590. 32 Jervis, Robert. 1978. “Cooperation under the Security Dilemma.” World Politics 30 (2): 167–214. https://doi.org/10.2307/2009958.

2

CONCEPTS

23

Because this book examines the power interaction between state and private actors, the state power also needs some differentiation. I provide a very rough one, differentiating between national and large municipality agencies and public companies on the one hand and small municipality agencies and public companies on the other. The reason behind this differentiation has to do not only with resources “owned” by these agencies (budgets and employees), but also with resources administered by them. The more resources of potential interest to businesses they manage, the more power they acquire. In some exceptional cases, relatively small municipalities control a scarce resource in high demand and gain leverage beyond their relative size, but they are few and far between.33 Typically, the size of the portfolio of public contracts and managed resources end up being related to the overall budget and the portfolio of managed resources. This is how we end up with a 2 × 3 matrix, specifying the distribution of power in the nexus. Overall, it tends to favor business rather than public management with the exception of very small companies. This is because businesses, unlike public managers and institutions headed by them, have relatively narrow sets of interests, more streamlined management structures and are less constrained by various institutional rules and limitations. They are able to act swiftly and, if necessary, hire the best talent on the market, including former bureaucrats and politicians. Tables 2.1–2.3 provided so far, offer a mid-level analytical framework(s) for understanding the evolution of business–politics relations in transitional countries. Since the business–politics nexus lies at the heart of day-to-day democracy, these frames may have broader relevance for examining transitional critical junctures that may or may not provide momentum for open access social orders. In contrast to those who focus on the deep cultural underpinnings of exclusive situationalism—whether it is Azeri tapsh, Chinese quanxi or Russian blat , I find no substantive reason to assume that exclusive political and business practices are somehow more resistant to change in Lithuania than in other CEE countries. Yes, these practices were an integral part of Soviet Lithuania’s culture, but their justification had relatively shallow roots. Paying a bribe to get ahead in the waiting line for public housing might be a convenient way to solve the problem, but that’s about it. 33 For example, the municipality of Neringa is located on the Curonian spit, a unique national nature reserve located between the Baltic Sea coast and the Curionian Lake. Here land for development is very scarce, which increases the power of the municipality.

24

A. LAŁAS

There was nothing deeply Lithuanian about the act of bribing. As such, I do not find any specific cultural artifacts worth deconstructing in greater detail to illuminate local exclusive situationalism. Instead, I will focus on describing daily choices and incentives faced by relevant individual and institutional actors over the period of the last 20 or so years. However, before we get there, it is necessary to better understand the background of the selected case study and explicate the methodological approaches of this work.

CHAPTER 3

Context and Methodology

Abstract Lithuania, unlike some other post-Soviet countries, had relatively limited external pressures for exclusive practices. At the same time, unlike e.g. Estonia, it also had limited external cultural-linguistic connections to Scandinavia, which limited opportunities to attract regional foreign investment. Although the cozy and opaque relationship between state and business representatives was a common feature of the transition period, Lithuanian public support for exclusive practices gradually declined. Efforts to fight corruption were reflected in the improvements of corruption indexes and the declining reports of bribing activities. In order to test further the validity of these trends and to understanding the drivers behind them, 63 anonymous interviews were conducted, covering the period of the last 23 years. Keywords Latvia · Estonia · Scandinavia · Corruption Perception Index · European Values Survey

It would be intellectually dishonest to assert that the case study of Lithuania was selected systematically based on an objective set of criteria. It was not. It was a deliberate choice based on personal experience, language proficiency, cultural familiarity and my acquaintance networks.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_3

25

26

A. LAŁAS

In the same way, the selected methodology and especially interview questions were shaped by the context of the case. Having specific background information and personal experiences, I have made deliberate choices in study design, topical focus, nature of interviews, etc. This linkage between prior knowledge/experience and methodology is reflected in this chapter as well. I start it with a discussion of the broader context within which Lithuania “sits” and only then move onto the discussion of methodological choices made in this book. I hope that this roundabout way will provide readers with a better appreciation of the case study and my approaches to it.

Context In terms of the regional context, Lithuania, unlike some other postSoviet countries, was not exposed to substantial pressures of exclusive practices from outside. Unlike such countries as Bulgaria or Romania, Lithuania did not border neighbors under international economic sanctions. In the Balkans, smuggling activities to evade sanctions for Serbia and Montenegro generated a large informal economy, which in turn had a marked corruptive influence on Bulgarian state bureaucrats and politicians (Crampton 2007: 412).1 The 2009 EU estimate of money available for laundering in Lithuania is relatively modest and makes up 1.33% of GDP. In comparison, Latvia reaches 2.27%, Estonia—2,96%, while Bulgaria goes all the way to 4.5% of GDP.2 This may have to do not only with geography but also with the ethnic makeup of the countries. Unlike Latvia or Estonia, Lithuania had a relatively small Russianspeaking population. With over a third of its population native Russian speakers, Latvia has been a natural bridge for Russian business activities in Europe, including various shady practices. Thus, it is not accidental

1 Crampton, R. J. 2007. Bulgaria. Oxford: Oxford University Press. 2 European Commission. Statistical Office of the European Union. 2018. Handbook

on the Compilation of Statistics on Illegal Economic Activities in National Accounts and Balance of Payments: 2018 Edition. LU: Publications Office. https://data.europa.eu/doi/ 10.2785/0256.

3

CONTEXT AND METHODOLOGY

27

that around half of all deposits in Latvian banks as recently as 2014 originated from Russia and other post-Soviet countries (Conley et al. 2016).3 With 88% of these deposits being available for withdrawal on demand, the Latvian financial sector faced a substantial liquidity risk.4 As indicated in Fig. 3.1, the situation in Latvia has greatly improved in recent years, but Lithuania (like Estonia) never experienced any substantial influx of non-euro zone money despite Russia’s importance as a primary import–export partner. This is not to say that Lithuania was or is completely immune to Russian business interests. I will show later in the book that the banking sector had some notorious owners with links to the East. In the early 2000s, the Lithuanian energy sector was also closely tied to and dependent upon major Russian oil and gas companies. Not surprisingly, this dependence generated numerous opportunities for the overlap of political and business interests. In addition, Lithuania represents the shortest and arguably the most convenient land route from mainland Russia to Kaliningrad exclave and back. This also stimulated Russian and Lithuanian business and political cooperation, both sides sought entry to larger markets—mainland Russia market for Lithuania or EU market for Russia. Though cultural connections to Russia were relatively limited, Lithuania, unlike Estonia, did not have strong linguistic-cultural links to Scandinavian countries. Its historical identity was linked to Poland. Thus, Scandinavian capital and businesses were relatively late arrivals to Lithuania. Already by 2000, the percentage and the total amount of FDI flows to Estonia from Scandinavian countries significantly exceeded those to Lithuania. The gap between the two countries did not change much even by 2015.5 In general, Lithuania had until recently limited FDI inflows with clear implications—local business practices cast a long shadow for a relatively long time. Reminiscing about the late 1990s and early 2000s, one currently successful businessman recalled his first steps

3 Conley, Heather A., James Mina, Ruslan Stefanov, and Martin Vladimirov. 2016. The Kremlin Playbook: Understanding Russian Influence in Central and Eastern Europe. CSIS, October 2016. Lanham: CSIS & Rowman Littlefield. 4 Durán, Jorge, and Héctor Navarrete-Plana. 2019. FDI & Investment Uncertainty in the Baltics. Luxembourg: Publications Office of the European Union. https://ec.europa. eu/info/sites/default/files/economy-finance/eb043_en.pdf. 5 Durán, Jorge, and Héctor Navarrete-Plana. 2019. FDI & Investment Uncertainty in the Baltics. Luxembourg: Publications Office of the European Union.

A. LAŁAS

Lithuania

Latvia

6-1-18

11-1-18

1-1-18

3-1-17

8-1-17

5-1-16

10-1-16

7-1-15

12-1-15

2-1-15

9-1-14

4-1-14

6-1-13

11-1-13

1-1-13

8-1-12

3-1-12

5-1-11

10-1-11

12-1-10

2-1-10

7-1-10

9-1-09

4-1-09

11-1-08

1-1-08

14 12 10 8 6 4 2 0 6-1-08

Billions, US Dollars

28

Estonia

Fig. 3.1 Extra Euro area, non-resident non-banks deposits in the Baltic States’ banks, 2008–2019 (ECB, Luminor and Marcobond data)6

in a joint business venture with a local criminal gang. Together they ran a gambling business, which technically was illegal at the time, but practically faced few obstacles. Why? According to the interviewee, one key member of the National Gaming Control Authority had close ties with some of the key gang members and thus provided cover from unexpected visits by the regulator. Also, local police chiefs, especially the head of the Economic Crimes Unit, were complacent and tolerated illegal business activities. The interviewee insisted that local gangs, which ran such businesses, paid protection money to the police. Only with the belated removal of the key police personnel did the situation change for the better. Public media sources seem to confirm the existence of such a corruption ring in Kaunas, the second-largest city in Lithuania, but Kaunas is not unique here.7 While the above example may not necessarily typify the situation in all major cities, the cozy and opaque relationship between state and business representatives was a common feature of the transition period. Wherever you looked—state, municipal, political or business organizations—you could easily find examples of “businessmen” ready to strike a deal and make some private gains at the expense of state coffers. To use Wang’s (2017) terminology, it is a kind of Red–Black collusion, where 6 Data received from Luminor Lithuania Chief Economist Žygimantas Mauricas. 7 Kisielius, Jonas. 2019. “Tyrimas Del ˙ Kauno Policijos Korupcijos Atliekamas Tarptau-

tiniu Mastu: Aiškeja ˙ Detales.” ˙ Kauno Diena, October 30, 2019. https://kauno.diena. lt/naujienos/kaunas/nusikaltimai-ir-nelaimes/tyrimas-del-kauno-policijos-korupcijos-atliek amas-tarptautiniu-mastu-aiskeja-detales-937289.

3

CONTEXT AND METHODOLOGY

29

corrupt public officials together with criminal elements work together to maximize their profits.8 Of course, this does not mean that there was no societal exposure to different, more transparent business and political cultures. There was, but it came more gradually through investment, travel, training, changes in personnel and memberships in international organizations. Despite the initial slow start in terms of attracting foreign investment, Lithuania’s return to Europe was never just a political elites-driven affair. To date, Lithuanians remain one of the leading euro-enthusiasts with 90% of the population considering EU membership as beneficial. By contrast, only 58% of Czechs and 59% of Bulgarians share this point of view.9 Appreciation for Western Europe can also be detected in day-to-day policy debates. Such countries as Finland, Ireland, Denmark, Sweden and increasingly Estonia regularly feature as cognitive anchors and potential examples to be followed. A survey conducted in 2018 revealed that 89% of Lithuanians viewed Scandinavian countries as important cooperation partners and 75% wanted an even closer relationship. In Lithuania, there are no signs of backsliding both in terms of societal attitudes and the overall quality of democracy. Repeated warnings about the rise of illiberal nationalism in Central and Eastern Europe does not apply here for now. In fact, cultural change seems to be steadily taking place in the direction of Western democratic ideals (Table 3.1). Cultural change, if any, can be registered through survey data. I used the European values survey (EVS) in order to place Lithuania into the broader comparative context and take notice of its temporal dynamics (see Fig. 3.2). For the purposes of this book, I created a composite measure for the justification of exclusive practices. It is an average of three related EVS questions: justification for falsely claiming state benefits, cheating on taxes, and accepting a bribe. Higher numbers indicate higher levels of justification for the named practices. Arguably, the measure represents

8 Wang, Peng. 2017. The Chinese Mafia: Organized Crime, Corruption, and Extra-Legal Protection. 1st ed. Clarendon Studies in Criminology. Oxford; New York, NY: Oxford University Press. 9 “Closer to the Citizens, Closer to the Ballot: A Public Opinion Monitoring Study.” 2019. 91.1. Brussels: Directorate-General for Communication, Public Opinion Monitoring Unit. https://www.europarl.europa.eu/at-your-service/files/be-heard/eurobarom eter/2019/closer-to-the-citizens-closer-to-the-ballot/report/en-eurobarometer-2019.pdf.

30

A. LAŁAS

Table 3.1 Inward FDI stock by country of origin, percentage of GVA of the recipient country10 Estonia

Denmark Germany Cyprus Latvia Lithuania Estonia Netherlands Finland Sweden United Kingdom Norway Russia Poland World

Latvia

Lithuania

2000

2015

2000

2015

0 1,3 −0,1 0,1 −0,1

2,2 1,4 3,7 2,7 3,4

2,9 2,4 0

2,7 3,3 5,9

1,3 15,4 20,5 1,3 2,2 0,6 0 51,6

9,6 22,5 25 2 4 4,6 0,2 99,8

0,1 2,6 0,8 1,8 3 1,5 1,6 1,7 0 28,8

2,7 4,2 4,8 1,8 12,2 2,4 3,4 5,5 0,3 62,8

2000

2015

4,1 1,7 0 0,3

1,7 3,7 1,4 2,7

1,4 0,3 1,4 3,9 1,5 1 0,2 0,5 22,6

2,1 5 1,7 9,3 1,2 2,5 0,6 2,1 40,2

not only public dispositions regarding the practices but also points to possible internal pressures for such practices. After all, once a particular set of practices proliferate they can create isomorphic pressures across the system (DiMaggio and Powell 1983).11 The measure was differentiated using explanatory factor analysis and its internal consistency was probed with Cronbach’s alpha measure (0.76). The data indicates that the levels of justification for such practices have been dropping steadily in a number of CEE countries, including Lithuania. However, Lithuanian society appears to be one of the most tolerant of exclusive practices in comparison to many other CEE countries. This was the case in 1999 and had changed little by 2017. Only Slovakia had higher levels of tolerance (with Russia and Belarus as the overall leaders). Also, there is survey-driven evidence to suggest not only gradual attitudinal changes but also changes in the frequency of some 10 Durán, Jorge, and Héctor Navarrete-Plana. 2019. FDI & Investment Uncertainty in the Baltics. Luxembourg: Publications Office of the European Union. 11 DiMaggio, P. J. and W. W. Powell. 1983. The Iron Cage Revisited Institutional Isomorphism and Collective Rationality in Organizational Fields. American Sociological Review 48 (2), 147–160.

3

CONTEXT AND METHODOLOGY

31

4.00

3.50

BG BY CZ

3.00

EE HU 2.50

LT PL

2.00

RO RU SI

1.50

SK 1.00 1999

2008

2017

Fig. 3.2 Justification of exclusive practices (EVS Data, 1999–2017)

exclusive practices over the last decade. Figure 3.3 provides data from a survey that has been repeatedly used by the Lithuanian Special Investigative Service. The survey is focused specifically on measuring corruption, and it surveys not only the general population but the business community as well. As indicated, the percentage of people, who paid a bribe over the previous 12-month period, dropped by half since 2007 and continues contracting. The number of business leaders, who paid a bribe, followed a similar trend, though lately their percentages seem to have stabilized. Still, both figures bear witness to the same trend—gradually falling levels of some problematic practices and a matching fall in societal tolerance for them. Transparency International reports a similar, but more moderate trend of improvement in fighting corruption. Along with Estonia, Lithuania has been steadily raising its scores since 2012. We cannot go back further in time due to changes in the methodology of the CPI index, but the 2001–2011 data shows limited progress in the case of Lithuania. The numbers are quite stable with some marginal ups and downs along the way. This is in line with other comparative studies of corruption, which have not found much improvement in other CEE countries (Shannon,

32

A. LAŁAS

30 25 20 15 10 5 0 2007

2008

2011 Citizens

2014

2016

2018

Business leaders

Fig. 3.3 Gave a bribe during the last 12 months (Lithuania’s map of corruption, 2007–2018)12

Funderbruck and Fisher 2012: 196).13 Thus, it seems that relatively small, but steady improvements in fighting corruption are a more recent phenomenon in Lithuania. However, the question remains to what extent this trend is accurate and able to capture long-term shifts. I wrap up this section of the chapter with an overview of democracy scores. The Polity5 dataset presents a rather dull picture of Lithuania, treating it as a fully institutionalized democracy with a maximum score of 10 right from 1991 through to 2018 (the latest available ranking year).14 Neither Estonia, nor Latvia had ever reached the same score, but in 2018 they were relatively close—9 and 8, respectively. A more nuanced and somewhat different picture is presented by the Economist’s Democracy

12 “„Lietuvos Korupcijos Žemelapio“ ˙ Tyrimas.” n.d. Vilnius: Special Investigative Service of the Republic of Lithuania. https://www.stt.lt/kita/tyrimai-ir-analizes/4956. 13 Funderbruck, Charles, Vaughn P. Shannon, and Julie Fisher. 2012. “Conclusion: Comparative Corruption and the Challenge of Reform.” In Political Corruption in Comparative Perspective, edited by Charles Funderbruck, 195–204. Burlington, VT: Asghate. 14 “Polity5 Project, Political Regime Characteristics and Transitions, 1800–2018.” n.d. Center for Systemic Peace. https://www.systemicpeace.org/inscrdata.html.

3

CONTEXT AND METHODOLOGY

33

Index. In 2019, Estonia was leading the CEE pack with a combined score of 7.9 out of 10. Lithuania along with Slovenia shared a score of 7.5, with Latvia just below them at 7.49. Not surprisingly, Hungary and Poland are much further down the list with scores of 6.63 and 6.62, respectively. Looking at non-Baltic former Soviet republics, Ukraine has the highest score (5.9), heavily downgraded by a very low mark for the functioning of the government dimension. It already falls into the hybrid regime category, while all CEE countries are labeled as flawed democracies. Among the five different dimensions measured by the index, political participation is the most problematic aspect for Lithuania followed by political culture and the functioning of government. Over the last ten years, all three Baltic States improved their scores, but the rise was very moderate with the partial exception of Latvia which managed to increase its score by 6%. On the other hand, Hungary’s index score experienced the steepest drop (8%), followed by the Czech Republic (6.1%) and Poland (6.1%). If one goes further into history and moves the starting line from 2010, which was a relatively low point due to the pressures of the financial crisis, all the way to 2006, the Baltic States’ progress looks more like a stasis. The improvements are barely noticeable and that, in my opinion, is absolutely false in the case of Lithuania. Democracy scores may serve as a useful starting point for discussions in the book, but they miss fundamental structural shifts, which took place during the last 20 years and thus misrepresent the scope of change which in turn took place on the micro level. This is a tough verdict, but for the rest of the book I hope to show that it is the right one.

Methodology In the study of discretionary practices, a typical methodological approach involves a combination of interview data, media reports, survey data, and/or official documents-driven evidence (e.g. Bojicic-Dzelilovic and Bojkov 2005: 70).15 The reasons for this type of triangulation has to do not only with methodology as such but also with the object of study, which is intentionally hidden from direct observation. Using official sources or statistics may not only fail to capture the full extent of the 15 Bojicic-Dzelilovic, Vesna, and Victor D. Bojkov. 2005. “Informality in Postcommunist Transition: Determinants and Consequences of the Privatization Process in Bulgaria.” Southeast European and Black Sea Studies 5 (1): 69–88.

34

A. LAŁAS

phenomenon but also misrepresent it because, as argued by Donatella della Porta (2000: 206), “there is no reason to believe that the exposed part of the iceberg is representative of the submerged one.”16 Often only a combination of multiple channels of access to information will provide a more or less satisfactory set of evidence regarding the object of study. This is especially true in such case studies as Lithuania, where there is very limited prior information about the nature of business–state relations. Similarly, many studies of informality rely on snowball or referral sampling methods to select interview participants (e.g. Aliyev 2014; Polese, Kovács and Jancsics 2018).17 In this case, I primarily used judgment sampling supplemented with snowball sampling. Initially, I identified a number of people, who were direct and influential participants of the politics–business nexus: political party leaders, business owners or top managers, and bureaucrats with access to both camps. Then I added those who mediated the relationship (PR agencies, law firms, mass media) or studied it (academia, journalists). This became the core groups of informants, whom I also used to reach other potential informants within these relevant categories. All interviews were anonymous and the majority of them were not recorded even for research purposes. These choices deserve a more detailed discussion. Anonymity is meant both to protect the sources of information and to encourage a more genuine exchange of information. When asked on record about the spread of hidden advertising in Lithuania media, the editor of the daily newspaper Lietuvos rytas Rimvydas Valatka, insisted that it was “a big problem” and “it has become even more widespread after the financial crisis.” However, according to the interviewee, his organization tried “not to compromise our values for the sake of advertising.”18 If taken at face value, one would conclude that this 16 Della Porta, Donatella. 2000. “Social Capital, Beliefs in Government, and Political Corruption.” In Disaffected Democracies: What’s Troubling the Trilateral Countries?, edited by Susan J. Pharr and Robert D. Putnam, 202–230. Princeton, NJ: Princeton University Press. 17 Aliyev, Huseyn. 2014. “The Effects of the Saakashvili Era Reforms on Informal Practices in the Republic of Georgia.” Studies of Transition States and Societies 6 (1): 19–33. Polese, Abel, Borbála Kovács, and David Jancsics. 2018. “Informality ‘in Spite of’ or ‘beyond’ the State: Some Evidence from Hungary and Romania.” European Societies 20 (2): 207–235. https://doi.org/10.1080/14616696.2017.1354390. 18 Interview with Rimvydas Valatka, deputy editor-in-chief of daily Lietuvos rytas , 29 September 2010.

3

CONTEXT AND METHODOLOGY

35

main daily newspaper did not engage in such problematic business practices. However, as we will see in the book, there is overwhelming evidence to the contrary based on anonymous interviews and observational data. Of course, anonymity does not guarantee open and genuine information sharing, but at least it eliminates one of many potential barriers to it. It may even encourage potential respondents to agree to an interview in the first place. The second issue relates to the recording of anonymous interviews. I decided not to record after I had already begun interviewing people of interest. The reason behind this change was based on one occasion, where a top-level politician expressed concern over recording and referred to a recent MG Baltic scandal,19 where secret recordings of business representatives and politicians have been publicized, exposing attempts by one of the largest Lithuanian business groups to influence political decision-making. The presence of a recording, if it is held privately, clearly constrained the interviewee and thus I decided not to record, but simply to make paper notes during interviews. The choice proved to be prudent during another interview with a high-level politician, who explicitly stated that he provided this information only because the conversation was not being recorded and thus there was no risk of the revealed information spreading. In a culture where public officials and businesspeople rarely encounter this type of investigative research, it takes much assurance and trust-building measures in order for some of them to open up. For example, often it was necessary to reveal information I knew from other sources to an interviewee in order to jumpstart some reciprocal information flow. Even then this process of the “normalization” of information exchange was not always successful as some interviewees remained aloof and formalistic in their answers. For the purposes of this book, I interviewed 63 people, who fall into the core categories already mentioned above and further detailed below (see Exhibit A for more detailed information). Also, I directly and indirectly relied on interview materials conducted for the Media and Democracy in Central and Eastern Europe project, where I worked as Senior Research Fellow from 2011 through 2013. They were especially 19 Lašas, Ainius, and Vaida Jankauskaite. ˙ 2019. “Korupcijos Skandalai Kaip Sisteminiu˛ Pokyˇciu˛ Variklis: „MG Baltic“ Atvejo Analize˙ [Corruption Scandals as Engines of Systemic Change: The Case of MG Baltic].” Politologija 93 (1): 8–35. https://doi.org/10.15388/ Polit.2019.93.1.

36

A. LAŁAS

useful in writing a chapter on the role of mass media in business–state relations. Why did I stop interviewing at sixty-three? The main reason was information saturation. As new stories kept following familiar behavioral patterns, further interviewing generated little analytical added value. One of the unexpected challenges with the selected interviewees relates to multiple “hats,” which they have worn during the main period of interest—from 2000 through 2022. In some cases, they changed jobs multiple times moving for example from journalism to media management, to politics, and then to academia. I have chosen to place on the list of interviewees only the most relevant job title for informing this research, though this judgment at times was more of a subjective impression than a choice based on objective criteria. After all, during the time period of interest, many interviewees held a number of relevant and often high-level positions, which cannot be easily compared or ranked in the context of business–state relations. Why am I focusing my research on the last 23 years? The dawn of the new century is a convenient framing device, but substantively 2000 was the year when Lithuania started formal accession negotiations with the EU. It was a geopolitical, socio-cultural and legal turning point that started Lithuania’s substantive “return to Europe.” It was also from this point onwards that Lithuania was expected to adjust its legal rules and practices according to ideal European standards; standards that had much to do with state–business relations. Thus, 2000 serves as an exit point from a critical juncture of an open-ended transition. As the next chapter demonstrates, this new geopolitical path was littered with old habits of doing business and politics. It took at least a decade for new behavioral patterns to emerge and yet another decade for them to spread more broadly.

CHAPTER 4

Practices in Practice

Abstract The business–politics relations in Lithuania was mediated by four key players: business associations, law firms, mass media and PR agencies. Each of them provided a distinct set of services ranging from new legislative proposals to consulting for political campaigns. Systematizing their day-to-day interactions, the chapter draws a distinction between two axes: Illegal-Legal practices and Ethical-Unethical practices. Once these axes intersect, one ends up with a gradation of situationalism ranging from Illegal-Ethical (Inclusive) to Illegal-Unethical (Exclusive) dimensions. The coverage of various practices reveals two seemingly opposite trends—the changing nature of business–state relations and the continuity of old practices in more limited contexts. This is why Lithuania should still be regarded as transiting from segmented to isolated exclusive situationalism. Keywords Illegal-Legal practices · Ethical-Unethical practices · Law firms · Business associations · Mass media · PR agencies

Moving from conceptual frames to the coverage of actual practices starts in this chapter but does not end here. My goal is to provide readers with enough raw information to make their own independent judgments and to see the world of state–business relations in full colors. Social theory © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_4

37

38

A. LAŁAS

tends to decontextualize and sanitize practice, while practice brings messy context forward. This chapter tries to explore this “mess” and at least partially track its evolution. The analysis is subdivided into two sections. First, I map out key players in the politics–business nexus in order to clarify the main channels of influence. Then, I take a closer look at the scope and dynamics of actual practices, as they were depicted by interviewees and publicly available sources.

Core Agents The main purpose of this section is not to provide a complete list of actors, but rather to identify key players in this game, who are able to influence both the processes and the outcomes. As denoted in Fig. 4.1, we have two sets of players. The full version of the figure represents the national level, while the reduced one (without the hyphenated boxes)—a local (municipality) level. This is not to say that the latter was completely devoid of PR agencies, law firms or business associations, but their role was less critical and less prevalent. Double arrow connecting lines indicate that the interaction among the agents is highly flexible and adaptable. Interests are like water that finds its way through gaps and cracks, wherever they might be. Based on gathered data, we can identify more regular (and even institutionalized) channels of communication, expertise and influence. I begin with the direct lines of communication, which are usually based on friendships and personal connections. There are numerous official and unofficial venues for meetings and discussions, starting with conferences, parties, state visits, fundraising events, working lunches, hunting trips, sauna bathings, phone calls or online chats. Until recently, it was quite easy to see many politicians having lunch with business representatives in cafeterias and restaurants close to the Parliament. At the national level, the situation has changed with the fallout from the MG Baltic scandal, where the Special Investigative Service (SIS) alleged that one of the largest business conglomerates in Lithuania sought to buy off key politicians from various parties in order to control the political agenda. Following the scandal, the visibility of such meetings, in the words of a party leader, became “toxic” due to the overall atmosphere and the critical view by the voters. Another party leader suggested that politicians became much more cautious due to the awareness of potential surveillance by the SIS. What was once dismissed as simply accidental stumblings of a few careless

4

PRACTICES IN PRACTICE

Third sector

International organisations (especially the EU) Politics: bureaucracy, political parties and committees

Law firms

39

Business associations

Mass media: owners & journalists

Citizens

PR Agencies

Business: state and private companies, individual business people

Fig. 4.1 Key players in the political–business nexus

politicians or bureaucrats into the net of anti-corruption agencies, now was viewed as thorough, sustained and effective surveillance work of the agencies with a broad reach. Being more afraid of maintaining direct communication lines led to strengthening the role of mediators. We identify four of them: business associations, law firms, mass media and PR agencies. If direct contact with a particular company raises some uneasiness, then business associations are usually perceived as more neutral in-between actors. They tend to represent a business sector and as such claim more public legitimacy and weight. Also, they closely follow legislative processes, actively participating in various governmental consultations and Parliamentary committees. Based on such characteristics, business associations are viewed by some scholars as a vital part of associative democracy, enhancing citizen participation and interest representation.1 However, at the same time, others

1 Hirst, Paul Q. 1994. Associative Democracy: New Forms of Economic and Social Governance. Amherst: University of Massachusetts Press.

40

A. LAŁAS

point out that they are not bottom-up, but top-down elite-driven organizations.2 Lithuania is no exception. It is quite common for some of these associations to be dominated by a major corporation. According to a number of interviewees, such a leading actor also tends to pay the largest membership fees and has priority in terms of projecting its interests through the association. The linkages between associations and leading companies can sometimes be tracked down through their leadership. For example, media sources and two interviewees agreed that the Association of Lithuanian Heating Providers is primarily the project of ICOR conglomerate (formerly known as Rubikon). Not surprisingly, the principal owner of ICOR Andrius Janukonis also headed the board of the association from 2005 through 2014. An identical scheme can be detected in the Association of Independent Energy Providers, whose chairman of the board (at the time of its establishment in 2016) was the president of Danpower Baltic, another influential energy corporation in Lithuania.3 This is not to say that all business associations are just window dressings for individual powerful corporations, but some of them certainly appear to be. Such associations become convenient vehicles to hire an assortment of experts to produce favorable data and reports and to hire law firms to come up with favorable legislation proposals. According to a senior business lawyer, business associations regularly ordered legislative proposals from law firms. It was a very convenient arrangement as law firms simply issued an invoice for legal services and the deal was done. But law firms also worked closely with individual politicians and political parties. In some cases, principal partners of law firms were party members and thus had a privileged relationship.4 Other political parties did not always have such legal expertise internally or had to turn to “external” law firms for help. I discuss the role of law firms in the legislative process later on 2 Saurugger, Sabine. 2008. “Interest Groups and Democracy in the European Union.” West European Politics 31 (6): 1274–1291. https://doi.org/10.1080/014023808023 74288. 3 15min.Lt. 2016. “˛Isteigta Lietuvos Nepriklausomu ˛ Šilumos Gamintoju˛ Asociacija,” October 3, 2016. https://www.15min.lt/verslas/naujiena/energetika/isteigta-lietuvosnepriklausomu-silumos-gamintoju-asociacija-664-691463. 4 One example is socialdemocrat K˛estutis Virbickas, the managing partner at Virbickas CLARUS, who, according to an interviewee and media sources, was the principal legal consultant of the party leadership. Not suprisingly, media also linked Mr. Virbickas to various state owned companies run by party-related management.

4

PRACTICES IN PRACTICE

41

when we go through a list of discretionary practices, but at this point, it suffices to say that they can play a key role as mediator, expert, and even gatekeeper.5 If law firms worked on legislation-related processes, PR agencies devised and often co-managed the overall public strategy for the achievement of set policy goals. Issue management was relevant both to businesses and political parties, but in Lithuania barely any PR agency worked with politicians on a permanent basis. Usually, their services were most sought after around election time. The reason for such an on-and-off relationship is threefold. First, most political parties could not financially afford regular PR agency services. Second, PR agencies at this point tried not to work with a single political party in order to diversify their portfolio and avoid a partisan label. Third, the elections cycle naturally structured political attention and resources, concentrating them predictably around campaign times. Although most PR agencies claimed that they had nothing to do with politics,6 it usually meant that they were not directly engaged in organizing/consulting for political campaigns. Still many of them encountered politics, especially working with companies that functioned in highly regulated business sectors such as energy, drugs, alcohol, transportation and so on. Even so, there were relatively few ones that did help to organize political campaigns, and their numbers seemed to have shrunk overtime as many of them found it difficult to operate in a very volatile and sensitive market segment, and which in turn could pose long-term complications in their relationship with business clients. Following Lithuania’s accession to the EU, many PR companies were tempted to try their luck in getting at least some access to governmentmanaged EU structural funds. According to at least three sources, many public tenders were quite problematic at the time. In fact, some PR agencies and their owners started to feel like kingmakers. These are not my words, but those of one of the participants in this process, who recalled a 5 To illustrate the gatekeeper role, a partisan lawyer described a situation, where s/he was assigned on the board of a municipality co-owned company in order to monitor the private owners, so they wouldn’t exploit legal gaps present in the company’s articles of association. 6 Žuolyte, ˙ J¯urate. ˙ 2019. “Politikai Žegnojasi Nedirbantys Su Viešuj ˛ u˛ Ryšiu˛ Agent¯ uromis: Vieni Nenori, Kitiems Tr¯uksta Pinigu.” ˛ Delfi, January 14, 2019. https://www.delfi.lt/m360/naujausi-straipsniai/politikai-zegnojasi-nedirbantys-su-viesujurysiu-agenturomis-vieni-nenori-kitiems-truksta-pinigu.d?id=80081543.

42

A. LAŁAS

conversation with the owner of a PR agency known for its active participation in politics, and who asserted that he was now factually in charge and could pull all the strings he wanted. The conversation took place around 2006–2007. Of course, such statements can be dismissed as pure self-aggrandizement, but there are equally reasons to take them seriously. If anybody could outrival the power of PR agencies in the politics– business nexus, local media moguls definitely could. First, they were here before any PR agencies came into play, building up a pretty much fully saturated network of business and political relationships. Second, before the rise and proliferation of internet media, they controlled the media message and the attention of civil society and voters. In the late 1990s and early 2000s, mass media was the most trusted institution in the country with unprecedented levels of popular trust among all European states.7 Even, when these percentage levels dropped from 60s to 40s due to various scandals, they still exceeded two to four times the trust in key political institutions such as the Parliament and the government. Since power without checks and balances tends to corrupt, it is little wonder that at the height of their influence, local media owners were trading their informational assets left, right and center! As described later, they not only regularly made deals with businesses, political parties or politicians, but also extorted resources from them. There were few who were willing to quarrel with media representatives as they ran the risk of substantial damage to their political or business reputation. A former chief of an investigative service half-jokingly argued along the same lines, saying that his agency could win one battle against the media, but not the whole war. If necessary, media owners also acted as principal mediators in order to facilitate various business transactions. And that’s why they are considered a key player in the business–politics nexus. While so far I have covered domestic players, it is absolutely necessary to include international ones as well. Among them, the European Union exuded by far the most powerful and lasting influence both during the membership accession process and in the post-accession era stretching up to today. The EU primarily acted as a structural power, framing and guiding the national legislative agenda and reforms related to private and 7 Gaidys, Vladas. 2018. “Žiniasklaida Ir Visuomenes ˙ Nuomone.” ˙ In Žurnalistika 1990– 2007 , edited by Audrone˙ Nugaraite, ˙ Vidas Maˇciulis, Aldona Žemaityte-Petrauskien ˙ e, ˙ Dainius Radzeviˇcius, Jonas Staselis, ldona Svirbutaviˇci¯ute, ˙ and Domijonas Šniukas, 35–37. Vilnius: Lietuvos žurnalist˛a s˛ajunga.

4

PRACTICES IN PRACTICE

43

public sectors. It worked most closely with politicians, though at the same time enabling or constraining other domestic actors as well. As mentioned earlier, the list presented above includes only the most relevant actors, but there were others as well, which occasionally affected politics–business dynamics. I will consider their role in the next chapter and revisit it briefly in Chapter 6.

Discretionary Practices Having covered the list of key players, it is now time to put them into action and observe how they interact and influence each other via day-today discretionary practices, which make up the fabric of business-politics dynamics in Lithuania. These processes reflect the nature of daily democracy, a set of more or less regular practices defining relations between key players in a given state or community. Using Ledeneva’s (2006: 38) classification of PR as a starting point, we draw a distinction between two axes: Illegal-Legal and Ethical-Unethical (see Table 4.1). In the first instance, a behavioral pattern is defined by law books, while in the latter case, by a set of moral principles. Since moral principles is a rather vague category, the Ethical-Unethical distinction is based on Aristotelian differentiation of political behavior between practices grounded in common good and practices focused on accumulating an actor’s private gains.8 Once these axes intersect, one ends up with a gradation of situationalism ranging from Illegal-Ethical (Inclusive) to Illegal-Unethical (Exclusive) dimensions. The Illegal-Ethical dimension represents a relatively rare group of practices that formally breaks the law but meets moral standards. This category contains the most ethically daring behavioral choices that value justice/truth even above the legal code. On the other side of the continuum, one encounters Illegal-Unethical practices that break both legal and moral standards. The Legal-Unethical category falls in between the earlier two and represents practices that often push the limits of legal boundaries and seek to create and exploit various legal loopholes. As such, they still fall under exclusive situationalism but capture a more complex relationship to legal and moral standards. Finally, the Legal-Ethical category is left blank in Table 4.1 because it is typically

8 Aristotle. 1999. Politics. Kitchener, ON: Batoche Books.

44

A. LAŁAS

the least “situationalist” in terms of ethics and the closest to the conventional understanding of the rule of law. For the purposes of this book, I readily acknowledge the existence of the latter category, but my focus is elsewhere. I first and foremost want to understand and explain the dynamics of state–business relations through the lens of exclusive situationalist practices and their evolution over time. When formulated in such a way, the Illegal-Ethical category should also be eliminated from the analysis because of its inclusive though situationalist nature, but I include it in order to better appreciate the available spectrum of situationalist practices and their changing dynamics overtime. If viewed through the conceptual lens of the principal–agent problem, a rather typical approach in anti-corruption literature, the list covers problematic practices related both to unprincipled principals and unprincipled agents. I do not explicitly differentiate between principal-driven practices and agent-driven practices because I do not find them culturally and behaviorally separate. As discussed in Chapter 2, the separation arguably comes from very different levels of actor dependence on the local market, e.g. export oriented vs. locally oriented companies. The entrance of external actors (agents and/or principals) can also make a significant difference, but largely because of the same advantage—their lesser dependence on the local market. The provided list of practices is based on interview data, mass media coverage and various official evaluation/audit reports. In cases where practices are similar or identical, but for example, have different target groups, they are discussed together. More generally, this suggested differentiation is messier in actual life as various strategies combine sets of discretionary practices. Nevertheless, the list provides a starting point to explore politics-business relations in Lithuania and compare it to other case studies. Let’s dive in. Employing Influential Politicians, Bureaucrats and Experts (LU4, LU6, LU9) It is hardly surprising that politicians or bureaucrats change their careers and migrate from public to private sector and back. Their social networks, know-how and/or public profile are valuable assets for businesses, NGOs and governmental agencies. This holds true not only in Lithuania, but pretty much anywhere in the world. While on the surface this practice might seem perfectly legitimate, it raises some ethical concerns because new hirers are often expected to engage in informal lobbying or information gathering in their former

4

PRACTICES IN PRACTICE

45

Table 4.1 Typology of situationism-driven business-politics practices Legal Ethical

Unethical

LU1 Special product/service discounts to politicians and fellow partisans LU2 Preparation of legislative proposals by businesses and business associations via law firms LU3 Gifts and favors for political leadership from subordinate organizations LU4 Hiring of politicians/bureaucrats (or their immediate family members) by businesses in order to strengthen ties with public agencies of interest LU5 Acquisition of partisan privileges in exchange for a financial contribution LU6 Hiring of well-known public experts as policy lobbyists by businesses LU7 Access to voters through business organizations LU8 Legal assistance to politicians/bureaucrats, including those under investigation LU9 Non-disclosure of meetings between politicians/bureaucrats and business representatives LU10 Tax evasion schemes using legal loopholes LU11 Usage of charitable funds as a means to stretch political finance limitations LU12 Business donations to sports clubs and cultural institutions as hidden kickbacks for political favors

Illegal IE1 Leakage of confidential information in order to curtail illegal/unethical practices IE2 Adjustment of public procurement conditions in order to avoid predatory (low-quality) bidders IU1 Trading in legislation, permits and public tenders IU2 Leaking/selling confidential information to eliminate political competition IU3 Media pressure on politicians/bureaucrats in order to access ministerial publicity funds, protect business interests of media owners and/or gain confidential information of interest IU4 Instrumentalization of media by owners to support friendly politicians and to smear unfriendly ones IU5 Political extortion of businesses that have won public procurement contracts IU6 Usage of personal charities to buy off voters or collect money for a political campaign IU7 Negligence in monitoring/evaluating the implementation of public tender conditions IU8 Usage of organizations under ministerial oversight as “landing platforms” for fellow party members or relatives IU10 Underpriced subletting of public property for businesses IU11 Blunt ignoring of current legislation, especially in public procurement

(continued)

46

A. LAŁAS

Table 4.1 (continued) Legal

Illegal

LU13 Gifts and favors to voter groups LU14 Diversion of public resources to political leaders’ preferred organizations and from political opponents’ preferred organizations LU15 Taking advantage of government-provided housing by politicians

IU12 Avoidance of the establishment of decision-making processes and procedures for public organizations IU13 Financial support for media owners’ (business) interests in order to win their favor and access their media outlets IU14 Extraction of public resources to support a political party IU15 Blunt pressure and threats upon bureaucrats and politicians from business associations’ lobbyists in order to access public and EU funding IU16 Blunt pressure and threats upon public company managers by top political leadership in order to avoid/postpone decision, which might generate negative press coverage

places of employment. Usually, this scheme is used by businesses operating in highly regulated sectors: energy, drugs, alcohol, transportation, etc. As a former high-level manager at such a private company confided, “our company had a lot of people related to politics. They were in charge of relations management with those institutions that made decisions, that had power in our business sectors.” When asked to specify their main target groups in public institutions, the interviewee named three key positions of interest—department heads, administration directors and CEOs of publicly owned companies. Of course, the implementation of such broad strategies required substantial resources, available only to the largest corporations. Smaller ones with more limited business interests focused on a particular ministry. For example, one high-level ministerial official recalled a very attractive offer from a textbook publishing house. If hired, the interviewee’s primary task would have been focused on “pushing through [right] decisions” at the Ministry of Education, Science and Sports regarding the selection of appropriate textbooks for schools.

4

PRACTICES IN PRACTICE

47

Another variant of this scheme involved project-based hiring of wellknown experts, who engaged in informal lobbying on behalf of companies without disclosing their affiliation. Such experts get relatively easy access to politicians, and they have better chances of boosting the legitimacy and objectivity of a particular policy position. One of the political party leaders described three situations, where s/he faced such lobbyists. In one case it was a public policy expert/analyst, who was hired by a PR agency. The interviewee was surprised by the clearly one-sided position of the expert: “He came to me and made a pitch about the damage of the proposed law. It was all one-sided and that was very strange. Later I discovered that he was hired by a PR agency.” On another occasion, a highly respected doctor [of medicine] came to express his disapproval of a proposed law and, in the words of the same interviewee, “very directly pushed” against it. Again, the interviewee later found out that the doctor was hired by pharmaceutical companies as an unofficial lobbyist. Similar stories were told by another former party leader (different political party), who also regularly encountered such lobbying practices. This informant recalled a former head of a public institute coming to him and pressuring him to accept a policy decision favoring a group of businesses. According to him/her, argumentation varied from quite crude to highly sophisticated. In high-stake cases, sophistication was a norm with PR companies devising elaborate “plans of attack.” Publicly available sources of information confirm both the tactics and the target groups used by key companies. The State Security Department’s report to Parliament on MG Baltic’s activities describes the company’s long-term strategy (devised in 2002) as consisting of three key goals: “1. To minimize the negative effects of state governing, legal and other institutions (influence upon laws and the minimization of applied sanctions); 2. To develop and maintain constant relations in state and governing institutions; receive information from important institutions (Parliament, Government); 3. Lobbying activities, whose success is measured as the number of structures prone to influence.”9 The same document also contains a secretly recorded exchange between the MG Baltic vice-president and the former head of the Vilnius

9 Kasnikovskyte, ˙ Monika. 2018. “VSD Pažyma: „MG Baltic“ Tapo Gresme ˙ Nacionaliniam Saugumui.” TV3.Lt, May 7, 2018. https://www.tv3.lt/naujiena/lietuva/ vsd-pazyma-mg-baltic-tapo-gresme-nacionaliniam-saugumui-n958013.

48

A. LAŁAS

chapter of the Social Democratic Party Algirdas Paleckis, who unsuccessfully ran for the position of the mayor of Vilnius but entered a governing coalition. In it, the vice-president urges the politician to be more aggressive: “Grab Zuokas’ [mayor’s last name] place. Take administrative positions. Vice-mayor, administration director, city assets.” Such practices developed overtime and grew in sophistication. As one politician recalled, in the early 1990s there were relatively few large businesses and they had very close personal connections to politicians. As more businesses emerged and they grew in influence and sophistication, methods and practices also evolved. Businesses and business associations began to participate in legislative processes from the very start of the policy cycle and to also think about influence in a more systematic way. The emergence of PR agencies in the late 1990s and their rapid proliferation in the early 2000s further contributed to this growing sophistication and in turn clearly advantaged those companies who could afford their services. The issue of unofficial meetings between unofficial lobbyists and top politicians or bureaucrats might have been partly addressed through an amendment to the Law on Lobbying Activities, which came into force in January 2021. Now both meeting parties are required to simultaneously declare such meetings which involve discussions on new legislation or amendments to existing laws. However, there is also every reason to believe that craftier participants will find a way around such a requirement. An example of how this could be done comes from the relations between ministries and state-owned companies under them. A chief operating officer of a state company recalled instances when a minister or his key advisors came to talk unofficially to key management members and sought to intentionally avoid any record of the conversation. During these meetings, they made off-hand requests such as to hire or to avoid firing somebody. The latest given example was from 2020. Occasionally, a well-known public figure was hired even if s/he did not satisfy formal requirements for the position. In a typical manifestation of political personalism, the mayor of Kaunas city decided to hire R¯uta Meilutyte, ˙ an Olympic gold medal winner and one of Lithuania’s most well-known swimmers, as his political advisor. Because Ms. Meilutyte˙ did not have even a high school diploma, she could not qualify for the position, which, according to the Law on Public Service, required at least a bachelor’s degree. However, according to a mayor’s spokesman, she was

4

PRACTICES IN PRACTICE

49

still hired for a year with “an official requirement to acquire higher education.”10 Given the lack of a high school diploma, such a requirement is meaningless in the short term, but the mayor treated her swimming experience as a sufficient qualification: “Higher education is an important aspect, thus I personally urged R¯uta to begin her studies, but university studies do not always match up to knowledge and experience, accumulated over R¯uta’s career” (ibid.). And so, laws could be publicly ignored in favor of important social status. Acquisition of Party Status (LU5) Seniority in parties is usually regulated by the length of tenure, a person’s popularity within the party and the importance of their public office. However, in Lithuania, there was at least one parliamentary party where seniority could be gained through financial contributions to the party budget. A noted party member explained: As elections draw closer, party leadership discusses financial needs: ‘Our budget looks like this, but we actually need this amount. Who will bring in the money?’ So then essentially the top 10 places are available for sale. You can gain the rank if you contribute a certain amount, even you are from the outside.

Later in the conversation, the interviewee clarified that this top 10 list is actually merged with the list of key party leaders, who have name recognition among voters. While today, in 2021, the party has a marginal presence in Parliament, it used to be one of the most popular parties and recently has made a partial come-back in terms of popularity ratings. I could not find any other instances of such behavior, but another interviewee related to a different party confirmed that partisans, who bring either their own financial resources or manage to extract them from businesses for party coffers, gain both in reputation and status. Here there seems to be a fine line between ethical and unethical practices as actors’ motives and methods may vary.

10 Venck¯ unas, Vilmantas. 2019. “Matijošaitis Gina Meilutyt˛e – Išsilavinimas Svarbu, Bet Tai Yra Ne Viskas.” TV3.Lt, October 17, 2019. https://www.tv3.lt/naujiena/lietuva/mat ijosaitis-gina-meilutyte-issilavinimas-svarbu-bet-tai-yra-ne-viskas-n1015991.

50

A. LAŁAS

While such crude status trading was not widespread in the Lithuanian party system, most political parties regularly practiced hunting for well-known personalities, who could be included in the electoral party list to boost its attractiveness. Often these personalities were not party members and were not even required to join it. For example, one of them most famous Lithuanian sportsmen, Virgilijus Alekna, decided to become a politician in 2016 after his long and glorious sports career in disc throwing. Apparently, he was simultaneously negotiating with two parties from opposite ideological camps: the Liberals’ Movement and the Social Democratic Party.11 Eventually, he chose the former and was given the fourth seat on the party list. If that looks like an unreasonably high position doled out half a year before the 2016 Parliamentary elections, there was an even more consequential case at the time. Just like Mr. Alekna, a popular former Minister of the Interior Saulius Skvernelis was also shopping for a party in the upcoming elections. However, he was not interested in fourth places, but had the ambition to head the party list. Since larger parties could not offer such a prize given negative intraorganizational consequences, Mr. Skvernelis turned to a smaller political party—Lithuanian Farmers and Greens Union. Although ideologically Mr. Skvernelis and his team had little in common with this conservative agrarian party, he brought it to the political Olympus with a whopping 54 seats out of 141 possible. Since in the previous Parliament the party had only one seat, the gamble of the longtime party leader Ram¯unas Karbauskis paid off, at least for the next four years. The lure of leading positions in government and Parliament held the personal union together, but, when the 2020 Parliamentary elections brought fewer seats, Mr. Skvernelis raised his wings and created a party of his own, bringing along many disgruntled and/or opportunistic party members. While these stories of political shopping seem to have little to do with business as such, they indicate how vulnerable and fleeting the Lithuanian political landscape was and to a large extent remains to this day. In this kind of environment, businesses with political interests could have a disproportionate role not only in political parties but also in forming the legislative agenda, to which I turn next. 11 BNS. 2016. “Olimpinis Cempionas ˇ V. Alekna Rinkimuose Dalyvaus Su Liberalu˛ S˛aj¯udžiu.” Delfi, May 10, 2016. https://www.delfi.lt/news/daily/lithuania/olimpinis-cem pionas-v-alekna-rinkimuose-dalyvaus-su-liberalu-sajudziu.d?id=71229612.

4

PRACTICES IN PRACTICE

51

Legislative Proposals (LU2, IU1) Officially, there are three standard sources for new legislative proposals in Lithuania: the President, the Government or the members of Parliament. During the 2012–2016 period about 58% of the proposals came from members of Parliament. About half of the volume was designed as fast-track legislation, which means that the proposal could skip the parliamentary committee and simply turn up on the voting floor with limited pre-screening and evaluation. The fast-track option was initially designed as a means to quickly react to exceptional situations but became a popular mode to push through legislation, avoiding the congested legislative pipeline. Given the extremely high overall volume of new bills, on average about 700 legislative proposals a year, the questions of quality and transparency rightfully emerge.12 The interview data suggests that private law firms were another crucial source of new legislative proposals throughout the last twenty-plus years of independence. One of the reasons had to do with the relatively limited funding provided for MP support staff. MPs found it extremely difficult to recruit quality support staff who could assist with legislative proposals. The other reason had to do with the way businesses or business associations approach MPs. Most often they not only publicly expressed their opinion about a particular legislative initiative, but they also brought along specific legislative proposals to MPs (or to the ministries).13 These proposals had usually been prepared by private law firms. When asked how often private law firms wrote legislative proposals, a founding member of a major law firm answered succinctly: “all the time.” Asked to expand on this, the interviewee explained: “Business associations regularly request for legislative proposals. Large businesses also approach directly. (…) Once the work is completed, you simply issue an invoice for legal consultations and that’s it.” According to the same source, sometimes law firms receive more delicate requests, requiring a number of MPs to sign up under a legislative proposal or even to sign up under a request to the Constitutional Court to review a law. Such a request needs at least 12 “Teisek¯ ˙ uros Procesas.” 2018. VA-2018-P-40-6-2. National Audit Office of Lithuania. https://www.valstybeskontrole.lt/LT/Product/23770. 13 Recently, the Chief Official Ethics Commission ruled that some businesses broke lobbying laws by engaging in illegal lobbying activities and providing legislation amendmends to ministries: https://www.vtek.lt/index.php/posedziu-informacija/635-2019-0821-posedyje-vtek-nusprende.

52

A. LAŁAS

29 MP signatures before the court considers the legal matter at hand. To encourage such signatures, a law firm may offer in exchange, some legal services or provide a cash payment for each signature. According to the source, the signature usually did not cost that much—around 500 euros. Two political party leaders confirmed the key role of law firms and how they manifest in three distinct ways. First, political parties regularly hired law firms in order to produce legislation. As one politician explained, their parliamentary faction had only one or two politicians with a legal background, but the needs were far beyond that. Plus, the issue of legal competence was also very acute even among support staff. Thus, “we still had to finish the legislative process in a private lawyer’s office.” Second, there were situations, when MPs, who were usually quite passive and had no interest in a particular policy area, all of a sudden brought a legislative proposal that had clearly been written not by the MP or his/her team, but by professional lawyers. The impeccable legal language was a key indicator. The third route can be more direct. One senior political interviewee recalled a situation when legislation passed the Parliament, but his party voted against it. The next day he had a legal inquiry to the Constitutional Court challenging this legislation delivered to his desk. When asked how come they reacted so quickly, the representative of a law firm, who sent the document, simply stated: “it goes fast when there is a will.” And the will appears to be present to this day, but the process is now more discrete and subtle. Access to Voters (LU7) Political scientists have shown again and again that personal contact with voters is paramount to successful political campaigning (e.g. Green and Gerber 2019).14 Thus, there is little surprise that with the approach of elections, politicians became increasingly interested in accessing voters. Typically, the strategies ranged from canvassing to town hall meetings, but there were also plentiful opportunities to use informal channels for access. Visits to schools and participation in the first day of school celebratory events, represent one such opportunity, and well-known local

14 Green, Donald P., and Alan S. Gerber. 2019. Get out the Vote: How to Increase Voter Turnout. 4th ed. Washington, DC: Brookings Institution Press.

4

PRACTICES IN PRACTICE

53

politicians leveraged their personal and partisan connections to campaign in schools.15 This was especially easy in smaller regions where many heads of schools were party members themselves. More interestingly, in order to keep their positions of power, a lot of them moved parties together with electoral fortunes. As one schoolmaster in Taurage˙ district, who himself swiftly changed parties, explained: “Earlier, when the mayor of the region was liberal centrist, more school masters were members of that party, now [they became] social democrats.”16 While the schoolmasters avoided explicating the real reasons for this switch, the former head of the opposition readily offered an answer: “Even in Soviet times it wasn’t like this. People felt threatened, but not like this. How does a school master feel when he has to join a political party not because of his convictions, but just to avoid being fired? Everybody knows that, but they are too afraid to say it.” Given such a climate, it was not surprising that many politicians treated schools as their political stomping grounds. A similar dynamic could be observed vis-à-vis businesses. If a politician had a close working relationship with a particular company, especially a larger one, s/he could get personal access to its employees during the campaign season. In one case, a large company invested heavily in political connections because its business was highly dependent on the state regulatory environment. A high-level company manager recalled one day when he had no choice, but to meet the mayor of his city: “I came to work one day and encountered the mayor, who was walking from desk to desk and meeting employees.” According to the interviewee, even during internal business meetings, the top management openly encouraged a vote for the mayor because “the candidate has a favorable view of the company.” Another interviewee recalled a situation when a politician, who also owned shares in a large company, was granted a special town hall type of meeting with employees. Some of these businessmen-politicians brought their campaigning to yet a new level by combining town hall meetings

15 Žigelyte, ˙ Lina. 2012. “Ar Ilgai Politikai Nevaržomai Agituos Mokyklose?” Delfi, October 10, 2012. https://www.delfi.lt/news/ringas/lit/lzigelyte-ar-ilgai-politikai-nevarz omai-agituos-mokyklose.d?id=59729887. 16 Žigelyte, ˙ Lina. 2012. “Ar Ilgai Politikai Nevaržomai Agituos Mokyklose?” Delfi, October 10, 2012. https://www.delfi.lt/news/ringas/lit/lzigelyte-ar-ilgai-politikai-nevarz omai-agituos-mokyklose.d?id=59729887.

54

A. LAŁAS

with food degustations; a strategy of the Labour Party in the 2012 Parliamentary elections. Because the head of the party, Viktor Uspaskich, was also the principal owner of several large food processing companies, their town hall meetings were often preceded by large-scale free food tastings. The Central Electoral Commission issued warnings about such attempts to attract and buy off voters. In response, the party leadership argued that it was not them who organized these tastings, but the companies themselves as if they pursued the party and aggressively sought to organize the tastings because the party was so popular and managed to bring together so many potential customers into a single space.17 Thus, the party leadership allegedly had no choice, but to give in to the companies’ persistent requests. In addition to these rather limited scale endeavors, there is at least one example, where a business played a key role in hauling in voters on a national scale. In 2004, Lithuania became a member of NATO and the European Union. This was the culmination of Lithuania’s foreign policy to ensure the country’s return to Europe. Unlike NATO, EU accession had to be approved by a popular referendum. Political leadership was concerned because the legal approval bar for referendum measures was set quite high—the majority of all citizens who have the right to vote had to endorse EU membership. The last three referendums could not muster sufficient support for various measures even when the turnout exceeded 50%.18 Given the high stakes, this was not the time to just try one’s luck. It was time to push all possible limits as the government sought to turn the referendum into a resounding stamp of success. To begin with, the referendum, which usually took only one day, became a two-day voting affair with extended voting hours (from 6 to 22) plus an extended period for voting by mail (8 instead of 4 days). On the night before the referendum, when campaigning was prohibited by law, the main political leaders were on live TV urging people to go out and vote. Because the referendum was taking place in May, there was a substantive risk that people would spend the weekend in their summer cottages rather than vote. 17 BNS. 2012. “Rinkimu ˛ Komisijos: Vaišes ˙ Prieš Darbo Partijos Susitikimus Su Rinkejais ˙ Nera ˙ I˛ statymo Pažeidimas.” Delfi, October 12, 2012. https://www.delfi.lt/arc hive/rinkimu-komisijos-vaises-pries-darbo-partijos-susitikimus-su-rinkejais-nera-istatymopazeidimas.d?id=59750943. 18 https://www.vrk.lt/ankstesni.

4

PRACTICES IN PRACTICE

55

The first day of the referendum seemed to confirm this suspicion. On Saturday only 23% of voters showed up at ballot boxes.19 In the evening, the interagency Referendum commission met up in the Parliament. It was headed by the Head of the Parliament Art¯uras Paulauskas. Other participants included the Prime Minister and the representatives of parliamentary political parties. During the meeting, there were no joint decisions made to approach businesses for help. However, at some point that evening, top political officials approached VP Market , the largest food retail business in Lithuania, with a request for assistance in boosting voting turnout. As one high-level company representative explained, the top management informed us that “government guys asked for help.” Given such an urgent request, “we called everyone, arranged everything in three hours, set up a campaign and put it in the media.” The company expected about 300,000 shoppers to show up at their stores for one of three heavily discounted items—a bottle of beer, a chocolate bar or a pack of detergent. Each of them was discounted to 1 cent for those who brought in their “I voted” sticker. According to Ignas Staškeviˇcius, the general manager of VP Market , the sale resulted in a loss of about 1.1 million Litas (319,000 euros) for the company,20 but a win for the government’s referendum campaign. Such joint efforts leave no doubt about the intimacy of the business–politics nexus in Lithuania in the early 2000s, especially among the top business and political leadership. Also, there is no doubt that favors were not only flowing in one direction, but it was a two-way traffic. While the case of the VP Market involvement in the referendum is one of a kind, more limited access to voter examples can continue to this day. Still, the spread of the practice largely depends on brazen personalities, who are ready to take a risk and forcefully push ethical boundaries for their re-election. Currently, such personalities are relatively few and far in between.

19 Nikitenka, Denisas, and Vilija Šiliniene. ˙ 2003. “Lietuva Tare˙ Tvirt˛a ‘Taip’ Europos S˛ajungai.” Vakaru˛ Ekspresas, May 13, 2003. https://www.ve.lt/naujienos/lietuva/lie tuvos-naujienos/lietuva-tare-tvirta-taip-europos-sajungai-377761/. 20 Juškeviˇciene, ˙ Jolanta, and Ramune˙ Šeštokiene. ˙ 2003. “Uostamiestis Sn¯uduriavo.” Kauno Diena, May 13, 2003. https://kauno.diena.lt/naujienos/lietuva/salies-pulsas/uos tamiestis-snuduriavo-530646.

56

A. LAŁAS

Milking the State’s Real Estate (LU15, IU10) In their 2018 audit report on the management of state-owned real estate, the National Audit Office concluded that the state did not have a long-term plan for the effective use of its real estate.21 The issues were especially visible at a municipality level, where the demand for real estate from businesses and private citizens came up against an opaque regulatory environment and uneven access to supply. In small municipalities with limited demand, the local authorities seemed to go out of their way to attract at least some kind of business activity and in doing so, signed financially detrimental agreements. For example, the SIS report on Varena ˙ municipality’s management of its real estate highlighted a case where the municipality charged minimal rent for a business, but took up substantial responsibilities for the maintenance and renovation of the facilities (p. 11).22 Similarly, in Ignalina municipality, the expansion of social housing came with additional financial debts, which were not taken into account by the municipality at the time of the purchase (p. 25).23 The 2018 audit of Marijampole˙ municipality discovered numerous cases of very low rents of municipality-owned real estate.24 A high-level manager of a state-owned company, controlling relatively large plots of land around major cities, recalled an internal audit that revealed at least four cases where a previous regional manager had rented out highly desirable properties without a public tender and for a very low price. It was all done according to the letter of the law, but the company ended up losing about half a million euros from just one of the rental deals. The company management pointed out the existence of this financial loophole to the ministry, but to date, the latter has taken no measures to close it. 21 “Valstybes ˙ Nekilnojamo Turto Valdymas.” 2018. VA-2018-P-60-8-1. National Audit

Office of Lithuania. https://www.vkontrole.lt/failas.aspx?id=3784. 22 Rajackiene, ˙ Livija. 2018. “Korupcijos Rizikos Analize˙ Varenos ˙ Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt.lt/korupcijosprevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/7471/act842. 23 Stukas, Mindaugas. 2019. “Lietuvos Respublikos Specialiuj ˛ u˛ Tyrimu˛ Tarnybos Išvada Del ˙ Korupcjos Rizikos Analizes ˙ Ignalinos Rajono Savivaldybes ˙ Veiklos Srityse.” Special Investigative Service of the Republic of Lithuania. https://ignalina.lt/savivaldybe/korupc ijos-prevencija/korupcijos-rizikos-analize/126. 24 “Marijampoles ˙ Savivaldybes ˙ 2017 Metu˛ Konsoliduotuj ˛ u˛ Ataskaitu˛ Rinkinio Ir Savivaldybes ˙ Biudžeto Ir Turto Naudojimo Vertinimas.” 2018. 1 – 21 – (2.1). Marijampoles ˙ savivaldybes ˙ Kontroles ˙ ir audito tarnyba. https://www.marijampole.lt/doclib/qpvyyhwro qwcj1hvn8rgs89qhr9q6tpb.

4

PRACTICES IN PRACTICE

57

Where the demand for real estate was high, politicians themselves could also take advantage of state resources for their own private gain. In July 2019, the media uncovered a case where a municipality, which attracted a lot of tourism, provided social housing for politicians and the employees of municipality-owned companies, who subsequently turned these apartments into sublet facilities for tourists. In response to this media investigation, the municipality insisted that the subletting of social housing was legal and thus it did not break any laws.25 Since most of the subletters turned out to be related to the Social Democratic Party, it was up to the party leadership to point out that such practices were unethical, dishonest and should be discontinued. Occasionally, even top-level politicians became entangled in similar “milking” schemes. In November 2019, the media reported that the newly appointed Minister of Transport and Communications had a parliamentary lodging, which he received despite living too close to his workplace to qualify for it. In addition, he did not actually live there, but his daughter, an advisor to the Minister of Culture, did.26 The cherry on the cake was a revelation that he had another family flat in the capital city, which his wife and he rented for income. Although the Minister immediately relinquished the parliamentary flat, he insisted that his and his wife’s actions were legal and thus “we could do what we want.”27 The breach of ethical standards did not seem to carry much weight for the Prime Minister as he saw no legal grounds for the dismissal of his team member or even grounds for criticism.

25 Jukneviˇci¯ ute, ˙ R¯uta. 2019. “Auksinis Verslas Auksinese ˙ Kopose – Socdemai Valdišk˛a Turt˛a Paverte˙ Asmeniniu Verslu.” LRT.Lt, July 17, 2019. https://www.lrt.lt/naujienos/ lrt-tyrimai/5/1079159/lrt-tyrimas-auksinis-verslas-auksinese-kopose-socdemai-valdiskaturta-paverte-asmeniniu-verslu. 26 BNS. 2019. “Turedamas ˙ But˛a Seimo Viešbutyje, J. Narkeviˇcius Su Žmona Užsiem ˙ e˙ Butu˛ Nuoma Sostineje.” ˙ Verslo Žinios, November 26, 2019. https://www.vz.lt/verslo aplinka/2019/11/26/turedamas-buta-seimo-viesbutyje-j-narkevicius-su-zmona-uzsiemebutu-nuoma-sostineje#ixzz7uRkkfwnM. 27 15min.Lt. 2019. “Apie But˛a Vilniuje Paklaustas J.Narkeviˇcius: „K˛a Norim, T˛a Ir Darom“,” November 26, 2019. https://www.15min.lt/video/apie-buta-vilniuje-paklau stas-jnarkevicius-ka-norim-ta-darom-171776.

58

A. LAŁAS

Ignoring Laws (IU11, IU12) The management consultant Peter Drucker famously argued that culture eats strategy for breakfast. In our case, it seems that culture also has an appetite for laws and procedures. They are simply being ignored, especially in smaller municipalities. Combing through SIS reports, there are numerous cases whereby municipality-owned companies ignored public procurement laws and purchased goods or services from the private sector without any public tenders. For example, in Ignalina municipality, a public transportation company purchased fuel for two years (2017–2018) without implementing any public procurement procedures.28 In 2016–2017 in Pasvalys municipality, there was an identical case, and not surprisingly such arrangements often involved overpriced contracts.29 Continuing with the transportation sector, a public transportation company in Raseiniai municipality subcontracted a school bus service to a private company for the last ten years without any public procurement procedures. During this period, the paid mileage service for the subcontractor increased by 40%.30 Šalˇcininkai municipality took a more refined approach and decided to adjust national regulation on calculating fees for garbage collection by unilaterally putting in additional criteria and postponing the implementation of the new calculation methodology.31

28 Stukas, Mindaugas. 2019. “Lietuvos Respublikos Specialiuj ˛ u˛ Tyrimu˛ Tarnybos Išvada Del ˙ Korupcjos Rizikos Analizes ˙ Ignalinos Rajono Savivaldybes ˙ Veiklos Srityse.” Special Investigative Service of the Republic of Lithuania. https://ignalina.lt/savivaldybe/korupc ijos-prevencija/korupcijos-rizikos-analize/126. 29 Stukas, Mindaugas. 2018. “Del ˙ Korupcijos Riziku˛ Analizes ˙ UAB „Pasvalio Autobusu˛ ¯ Parkas“ Ir UAB „Pasvalio Butu˛ Ukis“ Ir UAB „Pasvalio Vandenys“ Veiklos Srityse [On the Analysis of Corruption Risks in Activities of UAB ‘Pasvalys Autobusu˛ Parkas’ and ¯ UAB ‘Pasvalys Butu˛ Ukis’ and UAB ‘Pasvalio Vandenys’].” Special Investigative Service of the Republic of Lithuania. https://www.pasvalys.lt/savivaldybe/korupcijos-prevencija/ korupcijos-rizikos-analize/951. 30 Poškuviene, ˙ Lina. 2019. “Korupcijos Rizikos Analize˙ Raseiniu˛ Rajono Savivaldybes ˙ Valdomose I˛ monese.” ˙ Special Investigative Service of the Republic of Lithuania. https:// www.stt.lt/korupcijos-prevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-ana lizes/7471/act803. 31 Cesonien ˇ e, ˙ Olga. 2017. “Korupcijos Rizikos Analize˙ Šalˇcininku˛ Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt. lt/korupcijos-prevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/ 7471/act877.

4

PRACTICES IN PRACTICE

59

For the purposes of this analysis, the concept of ignoring laws includes cases where regulations at the municipality level were simply absent, though legally they had to be there. For example, at least until 2017 in Kretinga municipality and until 2018 in Šilute˙ municipality, there was no legislation in place regulating the termination, change or extension of existing procurement contracts.32 Kelme˙ municipality did not have any regulation for hiring top managers and assigning board members for municipality-owned companies.33 Instead, it was up to the administrative director to decide whom and how to hire. Another example comes from Pasvalys, where the municipality did not have any rules for distributing assistance funding.34 Finally, Palanga municipality was missing internal procedures and rules for letting out its real estate (including social housing): no rules for the formation of the decision-making committee, no actual decision-making guidelines or criteria, and no appeal procedures following the committee’s decisions.35 Not surprisingly, similar instances could be detected one step lower at municipality-owned companies. For example, Telšiai municipality owned a public transport company that had almost no legal procedures guiding the overall functioning of its board of directors starting from the structure of the board, voting rules, and even documentation.36 In Pakruojis 32 Nargelien ˙ e, ˙ Egidija. 2018. “Korupcijos Rizikos Analize˙ Kretingos Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt. lt/korupcijos-prevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/ 7471/act854. 33 Poškuviene, ˙ Lina. 2018. “Korupcijos Rizikos Analize˙ Kelmes ˙ Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt.lt/korupcijosprevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/7471/act852. 34 Stukas, Mindaugas. 2018. “Del ˙ Korupcijos Riziku˛ Analizes ˙ UAB „Pasvalio Autobusu˛ ¯ Parkas“ Ir UAB „Pasvalio Butu˛ Ukis“ Ir UAB „Pasvalio Vandenys“ Veiklos Srityse [On the Analysis of Corruption Risks in Activities of UAB ‘Pasvalys Autobusu˛ Parkas’ and ¯ UAB ‘Pasvalys Butu˛ Ukis’ and UAB ‘Pasvalio Vandenys’].” Special Investigative Service of the Republic of Lithuania. https://www.pasvalys.lt/savivaldybe/korupcijos-prevencija/ korupcijos-rizikos-analize/951. 35 Nargelien ˙ e, ˙ Egidija. 2018. “Korupcijos Rizikos Analize˙ Palangos Miesto Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt. lt/korupcijos-prevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/ 7471/act841. 36 Poškuviene, ˙ Lina. 2018. “Korupcijos Rizikos Analize˙ Telšiu˛ Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt.lt/korupcijosprevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/7471/act829.

60

A. LAŁAS

municipality, a local utility company had no formalized rules for organizing public procurement and monitoring procurement contracts.37 There is a long list of similar examples, indicating that changes in this area are still much needed and many legal gaps for discretion continue to exist. Legal gaps may endure due to the absence of regulation or due to the creative ability of some businesses to create gaps in regulation where none seem to exist. One such example relates to the national ban on alcohol sales after 8 pm on Monday–Saturday and after 3 pm on Sunday. The ban made some creative souls invent a business model, whereby a buyer purchased alcohol via a mobile application in advance and then supposedly stored it in a vending machine. The business claimed to provide just a storage service, where anybody could put their alcohol until it was needed for them. In such a way the 8 pm sales ban was circumvented because you could pick up your stored alcohol at any time. Although the Department for the Control of Narcotics, Alcohol and Tobacco sought to shut down the business, the attitude is indicative of many similar cases. To continue with alcohol, Lithuanian authorities not only regulate the hours of alcohol retail sales but also ban all media advertising—including social media. With the imposition of the ban starting in 2018, the beer industry switched their Facebook profiles and advertisement budgets from alcoholic to non-alcoholic varieties of beer. The issue at stake became the degree of similarity between advertised alcoholic and non-alcoholic beer products. The hard liquor industry cried foul, alleging regulatory leniency vis-à-vis the beer industry since the latter advertised their nonalcoholic brands as a stand-in for all beer products. Eventually, one of the largest liquor producers borrowed the same model and started advertising a non-alcoholic look alike but was banned from doing so by the oversight commission. The legal battles continue to this date as well as the attempts to find or create loopholes. One of the reasons behind such attempts relates to the alreadymentioned perception of an uneven playing field. But there also seemed to be a broader cultural disposition, at least by some actors, for pushing the limits of rules and regulations to make adjustments to fit the needs 37 Poškuviene, ˙ Lina. 2018. “Korupcijos Rizikos Analize˙ Pakruojo Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt. lt/korupcijos-prevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/ 7471/act846.

4

PRACTICES IN PRACTICE

61

of an organization. In public procurement, a typical case was the lack of planning for small-value procurement contracts.38 The public transport company for Kelme˙ municipality serves as an extreme illustration of this preference for flexibility. In 2016, its procurement plan included only four anticipated contracts, while in reality, it ended up with 1,586 additional small-value contracts. For 2017 the plan was increased to 11 contracts, but by September of that year it already had processed 645.39 Who needs planning when the lack of it is so convenient! Since most of the problematic cases are relatively recent, there is every reason to believe that such practices continue to be a major issue to this day. Interestingly though, the most problematic cases come from smaller municipalities with limited human and financial resources. Intentional Negligence (IU7) The lack of human and financial resources can also be blamed when talking about instances of negligence in monitoring contractual obligations, but evidence also points to intentional negligence. In 2018, the Ministry of Transportation and Communications audited the quality of key roads. Out of 33 roads finished in 2008–2017, only 4 met the necessary quality standards. The rest had various issues ranging from the thinness of the asphalt to the lack of necessary components in the asphalt mixture.40 Commenting on the findings, the minister pointed a finger of blame at both contractors and supervisors: The audit results confirmed the worst predictions. 90 percent of the tested roads do not meet the [quality] standards. These are surprising numbers that reveal the desire of contractors to make money at the expense of quality and the negligence of construction supervisors. The audit estimates that at least 16 million euros worth of damage was caused. The 38 Public Procurement Law defines small value acquisitions as not exceeding 58,000 EUR (without VAT) for goods and services and 145,000 EUR (without VAT) for work contracts (darbu˛ pirkimas). 39 Poškuviene, ˙ Lina. 2018. “Korupcijos Rizikos Analize˙ Kelmes ˙ Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt.lt/korupcijosprevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/7471/act852. 40 Lietuvos Respublikos Susisiekimo Ministerija. 2018. “Keliu ˛ Kokybes ˙ Audito Rezultatai: Be Defektu˛ – Tik 4 Iš 33 Keliu,” ˛ June 28, 2018. https://sumin.lrv.lt/lt/naujienos/ keliu-kokybes-audito-rezultatai-be-defektu-tik-4-is-33-keliu.

62

A. LAŁAS

very perception that roads can be built so carelessly must change, because so far nobody has been held accountable for poor quality.

In an interview, a former road industry consultant readily acknowledged that when businesses won public contracts because of their political connections, quality shortcuts automatically came along. He argued that in such instances, inspectors, though hired by a municipality, received very low salaries and acted more like the employees of a road construction company. They had little interest in proper oversight. The motivation might be reduced even further if key municipality officials have limited interest in monitoring the contractors as well. One obvious reason may be a financial one, as a recent bribery scandal from Kaunas, the secondlargest municipality in the country, indicates. According to media reports, the director of Kaunas municipality administration, Mr. Vilius Šiliauskas, received a 140,000 euros bribe from the director of the construction company Autokausta.41 For a number of years the company was a frequent winner of major construction tenders in Kaunas. As construction projects were usually valued at several million apiece, 140,000 euros may be a manageable sum to sacrifice in order to get the contracts. However, both sides of the deal understand that this expense is unofficially included in contract budgets and gets recouped through savings usually made at the expense of quality. As the road industry consultant noted, it may e.g. involve a different kind of gravel that is much cheaper and much worse in terms of road base stability, a thinner road base layer, a thinner asphalt and a number of other tricks of the trade. During interviews, I encountered another instance of negligence in building construction, where a new management team of a public company discovered that a building, which was built under old management, did not meet claimed quality standards. This discovery was made in 2016, but there are no reasons to believe that these practices disappeared by now. Still their overall scope is very difficult to judge and deserves a separate investigation. As in the case of the next practice on the list—the evasion of regulation—the difficulty also lies in differentiating between intentional and unintentional modes of action. 41 Stažyte, ˙ Karolina. 2022. “Kauno Korupcijos Skandalas: Bene Didžiausi˛a Kyš˛i I˛ tariamas Gav˛es Administracijos Direktorius Suimtas, Papirkejas ˙ – Ne.” 15min.Lt, March 10, 2022. https://www.15min.lt/naujiena/aktualu/lietuva/kauno-savivaldybes-administr acijos-direktoriui-galimai-duotas-kysis-didziausias-lietuvos-istorijoje-56-1651972.

4

PRACTICES IN PRACTICE

63

Evading Regulation: Funds Through Funds (LU10, LU11, IU6) One of the most notoriously known tax evasion schemes ever implemented in Lithuania takes us back to the wild era of 2002. At the time, the owners of VP Market , the largest national retailer, sold shares of a large real estate company Optimali investicija to a charity fund Spindulys , which was a fake charity foundation founded by the wives of VP Market owners. The value of the transaction was unknown. Subsequently, VP Market acquired the same real estate company for the equivalent of 600 million euros and demanded the government return the VAT back to the charity foundation. According to national legislation, the charity did not have to pay VAT on such sales because of their nonprofit status. This legal loophole was eventually closed, but at the time the trick forced the government to return 76 million Litas (around 22 million euros) to Spindulys . 13 years later, one of the principal owners of the VP Market made a public apology for this “legal, but morally doubtful operation” and pledged to use all the money gained from the transaction for real charitable causes.42 The usefulness of charitable funds for political causes did not have much relevance until 2012, when Parliament decided to provide public funding for political parties and ban financial donations from legal entities. In addition to public sources, party candidates could raise up to 8,850 euros per person per electoral campaign from individual donations (if an individual files income tax returns) and add up to 17,700 euros of their own savings. According to one major party leader, the public funding was generous enough to ensure the maintenance of the party machine. However, the generosity was directly dependent upon electoral performance. For less popular parties, the funding might not be sufficient, especially given the variation in support for individual party candidates. Plus, the funding was usually provided for the formal electoral period, while politicians sought regular visibility. Thus, clear incentives emerged for politicians to establish charitable foundations or nonprofit organizations in order to circumvent the ban on financial support from

42 Cerniauskas, ˇ Šar¯unas. 2015. “Nerijus Numaviˇcius Atsiprašo Lietuvos Už Vien˛a Gedingiausi ˙ u˛ „VP Grupes“ ˙ Istoriju.” ˛ 15min.Lt, August 19, 2015. https://www.15min. lt/verslas/naujiena/bendroves/nerijus-numavicius-atsipraso-lietuvos-uz-viena-gedingiau siu-vp-grupes-istoriju-663-522596.

64

A. LAŁAS

legal entities, and to use the collected donations for political or personal aggrandizement without legal constraints. According to information provided in mass media, 10% of all MPs had personal charity foundations in 2016.43 The head of Transparency International Lithuania, Sergejus Muravjovas, insisted that none of these funds provided sufficient information about their sources of funding and thus lacked transparency (ibid.). In 2016, the President of Lithuania initiated a law amendment in order to increase reporting requirements for charities, while one of the MPs went even further and offered an amendment banning politicians from being founders of such organizations.44 The elevated public, media and political attention to the charity funds and NGOs as instruments for circumventing campaign finance legislation, came in the light of the MG Baltic scandal, which shook up the political landscape half a year before the 2016 Parliamentary elections. Among many other interesting details from the scandal-related materials, it was revealed that the MG Baltic company donated money to politicians’ charities and to think tanks of sorts. “Of sorts” because they were not proper think tanks, but rather publicity vehicles for the principal founder and his/her party. For example, the vice-chairman of the Liberal Movement Party Gintaras Steponaviˇcius was a founder of his personal charity fund and a co-founder of the nonprofit Center for Freedom Studies. The latter organization had three more co-founders, also representing the top leadership of the party. Once the scandal broke out, Mr. Steponaviˇcius repeatedly sought to assure the public that the center was not just another means for pumping money into the party, but a separate entity with a separate agenda. While the entity was indeed technically different, the secretly recorded and publicized conversations revealed that the agenda was focused on elections and the attraction of voters to the Liberal Movement Party. Yes, the center had a somewhat longer perspective and focused on young voters, but substantively it was of and for the party. As the leader of the liberals Mr. Eligijus Masiulis noted, the center targeted

43 BNS. 2016. “Daugumai Seimo Nariu ˛ Fondu˛ Tr¯uksta Skaidrumo, Sako Nevyriausybininkai.” Delfi, July 2, 2016. https://www.delfi.lt/news/daily/lithuania/daugumaiseimo-nariu-fondu-truksta-skaidrumo-sako-nevyriausybininkai.d?id=71712856. 44 Andrukaityte, ˙ Milena. 2018. “Seime – Si¯ulymas Drausti Seimo Nariams B¯uti Paramos Fondu˛ Steigejais.” ˙ 15min.Lt, December 31, 2018. https://www.15min.lt/nau jiena/aktualu/lietuva/seime-siulymas-drausti-seimo-nariams-buti-paramos-fondu-steigejais56-1081410.

4

PRACTICES IN PRACTICE

65

young people, who, since the start of this project two years ago, graduated into newly minted voters.45 Such semi-educational projects were also implemented by the head of the once largest parliamentary party Mr. Karbauskis, who is also the owner of Agrokoncernas Group, one of the largest agricultural business conglomerates in Lithuania. Together with a famous musician, he established a charity foundation Švieskime vaikus (Let’s Educate Children), which was financed by his Agrokoncernas Group. Their activities came into the public limelight, when the opposition requested that the Central Electoral Commission evaluate whether their campaign to donate folk costumes to children represented a political campaign by the Green and Farmers Party. While the commission decided against the proposition by a margin of just one vote, their research demonstrated that 79% of the participants (out of 145 in total) involved in the distribution of clothes were in fact from or related to the party.46 Whether it formally met the threshold set for a political advertisement or not, the involvement of the party members was not accidental. Resources donated by the party-related business group financed a PR stunt for some of its party members and the party as a whole. Of course, this assertation does not eliminate the possibility of more noble motives as well. The illusion of the distance between the founder and an NGO disappeared completely in the case of personal charity foundations bearing the name of the politician. The potential for the conflict of interest was written all over these types of foundations and sometimes they did get into trouble. In October 2014, the Order and Justice Party candidate for the mayor of Kaunas, the second-largest city, established a personal charity fund. There were roughly five months left to the municipality elections date. Within this period, the candidate used the fund to organize free dance nights “For the over thirties.” The party website was also

45 Sinkeviˇcius, Dainius. n.d. “Kaip Koncerno Prašymu Konservatorius Bande˙ Pakenkti Landsbergiui Ir Del ˙ Ko Žeminosi Steponaviˇcius.” Delfi. https://www.delfi.lt/multim edija/mgbaltic/mg-baltic-byla-kaip-koncerno-prasymu-konservatorius-bande-pakenkti-lan dsbergiui-ir-del-ko-zeminosi-steponavicius.d?id=78192537. 46 Želniene, ˙ Liepa. 2018. “Tautiniu˛ Kostiumu˛ Dalybos – Ne LVŽS Reklama, Sprendim˛a Lem ˙ e˙ L.Matjošaitytes ˙ Balsas.” 15min.Lt, December 21, 2018. https://www. 15min.lt/naujiena/aktualu/lietuva/tautiniu-kostiumu-dalybos-ne-lvzs-reklama-sprendimaleme-l-matjosaitytes-balsas-56-1078168.

66

A. LAŁAS

put to good use in promoting the dance nights as a gift from the candidate. Since the Law on Municipality Council elections prohibited direct or indirect attempts to buy votes, the Elections Commission and later the Appeals court acknowledged such gifts from the candidate as being a clear violation of the law.47 But not everyone was as blunt in their “charitable” activities as the previous character. Mr. K˛estas Komskis, the former mayor of Pagegiai ˙ municipality, MP and the deputy speaker of Parliament for 2012–2016, used his foundation for a variety of charitable causes, but also Parliamentary visits for kids from his electoral district. Judging by the foundation’s Facebook account, even simple communication messages from the founder always emphasized his political position of power. Thus, the overlap between charitable and political was clearly noticeable. Prof. Algis Krupaviˇcius, a political scientist, was blunt about such schemes with a “double bottom” [false bottom], which were established “to help people, but also to score political points.”48 During one interview, the owner of one of the largest businesses in a mid-size municipality was very skeptical about the ability of local government officials to leverage any substantive power vis-à-vis larger businesses. According to him/her, the business hardly needed them, but still used to officially donate to all major parties in equal measure in order to avoid any potential troubles. Following the change in party funding rules, and the introduction of government funding, and the subsequent pop-up of foundations and think tanks, the same business owner claimed to have given small contracts to some of these funds in the pre-election season. Formally, the agreement involved a preparation of some kind of study for the business, but substantively the business representatives treated it as a formality. The value of such contracts was very small—between 2,000 to 3,000 euros. The interviewee saw it as pocket change money, “like giving 20 cents to a beggar by the church.”

47 BNS. 2015. “Teismas Nepagailejo ˙ A. Ruˇcienes: ˙ Nemokami Šokiu˛ Vakarai – Rinkej ˙ u˛ Papirkinejimas.” ˙ Delfi, February 9, 2015. https://www.delfi.lt/archive/teismas-nepaga ilejo-a-rucienes-nemokami-sokiu-vakarai-rinkeju-papirkinejimas.d?id=67128382. 48 Respublika. n.d. “Politikams Rinkejai ˙ Tapo Preke.” https://m.respublika.lt/lt/naujie nos/lietuva/lietuvos_politika/politikams_rinkejai_tapo_preke/.

4

PRACTICES IN PRACTICE

67

Small Favors and Gifts (LU1, LU3, LU13) The classical Hofstede’s measure of power distance suggests that Lithuania, like the rest of the Baltic states, is a small-power-distance country.49 Its work culture should be relatively cooperative and consultative with limited preferences for hierarchy. However, when considering partisan cultures, there is strong evidence to suggest that at least some political parties had a clearly expressed hierarchical culture with a lively intra-institutional economy of favors and gifts. This was especially evident in the Social Democratic Party, which was notoriously famous for its extravagant partisan feasts in the Parliament. Usually, the system worked as follows. Before each meeting of the parliamentary group, a particular MP would be in charge of providing food and drinks. S/he would coordinate with a business community in their constituency in order to provide necessary supplies. Each member of the Parliament sought to surprise fellow colleagues and party leadership with their generosity. According to a party insider, the practice is no longer in place, but it was there until about 2017. A different story, but comparable in flavor was told by a former adviser to the Minister of Health. On the day of the minister’s birthday, there would be a long queue of representatives from various health-related institutions and businesses with flowers to congratulate him. Although that particular minister felt quite uncomfortable with such excessive displays of respect and reverence, according to the interviewee, it clearly demonstrated the prevailing culture. In fact, it was quite common for any visitors to bring some sort of gifts when meeting high-ranking ministry officials. Gifts and favors could also be handed out as discounts for partisans in need. As one high-level party official recalled, their family was constructing a house around 2010 and needed certain building materials. The elder of a local administrative unit, who was a fellow partisan, offered to help because the political party had close connections with some local businesses. Upon request, the business owner sold building materials to them at a significant discount. Similarly, according to one insider from a business conglomerate, their company management handed out 35% discount cards for politicians to shop at their retail stores at last until

49 Hofstede, Geert H., Gert Jan Hofstede, and Michael Minkov. 2010. Cultures and Organizations: Software of the Mind: Intercultural Cooperation and Its Importance for Survival. 3rd ed. New York: McGraw-Hill.

68

A. LAŁAS

mid-2010s. This was a strategy for rewarding favorable politicians and the politicians apparently appreciated it. After all, as the interviewee noted with a smile, “you could purchase three decent suits and save 600 euros!” While such exchanges of small favors have limited societal consequences, others may have a much broader impact. For example, a former department head of a PR agency recalled a situation, where the Parliament took up legislative revisions, which put an additional financial burden upon a particular business sector. The PR agency was coordinating efforts to resist these revisions but had little initial success in delaying the process. As the voting day approached, the department head of the agency decided to contact one of the key MPs, whom he knew well from previous engagements, and asked if s/he could delay voting at least for a few days on procedural grounds. The MP helped out and managed to stall the process, which gave the PR agency and its clients more time for counter-actions. Later on, the personal favor was returned in the form of PR strategy advice during upcoming local elections. Favors also extended into the realm of cultural activities. As one former mayor noted, he was every once in a while approached by a seniors’ club to help with transportation. He would then call a private transport company and ask on behalf of this organization to supply free transportation for their cultural activities. As the interviewee recalled, the citizens would often promise to vote for him in the next elections as an expression of gratitude. Almost an identical story was told by another party official, who also informally asked for business donations on behalf of NGOs or cultural festival organizers. At the time, the party in question was heading the national government, which of course helped with the attraction of funds. In some smaller municipalities, similar practices continue to this date. When in power, some politicians and especially mayors not only helped local organizations or NGOs once in a while but also got “infected” with pet projects of their own, which I will consider next. Pet Projects (LU12, LU14) In politics, competition among actors is not limited to the struggle for resources. It is also a competition for ideas. If a particular business or social initiative gets tied to a politician, it either receives a substantial boost or, if the governing coalition changes, gets “marinated,” a Lithuanian colloquialism for being stuck. I open up this section with an example

4

PRACTICES IN PRACTICE

69

from the nonprofit sector. In 2007, the municipality of Vilnius purchased a Fluxus art collection, which contained the works of avant-garde Lithuanian émigré artists. Together with the collection, the municipality opened the Jonas Mekas Visual Arts Center (JMVAC). The chairperson of the board was the mayor of Vilnius himself Art¯ uras Zuokas. His former advisor Mr. Kristijonas Kuˇcinskas became the first director of the center, but later got involved in a scandal and was replaced by another of the mayor’s advisers and a fellow party member Mr. Gintaras Sodeika. At the time, the center was based in a building owned by a construction company Ranga IV. However, in 2015, the company went bankrupt, and it could no longer afford to offer space for the center. The JMVAC moved to a different building owned by the municipality, but to date has not received a proper space for staging exhibitions and storage facilities. The head of the center Gintaras Sodeika,50 stated to the media that Vilnius municipality under the new mayor remained deaf to his requests because the center was the idea of the previous mayor.51 Whether the real motive behind this perceived disregard related to rivalry between the mayors or not, I nevertheless came across a number of similar stories. In Lithuania, it is often said that basketball is a national religion, and data seems to confirm this. A national survey conducted in 2010 revealed that the majority of people (53.4%) as TV sports viewers first and foremost were interested in watching basketball.52 Its popularity was six times more than that of football, the second most popular sport, and TV viewership numbers echoed the opinion polls. For example, in 2015, the most popular TV programme was a basketball game—the European basketball

50 Cerniauskas, ˇ Šar¯unas. 2015. “A. Zuoko Bendražygiui – Puikus Postas.” Delfi, March 27, 2015. https://www.delfi.lt/news/daily/lithuania/a-zuoko-bendrazygiui-pui kus-postas.d?id=67540754. 51 P¯ ukene, ˙ R¯uta. 2019. “Meko Centro Vadov˛a Spejo ˙ Ir Atleisti, Ir Nušalinti: Tarp Priežasˇciu˛ – Ir Tikrieji Zuokienes ˙ Motyvai.” Delfi, August 1, 2019. https://www.delfi.lt/news/daily/lithuania/meko-centro-vadova-spejo-ir-atleisti-irnusalinti-tarp-priezasciu-ir-tikrieji-zuokienes-motyvai.d?id=81880299. 52 Delfi. 2010. “Tyrimas: Lietuvoje Populiariausi – Krepšinis, Futbolas, Lengvoji ˇ Atletika Ir Dailusis Ciuožimas,” April 23, 2010. https://www.delfi.lt/krepsinis/naujie nos/tyrimas-lietuvoje-populiariausi-krepsinis-futbolas-lengvoji-atletika-ir-dailusis-ciuozimas. d?id=31405961.

70

A. LAŁAS

championship final between Lithuania and Spain. It was watched by close to a third of the population.53 Given such trends, it is not surprising that basketball gained a lot of attention from politicians and businesses. In the latter case, one of the more unusual acquisitions occurred in 1997, when Gedvydas Vainauskas,the principal owner of the leading daily newspaper Lietuvos rytas , acquired the majority stake in a basketball club and renamed it in the honor of the daily newspaper. Since the club required substantial resources and the daily had the largest readership in the country, the newspaper became a convenient resource extraction instrument for businesses and public enterprises. In order to substantiate such a claim, I start from afar. In June 2011, a confidential report by the US embassy in Lithuania entitled “Lithuania’s corrupt media hurts everyone, including U.S. businesses” became available to the public as a part of the Wikileaks scandal.54 The report painted a bleak picture of local media owners and de facto editors, who constantly targeted politicians as well as businesses demanding financial support in exchange for favorable or the absence of negative coverage. As the Prime Minister’s advisor at the time, Mr. Vilius Kavaliauskas remarked “you must buy the right not to be attacked.” In the same report, one of the Labour Party officials complained about the discriminatory practices of the daily Lietuvos rytas , which demanded 25,000 litas (7,000 euros) from his party for a favorable article, while offering the same service to the Social Democratic Party for five times cheaper. Interestingly, the official accepted the practice as common and only complained about the unfair treatment. Such differentiated treatment makes more sense when considering the likely perspective of this media mogul turned basketball club owner. After all, the leaders of the Social Democratic Party not only had a long history of friendship with Mr. Vainauskas, but also an ability to compensate for media services by other means. One likely payment mechanism functioned through large public companies. For example, the already mentioned Lithuanian railways , which had close ties with the SDP, was among the more generous supporters of the basketball club. For instance, in 53 Padriezas, Andrius. 2017. “Apie Krepšin˛i, Medijas Ir Pergaliu ˛ Ieškotojus.” Delfi, November 20, 2017. https://www.delfi.lt/m360/naujausi-straipsniai/apie-krepsini-med ijas-ir-pergaliu-ieskotojus.d?id=76407155. 54 Aftenposten. 2011. “Lithuania’s Corrupt Media Hurst Everyone, Including U.S. Businesses,” June 5, 2011. https://www.aftenposten.no/norge/i/GG4kB/13092007-lit huanias-corrupt-media-hurts-everyone-including-us-businesses.

4

PRACTICES IN PRACTICE

71

2014–2016, the company donated over a million euros to the club.55 This fact by itself might seem rather mundane, but a number of interviewees pointed out that the owner of Lietuvos rytas often sought financial support for his club from various enterprises, while threatening to unleash hostile media coverage in case of refusal to cooperate. According to a top manager of a large technology company, the editorin-chief called him directly to discuss the issue of funding for the club. During the phone conversation, the editor talked about the possibility of publishing some scandalous materials about the owner of the company if the company management decided not to continue with financial support to the club. In the aftermath, the owner met with the editor-in-chief and resolved the issue to the satisfaction of both parties. Although the subsequent details are fuzzy, it is very likely that the owner used other companies of his to provide the demanded funding. Another businessman told an identical story, where the funding for the basketball club was the price for avoiding adverse media coverage. Using rather strong language, the interviewee argued that the principal owner of Lietuvos rytas was one of “the most serious racketeers,” conducting his activities via the sports club. Because such allegations match publicly available data, there is every reason to suspect that social democrats and the principal owner of Lietuvos rytas viewed payments by Lithuanian railways as at least partially coming from the party. The pet project of the media owner became the pet project of the Lithuanian railways and of the political party leaders as well. This is confirmed by a high-level party official, who viewed the linkage as obvious: “Of course the financial support for Lietuvos rytas club was treated as help from social democrats. Afterwards we got [publishing] space in the daily.” According to the interviewee, top-party management was never directly involved in specific exchanges because of potential reputational risks. However, basketball only crowned a long list of pet projects. Lithuanian railways became a major donor of financial resources to a number of organizations located within social democrat

55 ELTA. 2017. “„Lietuvos Geležinkeliai“ Plaˇciausiai Pinigin˛e Atverdavo „Lietuvos Ryto“ Klubui.” Krepsinis.Net, January 25, 2017. https://www.krepsinis.net/naujiena/ lietuvos-gelezinkeliai-placiausiai-pinigine-atverdavo-lietuvos-ryto-klubui/270019.

72

A. LAŁAS

dominated electoral precincts.56 For 2014–2016, Lithuanian railways ’ total donations amounted to about 3 million euros. Aside from state-owned companies, municipalities themselves were ready to provide financial support for their city basketball clubs. Kaunas municipality, managing the second largest city in the country, is among the most generous donors to its basketball club. As noted in Table 4.2, the city donated about 1.2% of its income budget to the Žalgiris basketball club in 2018. Although, for the last few years, the club’s financial situation has not been as desperate as it was in 2014 when it faced financial sanctions imposed by FIBA for not fulfilling contractual obligations to some of its players. The municipality, which has no ownership stake in the club, was swift to react and mobilized a number of municipality-owned companies to make donations or lend money to the club. Curiously, even a company responsible for the management of the city’s cemeteries lent 15,000 euros to the club. The next year three major municipality service providers—Kaunas water, Kaunas energy and Kaunas cleaning— together donated nearly half a million euros. Part of the money was used to cover the debt from 2014.57 When asked whether the municipality demanded money from them, the vice-director of Maintenance of Cemeteries responded in an evasive, but telling fashion: “… I don’t really want to talk about this topic – otherwise I’ll get punched in the face. It is how it is.”58 Although the financial support mechanism for the club changed in 2016, the municipality’s funding priorities did not. In fact, a new mayor, an ardent fan of the club, chose to almost double the funding. Using the financial instrument of a support fund of 2.5 million euros, earmarked for various city clubs and nonprofit organizations, the municipality allocated 84% of this budget to the Žalgiris basketball club (ibid.).

56 Cerniauskas, ˇ Šar¯unas. 2016. “„Lietuvos Geležinkeliu“ ˛ Pinigai – Socialdemokratu˛ Grietinel ˙ es ˙ Poreikiams.” 15min.Lt, December 5, 2016. https://www.15min.lt/naujiena/ aktualu/lietuva/lietuvos-gelezinkeliu-pinigai-socialdemokratu-grietineles-poreikiams-56721200. 57 Augustis, Mindaugas. 2016. “Kapiniu ˛ Priži¯uretojai ˙ „Žalgirio“ Nebegelbes.” ˙ Delfi, May 12, 2016. https://www.delfi.lt/krepsinis/naujienos/kapiniu-priziuretojai-zalgirionebegelbes.d?id=71252440. 58 Garniene, ˙ Aušra. 2014. “„Žalgir˛i“ Tures ˙ Gelbeti ˙ Ir Nenoromis.” Kauno Diena, October 2, 2014. https://kauno.diena.lt/naujienos/kaunas/miesto-pulsas/zalgiri-gelbesir-kapiniu-prieziura-652109.

4

Table 4.2 Municipality support for local basketball clubs in 2018 as a percentage of its income

Municipality

Kaunas Vilnius Klaipeda ˙ Šiauliai Panevežys ˙ Utena Prienai Kedainiai ˙ Pasvalys

PRACTICES IN PRACTICE

% of municipality’s income59 1.2% 0.4% 0.5% 0.5% 0.6% 1.2% 1.8% 0.7% 0.7%

73

% of club’s budget60 22% 35% 35% 44% 30% 35% 42% 26% 14%

In Lithuania, financial support for elite basketball clubs can occasionally become the means of thanking politicians for their favorable policy decisions. A team of investigative journalists uncovered a curious case of PKN Orlen, a Polish oil refiner, which also owns an oil refinery in Lithuania. It is the largest taxpayer in the country, contributing almost 380 million euros to the national coffers in 2018.61 Given its size, it can afford to contest some governmental taxes or simply refuse to pay them. That is exactly what it did for a number of years, while waiting for the right government to come to power and make tax adjustments. With the coming of Prime Minister Saulius Skvernelis in 2016, this moment had arrived and it eventually brought favorable tax-related decisions for the company. Among them was the decision to remove restrictions that disallowed back tax-owing companies from participating in government reserve electricity auctions. Following this change, Orlen Lietuva, a daughter company of PKN Orlen, received 6 million euros of taxpayer 59 Ivaškaite, ˙ Laura. 2018. “Paaiškejo, ˙ Kokius Pinigus Miestai Atiduoda Krepšinio Klubams: Kaunas Už Nugaros Paliko Vilniu.” ˛ Lietuvos Rytas, August 17, 2018. https://www.lrytas.lt/sportas/krepsinis/2018/08/17/news/biudzeto-kranelis-kok iais-pinigais-miestai-maitina-krepsinio-klubus-7276796/. 60 “Informacija Apie Savivaldybiu ˛ Biudžetu˛ Gautas Pajamas per 2018 m. SausioGruodžio Menesius.” ˙ n.d. Lietuvos Respublikos finansu˛ ministerija. https://finmin.lrv. lt/lt/veiklos-sritys/biudzetas/biudzeto-vykdymas/savivaldybiu-biudzetai/savivaldybiu-biu dzetu-pajamu-vykdymas/2018-m-1/iv-ketvirtis. 61 BNS. 2019. “Didžiausi Mokesˇciu ˛ Moketojai ˙ Pernai Sumokejo ˙ 12,7% Daugiau.”

Verslo Žinios, January 29, 2019. https://www.vz.lt/finansai-apskaita/2019/01/29/did ziausi-mokesciu-moketojai-pernai-sumokejo-127-daugiau.

74

A. LAŁAS

money in two years for simply maintaining a reserve electricity capacity in the case of an emergency. Following such changes, Orlen Lietuva, as if by chance, became a major supporter of three basketball clubs providing an estimated total contribution of almost half a million euros. In the case of two of these clubs, the principal owners had a relatively close working relationship with the PM and his team.62 In early 2020, even the wife of the PM was offered and accepted a job at Orlen Lietuva, raising further questions about the ethical limits of such practices. To be fair, this dealmaking with Orlen was related to a larger strategic game played by the Lithuanian side in order to rekindle relatively chilly bilateral Polish-Lithuanian relations. The strategy succeeded both for the PM and for Orlen, but the public was arguably on the losing side of this supposedly win-win deal. Obviously, such side payments may come in many different flavors. A former high-level municipality politician recalled an agreement with a heating provider in mid 2000s, who, having received a favorable business deal with the municipality, formally agreed to contribute at least 30,000 euros annually to the city’s cultural activities. This commitment was incorporated into the rental agreement of the city’s heating facilities and used as proof to the public that in the negotiations the municipality came out on top. Leadership Unplugged (IU1, IE2, IU14) Many key practices were anticipated by the author in advance based on experience and academic literature, but political leadership emerged as one of the unexpected aspects shaping state–business relations. To be more precise, it is about opaque organizational culture that results in a limited oversight of the leaders and subsequently their abuse of power. The classic example to date is the so-called MG Baltic scandal, which revealed a close connection between the political leaders of some parties on one hand and the management of a large private corporation on the other. Two political parties—the Labour Party and the Liberal Movement—stood out in this particular case, but there was public and interview-based evidence to assume that two more major parties had endorsed similar practices at least until the end of the 2008 financial crisis. To the list of four, we can add yet two more parties 62 Dovydas Pancerovas ir Birute˙ Davidonyte. ˙ 2019. Kabinetas 339. Vilnius: Alma Littera, 304–313.

4

PRACTICES IN PRACTICE

75

that had a similar governance model, but less problematic practices in terms of the state–business nexus. So with the exception of one or maybe two parties, the predominant governance model was authoritarianmercantilist. Such political organizations were dominated by a few leaders, who almost singlehandedly defined both intra- and inter-institutional dynamics. According to one high-level advisor to a former major party, it suffered from “the centralisation of decision-making,” where there was no delegation or systemic discussion about policy issues. In the same way, business access to political leadership in such a party became highly personalized: for those who leadership liked and trusted, access was granted, but for others—the door might be firmly shut. Here is how another high-level partisan interviewee described the style of leadership of a large city mayor in the mid-2000s: “In general, [name] had ‘his own’ and ‘not his own’ businesses, with a green light given for his own and a red light for others.” A businessman in another large municipality echoed this mindset of top political leaders: “ours vs. theirs plays out in a very significant way for [party name]. If you are not with them, you are an enemy.” However, other political leaders did not draw strict partisan lines, but instead took a much more pragmatic approach: they proactively sought engagements with businesses and tried to leverage their positions of power in order to maximize personal and partisan gains. The case of the Social Democrats trying to extract resources from state businesses has already been described. However, the Labour Party embodied another model, whereby business and politics blended into a close and murky partnership. One of the most revealing episodes was disclosed during a tax fraud trial of the Labour Party, where prosecutors accused the party of running a major tax evasion scheme. A set of informal accounting receipts disclosed a kickback mill run at the Ministry of Economic Affairs. At the time, the ministry was headed by K˛estutis Daukšys, who was also the temporary head of the Labour Party (as by this time, the actual leader had fled to Russia). Publicized by the media, the accounting receipts revealed that during March–April 2006 the party regularly received about 5–6% kickbacks from companies that got EU funding from the ministry. Usually, these kickbacks to the party coffers were paid a month or two before financial transfers from the ministry. The arrangement appeared to have been just business without any ideological or political dimensions. If the agreed EU funding hit an unexpected snag, the kickback was returned to the

76

A. LAŁAS

company. The public documents indicated that during March and April, there were at least nine such transactions amounting to about 1.6 million litas (464,000 euros) in kickbacks.63 The first red flag about potentially problematic practices was raised from within the party. One of its more senior members left the party and leaked the details of a party meeting to the media, where allegedly the party leader urged his fellow members to establish consulting firms to help businesses apply for EU funding schemes. According to the whistleblower, this was conceived as a kickback model for the financial benefit of the party.64 This schema was also confirmed by interview data. Four separate sources—a high-ranking party insider, a ministry official, a consultancy owner and a business representative—confirmed the existence of such arrangements at the time. The latter described a specific situation when s/he visited Labour Party headquarters in order to discuss the possibility of getting EU funding. According to the source, the arrangement was quickly agreed upon and included a kickback. Because this was a Russian-owned company, the owners had no problems paying for the service. However, such direct party-to-business arrangements were largely replaced in favor of consultancy companies that assisted many companies with applications for various funding calls. In such a way, the kickback model could be scaled back, while managing the risks of getting caught. But this was not an exclusive idea of the party. Some consultancies had also been more open than others to such types of cooperation with influential bureaucrats or politicians in order to guarantee a more certain outcome for their clients. In the case of the Labour Party, the totality of evidence suggests that the leadership worked in congruence with lower rank partisans to extract state resources. After a temporary bitter political divorce in 2006, Art¯uras Paulauskas—the former Head of the Parliament and co-partisan of Mr. Uspaskich—vividly summarized the essence of the Labour Party: His (Uspaskich‘s) entire party building project is based on business interests and business principles. He sees being in power as an opportunity to

63 Vireli¯ unaite, ˙ Lauryna. 2012. “Darbo Partijos Atstovai ˛i Juod˛aj˛a Buhalterij˛a Prie Bendroves ˙ Pavadinimo Nesibaimino Rašyti: „5 Proc.“.” 15min.Lt, December 8, 2012. https://www.15min.lt/naujiena/aktualu/lietuva/darbo-partijos-atstovai-i-juodajabuhalterija-prie-bendroves-pavadinimo-nesibaimino-rasyti-5-proc-56-286517. 64 BNS. 2005. “Opozicija Prašo STT Ištirti Galim˛a Plan˛a Finansuoti Darbo Partij˛a ES Pinigais.” Delfi, February 3, 2005. https://www.delfi.lt/news/daily/lithuania/opozicijapraso-stt-istirti-galima-plana-finansuoti-darbo-partija-es-pinigais.d?id=5974234.

4

PRACTICES IN PRACTICE

77

accumulate capital. He does not approach daily state affairs as a person who feels responsibility for that state, for the people who elected him; he views it pragmatically through the principle of benefit and this has manifested itself more than once.65

Although a number of the examples provided above seem to involve individuals from the same party, this is not necessarily always the case. In addition to the nationally infamous case of the Labour Party, there was another one with less notoriety related to Trakai municipality. Trakai is one of the key tourist destinations with an attractive medieval castle and a number of lakes for leisure activities. Because of that and its close location to the capital, Trakai municipality managed various resources that were of high potential interest to businesses. Not surprisingly, opportunities for exclusive situationalism were plentiful and the political leadership of the municipality took full advantage of them in 2006–2008. In the case brought against Trakai’s three top municipality officials (the mayor, the vice-mayor and the head of the administration) and a number of private firms, the state prosecutor alleged that they were running a criminal syndicate-like scheme that could not be avoided by local businesses, especially those coming into contact with public procurement.66 The scheme was quite similar to the one run by the Labour Party, whereby the officials demanded bribes (kickbacks) for contracts and permits. Although in some cases, coalition governments may act as constraining devices for discretion,67 this was clearly not the case in Trakai. The three convicted politicians were members of two different parties—the Liberal and Centre Union Party, and the New Union Party, but that did not prove to be a hurdle for cooperation. These interparty efforts indicate that at least in Trakai municipality, exclusive situationalism was not limited to a few bad apples within the same party, but represented broader cultural practices, involving politicians and businesses. 65 BNS. 2013. “A. Paulauskas Apie Pasikeitus˛i Poži¯ ur˛i ˛i V. Uspaskich˛a: Buvo Noro Kerštauti.” LRT.Lt, October 29, 2013. https://www.lrt.lt/naujienos/lietuvoje/2/28342/apaulauskas-apie-pasikeitusi-poziuri-i-v-uspaskicha-buvo-noro-kerstauti. 66 BNS. 2017. “Nuspr˛esta: Del ˙ Korupcijos Nuteisti Traku˛ Valdininkai Turi B¯ uti I˛ kalinti Realiai.” Delfi, September 8, 2017. https://www.delfi.lt/news/daily/law/nuspresta-delkorupcijos-nuteisti-traku-valdininkai-turi-buti-ikalinti-realiai.d?id=75702575. 67 Lašas, Ainius. 2019. “Behind the Storefront of Democracy: The Case of Media– Politics Relations in Lithuania.” Journalism 20 (10): 1379–1396. https://doi.org/10. 1177/1464884916688291.

78

A. LAŁAS

Discretion of power as a cultural trait can be detected among the lower ranks of leadership as well. Municipality administration directors are one category highlighted both by publicly available and interview data. According to a former mayor, the introduction of direct mayoral elections in 2015 shifted the power dynamics of decision-making in favor of the mayor and the administration director: “Earlier, whether you wanted or not, many decisions had to be coordinated with the city council. After the direct mayor elections [were introduced], I, as a council member, am now out of the loop. The mayor and the administration director deal with all matters by themselves.” Of course, this depended on the relationship between the mayor and the administration director, as technically they were both responsible for administrative matters. Not surprisingly, the mayor usually sought to put his/her own person in the director’s position. However, if in large municipalities the power of the administrative director was usually constrained by numerous vice-directors, who were coalition partners in charge of a particular policy area, the concentration of power and subsequently the opportunities for discretion were much greater in smaller municipalities. The SIS report on Raseiniai municipality offers an extreme example of discretion, when during 2017–2018, the director changed the board membership of the local utility company eight times, the local transportation company six times and the local heating company three times (p. 8).68 At least in one instance, it was done en masse—the boards of four municipality companies were dismissed and new ones approved in unison for no obvious objective reasons. The culture of exclusive situationalism can easily travel down the management ladder. There is evidence to suggest that mid-level managers also engaged in quid pro quo deals with businesses. Two businesspeople reported separate instances from the mid-2000s when they bribed municipality and government agency officials responsible for IT solutions in order to win public tenders for IT services. In one case, the bribe was cash, in another—travel tickets to an exotic country. In both instances, the transactions were successfully completed. According to the interviewees, this was a regular practice at the time, but one had to have a reliable 68 Poškuviene, ˙ Lina. 2019. “Korupcijos Rizikos Analize˙ Raseiniu˛ Rajono Savivaldybes ˙ Valdomose I˛ monese.” ˙ Special Investigative Service of the Republic of Lithuania. https:// www.stt.lt/korupcijos-prevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-ana lizes/7471/act803.

4

PRACTICES IN PRACTICE

79

personal relationship with a relevant public official. But there are also positive management discretion cases, where discriminatory public tender conditions were placed into contracts in order to avoid poor quality vendors. A state-funded organization manager provided an example of a public tender in 2017, where they decided to introduce the condition of membership in a professional organization in order to exclude poor quality survey providers. This decision significantly limited the pool of potential vendors and raised the price by about 10%, but, according to the manager, significantly improved the quality of the service provided. And finally, although the following exceeds the limits of the section, it is important to note that management discretion can quickly spread into the lower levels of organizations. As one of the interviewees has noted: “Bigger contracts and issues benefit top-management, while smaller issues and matters benefits smaller ‘fish.’ (…) It’s almost impossible to contain top-management corruption only at the top, while lower level corruption might actually be contained.” In some cases, it was very difficult to determine the origins of discretion, though the phenomenon itself was rather obvious. For example, the 2019 SIS report on Šilute˙ municipality highlighted a situation, when several municipality wards (the smallest administrative units in Lithuania) worked only with one vendor and ignored its competitor based in the same town. During 2016–2017, Kintai ward ignored Šilut˙es agrochemija and preferred working with Litorina, while a neighboring Rusne˙ ward had an opposite disposition: the majority of contracts went to Šilut˙es agrochemija and not a single one to Litorina. Because there were no formal long-term contracts with any of the companies, such choices imply the likely existence of informal arrangements. However, it is not clear whether they originated with acquisition department specialists or at higher level management. A national study focused on the relationship between private firms’ political donations and the winning of public procurement contracts also point in the direction of informal arrangements and privileged access of political donors to insider information.69 It turns out that following the 2012 ban on political donations by legal entities, former donor firms (a) were less likely to win the contracts by narrow margins, (b)

69 Baltrunaite, Audinga. 2016. “Political Finance Reform and Public Procurement: Evidence from Lithuania.” February 15. https://www.lb.lt/uploads/documents/files/Zin iasklaida/Renginiai/n26671_audinga_0215.pdf.

80

A. LAŁAS

lowered their price bids by 24% and (c) faced a 5% lower probability of winning the contracts in general. Although the study claims that political donations were not substituted with bribes as means to win public procurement contracts, concerns over prearranged biddings lingered on due to various practices already discussed above. Even the Public Procurement Office itself repeatedly pointed out to dubious contracts where e.g. prices for basic food items exceeded average price by up to 50%70 or where prices were hidden altogether, arguing falsely that it was confidential information.71 At the same time one has to acknowledge Public Procurement Office’s increasingly proactive role in preventing any flawed public procurement calls and its attempts to educate governmental agencies. Still, as the office’s monitoring data suggests, it continues to regularly flag contract calls due to the violations of transparency and equality principles.72 Applying Psychological Pressure (IU15, IU16) Building on the topic of unruly leadership, I came across instances where leading business associations’ lobbyists (officially registered or not) abuse their insider knowledge, connections and the power of organizational representation in order to get access to government-controlled resources. Given their frequent participation in the different policymaking stages, such lobbyists usually knew very well who specifically was responsible for setting up the funding criteria and mechanisms. If they didn’t, they could always find out using their extensive network of acquaintances. They would then request personal meetings with these bureaucrats and turn on full psychological pressure in order to get preferable sets of criteria for various initiatives. As it was described by one mid-level bureaucrat, who personally experienced such pressure, the demands were blunt and followed by open

70 “Maisto Produktu ˛ Ir Maitinimo Paslaugu˛ Pirkimai.” 2016. Viešuj ˛ u˛ pirkimu˛ tarnyba. https://vpt.lrv.lt/uploads/vpt/documents/files/VPT_maistas_03_16.pdf. 71 “Socialines Globos I˛ staigu ˛ Sauskelniu˛ Viešieji Pirkimai 2015–2017 Metais.” 2018. Viešuj ˛ u˛ pirkimu˛ tarnyba. https://vpt.lrv.lt/uploads/vpt/documents/files/Socialines_g lobos_istaigu_sauskelniu_viesieji__pirkimai.pdf. 72 “Viešinimo Ir Informavimo Paslaugu ˛ Pirkimu˛ Apžvalga 2010–2020 m.” 2021. Viešuj ˛ u˛ pirkimu˛ tarnyba. https://vpt.lrv.lt/uploads/vpt/documents/files/Viesinimo_ir_ informavimo_paslaugu_pirkimu_apzvalga.pdf.

4

PRACTICES IN PRACTICE

81

threats to report the person to their superiors, to limit access to particular policy formation committees or to embarrass publicly. While in this particular case, the interviewee managed to circumvent the demand due to personal character and strong backup from the management, who also experienced similar pressures, s/he acknowledged that many others succumb to such “psychological operations” and agree to meet demands. A top-level bucreaucrat, whose agency oversaw public procurement, agreed that many public officials are afraid to stand up to pressure. S/he also related a situation when business representatives threatened him/her with a hostile media campaign, if the agency continued to voice its doubts about the planned procurement. There is also publicly available evidence to support such claims. At least three different high-level officials, including the Minister of Transport and Communications, publicly complained about forceful psychological pressure and even threats leveraged by the head of the Lithuanian Business Confederation (LBC) Valdas Sutkus. The confederation unites 32 business associations and about 3,500 companies. According to a Facebook post published by the Minister of Transport and Communications Rokas Masiulis in August 2018, at the end of a meeting of the Parliamentary Committee on Economics, an influential LBC representative sent a threatening message to the Advisor for the Minister. The message was simple: if he continued the current course of action, the LBC representative would personally drag his name through the mud in the mass media.73 A former advisor to the Prime Minister conveyed a similar impression on the working methods of the President of the LBC: “Whoever got into conflict with him or something like that, all of them report to have received the same message: ‘If I need to destroy your carreer or your life, I can do that very easily.’”74 In June 2020 Mr. Sutkus and the President of the Lithuanian Banking Association were arrested for alleged corruption and illegal lobbyist activities.

73 Janužyte, ˙ Rima. 2018. “R. Masiulis: LVK Atstovas Grasino Susisiekimo Ministerijos Pareig¯unui.” Verslo Žinios, August 24, 2018. https://www.vz.lt/verslo-aplinka/2018/08/ 24/r-masiulis-lvk-atstovas-grasino-susisiekimo-ministerijos-pareigunui. 74 Jok¯ ubaitis, Marius. 2020. “V.Sutkaus Kelias ˛i I˛ takos Olimp˛a Buvo Gr˛istas I˛ vairiais Spaudimo B¯ udais.” 15min.Lt, June 9, 2020. https://www.15min.lt/verslas/naujiena/ bendroves/v-sutkaus-kelias-i-itakos-olimpa-buvo-gristas-ivairiais-spaudimo-budais-663-132 8836.

82

A. LAŁAS

While such instances create a lot of public buzz about widespread corruption and problematic business practices, the evidence only allows us to determine the limits of what is possible rather than estimate the extent of such practices. It also points to the predominant mindset among many local business owners, who seem to be fine with such methods of leverage. A number of interviewed businesspeople were aware that such practices took place, but seemed to view them as normal or at least necessary for getting things done. The other venues for such psychological pressures relate to top politicians leveraging their influence upon immediate or indirect subordinates. In one such case, a senior manager recalled a recent situation where a state-owned company was planning to fire some employees due to markedly reduced business activities in the wake of the COVID 19 pandemic. The situation was further sensitized because of the upcoming Parliamentary elections. In a meeting between the company’s top management, a board director and a minister, under whose ministerial formal supervision the company was, the minister asked the management to postpone the decision in order to avoid negative electoral repercussions. The meeting was arranged informally, so there wouldn’t be any written protocols. Following it, the director of the board met again informally with the management and told them not to fire employees and find alternative solutions. When asked to detail any potential solutions, the board director did not provide any, but told them to find one. Otherwise, he implied the position of the CEO was in danger. The pressure seemed to have worked and the company made some changes to its initial plan and fired very few employees. Since this example is quite recent, there is every reason to suspect that similar practices continue to date. Political Racketeering (IU5) There is a fine line of difference between psychological pressure and racketeering. And that fine line relates to the absence or presence of the element of extortion. In the case of racketeering, pressure is applied in order to extract resources from the source, while psychological pressure may have other purposes (political or otherwise), using and abusing a position of power. A classic example of political racketeering comes from an administrative center of the Kelme˙ district municipality, where the mayor of the town allegedly decided to get some kickbacks from the already awarded tender for public ground maintenance and recreational

4

PRACTICES IN PRACTICE

83

development in a yet smaller neighboring town. According to a businessman, who was approached by the mayor, the whole story started with official municipal notices to his subcontractor, who was in charge of various works. Since the notices kept coming at about a rate of two to three a month, the businessman suspected that the issue might have little to do with the contents of the complaints and approached the mayor. His suspicions proved to be correct as the mayor asked that for this large, already awarded, contract, the subcontractor provide a kickback in the region of 10,000 euros. Later the demanded sum was reduced by half and paid out to the mayor under yet unnoticed supervision of the SIS.75 A similar type of racketeering was also reported by the head of a consulting agency, whose client, after getting an official evaluation score for a tender application, was directly approached by the advisor to a Member of Parliament. The message was straightforward—the success of your application was subject to a kickback to the MP. Given the substantive amount demanded, the businessman got worried and approached the consulting agency for advice. Because the score was already assigned, the interviewed head of the agency suggested to his client to ignore the request. The suggestion turned out to be correct as the businessman got the contract anyway. At the time this story took place (circa 2010), the practice seemed to have been one of an exception rather than a rule because I could not find any other examples of comparable schemes by the MPs at work. Nepotism or “Landing Platforms” (IU8, IU14) One of the biggest human resources-related challenges for political parties follows elections. When elections are lost, and especially if they are lost badly, numerous politicians and political appointees find themselves without a job. Aside from private businesses, where some politicians with extensive professional networks and influence are welcome, there is another more alluring path of employment in the public enterprises sector. Here, there are arguably less performance pressures, more possibilities for landing high-level management positions and more opportunities 75 Šiuparys, Gintaras. 2020. “Kelm˛e Sudrebinusioje Korupcijos Byloje – Verslininko Pasakojimas Apie Politin˛i „gr˛ežim˛a“.” Lietuvos Rytas, October 13, 2020. https://www. lrytas.lt/lietuvosdiena/kriminalai/2020/10/13/news/kelme-sudrebinusioje-korupcijosbyloje-verslininko-pasakojimas-apie-politini-grezima—16689166.

84

A. LAŁAS

for extraction because often these organizations are monopoly service providers. As already discussed earlier, a number of interviewees and publicly available sources have repeatedly pointed out that Lithuanian railways , which falls under the oversight of the Ministry of Transport and Communications, had been closely linked with the Social Democratic Party. According to one high-level interviewee from within the party, Lithuanian railways was their patrimony. This tradition can be easily traced back to the early 2000s, when the viceminister of transportation and social democrat Valerijus Ponomariovas was also acting as the chairman of the board of directors at Lithuanian railways .76 In the aftermath of the 2004 Parliamentary elections, where Mr. Ponomariovas did not succeed in winning a seat and the social democrats came third in terms of the number of seats won, he became the vice-president of Lithuanian railways and later the head of their IT department. Following in the footsteps of Mr. Ponomariovas, the former head of the PM’s office and prominent social democrat Antanas Zenonas Kaminskas arrived at Lithuanian railways two years later. Like his predecessor, Mr. Kaminskas became the vice-president of Lithuanian railways . The team of vicepresidents was further supplemented by Stasys Gudvalis, who in contrast to others, worked at Lithuanian railways for a long time. However, his rise to company leadership was also controversial because his son-in-law, a member of the Social Democratic Party, worked as an advisor to the minister of transportation (also, a social democrat) at the time of his appointment.77 From media sources we can also see that around the same time yet another social democrat Arnoldas Kulikauskis was head of the Passengers’ transportation department.78 Lithuanian railways maintained its status as a key “landing platform” for social democrats until quite recently. For example, following an unsuccessful attempt in the

76 BNS. 2001. “Pakeista ‘Lietuvos Geležinkeliu’ ˛ Valdyba.” Verslo Žinios, November 7, 2001. https://www.vz.lt/article/20011107/Premium/311079963. 77 BNS. 2016. “Ministras Nežinojo Apie I˛ tarimus „Lietuvos Geležinkeliu“ ˛ Direktoriaus Pavaduotojui?” Diena.Lt, May 27, 2016. https://www.diena.lt/naujienos/lietuva/pol itika/ministras-nezinojo-apie-itarimus-lietuvos-gelezinkeliu-direktoriaus-pavaduotojui-752 133?psl=2?full. 78 “2007 m. Lietuvos Respublikos Savivaldybiu ˛ Tarybu˛ Rinkimai: Arnoldas Kulikauskis.” n.d. Lietuvos Respublikos Vyriausioji rinkimu˛ komisija. https://www.vrk.lt/statiniai/pus lapiai/rinkimai/3/Kandidatai/Kandidatas5781/Kandidato5781Anketa.html.

4

PRACTICES IN PRACTICE

85

2012 Parliamentary elections, another social democrat Dainius Budrys was hired by Lithuanian railways as the vice director of the Development department. Later, he became the head of the Rail Baltica Statyba, a subsidiary of Lithuanian railways .79 Another stronghold of social democrats was Vilniaus vandenys (Vilnius Water), co-owned by Vilnius city and three adjacent municipalities. In February 2009, a new city-governing coalition was formed. Four social democrats joined a freshly reshuffled majority in exchange for the positions of vice-mayor with the brief of city maintenance and the director of administration. The city maintenance department managed public service companies, so the ripple effects of the change quickly reached the management of Vilniaus vandenys . The newly appointed director of administration—social democrat Vytautas Milenas—also ˙ became the chairman of the board of directors at Vilniaus vandenys , and by May 2009, he had already signed a document appointing a new CEO—and fellow social democrat—Darius Norkus.80 Barely a year later, Darius Norkus was facing corruption charges by the SIS and was removed from his position.81 As the Appeals court acknowledged, Mr. Norkus demanded a bribe from a contractor for speedy payment transfers.82 Despite the scandals, two months later Vilniaus vandenys had another CEO and yet again another social democrat Valentinas Miltienis.83 However, his luck ran out in a few months as the Conservative Party formed a new governing coalition, gained

79 Ketlerius, Art¯ uras. 2017. “Atleistas „Lietuvos Geležinkeliu“ ˛ Projekto „Rail Baltica“

Direkcijos Vadovas A. Z. Kaminskas.” Delfi, February 27, 2017. https://www.delfi.lt/ verslas/transportas/atleistas-lietuvos-gelezinkeliu-projekto-rail-baltica-direkcijos-vadovas-az-kaminskas.d?id=73884880. 80 Tvaskiene, ˙ Jurga. 2010. “„Vilniaus Vandenys“ – Partiju˛ Aukso Kasykla.” Alfa.Lt, April 29, 2010. https://www.alfa.lt/straipsnis/10354418/vilniaus-vandenys-par tiju-aukso-kasykla/. 81 15min.Lt. 2010. “STT Sulaike˙ UAB „Vilniaus Vandenys“ Vadovus,” April 24, 2010. https://www.15min.lt/naujiena/aktualu/nusikaltimaiirnelaimes/stt-sulaike-uab-vil niaus-vandenys-vadovus-59-94963. 82 BNS. 2019. “Buv˛es „Vilniaus Vandenu“ ˛ Vadovas Darius Norkus Pripažintas Kaltu Del ˙ Kyšio Reikalavimo.” Lietuvos Rytas, March 4, 2019. https://www.lrytas.lt/lietuvosd iena/aktualijos/2019/03/04/news/buves-vilniaus-vandenu-vadovas-darius-norkus-pripaz intas-kaltu-del-kysio-reikalavimo-9456107. 83 Delfi. 2010. “„Vilniaus Vandenims” Vadovaus V.Miltienis,” July 7, 2010. https:// www.delfi.lt/verslas/energetika/vilniaus-vandenims-vadovaus-vmiltienis.d?id=34238615.

86

A. LAŁAS

mayorship, and placed its own party member Valdas Savickas as the new chairman of the board. Mr. Savickas initiated the dismissal of the CEO over issues related to a sludge processing facility, which, according to the Public Procurement Agency, was being built in contradiction to existing laws.84 The new chairman of the board also took up the role of the CEO, maintaining public concerns about the transparency and accountability of management practices at Vilniaus vandenys .85 Following the 2011 municipality elections, a new ruling coalition came to power with social democrats as coalition partners. They again managed to regain the vice-mayor position for city maintenance. This allowed the social democrats to regain control of the board and to reinstall Mr. Miltienis as the CEO.86 He maintained his position until September 2015, when the then mayor, who had been in position for just four months, decided to establish independent municipality-controlled company boards.87 So why were political parties so keen to put their own people onto company boards and in management positions? I already mentioned one obvious reason—workplaces for unemployed party members. However, even for the elected members of the city council, it was an opportunity to earn extra income or to position oneself for a good position in the future.88 For example, the already mentioned director of administration and social democrat Vytautas Milenas ˙ lost his position following the 2011 municipality elections, but within several months he was hired as an advisor to the CEO of another municipality company Grinda. The SIS questioned this practice because the company had never previously had 84 15min.Lt. 2011. “Valentinas Miltienis Atleistas Iš „Vilniaus Vandenu“ ˛ Generalinio Direktoriaus Pareigu,” ˛ March 29, 2011. https://www.15min.lt/naujiena/aktualu/lie tuva/valentinas-miltienis-atleistas-is-vilniaus-vandenu-generalinio-direktoriaus-pareigu-56143795. 85 TV3.Lt. 2011. “Išrinktas Naujas „Vilniaus Vandenu“ ˛ Vadovas,” February 25, 2011. https://www.tv3.lt/naujiena/verslas/isrinktas-naujas-vilniaus-vandenu-vadovas-n527056. 86 Cerniauskas, ˇ Šar¯unas. 2011. “V.Miltienis Gr˛ažintas ˛i „Vilniaus Vandenu“ ˛ Vadovo Post˛a, Buvusiam Direktoriui – Solidi Išeitine.” ˙ Delfi, September 23, 2011. https://www.delfi.lt/verslas/verslas/vmiltienis-grazintas-i-vilniaus-vandenu-vadovoposta-buvusiam-direktoriui-solidi-iseitine.d?id=49951918. 87 Simenas, ˙ Dalius. 2015. “Miltienis Palieka „Vilniaus Vandenis“.” Verslo Žinios, September 15, 2015. https://www.vz.lt/vadyba/is-tarnybos-i/2015/09/15/6439/miltie nis-palieka-vilniaus-vandenis. 88 A city council member earns about 300 euros a month plus the same amount can be compensated for various expenses. 600 euros is a rather modest sum just barely above a minimum wage rate in Lithuania. Having an additional position as an advisor to the CEO or vice-director can make quite a difference.

4

PRACTICES IN PRACTICE

87

such a position, but formally it was all according to the letter of the law. Later Mr. Milenas ˙ became the vice-president of Grinda. Similar but even less refined mechanisms were sometimes utilized in smaller municipalities. In Pakruojis municipality, the SIS report details a case, where in 2018 the board of directors of the heating company approved the cancelation of the Chief Engineer position and instead established the position of a vice-director, which was taken up by the CEO of the heating company without any public selection process mandated by law. The reason for this self-deprecation appears to be related to continuous criticism and even investigations of the CEO for various violations, including corruption charges.89 Despite public criticism of such practices by the SIS, the same person remained in the position of the vice-director. Besides attractive career opportunities, the political control of large state-owned companies could have substantial financial and media benefits for a political party. For example, in the case of Lithuanian railways , its financial contributions to Lietuvos rytas basketball club, examined previously in the “Pet projects” section, resulted in extra PR media pieces for the social democrats. In regard to municipality-owned companies, political party representatives also had opportunities to distribute a part of the company’s earnings allocated for various nonprofit causes. This was confirmed by a number of interviewees, but also by public sources. For example, in the SIS’s report on the municipality of Pasvalys, the town water supplier Pasvalio vandenys states that the “company board members, assigned by the City council, decided how to allocate charitable funds (2019: 24).”90 Not surprisingly, basketball was quite high on the priority list and the company every year chipped in a few thousand euros to the local premier league basketball club: 10,000 Lt (2,900 Eur) in 2013, 15,000 Lt (4,350 Eur) in 2014, 6,000 Eur in 2015 and 7,000 Eur in 2016. Yet another reason relates to the optics of policymaking and politics more generally. Once your own party member is in charge of a local 89 Poškuviene, ˙ Lina. 2018. “Korupcijos Rizikos Analize˙ Pakruojo Rajono Savivaldybeje.” ˙ Special Investigative Service of the Republic of Lithuania. https://www.stt. lt/korupcijos-prevencija/korupcijos-rizikos-analizes/atliktos-korupcijos-rizikos-analizes/ 7471/act846. 90 Stukas, Mindaugas. 2018. “Del ˙ Korupcijos Riziku˛ Analizes ˙ UAB „Pasvalio Autobusu˛ ¯ Parkas“ Ir UAB „Pasvalio Butu˛ Ukis“ Ir UAB „Pasvalio Vandenys“ Veiklos Srityse.” Special Investigative Service of the Republic of Lithuania. https://www.pasvalys.lt/saviva ldybe/korupcijos-prevencija/korupcijos-rizikos-analize/951.

88

A. LAŁAS

utility company, you can decide when and by how much to increase utility prices, whether to “make” a company (more) profitable or not. As one municipality politician explained: “You can quickly reduce the expenses of a utility company, by for example reducing the number of checks, by lowering infrastructure renovation ambitions, etc. And all of a sudden, you are already making profit!” Such a quick fix looks good for the party and potentially wins votes. Courts as Networks of Friends (LU8) On 20 February 2019, the public became aware of a major courts-related corruption scandal. 26 people were arrested, including eight judges and five attorneys. The SIS alleged that the judges and attorneys formed a network of accomplices, who sought to buy off judges for favorable decisions in courts. According to SIS estimates, the total amount in bribes reached 400,000 euros. Though the case is still under investigation, it produced smaller spin-off cases, where verdicts have already been handed down. In one of them, an indictee acknowledged that he sought to bribe three judges via an attorney in exchange for softening the measure of suppression for a murder suspect.91 In another one, an indictee admitted to a very similar schema—a bribe for judges via an attorney in order to get a positive decision in the light of a pending appeal.92 Whether this particular grand scandal materializes into more guilty verdicts or not, a number of interviewees have largely confirmed the presence of law firms known for their “mediating” activities in courts both for businesses and politicians. The working relationship is usually established through one of three channels. First, friendships made during university years serve as a good basis for cooperation. As one attorney noted, “everybody knows everybody. They studied together, but ended up on different sides of the barricades – attorneys vs. judges.” The importance of university friendships was echoed by a businessperson as well: 91 15min.Lt. 2019a. “Laisves ˙ Kaina – Po 10 T¯ukst. Euru˛ Trims Teisejams: ˙ Korupcijos Byloje Nuteistas Dar Vienas Veikejas,” ˙ October 29, 2019. https://www.15min.lt/nau jiena/aktualu/nusikaltimaiirnelaimes/laisves-kaina-po-10-tukst-euru-trims-teisejams-kor upcijos-byloje-nuteistas-dar-vienas-veikejas-59-1223946. 92 15min.Lt. 2019. “Dar Viena Atskira Byla Iš Didžiojo Teisej ˙ u˛ Skandalo: Ar Bus Skirta 39 T¯ukst. Euru˛ Bauda?,” October 30, 2019. https://www.15min.lt/naujiena/akt ualu/nusikaltimaiirnelaimes/dar-viena-atskira-byla-is-didziojo-teiseju-skandalo-ar-bus-ski rta-44-tukst-euru-bauda-59-1224570.

4

PRACTICES IN PRACTICE

89

“They also sat together in the same bench while studying and know each other. Small country, country of relatives.” Furthermore, this was not only about knowing somebody, but also knowing the landscape of their preferences. The same interviewee explained: “Judges fall into the following categories: A – talks and takes [bribes], B – talks and once in a while takes, C - talks, but does not take and D – neither talks, nor takes.” When presented with such a classification, another attorney largely agreed, but reduced it to three categories: talks and takes; talks, but doesn’t take; and neither talks, nor takes. While old friendships are hard to beat, there was also another reliable mechanism at work—families. It was not unusual for a husband and wife to practice law. Interviewees with legal backgrounds gave a number of examples where one of the family members was in a private practice, while another one—in courts. The interviewees were not able to name specific cases, where such a relationship played a role. They primarily based their argumentation on the reputation of some law firms, where such relationships were present. As one attorney explained, “everybody [in the legal community] knows that two law firms in particular engage in such [mediating] activities.” S/he also recalled a confidential conversation with a businessman, who described one of the two law firms as having unprecedented influence: “try finding another law firm, which can arrange favorable outcomes for you from the lowest to the highest [court].” Another interviewee from a business community named a third law firm that also allegedly engaged in “talking and taking.” It seems that such mediation services were especially widespread during the 2008 financial crisis. At the time, the Lithuanian economy was shrinking fast, and the real estate market collapsed. The prospect of bankruptcy was looming large as banks sought to recoup their potential losses from real estate projects. A business owner explained: At the time bankruptcies were a widespread phenomenon and banks sought to retrieve debts. A judge was a god and one simply had to find access [to him/her]. A decision made by the district court was not yet the end. Then there are regional courts and the Supreme Court. So you need to have people who have connections at different levels. And those people were attorneys.

A managing director of a major construction company echoed such stories by recalling a situation whereby an owner was complaining to an attorney

90

A. LAŁAS

that he did not need his services if he in turn could not purchase a favorable decision in court. Prices for such decisions usually varied according to the court level— the higher the court, the higher the price. As the just quoted business owner explained: “I paid in cash, only in cash, and 10,000 euros was small change. I had to pay 70,000 and even 100,000 because you could easily end up losing everything.” It is very difficult to determine the extent of such practices, but their presence raises no doubts. The crisis clearly tested the limits of normative/cultural change in the state–business nexus in general and the courts system in particular. Since then, such problematic practices have significantly subsided, but so did—desperation. With the economic boom, the demand for mediation services naturally decreased. However, the question remains open, whether and what kind of value change took place over the last ten years. This can be tested only by another economic crisis of similar proportions. While the examples provided above do not directly involve politicians, the availability of such legal venues was relevant for politicians, who might get in trouble with the law due to their business-friendly political decisions. If caught, they could rely on such legal networks of friends and get support in courts via their business friends. Commenting on the topic, one of the political party leaders gave the example of large construction companies, which had “their own people in many important places.” Because of this, “they are able to guarantee that even if caught, the issue would be resolved appropriately. In such a way, they demonstrate that they are a reliable partner and the legal consequences of corruption are minimal.” And in many instances, they appeared to be so. For example, the most notorious tax fraud case of the Labour Party, even after ten years in the courts, ended up with guilty verdicts for the party leaders and some of his accomplices, but accompanied by the largest individual fine of only 6,900 euros!93 The main government prosecutor Saulius Verseckas gave a rather telling assessment of this outcome: “After today’s verdict, I think that the legislators will see the need to revise laws governing tax fraud crimes in such a way that a tax fraud worth millions would not be treated

93 Lietuvos Aukšˇciausiasis Teismas. 2016. “Darbo Partijos Byloje Priimtas Galutinis Ir Neskundžiamas Teismo Sprendimas,” December 30, 2016. https://www.lat.lt/naujienos/ darbo-partijos-byloje-priimtas-galutinis-ir-neskundziamas-teismo-sprendimas/314.

4

PRACTICES IN PRACTICE

91

as minor violation without any real punishment. [To revise] In such a way that stealing would not pay off.”94 Leakage of Information (IU2, IE1, IU3) When Edward Snowden leaked US government data, the public found out about the presence of a vast government surveillance programme. In Lithuania, major leaks occurred in reverse direction with high-level politicians leaking the government surveillance agency’s information about fellow politicians or businessmen. In some cases, the surveillance agency itself seemed to have taken steps to publicize its gathered evidence before a trial in order to gain public support. Unlike in the US, the Lithuanian public does not seem to mind such leakage-driven justice as it becomes an alternative to what they perceive as corrupt legal practices. Below we will explore some of them. Following the 2014 Parliamentary elections, mass media published a so-called “blacklist” of undesirable politicians, whom the President did not want to take any governmental positions. The blacklist was based on information provided by the SIS to the President and the new Prime Minister. The list contained a number of high-level politicians, including vice-ministers. All of them allegedly had some kind of shady dealings or connections during their tenures in key political posts.95 It is impossible to determine the true motivation behind this leakage, but the consequences of being on the list were clear—limited future prospects in politics as long as the President (at the time) had any say. An example of a less prominent leak relates to the dealings between one of the political party leaders and former ex-president Rolandas Paksas and the owner of the Lietuvos rytas newspaper Gedvydas Vainauskas.96 94 15min.Lt. 2016. “Saulius Verseckas I˛ vertino Nutart˛i Darbo Partijos Byloje: „Reikia Keisti I˛ statymus, Kad Vogti Neapsimoket ˙ u“,” ˛ December 30, 2016. https://www.15min. lt/naujiena/aktualu/lietuva/saulius-verseckas-po-galutines-nutarties-darbo-partijos-bylojerreikia-keisti-istatymus-kad-vogti-neapsimoketu-56-734186. 95 Cerniauskas, ˇ Šar¯unas. 2014. “D. Grybauskaites ˙ „juodasis S˛arašas“ Pildosi Naujomis Pavardemis.” ˙ Delfi, June 11, 2014. https://www.delfi.lt/news/daily/lithuania/d-grybau skaites-juodasis-sarasas-pildosi-naujomis-pavardemis.d?id=65008301. 96 Pancerovas, Dovydas. 2016. “Išskirtiniai Kadrai: Po Slapto Susitikimo Su Rolandu Paksu STT Sulaike˙ Gedvyd˛a Vainausk˛a.” 15min.Lt, February 29, 2016. https://www.15min.lt/naujiena/aktualu/lietuva/isskirtiniai-kadrai-po-slapto-susiti kimo-su-rolandu-paksu-stt-sulaike-gedvyda-vainauska-56-588687.

92

A. LAŁAS

Both of them were allegedly discussing the issue of a building permit in exchange for a bribe over lunch. The online publication, which broke the story, provided not only specific details about the meeting but also video surveillance footage, including the arrest of Mr. Vainauskas by SIS officers. When asked about such leaks, one of the senior editors confided that usually, media outlets received this type of information via journalists, who have good personal connections to anti-corruption agencies. The journalists were informed in advance about an upcoming operation and/or got access to relevant documents. According to the senior editor, they never paid for information coming from state sources.97 The SIS does not seem to be bothered by such leaks from within the organization. In fact, they might even encourage it in order to demonstrate their resolve to fight corruption and to put suspects in the court of public opinion before they face the real one. The case of MP Petras Gražulis, who allegedly abused political office to promote his business interests, illustrates how this worked. With pre-trial material gathered by the SIS against Mr. Gražulis, the Parliament got repeated requests for removing his immunity from prosecution. Initially, such requests fell on deaf ears of the ruling majority, but following the 2020 Parliamentary elections, a new majority came to power and the request was granted. On December 15, 2020 Mr. Gražulis lost his immunity. A month later, pretrial material gathered by the SIS was leaked to the press, where various details about the MP’s abuse of office, his personal life and business details became public knowledge. Given the absence of any reaction from the SIS about this leakage and no attempts from the news organization to anonymize this material due to potential legal issues, this appeared to be yet another example of good personal relations between journalists and the SIS. Such cooperation was part of a wider pattern, typical of any democratic society, where journalists and bureaucrats or politicians have a close working relationship. The main difference, if any, points to the institutional side, where there seemed to be no particular effort to mask the source of information leakage or to make access to information more egalitarian, i.e. available to at least several media outlets. Furthermore, some journalists got used to their right to receiving classified information and

97 There are also curious instances of fake leaks. An example is provided in the Abuse of Media power section.

4

PRACTICES IN PRACTICE

93

often put pressure on top-level bureaucrats to cooperate in their investigations. As one former head of a state agency recalled, “every agency head gets ‘tested’ for cooperation. When I was a freshly-appointed director, I was approached by a journalist to help find information about a particular person. I refused, but I knew quite well that, if at some point in the future I or my agency makes some kind of misstep, the journalist and the publication will take sweet revenge for my non-cooperative attitude.” The interviewee thought that most bureaucrats cooperated with journalists because they did not want to be publicly harassed by media and instead sought to win their favor. This was especially true in the early 2000s, when Lithuanian mass media reached the peak of its political leverage. But that deserves a much closer and more extensive analysis as the media played a crucial role in the shaping both political and business practices. Abuse of Media Power (IU3, IU4, IU13) In the Habermasian version of a democratic society, mass media represents the principal public sphere, which ideally exists independently from political, religious and other economic interests, while connecting elites and society (Habermas 1989). As such, it registers and reflects upon broader developments in socio-political realms. Others upgrade it further to an independent watchdog, “monitor[ing] the full range of state activity, and fearlessly expos[ing] abuses of official authority” (Curran 2002: 217). Furthermore, for years many scholars talk about the mediatization of politics, whereas media becomes the central link between the politicians and the electorate (Mazzoleni & Schulz 1999).98 The growth of “selfmobilized” citizens (Dalton 1996)99 and the decrease in membership in political parties (Biezen & Poguntke 2014)100 are complementary 98 Mazzoleni, Gianpietro, and Winfried Schulz. 1999. “‘Mediatization’ of Politics: A Challenge for Democracy?” Political Communication 16 (3): 247–261. https://doi.org/ 10.1080/105846099198613. Strömbäck, Jesper. 2008. “Four Phases of Mediatization: An Analysis of the Mediatization of Politics.” The International Journal of Press/Politics 13 (3): 228–246. https://doi.org/10.1177/1940161208319097. 99 Dalton, Russell J. 2020. Citizen Politics: Public Opinion and Political Parties in Advanced Industrial Democracies. 7th ed. Los Angeles, California: SAGE, CQ Press. 100 Biezen, Ingrid van, and Thomas Poguntke. 2014. “The Decline of MembershipBased Politics.” Party Politics 20 (2): 205–216. https://doi.org/10.1177/135406881 3519969.

94

A. LAŁAS

processes to the growing dependence of politics upon media. However, in the case of Central and Eastern Europe (including Lithuania), the low level of citizens’ political engagement has been a regular feature of the modern post-independence landscape (Biezen et al. 2012).101 This phenomenon presupposes the central role of mass media in CEE political cultures. If the assigned roles and the expected standards of media performance are accepted as social facts or even as goals worth striving for, media’s instrumentalization, including self-instrumentalization, become a key threat to the successful daily functioning of democratic regimes. It is “daily” because the media’s intensity of interactions with social, business and especially political actors are in a category of their own. While many non-media businesses might have periods of more intense interactions with politicians and bureaucrats, media functions on the peak interaction level for most of the year (with a partial exception of the summer holiday season, when the political schedule significantly slows down). Thus, its weaknesses have the potential to translate into system wide distortions with broad societal effects. The usual story of business–media or politics–media nexus descriptions approaches these relationships through the lenses of media as an object of interest. Such concepts as media capture (Besley and Prat 2006),102 colonization of media (Bajomi-Lazar 2013),103 and media instrumentalization (Hallin and Mancini 2004)104 imply some kind of media control, structuring or manipulation by businessmen and politicians. In the next chapter, I will cover the case of Vladimiras Romanovas, which represents a full range of capture-like practices vis-à-vis a major regional daily, but there are many other examples as well. In May 2020, a regional newspaper 101 Biezen, Ingrid van, Peter Mair, and Thomas Poguntke. 2012. “Going, Going,… Gone? The Decline of Party Membership in Contemporary Europe: Going, Going,… Gone?” European Journal of Political Research 51 (1): 24–56. https://doi.org/10.1111/ j.1475-6765.2011.01995.x. 102 Besley, Timothy, and Andrea Prat. 2006. “Handcuffs for the Grabbing Hand? Media Capture and Government Accountability.” American Economic Review 96 (3): 720–736. https://doi.org/10.1257/aer.96.3.720. 103 Bajomi-Lázár, Péter. 2015. “Variations in Media Freedom: Why Do Some Governments in Central and Eastern Europe Respect Media Freedom More than Others.” Central European Journal of Communication 8 (1): 4–20. 104 Hallin, Daniel C., and Paolo Mancini. 2004. Comparing Media Systems: Three Models of Media and Politics. Cambridge: Cambridge University Press.

4

PRACTICES IN PRACTICE

95

Plung˙es žinios [News of Plunge] ˙ published online a farewell letter before the permanent closure of its business. It starts with a vivid recollection of its beginnings almost two decades ago: Eighteen years ago, a number of journalists, who were discharged or who left previous employment voluntarily, established THEIR OWN NEWSPAPER. They were tired of their owners’ and politicians’ dictate, widespread corrupt trade in newspaper articles and other manifestations of absurd. They established the newspaper, hoping to change Soviet mentality, back door deals with businessmen and politicians, so that people could be free and free to express their opinions. However, for those corrupt and comfortably seated (and now highly respected) businessmen and politicians, this was not acceptable. The newspaper survived attacks on its assets (setting on fire a vehicle and a building), businessman-ordered assault by criminals on the editor, betrayal by some of the newspaper’s co-owners…105

This is a rather typical story in smaller regional markets, where there were few independent newspapers with high levels of vulnerability and reliance upon few income sources, including the municipality and its key public service providers. However, the situation had been radically different on a national level and it deserves closer attention. Here, media owners, who came out of a journalistic community and built up their media empires as core businesses, exhibited distinct behavioral patterns that covered a much broader field of interests. Rather than limiting themselves to just using media as an instrument to protect or promote their other (primary) business interests, these owners-editors approached media in and of itself as the means to make good business. Because of that, they were much more “creative” in finding ways to leverage their assets. But first I begin this analysis with a short overview of the media landscape in the early 2000s because this period can be treated as the pinnacle of local media power. Specifically, two media groups—Respublika and Lietuvos rytas —dominated both national and regional landscapes with an extensive network of publications. This was especially true of political content, as commercial TV channels often focused on entertainment or infotainment at best, with relatively limited investigative focus. 105 Pilitauskas, Žydr¯ unas. 2020. “„Plunges ˙ Žinios“ Ir Aš Šiandien Li¯udi, Apgailestauja Ir... Sako STOP Bendroves ˙ Veiklai.” Facebook. May 31, 2020. https://www.facebook. com/zydrunas.pilitauskas/posts/3144116915645243.

96

A. LAŁAS

In 2002–2003, Lietuvos rytas was the leading newspaper with about a quarter of the average national readership. Respublika group’s two national dailies—Respublika and Vakaro Žinios —had a combined average audience of about 17–21%.106 Both of these groups also owned some of the leading regional newspapers and thus had an ability to leverage their informational power on multiple levels. Their rather exclusive status can also be detected when comparing annual turnover levels. In 2007, Respublika and Lietuvos rytas annual turnover reached around 35 and 26 million euros respectively. The third largest figure among printed media was 7.4 million euros by Verslo žinios , a business daily owned by the Swedish Bonnier Group, followed by another local media company Diena Media News with 7.2mil. EUR.107 Given such differences, there is little wonder that the leaders had plenty of opportunities for setting behavioral standards in the media–politics nexus. And they did! The market situation started to fundamentally shift with two simultaneous processes: the onslaught of the 2008 financial crisis and the rapid expansion of the internet media. The financial crisis brought on not only a slump in general economic activity but in 2009, it also triggered cancelation of a discounted VAT rate for printed media. The discounted rate was brought back in 2013 and further discounted in 2019 to just 5%. Despite these later efforts, the decline of printed media continued through to today. If at the height of their power, newspapers raked in about 35mil. EUR worth of advertisement income in 2007, twelve years later their total advertisement income dropped to just 8 million euros. As indicated in Fig. 4.2, newspapers represent the steepest decline category among all media channels with their media market segment contracting more than four times. In contrast, internet media has continued its growth and now makes up almost a fifth of the total advertisement market share. It is now the second largest advertisement channel in Lithuania, just as newspapers were until 2014. The impact of such changes will become more apparent as we analyze the dynamics of media practices, to which I turn now. In 2007, Transparency International published survey results of 502 high-level Lithuanian businesspeople about their relations with the media. 106 Delfi. 2003. “Išaugo ‘Respublikos’ Leidiniu ˛ Auditorija,” March 31, 2003. https:// www.delfi.lt/verslas/medija/isaugo-respublikos-leidiniu-auditorija.d?id=2123586. 107 TV3.Lt. 2008. “„Respublikos“ Leidiniu ˛ Grupe˙ Pajamomis Aplenke˙ „Lietuvos Ryt˛a“,” July 25, 2008. https://www.tv3.lt/naujiena/verslas/respublikos-leidiniu-grupepajamomis-aplenke-lietuvos-ryta-n206360.

4

PRACTICES IN PRACTICE

97

100 90 80 70 60 50 40 30 20 10 00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 TV

Newspapers

Journals

Radio

Outdoor

Internet

Movies

Fig. 4.2 Media advertisement share in Lithuania (2002–2019)

The results indicated that local media outlets regularly provided hidden advertising services for their clients. When asked how often media offered to publish bonus favorable articles on top of regular advertisement contracts, respondents chose “Very often” or “often” as follows: 42.5% for national printed media, 33.7% for regional newspapers and 28.2% for national TV channels (p. 7).108 A more detailed evaluation by specific media outlets revealed Respublika and Lietuvos rytas as the most opaque organizations with other locally owned ones following their lead (p. 9). Another publicly available source, the already mentioned confidential report by the US embassy in Lithuania, confirmed the survey findings. The report entitled Lithuania’s Corrupt Media Hurts Everyone points a finger at local media moguls, who abuse their power by demanding financial contributions from businesses and politicians for favorable or the absence of negative coverage. D. Jastramskis’ (2009) analysis of the media coverage of the 2004 presidential election campaigns also demonstrated 108 Juozapaviˇcius, Rytis, ed. 2007. Žiniasklaidos Skaidrumas. Vilnius: Eugrimas. https://www.transparency.lt/wp-content/uploads/2015/10/ziniasklaidos_skaidrumasw. pdf.

98

A. LAŁAS

that local media moguls had the most biased reporting. The conclusions are based on the content analysis of eight major dailies.109 My own anonymous interviews fall in line with these observations. Pretty much all the interviewees agreed that local mass media was not only the object but also the subject or sometimes even the prime mover of various shady practices. Typically, the more popular the publication was in terms of readership, the more leverage it potentially held vis-à-vis politicians and other businesses. In many ways, the behavior of the most powerful media owners-editors is reminiscent of a protection racket. However, instead of property rights protection, as often happens in the case of mafia, media owners-editors first and foremost traded in reputation protection or reputation damage services. They exploited the ample legal space left for media freedom to maximize profits, shore up their own business interests, support friends and undermine competitors or enemies. At the height of their power, they had no hesitation in confronting even the most powerful politicians or businessmen, who were perceived to be in their way. As reported earlier, their racketeering practices were further boosted by the unusually high levels of public trust in media combined with very low levels of trust in political institutions. Here I take a closer look at how this racket worked in practice. The instrumentalization of media against political or business targets is a rather typical mechanism, used by media owners and by media customers in many countries. Lithuania is no exception. In the summer of 2009, one of the largest Lithuanian banks Snoras acquired 34% of the Lietuvos rytas media group shares. It became the largest shareholder of the media company. The second-largest shareholder was Mr. Vainauskas, the long-term CEO and editor-in-chief, with 25.5%. Two years later, Snoras was facing financial troubles of its own. With the threat of nationalization looming over the bank, Lietuvos rytas , which was widely regarded as the newspaper of record, published an anonymous and highly controversial leading article entitled “Order: trample Lithuanian banks,” accusing the government and the President of a conspiracy to bankrupt one of the four national banks owned by Lithuanian businessmen.110

109 Jastramskis, Deimantas. 2009. Žiniasklaidos Organizacijos Nuosavyb˙es Strukt¯ uros Ir

Žiniasklaidos Priemon˙es Šališkumo Raiškos Santykis. Vilnius: Vilnius University Press. 110 Lietuvos Rytas. 2011. “˛Isakymas: Sutrypti Lietuviškus Bankus,” November 15, 2011.

4

PRACTICES IN PRACTICE

99

The following day, the government was forced to make a move and take over the insolvent bank. Lietuvos rytas continued a series of distinctly biased articles giving voice to the owners of the bank and accusing the government of intentionally robbing the bank. According to Dainius Radzeviˇcius—the head of the Lithuanian Journalists’ Union—the conduct of Lietuvos rytas demonstrated “the perversion of mass media” in Lithuania.111 Many interviewees, including some insiders, referred to this situation as a clear example of where the media outlet represented the interests of its key owners and ignored all basic standards of journalistic professionalism. As is typical in a hierarchical management model, the journalists of the newspaper remained largely silent and went on doing their daily job. According to one insider, “because everyone knew that this was in the interest of the newspaper management, nobody from within raised any major questions.” Another high-level interviewee from the political field confirmed that, during this crisis, the newspaper management was actively lobbying on behalf of the bank at the highest political level. The interviewee recalled a conversation between a key newspaper person and the top government representative on this case, where the former openly suggested terminating the legal procedures against the bank in exchange for one of the bank owners putting a substantial sum of money into the state coffers. Following this direct and blatant attack against the government, Lietuvos rytas was found guilty of violating ethical standards but continued with similarly outrageous practices. In March–May 2016, all three of Lietuvos rytas ’ media outlets (the TV channel, newspaper, and its online portal) ran a number of stories alleging corruption in the highest echelons of the Bank of Lithuania.112 The media material contained transcripts of conversations by the chairman of the board Vitas Vasiliauskas and the head of the Supervision service unit Vytautas Valvonis, where they had supposedly demanded a bribe from a financial services business. Both of them denied any wrongdoing and sued the media outlet. Almost

111 BNS. 2011. “D.Radzeviˇcius: „Lietuvos Ryto” Straipsnis Demonstruoja Išsigimusi˛a Žiniasklaid˛a.” Delfi, November 15, 2011. https://www.delfi.lt/verslas/medija/dradzevic ius-lietuvos-ryto-straipsnis-demonstruoja-issigimusia-ziniasklaida.d?id=51772233. 112 Zubrute, ˙ Liucija. 2017. “Teismas: „Lietuvos Rytas“ Dar Kart˛a Turi Paneigti Išgalvoto I˛ rašo Turin˛i.” Verslo Žinios, October 4, 2017. https://www.vz.lt/medijos/ 2017/10/04/teismas-lietuvos-rytas-dar-karta-turi-paneigti-isgalvoto-iraso-turini#ixzz7u VheB6aT.

100

A. LAŁAS

two years later, the courts ruled that the transcripts were fake, and that Lietuvos rytas had simply invented them.113 Why? Quite likely it was an order of a business client, who sought to either put pressure on or to revenge the financial services regulator. Quoting this example, a senior Bank of Lithuania official noted that such cases were rare, but they had a very negative and lasting impact. During these times, every public official was afraid of such potential public slurs because media could so easily damage their reputation. As a result, a very unhealthy atmosphere developed, where “business is afraid of government and government is afraid of business. The majority of people are fine and honest, but a few bad apples create an environment, where everyone is afraid to take more principled decisions.” Given the small size of the media market, these few “bad apples” mattered a lot because they were the dominating players at the time. In fact, they were confident enough not just to take on the government, but also to openly interfere in elections, if it made business sense. This wellknown case of the instrumentalization of media goes all the way back to the 2003 Presidential elections. One day before the voting date, when political campaigning was prohibited, newspaper Vakaro žinios , which belonged to the Respublika group, published and distributed for free around 300,000 copies of a special issue. This issue contained not only a smear piece on the incumbent President, but also an article about, as it turned out, fake financial problems in one of the country’s major banks. The latter seems to have been included as a tool to cast a shadow on the President’s track record and to heighten public interest. According to the Financial Crime Investigation Service, a major business donor to the challenger covered the expenses of this illegal media stunt, which contributed to the incumbent’s loss.114 As one of the insiders of this affair recalled, this was only a small portion of the media campaign covered by the donor. The informal agreement between the media outlet and the political campaign appears to have been largely based on commercial grounds. According to the same source, the media owner, Vitas Tomkus, and his confidants had negotiations with both political campaigns and

113 Ibid. 114 BNS.

2003. “R.Pakso Rinkimu˛ Kampanija Finansuota Pažeidžiant I˛ statym˛a (Video).” Delfi, November 19, 2003. https://www.delfi.lt/news/daily/lithuania/rpaksorinkimu-kampanija-finansuota-pazeidziant-istatyma-video.d?id=3204408.

4

PRACTICES IN PRACTICE

101

one of them simply agreed with the financial conditions set by the media mogul. Similarly, in preparation for parliamentary elections, political parties sought to lock in partnership agreements with a dominant media outlet. As a rule, such agreements included official and unofficial arrangements. Several sources from both political and media sides confirmed that most official political parties’ advertising contracts contained so-called oral agreements or bonuses. They usually involved informal arrangements in order to enhance the party leadership’s visibility and attractiveness to voters. As one interviewee explained, “here there was less politics and more glamour, e.g. interviews with the party leader showing off his family members, his hobbies, etc.” In the case of television, it could also involve participation in various entertainment programming. While elections were an especially favorable period for the media racketeers to haul in extra income, such media partnerships with politicians were not uncommon during the off-season as well. After all, political campaigning was a never-ending affair, requiring politicians to build more lasting relationships with mass media. In contrast to the election year, these deals rarely involved criticism of political rivals and were primarily self-focused. In addition to the two most obvious participants of a political and media representative, there was usually a third one either a business or businesses close to the politician, or a political party at hand. They provided both the payments and a legal cover for the partnership. A company would formally pay for its own advertisement in a media outlet, which may or may not even appear, but which would instead substantively cover the expenses of the politician’s positive media coverage. Since the media was free to charge whatever amount they wanted, it so happened that the inclusion of a meager logo would end up costing a ridiculous amount of money. That is what one former senior editor reported about the already mentioned partnership between Vilnius mayor Art¯uras Zuokas and Rubicon Group, which had a “reputation” promotion deal with the Respublika media group. Interestingly, such agreements appear to be rather short-lived and fragile as they largely depended on financial incentives and the whims of the media moguls, who tried not to overplay their political biases of the day. Another way to financially please the media owners was a subscription. A political party would pay the media outlet for a few hundred annual subscriptions and then distribute them among key party officials and some organizations of interest (e.g. one interviewee mentioned schools). In

102

A. LAŁAS

such a way, the party would get some space in the newspaper for its own needs, although the advantage was often limited. As one interviewee explains: “Of course, they [the newspapers] were smart – it’s business after all—and they would make the same agreement with other parties, which were also offered some space.” But it seems that the principal owner of the media outlet would decide which party to grant this privilege, and which one was not worth it. Such discrimination might be partly a reason why the already mentioned Labour Party leadership took up an ambitious media development and acquisition strategy in the late 2000s. Since the mid-1990s, the future Labour Party leader Viktor Uspaskich, who was based in the city of Kedainiai, ˙ controlled a regional TV channel K˙edainiu˛ krašto televizija [Television of Kedainiai ˙ region] and a regional newspaper Rinkos aikšt˙e [Market Square] through his family business group Vikonda. While this might have been enough for ensuring sufficient local support for his own Parliamentary seat, the creation of the National Labor political party required access to national media. A notorious court case, where the Labour Party was accused of various tax evasion schemes, confirms that the leadership was eager to pay its way into the hearts and minds of the key media moguls. For example, on 13 February 2006, the Labour Party paid 344,550 Litas (roughly 100,000 euros) in black money as subscription fees to the daily Respublika. Another payment to the same media group was done barely a month later to the amount of 405,450 Litas.115 The receipts of these payments have been used as evidence in the trial. According to two sources from the Labour party, these were standard practices in order to obtain the absence of negative coverage and, when necessary, positive coverage for the party. Since the party’s establishment in 2003, its leader Viktor Uspaskich had been actively buying up media favors on offer. Initially, he used PR agencies and other personal connections in order to gain the trust of local media power brokers. Later, as he grew in fame and political leverage, he personally made deals with media owners. The presence of such practices is also confirmed in the already mentioned US Embassy’s report. One of the Labour Party officials complained about the discriminatory practices of Lietuvos rytas , which 115 Želniene, ˙ Liepa. 2012. “Darbo Partijos Juodosios Buhalterijos Išlaidos: „Respublikai“ Ir TV3 – Beveik Milijonas Litu?” ˛ 15min.Lt, December 7, 2012. https://www.15min.lt/naujiena/aktualu/lietuva/darbo-partijos-juodosios-buhalteri jos-islaidos-respublikai-ir-tv3-beveik-milijonas-litu-56-286504.

4

PRACTICES IN PRACTICE

103

demanded 25,000 Litas (7,000 euros) from his party for a favorable article, while offering the same service to the Social Democratic Party for five times cheaper. The official accepted the practice as common and only complained about the unfair treatment. Given this context and the party’s exceptional popularity among voters (the Labour Party got the most seats in the 2008 Parliamentary elections), it was not surprising that the leader of the Labour Party decided to build a media empire of its own. In the Autumn of 2010, roughly half a year before the municipal elections, the company Interneto žinios , whose majority ownership stake was also held by Viktor Uspaskich, established ten news portal imitating websites for different Lithuanian municipalities. By 2012, the company controlled at least 20 such websites. Regarding political content, this was openly pro-Labour party and most banner ads featured Labour Party leaders. All these websites were eventually brought under a relatively popular online news portal Balsas.lt, which was owned by the Balsas.lt leidiniai media group. At the end of 2010, the group acquired one of the largest national weeky newspapers Valstieˇciu˛ laikraštis (Peasants newspaper). The chairman of the Lithuanian Journalists Union described it as a mystical ghost-like media group with connections to Respublika group and the Labour Party.116 Analysts and journalists, who used to work for this group, linked it directly with the Labour Party, though the formal ownership structures were obscured using various legal smokescreens, including fake stand-in CEOs and owners.117 As one senior media group insider explained: From within the organization the actual owners find people that show more initiative or are career driven. As a rule, these people are “softer” in character. They don’t have strong opinions. So you offer a couple hundred extra Litas [former currency of Lithuania] and ask if he or she would be willing to be a director. Substantively he is not a director, but they

116 Veidas.Lt. 2012. “V.Uspaskichas Lenda Iš Už ‘Ekonomika.Lt’ Ir ‘Balsas.Lt’ Savininku˛ Širmos,” March 9, 2012. http://www.veidas.lt/v-uspaskichas-lenda-is-uz-eko nomika-lt-ir-balsas-lt-savininku-sirmos. 117 Raˇcas, Art¯ uras. 2012. “M.Širvinskas: Darbo Partija, Vokeliai, Balsas.Lt Ir Aš.” Racas.Lt (blog). October 19, 2012. http://racas.lt/m-sirvinksas-darbo-partijavokeliai-balsas-lt-ir-as/. Vireli¯unaite, ˙ Lauryna. 2012. “Lietuviu˛ Pirkinys Rusijoje – Bankas.” 15min.Lt, June. https://www.15min.lt/verslas/naujiena/finansai/lietuviu-pir kinys-rusijoje-bankas-662-224922.

104

A. LAŁAS

need his/her signature. There is a “grey cardinal” in the organization who controls everything. She simply tells this fictitious director what to do.

In agreement with the insider, journalists from the Balsas.lt media group also argued that most editorial decisions in the group were made only with the supervision of the Labour Party MEP Vitalija Vonžutaite, ˙ who used to work for the group even during her active political career.118 She was the “grey cardinal,” who, in consultation with the party leader, made key decisions. The newly consolidated media empire was not just a useful tool for spreading the Labour Party’s political message for free, but it was also a convenient way to legalize kickbacks from ministerial public tenders under the supervision of Labour ministers. Here is how it worked according to the same senior media group insider: An owner of a waste management company, who won a public tender, spent 100,000 Litas on advertisements in our media group, which he did not need. The payments, which constitute a kickback for the tender, were processed officially with all receipts. No advertisement or articles came out as a result of this transaction. This took place in 2012.

Obviously, agreements between the party leadership and businesses interested in winning public tenders took place sometime earlier. The Labour Party began devising schemes for smooth access to EU money even much earlier than this. We know that because an insider left the party in public protest following the leadership’s suggestion to establish consultancy companies for funneling European funds.119 Though the party denied any wrongdoing, it already had key people, who acted as mediators between the business and the politicians. One of them was Uspaskich’s old business friend Romas Ruškulis, whose employee later became the whistleblower in the Labour Party trial. Judging from the trial material, another one was the already mentioned “grey cardinal” Ms. Vonžutaite. ˙

118 Peˇceli¯ uniene, ˙ Lina. 2012. “Kaip Mes Beviltiškai Kovojome Prieš Sukˇciu˛ Bals˛a.” Delfi, October 23, 2012. https://www.delfi.lt/news/ringas/lit/lpeceliuniene-kaip-mesbeviltiskai-kovojome-pries-sukciu-balsa.d?id=59822289. 119 BNS. 2005. “Opozicija Prašo STT Ištirti Galim˛a Plan˛a Finansuoti Darbo Partij˛a ES Pinigais.” Delfi, February 3, 2005. https://www.delfi.lt/news/daily/lithuania/opozicijapraso-stt-istirti-galima-plana-finansuoti-darbo-partija-es-pinigais.d?id=5974234.

4

PRACTICES IN PRACTICE

105

One of the interviewees, whose career spanned both political and business fields, personally negotiated a kickback deal between Ms. Vonžutaite˙ and the company he represented, though to be exact, it was a much more mundane affair than it may sound. Here is his short recollection of the situation: When Uspaskich was the minister, I was working for an insurance company. We went to the Labour party headquarters to figure out what was the situation with our project application. Vonžutaite˙ looked at it and said it was fine. She then reminded us not to forget the 15 percent. Since the owners of the company were Russians, they were not opposed to paying the fee.

And just like that, the Labour Party began to merge politics, business and media into one metabusiness project previously unseen in terms of its scale. As in the case of Lietuvos rytas , journalists working for the Balsas.lt group had little ability to resist deviant practices. The choice was usually binary: you either bowed down to the pressure or got fired. Here is how it worked from the management perspective as explained by an insider: If journalists fight against you, you are looking for legal ways to get rid of them. So you can move them to some God forsaken far away office, and if they refuse to go there, then some other issues would come up (like showing up late for work), and you give them a formal warning and then fire them without any severance payments. Those that resist, you have to get rid of them and to get rid cheaply or for free.

Some of those, who left the media group, returned the favor by publicly disclosing problematic journalistic and financial practices. One of them was Marijus Širvinskas-Gailius, who in 2012 published an open letter, describing the evasion of taxes and the lack of any ethical journalistic standards.120 According to his account, key party members directly dictated the content of the group’s publications. Since ideologically the party was relatively shallow and preferred populist rhetoric, they simply favored their own party and its political or business allies and disdained competitors. Here is how they approached news about the prime minister from 120 Raˇcas, Art¯ uras. 2012. “M.Širvinskas: Darbo Partija, Vokeliai, Balsas.Lt Ir Aš.” Racas.Lt (blog). October 19, 2012. http://racas.lt/m-sirvinksas-darbo-partija-vokeliai-bal sas-lt-ir-as/.

106

A. LAŁAS

the opposing political camp: “For example, on January 26th , the news item that Prime Minister Andrius Kubilius had received the World Leader Cycle Award, had to be strictly excluded from all group publications. And vice versa: a survey conducted on February 26th by the Veidas magazine, according to which A. Kubilius was extremely unpopular, had to be published in a mandatory manner, according to the personal instruction of the boss.” As public scandals, investigations and court cases accumulated, this rapidly expanding political and media merger began to crumble. In early 2013, the Balsas.lt group was already looking for a buyer. In 2014, two of its key companies—Balsas.lt leidiniai and Balsas.lt —were facing bankruptcy procedures. Looking back, this racket scheme appears to be unique due to its distinct partisan component. Unlike other media groups, who were relatively open to work with any willing and financially capable political partners, Balsas.lt group was primarily a one-party project and here lay its key vulnerability. As the party’s future came under question, so did the media group’s future as well. In 2015, the Swedish media group MTG, which controlled TV3 channel in Lithuania, began the takeover of Balsas.lt-related internet portals. In many ways, this was a symbol of two key trends in the market. First, during this period, the internet news media was rapidly growing at the expense of traditional printed media (see Fig. 4.2). Those, who did not register the trend on time, like the Respublika media group, faced falling market share and dwindling financial income. The Lietuvos rytas group was also somewhat late to join the internet wave but managed to partially catch up and maintain a respectable third position in the popularity rankings of the internet media. Still, the previous power and glory of the local media moguls was over. Instead, and this is the second notable trend, the strongest internet news media outlets—Delfi.lt and 15min.lt — were controlled by foreign owners. As the market share of these new portals grew, so did their impact on local journalistic culture and practices. At last, there was a larger choice of outlets where journalistic ethics and standards were taken and applied more seriously. This is not to say that the old-timers had suddenly seen the light and converted to “new journalism.” In many cases they didn’t, but their washed-out influence limited their overall systemic impact. Still in separate cases, especially when talking about stronger regional outlets, media racketeering continues to create challenges for smaller locally oriented businesses. In the same way, some journalists continue to work in highly hierarchical and oppressive

4

PRACTICES IN PRACTICE

107

organizational environments, where journalistic freedom is nothing more than a hollow romantic concept. When I raised this problem in a conversation with a journalist from one of those organizational environments, she simply stated that it was apparent to her that I spent too much time abroad and thus lost a grasp of the Lithuanian reality. Wrapping up this coverage of various practices, one can clearly discern two seemingly opposite trends—change and stasis. It is relatively easy both to notice the changing nature of business–state relations and to see the continuity of old practices in more limited contexts. This is why Lithuania should still be regarded as transiting from segmented to isolated exclusive situationalism. Probably nobody can predict exactly when or whether this process will end, but this chapter provides an initial basis for evaluating the underlying drivers of change and continuity. In the next two chapters, I examine these two types of drivers in greater detail, bringing out new and revisiting some old stories. The period of 20-plus years of transition contains plenty of material, but a researcher, focused on a small state, often encounters the same major political and business players again and again.

CHAPTER 5

Drivers of Continuity

Abstract The chapter explores three factors—entrenched power networks, hierarchical organizational cultures and the fragmentation of power—as key contributors to the observed persistence of established norms and practices. Entrenched power networks represented the winners of the early transition, who were interested in maintaining the current structure and rules of the game. They were assisted by the predominant business and political culture that was not only high in autocracy but also high in situationalism. Still a full-scale colonization of ministerial resources was not as easy in practice because of monitoring by other coalition partners, media oversight and eventual rotation of power following elections. Keywords Entrenched power networks · Hierarchical organizational cultures · Fragmentation of power · Personalistic party model · Situationalism

In 2019, Johnson and Neyer published an article in the Journal of Family Psychology, where they demonstrated that the change of partners among German participants did not lead to fundamental changes in relationship

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_5

109

110

A. LAŁAS

development.1 After some time, Partnership 2 was indistinguishable from the previous one in terms of various parameters. This example is one of many, which indicates that people’s behavioral patterns and value systems persist over time. In political or economic (institutional) contexts, where resources and resourcefulness can open up access to further resources, value systems get actual means of realization and institutionalization. We may end up with entrenched power networks, where businesses and politicians are co-dependent on each other for exclusive access to old and new resources, for maintaining convenient and opaque organizational decision-making structures and in general for limiting the entry of new political and business players with different cultural norms and practices. As one political appointee from a mid-size city remarked, local businesses in their city were far from excited about foreign investment as it meant an increase in wages and less choice in terms of potential employees. Thus, change, even if it was desirable from a national perspective, was not welcomed by those who were the winners of the early transition and who were interested in maintaining the current structure and rules of the game. In this chapter, we explore three factors—entrenched power networks, hierarchical organizational cultures and the fragmentation of power—as key contributors to the observed persistence of established norms and practices. As it will become clear later, some of these factors are not solely linked to exclusive situationalism, but can have opposite effects as well.

Entrenched Power Networks It is hardly surprising that a number of those business owners, managers, politicians and bureaucrats, who were active participants of the business– politics nexus in the early 2000s, have maintained a similar disposition and openness for “dealmaking.” Opportunities for extractive situationalism were gradually reduced due to the filling-in of various “holes” (as discussed in a later section), but the phenomenon did not disappear. And that seems to do with people in power, their values and their networks. Extractive practices lived on in institutional niches, where management promulgated such an institutional culture. However, in contrast to many 1 Johnson, Matthew D., and Franz J. Neyer. 2019. “(Eventual) Stability and Change across Partnerships.” Journal of Family Psychology 33 (6): 711–721. https://doi.org/10. 1037/fam0000523.

5

DRIVERS OF CONTINUITY

111

other former Soviet countries, the Baltic states did not develop closed clan-based politics or in other words neopatrimonial regimes (see, e.g. Shkel 2019).2 Therefore, even during the darkest era of the late 1990s and early 2000s, extractive practices were unstable and incomplete scopewise. They co-existed with regular injections of different values and practices from within and without. Often, changes came with elections as a new political leadership questioned previous agreements and ways of policymaking. To this day, we observe this continuous friction between the old and new ways of dealmaking, but the balance of power seems to be slowly shifting in favor of inclusivity and genuine value added. Now we turn to several examples in order to illustrate the situation in the early 2000s, when the relationship between politicians and business was arguably at its tightest and most intense. In fact, the first example is one where business and politics merge together, as it often happens in authoritarian regimes. The story begins in the mid-1990s when joint Lithuanian-Russian and Lithuanian-US venture companies named Stella Vitae and Itera Lietuva were established in Lithuania, along with Jangila Inc. in the British Virgin Islands. For the next six years, the first two companies (with ownership links to Gazprom’s top management) became the principle intermediaries for natural gas supplies from Russia to Lithuania, while Jangila was a short-term player representing Vikonda—another participant in the gas mediation business. In addition to Russian stakeholders, the three companies had Lithuanian owners as well—Antanas Bosas and Viktor Uspaskich. It so happened that these two businessmen were also the founders of the already familiar and much discussed Labour Party in the late 2003. Mr. Uspaskich became the chairman of the party, while Mr. Bosas—the vice-chairman. This politics–business project was partly a response to what happened in 2002. With the appointment of the new Gazprom CEO Alexey Miller, the fortunes of the two Lithuanian business partners took a sudden turn for the worse. Their lucrative natural gas supply contracts were handed over to a new company Dujotekana, which was headed by their former partner in business Rimandas Stonys. Mr. Stonys not only had the largest ownership stake among local players (28%) but also had managed to build strategic political bridges. Already in 1998, he 2 Shkel, Stanislav N. 2019. “Neo-Patrimonial Practices and Sustainability of Authoritarian Regimes in Eurasia.” Communist and Post-Communist Studies 52 (2): 169–176. https://doi.org/10.1016/j.postcomstud.2019.04.002

112

A. LAŁAS

became the founding member of Algirdas Brazauskas Fund, a personal charity organization established by one of the most popular and influential politicians in Lithuania during the first two decades of independence. Though according to two interviewees, Mr. Stonys limited his involvement in the fund largely to financial support, such status was held by very few businessmen and no doubt provided wide political access. Furthermore, unlike previous intermediaries, Dujotekana had a much more visible political component ingrained in its formal ownership structure as well. According to 2009 media reports,3 among Dujotekana’s smaller stakeholders was Mr. Vladimiras Orechovas, who was a twoterm MP representing the Russian Union party from 1999 to 2004 and the Labour Party from 2004 to 2008. Mr. Romas Ruškulis, who had close links to Mr. Bosas and Mr. Uspaskich, was also on the list of owners and also a founding member of the Labour Party. In fact, in one Parliamentary hearing, Mr. Orechovas designated Mr. Ruškulis as the representative of Mr. Uspaskich in Dujotekana.4 The first CEO and co-owner of Dujotekana, Mr. Raimundas Paliukas, belonged to the New Union party (Naujoji s˛ajunga), which was the initial political “shelter” for Mr. Uspaskich, when first elected to the Parliament in 2000. Finally, there was Mr. Sigitas Paulauskas, whom mass media hypothetically linked to the Liberal and Centre Union party (Liberalu˛ ir centro s˛ajunga) via his wife’s father Mr. Rimantas Taraškeviˇcius, a mayor of Klaipeda ˙ city from 2001 to 2011. The direct link to Gazprom’s new leadership and possibly all the way to Russian secret services was the vice-president of Dujotekana Mr. Piotras Vojeika, a former KGB operative, who until 2008, controlled a 49% stake in the company. His wife Tatjana Vojeika, also worked as a manager at Dujotekana, and unsuccessfully ran for MP position with the Electoral Action of Poles in Lithuania Party in 2004.5

3 TV3.Lt. 2009. “Gresm ˙ es ˙ Šaliai Grimzta Užmarštin,” January 21, 2009. https://www. tv3.lt/naujiena/lietuva/gresmes-saliai-grimzta-uzmarstin-n233899. 4 ˇ Cerniauskas, Šar¯unas. 2012. “V.Orechovas: V.Uspaskichas Nori Užvaldyti „Dujotekanos“ Dal˛i Duju˛ Sektoriuje.” Delfi, January 18, 2012. https://www.delfi. lt/verslas/energetika/vorechovas-vuspaskichas-nori-uzvaldyti-dujotekanos-dali-duju-sektor iuje.d?id=54344399. 5 “2004 m. Lietuvos Respublikos Seimo Rinkimai: Kandidato Anketa.” 2004. Lietuvos Respublikos Vyriausioji rinkimu˛ komisija. https://www.vrk.lt/statiniai/puslapiai/rinkimai/ 2004/seimas/kandidatai/kand_anketa_l_295383.htm

5

DRIVERS OF CONTINUITY

113

Dujotekana featured prominently in the 2006 investigation by the Parliament’s National Security Committee into the activities of the State Security Department. Declassified interviews with State Security Department officials described the company not only as an intermediary in gas supplies but also as Kremlin’s principal instrument to expand its influence in the Lithuanian energy sector, politics and society at large. Here is one excerpt, which gives a sense of the matter: During the first phase of our active investigation, we determined one very clear thing: Dujotekana Inc. was established with the help of Russian special services. I can now reveal the following—we have one document, which contains an appeal to the then Prime Minister Putin to open a company in Lithuania as an intermediary so that it can get a [gas] quota and make a profit. It is written here that the profits will be used to support the Russian diaspora [in Lithuania], to support loyal NGOs, which according to one bullet point, will allow for some Russian institutions to pursue their interests in Lithuania. […] We have this document.6

The security officials insisted that gas was just one part of economic and political interests of Dujotekana owners. The other three were oil refinement, electricity production and railways. In all cases, the key representatives of the company very actively influenced civil servants, ministry officials, Government and tried to implement their projects. Each of their new projects, new things were coordinated with the people living in Moscow…. The influence unfolded in the same way when a new [ruling] coalition was formed. Here, their whole point was to enable them to pursue their interests better and faster than others, that is, to place their own people, those who are favorable, loyal to them, in key positions.

Whether one takes the description of Dujotekana’s influence at face value or not, there is no doubt that Russia had a direct interest in Lithuania’s energy sector and used local players to extend its leverage. During this period, it signaled its interests in many different ways: starting from high-level visits, active participation in the privatization of key 6 BNS. 2007. “Seimo NSGK Paviešinta VSD Veiklos Tyrimo Medžiaga - 15 Posedis.” ˙ TV3.Lt, April 24, 2007. https://www.tv3.lt/naujiena/lietuva/seimo-nsgk-paviesinta-vsdveiklos-tyrimo-medziaga-15-posedis-1-dalis-n89305.

114

A. LAŁAS

energy companies, and even energy supply disruptions as a means for forcing cooperation. However, despite all these efforts, Russian attempts at controlling key Lithuanian energy companies were always met with deep suspicion by many politicians, especially on the political right. When political fortunes shifted, so did the potential for interference as well. Not accidentally, the above-mentioned parliamentary investigation took place during the period when the Conservatives, probably the most Russo-sceptic party, were in power. If one adds to this attempts by resentful former business partners now turned influential politicians (like Mr. Uspaskich) to curtail Dujotekana’s growing ambitions, it becomes clear why this influence was never complete or overwhelming. Just to fully immerse ourselves in this context, it is worthwhile to read through the memoir-like article of Žydr¯unas Damauskas, the spokesperson for the Ministry of Economy, who worked there during Mr. Uspaskich’s reign.7 The word “reign” is not accidental because the minister often acted like a king. Not surprisingly, Uspaskich used his political post to harm Mr. Stonys and his energy business interests because supposedly the self-made politician was cheated out of ownership in the oil production business. Specifically, Damauskas argued that Uspaskich ordered the ministry’s lawyers to investigate Geonafta, the largest oil producer in Lithuania, which Stonys controlled. Also, Uspaskich initiated legislative changes to the Law on Natural Gas and convinced governing coalition partners to support the changes. Furthermore, he went as far as demanding from a supposedly independent head of the National Commission for Energy Control and Prices to change the price calculation formula of natural gas. All of this and more just to curtail the power of Dujotekana and its key owners, who in turn sought to expose Uspaskich’s plan of attack. Not all of these attempts to hurt bore fruit because Mr. Uspaskich’s abrasive, arbitrary and illegal maneuvering often ended up in scandals and investigations. Barely just six months into his ministerial career, Uspaskich was curtailed himself and forced to resign for repeatedly breaching the conflict of interest rules. He simply overstepped too many red lines. As Balmaceda (2008: 25) notes, comparing Ukrainian and Lithuanian

7 Damauskas, Žydr¯ unas. 2005. “Skandalai Keite˙ Ir Politiko Veid˛a, Ir Kaukes.” Maga.Lt, September. https://maga.lt/11096.

5

DRIVERS OF CONTINUITY

115

cases, the latter’s political system was “more fragmented, having no decisive power either in the hands of the president or the parliament, a high number of effective parties in the Seimas, and with no clear dominant party or coalition but ultimately a more accountable political system making a difference, no matter how small.”8 Still, in the midst of this fragmentation, the link between politics and business was its peak in the early 2000s. In a study of the members of the newly elected 2004 Parliament, the business daily Verslo žinios counted 36 out of 141 MPs, who had previously declared their own or their family members’ ownership stakes in various companies.9 The actual numbers were even higher as the newly elected parliamentarians did not have to declare their business interests until the following spring. As one highlevel party official summarized the situation in the Parliament at the time: “[Unregulated] Lobbying was all over the place. (…) It came from politicians, business associations and individual lobbyists. They all offered their own versions of laws and amendments.” With extremely high volumes of legislation, availability for late submissions by MPs, and little transparency, this appeared to be a fruitful ground for the fusion of business and politics. One of the most notorious and ambitious examples of this attempted fusion relates to a nuclear power project, which came about as a result of the planned closure of the Soviet-built Ignalina Nuclear Power Plant. Due to its technological similarity to Chernobyl Nuclear Power Plant, Lithuania was committed to close the plant as a part of EU accession negotiations. In order to deal with the issue of future energy supply shortages, the social democrat-led government proposed a public–private partnership arrangement between the government and VP Market , one of the largest companies in the country. Interestingly, VP Market ’s core business was focused on food retail, but like a number of other companies at the time, it sought to get a piece of the state energy monopolies. Why? As a former state agency head noted, state monopolies were “wonderful bankruptcy-immune cash cows, which also had an extra layer of ‘lard’,

8 Balmaceda, Margarita M. 2008. “Corruption, Intermediary Companies, and Energy Security: Lithuania’s Lessons for Central and Eastern Europe.” Problems of PostCommunism 55 (4): 16–28. https://doi.org/10.2753/PPC1075-8216550402. 9 Paˇckauskaite, ˙ Agne. ˙ 2004. “Politikai Turi Atsikratyti Akciju.” ˛ Verslo Žinios, December 23, 2004. https://www.vz.lt/article/20041223/Premium/312239985.

116

A. LAŁAS

e.g. land holdings.” One of the energy infrastructure regional monopolies, Vakaru˛ skirstomieji tinklai (VST),10 was already in VP Market ’s pocket after it was privatized under controversial circumstances in 2003. Based on the initial conditions of this tender, only Lithuanian and only the two largest businesses qualified as participants, these being VP Market and Achema Grup˙e . The latter bitterly lost the bidding competition, but, according to a number of interviewees, received compensation in the form of an exclusive right to participate in the building of an LNG terminal—another PPP initiative in the making.11 However, there were even more substantial issues with this deal, as specified by the National Audit Service in 2006. The audit concluded that “the VST was not adequately prepared for privatization”. Among the key issues raised were deficient and opaque initial valuation of the company, failure to create a favorable legal environment for the company before its valuation, failure to create adequate minimum share capital requirements for participating companies and, finally, failure to prevent the subsequent 100-fold reduction of share capital of the newly privatized company.12 All these failures had two major effects: they markedly undervalued the company before privatization and then provided the new owners with fresh possibilities to recoup their initial investments. For example, a year after the deal, Parliament passed revisions to the Law on Electricity Energy, which provided means for the VST company to raise its electricity prices for end users and substantially boost the value of the company (ibid.). In a similar vein, following the already mentioned 100-fold reduction of its share capital, the privatized company took up an obligation to pay out 401 million Litas to its new shareholders, which was subsequently envisioned as a contribution to the development of the new nuclear project. The head of a public agency openly criticized this

10 Vakaru ˛ skirstomieji tinklai (Western distribution network) used to be a part of Lietuvos energija, which, following EU recommendations for greater transparency, was split into four companies. Two of them—VST and RST were regional (Western and Eastern) electricity distributors, while two others—Lietuvos elektrine˙ and Mažeikiu˛ elektrine—were ˙ responsible for electricity production. 11 TV3.Lt. 2008. “Tariasi Del ˙ Duju˛ Terminalo,” September 16, 2008. https://www. tv3.lt/naujiena/verslas/tariasi-del-duju-terminalo-n213667. 12 “AB Vakaru ˛ Skirstomuj ˛ u˛ Tinklu˛ Privatizavimo Vertinimas.” 2006. 2030-29–112. National Audit Office of Lithuania. http://elibrary.lt/resursai/DB/VK/VK_veiklos_audi tai/2006/2.pdf.

5

DRIVERS OF CONTINUITY

117

drawdown mechanism. According to him/her, soon after the pronouncement, s/he received a personal visit from the VST company management with threats to “trample me, if I continue to escalate this topic.” Since none of the politicians were willing to investigate the issue further, the interviewee had little choice, but to forget about it. However, there is also a less cynical perspective on this initial stage of the project. According to four VP Market insiders, they pursued a double strategy. Of course, like any business idea, it was about earning money. The project had to be financially viable and for that, it was necessary to boost the company’s cash flow in order to have an ability to borrow on the international markets. Furthermore, there was also a genuine desire to develop the project and help the country integrate into the Western economic and political sphere. So this story is far from uni-dimensional and it does not exclude the presence of more noble motives as well. The privatization of VST was only the first step in the nuclear project that envisioned a combination of public and private investments in the form of three companies—VST , RST and Lietuvos Energija—under the cap of one holding company—Leo LT . Since VST was the only private participant, its valuation became a key factor in determining the distribution of shares among the participants of the holding. Since invested capital valuation favored state-owned companies, VST owners, in line with previously taken steps, pushed for a net cash flow valuation. Key government officials agreed with VP Market demands, which significantly boosted the percentage of its shares in the holding. According to one expert opinion, VST shares in the holding were inflated from about 28– 30 to 38%, granting the company owners a veto right for any decisions on the nuclear project. At the same time, according to another interviewee, cash flow was a key indicator as the holding planned its future borrowing strategy. So, did participating state officials fail to protect the public interest and instead favor business interests? “Yes” is one legitimate and reasonable answer. Corruption was not uncommon in those days and officials could be rewarded either through direct payments or lucrative job positions offered to politicians and bureaucrats by their business clients. In fact, at least two key public officials related to this story were later hired by VP Market . However, there was also a larger contextual issue of relatively easy and quite widespread access to state-controlled resources. It has already been mentioned that many MPs had ownership stakes in various companies and, on occasion, lobbied for them. That said, there were

118

A. LAŁAS

also state company managers who had their own companies on the side, which serviced the state company or took advantage of insider information to make business. One interviewee recalled an instance when s/he worked for a private company, which was owned by the wife of a mid-level state company manager. This state company employee was responsible for acquiring various supplies, which, as readers might have guessed, were supplied by his wife’s company. Such simple schemes were evident everywhere in the energy sector, with a former auditor describing the situation in this way: You look at acquisitions made by such companies and you see very suspicious patterns of repeated suppliers. You see purchases, which have nothing to do with the needs of the company. When you asked why they purchased this or that, engineers would lead you aside and tell you the real reasons with a warning that for audit purposes, they didn’t tell you anything. So you would end up with these findings that could not be reasonably explained.

In the case of the nuclear project, it turned out that the CEO of Lietuvos Energija Rymantas Juozaitis purchased shares of Lietuvos Energija worth half a million Litas through his daughter’s company (RNI Property) and sold them a week later as the news about the nuclear project pushed the share prices up.13 Furthermore, RNI Property also acquired 14 hectares of land right next to the Ignalina Nuclear Power Plant, which was a likely site for the new power plant. Despite criticism from both media and politicians, Mr. Juozaitis not only maintained his position but also became chairman of the governing board of Leo LT , which indicated both a very lax attitude towards such arrangements and the omnipresence of a “business spirit” among state officials. One of NDX Energy, which controlled VST , insiders recalled discussions about this scandal and whether Mr. Juozaitis should have been asked to resign. It was decided against such an escalation as it was too risky politically. This and other similar compromises inevitably exposed state resources for abuse. Practically all interviewees, who in one way or another were related to large state businesses at the time, acknowledged the fact that all of them were inundated with various opaque enterprises that sought to obtain a piece 13 Navickaite, ˙ Lina. 2008. “Li¯uto Gimimo Diena.” Kauno Diena, May 21, 2008. https://kauno.diena.lt/naujienos/kitas-kampas/liuto-gimimo-diena-469165.

5

DRIVERS OF CONTINUITY

119

of their budget. Still, no matter how powerful businesses were, they never managed to fully control the process or the message. For example, when they tried to use legal intimidation with punitive damage requests against their public critics, the courts struck down these damage requests.14 If Dujotekana and VP Market often targeted national politicians, there were companies who paid a much closer attention to municipal politics. Here, and especially in smaller municipalities, it was easier to maintain old boys’ networks even in increasingly tight regulatory conditions. Vytautas Grigaraviˇcius, the former mayor of Alytus, recalled these challenges: The more compact the municipality, the easier it is to govern, to put things in order. But at the same time, it is harder because the network of acquaintances is significantly larger. You certainly know one another, especially company senior managers. And they often participate in municipality tenders. Then it is harder to find a line of separation in order to avoid corruptive shadowly relations.15

One high-level party official described the context of smaller municipalities in a very similar way: “[In a small municipality] everything comes down to several hundred people. So the quality of relationships is very different. It often happens that you have close connections on both the left and on the right because you grew up and went to school together.” He then went on to list his own best friends from childhood, who are now prominent professionals in their own fields of practice on a national level. And then the interviewee presented me with a rhetorical question: so if I needed help on such and such an issue, would I use official channels or contact my friends? The answer was clearly in favor of childhood friends. And childhood friends are at the core of the next example of entrenched power networks from the field of district heating services for cities and towns. With politicians interested in foreign investment and the renewal of its aging Soviet central heating infrastructure run by poorly managed 14 “Byla 2A-191/2012.” 2012. Lietuvos apeliacinis teismas. https://eteismai.lt/byla/ 157674936055417/2A-191/2012. Navickaite, ˙ Lina. 2008. “Li¯uto Gimimo Diena.” Kauno Diena, May 21, 2008. https://kauno.diena.lt/naujienos/kitas-kampas/liuto-gim imo-diena-469165. 15 Zdramys, Alfredas. 2018. “V. Grigaraviˇcius: Politika Nera ˙ Švari.” Kauno Diena, July 15, 2018. https://kauno.diena.lt/naujienos/lietuva/politika/v-grigaravicius-politika-nerasvari-872485.

120

A. LAŁAS

and indebted municipality-owned companies, some businesses sensed a unique lucrative opportunity in the late 1990s and early 2000s. Rubicon Group (later renamed ICOR group) became one of the most iconic names of the period as they tried to win over politicians and the public with their vision of modern heating infrastructure boosted by a French partner Dalkia (later renamed Veolia). At the height of their influence, these business partners ran the heating infrastructure of ten municipalities under long-term rental agreements. Rubicon has encountered many scandals over its pricing strategies, investment tactics and overly close connections to politicians and bureaucrats. Rather than recalling all the details, which would require another book, I take a report from the National Audit Service as a foundation and supplement it with interview data and mass media reports. However, before diving into the report, there is one curious story, which can serve as a good introduction to this whole matter. In 2009, the Supreme Court of Lithuania found the former Mayor of Vilnius Art¯uras Zuokas and his childhood friend Andrius Janukonis, the head of Rubicon Group, guilty of attempting to bribe a local politician Vilmantas Drema ˙ in order to convince him to vote for Zuokas’ candidacy as the city mayor. According to secret phone conversation recordings, Mr. Drema ˙ was facing the prospects of others finding him “floating in the Neris river with a bloated belly”, if he refused to budge.16 While Mr. Zuokas repeatedly denied any wrongdoing, there is both publicly available and interview-based data to confirm an extremely close connection between the twice-elected mayor of Vilnius and the Rubicon Group. One could go even further and argue that Mr. Zuokas was one of the reasons why the city of Vilnius became a key launching pad for the rapid rise of the group. While other municipalities also generated some income, the concession agreement with Vilniaus šilumos tinklai (the principal heating service provider for Vilnius) signed during the mayorship of Zuokas, was arguably the proverbial goose that laid the golden eggs for Rubicon. But let’s return to the audit report and spend some time exploring their evaluations.

16 Ceponyt ˇ e, ˙ Jurgita. 2016. “Seimo Rinkimu˛ Dalyviai: Lietuvos Laisves ˙ S˛ajunga.”

LRT.Lt, September 22, 2016. https://www.lrt.lt/naujienos/kalba-vilnius/32/148985/ seimo-rinkimu-dalyviai-lietuvos-laisves-sajunga. Chadaseviˇcius, Saulius. 2009. “Amžinoji Vilniaus Mero Rinkimu˛ Byla Baigta: Zuokas – Kaltas!” 15min.Lt, February 10, 2009. https://www.15min.lt/naujiena/aktualu/amzinoji-vilniaus-mero-rinkimu-bylabaigta-zuokas-kaltas-atnaujinta-15.25-val-55-27646.

5

DRIVERS OF CONTINUITY

121

Reading through the report, one comes across two key themes illustrative of dominant practices in the closely-knit networks.17 First, it is the failure of municipalities and local politicians to closely monitor the management and renewal of rented infrastructure. For example, as noted in the report, the municipality of Palanga did not conduct any formal monitoring of the renter’s planned investments and subsequent pricing strategies for almost twelve years! One of the results of such negligence was overpricing of services by the renter (pp. 16–17). In some of these cases, there is every reason to suspect a premeditated strategy of negligence by politicians in favor of business partners. Such behavior clearly contrasted with very active efforts to sell the initial rental agreements and their early extensions to the public and other politicians. In other words, it was a part of a business plan, whereas negligence led to increased profit for the renter and kickbacks for politicians looking the other way. One high-level official, who had a chance to closely analyze both the documents and the practices from within the organization, was very blunt about this strategy of negligence: “We came and found almost no adequate information about assets under service concession, investments, etc. According to the service concession agreement, the municipality had to monitor the service provider, but you quickly understood that this was substantively impossible to do.” Even those high-level politicians, who defended the arrangement of public–private partnership in principle, admitted that in this particular case, monitoring was in very short supply: “I agree that the monitoring of the agreement with Dalkia was very weak. Overtime institutional friendships developed and real monitoring disappeared. Rubicon grew stronger, they became more powerful and new mayors could do little to change this.” So the monitoring ended up being a matter of just formal approvals by municipality officials and/or politicians. Another interviewee, who at the time was involved in municipal politics of a mid-size city and saw these processes from up close, tried to prove to his fellow municipality politicians (with the help of numbers) that his city could easily do a better job than the renter in providing heating for the residents. However, as he recalls, most of his colleagues had no willingness to listen to his arguments. One of them came and told him directly: “Listen, back off, with your suggestions. I need to provide for my children.” 17 “Šilumos Ukio ¯ Nuoma Savivaldybese.” ˙ 2017. VA-P-30-2-5. National Audit Office of Lithuania. https://www.valstybeskontrole.lt/LT/Product/Download/3503.

122

A. LAŁAS

Speaking of provisions, the second key theme relates to attempts by the renter to use rental time and available resources to build up their own infrastructure, which they would then own and be able to offer as replacement services to the city. In the case of Trakai and Alytus municipalities, the renter used partial EU funding to build new heating plant facilities and to capture their ownership. Again, the municipality and its politicians came to play a crucial role here because they had to approve changes to initial agreements in order to shift ownership rights from the rentee to the renter. And they did: the only issue, which was not anticipated, was the Competition Council of Lithuania and its verdict of anti-competitive collusion vis-à-vis the agreement.18 Usually, such institutional safeguards become activated when somebody issues official complaints or inquiries. However, when nobody seems to care, these safeguards have no effect. The audit report noted instances when, after the expiration of the rental agreements, the municipality officials failed to assess the value of returned assets, even though they were required to do so by law, to make sure that the value was not lower than at the start of the agreement. This failure often made sense in the light of what was taking place during the service concession agreement— running down of the municipality-owned companies and simultaneously building up of a new private business conglomerate as a better and more modern alternative. If one takes a closer look at the growth of Rubicon, you can track how its various service providers to the municipality-owned companies emerged over time and built up their profiles. For example, the Rubicon-owned Bionovus (later renamed to First Opportunity) became the principal biofuel provider for Vilniaus Energija, another Rubiconowned company, which was the principal heating service provider for the capital city under the concession agreement. The director of the National Commission for Energy Control and Prices estimated that, during the 2012–2014 period, Bionovus overpriced its biofuel to Vilniaus Energija

18 “Nutarimas Del ˙ Alytaus Miesto Sprendimu˛ Keiˇciant Sutart˛i Su UAB ‘Litesko’ Del ˙ ¯ Alytaus Miesto Šilumos Ukio Modernizavimo Ir Renovavimo Atitikties Lietuvos Respublikos Konkurencijos I˛ statymo 4 Straipsnio Reikalavimams.” 2015. Lietuvos konkurencijos tarnyba. https://kt.gov.lt/uploads/docs/docs/12853_imp_ca33c48611a86f9bf59ed 7a06f83a73f.pdf.

5

DRIVERS OF CONTINUITY

123

by up to 50% in comparison to market prices.19 One also saw the emergence of Rubicon-owned City Service (later liquidated and re-established in Estonia), an intermediary provider of heating and hot water services for Vilnius city kindergartens and schools. The 2010 agreement between City Service and Vilniaus Energija was challenged and counter-challenged in courts on the basis of unfair preferential treatment between these two Rubicon-owned companies.20 Another example is the Rubicon-owned Axioma metering company, which now produces heat, water and wastewater monitoring devices. In conjunction with the latter, Axioma servisas provides its own produced device maintenance and distance reading services. In its 2020–2022 strategy, Alytaus šilumos tinklai openly stated that they sought to free themselves from the overpriced Axioma servisas services.21 Probably one of the most notorious cases of using the opportunity to jumpstart a private alternative to a public service provider took place in the city of Alytus. There, Rubicon-owned Litesko, which was the principal heating service provider for the city under the concession agreement, managed to convince the municipality that the municipality-owned Alytaus šilumos tinklai no longer needed an old heating boiler, along with one-sixth of its network of heating pipes, and some other facilities. The municipality agreed to announce a public auction for this “unnecessary” infrastructure, which was won by a single participant, Fonas , a company through various subsidiaries related to Rubicon.22 Later, Fonas used previously secured EU funding to build a new biofuel heating boiler as a renewal project of this infrastructure. Not surprisingly, the boiler

19 BNS. 2019. “KT Tures ˙ Iš Naujo Spr˛esti Del ˙ Baudu˛ „Vilniaus Energijai“ Ir „First

Opportunity“.” 15min.Lt, June 6, 2019. https://www.15min.lt/verslas/naujiena/fin ansai/kt-tures-is-naujo-spresti-del-baudu-vilniaus-energijai-ir-first-opportunity-662-115 6038. 20 “Byla 3K-3-415/2013.” 2013. Lietuvos aukšˇciausiasis teismas. https://eteismai.lt/ byla/253859123994089/3K-3-415/2013. 21 “UAB „Alytaus Šilumos Tinklai“ Veiklos Strategija 2020-2022m.” 2020. Alytaus šilumos tinklai. https://www.alytausst.lt/wp-content/uploads/2020/10/2020-2022-m.A%C5%A0T-strategija.pdf 22 Malinauskas, Skirmantas. 2017. “„Litesko“ I˛ kaitu Tap˛es Alytus – Valstybes ˙ Turto Peremimo ˙ Schemos Kyla Viešumon.” 15min.Lt, March 27, 2017. https://www.15min. lt/verslas/naujiena/energetika/litesko-ikaitu-tapes-alytus-milijonu-pasisavinimo-schemosvercia-issizioti-664-773348.

124

A. LAŁAS

was acquired from Axis technologies , a Rubicon-owned company responsible for the production and installation of biofuel heater boilers. And so the circle went around and around with all these and other various companies mediating and servicing each other with the eventual price tag handed over to members of the public who then paid high premiums for heating and hot water services. For those who later tried to legally challenge these arrangements, the principal difficulty related to the fact that all these schemas were formally approved by municipality officials and even the councils. It all had the formal veneer of legality, despite various ethical and public interest-related concerns. Before moving on to the next section, it is important to emphasize that politicians and political parties were not only the objects of various business pressures. Political parties of the 1990s were a kind of business in themselves with minimal regulation. Their leadership and especially those responsible for fundraising actively sought contributions from private or public corporations, using various methods of persuasion or cooperation. For example, a top-level political advisor named a politician as being a key fundraiser in one of the largest parties before 2011 (when it was legally permissible to solicit donations from companies). He often traveled to different companies and, on behalf of the party, asked for donations. The preferred donation was, of course, cash. Following one less fortunate visit to a government-owned energy company, the politician came to the interviewee to complain that the new CEO refused “to pay a percentage” and thus it was necessary to put some pressure on her/him. The pressure came through the party leadership and up to the Ministry of Finance (the main shareholder) if the party controlled the ministry. Local municipality officials and politicians, where the company was established, could be activated for additional effect. Furthermore, the minister could simply invite the CEO for an informal talk (or pay a visit) and signal his/her dissatisfaction. For those with more prudence and caution, it was quite easy and convenient to put your own trusted people on the board of directors, who then would have the leverage to both monitor, manage and pick the company’s management. Not accidentally, as we saw earlier, that new ruling coalitions—especially in local municipalities—led to swift changes in membership on the board of directors for key public companies, all according to the pre-agreed divisions of the spheres of interest by coalition partners. Among others, the primary goal of such changes was the establishment of access to necessary resources, which could directly or

5

DRIVERS OF CONTINUITY

125

indirectly strengthen a political organization and take care of its members’ needs and expectations. In contrast to public companies, political pressure on private businesses was relatively rare and soft. Usually, mayors of cities or towns would ask for some financial help from their core circle of business supporters in order to organize a town festival or help a cultural association, who needed funding for their activities. In return, the city management would informally promise to improve local infrastructure, help as mediators to bring up a particular issue of importance to the Parliament or streamline necessary paperwork, approvals, etc. So more often than not this was a cooperative relationship that at least partially depended on the organizational cultures of both partners, a subject which I turn to next.

Hierarchical Organizational Cultures The collapse of the Soviet Union might have transformed the political map of the region, but at least initially it did very little to organizational cultures. The Hierarchical management model, which lies at the heart of the centrally planned Soviet economy, was the only model known and practiced at the time. Although two studies measuring power distance in Lithuanian organizations come up with moderate scores, their sample is only students and thus may not adequately reflect the situation during the last 30 years of independence (Mockaitis 2002; Huettinger 2008).23 In fact, other scholars repeatedly emphasize that the predominant managerial culture tended to be rather autocratic and paternalistic, but had recently undergone some changes (Diskiene et al. 2010; Snaebjornsson et al. 2017).24 And that’s exactly what we observe from interview and secondary data. Throughout the 1990s and early 2000s, the predominant business and political culture was not only high in autocracy but also high in situationalism. When a few individuals without consultations with their team 23 Mockaitis, Audra I. 2002. “The National Cultural Dimensions of Lithuania.” Ekonomika 59 (December). https://doi.org/10.15388/Ekon.2002.17007. Huettinger, Maik. 2008. “Cultural Dimensions in Business Life: Hofstede’s Indices for Latvia and Lithuania.” Baltic Journal of Management 3 (3): 359–376. https://doi.org/10.1108/174 65260810902414. Diskiene, ˙ Danuta, Albinas Marˇcinskas, and Asta Stankeviˇciene. ˙ 2010. “Leadership Attitudes in Lithuanian Business Organizations: Evidence and Perspectives.” International Journal of Leadership Studies 5 (3): 283–304. 24 Snaebjornsson, Inga Minelgaite, Ingi Runar Edvardsson, and Romie F. Littrell. 2017. “Societal Culture in Iceland and Lithuania: Managerial Implications.” SAGE Open 7 (2): 215824401770402. https://doi.org/10.1177/2158244017704023.

126

A. LAŁAS

or without previous planning make decisions on behalf of organizations, opportunities for situationalism abides both on the business and politics sides. We begin with politics, local politics. Those municipalities dominated by a single political party/movement and with a popular mayor at the helm tended to exhibit high levels of situationalism. In the case of one relatively large municipality, three interviewees described similar situations, where the mayor of the city, whose party/movement also had the majority in the city council, acted unilaterally and leveraged his/her power at will. A source, who personally took part in several meetings, described one situation where the mayor pressured his staff to come up with a building permit in one day. When the staff sought to explain the nuances related to the case, the mayor dismissed them and repeated his demands. In another instance, the mayor banned the approval of a building project, claiming that the developer’s partner acted irresponsibly at some point earlier and now it was time for revenge. Two other interviewees were not familiar with these particular stories, but they confirmed that the mayor often acted in a unilateral manner. In the early 2000s, such instances were common in smaller municipalities as well, where a mayor could either stall or empower particular projects. A co-owner of a large retail business described a contrasting situation between two relatively small municipalities, wherein the one case the mayor was very open to their retail investments, while in another— hostile. In both cases, they eventually managed to open up shops, but there was a substantial difference in the implementation time of these projects. Because the business depended on the municipality for building permits and the resolution of traffic-related issues due to increased traffic flows, it had to work things out or wait for a new mayor to be elected. Sometimes the latter option was the only available route. Another source provided a different example from the same “hostile” municipality, where a few years earlier the mayor demanded that they fix up a building before a liquor license would be granted to a restaurant renting the building. Legally, the two issues were not related, but the owner had no option, but to comply. In smaller municipalities, the issue was sometimes one of “right” access to political leadership. As one interviewee noted, help can come from local lawyers or even construction companies. The local construction company would approach a retailer seeking to open up a shopping mall, and offer its building services in exchange for a building permit. Such instances

5

DRIVERS OF CONTINUITY

127

were more common in the early transition period and became less so with time. However, at no point in time were these regular practices. According to the source, they were separate individual cases rather than systemic problems. However, the abuse of power by individual mayors, which we alluded to above, seems to be a more widespread phenomenon. In 2014, the mayor of Alytus, the sixth largest city, fired a city theatre director, who had leaked a previously recorded conversation with the mayor. In it, the mayor had threatened the director and its family with legal and other consequences, if she didn’t change her tactics. He openly boasted about his own abuse of office and informed the director that she “will soon be finished.” The language was laden with swear words and self-aggrandizement.25 A relatively similar recording surfaced in 2010, but with the mayor of Vilnius—Vilius Navickas—in a featured role. Mr. Navickas fired the Chief City Auditor/Controller Šar¯unas Skuˇcas, who was allegedly pressured to change audit reports of some municipality-owned companies. During the trial, Mr. Skuˇcas radically changed his story and eventually dropped the charges, but the recording deserves attention as it illustrates a candid way of thinking by the top politician. When the controller insisted that he had to implement assignments mandated by law, the mayor responds: “Yes, you can implement, but you know how they are implemented. One assignment, favorable to Fatherland Union [the ruling party], you implement in three days, while the other one favorable to Paksas followers [the opposition party] can be implemented in three years. Don’t you understand that? (…) You need to consider politics if you make politics out of it. Now you will get [punched] for this enactment, and you will get ‘into the horns’ like you’ve never seen before.”26 Curiously, both the mayors of Vilnius and Alytus seemed to be on the same linguistic wavelength, offering their subordinates “into the horns”, a colloquialism for beating somebody up.

25 Cerniauskas, ˇ Šar¯unas. 2015. “Alytaus Mero Košmaras T˛esiasi. Š˛isyk – Apie N**ui Siunˇciam˛a Lietuv˛a.” Delfi, February 20, 2015. https://www.delfi.lt/news/daily/lithua nia/alytaus-mero-kosmaras-tesiasi-sisyk-apie-nui-siunciama-lietuva.d?id=67227862. 26 TV3.Lt. 2010. “Vilniaus Meras Pl¯ udo Neparanku˛ Savivaldybes ˙ Kontrolieriu,” ˛ September 13, 2010. https://www.tv3.lt/naujiena/lietuva/vilniaus-meras-pludo-nepara nku-savivaldybes-kontrolieriu-n501762.

128

A. LAŁAS

Businesses were also not immune from such excesses. An extreme example was Mr. Vladimiras Romanovas, a business mogul, who now resides in Russia. Mr. Romanovas used to own the fourth largest bank in ¯ Lithuania Ukio bankas , as well as the largest regional daily Kauno diena, the most popular Lithuanian basketball club Žalgiris, a local football club Kaunas , and even the Scottish football club Heart of Midlothian. At the time, the regional daily Kauno diena was nothing more than an instrument to further his business and personal goals. As one member of the newspaper’s editorial team noted, all spheres of his interests—basketball team, night clubs, bank, loyal politicians, lawyers, architects, friends and even a particular brand of champagne he imported—were sacred cows that could only be worshipped by the paper. This was assured by both direct commands from the owner or, from what the editorial team called, his appointed Supervisor at the daily. Every evening the Supervisor’s job was to read through the preprepared edition of the next day’s edition and ensure that the will of the owner was not compromised in any way. Since the owner’s will could change quite unexpectedly and quickly—due to ups and downs in personal or business relationships—the newspaper editorial team apparently felt as if walking on thin ice. A late-night call from the disgruntled owner or his wife were a regular part of the editorial work experience. Anybody, who rubbed the owner up the wrong way, found themselves attacked by the newspaper. One such instance is a conflict between Mr. Romanovas and another local businessman Mr. Tautvydas Barštys, who publicly accused Mr. Romanovas of racketeering. In response, Kauno diena published an article, claiming that Mr. Barštys had been previously treated for schizophrenia and was related to the criminal world. In protest, the editor-in-chief and two vice-editors deleted their names from that particular newspaper edition.27 As it turns out, behind this protest was a blunt request by the owner to “find kompromat, anything, against Mr. Barštys”, which resulted in this botched up effort. Other journalists took more dramatic actions, protesting against constant interference and pressure. In 2010 two sports journalists resigned from the same daily, reporting ongoing pressure in their work. Here is a short excerpt from their joint public statement:

27 Lietuvos žurnalistu ˛ s˛ajungos Kauno skyrius. n.d. “„Kauno Dienos“ Redakcijoje – Maišto Nuotaikos.” http://www.kaunozurnalistai.lt/15799/.

5

DRIVERS OF CONTINUITY

129

We would like to inform you about the pressure experienced in the performance of our direct duties, which forced us to leave “Diena Media News”, the company that manages the daily newspapers “Kauno diena”, “Vilniaus diena” and “Klaipeda.” ˙ We have noticed before that the pressure to write negatively about certain personalities of the basketball world—without data supporting such information—comes from the banker Vladimir Romanov’s entourage. On October 15 [2010], Remigijus Jurgelaitis, who is also the director of SPORT1 television, became the company’s editor-in-chief and this pressure only intensified.28

Although politics is not a part of these particular stories, it was never far away. Mr. Romanovas already had extensive influence in municipal politics and used his media outlet to pressure disloyal politicians and reward the loyal ones. Since, as mentioned earlier, the list of his friends and enemies changed rather quickly, the editorial team had to tread carefully to avoid any missteps. However, Mr. Romanovas’ ambitions were far greater than Kaunas city. In early 2012, he established a political party “People’s Party of Lithuania” and tried his luck in the 2012 Parliamentary elections. Not surprisingly, he was leading the party list together with a number of famous former or current basketball players, who either worked or played for his Žalgiris basketball club. This model of attracting political candidates from your own organizations was extended to other companies owned by Romanovas. Out of a total of 61 political candidates listed for the parliamentary elections, at least 15 were employees of Romanovas’ business empire. Even the party leader Ms. Šimanauskiene˙ was working as a project manager at a real estate company closely linked to Romanovas. Not surprisingly, Kauno diena was also brought in to help the political campaign and published numerous articles with very favorable coverage of the party, its activities and its members.29 According to one highlevel insider, Mr. Romanovas initially requested journalists to join the 28 Krepsinis.Net. 2010. “‘Žalgirio’ Vadovai Em ˙ esi ˙ Riboti Žodžio Laisv˛e?,” October 21, 2010.https://www.krepsinis.net/naujiena/zalgirio-vadovai-emesi-riboti-zodzio-laisvepapildyta-foto/32563. 29 Selenis, ˙ Darius. 2012. “Bronzinis Boksininkas E.Petrauskas Žengia ˛i Politik˛a.” Kauno Diena, September 1, 2012. https://kauno.diena.lt/naujienos/laisvalaikis-ir-kultura/zva igzdes-ir-pramogos/bronzinis-boksininkas-epetrauskas-zengia-i-politika-500865. Tvirbutas, Saulius. 2012. “Lietuvos Žmoniu˛ Partija Surenge˙ Pirm˛aj˛i S˛askryd˛i.” Kauno Diena,

130

A. LAŁAS

party, but since that was too controversial (as it was explained to him), he turned his attention to newspaper administration—accountants, sales personnel—and sought their political involvement. Thus, in this political project, business, sports, media and politics came together. However, the election results were highly disappointing, as the party received only 0.25% of the total vote and came in last among all political parties. The growth and spread of such sultanistic practices created various isomorphic pressures upon other organizations and individuals. In order to avoid conflict with the powerful businessman and get negative media coverage, local politicians sought to please or at least to avoid confronting Mr. Romanovas and his business interests. Various informal deals, especially for the purposes of political advertisement, were commonplace not just at Kauno diena, but other major dailies. Following the growing trend of various informal arrangements, hidden media advertisements became the “gold standard”. Both business and political clients came to prefer such services because unmarked advertisements in the form of news items or interviews were considered the most persuasive to the readers. During the 2008–2010 financial crisis when media faced a dire situation, the management of a leading national media outlet, according to one interviewee, forced journalists to call companies and ask for their expert advice on various consumer-related topics and then invited these companies to purchase an advertisement in the same newspaper edition next to the planned article. The practice did not last long, but it clearly indicated the prevailing organizational culture. Another interviewee reported a similar case, when around the same time the senior editor of a news agency was asked by the owners to approach larger state-owned companies in attempt to attract EU funds. One could hardly be surprised that the spread of such practices came on the heels of the spread of various other rule-bending choices. Informal advertising arrangements often involved informal financial transactions, which eventually bore a high price on the national budget as well. Business taxes were to be avoided or modified by introducing various legal loopholes since they lowered income and general competitiveness. As a former CEO of an IT company noted, one was forced to game the system because otherwise you could not compete against others. If other companies evaded taxes, they were 30–40% more competitive in the marketplace. September 4, 2012. https://kauno.diena.lt/naujienos/lietuva/salies-pulsas/lietuvos-zmo niu-partija-surenge-pirmaji-saskrydi-324607.

5

131

DRIVERS OF CONTINUITY

One simply had no choice, but to mimic such behavior if your clients were local. As a result, to this day, Lithuania’s budgetary receipts from taxes and social contributions as a percentage of the GDP are among the lowest in the EU (see Fig. 5.1). According to the Lithuanian Central Bank economist Raimondas Kuodis, this is a sure indicator of the presence of the Orwellian national taxation system, where regular citizens, who cannot avoid taxation, get the short end of the stick. Despite all the pit-holes described above, hierarchy-based discretion can be not only extractive in nature but also based on sound logic and strategic thinking. One interviewee recalled a major government infrastructure project, which was opposed by a few telecommunication companies. According to the interviewee, the companies were backed by key governmental officials, including a vice-minister from the Ministry of Transport and Communications. They managed to stop the project proposal in its tracks by raising various concerns and questioning the calculations made by the research institute. Finally, the stalemate came to the attention of the PM, who initially was taking the business side. However, the interviewee managed to convince the Prime Minister that 50 45 40 35 30 25 20 15 10

Ireland

Bulgaria

Romania

Lithuania

Malta

Latvia

Estonia

Spain

Slovakia

Cyprus

Poland

Czechia

Hungary

Portugal

Croatia

Slovenia

Netherlands

Luxembourg

Greece

Germany

Italy

Finland

Austria

Sweden

Belgium

France

0

Denmark

5

Fig. 5.1 Total receipts from taxes and social contributions (percentage of GDP, 2019). Eurostat30

30 “Main National Accounts Tax Aggregates.” 2023. Eurostat. https://ec.europa.eu/ eurostat/databrowser/view/gov_10a_taxag/default/table?lang=en.

132

A. LAŁAS

these concerns had little substantive basis. The PM gave a green light to the project and that was the end of the discussion. To this day, it is considered as one of the key projects, which contributed to the rapid expansion of the telecommunications sector in Lithuania. Eventually, the companies which opposed the project came around and changed their hostile position. In many ways, this was an example of the brute power and authority of the PM, who had unprecedented stature in Lithuanian politics of the time. Still, the gathered interviews contain very few positive examples of hierarchical situationalism. Usually, the recalled situations were about the abuse of power rather than about the abuse of power abuse. Even the above-mentioned PM had little reservation in funneling budgetary resources to his own favorite projects. Here’s how one of his close confidants remembers the situation surrounding the case of a major national project, which, according to the National Audit Office calculations, ended up costing three times the original estimate, increasing from 33 to 106 million euros: It was a very important project for him and if it lacked funds, he simply said: “Find them wherever you want.” As a result, the government redistributed budget funds, took away resources from other projects and handed over to this one. He managed that project and everyone had to support it.

In Lithuania, political hierarchy had a sibling—a highly fragmented party system, which paradoxically both enabled and constrained the spread of exclusive situationalism.

Fragmentation of Power In the field of comparative politics, the stability of party systems is often measured using four distinct dimensions: electoral volatility,31 ideological polarization, parliamentary fragmentation32 and party competition in

31 Pedersen, Mogens N. 1997. “The Dynamics of European Party Systems.” European Journal of Political Research 31 (1/2): 83–98. https://doi.org/10.1023/A:100687871 5574. 32 Sartori, Giovanni. 2005. Parties and Party Systems: A Framework for Analysis. ECPR Classics. Colchester: ECPR.

5

DRIVERS OF CONTINUITY

133

government formation.33 In this section, I focus on the last two dimensions, as they relate most directly to the possibility of autonomous action by parties in government. During 2004–2010, Jastramskis (2010) classified Lithuania as the case of extreme multipartism with 7–9 relevant parties having a realistic chance to join a governing coalition.34 Extreme political fragmentation is often regarded as a cause of unstable and relatively dysfunctional political regimes. This is especially true of states, which have relatively ineffective and politicized public institutions.35 Without clear guidance and stability, such states drift, failing to implement necessary reforms and investments.36 Continuous political deal-making and compromises contribute to growing corruption.37 While Lithuania of the early 2000s faced plenty of corruption-related challenges, the fragmentation of power seems largely to do with a possibility of initiating and for some time maintaining exclusive practices within a politically controlled sphere of influence. A full-scale colonization of ministerial resources was not as easy in practice because of monitoring by other coalition partners, media oversight and eventual rotation of power following elections. This takeover process often started with post-election negotiations, dividing up top ministerial posts in a future governing coalition. Since this division often entailed some degree of governing autonomy for the party representative in charge, the most valuable ministries were those which, according to one high-level party official, had (a) the largest state-owned businesses under their supervision and (b) the largest centrally controlled and distributed budgets. Just to clarify the latter point, a ministry may nominally control a large budget, like the Ministry of Education, Science and Sports, but most of these sums were automatically distributed down

33 Mair, Peter. 2004. Party System Change: Approaches and Interpretations. Reprinted. Oxford: Clarendon Press. 34 Jastramskis, Mažvydas. 2010. “Partiniu ˛ Sistemu˛ Stabilumo Samprata Ir Matavimas: Lietuvos Situacija 1990–2010 Metais.” Parlamento Studijos, no. 9: 144–169. 35 Pujas, V., and M. Rhodes. 1999. “A Clash of Cultures? Corruption and the Ethics

of Administration in Western Europe.” Parliamentary Affairs 52 (4): 688–702. https:// doi.org/10.1093/pa/52.4.688. 36 Posner, Alan R. 1977. “Italy: Dependence and Political Fragmentation.” International Organization 31 (4): 809–838. https://doi.org/10.1017/S0020818300018683. 37 Lijphart, Arend. 1999. Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries. New Haven: Yale University Press.

134

A. LAŁAS

the line to municipalities, which oversaw and financed their network of schools. On the other hand, the Ministry of Transport and Communications was in charge of extensive project-based funding, which was distributed on a case-by-case basis. Its importance was further elevated with the influx of substantial EU funding, putting it along with the Ministry of the Economy, Ministry of the Environment, Ministry of the Agriculture and the Ministry of Health towards the top of the pecking order. Predictably, the Ministry of Foreign Affairs, the Ministry of Culture and the Ministry of Justice tended to draw less interest, though it also depended on the profile of the party.38 Similar institutional divisions took place following municipal elections. In larger municipalities, coalition partners divided up policy areas and subsequently the board of directors’ memberships in key municipal companies. In order to see how this takeover attempt worked in practice, it is worthwhile to consider an example, where political leadership attempted to establish a cash cow scheme for their party. Two high-ranking business people reported a case, where during 2009–2010 a top party leader with a few of his close advisors planned to take over key ministrycontrolled companies. It was modeled after the scheme executed by social democrats in the Ministry of Transportation and Communications. One of the sources was approached by the principal advisor to the party leader with an offer. The setting and planning arrangements are worth a more detailed explique: They invited me to a party. There were maybe six people there. [The advisor] invited me to talk in the bathroom, while the shower was switched on. [S/he] asked me if I was interested in heading a [] subsidiary company. I said: ok, I am interested. Great, [s/he] said and we left the bathroom for another beer. After a few minutes, another advisor came and provided the details: The subsidiary has the exclusive contract from this large state owned company. Every year there is a public tender and only this company win it because only they have the right to provide the service. The turnover is 15 million Litas per year. For the first two years you work properly, while they [anticorruption agencies] closely monitor you. Then you start sharing. A third goes to you, while the rest to us.

38 For example, the Ministry of Foreign Affairs was often regarded as prestigious due to its visibility.

5

DRIVERS OF CONTINUITY

135

According to the interviewee, this was a small operation with just a few close confidants in the loop. The rest of the party, even high-level operatives, were not familiar with it. The interviewee found this fact out when talking to a relatively high-level partisan, who had no clue about this schema and its execution. In this case, it did not succeed due to an external shock, which radically shifted the political environment. The reliability of such claims can be questioned, but I was able to find three independent sources who would corroborate this information in general, but not specifically the situation described. One of them, a business owner, who did not participate in any of these conversations, but knew about the plan from his business partner, who had close connections to the party leader. Another source is a managing director of a state company, who knew of the schema and specific people already “planted” into ministry-controlled companies. Most interviewees argued that such large-scale takeover plans have recently subsided on a ministerial level, but they are still widespread at a municipality level. One of the key reasons for the resilience of such practices seems to do with the race to the bottom in ruling coalition formations. If fractionalization in city councils is high and potential ruling coalitions are fragile due to alternative options, demands for quality and transparency in governance are limited because they reduce the ability to form and sustain a coalition. A former high-level municipality politician and employee explains: “Even before the coalition is formed, partners bluntly lay out their expectations: ‘we are used to such arrangements and want to see our people in charge of key positions.’ And then you are forced to make a choice between having no coalition and power on the one hand, and making compromises and handing them autonomy [of choices] on the other.” Another high-level politician was even more specific in describing negotiations with another party leader and a potential coalition partner: “[he] came to me and demanded the vice-mayor position, and a number of specific CEO positions and a provision that we would not interfere into their affairs. Of course, I understood that no interference was hardly an option, but I had to make compromises. As far as I know, they even traded CEO positions—whoever paid the most had the opportunity to become a CEO.”

136

A. LAŁAS

In many cases, such brazen political parties (or electoral committees at a municipal level) were either highly personalistic,39 business-like40 brands with controversial, but relatively popular political leaders at the helm—Labour Party, Order and Justice Party, Lithuanian People’s party and YES (Homeland Revival and Perspective)—or nomenklatura parties (Social Democratic party of Lithuania), who managed an extensive network of connections and links to the top management of the current or former (already privatized) state-owned companies. For the former, the main challenge was to maintain power long enough in order to build up exclusive schemas and make effective use of them. For the latter, it was difficult to maintain the network of privileged connections which was falling apart as time went on. Former state companies were privatized, old management retired or passed away and new foreign investors brought in different management practices and standards. This growing diversification of business practices increasingly squeezed out the available institutional spaces for exclusive situationalism. That said, if many businesses underwent some cultural changes, political parties appeared to be slower in this regard. The rise of the personalistic party model in the late 1990s and early 2000s introduced new electoral competition schemas, which undermined more traditional intraorganizational party dynamics. Some parties started essentially hiring popular personalities and politicians to improve or sometimes even to lead their electoral lists. One of the earlier examples was the attraction of Mr. Petras Auštreviˇcius, an unsuccessful candidate during the 2004 Presidential elections, to lead the Liberal and Centre Union of Lithuania for the 2004 Parliamentary elections. Later it turned out that the party might have paid Mr. Auštreviˇcius not just in offering the prize of the top position, but also in terms of actual salary. Mr. Auštreviˇcius denied such accusations, but a number of sources publicly ascertained it without

39 Kostadinova, Tatiana, and Barry Levitt. 2014. “Toward a Theory of Personalist Parties: Concept Formation and Theory Building: Concept Formation and Theory Building.” Politics & Policy 42 (4): 490–512. https://doi.org/10.1111/polp.12081. 40 Hopkin, Jonathan, and Caterina Paolucci. 1999. “The Business Firm Model of Party Organization: Cases from Spain and Italy.” European Journal of Political Research 35 (3): 307–339. https://doi.org/10.1023/A:1006903925012.

5

DRIVERS OF CONTINUITY

137

any subsequent legal consequences.41 Arguably the most successful implementation of this relatively popular hiring model was executed during the 2016 Parliamentary elections, when the newly appointed leader of the Lithuanian Farmers and Greens Union electoral list, who was not even a member of the party, managed to win the elections and become the PM. The cooperation lasted for five years, but eventually led to a split in the party ranks. The former PM led a break-off faction and established a new party of his own. This conflict again exposed the institutional weaknesses of Lithuanian political parties and the fundamental difficulty in establishing a lasting social contract between the parties and the electorate.

41 Vanagas, Justinas. 2006. “P.Auštreviˇciaus Skundo Prokurat¯ ura Nepatenkino.” Delfi, March 24, 2006. https://www.delfi.lt/news/daily/lithuania/paustreviciaus-skundo-pro kuratura-nepatenkino.d?id=9118467.

CHAPTER 6

Drivers of Change

Abstract The immediate explanations for the observed contraction of exclusive situationalism have primarily to do with five factors: gradual filling up of legislative and procedural gaps, limited ability to maintain access to state resources due to high fragmentation of power, technology-driven transparency and the active role of international and local pressure/monitoring institutions. Ironically though, determination to curtail exclusive situationalism sometimes involved backstage situationalist practices, though inclusive by nature, in order to put sufficient pressure on agents to roll back exclusive situationalist practices. Keywords Legislative and procedural gaps · Fragmentation of power · Technology · Local pressure institutions · International organizations

There are many academic discussions related to the quality of (new) democracies. They often entail shorter1 or longer lists2 of interconnected 1 Altman, D., and A. Pérez-Liñán. 2002. “Assessing the Quality of Democracy: Freedom, Competitiveness and Participation in Eighteen Latin American Countries.” Democratization 9 (2): 85–100. https://doi.org/10.1080/714000256. 2 Diamond, Larry Jay, Leonardo Morlino, and American Political Science Association, eds. 2005. Assessing the Quality of Democracy. Journal of Democracy Book. Baltimore: Johns Hopkins University Press.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_6

139

140

A. LAŠAS

dimensions indicative of the health of democratic regimes. While these lists provide useful ways to categorize and compare democracies, they tell us little about the evolutionary dynamics of (new) democratic regimes and the causes of changes or continuity. After all, the situation in the early 2000s looked different from today and in both cases, there were those who were interested in maintaining the status quo and those who were interested in change. For its part, a desire for change was not necessarily in the direction of more transparency and inclusivity, but in the opposite direction as well. These different paths were still realistically available in the early 2000s, though the momentum was gradually building up against exclusive situationism. Here I take a closer look at the key factors responsible for this growing momentum and the gradual closure of the critical juncture. At this point, it would be too early to proclaim Lithuania’s long-term lock-in into the path of liberal democracy, but the temptation is definitely there. And here is why.

Legislative and Procedural Gaps In the early years of the democratic transition, many institutions and rules informing their behavior were either absent or simply ignored. Enforcement inconsistencies and failures further enlarged existing legislative and procedural gaps. This empowered hierarchy and personal relationshipdriven business and politics nexus. The shadows of this reality extend all the way to today, but, looking from the legal perspective, the two situations are fundamentally different. It is easy to forget that, for example, first and still quite inadequate attempts to regulate lobbying activities appeared only in 2001,3 the first corruption prevention measures were introduced to the public sector in 2002, and the financing of political parties was virtually unregulated until 2004.4 Only by the end of the accession process to the EU, did Lithuanian legal and regulatory frameworks begin to more closely resemble those of older democracies, although the underlying situation on the ground was still tricky. Even when the rules and procedures increasingly filled existing gaps, as one 3 Ambrasaite, ˙ Monika. 2017. “Lobizmo Reglamentavimas Lietuvoje Ir EBPO Standartai.” Teis˙e 101 (101): 60. https://doi.org/10.15388/Teise.2016.101.10444. 4 Miškinis, Algirdas, and Giedre˙ Uleviˇci¯ ute. ˙ 2013. “Lietuvos Politiniu˛ Partiju˛ Finansavimo Šaltiniu˛ Analize.” ˙ Verslo Sistemos Ir Ekonomika 3 (1): 79–92.

6

DRIVERS OF CHANGE

141

interviewee noted, the creativity of people to bend or overcome them was endless. The old and tested ways of doing business became more refined, nuanced and fragmented in comparison to the “wild west” of the 1990s, but did not disappear. To see this dynamic in action, we revisit the interview data. As one banker remembered, state–business relations were quite crude in the 1990s. A senior politician could come to the head of the Bank of Lithuania and ask him to issue a license to his son-in-law to open a new bank. Although the central bank was formally independent from the government, factually it was under the government and the chairman had few choices, but to obey. In the same way, the word of the PM could overrule the decisions of the board members of the central bank. If the PM decided that a particular commercial bank, that was financially in trouble, had to be liquidated, then this was the final decision, as the interviewee recalled. Similar stories could be told about hiring practices in various ministrycontrolled companies or institutes at the time. They often became “landing platforms” for politicians, their friends or relatives. An interviewee, who headed one of the governmental research institutes, admitted that after elections he would receive calls from the representatives of senior politicians with requests to employ a particular party person, who just lost elections. Sometimes he could argue himself out of hiring, but sometimes there was simply no choice. Usually, it depended on the position of the ultimate requestor of the favor. These practices were still relatively widespread in the early 2000s. An owner of a construction company recalled how personal access to a mayor of a large city made a significant difference in terms of building permits and conditions. According to him, without access, small companies faced various bureaucratic and administrative barriers. For example, an energy provider could decide that you have to connect to the electricity grid section, which was two kilometers away from your building site. With the mayor on your side, the distance could be shortened to 100 meters. The difference between such unregulated choices could end up costing hundreds of thousands of euros and thus creating potential means for extraction. Another interviewee confirmed the existence of this particular regulatory gap, by providing a different example, where a smaller company without sufficient political backing had to accept a municipality’s request for additional services. The company, which owned a piece of land by a

142

A. LAŠAS

busy road, decided to rent this land to a car cleaning service provider. The municipality reviewed the application and decided that the owner of the land would have to invest in the road infrastructure nearby in order to avoid any potential congestion. The business argued that the request was unreasonably expensive and well exceeded potential profits made from the rent. The municipality revisited the issue and decided that the renter would instead have to build a bike lane for the city. This had nothing to do with the project, but it was a kind of kickback for the permit. However, some of these tacit agreements ended up in courts. For example, in 2008 a court ruled in favor of a business that was pressured by Alytus municipality to pay a 500,000 Litas (145,000 euros) voluntary contribution to the infrastructure improvement fund. The initial request from the municipality was closer to 50,000 Litas, but as tensions grew, the sum increased and the businessman had little choice but to agree.5 Variations of these semi-legal “voluntary donation” schemes were also widespread in the health sector. The Public Procurement Office conducted an investigation of public hospitals’ acquisition of diagnostic equipment and reagents in 2013–2015. They found out that in the majority of cases (44%), hospitals obtained the equipment through commodate contracts, where a company essentially gave the equipment for free use. In return, these companies were given exclusive contracts for the supply of reagents. Even when competitors were ready to donate new diagnostic equipment and supply reagents to a hospital for a much cheaper price (sometimes even twice as cheap), hospitals often ignored such bids and chose to stick with the existing supplier.6 When such problematic practices were presented to the Minister of Health, he chose “other priorities”, according to the head of the PPO.7 In an interview, a senior representative of the PPO pointed out yet another legal variant of donations, where hospital management established a number of nonprofit organizations and asked suppliers to “voluntarily” donate to

5 “Byla 2-797-343/2008.” 2008. Kauno apygardos teismas. https://eteismai.lt/byla/ 199800580340851/2-797-343/2008/. 6 “Laboratorijos Reagentu ˛ Ir Diagnostikos Priemoniu˛ Viešieji Pirkimai 2013–2015m.” 2016. Viešuj ˛ u˛ pirkimu˛ tarnyba. https://vpt.lrv.lt/uploads/vpt/documents/files/VPT_rea gentai_29_11_16%2B.pdf. 7 Gruode, ˙ Deimante. ˙ 2017. “Diana Vilyte: ˙ „Sveikatos Sektoriumi Tikrai Užsiimsime“.” Lsveikata.Lt, May 15, 2017. https://lsveikata.lt/aktualijos/diana-vilyte-sveikatos-sektor iumi-tikrai-uzsiimsime-6671.

6

DRIVERS OF CHANGE

143

them: “They establish various companies and nonprofits. Once a supplier wins a contract, then the hospital management asks them to transfer money for trips and other matters.” In such instances, it is quite difficult to formally prove wrongdoing as just asking for donations is not prohibited, though it may breach internal codes of conduct (if such exist). Even when some poorly regulated spaces started to gradually fill in, they still often represented, according to Jolanta Petkeviˇciene—Head ˙ of the Chief Official Ethics Commission—“very lenient and liberal” regulatory environments, “providing ample opportunities for ministers to use budgetary funds for self-advertisement” (BNS 2008).8 In this particular case, she talked about the usage of EU project-related PR funds by politicians for self-promotion purposes. Following Lithuania’s accession to the EU, the sudden inflow of structural funds has transformed some ministries into the largest buyers of media advertisement because all EUfunded projects come with a publicity and communication commitment attached to them. During the 2014–2020 period, Lithuania planned to spend about 19 million euros from EU structural funds and another 3.3 million euros from its own budget for publicity purposes.9 This 6 to 1 ratio clearly demonstrates the size of the EU effect on the local media, which sought ways to access these funds. On 28 June 2007, the already mentioned head of the Chief Official Ethics Commission issued a decision accusing the Minister of Agriculture Kazimiera Prunskiene˙ of misusing ministry funds for self-advertisement purposes. The minister sued the commission and won the case because formally she did not break any rules, but simply free-rided on the publicity of EU projects under her supervision. However, the report provided numerous examples of how national and regional media was paid by the Ministry to repeatedly and unequivocally praise the politician and her allegedly wonderful deeds in the context of EU-funded projects.

8 Alfa.Lt. 2008. “VTEK: Teismo Nutartis Del ˙ Prunskienes ˙ Apsunkino Kitu˛ Ministru˛ Veiklos Tyrim˛a,” September 8, 2008. https://www.alfa.lt/straipsnis/196963/vtek-teismonutartis-del-prunskienes-apsunkino-kitu-ministru-veiklos-tyrima/. 9 Galinyte, ˙ Aiste, ˙ R¯uta Mrazauskaite, ˙ Rugile˙ Trumpyte, ˙ and Sergejus Muravjovas. 2017. “Viešinimui Skirtu˛ ES Leš ˙ u˛ Korupcijos Riziku˛ Analize.” ˙ Transparency International Lietuvos skyrius. https://www.transparency.lt/wp-content/uploads/2017/05/Stu dija_ES_lesu_viesinimui_panaudojimo_rizikos.pdf.

144

A. LAŠAS

In 2007, the Ministry of Agriculture alone allegedly spent 9.5 million Litas (2,75 million euros) for such purposes.10 This schema worked quite smoothly because during public procurement procedures, Ministries were able to set some general discriminatory conditions, avoid detailed preplanning and chose a winning PR agency, which in turn oversaw the selection of appropriate media channels and content. All interviewees related to PR or media planning agreed that during the first years of EU membership, the majority of PR procurements by the ministries were predetermined before the actual bids were opened and evaluated. As late as 2017, Transparency International still identified at least six procurement-related areas with some risks for corruption: illegal influence of interest groups, inappropriate preparation of procurement conditions, lack of publicity for planned procurements, lack of efficiency and control, inappropriate selection of procurement method and low quality and opaque evaluations of suppliers’ offers.11 Another example of legal, but ethically problematic usage of EU funds relates to the promotion of countryside tourism. In order to encourage farmers to develop tourism infrastructure, the Ministry of Agriculture allocated a total of 40 million euros for the funding period of 2007– 2013. Each individual farmer could get up to 200,000 euros in aid for tourism-related housing. Since the probational period, during which activities of the owner were monitored, lasted only 5–7 years, this financial aid mechanism became a convenient tool for subsidizing your own individual housing, which formally met requirements for countryside tourism. Investigative reporters demonstrated that a number of business people became “farmers” in order to get government subsidies, but never utilized their houses for tourism purposes. In many cases they just rented their countryside houses on paper, trying to discourage any potential clients

10 Baublys, Viktoras. 2009. “K.Prunskiene˙ – Žiniasklaidos Žeme˙ Maitintoja.” Kauno Diena, May 14, 2009. https://kauno.diena.lt/dienrastis/lietuva/k.prunskiene—ziniaskla idos-zeme-maitintoja-217527. 11 Galinyte, ˙ Aiste, ˙ R¯uta Mrazauskaite, ˙ Rugile˙ Trumpyte, ˙ and Sergejus Muravjovas. 2017. “Viešinimui Skirtu˛ ES Leš ˙ u˛ Korupcijos Riziku˛ Analize.” ˙ Transparency International Lietuvos skyrius. https://www.transparency.lt/wp-content/uploads/2017/05/Stu dija_ES_lesu_viesinimui_panaudojimo_rizikos.pdf.

6

DRIVERS OF CHANGE

145

by claiming high prices or maintaining they were full (though in fact empty).12 A former Minister of Agriculture—Bronius Markauskas—admitted on record that “there were many instances when the countryside tourism infrastructure did not actually function according to purpose and afterwards became living quarters (for the owners).”13 Another similar scheme was meant for developing forest infrastructure for tourism. Again, the head of communication at the National Paying Agency under the Ministry of Agriculture, acknowledged that EU funding was misused: “… we have to admit that this funding instrument was among the most problematic ones during the 2007-2013 period. Subsidies for recreational projects were disposed of according to the legal code of the time, whose rules did not help to prevent frequent instances of abuse and improper use…”.14 This race to legally catch up with the abuses of current laws and regulations often led to numerous and repeated revisions. The Law on the Adjustment of Public and Private Interests in the Civil Service, which saw the light of day in 1998, was changed 27 times. Since its birth in 1997, the Law on Public Procurement has been revised 46 times! These revisions were not always plugging up holes, they could potentially create new ones as well. Such cases are difficult to prove, but there are some indirect indications of such activities. For example, mass media had widely covered the controversial efforts by the head of the Parliamentary Budget and Finance Committee, Bronius Bradauskas, to push through a Law on Gambling revisions favoring gambling and the betting industry and to suppress others favoring more rigorous regulation in 2013–2015.15 In the same way, one interviewee argued that various historic exemptions for a powerful beer industry (e.g. an exemption allowing outdoor advertisement for low-alcohol drinks, excise duty discount for small beer

12 Tvaskiene, ˙ Jurga. 2019. “Paramos Kaimui Pinigai Virto Prabangiais Turtuoliu˛ B¯ustais.” LRT.Lt, November 26, 2019. https://www.lrt.lt/naujienos/lrt-tyrimai/5/111 9433/lrt-tyrimas-paramos-kaimui-pinigai-virto-prabangiais-turtuoliu-bustais. 13 Ibid. 14 Pileckas,

Lukas. 2017. “Slaptoms Poilsiavietems ˙ – Šimtai T¯ukstanˇciu˛ Euru.” ˛ 15min.Lt, June 15, 2017. https://www.15min.lt/naujiena/aktualu/lietuva/slaptoms-poi lsiavietems-simtai-tukstanciu-euru-56-812610. 15 Lukaityte-Vnarauskien ˙ e, ˙ Rasa. 2015. “Seime Užvire˙ Tikras Detektyvas.” Delfi, May 20, 2015. https://www.delfi.lt/verslas/verslas/seime-uzvire-tikras-detektyvas.d?id= 68022324.

146

A. LAŠAS

producers, etc.) is yet another example of manufactured legal loopholes, which were later partly fixed. All these laws mentioned above represented constant and constantly changing political battlefields. The battle scars are still visible looking through 27 revisions in the Law on Gambling and 48 revisions in the Law on Excise Duty. Luckily for the state, the totality of changes, which tended to fill in empty legal and procedural spaces, pointed in the direction of reduced opportunities for exclusive situationalism. This is broadly consistent with the literature, which finds that institutionalization of procedures “reduce or at least control most of these [corrupt] activities” (Funderburk 2012: 3).

Fragmentation of Power I have already touched upon the topic of the fragmentation of power in the previous chapter. It was listed among the key factors ensuring the continuity of the status quo. So what is it doing here on the opposite side? As it was already pointed out, political fragmentation is a concept covering at least four different dimensions: electoral volatility, parliamentary fragmentation, ideological polarization and party competition in government formation. If parliamentary fragmentation provided niches for semiautonomous control of ministerial resources, higher levels of electoral volatility prevented or at least significantly complicated continuous access to these resources. Political appointees struggled to maintain their grip on resource-rich institutions and companies. In the same way, businesses were never quite sure of their continuous privileged access to state resources. Lithuanian railways —one of the largest state companies—is a case in point. As we have demonstrated previously, the company, often regarded as the stronghold of social democrats, was targeted by various politicians for the extraction of resources (not without the CEO’s willingness to play along). However, with the coming of the new governing coalition in 2016, the situation underwent radical changes. The newly appointed nonpartisan Minister of Transport and Communications—Rokas Masiulis—prioritized the cleaning up of the company, by both changing key personnel and various opaque practices. Mr. Masiulis argued that the company’s activities

6

DRIVERS OF CHANGE

147

brought shame upon the whole state.16 But since he did not belong to any political party in government, his luck ran out in three years as he fell into conflict with the head of the largest governing party. The next minister Jaroslav Narkeviˇc turned out to be a much more controversial and scandal-prone figure, though his time in office was limited and just a few days before leaving office in 2020, he appointed some rather controversial people to the railway board of directors.17 Mr. Narkeviˇc had to leave because, following parliamentary elections, a new governing coalition came to power. One of the first steps, which the new incoming minister of transport and communications took, was the removal of the just-appointed board of directors. It seems that for now, the situation in the company has stabilized for the better, but these shifts illustrate, in the words of Pujas and Rhodes (1999: 695), the challenge of a long-term “colonization of the management” of key institutions in the context of multifaceted and vigorous political competition. Another illustrative example relates to the national public broadcaster (LRT ), which often faced the wrath of the ruling political elites.18 A highlevel insider ironically remarked that “under one government, you are the den of Communists; under another government, you are the nest of Conservatives.” There are independent information sources that largely confirm the presence of such a dualistic outlook indicative of partisan groupthink phenomenon. The 2009 memo prepared by the US Embassy in Vilnius reports a conversation with Mr. Virgis Valentinaviˇcius, a newly appointed political advisor to the then Prime Minister Andrius Kubilius. It contained the following passage on the national broadcaster: Lithuanian public television, he said, was still aligned with the Social Democrats who led the previous government. ‘They’ve been too much

16 Jakilaitis, Edmundas. 2016. “Rokas Masiulis: „Lietuvos Geležinkeliai“ Žemino Valstybes ˙ Vard˛a.” 15min.Lt, December 22, 2016. https://www.15min.lt/verslas/nau jiena/bendroves/rokas-masiulis-lietuvos-gelezinkeliai-zemino-valstybes-varda-663-730676. 17 Karsokaite, ˙ Viktorija, and Saulius Jakuˇcionis. 2020. “Nueinanˇcio J.Narkeviˇciaus Dovanel ˙ e˙ – „geležinkeliu“ ˛ Valdyba Su Spalvingomis Pavardemis ˙ Ir M˛isle, Ar V.Poderys Dirbs Už Dyk˛a.” 15min.Lt, December 4, 2020. https://www.15min.lt/verslas/naujiena/ bendroves/nueinancio-j-narkeviciaus-dovanele-gelezinkeliu-valdyba-su-spalvingomis-pavard emis-ir-misle-ar-v-poderys-dirbs-uz-dyka-663-1419022. 18 A full description of this case can be found in A. Lašas (2019) Behind the Storefront of Democracy: The Case of Media–Politics Relations in Lithuania. Journalism 20 (10): 1379–1396. Here I borrow a short fragment from this article.

148

A. LAŠAS

involved in politics and not balanced,” he said. “The director needs to be replaced, but that’s difficult because there are many legal safeguards to prevent” him from being replaced for political reasons. (US Embassy 2009)

The perceived alignment with the Social Democrats was most likely related to the fact that the acting head of the LRT at the time was appointed when the Social Democrats were in power. However, the most relevant segment refers to “many legal safeguards,” which prevented the ruling coalition from replacing the current director with their own person. The director is appointed for five years by the simple majority vote in the Council, whose members are nominated by various political and civic actors (as specified above). The Council can replace the current director only with 2/3 of the votes. Because of these rules and the gradual nature of the rotation process in the Council, it is quite difficult to build a politically cohesive group of representatives, who would be able to make changes on behalf of a single political party. Political fragmentation here worked as a safety valve. So in this case rules mattered, but primarily because of the limited number of Council seats linked with a particular party or parties. Once the power is spread out among many stakeholders, it is quite difficult to accumulate it in order to advance partisan interests. And that applies not only to the management of public companies but to governing coalitions as well. Because new governing coalitions have to be approved by the President and at least partially maintain his/her support, this turned out to be yet another institutional safety valve for the spread of exclusive situationalism. Since 2000, the Office of the President was largely occupied by political leaders who expressed exceptionally strong support towards full and systemic integration of Lithuania into the EuroAtlantic community. During the two terms of Valdas Adamkus, who spent most of his professional life in the US, and the additional two terms of Dalia Grybauskaite, ˙ who took office following her appointment in Brussels, these two presidents often acted as “principled principles”, keeping a watchful eye on the daily political practices of governing coalitions and top-level bureaucrats more generally. However, empowered by the semi-presidential system, the head of state could have followed very different aims as well. Potential for this was clearly demonstrated by the election of President Rolandas Paksas in 2003. His stay turned out to be quite short, but memorable. He was impeached in 2004 by the Parliament for his shady connections

6

DRIVERS OF CHANGE

149

with and favors made to the main financier of his political campaign and Russian-born businessman Jurijus Borisovas. The checks and balances system worked, but only with few MP votes to spare. According to one member of the parliamentary impeachment commission, the necessary votes came only after the President made an openly defiant decision employing Mr. Borisovas as his advisor.19 Thus, one cannot ignore the element of contingency in such events and generally in the dynamics of business-state relations.

Role of Technology As in the case of the fragmentation of power, technology in itself appears to be neutral vis-à-vis exclusive situationism. It may minimize human discretion and increase the transparency of the system or it may provide opportunities to scale problematic practices or confuse the public by spreading fake news. Still a lot of anti-corruption literature views technology as largely a positive tool (for overview see Adam and Fazekas [2021]).20 Most of our interviewees also agree that technological advancement (digitalization) in decision-making has made a positive impact on the increased transparency of state–business relations. For example, in the construction sector, the introduction of the online platform Infostatyba provided more predictability and transparency in obtaining construction permits and streamlining the construction monitoring processes. As an owner of a construction company noted, With the onslaught of digitalization, there are fewer opportunities for manipulation. In earlier times, much depended on whether your file was put at the top or at the bottom of the pile. Now, you cannot move files and manipulate the process as easily as it used to be.

19 Pank¯ unas, Gytis. 2021. “17 Metu˛ Po Pakso Apkaltos: Specialioje Seimo Komisijoje Dirb˛es Politikas Prisimine, ˙ Kas Galutinai „nuskandino“ Prezident˛a.” LRT.Lt, April 10, 2021. https://www.lrt.lt/naujienos/lietuvoje/2/1384519/17-metu-po-pakso-apkaltosspecialioje-seimo-komisijoje-dirbes-politikas-prisimine-kas-galutinai-nuskandino-prezidenta. 20 Adam, Isabelle, and Mihály Fazekas. 2021. “Are Emerging Technologies Helping Win the Fight against Corruption? A Review of the State of Evidence.” Information Economics and Policy 57 (December): 1–14.

150

A. LAŠAS

Another owner of a construction business agreed but only in part, pointing to the continuous existence of discretion in decision-making: “Yes, Infostatyba helped, but behind this system, there are still human beings, who enter and monitor the process.” Because of that, he did not take risks and still submitted “files with legs.” In other words, the electronic submission was proceeded by face-to-face meetings in order to better manage the process and risks involved. Another businessman involved in real estate agreed that the success of larger development projects was still determined by the ability to work things out before uploading any paperwork to the online system. Otherwise, the online processing of paperwork might take even longer as numerous governmental agencies encountered and examined a completely new and unfamiliar application. On the other side of the barricades, high-level government officials tended to evaluate personal contact as a vulnerability and seek to minimize it. The risks of the human factor have also been emphasized by a vice-minister, who oversaw a large funding portfolio: “the less there is human involvement, the less there are opportunities for corruption.” According to the interviewee, technology had another important advantage—the ability to effortlessly trace decision-making process. Thus you could see right away “who changed what, when and why.” However, it seems that most of the technology-related added value can be harnessed not so much at a state–business, but more so at a state-society level. Technology can help to minimize petty extractive situationalism. The already mentioned example of Infostatyba illustrates this point very well. For a person, who plans to build a standard house, now decision-making procedures are transparent and streamlined. This means that all these standard cases are now no longer at risk of petty corruption. A client uploads necessary information to this one-stop-shop and from then on various institutions evaluate the request according to the preset timelines and decision-making trees. Another example, which is well-known in Lithuania, relates to speeding tickets and fines. In the 1990s, it was a common practice to pay a small bribe to a police officer in order to avoid a bigger fine for speeding or other traffic-related violations. The introduction of voice and video recording equipment in police vehicles has helped to dramatically reduce such occurrences. It has also helped to raise trust in the police as an institution. Since 2010, comparable practices were introduced in courts.

6

DRIVERS OF CHANGE

151

Initially, audio recordings were made just for administrative cases, and four years later paper protocols disappeared in civil cases (though not yet in criminal cases). Still, according to a lawyer, the policy of audio recordings has made a noticeable positive impact on the quality of court proceedings: When a court secretary recorded a protocol, she sensed what had to be put into it and what should be left out. “Unprocedural exchanges” were better left out. But now with the recording taking place, judges act in a more polite manner and exhibit more self-control. If you point out some kind of shortcoming, they tend to listen to you and react accordingly.

The recordings are used not only in lieu of the protocol but also for administrative purposes. A random court recording is selected and listened to for evaluation and promotion purposes. For younger judges, who have career aspirations, this is a strong motivation to adequately prepare and perform during court proceedings. Although there is much less actor awareness about recordings made by the Special Investigative Service, the effect of numerous cases brought to courts by them has also been felt across the public and private sectors. As surveillance technology got more sophisticated and new cases mushroomed, actors became much more careful and reluctant to engage in quick and dirty dealmaking. A number of interviewees confirmed this trend stating that business-politics dynamics are now different. During the 1990s, potential surveillance was rarely on a business person’s or a politician’s mind, but now everyone was aware of it. Even when meetings had no dubious agenda, everyone took extra precautions to limit potential surveillance. A typical and easy method was to leave all mobile phones outside meeting rooms or at least to put them on flight mode. With the growth of financial tech and internet retail services, cash transactions have also gradually diminished across all relevant segments— businesses, political parties and society at large, which provided further impulses for increased transparency. For example, investigating consumer behavior, the European Central Bank estimated that from 2016 to 2019 cash transactions at retail points have dropped 7% in Lithuania and stood at 68% (in comparison to 73% in the eurozone).21 At the political level, 21 Lietuvos Bankas. 2020. “Lietuvos Gyventojai Dažniau Nei Vidutinis Europietis Naudojasi Bekontaktemis ˙ Mokejimo ˙ Kortelemis, ˙ Bet Vis Dar Svarb¯us Ir Grynieji Pinigai

152

A. LAŠAS

one relatively high-positioned political party leader fondly illustrated this shift by recollecting an example from the early 2000s when he personally had to carry a suitcase containing half a million Litas (145,000 euros) in cash in order to pay for his party’s advertising campaign. According to him, now this is simply unthinkable. Despite this techno-optimism, technological choices, like most choices, come not only with advantages but also with disadvantages and risks. The question of how to manage these risks and understand the limitations of technology is largely missing in Lithuania. At this point, the focus is still on the elimination of human discretion because it is perceptually correlated with corruption. Once human discretion is eliminated, as the story goes, there is left no space for corruption. However, at the same time, some interviewees argued that it was time to discard this paradigm and understand that human discretion was not only a source of noise but also the primary engine of breakthrough decisions and solutions. As one interviewee noted, the real problem had increasingly less to do with the avoidance of corruption, but with a lack of professionalism and personal responsibility. Middle-level public management was now afraid to make any decisions based on their expertise and to stand up for them, especially when rules and procedures were not clearly spelled out: Nowadays it is not enough not to steal, but there is also a need for discretion, for sound political judgement. We are currently focused exclusively on avoiding graft, but we lack people, who are able to make strategic decisions, who are able to ensure breakthrough. This is what the middle income trap is all about.

This call for investment in human capital points both to the progress that Lithuania has made over the last 20-plus years of independence, but also warns of a new ceiling it faces. Transparent and technologically advanced public and business sectors are important for building a vibrant and sustainable democracy, but by no means do they represent a full scope of necessary and/or sufficient conditions.

Plaˇciau:” December 2, 2020. https://www.lb.lt/lt/naujienos/lietuvos-gyventojai-daz niau-nei-vidutinis-europietis-naudojasi-bekontaktemis-mokejimo-kortelemis-bet-vis-dar-sva rbus-ir-grynieji-pinigai.

6

DRIVERS OF CHANGE

153

EU and Other IOs So far we have only indirectly touched upon the role of the EU on the politics–business nexus, but this topic deserves a much closer attention. As a multi-dimensional power (Barnett and Duvall, 2005),22 the EU has made a gradual but broad and radical impact on the Lithuanian public and private sectors. To see this short-term and long-term impact, one needs to go further into history than just 2000. The most crucial and needy period for Lithuania was the 1990s when it was transitioning from a Soviet republic to a market-based democratic state. This in-between stage was simply too risky and too unpredictable for foreign private capital. Struggling to collect taxes, to attract foreign investment, and to keep law and order, the state welcomed the EU’s contributions with open arms. In the early 1990s, the EU primarily used the PHARE assistance instrument to allocate and monitor its funding schemes. Until 1995, the PHARE annual injections, though relatively small (20–40 million ECU), exceeded all foreign direct investment coming into the country. By 1997, it still made up about 15% of the country’s annual FDI. If one adds to the picture such investment/funding instruments as the European Investment Bank (EIB) and European Bank for Development and Reconstruction (EBRD), the West European footprint grows even further.23 By 2000, the EIB has been involved in 15 major public infrastructure projects worth about 240 milliom euros,24 while the EBRD portfolio expanded to 48 projects (mainly in the private sector) worth nearly 385 million euros.25 While detailing such investment projects exceeds the scope of the work, the case of Rokiškio S¯ uris, by now the largest cheese manufacturer in the Baltic region, is worth a quick mention. In 1999, the EBRD invested 8.7 million euros into the company, seeking to modernize its production facilities and to “set a good example of corporate governance.”26 Now,

22 Barnett, Michael, and Raymond Duvall. 2005. “Power in International Politics.” International Organization 59 (01): 39–75. https://doi.org/10.1017/S00208183050 50010. 23 Technically EBRD is a multilateral bank with a broad ownership, but the largest ownership stake belongs to the EU and its member states—54% stake. 24 https://www.ebrd.com/lithuania.html.

https://www.eib.org/en/projects/regions/european-union/lithuania/index.htm. 25 https://www.ebrd.com/downloads/about/policies/lithuania-2009.pdf. 26 https://www.ebrd.com/work-with-us/projects/psd/rokiskio-suris.html.

154

A. LAŠAS

reflecting on such investment, the company’s website explicitly acknowledges EBRD’s contribution and its benefits: “Foreign investors have not only added to the company’s capital, but also helped to form the western attitude of staff towards work.”27 What this new attitude exactly entails was detailed by the CEO of another company, which received EBRD’s investment around the same time. The interviewee described two major changes. First, EBRD representatives emphatically encouraged investment in staff education and skills. Whether it was English language skills or an MBA, there was a strong push for more expertise and knowledge. In a society, where formal lifelong learning was hardly present, this was a pretty radical idea. Second, with the coming of new board members, financial and management planning became more systematic and transparent. The old-era managers, who were used to quick and dirty decisions, had not only to justify their strategies before the board but also to plan ahead in a more rigorous fashion. As companies evolved and matured under this model of apprenticeship, they became much more attractive to foreign private investors. Coupled with increasingly more stable and transparent state institutions, this engine of change acquired further momentum. Of course, not every European involvement or project turned out to be a success and proper monitoring was lagging behind (Lasas 2004).28 There were many examples of misuse of funds and mismanagement, but this was only the beginning of increased and an increasingly diverse EU presence. With the 1999 invitation to start formal accession negotiations, Lithuania also joined newly initiated EU programs for candidate countries: SAPARD for agriculture and rural development, ISPA for environment and transportation, and Twinning program for strengthening administrative capacities. EU financial allocations were raised significantly. If during the 1992–1999 period, PHARE allocated a total of 328 million euros to Lithuania,29 EU allocations for the next four years more than

27 https://www.rokiskio.com/en/cheese/top-menu/ab-rokiskio-suris/company-s-his tory.html. 28 https://doi.org/10.1080/01629770400000161. 29 “Regular Report from the Commission on Lithuania’s Progress towards Acces-

sion 2000.” 2000. COM (2000) 707 final. European Commission. http://aei.pitt.edu/ 44573/.

6

DRIVERS OF CHANGE

155

doubled and reached 786 million euros.30 With this structured political process came regular country monitoring and evaluation reports as a means to assess progress and put pressure on accession countries for continuous reforms. Reading through them, one can clearly track down how various anti-corruption measures were gradually introduced, including institutions, legislative acts and international agreements. Where the EU fell short in terms of its own legislation, it readily brought into the picture the Council of Europe and its diverse set of conventions as yet another set of requirements for accession. As extensively discussed in this book, actual practices evolved on a much slower pace and even to this day, one can find pockets of extractive situationalism in action. EU funding created not only opportunities for positive change but also provided numerous opportunities for abuse. We touched upon a segment of these abuses, but even these exclusive and extractive practices tended to diminish over time. Of course, it would be naïve to expect their complete disappearance in the future, but by now the fallback to the early 2000s seems to be increasingly less likely. In contrast to this rather optimistic assessment, Krastev and Holmes argued that some CEE countries turned illiberal as a counter-reaction of the Western imitation imperative: What makes imitation so irksome is not only the implicit assumption that the mimic is somehow morally and humanly inferior to the model. It also entails the assumption that Central and Eastern Europe’s copycat nations accept the West’s right to evaluate their success or failure at living up to Western standards. In this sense, imitation comes to feel like a loss of sovereignty. (p. 118)31

However, while this argument may apply to Hungary, Poland or even Czech Republic, given their political leaders’ frequently expressed Eurosceptic views, it hardly rings true in the Baltics. Lithuania has not experienced the turn to illiberalism during the last 20 years and does not seem likely to do so in the nearest future, despite being one of the

30 “Regular Report from the Commission on Lithuania’s Progress towards Accession 2000.” 2000. COM (2000) 707 final. European Commission. http://aei.pitt.edu/ 44573/. 31 Ivan Krastev, and Stephen Holmes (2018) Explaining Eastern Europe: Imitation and Its Discontents. Journal of Democracy 29 (3): 117–128.

156

A. LAŠAS

so-called “imitators”. To put more salt in the wound, Lithuania has experienced one of the steepest rates of emigration among CEE countries, especially among younger people. Thus, the soil might potentially be ripe for illiberalism, but its manifestations remain limited. This implies that the argument about inferiority and resentment is either incorrect or has scope conditions, which bound its manifestations across the Central and Eastern European imitators. The scope conditions might have to do with the size and geopolitical situation of the Baltic states in general and Lithuania specifically. Facing the Kaliningrad region of Russia from the West and an autocratic Kremlinfriendly regime of Belarus from the East, Lithuania has felt insecure since the regaining of its independence. Unlike Poland, it never imagined even a hypothetical scenario of a possible long-term endurance against a large-scale Russian military campaign. Thus, NATO and EU memberships became not only key policy priorities, but were often seen as the one and only path to ensure the long-term survival and prosperity of the country. None of our political leaders assumed that Lithuania, a country of just a few million, could make it on its own in this neighborhood, where nostalgia for the former Soviet Union has yet fully disappeared. Because of that, resentful imitation was never an option. There was a genuine sense of urgency and need to fully integrate into the EuroAtlantic institutional structures. Even such seemingly economic matters, such as the introduction of the Euro currency, were securitized from the very start and treated as yet another security enhancement mechanism. The more integrated Lithuania was into the EuroAtlantic institutional structures, the more secure it was. So far this argument still stands out as the most important and unquestionable doctrine of Lithuanian foreign policy. And it will in the foreseeable future. Aside from the EU, the Council of Europe and NATO, it is worth putting up another international organization on the pegboard of IOs with a difference. The three-year-long process of accession to the OECD was a kind of cherry on the EuroAtlantic integration cake. As the then President of Lithuania Dalia Grybauskaite˙ remarked: this organization seems to end our membership [pursuit], our aspiration following independence for Lithuania to return to the world of democratic states and the group [of democracies] in order to ensure security and social

6

DRIVERS OF CHANGE

157

well-being and the future among honorable, self-confident and innovative countries.32

More substantively, the President also emphasized that this membership was and will be an external pressure mechanism, so that the country would not “slip off the path of democracy” and would continue “to guarantee human rights”.33 During those three years of negotiations, the Lithuanian Parliament passed the “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.” It also adopted a new law for the protection of whistleblowers—which was another suggestion by the OECD. Furthermore, the government implemented OECD-recommended reforms in the management of public companies and agencies. Although these changes were relatively few in comparison to the implemented EU wish list of reforms, cumulatively the impact of IOs could be observed through a continuous and substantial shift both in terms of national legislation and practices. The process is by no means complete or irreversible, but push towards a more transparent, accountable, and rule-based governance is now more rigorously continued by local institutions. Finally, one has to mention Transparency International and its local Lithuanian office. While technically it should be treated as an international NGO, TI Lithuania often functioned as a pressure mechanism for change from within. Its local team conducted and published regular reports, actively participated in legislative processes and coordinated their activities with the above-mentioned state agencies. Of course, its global Corruption Perceptions Index always generated plenty of local political and media attention, but most of TI Lithuania’s impact appeared to be in between the annual cycles of the index. As the main hub of independent expertise on transparency and anti-corruption measures, to this day TI Lithuania remains a go-to organization for legislative and policy advice and evaluation. This push towards a more transparent, accountable, and rule-based governance is further reinforced by local institutions.

32 Žilionis, Martynas. 2018. “Lietuva Prisijunge˙ Prie Turtinguj ˛ u˛ Klubo: Kaip Gyvename Palyginti Su Kitais?” Delfi, May 30, 2018. https://www.delfi.lt/verslas/verslas/lietuva-pri sijunge-prie-turtinguju-klubo-kaip-gyvename-palyginti-su-kitais.d?id=78151097. 33 Ibid.

158

A. LAŠAS

Local Pressure Institutions Detailing discretionary practices, Chapter 4 is dotted with references to various local institutions and organizations that monitored state–business regulation, practices and leveraged pressure for institutional change. The list has to include at least five state-run organizations: Office of the President, Financial Crime Investigation Service, Special Investigation Service, Public Procurement Office and the National Audit Office of Lithuania. Among them, only the latter was established together with the restoration of the independence, while the others started their work in the mid-1990s. Their relevance gradually increased as they gained more solid legislative and financial ground for action and their activities fell into the radar of the European Union. For example, starting with the 1999 EU Accession progress report, the European Commission began tracking all investigations initiated by the SIS and comparing their outputs over time. The 2001 Progress report is illustrative in this regard: In terms of its activities, SIS achieved considerable results in fighting corruption in budgetary, municipal, credit and financial institutions, as well as among civil servants in public tendering, privatisation, local authorities, foreign investment, customs and law enforcement. In 2000, 108 criminal cases were initiated (as compared to 125 in 1999), 56 crimes against the civil service were detected (as compared to 98 in 1999), and 98 civil servants and public officials were charged with offences against the civil service (as compared to 168 in 1999). In the first half of 2001, the SIS uncovered 124 crimes, and 98 persons, including 58 civil servants, were charged. (p. 20)34

Such reports boosted the SIS profile and provided political backing for its investigations because the EU accession was a political sacred cow. Even during the relatively turbulent and opaque presidency of Rolandas Paksas, who was impeached for the abuse of office in 2004, the SIS was given a green light to pursue its activities. As the head of the service explained following his conversation with the newly appointed President Paksas in 2003, the President expected the SIS to further boost its anti-corruption campaign “so that Lithuania, when entering the European Union, would show its abilities in reducing corruption.”35 Clearly, the EU attention 34 “Regular Report from the Commission on Lithuania’s Progress towards Accession 2001.” 2001. SEC (2001) 1750 final. European Commission. http://aei.pitt.edu/44575. 35 BNS. 2003. “Prezidentas Nekeis Specialiuj ˛ u˛ Tyrimu˛ Tarybos Vadovo,” April 29, 2003. https://m.delfi.lt/lietuvoje/article.php?id=2254964.

6

DRIVERS OF CHANGE

159

empowered SIS to take risks in questioning, criticizing or investigating political and business relations, but there were limits. When asked why the service did not take on all-powerful media owners and their blunt extractive practices in the early 2000s, a former senior official insisted that media was also a key ally in fighting problematic practices elsewhere, as it was eager to report this kind of material. Plus, quoting US colleagues from the FBI, the interviewee argued that they could have won one battle against mass media, but never a full-on war. It is this reluctant approach that might be the best explanation available for the media’s continuous and egregious abuse of power described in Chapter 4. Some media owners appeared to be simply too powerful, too useful and possible even too close to the service in order to take them on. In the same 2001 EU Progress report, the Commission also demanded to strengthen “the administrative capacity and the independence of the Public Procurement Office” (p. 36). This might have been a reaction to a 30% cut of PPO’s budget in 2000. However, since then, allocations were significantly and regularly increased: the PPO’s budget more than quadrupled from 2000 to 2008. If during the early 2000s, the above-mentioned organizations needed active EU support, ten to fifteen years later, they were much stronger with just local political and media backing. This is yet another confirmation of the importance of the EU role, but it also demonstrates the gradual, but growing capacity and ambitions of local organizations. Of course, one has to be careful not to overplay this shift because at least some of them, according to one senior insider, were still exposed to political pressures. As the heads of the state changed, opportunity structures for reforms and oversight fluctuated as well, leaving more ambitious managers frustrated and sidelined. Wrapping up the section and the chapter, I have to make a brief stop by the Office of the President. Though generally limited in terms of political powers, the Office of the President has a strong legal mandate in the oversight of the court system. According to the Constitution, the President appoints and dismisses judges for all levels of courts with Parliament’s agreement. Only in the case of the Constitutional Court, the President suggests three candidates followed by another three from the head of the Supreme Court, who is appointed by the President in the first place. Given these powers, the President has a lot of say in the formation of the judicial corps. And at least President Dalia Grybauskaite, ˙ who was in office from 2009 through 2019, took full advantage of these powers and more. One interviewee, who is currently an attorney and partner at a

160

A. LAŠAS

prestigious law firm, saw the situation from up close and commented on it in the following way: Grybauskaite’s ˙ advisor was basically kicking the doors of the Council of Judges [key body of judicial self-government] open. She blatantly threatened them numerous times, swore to watch very closely their every move and promised to immediately get rid of any corrupt judges.

According to the President herself, once in power she encountered many inexcusable things in the justice system: “links with politicians, nontransparent distribution of cases according to ‘needs’ or wishes, telephone justice, clan-based divisions, functioning sale schemas for verdicts.”36 At the time of this interview (2017), the President claimed that during her years in office, the Lithuanian justice system underwent the most fundamental change of all public institutions. Whether this assertion is true or not, there is no doubt that the Office of the President played a crucial role in raising the quality of courts. This was done not only by share force of intimidation but also by introducing new legislation. The already mentioned recordings of court proceedings (see This chapter) came about at the beginning of the first President’s term and were eventually expanded to include all of the court systems. The results of the President’s efforts are confirmed by the already mentioned attorney: Now, there is no sale of verdicts, but just 10 years ago there was plenty of that. You could purchase any verdict you needed. Then slowly it became unacceptable and largely disappeared. However, since the salaries of judges are very low, there is a risk for these practices to return.

Ironically, this political determination to curtail exclusive situationalism in courts involved situationalist practices by the Office of the President, which sometimes pushed the limits of ethical behavior. In other words, backstage situationalist practices, though inclusive by nature, were sometimes necessary in order to put sufficient pressure on agents to roll back exclusive situationalist practices.

36 Budenien ˙ e, ˙ Vilma. 2017. “Prezidente: ˙ Teismu˛ Sistemoje L¯užis Akivaizdus.” Teismai.Lt, December 2017. https://www.teismai.lt/data/public/uploads/2017/12/web zurnalas_nr12_-210x2975mmweb.pdf.

6

DRIVERS OF CHANGE

161

Having identified the key drivers of change, I provided immediate explanations for the observed contraction of exclusive situationalism. But this is still unsatisfactory because they contribute little in explaining the change in actors’ mindset in order to plug up legal gaps, to utilize technology to boost transparency, etc. For that, we need to revisit Chapter 2 and evaluate the findings in the context of the proposed frameworks and broader theoretical discussions.

CHAPTER 7

Evaluating Exclusive Situationalism and Its Broader Horizons

Abstract The findings clearly support the hypothesis that local and locally oriented companies tended to have the most intense relationship with politicians. On the other hand, the increasing presence of Western European and especially Scandinavian businesses made a difference by diluting and segmenting exclusive situationalism. Also, the findings support the general notion that bigger companies had more and more diverse leverage on political processes, but this leverage varied even among companies of the same caliber. In terms of policy recommendations, the case of Lithuania indicates that before considering any first-order specific recommendations, it is absolutely necessary to tackle a second-order issue: meta-motivation for change. During its years of regained independence, Lithuania has experienced two types of external meta-incentives/pressures: Russia (negative incentive) and the Euroatlantic membership (positive incentive). Crucially, these key incentive and pressure mechanisms were both substantive and relatively long-lasting. Keywords Meta motivation · Shared public knowledge · Big bang change · High-level prosecutions · Access money

Having related many different and diverse stories of exclusive situationalism in the last three chapters, I now revisit the proposed frames of © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_7

163

164

A. LAŠAS

analysis presented in Chapter 2. To what extent do they hold together? More fundamentally, how does one explain actors’ determination to take on exclusive situationalism? How do the findings fit into broader theoretical debates? Using these questions as a starting point, I will attempt to evaluate the explanatory power and limitations of this work.

Concepts Under Scrutiny Lithuania can be counted as an electoral democracy since its first free Parliamentary elections in 1990. In this area, nothing fundamentally changed over the last thirty years. Given the long-term presence of minimalist democracy, Table 2.1 placed Lithuania in the segmented exclusive situationalism category even during the most turbulent years of early transition. One may argue that this verdict is a bit naïve and in fact the state was fully captured by established oligarchical structures of the time. But what is the factual basis for such claims? As we have seen in the case of the all-important energy sector, the struggle for its control was always ongoing and success always partial. It would be difficult to name energy oligarchs that had exclusive access to constantly rotating political elites. If there ever was such a businessman with keys to all political doors, it would be Bronislovas Lubys, a former Prime Minister and the owner of Achema, the largest fertilizer producer in the Baltic states. He provided financial support for all major political parties on an annual basis and had the ears of political leadership at will. Equally though, Mr. Lubys, according to all interviewed party leaders, was quite careful not to throw his weight around too much. Even in the case of the privatization of the national electricity grid, where he declared his business interest, Mr. Lubys ended up losing to the VP Market group, and his promised consolation prize, a private LNG terminal, never materialized. The owners of VP Market are another possible option for the supreme oligarchic throne. Like Mr. Lubys, they had access to all political decisionmaking levels at will. Still, they also faced limitations, as the cancelled nuclear power station project demonstrated (see Chapter 5, Entrenched power networks). The limiting factor was not only negative public opinion or skeptical politicians but also another powerful corporation—MG Baltic which wanted its own piece of the energy business. The competition

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

165

reached its apex in 2007 as one of the owners of VP Market accused MG Baltic of cooperating with Russian security services.1 Like many others, these businesses had their share of influence on politics, but none of them managed to keep the political process hostage over longer periods of time. Even Rubicon, with its systemic takeover of municipal heating services, was eventually forced to scale down its ambitions as the cases of Vilnius and Alytus municipalities demonstrate. Therefore, the initial categorization appears to be reasonable, but the question remains whether by now Lithuania belongs to a qualitatively different category with only isolated instances of exclusive situationalism. This judgment is a difficult one because it requires to assess the depth of changes in political and business mindsets. Some interviewees were skeptical about the fact of actual transformation, while others were more willing to embrace it. This in part seems to do with where the interviewees were based at that particular time. Those interviewees, who still encountered national political processes from within, exhibited more skepticism. They still saw gaping legal-policy voids and repeated attempts of opaque and entrenched power networks to influence political processes, though they admitted that the style of action was a more refined one. For others, the change was rather obvious and especially among those, who by now worked at foreign-owned companies. While such observations could be interpreted as an example of the Miles’s Law (where you stand depends on where you sit), they also point out to a more general trend mentioned earlier—the increasing presence of Western European and especially Scandinavian businesses in the country. This presence is felt much more substantially now than in the early 2000s and that already makes a difference by diluting and segmenting exclusive situationalism. Following the suggested classification in Table 2.2, many of these businesses were export-oriented companies or at least had a much broader regional (if not global) footprint. With this broader footprint came a broader mindset and relatively few local political interests. Since the same applies to local export-oriented businesses and rapidly growing startup ecosystem, the hypothesis of the contraction of exclusive situationalism gets an even firmer grounding. The examination of practices

1 Bardauskas, Jevgenijus, and Tomas Kavaliauskas. 2018. “LEO LT: Dešimtmeˇcio Senumo I˛ vykiai Parlamentiniame Tyrime.” LRT.Lt, June 4, 2018. https://www.lrt.lt/nau jienos/lietuvoje/2/214748/leo-lt-desimtmecio-senumo-ivykiai-parlamentiniame-tyrime.

166

A. LAŠAS

in Chapter 4 confirms that on average both Legal-Unethical and IllegalUnethical varieties of exclusive situationalist practices not only became less brazen and more refined in nature but also less frequent over time. In line with Table 2.2, the findings clearly support the hypothesis that local and locally oriented companies tended to have the most intense relationship with politicians. I could not find a single interviewee, who would argue otherwise. In fact, it seems that the closest connection took place when childhood or university friends found themselves in these two camps. The previously earned trust provided the impetus for additional risk-taking and helped to sustain the connection even when public scandals broke out. Furthermore, I found support for the differentiation between public agencies with and without substantial state and/or EU investment funds, with resource-rich public institutions attracting much more political and business attention. More often than not, they featured prominently in various corruption or nepotism scandals. It would be hard to find any “dirt” in mass media on, for example, the Ministry of Foreign Affairs or the Ministry of Justice, while the Ministry of Transportation and Communications often stumbled into various public controversies vis-àvis exclusive situationalism. Of course, not every media scandal is a sign of actual misconduct, but this general conclusion is supported by numerous interviewees, who pointed out this differentiation between resource-rich and resource-poor public institutions. Finally, regarding the power dynamics specified in Table 2.3, they appear to be too detailed and mechanistic. The findings support the general notion that bigger companies had more and more diverse leverage on political processes, but this leverage varied even among companies of the same caliber. It seems that some owners were much more willing to take up the political route than others. Those who refrained could still manage to find their business niches due to other competitive advantages, and an ability to spot opportunities outside the public sector. But even when working with the public sector, they might simply end up with a longer and more convoluted decision-making processes rather than being completely eliminated from public procurement. If discriminated against, they had realistic legal options, which ended up not only frustrating competitors and political decision-makers due to delays, but in some cases also preventing instances of potential extractive situationalism. There was a series of legal cases, which involve municipalities’ attempts to place higher real estate taxes or parking fees on larger developers. In all of them, the courts struck down the municipality decisions, arguing

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

167

for a more transparent and legally sound basis for taxation and fees.2 This is yet another indirect confirmation that since the early 2000s Lithuania could at worst be classified as a country with segmented exclusive situationalism, and at best already knocking at the door of isolated exclusive situationalism. Still, given the evidence, I am forced to find some uneasy middle ground, where segmented exclusive situationalism appears to be slowly receding into fewer and fewer segments, but this still cannot be reduced to just a few isolated incidents. After all, some governing coalitions still seem to have no problems with sheltering tainted politicians, who in turn seek to exploit their power position for personal or partisan gain.

Broader Horizons of Situationalism So far I have considered the explanatory value of the proposed frameworks in Chapter 2, but there is still a need to take another step back and evaluate broader theoretical and practical implications of the findings. For that, I will first consider the role of incentives and then engage other ideas circulating in academic literature. The underlying argument here points to a three-step sequence of change: establishing fundamental and long-lasting motivation for systemic change, following up with specific institutional transformations and at the same creating adequate monitoring systems, where external principals are gradually supplanted by local ones with increasing independence and leverage. Incentives for Change The current academic literature provides a number of recipes to combat extractive practices in the business–politics nexus. Among these recommendations are regularly updated and company-tailored business codes,3 2 “Byla A16 – 1036/2006.” 2006. Lietuvos Vyriausiasis Administracinis Teismas. https://e-seimas.lrs.lt/rs/legalact/TAD/TAIS.282906/. “Byla A-1107-492/2015.” 2015. Lietuvos Vyriausiasis Administracinis Teismas. https://www.e-tar.lt/portal/lt/leg alAct/80c03fa0735711e5906bc3a96c765ff4. “Byla EA-383-556/2019.” 2019. Lietuvos vyriausiasis administracinis teismas. https://eteismai.lt/byla/222198092786424/eA-383556/2019. 3 Kaptein, Muel. 2004. “Business Codes of Multinational Firms: What Do They Say?” Journal of Business Ethics 50 (1): 13–31. https://doi.org/10.1023/B:BUSI.0000021051. 53460.da.

168

A. LAŠAS

international legislation against corruption and its coordinated implementation among signatories,4 strengthening the institutions of accountability,5 raising the legitimacy of law enforcement agencies,6 reduction of the regulatory burden7 and many others. However, if one checks this increasing number of targeted recommendations and insights against the reality, too often they seem to fail miserably. The 2020 Corruption Perception Index’s executive summary begins as follows: This year’s Corruption Perceptions Index (CPI) paints a grim picture of the state of corruption worldwide. While most countries have made little to no progress in tackling corruption in nearly a decade, more than twothirds of countries score below 50. Our analysis shows corruption not only undermines the global health response to COVID-19, but contributes to a continuing crisis of democracy.8

This sad state of affairs today indicates that before considering any firstorder specific recommendations, it is absolutely necessary to tackle a second-order issue: meta-motivation for change. In the words of Rothstein (2007), “why would agents that either stand to gain from corrupt practices or who can only loose by refraining from corruption at all be

4 Cuervo-Cazurra, Alvaro. 2008. “The Effectiveness of Laws against Bribery Abroad.” Journal of International Business Studies 39 (4): 634–651. https://doi.org/10.1057/pal grave.jibs.8400372. Mackey, Tim K., Taryn Vian, and Jillian Kohler. 2018. “The Sustainable Development Goals as a Framework to Combat Health-Sector Corruption.” Bulletin of the World Health Organization 96 (9): 634–643. https://doi.org/10.2471/BLT.18. 209502. 5 Shah, Anwar, ed. 2007. Performance Accountability and Combating Corruption. Public Sector Governance and Accountability Series. Washington, DC: World Bank. 6 Tankebe, Justice. 2013. “Viewing Things Differently: The Dimensions of Public Perceptions of Police Legitimacy: Public Perceptions of Police Legitimacy.” Criminology 51 (1): 103–135. https://doi.org/10.1111/j.1745-9125.2012.00291.x. 7 Amin, Mohammad, and Yew Chong Soh. 2021. “Does Greater Regulatory Burden Lead to More Corruption? Evidence Using Firm-Level Survey Data for Developing Countries.” The World Bank Economic Review 35 (3): 812–828. https://doi.org/10.1093/ wber/lhaa007. 8 “Corruption Perceptions Index 2020.” 2021. Transparency International. https:// images.transparencycdn.org/images/CPI2020_Report_EN_0802-WEB-1_2021-02-08103053.pdf.

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

169

interested in creating such ‘efficient’ institutions?”9 Others posed the same question in a more amusing way: how do you make turkeys vote for Thanksgiving?10 The case study of Lithuania points to a potential answer that has to do with long-term substantive incentives for state security, development and modernization. The perspective of becoming a new kind of state, a full-fledged member of the Euroatlantic economic and security communities, has motivated local agents in Lithuania to follow this path, along which they had to transform their own institutions and stay accountable to external oversight agents. Without this enticing meta perspective, coupled with adequate monitoring and pressure mechanisms, all subsequent recommendations could have potentially been thrown into the garbage bin of interesting, but underperforming ideas. History is littered with examples of such ambitious failures. During its years of regained independence, Lithuania has experienced two types of external incentives/pressures: Russia (negative incentive) and the Euroatlantic membership (positive incentive). The wariness of Russia, nostalgic of its Soviet past and sometimes even ready to use military force in the post-Soviet space, pushed Lithuanian political elites to commit themselves to full integration into Western institutions. This was understood as an absolute necessity for the long-term viability of the state. Geography in combination with Soviet experiences of the Baltic states pushed to reject any lesser alternatives. On the other hand, once these strategic choices were made, membership of NATO and especially EU, acted as the primary driver for change during the accession process and beyond. Of course, Lithuania was not unique in its choices. There were ten more Central and Eastern European countries that recognized the overwhelming magnetism of EU and NATO membership offers. Constantly comparing themselves to other countries in this accession race, Lithuanian political elites were under persistent domestic pressure from both media and the electorate to meet Western institutional expectations. Still 9 Rothstein, Bo. 2007. “Anti-Corruption – A Big Bang Theory.” QoG Working Paper Series, no. 3 (May). https://www.gu.se/sites/default/files/2020-05/2007_3_Rothstein. pdf. Rothstein, Bo, and Jan Teorell. 2008. “What Is Quality of Government? A Theory of Impartial Government Institutions.” Governance 21 (2): 165–190. https://doi.org/ 10.1111/j.1468-0491.2008.00391.x. 10 Stephenson, Matthew. 2019. Corruption and Anticorruption: A Talk by Professor Matthew Stephenson. Harvard Law School. https://www.youtube.com/watch?v=V6t0Tz n2ZSU.

170

A. LAŠAS

given this pressure, change was often rushed and ended up being rather superficial in nature. Changing laws was no doubt useful, but that did not automatically guarantee the rule of law. However, this process turned out to be a kind of cover for the emergence of other relevant actors, such as the growing number of international investors, new local businesses and stronger civic and state organizations. Luckily for Lithuania, the investors often came from Scandinavia, new businesses often oriented themselves towards the Western markets, while civic and state organizations modeled themselves after Western European counterparts. Together they formed a kind of wave that continued beyond the accession date of 2004, creating new ways of doing business and politics. In the words of Acemoglu and Robinson (2012), this was the start of “the virtuous circle” leading to more transparency and inclusiveness. Crucially, these key incentive and pressure mechanisms were both substantive and relatively long-lasting. Substantive incentives made it almost impossible for political elites to ignore them, while the long-lasting nature of pressures ensured continuity of reforms, even under less enthusiastic and more extractive governments. This meta-motivation for change can be regarded as a necessary, but not yet a sufficient condition, considering paths taken by other CEE countries. Again, luckily for Lithuania, since 2000 politics stayed coalitional in nature, preventing any serious disruptions from the pro-Western political course. The extreme fragmentation of the Lithuanian party system turned out to have a brighter side. It prevented the Hungarian type of scenarios, where a single ruling political party could practically muster a Constitutional majority in the Parliament and get a green light to entrench and abuse its political powers. Furthermore, as it was mentioned in Chapter 3, the public overwhelmingly supported the Euroatlantic integration, helping to maintain consensus among political elites as well. Playing on Eurosceptic sentiments was not really a viable option. Order and Justice party led by a controversial impeached president Rolandas Paksas explored this playbook following the Polish example, but never generated any substantial benefits. After the 2012 Parliamentary elections, where the party lost votes and seats, they managed to join a ruling coalition as a minor partner, but that was the height of their achievements. Seeing the futility of efforts to damage the reputation of the external oversight bodies (primarily the EU) in the eyes of the public, most political parties preferred to follow a different path—to show off their ability to comply with external recommendations and requirements.

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

171

Thus, based just on the Lithuanian case, the underlying motivation for change in the nature of situationalist practices materializes when (a) substantive political goals/vision, connected to transforming state laws, practices and institutions, are present; (b) these goals have a broad and sustained societal support; (c) political power is fragmented and/or constrained enough to avoid sudden shifts in the political course of the country and to ensure genuine electoral change and (d) a bit of luck works in your favor. At this point, it is impossible to precisely judge which of these factors are necessary conditions for meta-motivation to develop and persist, but they all had a noticeable role. Just to emphasize again, this future vision was not about the nature of situationalism, corruption or politics–business relations, but about a new geopolitical and economic status for Lithuania that promised more safety, prosperity and political integrity. The presence of meta-motivation transforms an academic debate in anti-corruption research between the adherents of principal–agent and collective action theories. If the former tends to focus on challenges related to renegade agents, the latter points a finger to renegade principals as a prior and more fundamental problem. However, meta-motivation resolves this apparent “dilemma of focus” by creating a collective interest of agents to adhere to the chosen political meta course (including the implementation of necessary reforms) and by bringing in monitoring instruments, in other words, “principled principles”, for the observation and evaluation of the agents. Scope is key here because incentives and monitoring are injected from outside into the whole system. In such a way, the pressure for change eventually reaches all key agents, while the gradual empowerment and proliferation of local principles ensures the increased effectiveness of monitoring. As the “virtuous circle” gains momentum, trust grows and local political agents have stronger incentives to outbest their rivals in the implementation of reforms, seeking reassurance from internal and external monitoring principals, including voters. Beyond Incentives So far in this section, I paid most attention to the incentives for change, but it is also worthwhile touching upon other change-related issues raised by academic literature on anti-corruption and informality. To begin with, I turn to the divide between the so-called big bang and incrementalist

172

A. LAŠAS

camps of change. The key debate here is about the principal strategy for bringing about change in a society with systemic problems of corruption (see, e.g. Rothstein 2011).11 Looking from the perspective of the Lithuanian case, this divide appears to be artificial. In many ways, Lithuania embodies both scenarios of change, whereas incremental changes during most of the 1990s were followed by the big bang of 1999–2004 and then followed by incremental changes again from 2005 onwards. The latter period can be further subdivided into more or less intense periods of policy evolution since it unfolded in stop-go cycles, as policies often do.12 As it was mentioned earlier, the big bang change during EU and NATO accession negotiations brought a lot of formal transformations, but then it took a relatively long time for the society to catch up in terms of daily practices. And that is where I come to the issue of culture. In their study of global corruption determinants, Jetter and Parmeter (2018) bravely assert that “institutions and education matter—not culture.”13 On the other hand, Hira (2016) argues that “culture matters in corruption reforms.”14 So does it in the case of Lithuania? If culture is defined as shared beliefs and practices, the evaluation spectrum becomes disproportionally wide and diverse. Without getting into this trap of all things culture, I would like to pinpoint to the potential relevance of shared public knowledge about the nature of situationalist practices in a society. This is obviously an endogenous variable, which depends upon the extent of these practices and their dynamics, but it can also significantly differ (lag) from reality because of

11 Rothstein, Bo. 2011. “Anti-Corruption: The Indirect ‘Big Bang’ Approach.” Review

of International Political Economy 18 (2): 228–250. https://doi.org/10.1080/096922 91003607834. 12 Scott, Peter M., and James T. Walker. 2019. “‘Stop-go’ Policy and the Restriction of Postwar British House-building.” The Economic History Review 72 (2): 716–737.https:// doi.org/10.1111/ehr.12700. 13 Jetter, Michael, and Christopher F. Parmeter. 2018. “Sorting through Global Corruption Determinants: Institutions and Education Matter – Not Culture.” World Development 109 (September): 279–294. https://doi.org/10.1016/j.worlddev.2018. 05.013. 14 Hira, Anil. 2016. “Broken Windows: Why Culture Matters in Corruption Reform.” Journal of Developing Societies 32 (1): 1–16. https://doi.org/10.1177/0169796X1560 9710.

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

173

the stickiness of beliefs. Still the knowledge/awareness of prevalent practices can structure behavioral choices, e.g. through the mechanisms of social conformity.15 When I meet a builder, who gives me a “you are stupid” look after I explain that I will be paying for his services via a bank transfer (which means a hefty VAT tax on top), he signals about possible and acceptable practices. When an acquaintance tells me that the road to his house was made out of old asphalt, which had to be recycled and reused by a municipality company, but instead every second truck was sent to him, I understand how this world functions, if you have good acquaintances. When a doctor explains to me inventive ways to signal that he welcomes a bribe from visiting patients and they recognize these signals, I am faced with the existing dynamics of day-to-day power relations in public medical services. When an art shopkeeper tells me that she has to regularly make fictional business orders with her relatives in order to cover real orders that artists do not want to report to tax authorities, my horizons of situationalism expand to pretty much any business relations. Furthermore, I am pushed to rethink what is business when I am told by two unrelated businessmen that the cheapest way to cash out your company income is allegedly through a church organization, which has minimal tax oversight and significant inflows of cash. A company would “donate” funds to the church and in return would get cash. By the way, during the COVID pandemic, the cashout fee has apparently increased from 15 to 20% and that still remained a highly attractive business offer. All these stories, which I personally encountered, can be further and regularly reinforced by mass media. When I read of a large retail company potentially engaged in massive tax fraud by creating sophisticated evasion schemas16 or that sales of illegal cigarettes constitute about 18% of the

15 Cialdini, Robert B., and Noah J. Goldstein. 2004. “Social Influence: Compliance and Conformity.” Annual Review of Psychology 55 (1): 591–621. https://doi.org/10. 1146/annurev.psych.55.090902.142015. 16 Degutis, Gintautas, and Jolita Skinulyte. ˙ 2010. “Mokesˇcius Tiekejams ˙ Prekybos Centrai Paslep ˙ e˙ Po Nuolaidu˛ Vardu.” Kauno Diena, October 20, 2010. https://kauno. diena.lt/naujienos/verslas/ekonomika/mokescius-tiekejams-prekybos-centrai-paslepe-ponuolaidu-vardu-510646.

174

A. LAŠAS

total sales in the country17 or any other similar articles, I gain additional and longer lasting confidence in my convictions about the nature of social exchanges. And this is already not just a personal conviction, but a shared (cultural) knowledge among a significant portion of the society. In turn, this knowledge can reinforce prevalent tendencies in businessstate relations because of its application in daily life. After all, politicians and the majority of businesspeople do not materialize from some outside space, but are in fact a part of the same social-cultural fabric and are aware of prevalent cultural trends. Thus, shared cultural knowledge can legitimize and extend the lifecycle of practices, but it does not have to lock in them permanently. The case of Lithuania clearly demonstrates that cultural (shared) practice and knowledge can noticeably change and can do so in a matter of one to two decades, at least when talking about situationalist ethics. The already mentioned case of police, where an early and radical shift from exclusive practices took place, represents one of the most dramatic examples of change in public attitudes. From 1998 to 2018, public trust in police nearly tripled with the most consistent growth taking place during the last 15 years.18 By 2020, public trust levels in police peaked at 68.4% and stayed in the mid-60s to date.19 When entrenched practices undergo evolution, it is hard to imagine such developments without the active role of political leadership. This element has been repeatedly stressed in academic and development literature.20 I can clearly see it working in the Lithuanian case as well, but

17 BNS. 2018. “Nelegalios Cigaretes ˙ Lietuvai Kainuoja Daugiau Nei 50 Mln. Euru˛ per Metus.” Delfi, June 22, 2018. https://www.delfi.lt/verslas/verslas/nelegalios-cigaretes-lie tuvai-kainuoja-daugiau-nei-50-mln-euru-per-metus.d?id=78377399. 18 Gaidys, Vladas. 2019. “Pasitikejimo ˙ Institucijomis Dinamika Lietuvoje 1998–2018 m.: Ilgalaikiai Ir Ad Hoc I˛ takos Veiksniai.” Filosofija. Sociologija 30 (4): 287–294. 19 Budzinauskas, Vytautas. 2020. “Pasitikejimas ˙ Lietuvos Policija – Didžiausias per Dvidešimt Metu.” ˛ Delfi, February 22, 2020. https://www.delfi.lt/news/daily/lithuania/ pasitikejimas-lietuvos-policija-didziausias-per-dvidesimt-metu.d?id=83600229. 20 Leak, Tan Ah. 1999. “The Experience of Singapore: In Combating Corruption.” In Curbing Corruption: Toward a Model for Building National Integrity, edited by Rick Stapenhurst and Sahr John Kpundeh, 59–66. EDI Development Studies. Washington, DC: World Bank. Igiebor, God’s time Osariyekemwen. 2019. “Political Corruption in Nigeria: Implications for Economic Development in the Fourth Republic.” Journal of Developing Societies 35 (4): 493–513. https://doi.org/10.1177/0169796X19890745.

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

175

it can work in both directions. If President Dalia Grybauskaite˙ used her leverage over the court system and brought significant positive changes there (sometimes even by ethically dubious means), the head of the Labour Party Viktor Uspaskich worked often in the opposite direction, spreading exclusive situationalist practices along his political career path. In a fragmented political system, neither of them could produce systemwide transformations, but the President came much closer to that goal due to her relatively long-term stay in office and her exclusive (nonshared) legal right to oversee the courts. Furthermore, many external and internal principals backed her up, which significantly complicated the situation for renegade agents. Ironically though, she used (inclusive) situationalist practices to fight deep-rooted exclusive situationalism, giving renegade agents a kind of taste of their own medicine. And this persistent activist approach worked despite relatively low salaries in the court system and high working loads, i.e. without providing a comprehensive solution as typically suggested in anti-corruption literature (see, e.g. Quah 2001).21 Another idea related to bringing about change in political and business culture focuses on the size of the so-called “fish” brought to justice. If big fish, powerful politicians and business people are successfully prosecuted for extractive practices, then, the argument goes, a strong signal of change is sent both to elites and society at large (Klitgaard 1998,22 Klitgaard 200823 ). In this regard, Lithuania represents a curious case of mixed signaling. On the one hand, a number of high-level investigations and prosecutions have been initiated over the last twenty years. Former ministers, MPs and business owners were accused of corruption and had to defend themselves in court. On the other hand, the outcomes of most prominent legal proceedings were usually quite timid with verdicts ranging from non-guilty to symbolic fines. At least that is what happened in the proceedings against Labour Party’s leadership, owner of daily Lietuvos rytas , MG Baltic scandal and several others. There is little doubt 21 Quah, Jon S. T. 2001. “Combating Corruption in Singapore: What Can Be

Learned?” Journal of Contingencies and Crisis Management 9 (1): 29–35. https://doi. org/10.1111/1468-5973.00151. 22 Klitgaard, Robert. 2009. Controlling Corruption. Berkeley: University of California Press. 23 Klitgaard, Robert. 2008. “A Holistic Approach to the Fight against Corruption.” Bali, Indonesia.

176

A. LAŠAS

that, given exceptional media attention to these cases, the majority of the public was disappointed with such light verdicts. However, if judged by the standards of institutional change, these scandals often generated a political momentum for new legislation aimed at curbing discretionary practices.24 Subsequently, the results of these legislative changes could be measured not only in terms of a more transparent system but also in terms of healthier public finances.25 Still “frying the big fish” seems to be neither a necessary nor a sufficient condition in the case of Lithuania. Finally, I consider the idea of change as a movement from purely extractive practices (petty theft, grand theft and speed money) to corrupt exchanges (access money). According to Ang (2020), the latter is a feature of capitalist economies and, despite its presence, this evolution from pure theft to flawed investment provides means for economic growth.26 While this conceptual schema is an intriguing way to go beyond a single and simplistic view of corruption, it does not fit well in the case of Lithuania. I observe a general shift towards less extractive practices. It applies to all categories listed in Table 4.1 and suggested by Ang. While it is possible that access to money could turn out to be the most persistent problematic practice over time, there is no evidence that this category got more attention from top political leadership and/or anti-corruption agencies than others. Attention to exclusive situationalist practices and subsequent policy suggestions usually gained momentum following public scandals or IO recommendations, but these moves were never agreed upon or shared by political elites in a longer-term perspective. Different ruling coalitions had different political priorities and differed in terms of their links to businesses. As it has been demonstrated in this book, some political parties essentially functioned as businesses trading their privileged position of power, while others resembled more closely the ideal model of a political party. To view them as a single collective actor might make sense in the

24 Lašas, Ainius, and Vaida Jankauskaite. ˙ 2019. “Korupcijos Skandalai Kaip Sisteminiu˛ Pokyˇciu˛ Variklis: „MG Baltic“ Atvejo Analize˙ [Corruption Scandals as Engines of Systemic Change: The Case of MG Baltic].” Politologija 93 (1): 8–35. https://doi.org/10.15388/ Polit.2019.93.1. 25 Baltrunaite, Audinga. 2016. “Political Finance Reform and Public Procurement: Evidence from Lithuania.” February 15. https://www.lb.lt/uploads/documents/files/Zin iasklaida/Renginiai/n26671_audinga_0215.pdf. 26 Ang, Yuen Yuen. 2020. China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption. Cambridge, UK: Cambridge University Press.

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

177

case of China, but not in Lithuania. In the same way, as discussed earlier, businesses differed as well in terms of their needs for public services or access to public resources. As foreign investment poured in and local firms found more reliable export markets abroad, the nexus of business–politics relations underwent evolution towards more transparent and inclusive practices. While building a broader theory based on experiences of a relatively homogenous and small state like Lithuania is an endeavor fraught with all of kinds of pitfalls, I believe these insights have broader implications. They demonstrate at least one potential pathway for changes in situational practices. The model is not easy to emulate because of the unique nature of incentives offered by the EU and NATO and threats by Russia, but it still shows a way to proceed and even succeed. The ability to generate a high and lasting motivational environment coupled with adequate monitoring and the presence of principled principals (even if external ones at the start), jumpstarts the process of change and has potential to initiate the “virtuous circle” on a systemic level. While the emulation of this model is hard to imagine in some countries, I would argue that, e.g. Ukraine and Moldova could easily follow the path of Lithuania, given the invitations for Kiev and Chisinau to join the European Union. As demonstrated above, this path is full of challenges and even luck is needed, but systemic change is possible and definitely worth a try.

Limitations and Future Research During this research project, I have made a conscious effort to bring into the manuscript as much raw information as possible, so that readers can judge for themselves about the nature of the politics–business nexus in Lithuania and make their own conclusions. This choice came at a price of many diverse stories that can sometimes be disorienting for those less familiar with the region. The heavy dependence on anonymous interviews, that resulted in these stories, has another price tag—reliability. It was very difficult or sometimes even impossible to confirm some stories relayed by the interviewees. The events they encountered might have occurred in a very narrow (exclusive) circle of participants or they might have been intentionally or unintentionally distorted by a narrator. Some stories, which I expected to be confirmed by others, were fervently denied. For example, one interviewee was pretty sure that in the early 2000s his senior party colleagues bought off a national survey in order to

178

A. LAŠAS

show better polling results before upcoming elections. The interviewee even named a specific price paid for the service. However, having interviewed a number of alternative sources, I could not find anybody else, who had the knowledge of this particular transaction. In public media sources, I managed to track down only one similar story, where a survey agency was willing to tweak not the result, but the actual questions in order to boost the popularity of former PM Kazimiera Prunskiene. ˙ In 2004, she was running as a presidential candidate against the one-term president Valdas Adamkus. The survey agency asked two questions. The first inquired whether a woman can become the president, to which 85% of survey respondents answered in the affirmative. Then respondents were given a closed list of just four women candidates and asked to name which one was the best in representing their interests, and to this 65% of the survey respondents chose Ms. Prunskiene. ˙ The results were publicized as if 65% of the voters wanted to see her as a presidential candidate. Although the candidate was not successful in winning the election, the presidential race turned out to be quite competitive with Prunskiene˙ gaining 47.4% of the vote. While Prunskiene’s ˙ problematic survey was an indicator that at least one survey conducting agency was willing to compromise its integrity in the early 2000s, there was not sufficient evidence to ascertain the presence of a broader and more systematic phenomenon. This uncertainty, linked to the source of information or to insufficient efforts by the interviewer, also applies to publicly available media sources. Just because a story is published or posted, it does not automatically increase its reliability. The only way out of this trap seems to be methodological triangulation, where various sources could confirm the reliability of gathered material. Another related challenge was the actual determination of exclusive or even extractive practices. What for state officials might look like an egregious and criminal act by cynical business representatives, business representatives themselves perceived it much more positively and even pointed to a purely idealistic motivation. While researching the Leo LT story, I encountered exactly this contrast in perceptions. Everyone from the business side, who participated in these events, saw them in a more much positive light for society and less positive for business itself. The two sides radically differed in their perceptions, which made it harder to delineate reality from perceptions. This story is still fuzzy in many regards and needs further research, but at the same time, I was able to find some

7

EVALUATING EXCLUSIVE SITUATIONALISM AND ITS BROADER …

179

relevant common ground, where all interviewees concurred—the relative ineptitude of public institutions at the time. Finally, some uncertainty lingers on vis-à-vis the proposed shift of Lithuania from segmented to isolated exclusive institutionalism over the last twenty-plus years. Although recently, like most other countries, Lithuania encountered many COVID-19-related issues, this stress test was much lighter than the one experienced during the 2008 global financial crisis. Without sufficient desperation, it is very difficult to judge whether business and political cultures have substantively changed or whether a less desperate situation simply leads to less desperate behavioral choices. There is evidence to believe that the process of Westernization is quite sustainable at this point and that Lithuania has exited an open critical juncture, but there is also some cause for concern. A recent SIS investigation of the construction sector in Vilnius has allegedly identified a trans-institutional corruption schema, whereby 60 people, including 20 public officials, were identified as suspects.27 The mayor of Vilnius Remigijus Šimašius was relieved that none of his political team members were a part of the scoop, but he acknowledged having some suspicions about other key people in the municipality. This scandal seems to at least partially confirm remarks by a former head of a political party, who noted that politicians like Mr. Šimašius might be of a new generation, i.e. more reluctant to engage in blunt exclusive situationalism, but they were often blind to the problematic practices of lower level key bureaucrats, who have been there before Šimašius and will stay there after him. And that’s why it is too early to proclaim the victory of a new bravely inclusive world. Furthermore, it is not entirely clear how these dynamics play out in smaller municipalities. Although this book tried to bring some regional and municipal perspectives to the foreground, there is much more to be done here. It seems that regions, or at least some of them, substantially lag behind in terms of inclusive, ethical and transparent practices. Of course, the effect of these localized practices upon the country as a whole appears to be rather limited and does not change the overall trends, but it potentially points to growing differences between the largest cities and the rest of the country. In 2019, the three largest Lithuanian counties 27 Gauˇcaite-Znutien ˙ e, ˙ Modesta. 2021. “Aiškeja ˙ Daugiau Detaliu˛ Apie STT Tyrim˛a: J˛i Vykde˙ Ilgiau Nei Metus, Nustatyta Daugiau Nei 60 I˛ tariamuj ˛ u.” ˛ LRT.Lt, November 25, 2021. https://www.lrt.lt/naujienos/lietuvoje/2/1550356/aiskeja-daugiau-detaliuapie-stt-tyrima-ji-vykde-ilgiau-nei-metus-nustatyta-daugiau-nei-60-itariamuju.

180

A. LAŠAS

(out of ten) received almost 90% of all FDI and this is a pretty consistent trend over time, pointing both to the presence of socioeconomic inequality across the regions and very different political-business environments. Bridging this gap is yet another crucial task for Lithuania in order to lock in its business–politics nexus into the path of increasingly ethical and legal practices.

CHAPTER 8

Conclusions

Abstract Spurted by the underlying prospect of the EuroAtlantic integration and escape from the Russian sphere of influence, the gradual infusion of foreign capital and the rise of new Lithuanian economic elites created space for a gradual decoupling of economic and political powers. These trends represent the “Westernization” of Lithuania, but the process really took off following the 2008–2010 financial crisis. In other words, it was a much-delayed development, if considering the literature on transitology. The biggest challenge now facing Lithuania’s public sector is arguably no longer exclusive situationalism, but incompetence. Keywords Democratic transition · Westernization · Incompetence · Mediocrity · Isolated exclusive situationalism

The explanation of social change and transformation in this book partially echoes Durkheim’s conceptualization of change grounded in the division of labor. Spurted by the underlying prospect of the EuroAtlantic integration and escape from the Russian sphere of influence, the gradual infusion of foreign capital and the rise of new Lithuanian economic elites, which had less dependence upon the local market, local rules and customs, created space for a gradual decoupling of economic and political powers. This new equilibrium formed with growing exports to Western Europe, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1_8

181

182

A. LAŠAS

foreign investments from companies with a Western mindset and the plugging of legal and policy gaps, thanks to the continuous pressure from the EU and other international and local organizations. Over time access to political elites became less of an asset, while professional knowledge increasingly grew in importance. This process of transformation is far from complete, but the fusion of the political– business nexus appears now much more fragmentary and limited than 20-plus years ago. The growing complexity of the division of labor, i.e. the growth of new Western investments and Western-oriented businesses, did not seem to bring about Durkheim’s organic solidarity, but it did bring changes in daily practices. More fundamentally, changes came to daily democratic practices, where the exercise of delegated political power became more transparent and refined. “Refined” here indicates both a change in practices and a change in the style of practices. The crude manifestations of exclusive situationalism have become less frequent, while Western style lobbying grew in practice and prominence. These trends represent the “Westernization” of Lithuania, but the process really took off following the 2008–2010 financial crisis. In other words, it was a much-delayed development, if considering literature on transitology. By that time, formal political and economic transitions should have been a distant memory. And in part, they were, if one considers, e.g. the criterion of free and fair elections. But the deep societal transition, i.e. transition to democratic values and practices, has taken a much slower and bumpier route. It took time for external principals to empower local/internal principals that could monitor reforms, sanction renegade political and business agents and thus infuse trust into the system. To this day, there are plenty of active politicians, business people and bureaucrats, who gamed the system previously for personal gain and, given opportunities, might do it (or actually are doing it) again. There is nothing predetermined about the direction or intensity of the observed changes. They seem to fluctuate and occasionally open up political and subsequently additional economic opportunities for purely opportunistic political parties, whose leaders have little more than the extraction of state resources on their mind. Even now, decade and a half after the financial crisis, Lithuania remains vulnerable to various kinds of economic and political populism due in part to very limited and shallow links between political parties and society. The fact that it did not experience any substantial fallbacks in terms of democratic standards (as, for

8

CONCLUSIONS

183

example, Hungary did) is more due to political fragmentation, presidential political leadership and luck than to the resilience of the political culture. Still by now, one can identify some signs of growing broader societal resilience and that gives hope for the future. The biggest challenge now facing Lithuania’s public sector is arguably no longer exclusive situationalism, but incompetence. Whether we talk about awkward public procurement rules and procedures, the mismanagement of COVID-19 crisis or other issues, they often reveal a limited capacity to deal with them rather than the existence of some “powerful set of practices” that subvert “the ability of the rule of law to function coherently” (Ledeneva 2006: 12). As the owner of one consultancy remarked: “I don’t see much corruption these days, but I see lots of ineptitude.” A former Lithuanian ambassador to the UNESCO readily agrees: “What worries me more is the intellectual capacity of our policy makers. [I see] thinking in premade frames, the lack of real intellectual activity.”1 Ironically, these assessments bring us back to Lithuania’s first progress report issued by the European Commission in 1998, where the Commission stated that Lithuanian laws are frequently amended while the establishment of proper implementation structures often lags behind. To a certain extent, this is due to a lack of administrative capacity and, at times, to the absence of clearly defined medium-term strategies. (p. 17)2

These words have not lost their relevance today and this seems to be Lithuania’s Achilles heel, which needs to be dealt with much more seriously. In an increasingly competitive world, where small advantages or disadvantages play an increasingly noticeable role, the country’s public institutions cannot afford to be trapped in mediocrity. If Lithuania wants to stand a chance of becoming a country with isolated exclusive situationalism, it still has a long journey ahead of it. The direction taken so far is encouraging, but much systemic work is still waiting. Samuel Huntington (1968) once pointedly noted that where economic opportunities are more plentiful than political ones, ambitious people use wealth to 1 Klusas, Mindaugas. 2021. “Irena Vaišvilaite: ˙ UNESCO Kuria Pasaul˛i, Kuris Lietuvai, Deja, Neegzistuoja.” LRT.Lt, October 7, 2021. 2 “Regular Report from the Commission on Lithuania’s Progress towards Accession 1998.” 1998. COM (98) 706 final. European Commission. http://aei.pitt.edu/44570/.

184

A. LAŠAS

seek power. On the other hand, where political opportunities abound and economic ones are scarce, power pursues wealth. Lithuania needs both— plentiful economic and political opportunities, ensuring a power balance and a constructive dialogue between the business and political elites.

Exhibit A: List of Interviewees

Some interviewees held these positions in the past and some hold them today. In order to ensure the anonymity of information sources, I do not specify the time period or age of the interviewees. Due to the small size of the country, it can be quite easy to figure out a person’s identity based on the position and information they are able to provide. 2. Media experts 2.1. Leading political journalist 2.2. PR specialist 2.3. Head of a media agency 2.4. Regional newspaper owner 2.5. Leading business journalist 2.6. Section editor, major regional newspaper 2.7. Senior media manager 2.8. Business journalist 2.9. Head of a mass media outlet.

3. Business owners and managers 3.1. Department head, Leading real estate management company 3.2. Department head, Leading retail company 3.3. CEO, Leading retail company 3.4. Owner and CEO, Real estate development company © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1

185

186

EXHIBIT A: LIST OF INTERVIEWEES

3.5. Senior manager, Banking sector 3.6. CEO, Banking sector 3.7. CEO, Alcohol/beverage manufacturing company 3.8. Owner and CEO, Real estate development company 3.9. Executive director, Basketball club 3.10. Owner and CEO, Construction company 3.11. CEO, PR agency 3.12. Regional head, IT company 3.13. Co-owner and CEO, Leading retail company 3.14. Department head, State Transportation company 3.15. Managing director, State Transportation company 3.16. CEO, IT company.

4. Politicians and bureaucrats 4.1. Head of a political party 4.2. Member of Parliament and Minister 4.3. Member of Parliament and Minister 4.4. Head of a political party 4.5. Minister 4.6. Mayor of a medium-size city 4.7. Vice-minister 4.8. Advisor to the Prime Minister 4.9. Director, state monitoring agency 4.10. Mayor of a large municipality and member of parliament 4.11. Mayor of a large municipality 4.12. Mayor of a large municipality 4.13. Director, state agency 4.14. Head of a political party 4.15. Minister 4.16. Vice-minister 4.17. Vice-minister 4.18. Member of Parliament; Vice-chairman of a political party 4.19. Municipality Director of Administration 4.20. Vice-chairman of a political party 4.21. Head of Communication, Political party 4.22. Member of Parliament and Vice-chairman of a political party 4.23. Advisor to the Speaker of the Parliament and Member of Parliament

EXHIBIT A: LIST OF INTERVIEWEES

4.24. Head of a political party 4.25. Vice-chairman of a political party 4.26. Vice-minister 4.27. Head of a political party 4.28. Head of the Prime Minister’s Office 4.29. Head of a political party and Minister 4.30. Head of a governmental anti-corruption agency 4.31. Head of the legal department, state agency.

5. NGO sector management 5.1. Head of a public research institute 5.2. Head of a private research institute.

6. Law firms 6.1. Partner, Law firm 6.2. Partner, Law firm 6.3. Partner, Law firm; Member of a city council 6.4. Legal scholar 6.5. Partner, Law firm.

187

Exhibit B: MPs and Their Private (Business) Interests as Declared to Chief Official Ethics Commission for 20031

Antanas Bosas : UAB “Lorna”, UAB “Vakaru˛ Lietuvos pramones ˙ ir finansu˛ korporacija”, UAB “Bega”, AB “Vakaru˛ bankas”, UAB “Stella Vitae”, UAB “Ladina”, UAB “Degalu˛ prekyba”, UAB “Serenika”, UAB DK “Censum”, UAB “Iteralit”, UAB “Itera Lietuva”, AB “Klaipedos ˙ kartonas”, AB “Klaipedos ˙ nafta”, AB “Gargždu˛ statyba”, AB “Klaipedos ˙ kranai”, UAB “Klaipedos ˙ ¯ “Aglaura”; viktorija”, ŽUB Bronius Bradauskas : UAB DK “Lamantinas”, UAB “Bartžuve”, ˙ UAB “Donetas”, UAB “Lamantino partneriai”, AB “Klaipedos ˙ j¯uros krovos darbu˛ kompanija”, UAB “Aviaekspresas”; Algirdas Butkeviˇcius: UAB “Vilkuva”; Julius Dautartas: UAB “Antras dublis”; Audrius Endzinas: UAB “Meksimela”, UAB “Prekybos namai Eksa”; Ram¯ unas Garbaraviˇcius: VŠ˛I Sugiharos fondas “Diplomatai už gyvyb˛e”; Gediminas Jakavonis: UAB “Patrimkalnis”; Donatas Jankauskas: Printing house “Raide”; ˙ Jonas Juozapaitis: AB “Pieno žvaigždes”, ˙ AB “Šiauliu˛ pienas”, AB ¯ “Šiauliu˛ mal¯unas”, Pakruojo u ¯ kininku˛ kredito unija, Guostalio ŽUB;

1 https://www.vz.lt/archive/news.php/id=249123#ixzz6lDFW1g1M.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1

189

190

EXHIBIT B: MPS AND THEIR PRIVATE (BUSINESS) …

Vaclovas Karbauskis: UAB “Liuksas”, UAB “Holista”, UAB “Taurages ˙ daržoves”, ˙ UAB “Ralbera”, UAB “Euragra”; Gediminas Kirkilas: AB “Liteksas”, AB “Kauno audiniai”, AB “Metalu˛ komercija”, AB “Grigiškes”, ˙ AB “Vilniaus vingis”, AB “Ekranas”, AB “Krekenavos agrofirma”, AB “Anykšˇciu˛ vynas”, AB “Lietuvos dujos”, AB “Suskystintos dujos”, AB “Dujiniai ˛irengimai”; Egidijus Klumbys: UAB “Sana vita”; Rytas Kupˇcinskas: UAB “Komplektas”; Saulius Lap˙enas: UAB “Vamzdynas”; Algimantas Matuleviˇcius: UAB “Algarve”, ˙ UAB “Via Atlantica”; Stasys Mikelis: AB “Ažuolynas”; ˛ Viktoras Muntianas: UAB “Songailai”; Vladimiras Orechovas: UAB “Dujotekana”, UAB “Telesta”; Raimundas Palaitis: AB “Lietuvos telekomas”, AB “Lietuvos j¯uru˛ laivininkyste”, ˙ AB “Utenos trikotažas”, UAB “Integrita”, AB “Klaipedos ˙ laivu˛ remontas”, “Intervelas future pool”; Juozas Palionis: UAB “Ginvesta”, UAB “Konsole”, ˙ AB “Alytaus pienine”; ˙ Alfredas Pekeli¯ unas: AB “Krekenavos agrofirma”, UAB “Krekenavos pašarai”, UAB “Proviantalis”; Algis Rimas: UAB “Žem¯ uktechnika”; Viktoras Rinkeviˇcius: UAB “Žydruva”, UAB “Biržu˛ žemtiekimas”, AB “Šiauliu˛ mal¯unas”, AB “Nord/LB Lietuva”, AB “Biržu˛ linai”, Biržu˛ kredito unija; Julius Sabatauskas: AB “Alytaus kranai”; Alvydas Sadeckas: UAB “Ekskomisaru˛ biuras”, AB “Grigiškes”, ˙ AB “Vilniaus vingis”, AB “Anykšˇciu˛ vynas”, AB “Mažeikiu˛ nafta”, AB “Lietuvos dujos”, AB “Lietuvos telekomas”, AB “Rytu˛ skirstomieji tinklai”; Algimantas Salamakinas: AB “Progresas”; Vytautas Saulis: AB “Nord/LB Lietuva”; Algirdas Sysas: AB “Alita”, AB “Panevežio ˙ linas”, AB “Pieno žvaigždes”; ˙ Art¯ uras Skardžius: AB “Lietuvos telekomas”; Vaclovas Stankeviˇcius: UAB “Irmos kontinentas”; Raimondas Šukys: UAB “BNA market”;

EXHIBIT B: MPS AND THEIR PRIVATE (BUSINESS) …

191

Dalia Teišerskyt˙e: UAB “Gabija”, UAB “Hervita”, UAB “Modilina”, UAB “Tukas ir trintukas”; Viktoras Uspaskich: UAB “Vikondos kapitalas”, AB “Krekenavos agrofirma”, AB “Kedaini ˙ u˛ gr¯udai”, AB “Agrofirma Josvainiai”, UAB “Lukta”, UAB “Kedaini ˙ u˛ NPA”, UAB “Kedaini ˙ u˛ lombardas”, UAB “Vitkus ir Co”, UAB “Dukeda”, UAB “Songailai”; Roma Žakaitien˙e: UAB “Lietuvos eltika”.

Index

A Access money, 168 Achema Grup˙e , 112 Adam, Isabelle, 143 Adamkus, Valdas, 142, 169 Ágh, Attila, viii Agrokoncernas Group, 63 Alekna, Virgilijus, 50 Aliyev, Huseyn, 2, 11, 12, 34 Altman, David, 133 Alytaus šilumos tinklai, 119 Alytus municipality, 136 Ambrasaite, ˙ Monika, 134 Amin, Mohammad, 160 Ang, Yuen Yuen, 168 Aristotle, 43 Auštreviˇcius, Petras, 131, 132 Autokausta, 61 Axioma metering , 119 Axioma servisas , 119 Axis technologies , 119 B Bachrach, Peter, 21

Bajomi-Lázár, Péter, 92 Balkans, 26 Balmaceda, Margarita M., 110 Balsas.lt leidiniai, 100, 103 Baltic states, 1, 10, 19, 28, 33, 65, 107, 149, 156, 161 Baltrunaite, Audinga, 77, 168 Bandiera, Oriana, 17 Bánkuti, Miklós, viii Baratz, Morton S., 21 Barnett, Michael, 146 Barštys, Tautvydas, 124 Beblavý, Miroslav, 2 Belarus, 30, 149 Besley, Timothy, 92 Best, Michael Carlos, 17 Bicchieri, Cristina, 11 Big bang perspective on change, 163, 164 Bionovus (later renamed to First Opportunity), 118 Blat , 23 Bojicic-Dzelilovic, Vesna, 10, 33 Bojkov, Victor D., 10, 33

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 A. Lašas, Backstage Democracy, Political Corruption and Governance, https://doi.org/10.1007/978-3-031-25531-1

193

194

INDEX

Borisovas, Jurijus, 142 Bosas, Antanas, 107, 108, 181 Bourdieu, Pierre, 2 Bradauskas, Bronius, 139, 181 Budrys, Dainius, 82 Bulgaria, 10, 26, 33 Business associations, 11, 38–40, 45, 46, 48, 51, 78, 79 C Carothers, Thomas, 8, 9 Causal nature of power, 21 Center for freedom studies, 63 Central and Eastern Europe (CEE), 2, 3, 8, 9, 23, 29–33, 35, 91, 148, 149, 162 Central Bank of Lithuania, 126 Central Electoral Commission of the Republic of Lithuania Chernobyl Nuclear Power Plant, 111 Chief Official Ethics Commission, 51, 137 Christiansen, Thomas, 12 Cialdini, Robert B., 164 City Service, 118 Collective action theory, 163 Colombia, 3 Colonization of media, 92 Competition Council of Lithuania, 118 Conley, Heather A., 27 Constitutional Court of Lithuania, 51, 52, 153 Corruption Perception index (CPI), 31, 160 Council of Europe, 148, 150 COVID 19, 80, 170, 175 Crampton, R.J., 26 Cuervo-Cazurra, Alvaro, 160 Culpepper, Pepper D., 4 Culture of informality/informality, 8, 11–13, 33, 34, 163

Czech Republic, 10, 33, 149

D Dahl, Robert A., 3, 21 Dalkia (later renamed Veolia), 115 Dalton, Russell J., 91 Damauskas, Žydr¯ unas, 110 Danpower Baltic, 40 Daukšys, K˛estutis, 73 Davidonyte, ˙ Birute, ˙ 72 Delfi.lt , 103 della Porta, Donatella, 15, 33, 34 Democratic practices, 174 Denmark, 29, 30 Department for the Control of Narcotics, Alcohol and Tobacco, 59 Diamond, Larry, 2, 9, 13, 133 Diena Media News , 93 DiMaggio, Paul J., 30 Diskiene, Danuta, 121 Domingo, Pilar, 9 Drema, ˙ Vilmantas, 116 Dujotekana, 107–110, 115 Durán, Jorge, 27 Duvall, Raymond, 146

E Economist’s Democracy Index, 32 Edvardsson, Ingi Runar, 121 Electoral Action of Poles in Lithuania Party, 108 Estonia, 26, 27, 29–32, 118 Euroatlantic membership, 161 European Bank for Development and Reconstruction (EBRD), 147 European Central Bank, 145 European Investment Bank (EIB), 146, 147 Europeanization, 1

INDEX

European Union, 2, 12, 26, 40, 42, 54, 151, 169 European values survey (EVS), 29 Exclusive situationalism, 3–5, 15, 16, 18, 19, 21, 23, 24, 43, 75, 76, 104, 106, 128, 131, 139, 142, 154–159, 166, 171, 174, 175 Extractive institutions, 13

F Fatherland Union Party, 123 Fazekas, Mihály, 2, 143 15min.lt , 103 Financial Crime Investigation Service of Lithuania, 97, 151 Finland, 29, 30 Fisher, Julie, 32 Fonas , 119 Funderbruck, Charles, 15, 32

G Gaidys, Vladas, 42, 166 Gazprom, 107, 108 Geonafta, 110 Gerber, Alan S., 52 Goldstein, Noah J., 164 Gražulis, Petras, 89 Greece, 3, 12 Green, Donald P., 52, 63 Grigaraviˇcius, Vytautas, 115 Grinda, 84 Grødeland, Åse Berit, 10 Grybauskaite, ˙ Dalia, 142, 150, 153, 166

H Hallin, Daniel C., 92 Halmai, Gábor, viii Heart of Midlothian FC , 123 Heidenheimer, Arnold J., 15, 16

195

Helmke, Gretchen, 13 Hira, Anil, 164 Hirst, Paul, 39 Hofstede, Geert, 65, 121 Hofstede, Gert Jan, 65 Holmes, Stephen, 9, 148, 149 Hopkin, Jonathan, 131 Huettinger, Maik, 121 Hungary, 9, 32, 33, 149, 175 Huntington, Samuel, 175 I ICOR (previously Rubikon), 40, 115 Igiebor, God’stime Osariyekemwen, 166 Ignalina municipality, 56, 57 Ignalina Nuclear Power Plant, 111, 114 Inclusive institutions, 13 Inclusive situationalism, 17 incrementalist perspective on change India, 3 Informal network, 10, 11 Infostatyba, 143, 144 Interneto žinios , 100 Ireland, 29 Italy, 3, 11, 128 Itera Lietuva, 107, 181 J Jackson, Patrick Thaddeus, 9 Jancsics, David, 34 Jangila, 107 Jankauskaite, ˙ Vaida, 35, 167 Janukonis, Andrius, 40, 116 Jastramskis, Deimantas, 95 Jastramskis Mažvydas, 128 Jervis, Robert, 22 Jetter, Michael, 164 Jiang, Ting, 11 Johnston, Michael, 15, 16

196

INDEX

Jonas Mekas Visual Arts Center (JMVAC), 67 Juozaitis, Rymantas, 114 K Kaliningrad region, 149 Kaminskas, Antanas Zenonas, 82 Kaptein, Muel, 159 Karbauskis, Ram¯unas, 50, 63 Kaufmann, Daniel, 13 Kaunas FC, 28, 48, 61, 64, 70, 71, 123, 124 Kaunas municipality, 61, 70 Kauno diena daily, 123–125 Kavaliauskas, Vilius, 68 K˙edainiu˛ krašto televizija, 99 Kelme˙ municipality, 58, 59 Khan, Adnan Qadir, 17 King, Lawrence Peter, 2 Klaipeda ˙ daily, 71, 108 Klaipeda ˙ LNG terminal, 112, 156 Kleine, Mareike, 12 Klitgaard, Robert, 167 Kohler, Jillian Komskis, K˛estas, 64 Kostadinova, Tatiana, 131 Koutkova, Karla, 12 Kovács, Borbála, 34 Krastev, Ivan, 9, 148, 149 Kretinga municipality, 58 Krupaviˇcius, Algis, 64 Kubilius, Andrius, 103, 141 Kuˇcinskas, Kristijonas, 67 Kulikauskis, Arnoldas, 82 Kuodis, Raimondas, 126 Kurer, Oskar, 15, 16 L Labour party, 53, 68, 72–75, 88, 99–102, 107, 108, 131, 166, 167 Latvia, 26, 27, 30, 32, 33

Law firms, 34, 38–41, 45, 51, 52, 86, 153 Leak, Tan Ah, 166 Ledeneva, Alena V., 1, 2, 10, 43, 175 Leo LT , 113, 114, 170 Levitsky, Steven, 13 Levitt, Barry, 131 Liberal and Centre Union party, 75, 108 Liberals’ Movement, 50 Lietuvos Energija, 111, 113, 114 Lietuvos rytas , 34, 68, 69, 84, 89, 93, 95–97, 100, 102, 103, 167 Lijphart, Arend, 128 Limited access social order, 18 Lindblom, Charles E., 3, 4 Lindemans, Jan Willem, 11 Linz, Juan J., 3 Litesko, 119 Lithuanian Banking Association, 79 Lithuanian Business Confederation (LBC), 79 Lithuanian Farmers and Greens Union, 50, 132 Lithuanian National Radio and Television (LRT), 141 Lithuanian railways , 69, 70, 81, 82, 84, 140 Lithuanian Special Investigative Service (SIS), 30, 38, 56, 57, 76, 77, 81, 83–85, 88, 89, 151, 152, 171 Litorina, 77 Littrell, Romie F., 121 Lubys, Bronislovas, 156

M Mackey, Tim K., 160 Maintenance of Cemeteries , 70 Mair, Peter, 91, 128 Mancini, Paolo, 92

INDEX

Marˇcinskas, Albinas, 121 Marijampole˙ municipality, 56 Markauskas, Bronius, 138 Marsh, David, 3, 4 Masiulis, Eligijus, 63 Masiulis, Rokas, 79, 140 Mass media, 34, 35, 39, 42, 44, 62, 79, 88, 90, 91, 95, 98, 108, 116, 139, 152, 158, 165 Mazzoleni, Gianpietro, 91 Media capture, 92 Media instrumentalization, 92 Meilutyte, ˙ R¯ uta, 48 Meta motivation, 4, 163 Mezrich, Ben, 2 MG Baltic scandal, 35, 38, 63, 72, 167 Milenas, ˙ Vytautas, 83, 84 Miles’s Law, 157 Miller, Alexey, 107 Miltienis, Valentinas, 83 Mina, James, 27 Minelgaite Snaebjornsson, 121 Ministry of Culture of Lithuania, 129 Ministry of Economic Affairs of Lithuania, 73 Ministry of Education, Science and Sports of Lithuania, 46, 129 Ministry of Foreign Affairs of Lithuania, 129, 158 Ministry of Health of Lithuania, 129 Ministry of Justice of Lithuania, 129, 158 Ministry of the Agriculture of Lithuania, 129 Ministry of the Environment of Lithuania, 129 Ministry of Transportation and Communications of Lithuania, 60, 129, 158 Minkov, Michael, 65 Miškinis, Algirdas, 134

197

Mockaitis, Audra I., 121 Moldova, 169 Montenegro, 26 Morlino, Leonardo, 133 Muravjovas, Sergejus, 62

N Narkeviˇc, Jaroslav, 140 National Audit Office of Lithuania, 151 National Commission for Energy Control and Prices, 110, 118 National Gaming Control Authority of Lithuania, 28 National Paying Agency, 138 Navickas, Vilius, 122 NDX Energy, 114 Neopatrimonial regimes, 107 Nexon, Daniel H., 9 Norkus, Darius, 83 North Atlantic Treaty Organization (NATO), 8, 54, 149, 150, 161, 164, 169 North, Douglass C., 13, 16, 17

O O’Donnell, Giullermo, 2, 4, 9, 13, 16 Open access social order, 18, 23 Optimali investicija, 61 Order and Justice Party, 64, 131, 162 Orechovas, Vladimiras, 108 Organization for Economic Co-operation and Development (OECD), 150 Orlen Lietuva, 71, 72

P Pagegiai ˙ municipality, 64 Pakruojis municipality, 58, 84

198

INDEX

Paksas, Rolandas, 89, 123, 142, 152, 162 Palanga municipality, 58 Paleckis, Algirdas, 47 Paliukas, Raimundas, 108 Pancerovas, Dovydas, 72 Paolucci, Caterina, 131 Papamichail, Theodora, 12 Parliament of the Republic of Lithuania Parmeter, Christopher F., 164 Particularism, 2, 13 Pasvalio vandenys , 85 Pasvalys municipality, 57 Patrimonialism, 13 Paulauskas, Art¯ uras, 54, 74, 108 Pedersen, Mogens N., 128 People’s Party of Lithuania, 125 Pérez-Liñán, Aníbal, 133 Peri´c, Ana, 12 Petkeviˇciene, ˙ Jolanta, 137 PHARE assistance instrument, 146 Philp, Mark, 13, 15, 16 Piattoni, Simona, 12 Piscopo, Jennifer M., 12 PKN Orlen, 71 Plung˙es žinios , 92 Poguntke, Thomas, 91 Poland, 19, 27, 30, 32, 33, 149 Polese, Abel, 34 Political corruption, 15, 16, 32, 34, 166 Political culture, 29, 33, 91, 121, 170, 175 Politics-business nexus/state-business relations, 2, 4, 5, 9, 13, 14, 17, 20, 34, 36–38, 42, 44, 72, 135, 143, 146, 169 Polyarchy, 3 Ponomariovas, Valerijus, 81, 82 Posner, Alan R., 128 Powell, Walter W., 30

PR agencies, 34, 38, 39, 41, 42, 48, 100 Prat, Andrea, 17, 92 Principal–agent theory, 163 Principal-agent problem, 44 Prunskiene, ˙ Kazimiera, 137, 169, 170 Przeworski, Adam, 18, 19 Public Procurement Office of Lithuania (PPO), 78, 136, 151, 152 Pujas, Véronique, 128, 140 Q Quah, Jon S.T., 167 Quanxi, 23 R Radzeviˇcius, Dainius, 42, 96 Rail Baltica Statyba, 82 Ranga IV, 67 Raseiniai municipality, 57, 76 Red-Black collusion, 28 Respublika, 93, 95, 97, 99, 100, 103 Rhodes, Martin, 128, 140 Rinkos aikšt˙e , 99 RNI Property, 114 Romania, 10, 26, 34 Romanovas, Vladimiras, 92, 123–125 Rothstein, Bo, 13, 16, 160, 164 Rule of law, 3, 8, 9, 13, 14, 44, 161 Rupnik, Jacques, viii Ruškulis, Romas, 101, 108 Russia, 2, 27, 30, 73, 107, 109, 123, 149, 161, 169 Russian speakers/Russian-speaking population, 26 Rytu˛ skirstomieji tinklai (RST), 111, 113, 182 S Šalˇcininkai municipality, 57

INDEX

SAPARD assistance instrument, 148 Sartori, Giovani, 128 Saurugger, Sabine, 40 Savickas, Valdas, 83 Scandinavian countries, 27, 29 Scheppele, Kim Lane, viii Schulz, Winfried, 91 Scott, Peter M., 164 Serbia, 26 Shah, Anwar, 160 Shannon, Vaughn, 31, 32 Shapovalova, Natalia, 12 Siˇcáková-Beblavá, Emília, 2 Šiliauskas, Vilius, 61 Šilut˙es agrochemija, 77 Šimanauskiene, ˙ Joana, 125 Šimašius, Remigijus, 171 Širvinskas-Gailius, Marijus, 102 Skuˇcas, Šar¯unas, 123 Skvernelis, Saulius, 50, 71 Slovakia, 2, 30 Snoras Bank, 96 Snowden, Edward, 88 Social Democratic party of Lithuania, 131 Sodeika, Gintaras, 67 Soh, Yew Chong, 160 Soviet Union, 120, 149 Spindulys , 61, 62 Stankeviˇciene, ˙ Asta, 121 Staškeviˇcius, Ignas, 55 State Security Department of Lithuania, 47, 108 Steen, Jennifer A., 15 Stefanov, Ruslan, 27 Stella Vitae, 107, 181 Stephenson, Matthew, 161 Steponaviˇcius, Gintaras, 63 Stonys, Rimandas, 107, 108, 110 Strömbäck, Jesper, 91 Sutkus, Valdas, 79 Švieskime vaikus , 63

199

Sweden, 29, 30 Swedish Bonnier Group, 93

T Tankebe, Justice, 160 Tapsh, 23 Taraškeviˇcius, Rimantas, 108 Taurage˙ municipality, 53 Telšiai municipality, 58 Teorrell, Jan, 16 Tomkus, Vitas, 98 Trakai municipality, 75 Transition/transitology, 3, 8, 21, 28, 33, 36, 104, 106, 122, 134, 156, 174 Transparency International (TI), 31, 62, 94, 138, 150, 151

U ¯ Ukio bankas , 123 Ukraine, 33, 169 Uleviˇci¯ ute, ˙ Giedre, ˙ 134 Universalism, 13, 16 US Embassy in Lithuania, 68, 95 US Federal Bureau of Investigation (FBI), 152 Uspaskich, Viktor, 53, 74, 99–101, 107, 108, 110, 166, 183

V Vainauskas, Gedvydas, 68, 69, 89, 96 Vakaro Žinios , 93, 97 Vakaru˛ skirstomieji tinklai (VST), 111–114 Valatka, Rimvydas, 34 Valentinaviˇcius, Virgis, 141 Valstieˇciu˛ laikraštis , 100 Valvonis, Vytautas, 97 van Biezen, Ingrid, 91 Vannucci, Alberto, 15

200

INDEX

Varena ˙ municipality, 56 Vasiliauskas, Vitas, 97 Veidas , 103 Verseckas, Saulius, 88 Verslo žinios , 93, 111 Vian, Taryn Vikonda, 99, 107 Vilniaus diena daily, 124 Vilniaus Energija, 118 Vilniaus šilumos tinklai Vilniaus vandenys , 82, 83 Vilnius municipality, 67 Virtuous circle, 162, 163, 169 Vladimirov, Martin, 27 Vojeika, Piotras, 108 Vojeika, Tatjana, 108 Vonžutaite, ˙ Vitalija, 101, 102 VP Market , 55, 61, 62, 111–113, 115, 156, 157

W Walker, James T., 164 Wallis, John Joseph, 17 Wang, Peng, 28, 29 Webb, Steven B., 17 Weingast, Barry R., 17 Westernization, 9, 10, 170, 174 Wikileaks, 68 Winters, Jeffrey A., 3, 15 Y YES (Homeland Revival and Perspective) party, 131 Z Žalgiris basketball club, 70, 125 Zielonka, Jan, 11 Zuokas, Art¯ uras, 67, 98, 116