Political Corruption and Organizational Crime: The Grey Fringes of Democracy and the Private Economy (Organization, Management and Crime - Organisation, Management und Kriminalität) 3658343737, 9783658343736

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Organization, Management and Crime – Organisation, Management und Kriminalität

Elizangela Valarini  Markus Pohlmann Subrata Mitra Editors

Political Corruption and Organizational Crime The Grey Fringes of Democracy and the Private Economy

Organization, Management and Crime — Organisation, Management und Kriminalita¨ t Series Editors Markus Pohlmann, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Stefan Bär, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Baden-Württemberg, Germany Friederike Elias, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Julian Klinkhammer, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Elizangela Valarini, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany

Die Reihe ist im Bereich der Organization Studies angesiedelt und hat ihren Schwerpunkt im Schnittfeld von Wirtschafts- und Organisationssoziologie. Sie widmet sich dem Zusammenhang von verschiedenen institutionellen Feldern (Wirtschaft, Medizin, Staat etc.) mit den Organisations- und Managementformen, die in diesen vorherrschen. Neben organisationssoziologischen Studien werden managementsoziologische Analysen sowie Studien zur organisationalen Kriminalität in die Reihe aufgenommen. Darüber hinaus beschäftigt sich die Reihe mit aktuellen Themen (z.B. Liberalisierung der Wirtschaft, Subjektivierung der Arbeitswelt, Ökonomisierung der Medizin oder der Politik) und sie hinterfragt gängige Erklärungen öffentlicher Skandale, die von Manipulation, Korruption oder Betrug in Organisationen handeln. This book series establishes itself in the field of organization studies and focuses on the intersection between economic and organizational sociology. It is dedicated to the context of various institutional fields (economy, medicine, state, etc.) with the predominant organizational and management forms therein. In addition to studies on organizational sociology, management-related sociological analyses as well as studies on organizational crimes are included in the series. Also enclosed are current developments, such as Neoliberalism in the economy, the economization of medicine as well as the state of and the explanation for current scandals of manipulation, corruption and fraud.

More information about this series at http://www.springer.com/series/15792

Elizangela Valarini · Markus Pohlmann · Subrata Mitra Editors

Political Corruption and Organizational Crime The Grey Fringes of Democracy and the Private Economy

Editors Elizangela Valarini Heidelberg, Germany

Markus Pohlmann Neckargemünd, Germany

Subrata Mitra Heidelberg, Germany

Organization, Management and Crime — Organisation, Management und Kriminalität ISBN 978-3-658-34373-6 ISBN 978-3-658-34374-3 (eBook) https://doi.org/10.1007/978-3-658-34374-3 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 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. Responsible Editor: Stefanie Eggert This Springer VS imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Preface

Many contemporary democracies in the West, just as in transitional societies in Asia, Africa and South America, are marked by the rise of populist movements. Many of these movements have taken a position against dominant interests while others have emerged as ‘anti-corruption’ initiatives. Non-compliance with the norms in public life which these movements highlight, is a prime subject of inquiry for organizational sociology. While practices such as corporate wrongdoing, the use of illegal campaign finances, coercive methods, hate speech or outright use of violence have attracted global opprobrium, the organizations’ and actors’ rationality that lead to these practices, have not been subject to systematic investigation. Analysis of these grey fringes of democracy and transactions in the market, with special attention to context, structure and agency, forms the main theme of this book. This volume emerged from an international conference on “Illegal Party Financing in Comparative Perspective: The Role of Regulation and Self-Regulation”, held in September 2019, at Heidelberg University. The conference papers that were subject to intensive discussion during and after the conference, and some further contributions on ‘useful illegality’, have vastly enriched the volume. The chapters, stretching across the North-South divide, cover the disciplines of Sociology, Political Science, Law, Criminology and South and South-East Asian area studies. The initial impetus for the conference came from a consortium of colleagues from the University of Heidelberg, consisting of Prof. Dr. Markus Pohlmann, Max-Weber-Institut für Soziologie, Prof. Dr. Gerhard Dannecker, Juristisches Seminar, Dr. Elizangela Valarini, Max-Weber-Institut für Soziologie, Prof. Dr. Aurel Croissant, Institut für Politikwissenschaften, Prof. Dr. Reimut Zohlnhöfer, Institut für Politikwissenschaften and Professor em. Subrata Mitra Ph.D.

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(Rochester), South Asia Institute. We are grateful to the Max-Weber-Institute for Sociology of Heidelberg University for the administrative infrastructure, and general institutional support. Our special thanks go to all the speakers at the conference, and authors of this book, who contributed to a broader understanding of illegal financing of political parties and electoral campaigns as well as to other forms of illegality. Many colleagues contributed to the onerous process that all international conferences—like ours—involve, and the subsequent preparation of the volume for publication. We are particularly grateful to Dr. Kristina Höly, Laura Sophie Hauck, Maria Eugenia Trombini, Mario H. Jorge Jr., Yuanyuan Liu, Nicólas Jaramillo, Jan Peter Hoffman and Ragna Heyne for their most valuable and much appreciated assistance. We dedicate this book to the German Research Foundation (DFG), for their support through the research project on “Organizational Crime and Systemic Corruption in Brazil” and the Field of Focus IV: Self-Regulation and Regulation, of the Heidelberg University, with our deep appreciation. Heidelberg December 2020

Elizangela Valarini Markus Pohlmann Subrata Mitra

Contents

Organisational Wrongdoing in Cross-National Perspective: Culture, Context and Comparative Theory . . . . . . . . . . . . . . . . . . . . . . . . . Subrata Mitra, Elizangela Valarini, and Markus Pohlmann

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Political financing in Asia Making Elections Work: Campaign Cash, Marketisation of Votes and Social Negotiation in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subrata Mitra and Markus Pohlmann Democracy, Electoral Process and Campaign Expenditure in India: A Study of Election Campaign Expenditure in Chevella Parliamentary Constituency, Telangana State . . . . . . . . . . . . . . . . . . . . . . . K. C. Suri Political Finance Regimes, Political Corruption and Party System Institutionalization in Southeast Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aurel Croissant

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Political parties, elections and corruption in South America ‘Culture’, Criminality and Collective Mindset: Political Financing in Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elizangela Valarini

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Fighting Criminal Corruption in Brazil: Its Potential Effects on the Electoral Arena . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fabiana Alves Rodrigues

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Contents

Balancing Representation Political Financing: The Regulation of Competing Legal and Illegal Organizations Resources in Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nicolás Jaramillo Corruption Trials in Argentina: Justice Delayed? . . . . . . . . . . . . . . . . . . . . Friederike Elias and Sebastián Pereyra Money, Politics, and the Judicialization of Electoral Processes in Brazil: A Political Science Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wagner Pralon Mancuso, Vanessa Elias de Oliveira, and Bruno Wilhelm Speck

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Misuse of Public Office for Organizational Gain? Brazilian Political Parties in Corruption Scandals . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maria Eugenia Trombini

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Lawyers as Enablers of Wrongdoing: Challenges Faced by Democracies Regarding Corruption and Money Laundering . . . . . . Mario H. Jorge Jr.

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Political financing and corruption in Europe Party Financing Scandals in the History of the Federal Republic of Germany: The “Flick” Affair and CDU Donations Affair . . . . . . . . . . Jens Ivo Engels

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Party Financing in Germany: A Critique . . . . . . . . . . . . . . . . . . . . . . . . . . . Hans Herbert von Arnim

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Criminal Liability for Corruption in German Parliaments . . . . . . . . . . . Kristina Peters

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The Financing of French Political Life: From Self-control to Self-interested Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Éric Phélippeau

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Non-compliance, Organizational Deviance and Useful Illegality: Towards a Unified Agenda of Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subrata Mitra, Markus Pohlmann, and Elizangela Valarini

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Contributors

Hans Herbert von Arnim Universität Speyer, Speyer, Germany Aurel Croissant Institut für Politische Wissenschaft, Universität Heidelberg, Heidelberg, Germany Vanessa Elias de Oliveira Engineering, Modeling and Applied Social Sciences Center (CECS), Federal University of ABC Region (UFABC), São Paulo, Brazil Friederike Elias Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Jens Ivo Engels Institut für Geschichte, Technische Universität Darmstadt, Darmstadt, Germany Nicolás Jaramillo Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Mario H. Jorge Jr. Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Wagner Pralon Mancuso School of Arts, Sciences, and Humanities, University of São Paulo (USP), São Paulo, Brazil Subrata Mitra South Asia Institute, Universität Heidelberg, Heidelberg, Germany Sebastián Pereyra Universidad Nacional de San Martín (UNSAM), Buenos Aires, Argentina Kristina Peters Ludwig-Maximilians-Universität München, Munich, Germany

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Éric Phélippeau Institut des sciences sociales du politique, Université Paris Nanterre, Nanterre, France Markus Pohlmann Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Fabiana Alves Rodrigues University of São Paulo (USP), São Paulo, Brazil Bruno Wilhelm Speck Department of Political Science, University of São Paulo (USP), São Paulo, Brazil K. C. Suri Department of Political Science, School of Social Sciences, University of Hyderabad, Gachibowli, India Maria Eugenia Trombini Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Elizangela Valarini Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany

Organisational Wrongdoing in Cross-National Perspective: Culture, Context and Comparative Theory Subrata Mitra, Elizangela Valarini, and Markus Pohlmann Introduction People—entrepreneurs, corporate managers, candidates in intensely contested elections or for that matter, ordinary folks filling in their tax returns—go through fleeting moments of indecision about whether to comply with the norms of transaction or not, in their everyday lives. These momentary indecisions are part of our ‘conditioned reflex’ as members of society, citizens, buyers, sellers and consumers who make up the political process and the market. Fortuitously, most people, most of the time, choose to comply with the norms of orderly transaction, and in consequence, hold the potential threat of anarchy at bay.1 As for persons who are 1

Sigmund Freud describes the allure of noncompliance and the man-made mechanisms of self-policing as part of the human condition in his late writing. “The tension between the stern super-ego and the [sexual gratification-seeking] ego that is subject to it what we call a ‘sense of guilt’: this manifests itself as a need for punishment. In this way civilization overcomes the dangerous aggressivity of the individual, by weakening him, disarming him and setting up an internal authority to watch over him, like a garrison in a conquered town.” (Freud, 2014, p. 88).

S. Mitra (B) Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] E. Valarini · M. Pohlmann Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] M. Pohlmann E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_1

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routinely non-compliant, the agents of law and order try to keep a close watch on them, in their effort to hold order-wrecking tendencies in check. There is, nonetheless, beyond the hordes of the compliant, and the less numerous non-compliant persons, a third category of the ‘partially compliant’ who shuttle between the two poles of compliance and noncompliance. The grey fringes of democracy and the market, made up of the partially compliant, are of special interest to us in this book. The presence of the partially compliant is universal, though in quantum and significance their numbers and activities vary widely across countries of the Global North and the Global South. Despite differences in the levels of economic growth, social indicators of development, institutional complexity and stringency of regulation, countries as far apart as Brazil and India, or European and SouthEast Asian states, all have their grey fringes in the normal process of market transactions and politics. These phenomenon of electoral irregularities, dubious relationship between private and public sectors, questionable role of the justice system and financial scandals, will come in for close analysis in the chapters that follow in this book. The events and developments that they analyze feature in reports in global and national media and those of regulatory agencies. From an ethical point of view, acts such as criminalization of politics or attempts by dominant interests to subvert democratic representation through illegal campaign financing and other form from deviance deserve to be exposed by all means. However, from a sociological point of view, one needs to probe deeper into the dynamic that leads to such non-compliance with the law in the first place. This is the main objective of this book. It focuses on the subject of corporate wrongdoing and illegality, dealing particularly with party and electoral financing, corporate wrongdoing and institutional means for regulation. It aims not to highlight non-compliant or partially compliant behavior that does not meet the moral criterion of liberal democracy, but to show-case the duality of political agency— one face of which represents the tendency of actors to chase after their own goals, and to try to win at any cost, and take resort to the locally available means to win the race—and the other face which is turned towards regulatory institutions. The choices actors make may be sometimes individually ‘rational’ in the sense that they are strategically calculated to enhance their interests. However, what is individually rational might turn out to be sub-optimal at the collective level. While the behavior of individual actors and groups is understandable in terms of the sociology of elections and rational choice theory, seen through the prism of systems analysis, one can see the perverse consequence of individual preferences that surface as social choice at the aggregate level. In a political system when the standard practice for actors is to engage in action that is not legal, and as

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such, non-compliant, this might lead to collapse of the system, and spell doom for democratic politics and orderly operation of market transactions.

Compliance in Political Transactions Issues of compliance with electoral laws, and the norms that sustain orderly political and economic transactions have emerged as a common problem in embattled democracies across the North-South divide. If we take a step back and postpone our immediate moral reaction to illegal transactions for a moment, we shall see that such non-compliance does not have merely dysfunctional effects of systematically distorting and undermining political and economic life, but it can have also functional aspects. Let us assume that we live in a country where the state is not prepared to cover the costs of running the democracy. To go to the polls when voting is not mandatory, the poor voters need selective incentives that cover the cost of electoral participation in terms of lost income, which can solve the problem of collective action, at least partially. At the same time, the candidates need enough money to reach the voters. If the state does not cover the costs of exercising the right to vote, and to stand for office, a system would be created in which only the richest people could stand for election. However, if campaign cash comes into play on a larger scale, the situation changes. Even not so rich candidates can then reach voters and even poor voters can go to the polls in order to exercise their choice among competing candidates. In order to prevent the functional effects from outweighing the dysfunctional effects, the first step is to clarify the distinction between standard campaign practices as the distribution of gifts, and electoral fraud. The one, does not necessary imply the other. The second thing we have to do is clarify the question: Where does the campaign cash—often alluded to broadly as ‘black money’—come from? If we assume that the ‘black money’—so called because it is usually not accounted for—comes from different sources and is accompanied by expectations to do something for the interests of the potential voters, this can be part of the political business. If illegal campaign financing is related to donations, e.g. of big business, expecting the elected candidate to return the favor by passing legislations or to make executive decisions for the particular benefit of donors after the elections, it is clearly illegal. But if the funds are used to promote the election of candidates from the same region, for a candidate who promises to act in favor of the respective constituency, such campaign financing would be in the interest of the principal, though its provenance might be illegal. Also ‘election gifts’ and ‘black money’, as shown before, can be in the very interest of the constituency. Even if it

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confuses the moral compass for many of us, electoral democracies like India, for example, show that there are functional effects of illegal campaign financing in addition to the dysfunctional side, which stabilize the democratic system, which many transitional democracies have failed to achieve. Whether we like it or not, or, whether we demonize it or not, deviations from the rules do not always have to be subversive for the functioning of the system, but can also sustain it and add resilience to it. In the real world, partial compliance is not only often useful, but might also be necessary to keep a system running. In many democracies, the ‘truth’ is in-between, for partial compliance is part of the everyday life in a functioning democracy. Besides the subversive exploitation of the system, there are many forms of illegality that are useful for the system, which stabilize it and gain informal recognition in the gray area of its operations. Where the red line lies, most citizens know without much thought. But the shadow of criminal, dictatorial or destructive exploitation of the system makes it difficult for us sometimes to consider this gray area of partial compliance in terms of their rational and functional character. But democracy is a system that works even when most of its roles are filled with small sinners. Conversely, no system works only with saints. Under the pressure of the exigencies of everyday life, in politics as in other transactions, actors sometimes make choices that are ambiguous in terms of their legality. Such ‘useful illegality’ which belongs to the grey fringes of democratic politics, just as in market transactions, has serious implications for rule of law and liberal democratic politics. However, while practices such as the use of campaign finances which are of doubtful legality, coercive methods, hate speech or outright use of violence have attracted global opprobrium, the agency and actors’ rationality that leads to these practices, has not been subject to systematic analysis from the point of view of ‘partial compliance’ and functional wrongdoing.2 The causal chain, particularly, the link between individual choice, electoral campaigns and party finances thus holds a great interest for disciplines ranging from organizational sociology, criminology, studies of corruption, financing and regulation of party competition, elections and campaigns, and laws governing electoral behavior and party finance in terms of accountability and compliance. Party and campaign finance touch on a more general phenomenon. An orderly political life pre-supposes the existence of norms and norm compliance. The legitimacy of norms and their binding character depend on the free articulation and 2

Pohlmann et al. (2020) provides important insights into the process of organizational wrongdoing and indicates the theoretical and methodological issues that sociological research in this field involves.

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fair aggregation of preferences of voters in conformity with norms embedded in institutions. Elections and political parties function as conduits that help articulate the preferences of voters, and aggregates individual preferences into a ‘social choice’ that emerges from the election in the form of a mandate. Legitimacy of the mandate springs from the ‘free, fair and representative character’ of the electoral process. These in turn surface as new laws, institutions and policies of the state. Noncompliance, thus, lowers legitimacy. This makes the case for regulatory agencies, to monitor political and corporate transactions, a compelling necessity.

Compliance in Corporate Transactions and Regulatory Agencies Non-compliant or partially compliant behaviors with formal rules are not only a phenomenon of the political sphere, but such attitudes exist within other organizations as well. The collective (mis-)behavior of organizational members are guided by legitimized unwritten rules and norms inside the organization. The deviance of rules in an organizational context is pointed by Luhmann (1964 [1995]) as a prerequisite for the functionality of organizations. However, he does not suggest that all forms of deviance from formal rules are unlawful. By using deviant practices, unwritten rules are emerging and these begin to provide orientation for the collective behavior. Some of these unwritten rules would develop and remain in the legal gray area of the collective activities, while others would become illegal. Deviance of rules (non-compliant practices) and partial compliant behavior (deviance of rules that stay in the legal gray area of organizational activities) can be explained in the literature in different forms. From an organizational perspective, the collective practices have been explained as result of institutional and organizational settings—“good barrels”—that provide right incentives and penalties to flag corrupt behaviors. In that sense, the collective wrongdoing would be a result of “bad barrels” (Ashforth et al., 2008, p. 672 f.). Furthermore, empirical studies about bribe-givers show that they are mostly high-ranking, well-educated, and well-paid managers, corporate executives and professionals (Pohlmann et al, 2016; Valarini & Pohlmann, 2019). They accept high personal risks for the benefit of the organization, without being primarily interested in their own benefits. Non-compliance could be understood in most of the examined cases as useful for an organization (Pohlmann et al., 2016). According to Niklas Luhmann (1964 [1995]), “useful illegality” (ibid., p. 304) can be understand as a behavior that violates the terms of membership; however it is considered as useful in terms of the purpose of the organization. Empirical studies point useful illegality as a possible

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explanation for high-profile cases of structural corruption, organizational crime as well manipulation of lists for transplant of organs (Klinkhammer, 2013; Pohlmann & Höly, 2017; Pohlmann, 2018). This definition can also be used to explain other kinds of behaviors which exist in a gray area of legal systems. The use of illegitimate or illegal means attempt to pursue socially legitimate organizational purposes and goals that are compliant with the formal rules and law. From this perspective, legal regulations would not be sufficient to prevent and counter organizational deviant practices, because the understanding of the collective wrongdoing could be gained primarily through the self-regulation of the social actors by the interplay between legal rules and illegal practices. The rule violations occur repeatedly and are compliant with the purpose of the organization. Thus, they are oriented towards unwritten rules and collective interpretations patterns, and action rules established and legitimized inside the organization. The informal rules would justify and normalize the deviant orientation in the group (Brief et al., 2001; Campbell & Göritz, 2014; Palmer, 2012; Pinto et al., 2008; Vaughan, 1999). While non-compliant and partially compliant matters seems to be a global phenomenon in the last decades, the South American Continent, particularly Brazil, has attracted wide attention. Not only in terms of corruption scandals which have involved large enterprises and high-ranked politicians, but also because there were a lot of changes in the institutional setting regarding to the anticorruption matters. In Brazil as well as in many other countries, the global diffusion of regulatory agencies took place since the 1990s (Braithwaite, 2008). Institutional changes in terms to ratify and internalize the international anticorruption legislation in domestic legislation seemed to encompass many international agreements regarding anticorruption issues. This leads to reforms and changes of national legislation, particularly at the organizational and functional level of bodies that belong the justice system, for example, creation of new bodies of control and specialized courts.

Structure of the Volume The essays brought together in this volume offer a window into various forms of non-compliant and partially compliant action that actors in the political, juridical as well as in the corporate fields engage in. Sometimes, and under specific conditions, such activities shade off into criminality. To fend off such acts of deviance from the norm, regulatory norms and institutions emerged first in Europe and subsequently spread world-wide through colonization and commerce. As one might

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expect, partial compliance would be greater in the places where these norms and appropriate institutional arrangements were slow to reach, or, where these constraints on human behaviour gained legitimacy in a long-drawn-out process. Keeping this in mind, we start our analysis of political corruption and organizational crime in Asia, followed by South America. It is interesting to note that such deviant behaviour takes place in Europe—taken up in the third section of the book—as well. This goes to show that the temptation to deviate from the norm is universal. The fact that its manifestation in partial compliance varies greatly from one context to another can be understood in terms of differences in constraints on such behaviour, such as different levels of cultural legitimacy and acceptance of deviance, credibility of sanctions, and structural and functional usefulness of partial deviance and the pace of endogenous evolution of regulatory norms and regulatory bodies, and their diffusion through binding laws and contracts. In the epilogue, we gather the knowledge gained through the country studies in the form of an agenda for future research. We begin our analyses with political corruption, electoral processes and political financing in several East and South Asian countries. The role of campaign financing in sustaining electoral democracy in India will be discussed by Subrata Mitra and Markus Pohlmann. The main assumption that underpins democratic theory, they assert, is that votes are neither bought nor coerced. In this context, the case of India is interesting. Despite regular, frequent, free and effective elections, illegal campaign-financing and crime-politician nexus have become an integral part of the electoral process. This co-existence of a vibrant, resilient democracy and illegal campaign financing in India is puzzling. Based on their analysis of the Indian case, the authors provide a general explanation for the co-existence of these two normatively discordant elements. Combining the concept of ‘useful illegality’ of Niklas Luhmann and James Coleman’s principal-agent theory, the authors cast electoral choice as a rational process whereby candidates and voters are able to communicate, and rationally transact the game of popular elections. Campaign cash in India has become a catalyst of social churning, and the consequent transformation of a hierarchical society into a competitive democracy. Thus, what might come across as illegal campaign and party financing, is not just a deviance from normative and legal rules. It might actually be functional, as an incentive for initiating and subsequently sustaining a vibrant democracy in a postcolonial state where electoral participation is not compulsory and which began its electoral journey with great social inequality, poverty and illiteracy. The analysis of the electoral processes in India will be continued by K. C. Suri with a focus on the interplay between democracy, electoral process and campaign expenditure. While parties spend huge amounts on general publicity, mega rallies,

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and media management, most of the expenditure at the constituency level is met by candidates from their own funds. As election campaign expenditure incurred by candidates and parties continue to spiral, parties prefer to field candidates who are wealthy and fund their own campaign. Money cannot win an election, but without money it is difficult to get a party ‘ticket’—an Indian concept—which means authorization to stand as a candidate on behalf of a political party, and conduct an effective election campaign which has become highly expensive. As a result, people belong to a new class of businessman-turned-politicians are entering politics in large numbers and professional politicians are increasingly looking for avenues to accumulate wealth as a means to sustain themselves in politics. There is a growing concern that this flood of money in elections undermines the foundations and functioning of a democratic polity. However, barring a few studies, we do not have adequate understanding of why candidates spend huge amounts of money on winning an election in a constituency. Understanding candidates’ constituency campaign expenditure enables us to see the complex political reality of India’s democratic politics. It would tell us the merits as well as limitations of the grand narratives of ethnic politics, criminalization, political corruption and clientelism. Contrary to the dominant view that India’s electoral landscape has become a hotbed of corruption, criminality and clientelism, Suri provides a grounded view of an evolving democracy in changing India. Concerning political finance regimes, political corruption and party system in Southeast Asia Aurel Croissant examines how systems of political finance differ in the region, and how forms of political finance influence the institutionalization of political party systems in Southeast Asia. With regard to the first question, the author identifies two modes of political finance and its regulations in the region. The first one is a laissez-faire model of political financing under electoral authoritarianism, whose regulations are designed to bolster the dominant position of ruling parties. The second model is one of oligarchized party financing combined with public subsidies, and a flawed regulatory framework. With regard to the issue of party and party system institutionalization, his study tentatively concludes that there is reason to assume that two causal mechanism connect democracy and party finance regimes in Southeast Asia. First, smart political finance regulation can be a sharp tool for combating political corruption, which has positive effect on the democratic qualities of a political system. Second, ‘good’ party finance regulation can contribute to political party institutionalization, which can contribute to a stronger democracy, but also a more resilient autocracy. The second part of the book concerns the analysis of political corruption, electoral financing and organizational wrongdoing in three South American countries: Brazil, Argentina and Colombia. Illegal party and electoral financing in Brazil is

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the starting point of Elizangela Valarini’s analysis of the corrupt relationship between political and economic sectors. Illegal electoral financial is only one of the outcomes of the interaction between both sectors. Based on empirical data from the ‘Car Wash Operation’, the author attempts to analyse the denominated corrupt practices in a hermeneutic perspective through the reconstruction of ‘collective mindsets’, accessed by the participants in the analysis of corruption cases. The results show that the corrupt relationship is based on essential elements of daily interaction based on trust, personal proximity and loyality. The interaction has been understood from the perspective of the participants as necessary to develop the Brazilian economy and a strong group of corporations to promote national industry. The collective mindsets are rooted in the institutionalized cognitive and normative elements that compose the “collective pattern” in Brazilian context for these groups. Analyzing the fight against criminal corruption in Brazil, Fabiana Alves Rodrigues presents the recent Brazilian scenario took the debate on controlling criminal corruption to another level, notably after the impressive results produced by ‘Lava Jato’ (Car Wash) Operation, in her chapter. This most massive Brazilian anti-corruption operation radiated its effects to several arenas, from the intensification of society’s polarization to relevant implications on the political scene. This chapter presents an analytical framework of the leading institutional factors that provide gateways for the Judiciary’s interference in the electoral competition through the criminal control of political corruption, which involves court autonomy, rules of competence, subjectivity in applying laws, and deficiencies in checks and balance mechanisms. The framework was developed in light of the analysis of the criminal justice system’s strategic behavior in 144 actions of the ‘Lava Jato Operation’ that started in the Federal Court. It focuses on the institutional factors that allow the criminal process potential use as a tool to influence the electoral arena, through gray zones of doubtful legality or by behaviors that find intricate control mechanisms. Nicolás Jaramillo presents “Balancing representation and political financing: the regulation of competing legal and illegal organizations and resources in Colombia” in his chapter, based on an analysis of regulations in political financing. It is a topic that has a bearing not only on economic resources but party organization and electoral mobilization as well. The chapter starts with a brief theoretical discussion, followed by a discussion of the Colombian political context, and by the debates of Congress, directed to pass the Law 1475/2011, with its special emphasis on political financing. The case of Colombia shows how traditional organization of candidates facilitate the entrance of illegal money into campaigns. The bill, finally approved by the Colombian legislatute, has been

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studied in order to analyze how legal modifications and innovations may be explained, with reference to the autonomy of politicians over the strengthening of parties, which appears to be a special feature of the Colombian case. With regard to the dysfunctional justice in Argentina, Friederike Elias and Sebastián Pereyra argue in their chapter, that corruption trials in Argentina take decades and often end in the statute of limitations. This chapter is based on qualitative interviews with Argentinean judges, prosecutors, lawyers, nongovernmental organizations, representatives of the state and journalists who were interviewed as experts in the field of corruption trials. Within the framework of a qualitative content analysis, the authors seek to identify which central institutions play a role in the process and which problems and possible solutions are taken into account by the actors. Finally, the results are viewed from a neo-institutionalist perspective in order to show the importance of organizational processes in the protraction of the trials and thus to view possible reforms in a new light. In their chapter “Money, politics, and the judicialization of electoral processes in Brazil: A political science approach”, Wagner Pralon Mancuso, Vanessa Elias de Oliveira and Bruno Wilhelm Speak deal with the judicialization of electoral processes in Brazil, resulting from the relationship between money and politics in the period between 2010 and 2018. Four topics received their special attention: (a) abuse of economic power in elections; (b) corruption or fraud; (c) illegal fundraising or expenditure of electoral resources; and (d) donations above the legal limit. After discussing the concept of judicialization of electoral process, they compare the relative importance of the four issues above as catalysts for electoral judicialization and explored the elements that affect the distribution of these litigations over the analyzed period. They also address factors that may trigger a phenomenon of interest (such as the type of election held; the legal topic in question; the change in electoral rules; the behavior of public and political actors; and administrative matters of the electoral courts), and discuss strategies to explore these factors in future research. Maria Eugenia Trombini in the chapter “Misuse of public office for organizational gain? Brazilian political parties in corruption scandals” examines how political corruption is often defined as the misuse of public office to advance personal gain. Solutions are often reflections of the view that corrupt practices can be avoided if the principal-agent problem is solved. Yet in Brazil, the attainment of collective goals seems to be significant for understanding rule-deviation inside and across political parties. By examining the participation of members of the political parties in acts that were investigated and prosecuted at two recent scandals, the Mensalão and the Petrolão, she tests the theoretical model of organizational corruption hypothesis at this particular type of organization indispensable

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for a democratic system. Using official records from the criminal and administrative investigations concerning the Workers’ Party (PT) and the Progressive Party (PP) as evidence, behavior in pursuit of self-interested goals has been found to be underrated in regards to goals of the party. This was true for members of the party’s bureaucracy and for mandate holders, with partisan elites playing a central role in the decision-making process. Instead of intentionally making unethical decisions motivated by greed, individuals break rules to collect money for electoral campaigns or to secure their place in the coalition in what appears to be a reaction to overly rigid regulation too costly to comply with. In his chapter Mario H. Jorge Jr. analyses the ethical dilemma faced by lawyers. Lawyers perform a varied number of activities, some of which go beyond their clients’ interests and affect the democratic rule of law as a whole. They are bound by legality and codes of conduct, but do not always comply with the ethical standards set for their professional class. Their behavior can be seen as enabling wrongdoing, since they are in the position to prevent misconduct from taking place. In more complex cases, due to what some may consider an ethical dilemma, weighing in conflicting interests, it is hard to grasp how regulation and self-regulation can achieve compliance. In other cases, the wrongdoing constitutes illegal conduct in the form of facilitating corruption and money laundering, protecting assets which can later be reinserted in the economy as illicit campaign funds. A brief analysis of the involvement of lawyers in Brazil’s Car Wash Operation and Mensalão Scandal provides an overview of how they interact with executives and politically exposed persons in that particular context, while international examples highlight the universality of the problem. In the third section, we continue our analysis of partial compliance with European cases, including party financing and related corruption scandals in Germany and France. Jens Ivo Engels analyzed two party financing scandals in Germany’s history: The Flick affair in the 1980s and the CDU-Spendenaffäre (the donation issue of the Chriatian Democratic Union) of 1999/2000. Both left their marks on public debates showing that the financial conduct of political parties had been illegal over decades. During the Flick scandal, the first calls for “transparency” related to the German party financing came up. The second affair led to the the loss of public reputation on the part of the former chancellor Helmut Kohl. The two scandals are representative of a broader process of loss of legitimacy of the party system. They contributed to the emergence of a fundamentally critical perception of the political elites. The process of party financing in Germany is critically discussed by Hans Herbert von Arnim. While the parties in Parliament decide on their own financing, effective controls are needed to prevent an excess

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of state money being given away in this fashion, and discrimination against potential political rivals. But the parties also regulate the structure of these controls and seek to defuse them in various ways. The result is often compromised regulations and abusive practices. Party financing thus proves to be a central application of the fundamental question of the party state: Who controls the controllers? From a perspective of the jurisprudence, Kristina Peters explains that fight against corruption has been a very popular topic in German criminal law since the 1990s. The discussion is hardly ever related to parliaments, but almost exclusively concerns bribery in business dealings and among public officials. When it comes to elected representatives, there is a complex tension between a broad political freedom of action and the integrity required specifically by article 38 of the German constitution. How German criminal law tries to strike a balance between these conflicting notions will be demonstrated in this chapter, with focus on the most important offence in relation to political corruption in Germany: The bribery of elected representatives, regulated in Section 108e of the German Criminal Code. She illustrates that such behaviour does indeed occur in Germany and demonstrates that the new law—Implemented in 2014—has the potential to sufficiently establish adequate criminal liability. Nevertheless, Peters shows, the provision is in part insufficient, and is in need of reform. Éric Phélippeau analysed the role of financing in French political life by using data published by the National commission for campaign and political finance (CNCCFP)—the administrative authority responsible since 1990—for ensuring compliance with the rules governing the financing of French political life since 1988. The first impression generated by the data is rather that rules are known and respected by the political elites, which creates the impression of a rather smooth political life. To investigate further into these initial impressions, several obstacles to understanding must be removed. Once this is done, electoral campaigns and French political organizations would appear for what they really are, that is, quite similar to those that characterize most major liberal democracies, comprising the rules governing their financial aspects which had been produced by the tailormade political elites, the ability of those they concern to use and circumvent them, and institutions responsible for enforcing them like toothless tigers. This chapter aims to provide food for thought from these different angles. The epilogue, “Non-compliance, organizational deviance and useful illegality: Towards a unified agenda of research” sums up the lessons learnt from our case studies, under three rubrics. The first explains how partial compliance is universal. Cross-national analysis shows that it happens both in the Global South as well as in old, established democracies of the North, as one can find in European societies. Partial compliance, in this sense, is integral to the political process and

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market transactions. Secondly, the existence of partial compliance, though functional but still lowering the legitimacy of the system as a whole, can act as an incentive for the system to change its norms. Partial compliance and organizational deviance thus emerge as catalysts of institutional evolution. In the third place, partial compliance, emerging from the tension between ‘local knowledge’ and ‘global norms’, can become the basis of the hermeneutic of ‘wrongdoing’ and provide insights into the deeper layers of political culture in which the normative, cognitive and behavioral dimensions of compliance are ensconced.

Conclusion The essays brought together in this volume provide insights into a number of issues relating to compliance, individual and corporate wrongdoing, efforts at regulation and useful illegality that sometimes underpins choices by people. They show how candidates and their campaign managers function, parties and politicians are made accountable, how, when and with which consequences fixers and crime-entrepreneurs step into help out leaders and whether campaigns and the electoral process are free, fair, uncorrupt, and efficient. The study of campaign financing also raises the deeper issue of norms and modalities of electoral choice. Can cash buy votes? In other words, does reality conform to the ideal type of democracy where issues and ideas are the main basis of electoral choice, and, where money plays only a marginal role? The book which emerged from a conference intended to engage with the field of party competition, electoral campaigns and the logic of voting, has acquired greater diversity with the addition of new areas and themes. It approaches actors, agencies and processes through a wider range of concepts that take on board agency-driven attempts at bending the rules of transaction in order to win. Even as one morally disproves of useful illegality, one still needs to develop adequate empathy in order to understand its use as the actors do, explain how the sum of individual choices can lead to the lowering of collective welfare and seek to dissect the loopholes in the system that admit such usage. Illegal party and campaign financing and corporate wrongdoing contradict two basic principles of democracy and the market, namely rule of law, equal opportunity for citizens to influence electoral choice and compliance with norms of orderly market transactions. Thanks to the participation of specialists in party and campaign financing; democracy transition, consolidation and deepening; and sociology of organizations, organizational deviance, corruption and useful illegality; the volume has been able to generate new comparative knowledge, and policy

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analysis based on ‘best practices’ that can contribute to reform aimed at bringing agencies and practices connected to useful illegality, back into the academic study of compliance.

References Ashforth, B. E., Gioia, D. A., Robinson, S. L., & Treviño, L. K. (2008). Re-viewing organizational corruption. Academy of Management Review, 33(3), 670–684. Braithwaite, J. (2008). Regulatory capitalism: How it works, ideas for making it work better by John Braithwaite. Edward Elgar. Brief, A. P., Buttram, R. T., & Dukerich, J. M. (2001). Collective Corruption in the corporate world. Toward a process model. In E. T. Marlene (Ed.), Groups at work. Theory and research (pp. 471–499). Mahwah: Erlbaum (Applied social research). Campbell, J.-L., & Göritz, A. S. (2014). Culture corrupts! A qualitative study of organizational culture in corrupt organizations. Journal of Business Ethics, 120(3), 291–311. Freud, S. (2014). Civilization and its Discontents. London: Penguin. (First published: Das Unbehagen in der Kultur. Internationaler Psychoanlytischer Verlag 1930). Klinkhammer, J. (2013). On the dark side of the code: Organizational challenges to an effective anti-corruption strategy. Crime, Law and Social Change, 60(2), 191–208. Luhmann, N. (1964). Funktionen und Folgen formaler Organisation. Duncker & Humblot. (First published 1995). Palmer, D. (2012). Normal organizational wrongdoing. A critical analysis of theories of misconduct in and by organizations. Oxford Univ. Press. Pinto, J., Leana, C. R., & Pil, F. K. (2008). Corrupt organizations or organizations of corrupt individuals? Two types of organization-level corruption. Academy of Management Review, 33(3), 685–709. Pohlmann, M., Bitsch, K., & Klinkhammer, J. (2016). Personal gain or organizational benefits? How to explain active corruption. German Law Journal, 17(1), 73–99. Pohlmann, M., & Kristina, H. (2017). Manipulationen in der Transplantationsmedizin – Ein Fall von organisationaler Devianz? Kölner Zeitschrift für Soziologie und Sozialpsychologie, 69(2), 181–207. Pohlmann, M. (2018). Der Transplantationsskandal in Deutschland. Eine sozialwissenschaftliche Analyse der Hintergründe. Springer VS. Pohlmann, M., Gerhard, D., & Valarini, E. (2020). Bribery, Fraud, Cheating. How to Explain and to Avoid Organizational Wrongdoing.Wiesbaden: Springer VS. Valarini, E., & Pohlmann, M. (2019). Organizational crime and corruption in Brazil a case study of the “Operation Carwash” court records. International Journal of Law, Crime and Justice, 59,. Vaughan, D. (1999). The dark side of organizations: Mistake, misconduct, and disaster. Annual Review of Sociology, 25(1), 271–305.

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Subrata Mitra, Ph.D. (Rochester), is emeritus professor of Political Science at Heidelberg University. His research areas include South Asian and Comparative Politics, rational choice, research methodology, governace, citizenship and political theory. His books include Kautilya’s Arthashastra: An Intellectual Biography – the Classical Roots of Modern Politics in India (2017), Citizenship and the Flow of Ideas (2012), Reuse: The Art and Politics of Integration and Anxiety (2012), Politics in India: Structure, Process, Policy (London: Routledge, 2017, second edition), When Rebels become Stakeholders (2009), the Puzzle of India’s Governance (2005). Professor Mitra edits the Routledge Advances in South Asian Studies and Modern South Asian Studies; and, ‘Society, Politics, Economy’, NOMOS (Baden Baden, Germany). His ‘Governance by Stealth: the Ministry of Home Affairs and the Making of the Indian State’ will appear from Oxford University Press in 2021. Elizangela Valarini is a Postdoctoral researcher and Assistant Professor at Max-WeberInstitute of Heidelberg University, from where she holds a Master’s degree and Ph.D. in Sociology. She is a member of the research group HeiGOS (Heidelberg Research Group for Organization Studies) and coordinates the research project Corporate Crime and Systemic Corruption in Brazil (funded by DFG – FAPESP). She studied Psychology at the Universidade Estadual de Maringa (UEM), Brazil. Her research areas span organizational sociology, the sociology of management, and economic sociology, and themes related to Brazilian economic and political development. Markus Pohlmann is full professor of Sociology at Max-Weber-Institute of Heidelberg University and currently Fellow of the Marsilius Center for Advanced Studies. Prior to his current position, he was Professor at the Friedrich-Alexander-University in Erlangen, and Research Director of the ISO-Institute in Saarbrucken, Germany. His research areas span organizational sociology, the sociology of management, and economic sociology. Currently, he leads the research groups for Organizational Deviance Studies and International Management Studies.

Part I Political financing in Asia

Making Elections Work: Campaign Cash, Marketisation of Votes and Social Negotiation in India Subrata Mitra and Markus Pohlmann Introduction Free, fair and orderly elections, and significant popular participation are the sine qua non of a robust democracy. And votes which are neither ‘bought’ nor coerced, are vital for legitimacy of the democratic process. At the first sight, Indian democracy appears to deviate from this norm. The country has had regular, generally free and fair elections, over past seven decades, conducted and closely supervised by the independent Election Commission of India. These elections are not a mere ritual. Power changes hands in India through elections and not military coups. However, allegations of crime-politician nexus, presence of ‘black money’ and use of campaign-cash of dubious provenance and often, well-over the legal limits, have become a regular feature of the electoral process. This co-existence of two discordant facts—a vibrant, resilient democracy and campaign-cash—is puzzling. India is not a peripheral case. It is a large country with an open political system. With its huge electorate of 910.5 million, of which well over 60% take part in elections, India is considered to be the biggest democracy of the world. How,

S. Mitra (B) Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] M. Pohlmann Max-Weber-Institut Für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_2

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then, does one explain the resilience of this electoral democracy with a continental stretch, but whose regularity and efficacy is underpinned with a soupçon of illegal campaign cash and other forms of wrongdoing? We draw on sociological theory in order to explain the cause and consequences of non-compliant campaign financing in India’s elections. Our aim is to explore the question whether ‘illegal’ campaign financing acts as a proxy variable to compensate for the absence of factors such as party organisation, membership fees, guaranteed state funding and relatively stable social bases of parties which form the core of electoral competition in Western liberal democracies. The chapter explores campaign-financing by drawing on two classical sociological perspectives, respectively, from Niklas Luhmann (1964, 2000) and James Coleman (1992), and rational choice theory of Downs (1957), with empirical evidence drawn from ethnographic studies of electoral competition in India (Bjorkman, 2014; Michelutti, 2007; Mitra, 1979). We draw on Niklas Luhmann’ concept of ‘useful illegality’ to show how material incentives might actually have contributed to the enhancement of participation in general elections. James Coleman’s principal-agent theory helps us show how the principal (the electorate) selects candidates as agents when they are convinced of their capacity to deliver the benefits they expect. We combine these ideas to cast electoral choice as a rational process whereby candidates and voters are able to communicate, and rationally transact, the game of popular elections. The juxtaposition of general theory and the Indian context based on ethnographic studies reveals new dimensions of democratic deepening in post-colonial states, ensconced in transitional societies. What might come across as ‘illegal’ campaign financing is not just a deviance from normative and legal rules. It might actually be functional, as an individual incentive for initiating and subsequently sustaining a vibrant democracy in a context where electoral participation is not compulsory and great social inequality, poverty and illiteracy mark the electorate. By unpacking the actual use of electoral cash, we show how money, rather than ‘buying votes’ actually becomes the basis of political transactions, social negotiation, turning a hierarchical society upside down, and eventually, of the ‘vernacularization’ of imported norms of electoral democracy. Finally, systematic non-compliance, which could undermine the legitimacy of lawful governance and lead to the creation of electoral mafias, is kept within check in India, thanks to the proclivity of the political system to generate its self-correction through the evolution of new, innovative norms of transparency, control and verification, through the creation of new institutions. (Jha, 2020)

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Instead of attributing the deviant character of Indian democracy to India’s alterity,1 we take a structural approach which treats the strategic use of cash in India’s electoral campaigns as a multiplier of electoral participation. We make a distinction among normative, functional, and legal dimensions of campaign financing, and explain why illegal campaign financing is a concomitant of democracies in transitional societies. We continue this exploration with the role of electoral regulatory institutions and the complex relationship of democracy and useful illegality. Far from actually justifying illegal electoral financing, the article draws on the knowledge gained from this analysis to develop policy recommendations that might phase illegal campaign funding off competitive elections

The Indian Context: Puzzling Resilience of a ‘Flawed’ Democracy Alone among large post-colonial states, India has been able to sustain an electoral democracy over the past seventy years since independence from British colonial rule in 1947 and general elections with universal adult franchise began in 1951–1952. Although many scandals emerged during the last two decades, Indian democracy continues to be remarkably stable. Strict regulations of political finances in India have made parts of electoral donations illegal. However, the need for money in order to attract the attention of the voters is constantly on the rise. Electoral democracy is deeply rooted in India, with 554 million voters queuing up at over 900,000 stations to cast their ballots in 2014 to determine the fortunes of 8,250 candidates representing 464 political parties. Over thirty-one national and regional parties, 2044 registered unrecognized parties and more than 8,000 candidates contested for the 543 Lok Sabha (lower house) seats in the 2014 parliamentary elections in India. (Mitra, 2017) But all is not well with the vibrant and resilient democracy of India. Campaign finances are critical and crucial resources to win a seat. Indian democracy—labelled ‘flawed’2 by international ranking agencies—is marked by illegal practices such as hate speech, coercion, threat of and resort to violence 1

See Inden (1986) for a comprehensive criticism of Indian ‘culture’ as an explanation of the country’s exceptionalism. 2 See the Economist Democracy Index 2015: Democracy in an age of anxiety which classifies India as a flawed democracy. The country dropped by ten points in the most recent Economist democracy index. “India’s overall score fell from 7.23 in 2018 to 6.9 in 2019,” the Economist Democracy Index reported. https://qz.com/india/1789129/india-drops-in-the-economist-dem ocracy-ranking-over-kashmir-caa/.

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and use of illegal campaign and party financing. India does not stand alone. One comes across similar allegations in many Latin American countries (CasasZamora & Zovato, 2015), in Western Europe and North America (Gunlicks, 2019) as well as in South Asia (Ufen, 2017) or Africa (Sigman, 2015). As such, in comparative terms, allegations of ‘vote buying’ and electoral corruption are not unique to India but are a common pattern, though its quantum varies from one country to another.3 The question is, whether this use of illegal means is a threat to democracies or is partly useful to keep the democratic game running. From a moral point of view, the answers to this question are clear and obvious. The use of ‘black money’—a wide-ranging term used in India to refer to unaccounted for cash, concealed from the tax authorities—as campaign cash adds a touch of illegality to outcomes in general elections that are held to be free and fair. However, from an analytical perspective, one needs to dissect the functions of campaign-cash in a country where political parties do not have deep roots going back to several generations of party identification among voters, no significant bureaucratic organisation with volunteers taking time off their normal occupations to take part in the campaign, and membership fees to fund election-related activities, as in Western liberal democracies. Besides, electoral constituencies are huge and heterogeneous and there is no substantial public funding to help defray the cost of campaigns. This is not to justify illegal campaign financing but to understand how it works and what their consequences are for democracies. Does it really ‘destroy’ democracies? More precisely, does material incentives thrown into the electoral process by competing candidates serve more to motivate people to turn out to vote than actually influencing their electoral choice? When material gratification serves basically to get the vote out, enhance participation and legitimize elections as the main arbiter of allocation of power at the level of the political system as a whole, the consequence of illegal campaign financing is different from straightforward vote buying which can reduce a democracy to an electoral plutocracy. A brief perusal of the state of play with regard to cash, crime and candidates will give a comprehensive idea of the vast dimensions of the problem. Besides 3

One common response to the apparent increase in the costs of politics, and to complaints about plutocratic party finance is to introduce or to boost public subsidies for political parties and/or candidates (Alexander, 2019; Scarrow, 2007, p. 203). While it appears to be fair and above board, state funding of elections has its critics. The Election Commission of India, an independent regulatory agency that is responsible for the conduct of elections, is opposed to it on the ground that the Commission does not have access to campaign and party financing in the first place and suspects, public subsidy will be heaped on the top of cash whose provenance is not clear, and possibly illegal.

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being the world’s largest, India is also perhaps the most expensive as far as the cost of electoral competition is concerned. It has been estimated that the parties and candidates spent around $2 billion in the 2009 general election and the sums involved in 2014 were to the tune of $5 billion (Sheth, 2009; Gottipati & Singh, 2014). The sums are estimated to have been twice as much in the parliamentary election of 2019.4 Political parties in India generally do not have strong, bureaucratic organizations, nor do they have their own sources of income from membership dues like many European political parties. Come election: parties scramble for cash, workers, and managers to run their campaigns. Some candidates give strategic gifts to motivate voters though explicit bribery is prohibited under electoral laws. We learn from a number of studies that in India there is little transparency about where the vast sums of money come from, nor how this money is spent.5 The graphic 1 shows the different sources of campaign financing. A candidate can spend up to roughly Rs.70 lakh (1.137.185, 00 US-Dollar) depending on the federal state where they are contesting the lower house election. Expenditure limit in the Assembly Elections is Rs. 28 lakh (409.437, 57 US-Dollar) in bigger States of India. However, this is only half of the story. The sums spent are usually in excess of the legal limits—sometimes by a factor of 50 or more (Sharma, 2019). According to a report released by the Association for Democratic Reforms (ADR), a non-profit that works on electoral and political reform, a total of 1,580 Members of Parliament (MPs) and Member of Legislative Assemblies (MLAs), or approximately 33 percent of the legislators in India’s Parliament and State assemblies, have criminal cases pending against them. While some of their charges are minor, over 20 percent of the new MPs face serious charges such as attempted murder, assaulting public officials, and theft.6 The Supreme Court of India— India’s highest judicial body—has been unsparing in its critical observations on the nexus between politics and crime.

4

For comparative purposes, it has been pointed out that the combined 2015-16 United States presidential and congressional elections involved $11.1 billion (U.S. Federal Election Commission 4/19/2013). 5 Mitra had noticed the use of cash, gifts and alcohol as incentives in my study of the 1977 parliamentary election in an Indian village (Mitra 1979), but for actual documenting we turn to the meticulous documenting of cash by Bjorkman (2014). 6 Neeta Lal, “India’s Criminal Politicians: Why are so many people facing criminal charges still elected to India’s legislative bodies?” the Diplomat, December 19, 2018.

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S. Mitra and M. Pohlmann In September, the Supreme Court ordered the Parliament to ‘cure the malignancy’ of criminalization of politics by making a law to ensure that persons facing serious criminal cases do not enter the political arena. It also advised that the ‘polluted stream of politics’ be cleansed. Holding that the criminalization of politics is an ‘extremely disastrous and lamentable situation,’ the five-judge constitution bench headed by erstwhile Chief Justice Dipak Misra said this ‘unsettlingly increasing trend’ has the propensity to ‘send shivers down the spine of a constitutional democracy.’ The court added that the criminalization of politics was ‘not incurable’ but the issue was required to be dealt with soon before it becomes ‘fatal’ to democracy. ‘Our Indian democracy has seen a steady increase in the level of criminalization creeping into Indian polity. This tends to disrupt constitutional ethos, strikes at the root of democratic form of government, and makes citizens suffer,’ the judges added. (Neeta Lal, 2018)7

Experts opine that a major reason why non-compliance is so entrenched in the system is because there is no stringent law that requires political parties to revoke the membership of ‘tainted’ candidates. As a matter of fact, tainted candidates appear to carry their brush with the law as a badge of ‘winability’, giving voters the impression that they would be able to deliver results that the state itself cannot.8 Neeta Las (2018) quotes Soutik Biswas of the BBC, to suggest that criminals get elected not only because many voters are ill-informed, but also for socio-political reasons. In constituencies, where social divisions driven by caste and/or religion are sharp and the government fails to carry out its functions such as delivering services, dispensing justice, or providing security in an impartial manner, resourceful candidates have an edge. In a classic case of art imitating life, Bollywood, the Indian film industry, often portrays Robin Hood-esque criminal politicians as protagonists. Many such movies have gone on to become hits. Political scientist Milan Vaishnav, who has been studying links between crime and democracy in India, points out in his book—When Crime Pays—that “a key factor motivating parties to select candidates with serious criminal records comes down to cold, hard cash.”9 (Fig. 1) Voters, for their part, know that there are hardly any untainted candidates. Rarely does an incumbent serve out a term without facing corruption charges. A large share of the money comes directly from the candidates themselves. They 7

Neeta Lal, ibid. “In a recent report, rights group Association of Democratic Reforms pointed out how nearly half of the 542 Lok Sabha lawmakers elected last year have declared criminal cases against them, as shown in their mandatory affidavits. It noted a sharp increase—within the decade since 2009—in elected parliamentarians with cases against them for serious criminal acts, including murder and rape. In their latest report on the Delhi assembly polls held on February 8, it found that 37 of the 70 legislators are facing serious criminal cases.” Pallab Bhattacharya, “Tainted politicians, elections and judiciary” South Asia Journal, February 17, 2020.

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Fig. 1 Sources of campaign financing in India. Perceived Most Common Source of Funding for Peer Politicians. MP = Member of Parliament, MLA = Member of the Legislative Assembly, DPP = District Panchayat President; BPP = Block Panchayat President. Source: Jennifer Bussel (2018).

are usually wealthy entrepreneurs or sponsored by them. The politics ‘business’ is hugely profitable. By winning an office, legislators are able to get great returns on their investments: As a study by Fisman, Schulz and Wig (2014) shows that their “winner’s premium” is around 4 to 10% depending on the prevalence of http://southasiajournal.net/india-tainted-politicians-elections-and-judiciary/ Downloaded on July 9, 2020. 9 Other examples of electoral wrongdoing galore. A report in the Press Trust of India (May 26, 2019) says that 43% of newly elected Lok Sabha MPs in 2019 faces criminal charges. Nearly half of the newly-elected Lok Sabha members have criminal charges against them, a 26 per cent increase as compared to 2014, according to the Association of Democratic Reforms. In the new Lok Sabha, nearly 29 per cent of the cases are related to rape, murder, and attempt to murder or crime against women. Pragya Singh Thakur, the newly-elected BJP MP from Bhopal, faces terror charges in connection with the 2008 Malegaon blasts. Dean Kuriakose from the Congress, who won from the Idukki constituency in Kerala, has 204 criminal cases against him, including culpable homicide, house trespass, robbery, criminal intimidation.

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corruption in the respective Indians States. An investment into a costly election campaign soon turns out to be an investment in the contestant’s own career. Bjorkman (2014) shows that in the intensity of a campaign, ‘tainted money’ is actually a non sequitur because the ability to generate huge amounts of cash and to invest it strategically in karyakartas (campaign workers) shows the political connectivity of a candidate and contributes to his winability. What matters is cash in time, not its provenance. Although as regards the dark side of the elections where only speculative estimations are available, there is no doubt that ‘black money’ (unaccounted for cash) plays a major role in Indian elections. In Jennifer Bussel (2018) study quoted above, (Fig. 1) based on data collected between 2011 and 2014 from surveys of more than 2,500 incumbent politicians, most politicians understand black money to be the most important source of funds. It is not just the top echelon of elections like those to the national parliament or legislatures of the federal states, or the wealthiest of Indian financiers who are involved. The same cycle of cash → elections → cash is repeated ad nauseam at all levels of the electoral pyramid of India (Kapur & Vaishnav, 2018). The disquiet over illegal campaign and party financing cuts at the root of legitimacy and trust in politicians. (Fig. 2) A public opinion survey in India (Mitra, 2017) found that trust in politicians was much lower than trust in the judiciary and the Election Commission. Even civil servants ranked higher. This might potentially be damaging to democracy. Civil servants can administer, just as the judiciary can arbitrate, but elected political leaders alone can legislate, and set new, binding norms for regulation and compliance. (Fig. 2)

Campaign-Cash, Non-compliance and the Politician: Three Dilemmas The co-existence of a vibrant, resilient democracy and practices that are not compliant with electoral laws, points towards ‘useful illegality’ of means of campaign financing. The Election Commission of India and the Supreme Court, both of which are politically independent, have stepped into monitor the electoral process. Their effective intervention contributes to the running of elections on the lines of a free and fair competition. However, in the long run, their intervention needs to be institutionalized through effective, binding and transparent legislation. Only then can electoral democracy deliver on the promise of transparency. No regulation can be effective without self-regulation. That itself is part of a bigger dilemma. Election Commissions and Judiciary can arbitrate and adjudicate but

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2006

2012 95.5

100 90

82

80 70 60

51.4

50 40 30

28.7 28.8

43.4 33.6

37 34.3

38.2

50 41.7

51.7 42.4

45.7 44

51.4 46.9

56.1 49.1

61.3 58

65.9

70.5

74.4

63

20 10 0

Fig. 2 Trust and Confidence in electoral and non-electoral institutions in India (2006, 2012) Source: world values survey, http://www.worldvaluessurvey.org/wvsdocumentationwv5.jsp

legislation can only be done by legislators. With the amount of criminality and involvement in illegal deals that underpin electoral success, can we really expect poachers to become gamekeepers? There are no recorded cases of public rejection of top leaders in India. Rajiv Gandhi, who was alleged to have received kickbacks from the Swedish armament company Bofors, or more recently, the Manmohan Singh government, embroiled in controversies about illegal allocation of coal blocs were not publicly sanctioned. Measures intended to regulate illegal practices quickly get embroiled in public controversy. For example, to obviate illegal financing of election campaigns, the government of India introduced the method of ‘election bonds’ in 2018. Electoral bonds are a vehicle through which associations, corporations, and individuals can donate funds legally and transparently to a political party of their choosing via the formal banking system. A report issued by the Centre for Media Studies (CMS) estimates that total election expenditures doubled from 2014 to 2019, with the BJP accounting for around 45% of all election spending (Association for Democratic Reform, 2019). This gets into three normative dilemmas:

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1. The democrat’s dilemma: Democracy has moved beyond Athens where a few selected men could legislate on problems of the city-state in a public assembly. Modern elections, acting on universal adult franchise, involving huge electorates are enormously elaborate and expensive affairs. State funding to political parties might leave out small parties, and groups that are not yet recognized as parties. Most important of all, being based on voting in the previous election, it does not take the shift in public opinion into account, and is thus biased towards the status quo. Leaving all funding to membership alone is not practical for a country like India where the culture and tradition of political parties are young; membership, other than those of parties of the Left and Right is irregular and not given to paying membership dues. That leaves voluntary contributions as the only legitimate and practical source. Does this corrupt the voting mechanism of a democracy? Once elected, how do these unequal contributions extract a quid pro quo, and influence legislation and administrative action? 2. The regulator’s dilemma: In order to change the constitution or the forms of campaign financing, one needs majorities in parliament. Those who have benefited from the system will show little inclination to change it to their potential disadvantage. It is like putting the fox in charge of the henhouse. Who bites the hand that feeds? “Quis custodiet ipsos custodes?” (“Who watches the watchers?”) This problem of self-regulation of regulators is a classic dilemma. 3. The democrat’s dilemma and regulator’s dilemma join one another in the state’s dilemma. In modern liberal democracies, elected leaders alone are authorized to exercise authority of the state. However, if the election of these leaders is based on practices that are not legal and voters consider the capacity of candidates to ‘deliver’ as more important than their commitment to the laws of the land, how can the state function in a manner that is legal, legitimate, just and proper?

Two Sociological Perspectives on Illegal Campaign Financing Taking up the perspective of the three dilemmas, we would like to explore them further by using two different theoretical approaches. These approaches are quite common in sociology but are rarely applied to the issue of illegal campaign financing.

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Luhmann’s approach received some theoretical attention (Weiß, 2016), but has not been used as a heuristic method to analyze illegal campaign financing. By referring to Luhmann’s perspective, we like to highlight the distinction between the normative self-description of the state, and the functional prerequisites of the electoral system in order to understand democracy. Based on these prerequisites, illegal campaign financing is not just a deviance from normative and legal rules, but partly functional for facilitating an electoral transaction between candidates and voters based on cash transaction. However, what is rational at the micro level might become anti-systemic at the macro level.10 James Coleman’s perspective is based on an analytical model of Rational Choice-Theory. While rational choice assumptions—at least since the works of Anthony Downs (1957)—are very common in political sciences (McGann, 2016; Stevens, 2018), Coleman’s theory is not. By introducing his frame of principal-agent theory to understand democracy, ‘vote-buying’, and illegal campaign and party financing, we stress on the fact that part of the illegal financing is in favor of the principal, i.e. the individual voter. This adds to the argument of ‘useful illegality’ from a different theoretical angle. Luhmann’s theory takes a societal stand, whereby he sees society as communication based and differentiated into functional systems. The political system is one of these systems, and democracy is understood as just one of several forms of organization of the political system (Buchstein 2016, p. 22 f.). The function of the political system is to ensure that collectively binding and publicly accepted decisions are made within political organizations. According to his perspective, the political system is based on a form of decision-making that binds collectively by executing power. Power is a communication medium that serves to enforce priorities by introducing sanctions—alternatives that one would rather avoid. The control over the use of power in the political system is ensured by the formal occupation of offices. Luhmann’s approach is a power based one that can be traced back to the Italian social theory of Machiavelli, Pareto, and Mosca, albeit introducing a completely different frame of analysis. His understanding of democracy includes the division of the top of the differentiated political system into government and opposition. All political communication in a democracy is coded to benefit either the government or the opposition. In addition, the government can pick up ideas from the opposition. The legitimacy of political power emerges through the procedures prescribed by the code government/opposition. According to Luhmann, lack of opposition is synonymous with lack of democracy and therefore the prevalence of 10

Illegal campaign finance can have a negative consequence for democracy. One can see this in the case of Brazil. Personal communication, Elizangela Valarini. Heidelberg, 14.7.2020.

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dictatorship. Against this background, democracy is seen as a structure to regulate the power struggle and occupation of public offices. Its historical advantages have been to allow a non-violent change of public office and to codify the superiority of powers and peaceful ways to exchange it. As other functional systems, the political system is inclusive. The formal inclusion of the population is recognized as democracy in modern politics. The organization of elections—even in populous countries such as India—is evidence that democracy is realized. Although in India, some older citizens are still unable to read and write, they can make their choice with corresponding images and symbols. This lack of prerequisites to vote or to run for office facilitates the global spread of mass democratic. Democracy legitimizes itself by this formal procedure. If they are not satisfied, the voters can “throw the rascals out.” All votes carry the same weight—this became a formal principle of equality, sustainable even in the case of severe social inequality. Once established, democracy leaves hierarchical social status systems intact and leaves it to voters and to the elected government to influence the social inequality pattern of a given nation state. Democracy itself is indifferent even to severe kinds of social inequality as long as formal equality in voting and election is guaranteed. According to Luhmann, the political system emerged as an autonomous sphere of society and does not mirror any more the stratification and status order of the society (Luhmann, 2000, p. 214). Candidates from lower strata of the society can be elected as well; and people from the highest strata of the society may not even be represented in the government or opposition. According to Luhmann’s observations, society is not dominantly structured by classes anymore, but by autonomous functional subsystems like politics, law, economy etc., inclusive to the population. According to Luhmann’s approach, “democracy” is also part of political semantics and at the same time frames a normative requirement for all entities that want to appear as states and gain recognition (Luhmann, 2000, p. 96 f.). Democracy represents on the one hand a normative self-description of modern states and is on the other hand a formal mechanism that offers opportunities to exercise power and exchange governments in a peaceful way. While the mode of self-description is a normative one, the power mechanism of democracy is not. If illegal campaign financing is a challenge to the normative self-description of the modern state, is it a distortion or elimination of its formal mechanism to regulate the power struggle inside a nation state as well? In normative terms, illegal campaign and party financing undermine the concept of free, fair, and equal elections. That is why the Indian state, like many others, creates regulations to control the flow of money to the candidates. Although these regulations are not very effective, they legitimize the state as a

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democratic one and hold up its democratic legitimation. But is the power mechanism eliminated or substantially distorted by the flow of black money into the election system? Or is it just part of the larger democratic game? This question again is not easy to answer. According to Luhmann, the voters are merely an audience whose votes are to be won. How and in which way this happens is contingent. Programs, ideas, values are means to reach the audience and as such exchangeable. How the voters choose is up to them. Therefore, everything revolves around the management of candidates’ perception by the electorate. If votes are bought directly,11 or voters are forced to vote for a particular person with violence or direct physical threat, we would say that the election is corrupt, or the freedom of choice is eliminated. But if the audience is motivated by money, material incentives, the wealth of the candidates, this is not a fundamental problem for a democracy. That is because it translates precisely the motivations of the public and the interests of the voters into parliamentary seats, political party shares, and executive power. When we talk about political organizations of parties and candidates, in order to win elections and access to public offices, Luhmann’s early work (1964) on formal organizations is particularly relevant. If organizations want to function, they must be able to rely on useful deviations. Conversely, one can show that adhering to formal rules strictly impedes any organization. Miners in South Africa, nurses in England or Canada, teachers or pilots have all used work-to-rule strikes as effective mean to hinder the organization from running. Each organization relies on control deviations for its functioning, because no organization can phrase formal rules so perfectly and comprehensively that they ensure the functioning of the organization in every given situation. If nobody can follow all the rules and deviations are necessary for the survival of the organization, how does one regulate the handling of deviations? Especially with the internal unwritten rules, the phenomenon of self-regulation comes into play. As organizations rely on useful forms of deviant behavior from their highly skilled staff to function, their informal cultures suggest certain forms of “useful illegality”. In the sociological sense, “useable illegality” generally refers to the legitimate deviation from formal requirements, and not just in the legal sense, but to the possible infringement of legal norms. Self-organization then refers to the fact that the formal structures of the organization are supplemented, controlled or suspended by self-created, collective forms of informal regulation that defies 11

Voting is confidential and is perceived by voters to be confidential. There is no guarantee how a particular voter will vote, regardless of the incentives he has been given. Bjorkman says: “as one social worker so aptly put it, ‘you can’t buy a vote’” (Bjorkman, 2014, p. 630, emphasis in original).

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formalization. It cannot or must not be formally regulated. They are collectively accepted unwritten rules that emerge and hold because they are considered useful to the organization. According to Hiller (2005), the subsequent perception of corruption in the public is foremost a consequence of the differentiation into functional subsystems that Luhmann had in mind. It is only on the basis of this differentiation that expectations concerning the independence of the political system are created. According to the norms of democracy, politicians shall not be influenced by external money, but merely by political ideas and future policies. But political organizations have to deal with external money, with the costs of election campaigns or political parties. Thus, the scandals erupting in consequence of the disappointment of these normative expectations are quite common.

Cash, Campaign Participation and Social Negotiation Why do people take part in general elections where the impact of a single vote, where constituencies number in millions, is inconsequential? Rational Choice (RC) in political science usually draws attention to the fact that voting and other forms of political action are always costly, be it time, money or attention (Downs, 1957). The marginal impact of a single vote being so low, it is irrational for most citizens to acquire political information for election purposes. Therefore, it is a ‘rational ignorance’ of citizens (Buchstein, 2016, p. 22 f.). Coleman’s theory adds a principal-agent perspective to the usual RC-approach. In recent political science, principal-agent theories are mostly applied to the relation between elected politicians and their administrative units (Cook & Wood, 1989; Alvarez & Hall, 2006), but not as much to the relation between voters and candidates or politicians (Enos & Hersh, 2015; Cole, 2018). In his understanding of democracy, Coleman focuses on the voters’ role as principals, as sovereigns, delegating part of their rights to agents that are supposed to act in their interests. As the principal elects the agents, the crucial question for the voters in a democracy is if they act in their interests (Coleman, 1992, p. 168). The subsequent question is whether the agents, who receive black money or engage in vote buying, act in congruence with the principal’s interests. If they do so, illegal campaign and party financing may be legitimate for the constituency. In Coleman’s perspective, to act illegally is not the same as acting in an illegitimate manner. The agents’ action can be illegal and legitimate at the same time. If a member of the parliament (MP) exchanged the promise to vote against a bill for personal gain (money, lucrative investment opportunities or a lucrative

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case for their own law firm), it would be seen as illegitimate and it will probably be illegal as well (Coleman, 1992, p. 169). But if they exchanged their vote on the bill for the voters’ promise to support them, or for the promise of the party chairman to promote them, or of the administration to locate a big infrastructure investment in their constituency, it would be perceived as legitimate (Coleman, 1992, p. 170). Coleman’s approach raises the question of democratic sovereignty. Accordingly, we have to ask if illegal campaign financing violates the interest of the principal concerning the constituents and society as a whole. Answers to this question depend on the kind of trade. If illegal campaign financing is related to donations, e.g. of big corporations, expecting the elected MP to return the favor by passing beneficial legislations after the elections, it is clearly illegitimate. But if the illegal money is used to promote the election of candidates from the same region, for a candidate who promises to act in favor of the respective constituency, illegal campaign financing would be in the interest of the principal, though it is illegal.12 Following Coleman, not all illegal campaign and party financing are against the sovereign’s interest. In many cases, it is aligned with the interests of the principal with the consequence that it may be legitimate, but illegal at the same time. However, we still have to ask how the phenomenon of illegal campaign and party financing is explained by the RC- theory, if and how it is based on the rational choices of candidates (a) and voters (b). (a) The candidates find themselves in the role of political entrepreneurs, whose idea it is to count as eligible for enough citizens to win the election (Buchstein, 2016, p. 22f.). They will therefore remain as vague as possible and try to win different groups of voters with partially mutually exclusive agendas. They will also participate in an emotional political debate based on populist demands whenever it serves their purpose (Buchstein, 2016, p. 22f.). In a political system like India’s, where most of the candidates appear to rely on black money, ‘cheating’—being vague about electoral promises—appears to be the best rational strategy for candidates. Although scandals emerge from time to time, the enforcement of the regulations concerning political finances is weak. Thus, the risks for offenders to be detected or punished are low. In terms of a cost-benefit analysis, this helps to 12

In the Mumbai election that Bjorkman (2014) studied, we find winability of the candidate and his chances of delivering benefits after the election were the main concern for voters. Where his cash came from was a secondary consideration.

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explain, why many of the Indian candidates engage in non-compliant behavior. If candidates expect many others to take black money, the effects will multiply to the level of systemic corruption. Once elected, why should the elected care to implement a stronger enforcement of the regulations, while capitalizing on the low risks of taking black money to prepare for their reelections? For elected politicians, it is not rational to stress on the enforcement of bills to ban illegal campaign and party financing beyond the symbolic level of legitimation. We would expect rational actors to keep up double standards in that situation, i.e. keeping up the legal façade to fulfill the normative expectations of the voters and circumventing the legal regulations in their real-life activities to fulfill the requirements of the political system in order to win the elections. Thus, implementing formal regulations that prohibit the inflow of black money and accepting it at the same time, seems to be a perfectly rational game to deal with the requirements of the political system. (b) For voters, the same is true. In a political system, where most candidates rely on black money, it is rational for voters to choose those candidates who distribute a bigger part of the money directly among the voters themselves. Vote buying provides additional incentives for voters to elect candidates who act seemingly in the voter’s interest, although voters do not know how they will act once they are in office. This veil of ignorance regarding how politicians will act is typical for the democratic game. Very often, even promises that have been important for the electoral success are not kept. That is why it is rational to vote for the candidates providing immediate benefits because future risks and costs are not calculable. If the candidates have a criminal record concerning corruption, i.e. illegal party financing, this may be even more promising concerning the voters’ cost-benefit calculus, because they will assume that the share of black money they attract and re-allocate is potentially bigger than that of other candidates. In terms of Coleman’s theory, for both sides, the principal and the potential agents, it is a rational choice. If it is in the interest of the principal, although illegal, it will not harm the electoral mechanism in the dimension of the delegation of rights.

Reports from the Field For empirical evidence to support some of the conjectures from general theory made above, we turn to Milan Vaishnav’s, When Crime Pays: Money and Muscle in Indian Politics, (2017). He points out that India’s politicians are accused not just of ‘white collar’ crimes like corruption or bribery, but serious offenses like

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murder, kidnapping, arson, banditry, rapes and more. But paradoxically, the voters keep electing them and parties keep choosing them as their candidates. Vaishnav argues that the “crime-politics nexus” in Indian politics matters not just for other developing countries and nascent democracies, but also to established ones like the United States. He explains that the politician-crime nexus has existed in India for decades, dating back to the country’s first elections following independence in 1947. During the long years of one-party-dominance of the Congress party, this network became the mainstay of the Congress organisation which was based not on cadres but essentially a patronage network. Power and access to resources held the electoral network together, and helped mobilize or suppress turnout, hand out pre-election incentives by the way of cash, contracts, licenses and permits which were much prized in India’s controlled economy. The same method was also used to coerce voters or to ‘capture’ polling booths. This symbiotic relationship between crime and politics raises two complex questions about the motivation of political parties and voters. Why do parties have crime entrepreneurs as fixers who are useful to garner resources and mobilise voters even though they may step beyond the boundaries of the law? And why do voters vote for candidates with links to the underworld of crime? The answers we get from recent scholarship such as that of Vaishnava are enlightening. Across the world, elections have grown increasingly expensive. India, as we have already seen above, is no exception which explains why parties in India sometimes even compete against one another to recruit “tainted” politicians who can cover the costs of their own campaigns, pay the parties for the privilege of running and subsidize candidates who don’t have the same kind of wealth. As for voters, the motivation to opt for politicians with criminal connections, runs on parallel lines. In an environment where the rule of law is weak and society is deeply divided along ethnic lines, many voters view strongmen as saviours. These politicians tout their willingness and ability to “do whatever it takes” to represent their community’s interests. They reinforce this message by expressly catering to their narrow segment of the electorate. In a society fragmented on the lines of community, parties win by rallying their core supporters, with the help of the ubiquitous strongmen.13 There are several other countries where we see the symbiosis of crime and politics. In a diverse set of countries such as Brazil, Jamaica, Nigeria, Pakistan 13

These are referred to as ‘goondas’ or ‘mastaans’ in vernacular language. These mercenaries of electoral politics follow the cash-trail, and go to which ever party offers the best deal. This has been the case in West Bengal. When the Congress party yielded the ruling position to the communist party, the goondas moved on to the new ruling elites. When the TMC replaced the CPM, the same characters effortlessly moved on to new regime.

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and the Philippines, similar dynamics are at play. However, this is not purely a developing world phenomenon; after all, many voters in the United States have spoken to reporters about how President Trump’s demonstrated ability to bend the rules in his business career spoke to his qualifications to do whatever it took to get a “good deal” for ordinary Americans. That said, India is unique for at least two reasons. First, the scale of the issue is mind-boggling. And second, many politicians—at least 20 percent of Parliament—are accused of serious violations of the law. This speaks to the real weakness of the rule of law in India, which both creates an opportunity for the criminal politician to act as a “Robin Hood” figure, and increases the likelihood that he or she can manipulate the rules once in office, with a low probability of being punished. This raises the question about the actual use of campaign cash. “More than two thirds of the money” according to one estimate, “gets spent on election rallies, maintenance of party and electoral workers, media advertisements and media management”.14 The total amount of campaign cash snowballs because the onus is not just on spending but outspending the opponents. (Bjorkman, 2014) The money thus acts as an image booster and a catalyst for the spiralling effect on campaign spending. The importance of Bjorkman’s study (2014) for empirical illustration of the use of campaign cash arises from the fact that she documented the steps taken by a candidate during an entire election cycle, starting with the building of her electoral machine, the recruitment of the campaign workers and most important of all, the logic that underpinned the disbursement of electoral cash. Her interpretation of campaign cash both as a signifier of the political prowess of the candidate and signified, in terms of the location of the candidate by the electoral in the local power index, are significant for our essay. With her meticulous analysis of how a campaign-machine is set up with workers (karyakartas) and funded, she shows how this investment can be “productive and performative of sociopolitical networks that infuse everyday life far beyond the Election Day. “Election season exchange is … constitutive of enduring networks of trust, sociality and accountability.” (Bjorkman 2014: p. 618). Campaign cash becomes a mechanism for shoring up social capital, and in the hands of a strategic investor, capable of taking calculated risk in the selection of reliable karyakartas, and calculate the optimal amount to be paid for services to be delivered, the election itself becomes a value-multiplier. “Money, in this sense, works simultaneously as a sign of the ‘sedimented embodiment of accomplished power, and as the ‘transactional

14

Personal communication, K.C. Suri, 23 July, 2020. See his chapter on the Chevalla Lok Sabha constituency in this volume.

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mechanism for its attainment.” (Parmentier 2002: p. 65, cited by Bjorkman, 2014, p. 629) “Election-time cash flow inhabits a deeply political landscape of contestation where issues at the heart of Mumbai’s modernity—land use, infrastructural investment, and business prospects—are negotiated and speculated on. These findings [on campaigns and cash] critically engage a conceptual terrain that counterposes individual rationality and political choice to traditional forms of authority mediated by relations of patronage, while producing important insights into long-standing anthropological debates on money and exchange.” (Bjorkman, 2014, p. 617) Bjorkman concludes: “…money does not buy votes but, rather—somewhat conventionally—pays for a variety of campaign-related expenses, including… hiring crowds to participate in campaign rallies.” (2014, p. 618)

Individual Rationality and Systemic Non-compliance: Self-correcting Mechanisms At the core of Luhmann’s and Coleman’s approaches are the formal mechanisms that relate choices of voters, candidates and politicians in elections. These are power-based approaches. Democracies regulate access to public offices via elections. The ultimate electoral choice lies with voters. For Coleman, democracy is about the exchange of rights and the control of the agents (elected politicians) by the principal (voters). According to these sociological approaches, five different aspects become apparent when dealing with illegal campaign financing and vote buying. We need to draw a distinction between the excessive normative claims concerning the self-description of the democratic state and the economic prerequisites of running an electoral system. Very often, the formal working of the latter leads to a disappointment of the first. Doing politics is not a dirty business because political organizations rely on money as all organizations do. It appears to be ‘dirty’ only because the normative expectations of the democratic system overpower the reality of democratic politics. Even if the normative expectations are disappointed, in the Indian case, the voters and candidates do not turn their backs on electoral democracy, despite scandals. With a turnout of 67.11%, the 2019 Lok Sabha elections beat the previous elections in 2014 according to the Election Commission (The Times of India, 2019). The disappointment of the normative expectations did not have an impact on the legitimation of democracy in India.

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The loosely enforced regulations that led to further labeling of vote buying and black money as illegal did not have an impact on the legitimacy of the electoral system. Elections are becoming more and more expensive for the candidates. There are many reasons. Among them are increases in the size of constituencies and more ‘independent voters’ who need to be motivated with gifts before elections—and a steady rise in political competition and the number of candidates” (Subramanian & Venkataramakrishnan, 2019). Parliamentary candidates report having to cave into this practice due to fierce competition (Donovan, 2019). The informal side of elections with its dark money and illegal payments do not appear to destroy the legitimacy of elections. In contrast to other post-colonial and/or transitional states, India has managed to sustain not only resilient and effective democratic governance but also social change over the last decades (Mitra, 2017, p. 2 ff.). This can be attributed to the role of Indian politicians as intermediaries “between the traditional society and the modern state, without being exclusively identified with either modernity or tradition” (Mitra, 2017, p. 5). As voting is confidential, there is no way of tracking down who voted for whom.15 The alleged ‘vote buying’ neither reduces the intensity of electoral competition nor indeed the choice for the voters. As Bjorkman notes, voters can take money from one or several candidates and in the privacy of the polling booth, vote as they wish. Although it violates the norms and values of the democratic self-description, the campaign-cash has become part of the democratic power game and not an impediment against the formal mechanism of electoral democracy. The so-called ‘vote buying’—to be seen as a metaphor to describe the act of spreading campaign cash among voters—has become an integral part of India’s electoral democracy. It is also an example of useful illegality because it provides incentives for the voters to participate in the elections, and boost the percentage voting (Mitra, 1979). Norms are necessary but not sufficient for the prevalence of orderly elections. They function best when backed by institutions and organisations to coordinate the movements of individual actors and sanctions to keep them on the narrow and straight path of the law.16 Without these additional layers, collective action runs the risk of non-compliance. (Mitra, 2021, forthcoming) Norms which have achieved this status of binding rules are, however, the visible tip of a much larger 15

Voting in very large, general constituencies, sometime with over a million voters, is different from voting in legislatures where votes can be monitored and lobbyists can thus seek to influence voting in return for material considerations. See Mario Jorge’s contribution to vote buying in Brazilian legislatures. 16 “Effective rule-use demands both that compliance is produced and that compliance is linked to desired results.” (Baldwin 1995, p. 142. Emphasis added).

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and less visible ensemble of contested values, unfulfilled desires, anxieties, rage and collective memories. What stops the actors who are merely satisfying in a rule-bound world from resorting to their unfulfilled goals? In other words, what explains compliance with rules?17 One can see this problem in terms of a very simple game of two players, each seeking to maximise her gain at the cost of the other. Relentless competition between them as Axelrod shows in his Evolution of Cooperation (1984) can drive both to an outcome where both are poorer. In contrast, self-policing by the actors, or externally imposed sanctions can hold them down to rule-compliance.18 Yet another method is to develop a public culture and a collective mind-set that elevates rules to the level of sacred commandments, which individuals have an inner compulsion to obey. Colonial order was based on a combination of incentives, sanctions, symbolic reification institutions which tamed the tendency to self-rule and generated order. These ideas emerging from colonial discourse found their way into training manuals for civil servants, and became part of the political culture and tradition of ‘shaping’ of young entrants into the mandarinate of the Empire, by old, trusted, hands. These ideas find their echo in the correspondence of Nehru and Patel, and in the Constituent Assembly Debates. The institutional arrangement that underpins the state in India can be seen in Fig. 3. The fact that the end of colonial rule would inevitably unleash desires long suppressed and lead to the conflict of class, caste, ethnicity, religion, region and simple thwarted ambition became the creation of institutions that divided power in intricate ways. The separation of executive, legislative and judicial powers was juxtaposed to the division of powers between the Union and the 17

The issue is extensively analysed under the concept of ‘useful illegality’. See Niklas Luhmann (). For further analysis of this issue, see (2005, 2008) and Mitra, Pohlmann and Hauck (2019). 18 One can argue, hypothetically, that the higher the credibility of sanctions against noncompliance, the higher would be the expectation of governance. However, force alone cannot be a long-term solution. No state can have as many compliance officers as people, and even if it did, who will police the police? Beyond the bureaucratic control over individuals, therefore, there comes yet another parameter of rule which originates in the community in which one lives. In a social context, where individuals face each other daily and can expect to do so over the foreseeable future, their proximity to one another and knowledge of each other might induce them to what Axelrod (1984) calls ‘tit for tat’. People learn to reciprocate like with like. Since there is a tomorrow, the actor sees the incentive in investing in good will and social capital. Thus, following Axelrod, knowledge, proximity, reciprocity and recursiveness of the context where one is embedded can lead egoists to cooperate. People, who instinctively resort to self-help, can learn to understand and abide by social norms. Compliance, in this case, emerges from a combination of regulation and self-regulation. Trust, shared norms and social networks that result from such institutional arrangements enhance governance.

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Fig. 3 A dynamic neo-institutional model of governance and norm innovation in India. Source: authors’ own

States (to which the 74th constitutional amendment added locality as a third layer in 1992). The political leadership in charge which rose from lower levels of the system through elections understood the salience of maintaining colonial rules like the Indian Penal Code (IPC) and Criminal Procedure Code (CRPC) and the paraphernalia of police, secret services and the judiciary. With the stick came the carrot in the form of social and economic legislation and strategic reform that opened up a non-revolutionary, democratic alternative for land-hungry peasants and labour, clamouring for better wages. Universal adult franchise, popular elections and quotas for former untouchables, tribal communities, backward castes and women became the main engine of empowerment, enfranchisement and entitlement in the post-colonial democracy. The ballot became an engine of change. This, in a manner of speaking, was the Indian response to the ‘Huntington law’ (1968, p. 55) that predicted that post-colonial democracies ultimately fail when the hiatus of popular expectations exceeds state capacity. The right to vote became the veritable weapons of the weak (Scott 1985) in India. But, the party organisation which links voters to the ballot box in established liberal democracies was not there. Nor was the funding from membership fees or state allocation available for increasingly more expensive campaigns in large constituencies where candidates, without any deep social roots, vied with one another for the vote. This is the gap that the strategic use of campaign cash has filled in. Despite the evidence of the useful illegality of electoral cash for empowerment of the subaltern that we get from anthropological studies, the side-effect of can reinforce crime-politician linkages, and corrode democracy and rule of law. The

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sensational killing of Vikas Dubey, a mafia don from Uttar Pradesh, in North India, with deep political connections, has generated a vigorous debate in India about the crime-politics nexus which leads to the rise of figures like him, and which also gives rise to the so called ‘encounter’ deaths, an euphemism for illegal execution of suspected criminals, by the police. Julio Ribeiro, an experience police office from India, writes: How did Vikas Dubey, a local hoodlum whose territory did not extend beyond a couple of districts in Uttar Pradesh, lose all respect for the police and authority of the state? The answer is not difficult to formulate. All the classical signs of decay of the judicial system, because of the politicisation of the institutions of governance, were long visible to even those outside this system…The criminals offer not only money to fight elections, they also provide muscle power. The temptation to accept their services is so great that most political parties gratefully accept their help. Since they control the appointments and postings, they oblige police officers who seek their intervention. Once the officers are posted through the political route they are obliged to their patron. The politicisation of the force is complete if lobbying plays a role in the appointment of the police chief.19

The Indian political system has come up with measures to generate new norms of electoral behaviour to cope with these negative side-effects of campaign cash. In addition to the vigilant media and pro-active judiciary, the state itself has generated new means of electoral finance such as ‘electoral bonds’ and ‘Model Code of Conduct’ that seek to create a level playing field for competing candidates. Electoral bonds are interest-free banking instruments, which can be bought from specified branches of State Bank of India in multiples of thousand rupees (13.29 US dollars) up to one crore (132.853,73 US-Dollar). These can be bought from the State Bank of India, by Indian citizens and corporations, and have to be redeemed by the political party for whom they are meant. This is meant to bring campaign cash entirely into the banking system.20 Election Commission of India’s Model Code of Conduct is a set of guidelines issued by the Election Commission of India for conduct of political parties and candidates during elections mainly with respect to speeches, polling day, polling booths, portfolios, election manifestos, processions and general conduct. These 19

Julio Ribeiro, “The creation of Vikas Dubey, who flourished all these years because of political and police patronage” Indian Express, July 11, 2020. https://indianexpress.com/article/ opinion/columns/vikas-dubey-kanpur-encounter-up-police-6499829/downloaded on July 12. 20 Anuja, Gireesh Chandra Prasad, “Electoral bonds boon or bane for India’s political funding system?” in Livemint, 4 Dec 2019 https://www.livemint.com/politics/policy/electoral-bondsboon-or-bane-for-india-s-political-funding-system-11575424422379.html. Downloaded on July 14, 2020.

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set of norms has been evolved with the consensus of political parties who have consented to abide by the principles embodied in the said code in its letter and spirit.21 The Model Code of Conduct comes into force immediately on announcement of the election schedule by the commission for the need of ensuring free and fair elections. Its main purpose is to ensure that ruling parties, at the Centre and in the States, do not misuse their position of advantage to gain an unfair edge. Can corrective measures like the transparency act, model code of conduct or for that matter, attempts to regulate campaign contributions strike root in societies that lack deep democratic mindsets, or the collective memory of historical landmarks of democratic turning points? How does the idea of ‘public good’ gain precedence over private interests? Empirical research on illegal campaign financing assumes the existence of a ‘democratic mindset’ where both candidates and voters are guided by constitutional norms of propriety which have found their way into practice by the way of the Right to Information act that empowers citizens to obtain information from the government, and public interest litigations in defence of citizens’ rights. (Jha, 2020) With regard to the regulator’s dilemma, parallels are drawn to the prisoner’s dilemma, where, in the end, everyone is worse-off. The solution to such problems, from a game theoretical perspective, is found in

21

Election Commission of India’s Model Code of Conduct. file:///C:/Users/js3/AppData/ Local/Temp/Election_Commission_of_India’s_Model_Code_of_Conduct.pdf. Downloaded on July 14, 2020. The main points of the code of conduct are: 1. The government may not lay any new ground for projects or public initiatives once the Model Code of Conduct comes into force.2. Government bodies are not to participate in any recruitment process during the electoral process.3. The contesting candidates and their campaigners must respect the home life of their rivals and should not disturb them by holding road shows or demonstrations in front of their houses.4. The election campaign rallies and road shows must not hinder the road traffic.5. Candidates are asked to refrain from distributing liquor to voters. 6. The election code in force hinders the government or ruling party leaders from launching new welfare programs like construction of roads, provision of drinking water facilities etc. or any ribbon-cutting ceremonies.7. The code instructs that public spaces like meeting grounds, helipads, government guesthouses and bungalows should be equally shared among the contesting candidates.8. Candidates should not display their election symbols near and around the poll booths on the polling day. 9. There will be poll observers to whom any complaints can be reported or submitted.10. The ruling party should not use its seat of power for the campaign purposes.11. The ruling party ministers should not make any ad hoc appointment of officials, which may influence the voters to vote in favour of the party in power.12. Before using loud speakers during their poll campaigning, candidates and political parties must obtain permission or license from the local authorities. The candidates should inform the local police for conducting election rallies to enable the police authorities to make required security arrangements.

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Axelrod’s account of the evolution of cooperation among egoists (1984). A solution to the regulator’s dilemma is possible when the players become aware of the cost of indecision (knowledge), regular interaction that makes communication possible (proximity), reciprocity, i.e., tit-for-tat (quick action and counter-action by players) and the threat of durable misery for all concerned. This can help alleviate accountability and compliance. The Indian constitution has moved in this direction by incorporating a set of ‘citizen duties’ (article 51A of the constitution). The parliament has continuously passed binding legislation such as the Representation of the People Act, and empowered the Election Commission and the judiciary, both of which are independent bodies, which enjoy high trust among the citizens of India to act as regulators and watchdog institutions (Mitra, 2017, 2021).

Conclusion: Rethinking Campaign-Cash and Electoral Democracy in Transitional Societies Most democracies have legal norms and agencies (such as the politically independent Election Commission of India, the High Courts and the Supreme Court) that regulate political party financing, both during and outside of election periods as well as campaign financing. Yet, no matter what, deviant practices seem to erupt, or never stop at all. Regulations are—as we have argued in this essay—not sufficient for compliance. Intense political competition further escalates pressure on contesting parties. In countries like India, where legal norms of financial rectitude are comparatively lax, enterprising donors in search of pliable candidates and politicians seeking patrons are quite likely to find methods to work around regulations. Under the heat of ferocious competition, zealous supporters and cash from all directions overwhelm regulation and self-regulation. However, just as democracies cannot condone the supremacy of cash over conviction, so can a democracy hardly forbid all forms of cash contribution, short of cutting at the root of the social basis of electoral democracy. Democracy needs an engaged citizenry, and campaign participation and contribution are the most effective way for ordinary voters to express political support in new democracies. As democracy in India goes, there are no historical landmarks on which to build the edifice of democratic institutions. Equivalents of the journey of the Mayflower and the Boston Tea Party of the American vintage, or comparable English or French precedents such as signing of the Magna Carta or of King Charles the First on the scaffold, beheaded for the temerity to have challenged the power of the British Parliament, nor the Guillotine-infused republicanism of

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a frenzied mass of sans culottes of Paris, drunk on the spirit of ‘liberty, equality, fraternity’ are missing in the Indian case. And yet, one simply needs to look at the political frenzy around each election, and the unseating of parties in power when they fail to get majority approval. Elections are the cutting edge of Indian democracy and campaign cash is the fuel that runs this machine. As the Indian anthropologist Satendra Kumar writes (2020, p. 58): There is an increasingly mutually constitutive relationship between elections and everyday life since both shape each other… [the] exchanges and transactions [between leaders and voters] should not be seen as instances of vote-buying or distribution of money in a simplistic way but should instead be seen as attempts by political leaders to create moral ties of reciprocity…

India’s democratic conceit hangs critically on making popular elections work, get the ‘rational’, strategic, empowered voters to cast their ballots freely, under the watchful eyes of the Supreme Court, the independent Election Commission and the intrusive media, usually on feverish over-drive at election time. Election-cash, as we have seen time and again in reports from the field, does not “buy votes” but helps with the process of “vernacularization of democratic politics”. In a country that still lacks the bureaucratized party-machines, sumptuous public funding of elections and inter-generational party-identification, campaign cash acts in “ways and means in which the values and practices of democracy become embedded in particular cultural and social practices, and in the process becomes entrenched in the consciousness of ordinary people”. (Michelutti, 2007, p. 641)22 Instead of giving into the urban panic at the rural masses—India’s great unwashed—corrupting the electoral process through their vulnerability to campaign cash, or the alleged alterity of Indian voters as compared to their ‘rational’ Western counterparts, we have argued in this essay that the explanation for the prevalence of illegal campaign financing lies in structural factors. It is not India’s cultural proclivity towards corruption which leads the country’s political leaders

22

A host of anthropological studies from India bear this out. (Mitra, 1979; Bjorkman, 2014). Auyero (2000a, b) shows how election cash acts as a ‘gift’ and rather than a one-off purchase of a vote, shades off into the moral economy of the poor. It is this socio-transactional aspect of campaign-cash that has embedded electoral democracy in many transitional societies. Michelutti (2007, p. 641) argues, “In recent years there has been a dramatic rise in support for popular politics and political figures who represent themselves as leaders of the underprivileged and as promoters of pro-poor social policies in countries like Bolivia, Venezuela, Brazil, Argentina, Uruguay and Indonesia.”.

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and voters to engage in so-called cash-for-vote deals.23 The incentive for ‘useful illegality’ comes from a combination of factors such as the absence of inner party democracy and transparency, self-policing by the party organization, and absence of membership fees as a source of finance. These motivate campaign managers and the humble karyakartas—street level campaign workers—to seek other forms of campaign contributions than those permitted by law. Under these conditions, to a certain extent, illegal cash donations, is in fact useful not only to the candidates but also to the voters and does not necessarily lead to the abrogation of democracy. On the contrary, it may even lead to greater participation and public engagement in the democratic process. But of course, there’s always the flipside of the coin, that black money can also be used to influence the voters and to betray the constituency. To what extent the one or the other side of the coin is dominating the field, can neither be measured nor controlled easily. Our task here has just been to highlight the functional side of black money, because this side is often overlooked in the moral condemnation of black money. With regard to cash, campaigns and democracy in India, it is indispensable to differentiate between the normative self-description of a democratic state and its informal rules of how to play the game of winning competitive elections under the constraint of regulatory bodies. While strategic use of campaign cash is frowned upon by the advocates of the formal moral-legal approach to voting, it might very well be widely accepted by the stakeholders as “useful illegality” on the informal side. The challenge for the democratic state in transitional societies is to devise procedures and institutions that balance the one and the other. That is the best way forward for transitional societies to achieve the deepening of democracy, re-structuring of power relations embedded in social hierarchy, and maintain compliance with norms of free and fair competition through its regulatory bodies, all the while hoping for the ‘democratic mind-set’ to emerge, and supplement regulation with self-regulation.

References Alexander, H. E. (2019). Comparative political finance among the democracies. Routledge. Alvarez, R. M., & Hall, T. E. (2006). Controlling democracy: The principal–agent problems in election administration. Policy Studies Journal, 34(4), 491–510. 23

Picherit (2020, p. 93) quotes a faction leader to show that there is no direct linkage between distribution of money and vote: “I give money, but people are free to vote, which control do I have? They smile, they talk softly and once they leave the house, they will go to the other candidate. They are like bastards, but this is the game”.

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Association for Democratic Reform. (2019). Analysis of Sources of Funding of National Parties of India, FY 2017–18. https://adrindia.org/content/analysis-sources-funding-nat ional-parties-india-fy-2017-18. Accessed 26 Aug 2019. Axelrod, R. (1984). The evolution of cooperation. (Revised edn.). Basic Books. Auyero, J. (2000a). Poor people’s politics. Peronist survival networks and the legacy of Evita. Durham: Duke University Press. Auyero, J. (2000b). The logic of clientelism in Argentina: An ethnographic account. Latin American Research Review, 35(3), 55–81. Biswas, S. (2017). Why do Indians vote for ‘criminal’ politicians? In BBC, 16 January 2017. https://www.bbc.com/news/world-asia-india-38607255. Accessed 23 Aug 2019. Bjorkman, L. (2014). ‘You can’t buy a vote’: Meaning of money in a Mumbai election. American Ethnologist, 41(4), 617–634. Buchstein, H. (2016). Typen moderner Demokratietheorien. Überblick und Sortierungsvorschlag. Springer VS. Bussel, J. (2018). Whose Money, Whose Influence? Multi-level Politics and Campaign Finance in India. In D. Kapur & M.Vaishnav (Eds.), Costs of democracy. Political finance in India. (1st edn.) New Delhi, India: Oxford University Press. Casas-Zamora, K., & Zovato, D. (2015). The cost of democracy: Campaign finance regulation in Latin America. Brookings Institution (Latin America Initiative). https://www.brookings.edu/research/the-cost-of-democracy-campaign-finance-reg ulation-in-latin-america/. Accessed 23 Aug 2019. Cole, H. J. (2018). Rethinking principal-agent dynamics and electoral manipulation: Local risks, patronage, and variation in tactic. Coleman, J. (1992). Grundlagen der Sozialtheorie: Bd. 2. Körperschaften und die moderne Gesellschaft. De Gruyter Oldenbourg. Cook, B. J., & Wood, B. D. (1989). Principal-agent models of political control of bureaucracy. American Political Science Review, 83(3), 965–978. Donovan, N. (2019). India is holding one of the world’s largest – and most corrupt – elections. In NewStatesman, 10 May 2019. https://www.newstatesman.com/world/asia/2019/05/ india-holding-one-world-s-largest-and-most-corrupt-elections. Accessed 23 Aug 2019. Downs, A. (1957). An economic theory of political action in a democracy. Journal of Political Economy, 65(2), 135–150. Enos, R. D., & Hersh, E. D. (2015). Party activists as campaign advertisers: The ground campaign as a principal-agent problem. American Political Science Review, 109(2), 252– 278. Fisman, R., Schulz, F., & Wig, V. (2014). The private returns to public office. Journal of Political Economy 122(4). Gottipati, S., & Singh, R. K. (2014). India set to challenge U.S. for Election-Spending Record. Reuters. 9 Mar 2014. Gunlicks, A. B. (2019). Campaign and Party Finance in North America and Western Europe. Hiller, P. (2005). Korruption und Netzwerke. Zeitschrift für Rechtssoziologie, 26(1), 57–77. Inden, R. (1986). Orientalist constructions of India. Modern Asian Studies, 20(3), 401–446. Jha, H. (2020) Capturing institutional change: The Case of the Right to Information Act in India. Oxford University Press. Kapur, D. & Vaishnav, M. (Eds.) (2018). Costs of democracy. Political finance in India. (1st edn.). Oxford University Press.

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Kumar, S. (2020). Uttar Pradesh local elections 2015: Money, muscle and manipulation in a village. Commonwealth and Comparative Politics, 58(1), 43–62. Lal, N. (2018) India’s Criminal Politicians: Why are so many people facing criminal charges still elected to India’s legislative bodies? The Diplomat, 19 Dec 2018. Luhmann, N. (1964). Funktionen und Folgen formaler Organisation. Duncker & Humblot. Luhmann, N. (2000). Die Politik der Gesellschaft. (1. Aufl., [Nachdr.]). Suhrkamp. Martin, N., & Picherit, D. (2020). Special issue: electoral fraud and manipulation in India and Pakistan. Commonwealth and Comparative Politics, 58(1), 1–20. McGann, A. (2016). Voting choice and rational choice. Oxford Research Encyclopedia of Politics. Michelutti, L. (2007). The vernacularization of democracy: Political participation and popular politics in North India. Journal of the Royal Anthropological Institute (N.S.), 13, 639–656. Mitra, S. (1979). Ballot box and local power: Elections in an Indian Village. Journal of Commonwealth and Comparative Politics, 17(3), 282–299. Mitra, S. K. (2017). Politics in India. (2nd ed.). Taylor and Francis. Mitra, S. K. (2021, forthcoming). Governance by stealth: The Ministry of Home Affairs and the making of the Indian state. Oxford University Press. Picherit, D. (2020). ‘Elections will not change anything. But they can change my life’. Manipulation of the electoral process and self-making of small politicians in Andhra Pradesh. Commonwealth and Comparative Politics, 58(1), 82–99. Scarrow, S. E. (2007). Political finance in comparative perspective. Annual Review of Political Science, 10(1), 193–210. https://doi.org/10.1146/annurev.polisci.10.080505.100115. Sharma, R. (2019). No country for strongmen: How India’s Democracy constrains Modi. Foreign Affairs. https://www.foreignaffairs.com/articles/india/2019-02-12/no-country-str ongmen. Accessed 23 Aug 2019. Sheth, N. (2009). Corruption mars image of change in India Elections’. Wall Street Journal, 9 April 2009. Sigman, R. (2015). Which jobs for which boys? Party financing, patronage and state capacity in African democracies (Dissertations - ALL, 325). Stevens, J. B. (2018). The economics of collective choice. Routledge. Subramanian, N., & Venkataramakrishnan, R. (2019). The Election Fix: Despite note ban, cash is all over India’s elections – but can votes be bought? In Scroll.in, 7 April 2019. https://scroll.in/article/919108/the-election-fix-despite-note-ban-cash-is-allover-indias-elections-but-can-votes-be-bought. Accessed 23 Aug 2019. The Times of India. (2019). This story is from May 20, 2019 at 67.11%, 2019 LS poll turnout highest so far. In The Times of India, 20 May 2019. https://timesofindia.indiatimes.com/india/at-67-11-2019-turnout-highest-for-loksabha-elections/articleshow/69415584.cms. Accessed 23 Aug 2019. U.S. Federal Election Commission. (19 April 2013). FEC Summarizes Campaign Activity of the 2011–2012 Election Cycle. https://www.fec.gov/updates/fec-summarizes-campaignactivity-of-the-2011-2012-election-cycle/. Accessed 23 Aug 2019. Ufen, A. (2017). Political Finance and Corruption in Southeast Asia: Causes and Challenges. In C. Rowley & M. dela Rama (Eds.). The Changing Face of Corruption in the Asia Pacific: Current Perspectives and Future Challenges. Place of publication not identified, s.l. (pp. 23–33). Elsevier Ltd.

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Vaishnav, M. (2017). When crime pays: Money and muscle in Indian Politics. Yale: Yale University Press. Weiß, A. (2016). Left after Luhmann? Emanzipatorische Potenziale in Luhmanns Systemtheorie und ihre Anwendung in der Demokratietheorie. In M. Haus & S. de La Rosa (Eds.). Politische Theorie und Gesellschaftstheorie. Zwischen Erneuerung und Ernüchterung (1. Aufl.). Baden-Baden: Nomos (Schriftenreihe der Sektion Politische Theorie und Ideengeschichte in der Deutschen Vereinigung für Politische Wissenschaft, Bd. 32).

Subrata Mitra, Ph.D. (Rochester), is emeritus professor of Political Science at Heidelberg University. His areas of research include South Asian and Comparative Politics, rational choice, research methodology,governance, citizenship, negotiation and political theory. His books include Kautilya’s Arthashastra: An Intellectual Biography – the Classical Roots of Modern Politics in India (2017), Citizenship and the Flow of Ideas (2012), Reuse: The Art and Politics of Integration and Anxiety (2012), Politics in India: Structure, Process, Policy (London: Routledge, 2017, second edition), When Rebels become Stakeholders (2009), the Puzzle of India’s Governance (2005). Professor Mitra edits the Routledge Advances in South Asian Studies and Modern South Asian Studies; and, ‘Society, Politics, Economy’, NOMOS (Baden Baden, Germany). His ‘Governance by Stealth: the Ministry of Home Affairs and the Making of the Indian State’ will appear from Oxford University Press in 2021. Markus Pohlmann is full professor of Sociology at Max-Weber-Institute of Heidelberg University and currently Fellow of the Marsilius Center for Advanced Studies. Prior to his current position, he was Professor at the Friedrich-Alexander-University in Erlangen, and Research Director of the ISO-Institute in Saarbrucken, Germany. His research areas span organizational sociology, the sociology of management, and economic sociology. Currently, he leads the research groups for Organizational Deviance Studies and International Management Studies.

Democracy, Electoral Process and Campaign Expenditure in India: A Study of Election Campaign Expenditure in Chevella Parliamentary Constituency, Telangana State K C Suri

The Context and the Problem It is now common knowledge in India that the politicians who are serious contenders in elections, spend huge amounts of money far exceeding the limits imposed by law. Political observers and governance activists are alarmed that this growing role of money and criminality in elections vitiates the electoral process, undermines the efficacy of the representative institutions and as such erodes democratic accountability (Kitschelt & Steven, 2007; Vaishnav, 2017). But the question is why do politicians spend money in elections several times to the legally permitted levels? Where does the election fund for candidates come from and where does it go? Why do candidates overspend and underreport their actual expenditure? Would money ensure a win for a candidate in an election? These are some of the questions this chapter seeks to address at a constituency level while viewing these questions in the light of prevailing knowledge in the social sciences about Indian democracy, and how it works. But first let us see the nature of the problem as presented in official reports and court judgements and reports of civil society organizations. Issuing detailed instructions on election expenditure monitoring, the Chief Election Commissioner K. C. Suri (B) Department of Political Science, School of Social Sciences, University of Hyderabad, Gachibowli, India E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_3

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of India, who is entrusted with the task of conducting elections, says: “The unabashed misuse of money power to influence voters has undermined the integrity of the democratic process” (ECI, 2019a). This “adversely affects the level playing field for political parties and candidates,” says another member of the Election Commission (Ibid). The Law Commission of India, an advisory body of legal experts in the Ministry of Law and Justice, says that money from illegitimate sources results in undisguised bullying and unduly influencing the voters. “It is now well established that money plays a big role in politics…. Currency notes come first in containers, then in truckloads, moving to wholesale/small retail forms, and finally to suitcases and in people’s pockets.” Government of India (GoI), 2015. The National Commission to review the working of the Indian Constitution (NCRWC) was of the view that “money power” is one of the most critical problems facing the Indian electoral system. It says: As against the limits prescribed by our electoral laws, the campaign expenditure by candidates is in the range of about twenty to thirty times the said limits. As a result, contesting elections is becoming a very costly affair, which keeps many good candidates out and it also creates a high degree of compulsion for corruption in the political arena. This has progressively polluted our entire system. Corruption, because it erodes performance, becomes one of the leading reasons for non-performance and compromised governance in the country. The sources of some of the election funds are believed to be unaccounted criminal money in return for protection, unaccounted funds from business groups who expect a high return on this investment, kickbacks or commissions on contracts etc. No matter how we look at it, citizens are directly affected by it because apart from compromised governance, the huge money spent on elections pushes up the cost of everything in the country…. In the ultimate analysis, the reality seems to be that political parties and serious contenders have a single point agenda “to win” and then to remain in power. Everything else, whether issues of good governance or even long-term national interest, comes second. Once we accept this, we realize that political parties as well as candidates will take all those actions that contribute to this objective. Both political parties and political candidates, in order to win, will do all they can and all that the system will permit them to do. Political parties and candidates have found that by spending money on intermediaries to buy votes, by distributing liquor and other goodies, by directly bribing officials, and by patronizing, through the spending of money, most rowdies and “goondas” of the locality, their chances to win become better. This is what has become the norm therefore. They do this, however, because the system, directly or indirectly, permits them to collect a far greater sum of money if they win the election. Therefore, the money spent on elections is like a mandatory investment. In the eventual analysis, costs can only be controlled if we control the way in which politicians can generate

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money through corrupt means once they are in power. If this is not entirely possible within the current scenario, then whatever rules and regulations we bring about can only have a limited influence toward achievement of this objective. (NCRWC, 2015, pp. 14.1–14.3)

The Supreme Court of India, too, came down heavily on the detrimental role that money power plays in India’s elections. In the famous Ashok Shankarrao Chavan vs Madhavrao Kinhalkar and Others,1 the Supreme Court judges lamented that voters are willing to sell their votes for a few hundred rupees, candidates are taking advantage of the weakness of voters and exploiting them to the maximum, and parties are willing to give party tickets to highest bidders. They observed: “It is hard reality that if one is prepared to expend money to unimaginable limits only then can he be preferred to be nominated as a candidate for such membership (in parliament or State legislature) as against the credentials of genuine and deserving candidates.” (Supreme Court of India, 2014). After analyzing the affidavits2 on assets and liabilities of the members of the 17th Lok Sabha (House of the People) elected in May 2019, Association for Democratic Reforms, a public interest group committed to improve governance and strengthen democracy by working in the area of electoral and political reform, reported that 88 percent of elected representatives at the federal legislature are crorepatis (multimillionaires). The report says that the proportion of multimillionaires among the members of parliament has been increasing over the years, from 58 per cent in 2009 to 82 per cent in 2014 to 88 per cent in 2019. In this phenomenon, there is no significant difference between the ruling party and the opposition or between opposition parties or across the States. Although an amount of one crore rupees (ten million) is not a huge amount these days, there 1

In its judgement, the Supreme Court upheld the power of the Election Commission to inquire into complaints of “paid news”, that is, election campaign advertisements carried by newspapers as news reports, and disqualify candidates if expenditure on these ads were not reported as part of a candidate’s election spending. Ashok Chavan was, a powerful politician in the State of Maharashtra who was twice its Chief Minister and the President of the Maharashtra Provincial Congress Committee, was accused of resorting to paid news in his election campaign in the Maharashtra Legislative Assembly elections held in 2009. He won that election and went on to become the Chief Minister of the State later. 2 While filing nomination, every candidate contesting elections to legislatures at the State and federal levels in India have to file an affidavit before the Returning Officer appointed by the Election Commission. In The affidavit, a candidate has to declare his personal information, including education, occupation, criminal cases pending and convictions, if any, and assets possessed by one’s own self and family members. These affidavits are made public soon after they are filed. The purpose is to allow public to make evaluations of candidates based on personal information.

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seems to be some merit in what the Association for Democratic Reform (ADR) says about the increased presence of rich people in the electoral arena and their presence in legislatures. Table 1 gives the percentage of multimillionaires among members of the 17th Lok Sabha elected in May 2019. If we consider an asset value of Rs 5 crore (Rs 50 million) and more as an indication of belonging to the rich class, about half of the members of the Lok Sabha fall in this category. At the time of 2019 Lok Sabha election, the average asset value of the Bharatiya Janata Party (BJP) legislators was Rs 145.2 million (roughly e 1.78 million).3 It is much higher at Rs 387.1 million (roughly e 4.73 million) for the members of the Congress party (ADR, 2019). Neelanjan Sircar (2018) investigates the role of personal wealth in elections to the national legislature (Lok Sabha) over three elections between 2004 and 2014. He shows that competitive parties (that is, those parties that can conceivably win in a constituency) systematically select wealthy candidates who can spend money in elections. A candidate’s personal wealth, measured in terms of movable assets, has a significant positive impact on the candidate’s electoral fortunes. The wealthiest candidate has a greater probability of winning the constituency (Sircar, 2018, pp. 37–38). The ADR report (2019) on the financial background of the candidates too says that the winning chance for a millionaire is several times to that of a candidate who is not a millionaire. Reports on election expenditure in India show that it has increased by leaps and bounds in recent years. An estimate of election expenditure made by Centre for Media Studies estimates that, on an average, nearly a billion rupees get spent per Lok Sabha constituency by the candidates, set up by the leading parties in the area, who entertain a hope or stand a chance to win the election (CMS, 2019, p. 9). The legally permitted upper limit for election expenditure in parliamentary constituencies is Rs. 7 million. Some conservative estimates put the figure in the range of Rs 400–500 million which is still 60 to 70 times to the legally permitted maximum expenditure levels. The growth of this phenomenon is often attributed to the politicians’ craving for power, prestige and wealth at any cost or to voters’ readiness to exchange their vote for individual benefits. While such observations may be valid, they do not fully explain underlying reasons for this phenomenon and its variation across States and levels of elections. The voter per capita expenditure tends to be more at the local and State levels than in the Lok Sabha. It also varies across States. It is more in the southern States of Tamil Nadu, Karnataka, Andhra, and Telangana and Maharashtra in the west. It is low in the eastern States of Odisha, Bengal, Assam and the strong hold of the Left 3

1 Euro equals to nearly 82 Rupees.

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53

Table 1 Party-wise percentage of multi-millionaires (a minimum asset value of Rs 10 million) S.No

Party Name

Number of Winners analyzed

No

%

Average Asset value (Rs in millions)

1

Bharatiya Janata Party

301

265

88

145.2

2

Indian National Congress

51

43

84

387.1

3

Dravida Munnetra Kazhagam

23

22

96

245.1

4

All India Trinamool Congress

22

20

91

61.5

5

YSR Congress Party

22

19

86

548.6

6

Shiv Sena

18

18

100

129.8

7

Janata Dal (United) 16

15

94

42.1

8

Bahujan Samaj Party

10

10

100

340.9

9

Telangana Rashtra Samithi

9

9

100

599.9

10

Biju Janata Dal

12

8

67

119.7

11

Lok Janshakti Party 6

6

100

120.4

12

Samajwadi Party

5

5

100

139.7

13

Nationalist Congress Party

5

4

80

715.5

14

J&K National Conference

3

3

100

269.0

15

Telugu Desam Party

3

3

100

1327.5

16

Communist Party of India (M)

3

2

67

12.5

17

All India Majlis-e-Ittehadul Muslimeen

2

2

100

104.3

18

Apna Dal (Soney Lal)

2

2

100

25.0 (continued)

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K. C. Suri

Table 1 (continued) S.No

Party Name

Number of Winners analyzed

No

%

Average Asset value (Rs in millions)

18

Indian Union Muslim League

3

2

67

141.9

20

Shiromani Akali Dal

2

2

100

2180.0

21

NPF

1

1

100

13.7

22

Janata Dal (S)

1

1

100

97.9

23

AJSU Party

1

1

100

13.5

24

NPP

1

1

100

29.4

25

Revolutionary Socialist Party

1

1

100

17.5

26

Aam Aadmi Party

1

1

100

16.4

27

Independent

4

3

75

212.3

Source: ADR (Association for Democratic Reforms) (2019). Report of Criminal and Financial Background Details of Winners in Lok Sabha, 2019 Elections. https://adrindia.org/content/lok-sabha-elections-2019-analysis-criminal-background-fin ancial-education-gender-and-other

parties in the South, the State of Kerala. It is interesting to note that election expenditure is more in States that record relatively high economic growth rates, States in which a new entrepreneurial class has grown among the middle segment of society, and known for high levels of corruption and what is generally termed “crony capitalism”. Broadly speaking, we have two theories of Indian politics dominating the scholarship in the west at present, especially among scholars in the USA. One is that Indians vote according to their caste or ethnic identity. A second one says that Indian politics is clientelistic which means that the relationship between politicians and citizens is mainly transactional: voters exchange their votes for money or individual benefits offered by politicians. Each contradicts the other, because if a voter goes by ethnic identity, monetary incentive becomes either irrelevant or secondary. If she goes by monetary incentive, vote on the basis of ethnic identity or solidarity becomes irrelevant to analysis. Although each of these theories helps us to understand the epiphenomenon of Indian politics, they are of only a limited value, if not flawed, to explain the underlying reasons and processes.

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Several studies have established that the scholarly and journalistic accounts of vote buying are either exaggerated, misleading, or have no basis in empirical reality (Bjorkman, 2014; Bjorkman & Witsoe, 2018; Chauchard, 2016, 2018; Chhibber & Verma, 2018). Chauchard (2018) suggests that election campaigns are getting more expensive not only because politicians distribute gifts and money to voters, but also because “they are getting bigger, more ambitious, more sophisticated, more professional and more competitive” (Chauchard, 2018, p. 229). Lisa Bjorkman (2014) tells us that distribution of money in elections cannot buy votes, but it plays multiple roles—pays for a variety of campaign-related expenses, generates enduring networks of trust, sociality and accountability, and signals access to powerful networks of knowledge, resources and authority. According to her, highly visible spectacles of election-season cash expenditure generate intense speculation and political alignments in the run-up to the election-day (Bjorkman, 2014, pp. 618–619). Chhibber and Verma (2018) argue that the claims of politicians buying votes with money has very little empirical basis. Candidates spend huge amounts to signal their credibility, resources and power, as a supplement in the absence of a party organization and committed volunteers to mobilize votes and to carry out campaign with paid workers in the short span of time allowed by the Election Commission (Chhibber & Verma, 2018, pp.123–124). On the lines of the study conducted by Simon Chauchard and Lisa Bjorkman in Mumbai or by Chhibber and Verma in Chennai, we need a closer scrutiny of the phenomenon at the local level, the theatre of democratic politics. Sweeping generalities about election expenditure may be attractive and may indeed fascinate us. But they could be misleading and do not help us to comprehend the reality well. There seems to be several systemic factors that explain high expenditure in elections and its variation across levels, States and constituencies to which we should turn our attention. We should also guard ourselves from imagining all Indian politicians as a crooked lot completely immersed in aggrandizing their own interests at the cost of public good or people as vote sellers even as we recognize the challenges that Indian democracy faces. An alarmist view of the working of Indian democracy and calls for more stringent legislation may all sound good but do not address the core issues such as why has election campaign expenditure saw a phenomenal increase in recent decades, why do wealthy persons seek and secure party tickets and willing to spend huge amounts of funds to win election, do voters prefer candidates who splurge money over others who don’t, does campaign money come from business persons and corporate houses or do candidates largely self-finance their campaign, and what extent money can trump the citizens’ larger concerns of governance, welfare and development as well as ethnic and other considerations of voting. The situation with regard to election campaign

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K. C. Suri

expenditure is more complex than what we imagine it to be: as a simple affair of nefarious elements splurge their ill-gotten wealth to buy party tickets, offer momentary monetary inducements to voters through organized support networks, and bamboozle the electorate by organizing shows and conducting propaganda with their money power. It is with this view a micro-study of election expenditure at the constituency level is undertaken for this paper. I hope it would enable us to take a different view from what we get looking at the situation at all-India level. In the following pages I present an account of election campaign expenditure in Chevella parliamentary constituency in the State of Telangana, India. The paper is organized in four sections. The first section provides a descriptive account of the Chevella parliamentary constituency. The social, economic and political background of the candidates contesting elections is given in the second part. The third section discusses the election campaign expenditure of different candidates. The last section presents concluding observations.

The electoral landscape of Chevella parliamentary constituency Chevella is one of the 17 Lok Sabha constituencies in the State of Telangana, out of a total of 543 for the entire country. One member from each constituency is elected to the Lok Sabha on the basis of first-past-the-post (FPTP) voting (Figs. 1, 2 and 3). This constituency is named after a small suburb town called Chevella, which is part of Hyderabad Metropolitan Authority. It was formed in 2008 after a national delimitation exercise redrawing the electoral district boundaries. Since then, the electorate of Chevella went to polls three times—in 2009, 2014 and 2019. In Fig. 1 Map of Chevella parliamentary constituency

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57

Fig. 2 Chevella Lok Sabha constituency—Seven Assembly segments

Fig. 3 Chevella Lok Sabha constituency in Telangana State: Telangana State map Source: Maps of India, https://www.mapsofindia. com/maps/telangana/distri cts/

2019, it went to polls in phase I of the election held on 11 April. The voter turnout was relatively low, at 53.23 per cent, compared to 62.71 per cent for the State of Telangana and 66.84 per cent for India. Chevella constituency is vast in size. The total number of electors in the constituency in the latest 17th Lok Sabha election held in 2019 was 2.44 million. It is on the high side of the national average of 1.65 million voters per constituency. Just to put the size of the constituency in perspective, the electorate of Chevella is larger than the entire State electorate of Brandenburg (2,094,455 in

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2016) or Saxony-Anhalt or Thuringia in Germany. As such, it is just not possible for candidates contesting polls to visit all localities in the constituency, let alone meet voters individually or conduct a house to house campaign. They have to rely for publicity holding large scale meetings, organizing ‘road shows’ and putting out advertisements in the mass media which all involve considerable amounts of money. The Election Commission of India has set a maximum limit on the amount that a candidate can incur to meet his campaign requirements in the constituency. It is Rs 7 million (about US$ 93,000) in large States such as Telangana and Rs 5 million (about US$ 67,000) in smaller States. For Chevella constituency, this works out to less than 3 rupees (US$ 0.04) per person. The ceiling set by the Election Commission of India is barely sufficient to meet campaign expenditure requirements of the major candidates in the given circumstances. As a result, candidates report expenditure much below that what they have actually spent. The constituency is very diverse in composition in terms of rural and urban population, caste and religious groups, and people speaking different languages. It consists of highly urban, semi-urban and fully rural segments spread over two administrative districts of Ranga Reddy and Vikarabad (see Constituency map at the end of the paper). Like any other Lok Sabha constituency in the State of Telangana, it consists of seven Legislative Assembly segments (See Table 2 for details). Three of them—Malleswaram, Rajendra Nagar, and Serilingampally in Ranga Reddy district—are completely urban and form part of Hyderabad city. Serilingampally is the hub of Information Technology, multinational companies and home for upper and middle classes. Chevella segment is semi-urban joining the rural hinterland with Hyderabad city dotted with educational institutions. Table 2 Details of the Chevella parliamentary constituency—Seven Assembly segments and their respective electorate strength

Name of the Assembly Segment District Maheswaram

Voters

Ranga Reddy 4,50,025

Rajendra Nagar

Ranga Reddy 4,63,156

Sesrilingampally

Ranga Reddy 6,17,216

Chevella (SC)

Ranga Reddy 2,35,114

Parigi

Vikarabad

2,43,522

Vikarabad (SC)

Vikarabad

2,19,767

Tandur

Vikarabad

2,14,312

Total registered voters

24,43,112

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Parigi, Vikarabad and Tandur are in Vikarabad district. These three Assembly segments are primarily rural and represent some of the economically underdeveloped areas of the State. The constituency has an estimated Backward Caste population of 50 per cent, Scheduled Caste population of 15 per cent and Scheduled Tribes population of 6 per cent.4 Of the seven Assembly constituencies, Chevella and Vikarabad are reserved for the Scheduled Caste candidates. Muslims are in sizeable number, more than the State average of 12 per cent, constituting more than a majority in the Assembly segment of Rajendra Nagar in Hyderabad city. Telugu is spoken by majority of people. But Kannada, Marathi, and Urdu-speaking population are in considerable number who together constitute a fourth of the electorate. The estimated literacy level of Chevella is 70 per cent. The social diversity of the constituency seems to have played an important role in determining the final electoral outcome in 2019. According to one account the victory of the Telangana Rashtra Samiti (TRS) candidate became possible because of its candidate got a big margin in one of the seven Assembly segments, Rajendra Nagar. Ranjit Reddy won the Chevella constituency with an overall majority of 14,317 votes. But he secured a lead of 26,680 votes in Rajendra Nagar, setting off the deficit he had in all other Assembly segments. Congress leaders suspect that the Muslim voters have voted in large number to the TRS, which had an electoral alliance with the party that claims itself representing the Muslims of Hyderabad, the All India Majlis-e-Ittehad-ul Muslimeen (AIMIM). So, it is not so much the popularity of the winning candidate or that of the party’s supreme leader or vote buying or the performance of the incumbent party in terms of managing the economy or delivering governance, but the weight of the Muslim vote that tilted scales in favour of the TRS candidate. Chevella has seen high political competition in recent elections. Indian National Congress (INC), Telangana Rashtra Samiti (TRS) and the Telugu Desam Party (TDP) have been strong in the constituency.5 Of late, the Bharatiya Janata Party (BJP) has gained strength. The Effective Number of Parties (ENP) in the constituency in 2009 was 3.31 which went up to 3.88 in 2014 and with the decline of the TDP and other small parties by 2019 it came down to 2.90. After the bifurcation 4

https://www.news18.com/lok-sabha-elections-2019/telangana/chevella-election-result-s29 p10/ 5 TDP and TRS are both regional parties. TDP was founded in 1982 and ruled the State of Andhra Pradesh, in which Telangana region was a part until 2014. TRS was formed in 2001, campaigned for separate statehood for the Telangana region and came to power in the separate State of Telangana when it was carved out of Andhra Pradesh in 2014. It returned to power again after the Assembly elections held in December 2018.

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of the State in 2014, the TDP has declined and almost faded away by the time of 2019 elections. Looking at the margins with which the seat was won in the last three elections to the Lok Sabha we notice that this is a seat that could go in favour of any candidate from the major parties contesting election. In 2009, S. Jaipal Reddy, a nationally prominent leader of the INC, won the seat by defeating the TDP candidate by a margin of 18,532 votes which was 1.70 per cent of total votes polled. INC had a vote share of 38.73 per cent in the constituency. In the 2014 Lok Sabha election, Konda Vishweshwara Reddy of the TRS won the seat by defeating the nearest candidate by a margin of 73,023 votes which account for 5.52 per cent of the total votes polled in the constituency. TRS had a vote share of 31.45 per cent against INC’s 27.4 per cent followed closely by the TDP with 26.71 per cent. In 2019, Ranjit Reddy of the TRS, has defeated his rival Konda Vishweshwara Reddy of the INC by a margin of 14,317 votes which was 1.10 per cent of the total votes polled. TRS had a vote share of 40.62 per cent while the losing INC polled 39.52 per cent votes (see Table 3). The winning margins are so narrow, every vote becomes crucial in a situation in which a candidate who wins largest number of votes in the constituency without any requirement to meet a certain quota or a majority of votes wins the election. The political competition in the constituency was so close in 2019 that there was a see-saw motion between the two principal contenders on the counting day. Counting of votes in Chevella constituency was done in 43 ‘rounds.’ Counting of votes for each Assembly segment of the parliamentary constituency is done in a separate hall. Each counting hall has 14 counting tables. After votes recorded in each of the Electronic Voting Machines (EVM) placed on a table are counted, a tabulation of all 14 EVMs was done, and the Returning Officer announced the result of that round of counting. Vishweshwara Reddy of INC was leading till the end of 28 rounds, although the leads were slender in each round. His rival, Ranjit picked up from the 29th round. In the morning, as the results of counting began to emerge, the local activists and workers of the INC in towns and villages began celebrating the impending victory of their candidate. But by afternoon, it was the turn of the TRS activists and supporters to have a last laugh and celebrate the victory of the TRS candidate. A fourth aspect is the dynamic political situation that prevails at the constituency level. For the past few decades, there has been a constant flux in the party domain in Telangana. Several new parties have emerged, including the TRS which grew in strength and came to power in 2014; some old parties declined while some others such as the BJP gained strength. We also see a phenomenon in which leaders are not firmly attached to parties. Some of them change parties during and in

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Table 3 Party competition in Chevella: Votes (in percentage) by major parties in the Lok Sabha elections, 2009, 2014 and 2019 Party name

2009

2014

2019

Indian National Congress

38.78

27.38

39.52

Telangana Rashtra Samiti

**

32.90

40.62

Bharatiya Janata Party

10.39

##

15.53

Telugu Desam Party

37.08

26.71

@@

Other parties

10.05

10.23

2.01

Independents

3.70

2.02

1.61

None of the above (NOTA)

&&

0.76

0.71

Total valid votes polled

1,085,000

1,315,862

1,300,194

Voter turnout

64.61

60.51

53.23

Effective Number of Parties

3.31

3.88

2.90

Difference between winner and loser

1.70

5.52

1.10

Note: Winning party is shown in bold font in the table ** TRS did not contest. Had an alliance with the TDP ## BJP did not contest. Had alliance with the TDP @@ TDP not contest. Ceased to be a major force in the constituency, supported the INC && NOTA ballot option was not there in this election Source: Compiled from Election Commission of India data on past parliamentary election results. https://eci.gov.in/general-election/general-election/

between elections depending on the electoral prospects of the party and their own prospects of being nominated as party candidates. For instance, Jitender Reddy, who contested as TDP candidate in Chevella in 2009 and polled 37 per cent of votes later left the party and joined the TRS. In 2019, he joined the BJP as he was denied party ticket in the TRS. In 2014, Konda Vishweshwara Reddy, who belongs to a traditional INC family but joined the TRS before the 2014 elections to become its candidate, won the election in the constituency by defeating his nearest rival, Kartik Reddy of the INC. But as the 2019 election approached, the TRS Member of Parliament got estranged from the party’s supreme leader, Chandrasekhara Rao, and left the party to join the INC. As Konda joined the INC, his rival Kartik Reddy joined the TRS. Soon after he had switched to the INC, Konda became its candidate in the 2019 election. Thus, the same person stood as a candidate of two principal rival parties in successive elections from the same constituency, first time in 2014 as TRS candidate and defeated the INC, and second time in 2019 stood as INC candidate to be defeated by the TRS. TDP

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K. C. Suri

was very strong in the constituency as was evident in the vote it received in 2009 and 2014 elections. But it had evaporated in the matter of three to four years after the State was bifurcated in 2014 and with the creation of the new State of Telangana. BJP has been a third party for a long time. Riding on the popularity wave of its leader Narendra Modi and growing electoral tide in party’s favour in general across the country, the BJP in 2019 has been able to consolidate on its strength. The unstable party alliances have also contributed to the fluid situation and the electoral outcomes in the constituency. TDP and TRS had an alliance n 2009 elections. But soon they turned into bitter foes. In 2014, TDP and BJP had electoral understanding. The BJP did not put up a candidate here and supported the TDP candidate. But they fell out with each other by 2019 election. All this means that candidates have to exert on their own to win the seat by not leaving any stone unturned. Another aspect of relevance in understanding high campaign expenditure in the constituency is the high electoral volatility and a large proportion of floating voters, which means higher unpredictability of voting decisions. Along with the changing party competition, and perhaps partly because of it, we see a large movement of voters from one party to another, from one election to the next election. India’s political life is full of contradictions: party memberships are high, but party attachments are very weak. Sometimes, parties do not get as many votes as there are members, if we go by the claims of party leaders. Electoral volatility at the all-India level is 11.69. For the Telangana State it was 22.10 (see Table 4). Nowadays, a third of the electorate decides on the day of polling or a day or two before the polling day (NES 2019). While this situation can be partly attributed to the rise of sophistication and autonomy of voters, we may note that the party attachment thesis does not apply in full even before. Even the traditional voters of a party do not mind shifting their candidate preferences either due to the decline of their party, or the party fielding a candidate not to their liking, or because of the availability of a better alternative. But this has serious implications to campaign expenditure. In a situation where voters are willing to move from one camp to the other or they remain free floating for quite some time before the actual day Table 4 Electoral volatility in Lok Sabha elections: 2009–2019

State name

2009–2014

2014–2019

All India

23.37

11.69

Telangana

31.30

22.10

Chevella

33.46

35.33

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Table 5a Social background of the candidates Name of the Candidate

Party

Age

Education

Occupation

Dr Gaddam Ranjit Reddy

TRS

54

Master’s in Veterinary Sciences

Business

Konda Vishweshwar Reddy

INC

59

MS in Electrical Engineering

Business

B. Janardhan Reddy

BJP

58

Graduation in Mechanical Engineering

Business#

Table 5b Income and assets of the candidates Name of the Candidate

Party Annual Income Assets (in Rs) (in Rs)$ Movable (2017–18) assets

Immovable assets

Total assets

957,660,000

1,642,684,673

Ranjit Reddy TRS

168,234,433

685,024,673

Vishweshwar INC Reddy

10,564,750

8,586,617,013 406,360,400

Janardhan Reddy

60,528,820

194,910,405

BJP

8,992,977,413&

1,002,400,000 1,197,310,405

Source: Candidate affidavits Election Commission of India. https://affidavit.eci.gov.in/ Notes: $ Income as in Income Tax Returns filed with the Income Tax Department of India. Janardhan Reddy paid only Rs 6,259,210 as income tax in 2013–2014 Financial Year. Ranjit Reddy paid Rs 10,840,350 as income tax in the Financial Year 2013–2014 # Janardhan Reddy claims no occupation or profession in the affidavit. He lives on income from agriculture, rents and interest @ One criminal case (routine in nature) pending against Vishweshwar Reddy for resorting to hunger strike before RDO office, Vikarabad. & Vishweshwar Reddy’s total asset value as declared in his 2014 election affidavit was Rs.5,286,230,210

of polling, competitive candidates become desperate to get those few more votes that see them pass the post.

Candidates: Their Social Background and Financial Strength The contest in Chevella in 2019 was primarily between three candidates: Ranjith Reddy of the TRS, Vishweshwara Reddy of the INC, and Janardhan Reddy of

64

K. C. Suri

Table 6 Votes polled and election campaign expenditure of party and independent candidates: Chevella Lok Sabha constituency 2019 (Total expenditure in Rs) S.No

Candidate

Party

Expenditure (Rs)

Votes polled

% of Votes

1

G. Ranjith Reddy

Telangana Rashtra Samithi

5,602,868

528,148

40.62

2

Konda Vishweshwar Reddy

Indian National Congress

5,633,896

513,831

39.52

3

B. Janardhan Reddy

Bharatiya Janata Party

4,682,679

201,960

15.53

4

Vijay Aarya

Bahujan Samaj Party

161,903

4860

0.37

5

Giri Kummari

Pyramid Party of India

51,505

859

0.07

6

Korra Pandu Naik

Bahujan Mukti Party

24,435

767

0.06

7

Gurram Papi Reddy

Ambedkar National Congress

102,012

607

0.05

8

Chepuri Raju

Dalita Bahujana Party

20,140

1103

0.08

9

Nalla Prem Kumar

Prem Janata Dal

28,700

1223

0.09

10

Palamakula Madhu

India Praja Bandhu Party

63,168

1114

0.09

11

Baswaiah Madiga

Prajaa Swaraaj 21,500 Party

4179

0.32

12

Bennala Julee

National Women’s Party

26,500

2155

0.17

13

Ragam Sathesh Yadav

All India Forward Bloc

840,028

1458

0.11

14

Ija Venkatesh Goud

Social Justice Party of India

59,000

1523

0.12 (continued)

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65

Table 6 (continued) S.No

Candidate

Party

Expenditure (Rs)

Votes polled

% of Votes

15

Vanam Sudhakar

Marxist Communist Party of India (United)

86,120

6226

0.48

16

A.A. Sabri

Independent

127,080

4514

0.35

17

Anusha Keshavabhatla

Independent

47,512

3860

0.3

18

Yedla Suresh

Independent

17,500

6732

0.52

19

Jaidupally Yadaiah

Independent

22,500

1396

0.11

20

T. Durga Prasad

Independent

55,700

1078

0.08

21

P. Purushotham

Independent

58,500

1805

0.14

22

G. Ravi Kumar Yadav

Independent

27,400

781

0.06

23

Sanem Raju Goud

Independent

79,980

771

None of the Above

– -

9244

NOTA Total votes polled

1,300,194

Total electors

2,442,600

0.06 0.71

Source: Chief Electoral Officer Telangana Election Commission of India Hyderabad 2019 http://www.rangareddy.telangana.gov.in/rangareddy/login.apo?mode=getCommun ications&id=159 Table 7 Source of funds raised by candidate (in Rs) S No

Particulars

1

Vishweshwara Reddy (INC)

Janardhan Reddy (BJP)

Amount of own fund 5,602,868 used for the election campaign

5,608,896

Nil

2

Fund received from the party in cash or cheque etc

Nil

Nil

5,000,000

3

Fund received from any other person or company

Nil

25,000

Nil

5,602,868

5,633,896

5,000,000

Total

Ranjit Reddy (TRS)

Source: Compiled from the “Accounts of election expenditure by the candidates” https://ceo telangana.nic.in/GE_2019/Candidate_Expenditure/index.html

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K. C. Suri

Table 8 Election campaign expenditure of the TRS INC and BJP candidates (in Rupees) S. No

Particulars

1

Vishweshwara Reddy (INC)

Janardhan Reddy (BJP)

a: Expenses in 1,778,267 public meeting rally procession etc

1,430,312

486,535

b: Expenditure in 1,399,419 public meeting with the Star Campaigner(s)

1,132,268

1,382,538

2

Campaign materials 428,760

63,315

123,760

3

Campaign through print and electronic media

435,601

1,451,546

4

Expenditure on 1,139,100 campaign vehicle(s) used by candidate

2,384,433

888,300

5

Expenses of campaign workers / agents

0.00

325,000

6

Any other campaign 396,850 expenditure

25,000

25,000

5,633,896

4,682,679

Total

Ranjit Reddy (TRS)

386,972

73,500

5,602,868

the BJP. Brief profiles of the candidates are presented in the following pages, which would tell us a lot on the nature of party competition, election funding and campaign funding. Engineer-turned-entrepreneur-turned politician, Konda Vishweshwar Reddy (KVR) hails from an influential family in the area with an illustrious political background. His paternal grandfather was Konda Venkata Ranga Reddy, who was a Cabinet Minister in the first government of the Hyderabad State. His house used to be the hub of Hyderabad politics at that time. He served as the Deputy Chief Minister of Andhra Pradesh (1961–1962). The Ranga Reddy district, in which two-thirds of the Chevella constituency falls, is named after him. His uncle, Chenna Reddy, was the Chief Minister of the State of Andhra Pradesh twice during the period 1978 to 1990. His father, Madhava Reddy, was the former Chief Justice of the High Court of Andhra Pradesh (Telangana was part of Andhra Pradesh till 2014) and High Court of Maharashtra. In his election affidavit, Vishweshwar declared family assets worth Rs 8.95 billion, making him

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Table 9 Details of assets of winners from the State of Telangana Sl No

All India rank

Name

1

14

2 3

Constituency

Party Name

Total Assets (Rs million)

Gaddam Chevella Ranjith Reddy

TRS

1642.7

17

B.B.Patil

Zahirabad

TRS

1287.9

19

Kotha Prabhakar Reddy

Medak

TRS

1266.6

4

25

Nama Nageswr Rao

Khammam

TRS

1074.7

5

29

Dharmapuri Arvind

Nizamabad

BJP

876.9

6

94

Anumula Revanth Reddy

Malkajgiri

INC

245.4

7

118

Asaduddin Owaisi

Hyderabad

AIMIM

179.0

8

132

Komatireddy Venakat Reddy

Bhongir

INC

162.5

9

210

Gangapuram Secunderabad Kishan Reddy

BJP

81.4

10

235

Manne Srinivas Reddy

Mahbubnagar

TRS

63.4

11

329

Nalamada Uttam Kumar Reddy

Nalgonda

INC

31.5

12

366

Dayakar Pasnori

Warangal

TRS

24.9

13

395

Kavitha Malothu

Mahabubabad

TRS

19.7

14

420

Venkatesh Netha Borlakunta

Peddapalle

TRS

16.6

15

466

Pothuganti Ramulu

Nagarkurnool

TRS

10.8 (continued)

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Table 9 (continued) Sl No

All India rank

Name

Constituency

Party Name

Total Assets (Rs million)

16

513

Bapu Rao Soyam

Adilabad

BJP

3.1

17

518

Bandi Sanjay Kumar

Karimnagar

BJP

2.3

Source: ADR (Association for Democratic Reforms) (2019). Report of Criminal and Financial Background Details of Winners in Lok Sabha 2019 Elections. https://adrindia.org/content/loksabha-elections-2019-analysis-criminal-background-financial-education-gender-and-other

the second richest politician contesting election in the country and the richest in Telangana. Graduated in Engineering from University of Madras, KVR took his Master’s degree in Electronics from New Jersey Institute of Technology, United States. He worked for some time with the General Electric as the Managing Director of GE Medical Systems Information Technology. He came back to India and started a bio-medical instruments manufacturing unit. Later he started a software developing company, called Citadel Research and Solutions Ltd. He is presently the Managing Director of this unlisted company. Till recently, he was not interested to join politics. He said: “I have earned enough. I have reached the level I wanted to reach. There may be many who have more wealth that what I got. But I am content with the wealth I have earned. I was not at all interested to join politics. My grandfather wanted no one from his family to join politics” (Dil se with Anjali, Interview with Konda Vishweshwara Reddy).6 But the leaders of the TRS, Chandrasekhara Rao, and his son, Rama Rao, had prevailed upon him to join the party to share the responsibility of building a new State after its formation. He eventually joined the TRS in 2013 when the agitation for a separate State was at its peak. He won the Chevella parliament seat in 2014 general election by over a margin of 75,000 votes. But at a time when several opposition Congress leaders left the INC and chose to join the TRS, he, in November 2018, on the eve of Telangana State Assembly election held in December, resigned from the TRS and joined the INC. He says he was disillusioned with the state of affairs in the TRS. According to him, once the party came to power the TRS leaders became arrogant, KCR became autocratic and the party became a family rule like no other. “Nizam’s 6

https://www.youtube.com/watch?v=iNewf4aoT3o.

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rule (the monarch of Hyderabad till 1948) went decades ago. But KCR has turned into a new Nizam and his son KTR is the crown prince”, he said bitterly. “KCR reneged on the very ideology he professed. I became a small man in my own eyes for putting up with it and my self-esteem was affected. I felt that the party was using me as a prop and betraying and fooling the people I was representing in my region. So, I came out,’ he told (M.L. Molly Maitreyi, “CM destroying democracy: says Konda Vishweshwar”, The Hindu, March 30, 2019). One reason for Vishweshwar Reddy leaving the TRS was that he was upset with the TRS leadership for sidelining him and giving more importance to the Transport Minister P. Mahender Reddy, who hails from the same district and someone he dislikes most. Mahender Reddy was with the TDP for a long time, but switched to the TRS just before the 2014 election. Vishweshar never had good relationship with Mahender Reddy. He says: “Mahender Reddy had a criminal background, engaged in grabbing lands and doing goondaism. He sent goondas to attack on WASH (Water, Sanitation, And Hygiene) volunteers.7 When I complained and wanted action against him, KCR and KTR supported Mahender Reddy. I said enough is enough and wanted to come out of TRS” (Dil se with Anjali). Mahender Reddy won 2014 Assembly elections from Tandur constituency, part of Chevella Lok Sabha constituency. But he lost in 2018 Assembly election. Local sources say that Vishweshwar Reddy worked to defeat Mahender Reddy. TRS leaders attacked Vishweshwar Reddy, saying that he uses politics just as a means to further his business interests. They reject his claim that the TRS top leadership never paid heed to his request to fulfil the party’s developmental promises such as irrigation water to the agricultural lands and infrastructure to the rural areas in his constituency. They allege that Vishweshwar never met KCR to discuss developmental works in his constituency. Vishweshwar Reddy sees “politics as business”, says Gattu Ramachandra Rao, official spokesperson of the TRS. “He only sought party help in big land deals to improve his business. When the party turned down these deals, Reddy developed grouse against party leadership”, he said (“Politics just a means to further business for Konda Vishweshwar Reddy: TRS”, in the New Indian Express, 27 November 2018). When sitting Member of Parliament Vishweshwar Reddy left the TRS to join the INC when the parliamentary elections are around the corner, TRS leaders searched for a suitable candidate who can take upon the former in the upcoming election to the Lok Sabha, in case he becomes the INC candidate. Before he moved to the INC, Vishweshwar Reddy met its President Rahul Gandhi. 7

WASH is an NGO funded by Vishweshwar Reddy and engaged in the work of cleaning toilets in schools.

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There were sufficient indications that Vishweshwar Reddy would be fielded as the INC candidate. TRS leaders were firm in their resolve to defeat Vishweshwar Reddy and teach him a lesson. They finally zeroed in on Gaddam Ranjit Reddy (54 years), a big businessman from the same community as that of Vishweshwar Reddy. Ranjit Reddy, like his opponent, is also a professional-turned-businessmanturned-politician. He is the Managing Director of the SR Group, a large business conglomerate based in Hyderabad. He is also the president of Telangana Poultry Breeders’ Association, and this is his sixth term as its president. But, unlike Vishweshwar Reddy, Ranjit Reddy has humble beginnings. He hails from an ordinary farmer’s family from a district town of Warangal, 150 Kms away from Hyderabad. A post-graduate in veterinary sciences from Agricultural University in Hyderabad, Dr Ranjit Reddy began his career as a technical advisor working for poultry farms in and around Hyderabad. After a few years, he turned entrepreneur by setting up his own business firm, SR Hatcheries in 1996. His business has been on a continuous growth curve since its inception. Within a span of 20 years, he has diversified into various other business activities, including manufacturing poultry feed to become SR Group. SR Hatcheries is the largest chicken seller in South India, selling 700,000 kilos of chicken on week days and about 2 million kilos on Sundays and holidays. His Rohini Minerals is the largest poultry feed seller in the country, with a revenue of about Rs 15 billion. SR Group has breeding farms in other countries, such as Uganda and Kenya. People say that he “made chicken to lay golden eggs” for him. In August 2018, the US investment banking firm Goldman Sachs acquired a 60 per cent stake in his Hyderabad-based Rohini Minerals (“Poultry turns a golden goose for Rohini Minerals”, Telangana Today, 9 December 2018). He has further established several educational institutions, including engineering, medical, pharmacy, and management colleges. In terms of financial assets of contesting candidates, Ranjit Reddy ranked 28th in India with a declared total asset value of Rs.1.63 billion. “Konda is a rich candidate. I don’t have that much wealth. But I have a mountain of support from TRS leaders and workers. That gives me strength to fight Konda”, said Ranjit Reddy. People in the constituency humorously termed the fight between the two big businessmen, Ranjit Reddy and Konda Vishweshwar Reddy, as a fight between a ‘Fowl’ (reference to Ranjit Reddy’s poultry business) and a ‘Hill’ (Konda in Telugu means hill). “I have worked hard to develop my business. God is kind to me. Money came my way in a big way. I have earned enough. I am happy and contented. I told this to KCR and told him that now I want to serve people. He has kindly agreed and asked me to stand in election. There are rumours that TRS sold tickets to businessmen. That is not true. I haven’t paid any money to get the ticket. There is

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nothing wrong for a businessman to enter politics. There is nothing wrong for a politician to engage in business. There are not many politicians who do not have business interests these days” (Interview with Chevella MP Ranjit Reddy, Yoyo TV).8 Ranjit Reddy joined the TRS in 2004, but did not hold any key position in the party. He is said to be close to the Cabinet Minister Etela Rajender, and a former Minister and a key leader in the constituency, Mahender Reddy. Mahender Reddy’s name is considered for the seat. But he lost Assembly election a few months ago and the party leadership was not sure if could face Vishweshwar Reddy in view of bitter hostilities between them. Another name considered by the TRS was that of Patlolla Karthik Reddy. He contested 2014 Lok Sabha election as Congress candidate against Vishweshwar Reddy who was the TRS candidate at that time. As Vishweshwar Reddy joined the Congress in November 2018, Karthik Reddy shifted to the TRS. Karthik Reddy is the son of Sabita Indra Reddy who won Chevella Assembly seat in 2018 Telangana Assembly elections but soon after the election switched to the TRS along with her son, Karthik Reddy. She originally belonged to the TDP, but moved to the INC after the split in TDP in 1995. For public consumption she said that she shifted to the TRS to bring development to the constituency by being with the ruling party in the State. But the immediate reason was that Vishweshwar Reddy, who was the sitting TRS MP and their political opponent, joined the INC. Had Karthik Reddy become the TRS candidate, 2019 election could have been a repeat of 2014 election, except that the candidates changed party labels. Since Karthik Reddy expressed his disinclination to fight the election (as he was not sure of TRS victory against Vishweshwar Reddy who was perceived to be a strong candidate and a sure winner and opinion polls showed a Congress victory in the constituency), Ranjit Reddy got the party nomination. Janardhan Reddy was the BJP candidate. There was considerable uncertainty about the BJP candidate for some time before and during the nominations time. Initially, BJP’s former president Kishan Reddy was rumoured to be the party candidate who eventually became a candidate from Secunderabad constituency. Then the name of Jitender Reddy, floor leader of the TRS in the Lok Sabha and sitting MP from Mahbubnagar, made rounds. The speculation was that he might not get the TRS party ticket again from the neighbouring Mahbubnagar and, in that situation, he would prefer to leave the party and join BJP if it agrees to field him from Chevella. He was not new to the BJP nor to Chevella. He was elected to the Lok Sabha from Mahbubnagar on BJP ticket in 1999 and won. In 2009, he contested from Chevella on TDP ticket and lost narrowly to a prominent 8

https://www.youtube.com/watch?v=jjYx1u_f9aU.

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Congress leader, Jaipal Reddy. Once again, he changed party, joined the TRS and won from Mahbubnagar in 2014 on its ticket. Jitender Reddy did finally join the BJP towards the end of March, but with no avail. Janardhan Reddy strongly lobbied for ticket in New Delhi. He may not be someone who is popular with the electorate at the local level, but well-connected with local and higher-level leaders. He is a close relative of BJP’s strongman and former Union Minister of the BJP, Bandaru Dattatreya. His efforts to get party ticket began several months before polls. Finally, the party high command gave him the ticket (Andhra Jyoti, 24 March 2019). Janardhan Reddy had been in politics for the past three decades. A real estate businessman, he hails from Chandrayangutta, an interior part of the old city where the BJP has been in tug of war with the Muslim party MIM. He joined the BJP in 1991. During the years 1991 to 2004, he held the positions of BJP Organizing Secretary and one of its vice-presidents. He was a member of the State Executive Council of the BJP during 2004–2011. Sensing an opportunity in the newly emerging YSR Congress Party, he joined it in 2011 and acted as its Ranga Reddy district president till 2014. After the bifurcation of the State and the disappearance of the YSRCP in Telangana, he once again switched back his loyalties to the BJP. He became one of the State secretaries of the Telangana BJP in 2016. He was the party in-charge in Chevella constituency at the time he got the party ticket for the same constituency. He toured the constituency widely in 2018 and projected himself as a potential candidate. A few aspects are worth noticing when we look at these major or serious contenders for power. All of them belong to the Reddy caste. It is the general practice of all major political parties to field candidates from the same community which is numerically strong and enjoy a relatively better economic position in the constituency. Historically, Reddys have been a major social group in Telangana society and politics. Located at the middle of the traditional (varna) social order (the uppermost crust of the so-called sudra category or the savarna sudras), their traditional occupation was agriculture and, in medieval times, military service. But they could take to English education early in twentieth century, moved into different high-earning occupations and some of them became successful businessmen. For a long time, they held power at the local and State level before and after independence. Secondly, all of them are highly educated and politically well-connected. Vishweshwar Reddy hails from a highly political family. Thirdly, all three of them are very rich. Fourthly, they are all business persons, not of old type of businesses but to the new ones such as Information Technology (Vishweshwar Reddy of the INC), poultry and running professional educational institutions (Ranjit Reddy of TRS) that involve considerable amounts of money,

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and real estate (Janardhan Reddy of the BJP). Tables 5a and 5b provide a comparative view of the three candidates. It is the entry of these new kinds of business persons that changed the electoral landscape and political competition in India, a point about which we will return later in this paper.

Election Campaign Expenditure Election campaign expenditure can be divided broadly into two categories. The first category is the expenditure incurred by political parties. It covers various items such as: financial support to the candidates it has set up, expenses on media advertisements, publicity materials, holding public meetings, and expenses on star campaigners and leaders. There are no limits on individual contributions to parties. Corporate contributions are allowed up to 7.5 per cent of the company net profit in a year. The only condition is that a political party should report in each financial year all contributions above Rs. 20,000 received from any person or company to the Election Commission. There are no limits on the amount a party can spend on election campaign expenditure. Parties are, however, required to submit their statements of election expenditure to the Election Commission within 90 days of completion of Lok Sabha elections. The second category of expenditure is the one incurred by the contesting candidates, which I have mentioned in the beginning of this paper. There is no dearth of laws, rules, regulations and instructions to candidates in regard to election campaign expenditure. The problem is actually an excess of them, especially the umpteen rules and instructions issued by the Election Commission from time to time. The language of the Election Commission, in many of the instructions it issues from time to time, sounds as if tends to view political leaders with suspicion as people trying evade law and regulations. Representation of the People Act of 1951 is the principle legislation that regulates the functioning of political parties, political financing and party and candidate expenditure. Rule 90 of the Conduct of Election Rules, 1961, prescribes the limits of election expenditure for Parliamentary and Assembly constituencies in each State. At present it is Rs 70 lakhs per constituency in large States such as Telangana. It is mandatory for every candidate contesting election to the federal and State legislatures to file an account of election expenditure with the Election Commission of India within 30 days after the declaration of results. This second category of election expenditure, that is the expenditure incurred by a candidate, can again be divided broadly into two categories. The first

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category is the legal and legitimate expenditure allowed under the law of electioneering. This includes expenses on (i) public meetings, rallies and processions, (ii) travel of lead campaigners, (iii) procuring campaign materials, (iv) campaign through print and electronic media including cable networks, internet and social media, (v) on hiring vehicles, and (vi) expenses on campaign workers and agents. The second category of election expenditure is the illegal expenditure that aims to influence voters through offering gifts, allurements, and rewards or any other gratification such as distribution of liquor and money. The Indian Penal Code treats any offer of such gratification to voters for exercising vote, casting vote in a particular way or rewarding a person for having exercised his voting right as bribery and punishable with imprisonment or fine or with both. Obviously, no candidate would report such expenditure. For monitoring election expenditure in each constituency, the Election Commission has put in place an elaborate mechanism. Expenditure observer are appointed by the Commission for each constituency stay there during the entire campaign period. He supervises and guides all the election expenditure monitoring personnel in the constituency, inspects the expenditure register of each candidate from time to time, and coordinates with the law enforcement Departments, various nodal officers and the District Election Officer. He is assisted by Assistant Expenditure Observers, at least one for each Assembly constituency, who are responsible to attend all complaints and reports with respect to each candidate. Further, the Election Commission deploys Video Surveillance Teams to record sensitive events and big public rallies in the constituency. In its enthusiasm to exercise its powers to conduct elections, the Election Commission went to the extent of giving very minute instructions to its personnel on how to track candidate election expenditure. For example, it instructs the Video Surveillance Teams as following: The Video Surveillance Team, at the beginning of the shooting shall record in voice mode the title and the type of event, date, place and the name of the party and candidate organizing the event. It shall videograph the vehicles/event/poster/cut-outs etc. in such a way that the evidence of each vehicle, its make and registration number, items of furniture, size of rostrum, banner and cutout etc. can be clearly seen and the expenses thereon can be calculated. Wherever possible, statements of the drivers and passengers of the vehicles should also be recorded to prove that the vehicles were used for election purpose, if such vehicles are parked outside the venue of rally. During the shooting of the event, the video team shall also record in voice describing the estimated number and types of vehicles, chairs/ furniture/ lights/ loudspeakers etc., the approximate size of rostrum/banner/poster/cutout etc. used in the event. It will then be easier for the Video Viewing Team to cross check with reference to the visuals and estimate the

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expenditure of the event. (Election Commission of India, Compendium of Instructions on Election Expenditure Monitoring, 2019. Nirvachan Sadan, New Delhi)

Representation of the People Act requires every candidate to keep a separate account of all expenditure incurred in connection with the election, between the date on which a candidate is nominated and the date of declaration of the result. In order to facilitate monitoring of election expenditure, each candidate is also required to operate a separate bank account exclusively for the purpose of election expenditure. All money to be spent on electioneering shall be deposited in this bank account irrespective of the source of funds and all election expenditure from this account shall be made only by the candidate. Any contribution or donation in excess of Rs 10,000 shall be received by the candidate only by account payee cheque or account transfer. The candidate shall mention the names and addresses of such persons or entities in the statement of election expenditure. A candidate should also maintain his election expenditure in different registers (Day to day accounts register, Cash register, and Bank register), compile all the bills and vouchers in this regard and at the same time he has to get his accounts inspected by the election authorities such as Expenditure Observers. He should lodge a statement of election expenses with the District Election officer (DEO) within thirty days from the date of announcement of the result. Any discrepancy in the account of election expenses or failure to lodge an account of election expenses within the time without a good reason would warrant disqualification from being a member of the legislature. A preliminary analysis of election expenditure would tell us that not all candidates contesting elections spend huge amounts of money. Even those candidates fielded by major parties but do not have much hope of winning the election do not spend money in excess of the limits imposed by the Election Commission. It is waste of money for them. Thus, only the candidates who are serious contenders for power, especially of those parties that hope to win and form government, spend huge amounts to win election in the constituency. For example, in Chevella, the INC and TRS candidates were in that kind of a race to match each other in campaign expenditure. The BJP candidate entertained a distant hope of winning the election, riding on the popularity of Prime Minister Narendra Modi and did not spend much money from his pocket. Of the 12 other candidates fielded by various other parties, only the candidate of the All India Forward Bloc spent a significant amount (see Table 6). Candidates, parties, and supporters are all rational enough not to squander their money when there is no hope of winning. A second important point to note is that both the candidates (the winner and the runner-up who came very close second) seriously fighting for a win in the

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election bore almost all the expenditure from of their own funds. Among the major parties and candidates, the exception is the BJP candidate in this constituency. He claimed that all the money he spent came from the party. The two main candidates of the INC and the TRS who fought head to head in the constituency did not get any financial support from their respective parties (see Table 7). Parties expect candidates to meet all the expenditure at the constituency level aimed at promoting the candidate or eliciting votes particularly for the candidate. This is generally the condition on which asset-rich aspirants for party ticket are chosen. In some cases, party also collects donation or contribution from such resourceful candidates to meet general party expenditure that include expenditure towards party propaganda, publicity materials, organization of public meetings, travel of leaders and campaigners, and the maintenance of party offices. These days, money that comes from party membership fee and other subscriptions is too small to meet the huge cash needs of major parties. For example, the BJP gets only 0.54 per cent of its reported income from membership fee and subscriptions. Only communist parties receive substantial portion of their income from membership fee and levy on members’ income. Other parties secure much of their ‘party fund’ from resourceful persons in the society. Some top party leaders collect money from those who aspire for party tickets in order to meet general party expenses and to cross subsidize candidates who cannot fund themselves but who are needed by the party and who have chances to win if financial support is provided. Of the six legal and visible heads of expenditure listed by the Election Commission, three seem to take a lion’s share: expenditure on public meetings, hiring vehicles for campaigning, and publicity in print and electronic media (see Table 8). We notice that election campaign has become hugely expensive in recent decades due to payments involved not only for publicity materials, banners, posters, etc., but to pay for those who participate in these meetings. Mercenary nature of election campaign activity and the increased cash needs for organizing party and public meetings had contributed to the spiraling costs of election campaign. Over the years, voluntary participation and local financial support for party and election campaign activity had dried up. Many of those who participate in public meetings and rallies have to be hired and paid. For big public meetings held in one or two places in the constituency when national or top party leaders come to exhort people to vote for the party, even party sympathizers and supporters have to be mobilized and brought from different places to the venue in vehicles. Their travel and food needs have to be taken care of, in addition to providing some out of pocket expenditure ranging from a two to five hundred rupees. A meeting with one hundred thousand people would at least cost more than Rs 10

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million, if only the expenditure to arrange the venue, erect the stage, put barricades, arrange vehicles for transport of people and supply them with drinking water is taken into account. Expenditure goes up much higher by several times if we take into account payments made in cash for those who attend meetings. For example, when INC candidate had to meet much expenditure when its star campaigner Ghulam Nabi Azad addressed a public meeting in the constituency. Similarly, the TRS candidate had to meet expenditure on a large scale to organize public meetings of KCR and KTR. Such public meetings are held not merely during the official campaign period after the filing of nominations. They are also held after the election schedule is announced and before nominations are filed, and sometimes even before the announcement of election schedule. When there are leaders vying for party nomination and to become party candidates, these public meetings turn out to be occasions to show the strength of a candidate to the public, to the rivals within the party and to opponents outside as well as to the party leadership. Those who mobilize people in good number for party meetings addressed by the top leader entertain hope of securing party ticket. Such candidates are considered capable leaders. For parties these meetings serve the purpose of flexing their muscle and get prepared for the upcoming election. Processions, rallies and road shows are common during the election time. Candidates go in a huge procession to file nomination and once the nomination is filed the candidate is taken out as if this was a victory parade. Road shows by star campaigners along with the candidates and sometimes by the candidates on their own mean a lot of money. Parties and candidates want to present these public meetings and road shows as a show of their strength and create a positive effect on the voters’ mind. They want those who participate in these events carry back to their localities the stories of the leaders and the candidate. In addition to the loyal supporters of the candidates, who are always few in number, hundreds of participants hired on part-time or on a daily basis join the road show and mix with other supporters of the party and the candidate giving an impression to the public that huge crowds throng these leaders indicating high levels of electoral support. With a view to build tempo, big leaders sometimes conduct whirlwind tours addressing people at a few major centres on the way. State level leaders, district leaders, leaders in-charge of the constituency, Ministers from or responsible for the area, members of State legislative assembly (which form part of the larger Lok Sabha constituency and representing the same party as that of the candidate), Mayors and municipal chairman, nominated heads of corporations and committees, caste and community leaders all descend on the constituency to extend

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support to the party candidate. It is the responsibility of the candidate to host, feed and entertain them. Candidate’s visits to select localities also involve a lot of money. When a candidate in these places moves from house to house, more in a symbolic gesture to elicit support, he is accompanied by a large retinue of his followers and aides. Also, local party workers, party chief of the locality, village president, panchayat members, ward members, former village presidents and panchayat members join him. They tell him how the other party candidate has been liberally spending money to attract voters and how it can be encountered with more money. Often these house-to-house campaigns are undertaken by local supporters of the candidate and they expect some flow of money to keep the campaign going. In fact, this network of supporters has to be continuously maintained by a leader who wants to be a candidate in an election. So, election expenditure for a candidate is not just what he spends in three weeks from nomination to the polling day. It also includes the amount he spends in nurturing these networks of supporters, generating goodwill among people of the constituency and gaining potential voters if he becomes a candidate. In Chevella, candidates have also spent considerable amounts on holding the meetings of party activists and sympathizers in various Assembly segments and towns (preparatory meetings) to enthuse party workers and establish contact with party workers and small-time local party leaders. Local leaders, activists and workers from surrounding places are also mobilized for these meetings. Sometimes such party workers meeting take place even at the village and ward levels, when the candidate visits the place. In between, the candidates have to engage with media persons and keep them in good humour. A new head of expenditure which has been on the rise is the money spent on publicity in the mass media. Come elections, newspapers and television channels make huge money through advertisements for parties and candidates. More than that they enter into deals with candidates to do publicity in his favour not in the form of advertisements, but in the form of news and views in such a way an ordinary reader or viewer would believe it to be true. Such coverage includes adulatory stories about the candidate, presenting him in a positive light, providing his biographical details, achievements, wide coverage of his meetings, long interviews in television channels, detailed reports of his speeches and the promises he makes to the electorate. For all this the media people and the management get hugely paid. If money is not paid, the candidate does not get enough coverage, or may even get blacked out. We are told that there are different rates for different packages. Some packages include not only a positive publicity for a candidate

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but also a simultaneous negative publicity about his rival. The Election Commission coined a new term to describe this new phenomenon: “paid news”. Huge amounts cash change hands behind the scenes. So far, we have known situations where the media houses and media barons sided parties and carried out publicity in favour of the ones they supported. They were rewarded if the party they favoured came to power. Like lawyers who will argue in favour of their client, media people now have professionalized themselves and are willing to customize their reportage as per the requirement of candidates. Whoever pays for it can buy their time and space. This is a new norm that prevails in the mass media. Former CEC, Navin Chawla, thinks that the phenomenon of paid news is awful and outrageous and threatens the very foundations of India’s democracy. But the fact is it is widespread, hard to find out because those who pay for it do not speak out, and difficult to curb because it is widely accepted as publicly objectionable but privately normal. Considerable amounts of money also go into distribution of gifts and money to supporters and voters. There has been much discussion on this aspect among researchers and political observers. Reports on vote buying and gift distribution are often based on hearsay and wild guesses. In the absence of any reliable estimates, reports of vote buying can be exaggerated. The Election Commission had reported that Rs 709.8 million cash and 395,000 L of liquor were seized by the officials during the election time in the State of Telangana. There were rumours that the ruling TRS party moved money in police vans for distribution to voters a few days before elections. But it used police to check the opposition parties from distributing money. Two days before the day of polling the State police seized Rs 10 lakh cash from an aide of the Congress candidate Vishweshwar Reddy. The police alleged that the money was meant for distribution to voters in Chevella constituency. A case was booked for illegal payments in connection with an election, under Section 171-H of the Indian Penal Code. But the Congress candidate termed it as a smear campaign at the behest of the ruling party and an attempt to defame him. The Congress spokesperson denounced the fake news put out by the media in connivance with the police that Rs15 crores of money meant for vote buying was seized from a person closely associated with Vishweshwar Reddy (“Cops seize 10L from Congress candidate’s aide”, The Hans India, 11 April 2019; “Rs 10L cash seizure from Konda’s confident triggers war of words between TRS, Congress”, Times of India, April 11, 2019). Contrary to the general belief that there is extensive vote buying with money and liquor, Bjorkman and Witsoe (2018) argue that politicians in India cannot buy votes with money. Chhibber and others term vote buying a myith (Chhibber, Pradeep, Shah, Harsh,

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and Verma, Rahul. “Money can’t always buy votes”, The Hindu, November 15, 2017).

Conclusion: Changing India Election campaign expenditure by candidates contesting elections to legislatures has enormously increased in India in recent decades. This is extensively reported in the mass media and readily admitted by politicians themselves. Since the turn of the century, there have been a whole slew of legislative measures and monitoring mechanisms to curb ‘money power’ in elections. Yet the flood of money into the electoral landscape continues unabated. Any study of the reasons for the rise in election expenditure, the illegalities involved and their implications for the future of Indian democracy need to focus more on the systemic factors that explain this phenomenon. On the lines of the study conducted by Simon Chauchard in Mumbai or that of Lisa Bjorkman and Jeffrey Witsoe, we need a closer scrutiny of the phenomenon at the local level, the theatre of democratic politics, rather than merely engaging in sweeping generalities of either denouncing the defective democracy due to money power or praising the success of democracy in India in holding relatively free and fair elections. The constituency level study as discussed in this paper enables us to take a “worm’s eye view” of the matter, raise questions concerning some of the general beliefs about politicians and voters and the relationship between them, and identify some systemic factors that contribute to the rise of election campaign expenditure of candidates. A microstudy such as of Chevella would reinforce some of the views that we find in the popular and scholarly accounts of election expenditure. In some respects, it would lead us to views contrary to what is generally believed to be true or to certain views that are ambivalent. Firstly, we should talk about the changed and changing social structure in which political competition takes place. In the early decades after independence, the big men who derived wealth from control over resources such as land or those who have enjoyed high status (upper castes) in the society or have amassed wealth through new occupations under the British such as law and money-lending came to occupy the seats in the legislatures. Traditional sources of economic power, social influence, family and lineage of the candidates, patronage and loyalty played an important role in determining the voting choices of voters. In places where social and political movements were strong party ideology and attachments mattered. Congress party was able to win most of the elections for two decades

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after independence, riding on its lead role in the nation’s freedom movement and roping in the members from dominant social groups and elites. As the old structures of authority and caste hierarchies began to crack and crumble due to a plethora of public policies pursued by successive governments, such as land reforms, increased education, occupational mobility and urbanization, political leaders had to find new ways to mobilize electoral support. In 1980s and 1990s we have two parallel ways of mobilizing such support: through populist appeals of poverty alleviation and welfare benefits (termed ‘competitive populism’) and through appeals to the newly constructed caste-based solidarities of the backward social groups by promising self-respect, empowerment and inclusion. As a result, some of the old parties, such as the Congress and the Communist Parties had declined, several new parties had emerged and became dominant for some time. These developments and social and political transformation had also led to the formation of an elite in all social groups who are capable of engaging in political bargaining with others and form political coalitions. The more voters became autonomous, informed and sophisticated, the more the candidates had to exert themselves to persuade voters to vote for them. Coercion does not pay any more. Nor does family lineages help much. An effective election campaign requires not just more time and energy, not merely party support and personal popularity, but also more money to conduct a sustained campaign over weeks, if not months. An increase in party competition is another factor that contribute to the rise of election expenditure. We saw how close the political competition was in Chevella constituency in the last three elections since the formation of the constituency. In 2019, the victorious candidate won the seat by 14,317 votes out of a total 1,300,194 polled votes, a slender margin of just 1.1 percent votes. When the votes were counted, the leads kept on shifting between the two front runners in the constituency. Till the last few rounds of counting it was not clear who the winner would be. The close competition between candidates makes candidates to expend an extra rupee in securing that one vote which matters in seeing him in the legislatures. The single member simple plurality system as practiced in India makes candidates important in the electoral process. In PR systems parties have a greater say in selecting candidates and promoting them to legislatures. This is not the case in the FPTP systems. While social identities, party attachments, performance of governments and leadership at the federal and State levels do matter in voting decisions, voters also go by candidates. Candidates have to be talented, resourceful and should work hard to win. They try their best to woo voters by making promises of bringing development to the constituency, effective and

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efficient delivery of government schemes and benefits and resolution of the problems people face in the area. In a situation of multi-party competition such as in Chevella, where 35–40 per cent vote can ensure victory, candidates do everything they can do to enthuse their party workers and supporters, to please the small-time local leaders, and get the vote from voters by offering goodies to them. Candidate-centric elections make Indian elections very expensive. The huge size of constituencies both in terms of population and area is another factor. It would warrant candidates to spend considerable amount of money on public meetings, rallies and roadshows to attract votes. Given the decline of voluntary participation in party activities and the rise of mercenary nature of party work, much of the election-related activity is based on “paid political participation” (Chauchard, 2018, p. 219). There are hardly any local supporters who are willing to provide space for local party office or contribute money. Every activity has to be paid by candidates in cash right from renting election offices, public meetings and rallies, publicity materials, hiring vehicles and payments to hired workers. Therefore, the cash-needs of candidates have enormously grown over the years. The changed nature of election campaign is another factor. Days are gone when candidates conducted their campaign holding a microphone atop bullock carts supplied by local supporters. Mass media has become very critical to winning an election. “Paid news” in newspapers and “paid coverage” in television involve considerable amount of money. Much of this election expenditure is not transparent nor is talked about, let alone reported. So, it is difficult to estimate the extent of illegal and clandestine expenditure in this regard. In the race to win power, parties are desperate to win as many seats in the legislatures as possible.9 Since a seat goes to the candidate who secures the largest number of votes in the constituency, the ability of the candidate to meet various requirements of election-related expenditure becomes critical in candidate selection. Winnability, a new English word that has entered the Indian political lexicon which means ability to win an election, has become the new mantra of Indian parties. With the gradual rising of election expenditure, parties began looking for candidates who can spend huge amounts of money in elections. The ‘financial strength’ or ‘financial capacity’ of the aspirant for the party ticket has become important, pushing back other criteria such as seniority in the party, probity in public life and even closeness to the party’s top leadership.

9

Jayaprakash Narayan, N. (2000). Indian Elections: Campaign Finance Reform. Paper presented in National Seminar on Electoral Reforms, Calcutta.

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Sometimes, candidates are preferred, when all other things remain equal, who can make a donation to party fund. We often hear reports of party leadership ‘selling’ party tickets to wealthy candidates. Parties have huge recurring expenses to meet: to maintain party offices and personnel, conduct publicity and propaganda, hold public meetings and rallies, travel expenses of leaders, etc. In addition to contributions from resource-rich high clients, many parties collect money from candidates with financial capacity and willing to pay. Part of this money is used to cross-subsidize financially weak candidates but who the party thinks are important in terms of their presence in the legislature or government. Funds from business persons and contractors of public works come to a party if it is in power or perceived to have the potential to come to power. If not, parties have to depend on wealthy politicians and candidates who will support the party if they see winning chances for the party and for themselves. Nilanjan Sircar shows that wealthiest candidates who have the greatest capacity to self-finance their election campaign are systematically selected by parties and have greater probability of winning the constituency. The Chevella case does not support the hypothesis that richest candidates have several times probability to win, as the wealthiest candidate, Vishweshwar Reddy, lost the election. But the fact remains that the candidate who won election is too a very wealthy candidate. In fact, he is the richest among the winners from the State of Telangana. So, one conclusion we can draw from our study is that wealthy aspirants of power are more likely to be selected by parties. Political parties get caught in this situation, as one political party chooses a wealthy candidate, the other party which is equally competitive too has to field a wealthy candidate (see Table 9). Funding for party candidates at the constituency level has dried up for several reasons. Power in parties and government is heavily centralized, often in one leader at the top with a small coterie of confidants and cronies gathered around him. This is true more with the regional parties, than with the national parties, because with regional parties the pyramid of power stops in the State capital itself. There is hardly any meaningful role for legislators in the debates on bills proposed in the legislatures. The anti-defection law binds members of legislatures to vote according to party whip, which means the direction of the party’s supreme leader. So, those who seek favours from a ruling party or government would therefore prefer to approach the party supreme leader or the State leaders directly rather than approach the local representative who has little role in policy decisions. In a situation where the money barriers to enter election race are raised so high, where local financial support for candidates is not coming forth and in the absence of party funding from above, self-funding the election campaign expenditure became important. This has facilitated the entry of resource-rich businessmen into politics.

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The fact that both the serious contenders fully funded their campaign out of their resources reinforces the argument made by Nialanjan Sircar. Chevella case also tells us that the business people who enter politics in increasing numbers are a new breed of business persons. Some of the candidates could be from the old type of businesses such as manufacture of goods, providers of services and engaged in export and import businesses. But many of them are into new kinds of businesses: such as owners of corporate hospitals, those engaged in agriculture-related businesses such as seed manufacturers, tobacco and cotton processing, poultry and aqua farmers, liquor dealers and wine shop owners, real estate dealers, developers and promoters, owners of restaurants and hotels, cinema halls, professional colleges and coaching centres and contractors of public works. Also join the list of new set of politicians are successful professionals such as doctors, lawyers and chartered accountants, former civil servants and film actors who have amassed wealth and have business interests. Many of these businessmen deal with government on a regular basis and require support from the government to tweak policy decisions in their favour. They would need support from bureaucratic machinery in carrying out their businesses and support from police when instances of controversies and conflicts arise between them and their business rivals or friction with people. Bureaucrats and police officials have developed an attitude to act at the behest of those who are in power. Hence power gives the members of these new business groups to gain access to the bureaucracy and police, if not control over them. There is no doubt there is a close connection between growing businesspolitics nexus, ‘black money’, political corruption and governance problems on the one hand and the rise in election campaign expenditure by individual candidates. But we should also guard ourselves against the temptation of viewing Indian politicians as a bunch of rascals who should be thrown out. We should also realise that there is nothing intrinsically wrong if business persons enter into politics in greater number. If rule by a Trump in the USA or rule by a Macron in France does not diminish the diminish democracy in these countries, why should an election of businessman to India’s legislature should be viewed with skepticism and alarm? Perhaps, this is a phase that India has to go through before democracy matures further. Also, let us keep in mind that it is not as if wealthy people began to dominate Indian politics and elections only in recent years. Ability to spend big amounts of money was always an important factor in the selection of candidate or in the victory of a candidate. Even earlier, candidates mostly belonged to upper classes had a chance of being selected or winning an election, except in constituencies reserved for Scheduled Castes and Scheduled Tribes. Even today we notice that the least election campaign expenditure is in constituencies reserved for these

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social categories (ADR, 2019, p. 34). The practice of offering money, food and liquor is not entirely new. Those who are familiar with elections in the early decades after independence tell us that even then candidates distributed small amounts of money to voters willing to accept money, arranged feasts and liquor during election campaign days, especially a few days before polling. We know very little about it, nor do we talk about those illegalities because in those days there were hardly any monitoring mechanisms of election campaign or election expenditures. So, what is important is not the fact of wealthy persons getting selected or money being spent in elections. No doubt the magnitude of money spent in elections has enormously increased. But what could be more important is to examine the changed nature of the candidates with the emergence of a new breed of politicians, the sources of money and funding and why the candidates are willing to spend huge amounts of money to enter legislatures. Political observers and scholars have come up with various suggestions to curb the growing menace of money power in elections and to ease the entry barriers to ordinary citizens to think of participating in elections as candidates. Towards this end, suggestions such as provision of public funding, decentralization of state powers, introduction of proportional representation system and downsizing the constituencies by increasing the number of smaller parliamentary constituencies have been made (Gowda & Sridharan, 2012; Yadav, 2001; Law Commission, 2015; Chhibber & Verma, 2018). But there is no agreement on the feasibility and desirability of these measures as an effective check on spiraling candidate expenditure. In desperation, some call for more stringent laws to control the flow of money. Some suggest more powers to the Election Commission to enforce monitoring regulations about excess and illegal campaign expenditure. Much of the criticism in scholarly as well as journalistic writings target politicians. If we try to understand the problem from a systemic perspective, our anger against the political leaders may subside. Since it is the politicians who make laws, we cannot expect them to make laws that are not to their liking and beyond what they think is right. If they under report campaign expenditure, the problem is not that they are liars. They are forced to lie under the present regulations which have to be changed. If election expenditure keeps spiraling, a situation may arise when politicians realize that it is not worth spending so much money to win a seat in the legislature. That is the point when self-regulation becomes possible. There are hardly any attempts by the Election Commission to forge a consensus among political parties to scale down election expenditure, including the so-called illegal expenditure. A change in the attitude of citizens as well as politicians may bring out a change in this matter. Such a change might come as the economy develops, individual incomes grow, goodies offered by politicians do not evoke

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much excitement, and people’s dependence on the state for basic needs become less.

References ADR (Association for Democratic Reforms). (2019). Report of Criminal and Financial Background Details of Winners in Lok Sabha 2019 Elections. https://adrindia.org/con tent/lok-sabha-elections-2019-analysis-criminal-background-financial-education-gen der-and-other Bjorkman, L. (2014). “You can’t buy a vote”: Meanings of money in a Mumbai election. American Ethnologist, 41(4), 617–634. Bjorkman, L., & Witsoe, J. (2018). Money and votes: Following flows through Mumbai and Bihar K Devesh V Milan. Costs of Democracy: Political Finance in India New Delhi Oxford University Press, 153, 200. Chauchard, S. (2016). Electoral handouts in Mumbai Elections: The cost of political competition. Asian Survey, 58(2), 341–364. Chauchard, S. (2018). What Costs So Much in Indian Elections? Intuitions from recent elections campaigns in Mumbai In K Devesh V Milan. Costs of Democracy: Political Finance in India New Delhi Oxford University Press, 201, 231. Chawla, N. (2019). Every Vote Counts: The story of India’s elections (p. 153). HarperCollins Publishers. Chhibber, P., & Verma, R. (2018). Ideology and identity: The changing party system of India. Oxford University Press. CMS (Centre for Media Studies). (2019). Poll Expenditure: The 2019 Elections. A CMS Report, New Delhi. Election Commission of India. (2019a). Compendium of instructions on election expenditure monitoring. Nirvachan Sadan. Election Commission of India. (2019b). Candidate affidavits. Election Commission of India. https://affidavit.eci.gov.in/ Election Commission of India. (2019c). Accounts of election expenditure by the candidates. https://ceotelangana.nic.in/GE_2019/Candidate_Expenditure/index.html GoI (Government of India) Law Commission of India. (2015). Electoral Reforms. Report No. 255. New Delhi. Jayaprakash Narayan, N. (2000). Indian elections: Campaign finance reform. Paper presented in National Seminar on Electoral Reforms Calcutta. Kitschelt, H., & Steven, W. (Eds.). (2007). Patrons Clients and Policies: Patterns of Democratic Accountability and Political Competition. Cambridge University Press. NCRWC (National Commission to review the working of the Indian Constitution). (2001). Review of Election Law Processes and Reform Options. Advisory Panel on ‘Electoral Reforms: Standards in Political Life’ Member-In-Charge: Subhash C. Kashyap. Consultation paper Section 14. Rajeev Gowda, M. V., & Sridharan, E. (2012). Reforming India’s Party Financing and Election Expenditure Laws. Election Law Journal., 11(2), 226–240.

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Sircar, N. (2018). Money in elections: the role of personal wealth in election outcomes K Devesh V Milan. Costs of Democracy: Political Finance in India New Delhi Oxford University Press, 36, 73. Supreme Court of India. (2014). Judgement in Ashok Shankarrao Chavan v Madhavrao Kinhalkar and Others. https://www.casemine.com/judgement/in/56b48d61607dba348fff2 a09. Vaishnav, M. (2017). When crime pays: Money and muscle in Indian politics. HarperCollins. Yadav, Y. (2001). A radical agenda for political reforms. Seminar. Issue no. 506.

Kondaveeti Chinnaya Suri is professor of Political Science at University of Hyderabad. His research focuses on Party politics and policies, Electoral politics and State politics in India. His recent publications include Indian Democracy (Ed), Oxford University Press, New Delhi, 2013; and Party Competition in Indian States: Electoral Politics in Post-Congress Polity (Co-Editor), Oxford University Press, New Delhi, 2014. His analysis of the changing Indian voter in recent times appears in “Social Change and the Changing Indian Voter: Consolidation of the BJP in India’s 2019 Lok Sabha Election”, Studies in Indian Politics, 7(2), 2019.

Political Finance Regimes, Political Corruption and Party System Institutionalization in Southeast Asia Aurel Croissant

Introduction It is a long-standing belief in democracy studies that configurations of wellinstitutionalized and both moderately polarized and fractionalized party systems promote the effectiveness and efficiency of democratic institutions and thereby contribute to the functioning and legitimacy of the democratic system at large. At the same time, scholars frequently reassert the difficulty of consolidating democracy if political parties and party systems fail to establish a strong institutional linkage with society. A growing literature in the study of authoritarianism argues that political parties, often accompanied by multiparty elections, are a crucial element of the institutional structure of modern autocracies as well. Well-institutionalized regime parties can help rulers overcome the information dilemma and dampen intra-elite conflict. Multiparty elections may complement repression as a tool of regime survival by providing alternative forms of coopting opposition and controlling dissent. While flawed, authoritarian elections still provide legitimacy to autocrats and signal their political power to domestic and international audiences. It is therefore no surprise that almost 80 percent of all authoritarian regimes in the period 1946–2008 had at least one political party (Gandhi, 2008) and in 2017, 69 percent of all authoritarian regimes had multiparty elections (Lührmann et al., 2018). In any political regime, money is vital for electoral success. Political parties need access to financial resources, especially campaign funding. This is also true A. Croissant (B) Institut für Politische Wissenschaft, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_4

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for Southeast Asia, where many countries experienced institutionalized corruption under both dictatorship and democracy (Rock, 2017). In authoritarian regimes, rulers and ruling parties control the state and encourage corruption as a way to pad salaries, to buy loyalty or to coopt potential opposition elites (Reuter, 2015). The transition to democracy in some countries might have brought some improvement, but levels of corruption are still high also in democratic regimes in the region (Croissant & Bünte, 2011). While the issue of political corruption, illicit money and its effects on party politics is increasingly gaining attention in the Southeast Asian region, not all countries in the region have responded as quickly and comprehensively to this phenomenon as, for example, countries in Latin America, Central and Eastern Europe (Sachsenröder, 2019b). Although “political finance emerged as a global norm” (Hummel et al., 2018, p. 9) in the twenty-first century and political finance regulations are common in many countries, Southeast Asia is lagging behind most other regions and implementing legal regulations is often problematic (Ufen & Mietzner, 2015). Strengthening the integrity of political finance regimes is crucial for combating political corruption. There is also reason to assume that political finance regimes differ in their impact on the development of political parties and party systems; the relationship between party elites and party organizations; and the role of political parties in processes of political partizipation, representation and accountability. In particular, types of political finance affect the relationship between political party leaders, party organizations and voters. Different political finance regime incentivize or dis-incentivize party elites to spend political (and financial) capital on the institutionalization of party structures and organizations. Different forms and levels of political party institutionalization, in turn, affect the ability of political parties to perform their political and, especially, democratic functions. This paper will focus on political finance regimes and party politics in the eight countries in Southeast Asia that allow for multiparty elections: Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Timor Leste and Thailand. The analysis is guided by two main research questions: (1) How do systems of political finance differ between the aforementioned countries? (2) How do forms of political finance influence the institutionalization of political party systems in Southeast Asia? The paper argues that political systems with stronger party finance regulation tend to have less political corruption and, especially, more transparent and less biased systems of campaign finance. In addition, there is a positive relationship between certain types of political party finance and the extent to which

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political parties and party systems are institutionalized. However, the relationship is far from linear and an institutionalized party system is functional for both democracies and autocracies. The remainder of this study unfolds as follows. The subsequent section clarifies key concepts of this study and introduces the data used in this analysis. Section 3 elucidates the political context for political finance regulation, and models of party finance and party system institutionalization in Southeast Asia. The paper continues with examining political finance regimes in eight countries in the region. Section five discusses the relationship between party finance and party system institutionalization. The final section of the paper summarizes the findings and offers tentative conclusions.

Concepts and Data Three concepts are key to this study: political corruption, political finance (regulation), and party system institutionalization. The concept of political corruption as employed here, defines political corruption in a general fashion as the abuse of public office for private gain (Rose-Ackerman, 1999, p. 91). Typically, it involves the exchange of money or goods for political influence (Della Porta & Vannucci, 1999; Evertsson, 2013). The Varieties of Democracy (V-Dem) project provides a political corruption index (v2x_corr) (Coppedge et al., 2019). The index is based on experts’ assessments of the pervasiveness of political corruption in a particular country in a given year. Hence, it is similarly prone to measurement error as other corruption indices (McMann et al., 2017). However, it covers more types of corruption than other corruption datasets that are currently available and offers a substantial improvement in coverage as yearly estimates for more than 150 countries extend from 1900 to the present extend. The index measures six distinct types of corruption that cover both different areas and levels of the polity realm, distinguishing between executive, legislative and judicial corruption. Furthermore, this study builds upon the definition of political finance provided by International IDEA (2014). Defined broadly, political finance “refers to all money in the political process.” In a narrow sense, political finance means “the (legal and illegal) financing of ongoing political party activities and electoral campaigns (in particular, campaigns by candidates and political parties, but also by third parties).” (IDEA, 2014, p. 2). Since most candidates in most countries stand for elections in the name of one or more political parties, this study uses political finance and party finance interchangeably. Political finance regulations, then, encompasses all legal and statutory regulation of money in politics, whose goal it

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is “to prevent certain types of behavior while creating transparency in how money is raised and spent.” (IDEA, 2014, p. 3). Such rules stipulate what practices are legal or illegal; the type of government subsidies (if any) are granted to support political parties and/or candidates for public office (monetary or in-kind); and the enforcement mechanisms to ensure that laws regulating behavior and subsidies are adhered to (Gokcekus & Sonan, 2016; Hummel et al., 2018). The International IDEA’s Political Finance Database (https://www.idea.int/data-tools/data/politi cal-finance-database) is a repository of political finance regulation that provides country-specific data for 180 countries that was collected throughout 2017 and 2018. The 2018 updated version of the database gives answers to 74 questions on political finance within four broad categories: 1. Bans and limits on donations and private contributions (who can contribute to political parties and/or candidates and how much?) 2. Spending bans and limits (how much and one what can political parties and/or candidates spend money?) 3. Public funding (is there direct and indirect, i.e. mandatory, free-of-charge access to media, funding available to political parties and/or candidates, and who gets access to how much funding?) 4. Rules regarding reporting, oversight and sanctions (what are requirement for those involved in politics to submit information about how they raise and spend money, which institution has a legal mandate to receive financial reports or investigating violations of political finance regulations and how is illegal behavior sanctioned and by whom?). The existence of a law on the books does not automatically bring compliance. In order to examine the practice of political finance in reality, this study builds upon two more datasets, in addition to country specific qualitative information mined from the scholarly literature, media reporting and official information published by election management bodies. Regarding political campaign funding and political corruption, this study employs the Campaign Finance Sub-Index of the Perceptions of Electoral Integrity (PEI) dataset (Norris et al., 2018), as well as data on public campaign finance and political corruption provided by the Varieties of Democracy (V-Dem) dataset (Coppedge et al., 2019). Building upon expert assessments, the Campaign Finance Index of the PEI dataset is an additive scale created by summing five variables, with missing values substituted via multiple imputation, and standardized to a 0–100 point scale. Higher values denote higher integrity (Norris et al., 2018). The Varieties of Democracy project’s “public campaign finance” (v2elpubfin) indicator builds also

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on expert assessments. It contrast to the previous index, the indicator measures only if there is significant public financing available for parties’ and/or candidates’ campaigns for national office, and how relevant public funding is relative to other party finance sources. The indicator is measured by an ordinal scale from 0 to 4 which is converted to interval by the V-Dem project’s measurement model (Coppedge et al., 2019). The third key concept in this study is party system institutionalization. There is generally little consensus in party research on how to measure the degree of institutionalization of individual parties and party systems, but most studies build on Huntington’s classic 1968 definition of institutionalization as a process through which organizations and procedures achieve stability and gain sufficient significance to surpass their function (Huntington, 1968, p. 12: cf. Vicky & Svasand, 2002). According to Mainwaring and Torcal, a party system is institutionalized “when actors develop expectations and behavior based on the premise that the fundamental contours and rules of party competition and behavior will prevail into the foreseeable future. In an institutionalized party system, there is stability in who the main parties are and how they behave” (Mainwaring & Torcal, 2006, p. 207). In the academic literature on democratic consolidation, particularly in new democracies, institutionalization of the party system, and the political parties that constitute this system, is normatively considered as a crucial element in the overall project of establishing stable, responsive and accountable democratic regime. Our effort to measure party system institutionalization builds upon the Varieties of Democracy project “party institutionalization index” (v2xps_party). Previously labelled “party system institutionalization index” (V-Dem version 1.1-1.6), it is formed by adding the indicators for party organizations (v2psorgs), party branches (v2psprbrch), party linkages (v2psprlnks), distinct party platforms (v2psplats), and legislative party cohesion (v2pscohesv). The index was then converted to a range from 0 to 1 (Coppedge et al., 2019).

The Political Context In Southeast Asia, the diversity of different types of political regimes is much greater than in other regions such as post-communist Europe, the post-Soviet space or Latin America. As of late 2017 the eleven countries in the region could be organized into three regime clusters (Croissant & Lorenz, 2018) (Table 1).

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Table 1 Political regimes in Southeast Asia Type of political regime (as of 9/2019)

Preceding regimes

Brunei

Royal dictatorship (since 1984)

Cambodia

Electoral (multiparty) authoritarianism (since 1993)

Closed (one-party) authoritarianism (1979–1991) and UN’s interim regime (1991–1993)

Indonesia

Multiparty democracy (since 1999)

Electoral (multi-party) authoritarianism (1966–1998)

Laos

Closed (one-party) regime (since 1975)

Electoral (multi-party) authoritarianism (1955–1975)

Malaysia

Electoral (multi-party) authoritarianism (since 1957)

Myanmar

Electoral (multi-party) authoritarianism (since 2011)

Military rule (1960–2011)

Philippines

Multiparty democracy (since 1986)

Electoral (multi-party) authoritarianism (1973–1986), multiparty democracy (1946–1973)

Singapore

Electoral (multi-party) authoritarianism (since 1965)

Thailand

Military regime (since 2014)

Military regime (1947–1973, 1977–1981, 1992, 2007, 2014–2019), Electoral (multi-party) authoritarianism (1981–1988), multi-party democracy (1975, 1988–1991, 1992–2006, 2008–2014)

Timor leste

Multiparty democracy (since 2002)

Indonesian occupation (1975–1999), UN interim government (1999–2002)

Vietnam

closed (one-party) regime (since 1955)*

* North Vietnam. South Vietnam had been under indirect or direct military rule from 1963– 1975 Source: the author, based on Croissant & Lorenz (2018); Croissant (2020)

The first category of “closed autocracies” includes Brunei, Laos and Vietnam as well as Thailand from May 2014 to May 2019. Laos and Vietnam are singleparty regimes and only candidates approved by the Communist Party can run for office. The authoritarian sultanate in Brunei is one of only five countries worldwide that hold no national parliamentary elections, and no political party

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is allowed to participate in the political process: In contrast to these three stable autocracies, the political history of the Kingdom of Thailand since the coup d’état against the absolute monarchy in 1932 has been characterized by a vicious cycle of military rule, transition to fragile democratic rule or multiparty authoritarianism and renewed military intervention. While Thailand experienced a prolonged period of multiparty democracy after 1992, the Kingdom saw nine different prime ministers (of which five were deposed by court orders or military coups), five consecutive constitutions, two military putsches and four different regimes between 2001 and 2019. From 2014 to 2019, a military government ruled the country with the political backing by the royal palace. Following semi-competitive elections in March 2019, Thailand entered a period of electoral (multiparty) authoritarianism. Since political party activities were banned after the May 2014 coup d’état and early 2019 and the new organic law on political parties was not promulgated before late 2018, the remainder of this paper primarily discusses party finance and party politics during the democratic period from 1992 to 2014. The second group of countries falling under “electoral authoritarianism” (Schedler, 2006) includes Cambodia, Singapore, Myanmar (since 2011) and Malaysia (until May 2018). Formal democratic institutions in these countries coexist with authoritarian political practices. Multiparty elections are “widely viewed as [the] primary route to power” (Levitsky & Way, 2010, p. 13) but the ruling political parties systematically abuse their powers and insulate their position against political challengers by imposing disadvantages on opposition parties, curtailing the development of civil society and the media, and suppressing political dissent. The case of Myanmar is somewhat special: In 2015, the National League for Democracy led by Aung Sang Suu Kyi won a sweeping victory in the national elections, taking more than eighty percent of the contested seats in the bicameral parliament and formed the national government. However, the Burmese armed forces (Tatmadaw) still controls key aspects of the political process (Croissant & Lorenz, 2018). Finally, Malaysia used to be known as one of the longest-serving multiparty autocracies worldwide but is the most recent democracy in the region. From independence in 1957 until 2018, the country had been ruled by a ‘multi-racial’ party alliance (Barisan Nasional) led by the United Malay National Organization (UMNO). However, the country’s political landscape changed after the 14th General Elections in 2018. The opposition coalition, the Pakatan Harapan (Alliance of Hope - PH) won the elections and former Prime Minister Mahathir Mohamad, the chairman of the coalition, became Prime Minister. As the country heads towards the second anniversary of the historic turnover of government, the polity appears to be deeply divided on the issue of democracy, while

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the Alliance of Hope is in disarray, and the window of opportunity for democratic change is about to close again (Chin, 2020). The third group of “electoral democracies” includes the Philippines, Indonesia, and Timor-Leste. The stability and quality of these newly democratized political regimes differ widely. In the Philippines, which is the oldest of the new democracies in the region, democratic institutions are about to slide back into authoritarianism under populist president Rodrigo Duterte (Kuhonta & Truong, 2020). In Timor-Leste, the democratic process and the effectiveness of democratic institutions are fragile, but democratic elections and political rights have remained relatively robust and functional (Croissant & Abu Sharkh, 2020). Even though clientelism, neo-patrimonialism, and untamed politicking are rampant in Timorese politics (Hicken et al., 2018), democracy as an abstract ideal and democratic turnover of power is accepted among both the political elite as well as the wider population Similarly, Indonesia has somewhat stabilized its democratic system, even though it has not yet become a consolidated liberal democracy (Aspinall & Mietzner, 2019). Differences in political regimes correspond with variation in party systems and party development in Southeast Asia. In most countries, the historical origins of political parties date back to the interwar period and the years immediately following the end of World War II. Like elsewhere, political parties emerged as organizational manifestations of social conflicts and interests resulting from socio-economic change at the beginning of the twentieth century (Croissant & Lorenz, 2018). Often, however, political circumstances prevented continuous party development. In fact, many scholars point to the incapacity of party systems in the region to accommodate social and political tension. Their feeble institutionalization and the lack of strong institutional linkages with society are, then, seen as major obstacles to democratic governance in most of Southeast Asia (Hicken & Kuhonta, 2016). In Cambodia, Laos, and Vietnam, wars and communist rule left no room for the development of a pluralist party system. Indonesia, Malaysia, and Singapore developed party systems aligned with social milieus and cleavages (Ufen, 2008). During the New Order, Indonesia’s President Suharto (1966–1998) “simplified” the party system and forced all political streams outside of the Golkar regime party into just two officially sanctioned opposition parties. In Singapore, the People’s Action Party (PAP) overwhelmed all other political parties and pushed them into oblivion. Only in Malaysia did a relatively pluralistic party system persist, despite the political hegemony of the Malay-dominated Barisan Nasional, who ruled the country from 1957 until 2018. In Thailand, political parties have been legal since 1957, but changing regulatory regimes and regime discontinuities prevented them from developing stable linkages with society. In the

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Philippines, where a two-party system with power alternation arose early on, the martial law regime under President Marcos marginalized and weakened political parties after 1972 (Croissant & Völkel, 2012).

Political Finance in Southeast Asia As previously mentioned, regulating political finance emerged as a global norm in the early twenty-first century. Southeast Asia is no exception but the problem in many countries is how these rules are (or are not) enforced. As observers note, “in some cases regulations are strict but oversight structures feeble, in others both regulations and their implementation are weak—often deliberately so” (Ufen & Mietzner, 2015, p. 559). What appears to set the region apart from other parts of the world is not so much the fact of political corruption but the “pervasiveness and exorbitant dimensions of money politics” and “the growing demands and impunity” of those involved in the system of illicit, illegal or shadow political finance (ibid.)

Variation in Finance Regulation in Southeast Asia The analysis of the IDEA Political Finance Database shows considerable differences across countries and within nations between the different dimensions of political finance regulation. Table 2 summarizes the total number of specifically regulated aspects of political finance in Southeast Asian nations. As can easily be seen, Malaysia has the least developed regulatory regime, while Thailand and Indonesia, compared to the rest of the region, have rather differentiated and sometimes complex set of rules. While all eight countries regulate their political financing, only four of the eight offer direct public subsidies for political parties or candidates.

Regulating Donations In a comparative perspective, Malaysia’s party finance regime is most laissez faire in that there are no bans or constraints on donations at all. Thailand, Indonesia and Timor Leste have the most exhaustive bans and limitations on political donations. The most common ban is against donations from foreign sources to particular political parties and candidates. All countries except Malaysia ban donations from

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Table 2 Ways of political finance regulations in Southeast Asia Donation bans and limits (29 regulatory aspects)

Spending bans and limits (9)

Reporting, oversight and sanctioning (21)

Total (59)

Public subsidies (direct/in-direct)

Cambodia

7

2

14

23

Yes/Yes

Indonesia

13

4

17

34

Yes/Yes

Malaysia

0

2

10

12

No/No

Myanmar

7

6

16

29

No/Yes

Philippines

8

6

14

28

No/Yes

Singapore

7

1

14

22

No/No

Thailand

10

7

17

34

Yes/Yes

Timor Leste

11

1

13

25

Yes/Yes

Source: Political Finance Database (2019)

foreign interests for candidates and political parties. Direct bans on private donations are rare: Timor Leste bans donations from corporations, whereas Thailand, Singapore and Cambodia prohibit interest groups, labor unions and social associations from financing any party or candidate for election. This hindered the emergence of alliances between parties and specific classes or social groups. In an attempt to reduce the power of coalition leaders to turn electoral success into a source of party funds, Thailand’s 2008 Party Law forbade the prime minister and Cabinet members from using their position to raise funds for a candidate or political party (Croissant & Chambers, 2010). In contrast to the global trend, anonymous donations are banned only in Indonesia and Timor Leste. While companies with government contracts are not allowed to donate to parties or candidates in the Philippines, no government unit or state enterprise is allowed to donate funds to parties in Timor Leste and Thailand. Religious institutions are not allowed to donate to parties and/or candidates in Myanmar, Thailand and Timor Leste. Singapore and Malaysia, where the ruling party (coalition) had been in power since 1957 and 1965, do not ban state resources being used in favor or against a political party or candidate. On the other hand, Indonesia and Thailand are the only regulation regimes which put a limit on the amount a donor can contribute to a political party over a time period, and no country puts limits on the amount a donor can contribute to a political party in relation to an election.

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Public Subsidies Most countries in Southeast Asia have some sort of indirect, in-kind public support to political parties. This includes provisions for free or subsidized access to media for political parties (Cambodia, Myanmar and Thailand) or candidates (Indonesia, Philippines, Timor Leste), or they provide tax reliefs for parties/candidates or their donors (Myanmar, Thailand and Timor Leste. In addition, Cambodia, Indonesia, Thailand and Timor Leste provide direct public funding to political parties. However, the total amount of public funding is usually much too small to cover party expenses. For example, according to the official numbers published by Thailand’s Election Commission, the total amount of public subsidies given to various political parties in the period 1998 to 2001 accounted for 67 percent of total reported donations, thus not including unreported donations, slush funds and other “black money”. In 2006, the total amount of state subsidies to political parties was Baht 271 million (roughly Euro 8.1 million); at the same time, parties reported Baht 235 million (Euro 7 million) in donations. In reality, private contributions are certainly far greater than those reported to the Election Commission of Thailand (Croissant & Chambers, 2010). In Indonesia, which introduced public subsidies for political parties in 2001, the payment per vote was reduced in 2005, from IDR 1,000 (approx. 0.60 Euro cent) per vote to IDR 100 per vote (about 6 Euro cents)—which is, of course, far too little to cover even the most essential operational expenditures, not to mention skyrocketing campaign costs (Reuter, 2015). Most countries use a threshold of support that a party must have to gain access to public funding—normally a certain share of the vote in an election or of seats won. Thailand was the only country where parties not represented in elected bodies at the national or subnational level were also entitled for financial support. A common rule is to allocate support in relation to vote/seat shares that a party receives in an election but Thailand employs other criteria: According to Section 75 of the 2007 Party Law (abolished after the 2014 coup d’état), state subsidy for political parties under the so-called Fund for the Development of Political Parties or FDP were allocated annually to those political parties which stood candidates at the latest general election of the House of Representatives and had received votes on a party-list basis equivalent to not less than 0.5% of the aggregate of votes cast for all political parties. The subsidy was distributed to entitled political parties by allocating (1) 40% of the total amount of the subsidy according to the number of votes obtained from an election on a party-list basis; (2) 40% of the subsidy according to the number of votes obtained from an

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election on a constituency basis; (3) 10% of the subsidy according to the number of branches of a political party; and (4) 10% of the subsidy according to the number of active members who paid annual subscription fees, under the rules and procedures prescribed by the EC (cf. Croissant & Chambers, 2010).

Regulating Spending Among Southeast Asian countries, Thailand had the most restrictive rules on spending regulations, followed by Myanmar and the Philippines, Indonesia, Cambodia and Malaysia, and, finally, Singapore and Timor Leste. Vote buying, and the use of public resources for partisan purposes (excluding regulated public funding) are banned in most places, but otherwise there are few examples other than a ban on TV advertising. There are limits on the amount a political party can spend in Myanmar, Philippines, and Thailand, usually a fixed amount per registered voter or a lump sum, but the limits are unrealistically low: for example, one peso and fifty centavos (about 2 Euro cents) for every voter currently registered in constituency in the Philippines. Most countries except Myanmar and Thailand have no regulations on third-party spending, but Cambodia, Singapore and Timor Leste impose limits on third-party spending on campaign activities. There are limits on spending on traditional media advertising in relation to election campaigns in Indonesia (candidates) and Thailand (political parties) but not a single country limits online media advertising spending.

Reporting, Enforcing and Sanctioning The most comprehensive reporting, oversight and sanctioning regimes can be found in Indonesia and Thailand, followed by Myanmar as well as Cambodia, Philippines, Singapore and Timor Leste. Once again, Malaysia has the lowest level of regulation in this regard. A cornerstone of any political finance regulatory system is the requirement for those involved in politics to submit information about how they raise and spend money. According to IDEA data, some form of reporting requirements exists in all countries accept the Philippines. In Malaysia, Myanmar, Singapore and East Timor, political parties do not have to report on their finances in relation to election campaigns but in all countries, candidates do have to report on their campaign finances. The information required in financial reports varies considerably among

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countries. Often, the most controversial is whether reports must reveal the identity of donors; this is required in all countries except Cambodia and Timor Leste. However, third parties or lobbying entities have only to report on contributions to campaigns or parties/candidates in Myanmar and, sometimes, in Singapore. Only in Malaysia, Singapore and Timor Leste, elected officials are not required to submit reports regarding their (personal) finance. In an attempt to make money politics more transparent, Thailand’s 2008w party law requires parties to identify any private donor offering sums of Baht 100,000 (ca. 2,800 Euros) or more. Donations to political parties of more than Baht 5,000 (about 140 Euros) or more must be done publicly. Where there was a donation to a political party, the party leader must accurately detail and sent to the Election Commission the donors’ names, and donated money, property or any other benefit of financial value (Croissant & Chambers, 2010). Under the 2007 organic law on political parties, executive committees and branch committees of parties were required to maintain political party accounts (at their respective levels) accessible to the Election Commission. Each year parties were audited and certified by an authorized auditor even if the party held no parliamentary seats (ibid.). In most cases, the election management bodies is the institution which receives financial reports by parties/candidates. Reports from political parties and/or candidates have to be made public in all cases but Cambodia and Malaysia but Myanmar is the only country in which campaign finance reports submitted by political parties and/or candidates in the last election been made publicly available. Though, other institutions such as Auditing Agency and courts may also receive information and examining financial reports or investigating violations. Violations of political financing rules can be sanctioned in different ways. Sanctions regarding candidates include fines, prison term or loss of the political mandate or loss of public subsidies (Thailand, Timor Leste and Indonesia), but also deregistering of the political party in: Cambodia, Malaysia, Myanmar, and Singapore as well as Thailand, where such regulations had been used in 2010 to dissolve the main opposition party at that time.

Political Party and Campaign Finance in Reality The previous overview described “only” the legal situation. However, the situation on the ground can be quite different from the laws on the book and a higher level of regulation does not necessarily mean that the role of money in politics is more transparent, or that rich competitors have fewer advantages (IDEA, 2014,

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Political corruption index

p. 4). The universal ‘ban of vote buying’ is a striking example. There is universal consensus among scholars that mass-based vote-buying, though prohibited, is widespread in Cambodia (Croissant, 2016), Indonesia (Muthadi, 2019), Thailand (Croissant & Chambers, 2010) and the Philippines (Cruz, 2014; Canare et al., 2018). The following Fig. 1 plots the V-Dem’s Public Campaign Finance Index and the Political Corruption Index for Southeast Asia. As one can see, there are actually only two countries that score fairly reasonable in terms of political corruption: Singapore, which provides little public support for political parties and few regulations on political finance, and Timor Leste, who has an elaborated public funding scheme for political parties, a significant number of regulations and some reporting and oversight mechanisms in place. Other cases, however, do not show any clear correlation between public finance and political finance regulations on the one hand, and the level of political corruption on the other hand. In general, more competitive political systems tend to establish a more elaborated regulatory framework than authoritarian regimes with hegemonic party

Myanmar 0.9 0.8 0.7 0.6 Philippines 0.5 Malaysia 0.4 0.3 0.2 0.1 0 0 0.5

Cambodia

Indonesia

Thailand

Timor Leste Singapore 1

1.5

2

2.5

3

Public campaign finance index

Fig. 1 Public Campaign Finance and Political Corruption in Southeast Asia (V-dem, 2015). Note: Public campaign finance index: A score of 0 indicates that no public financing is not available. A score of 1 means there is public financing but it does play a minor role in most parties’ campaigns. A score of 2 indicates that there is some public financing available but it is unclear whether it plays a significant role for parties, whereas a score of 3 means that public financing plays a significant role in the campaigns of many (but not all) parties. A score of 4 means that public financing funds a significant share of expenditures by all, or nearly all parties. The directionality of the V-Dem corruption index runs from less corrupt to more corrupt. The index is arrived at by taking the average of (a) public sector corruption index (v2x_pubcorr); (b) executive corruption index (v2x_execorr); (c) the indicator for legislative corruption (v2lgcrrpt); and (d) the indicator for judicial corruption (v2jucorrdc). In other words, these four different government spheres are weighted equally in the resulting index (Coppedge et al. 2019)

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systems and limited electoral competition. However, a high level of regulation may not be desirable in all situations: In authoritarian regimes, for example, the requirement to identify donors by name can serve as a government’s tool to disadvantage opposition parties or candidates because it will make it more difficult for them to recruit donors, or to establish links with interest organizations. On the other hand, constitutions in most political systems (with the notable exception of the Philippines and Timor Leste) share remarkably negative views of political parties which could be described as “negative constitutionalization” of political parties.1 In particular, there is a tendency in Southeast Asian constitutions to imagine parties, not mostly as electoral bodies but as organizations that need to be limited so as not to undermine democracy, or as public bodies that should be regulated so as to serve public interests. The constitution most devoted to parties as electoral units is Indonesia’s, where three-quarters of articles on parties deal with parties as organizations that field candidates. Yet Indonesia’s constitution was promulgated alongside a detailed party law in which parties are treated precisely as bodies requiring regulation (Mobrand, 2018). Nearly every constitution places the state as the guarantor of democracy. Parties can be a threat and they must be prevented from subverting democracy.2 As mentioned before, most authoritarian regimes in Southeast Asia also hold elections. At the same time, many national and international observers find that elections in both democracies and autocracies are often marred by irregularities and weaknesses, in turn raising doubts about the integrity of the electoral process and the credibility and accuracy of the election results. Furthermore, a number of reports and studies suggest that electoral integrity may have worsened over the last decade. Recent research by the Electoral Integrity Project and the results of its Perceived Electoral Integrity (PEI) Index support these concerns. According to the PEI expert survey, the integrity of the electoral process in Southeast Asia is lacking behind Europe, the Americas and East Asia/South Pacific, and just little 1

Van Biezen (2012) refers to the incorporation of parties into European constitutions as “party constitutionalization”. For the concept of “negative constitutionalization”, which denotes regulations in constitutional law which treat the presumed negative aspects of party politics and constraint the ability of political parties to play a meaningful role in politics, see Mobrand (2018). 2 For example, Section 45 of the 2018 Thai constitution stipulates: “A person shall enjoy the liberty to unite and form a political party under the democratic regime of government with the King as Head of State, as provided by law. The [party] law shall … prescribe measures to ensure that the administration be carried out independently and free from manipulation or inducement of any person who is not a member of such party, as well as oversight measures to prevent members of a political party from committing any act which violates or contravenes laws relating to election.”

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Western Europe

74.02

East Asia & South Pacific

59.14

Americas

55.87

Global Average

53.87

Easter Europe

52.8

South East Asia

51.86

West & Central Africa

50.92

South Asia

48.23

East & South Africa

46.28

Middle East & Northern Africa

45.79 0

10

20

30

40

50

60

70

80

Fig. 2 Perceived Election Integrity Index (2018). The PEI Index, standardized along a 100point score, collects views from over 2,000 experts and covers 139 countries holding 180 elections from 1 July 2012 to 31 December 2018

better than in West and Central Africa. It is particularly low in Malaysia (PEII of 32.9) and Cambodia (40.3) and the highest in Timor Leste (56), Singapore (59.1) and the Philippines (59.8) (see Fig. 2). For example, in the Philippines, political violence, organizational shortcomings, and vote buying negatively affect the procedural integrity of elections. In Thailand vote buying and a partisan electoral commission had similar consequences. Voters in both countries have lost faith in the electoral process: The 2014 World Value Survey reports that only 51.4 percent of respondents in the Philippines and 62.8 percent in Thailand believe that the election commission in their countries was neutral. A majority—58.8 percent in the Philippines and 52.1 percent in Thailand—believe votes are bought, and 77.6. percent of respondents in the Philippines and 55.5 percent in Thailand believe that rich politicians are able to simply buy the election (Croissant & Lorenz, 2018). In contrast, elections and election processes in Timor-Leste and Indonesia are of relatively high integrity. In Singapore, Malaysia, and Cambodia, electoral competition is real but unfair. Their “menu of manipulation” (Schedler, 2002) favors measures intended to skew the electoral playing field in their favor and to reduce the level of uncertainty elections entail. This includes manipulating the composition of the election commission, more technical details of the electoral system, including district size, malapportionment, and seat allocation formulae, was well as unfair regulations regarding campaigning and party financing, all tailored to discriminate against opposition parties.

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70 60 50 40 30 20 10 0

Fig. 3 Campaign Finance Index (PEII, 2018). Note: The wording of the questions posed to the experts is as follows: “Parties/candidates had equitable access to public subsidies”; “parties/candidates had equitable access to political donations”; “parties/candidates publish transparent financial accounts”; “rich people buy elections”; and “some state resources were improperly used for campaigning”

In fact, party financing is the area where most Southeast Asian countries receive the lowest scores (see Fig. 3), both compared to other aspects of election integrity and relative to other Asian countries. Proponents of public subsidies for political parties claim public money reduces corruption in politics, and ensures that all relevant political forces have access to enough resources to reach the electorate, thereby encouraging pluralism and providing the electorate with a wider choice of politicians and policies. In contrast, opponents claim that it is unlikely to work unless public funding is combined with limits on donations and/or spending and worry that public subsidies have no impact on corruption and in some cases may add to it (IDEA, 2014, p. 22; Hummel et al., 2018). In a recent study, using data for more than 150 countries that covered the period 1900 to 2015, Hummel, Gerring, and Burt (2018) find that political finance subsidies reduce corruption, and particularly embezzlement, even in countries where regulations are unevenly implemented. The authors conclude that “to the extent that the role of private money in electoral campaigns is minimized, opportunities for corruption decrease”. Political finance regulations attenuate the likelihood of a politician engaging in corrupt activity insofar as they (1) reduce the role of private money in campaign finance; (2) clarify the legal status of campaign finance activity (i.e., the line between what is legal and illegal); and (3)

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enhance the risk of discovery—and hence of negative publicity and possible legal sanction” (Hummel et al., 2018, p. 6). Yet, for Southeast Asia it is not suggest that such an effect exists (see Fig. 1). With the exception of the ruling parties in authoritarian regimes, parties and candidates in Southeast Asia are facing political finance challenges and candidates without sufficient resources at their disposal “find it hard to compete, since their parties often do not finance their candidates’ campaigns. As a consequence, private donations (often from corporations) play an important role in financing political actors” (Ufen, 2014, p. 84). Furthermore, clientelistic relations not only undermine the institutionalization of political parties and hinder the establishment of horizontal links based on common political interests; they also encourage rentseeking strategies. Clientelism is based on long-term individualized relationships of continued post-electoral payoffs to individual voters or small groups of voters (Stokes, 2005; Kitschelt & Wilkison, 2009). Vote-buying, on the other hand, entails pre-electoral cash transfers to voters in exchange for their vote (Schaffer & Schedler, 2005). It does not require an established patron-client relationship (Cruz, 2014, p. 13). In general, „the role of parties in Asia is too often to serve as clientelistic machines that generate money, jobs and licenses for their candidates and supporters” (Ufen, 2014, p. 83). While the organizational structures of political parties vary considerably across the region, what many of them have in common is that generate and handle enormous amounts of money and have deep roots in the economy and business sector (Sachsenröder, 2019b).

Political Finance in Electoral Authoritarianism: Sustaining an Unleveled Playing Field Denying a level playing field is a central component of electoral authoritarian regimes. Party competition is undermined less by fraud or repression than by unequal access to resources, media, and state institutions. Opposition parties must struggle to cover routine expenditures and their ability compete in elections is impaired. In contrast, ruling parties have easy access to either state funding or businesses and clientelistic networks, and enjoy the perks of being in government for many decades (Sachsenröder, 2019b). Still, there are important differences between party financing regimes and practices. In Malaysia, the UMNO, had built up a huge network of dependable funding sources through government linked companies and pervasive patronage. Under the so-called New Economic Policy initiated in the early 1970s, strong economic

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growth helped bolster the regime’s legitimacy and allowed the government to coopt important elites and groups into the regime coalition. At the same time, the close relationships between BN politicians and economic elites led to extensive “money politics” (Teh, 2002). As shown previously, Malaysia takes a laissezfaire approach to regulations and their enforcement. The combination of almost six decades of incumbency and literally no limits on political donations and contributions, as well as weak oversight mechanisms and the lack of any regulation regarding public subsidies for political parties or candidates created a highly skewed financial playing field that allowed the BN/UMNO to maintain power without resorting to the kind of fraud or repression that can undermine their international standing, allowing them, in effect, to have their cake and eat it too (Croissant & Lorenz, 2018). In fact, the country is plagued by incidences of vote buying, the commodification of party posts, frequent overspending by candidates, and a weak oversight system (Ostwald & Oliver, 2020; Ufen, 2020). Yet, the evident corruption of 1MDB, a sovereign wealth fund meant for development, eventually brought the UMNO down in the theconversation.com/malaysias-first-newgovernment-in-six-decades-revels-in-a-shocking-victory-96369 (Giersdorf, 2020). The case against the toppled Prime Minister Najib Razak, now going through the courts in Kuala Lumpur, also reveals that vote buying is a rampant feature of election strategies in Malaysia. This takes place either directly via cash payments to voters or through donations for village and town facilities which serve the whole community (Ufen, 2015a; Ostwald & Oliver, 2020). In Singapore, multiparty elections have been the hallmark of electoral authoritarianism since 1959. As in other authoritarian regimes where multiparty elections take place, they are used as a tool of the government rather than an instrument of choice. As some observers have aptly noted: “The PAP is everywhere, but it is the PAP government, not the party apparatus” (Mauzy & Milne, 2002, p. 49). Since 1959, the People’s Action Party controls the public purse and has direct access to the state administration, including powerful state-owned companies. Singapore’s electoral and legal framework allow for political pluralism and free economic activity, but constraints the growth of credible opposition parties (Tan, 2015). While elections is free and fair, campaign media is tightly controlled and largely pro-government. The regulations on the financing of candidates and parties are very strict, and they are efficiently implemented—especially with a view toward limiting the opportunities for the opposition. (Ufen, 2015). Yet, because the cadre party is almost identical with the state, and the opposition parties have virtually zero chance to actually win a majority in parliament, strict regulations actually help the PAP to solidify its political power.

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Finally, in Cambodia, international election monitors and national as well international civil society organizations frequently note the lack of party finance regulation and equal access of political parties to necessary financial resources as primary areas of concern over the integrity of elections (Croissant, 2016). Prime Minister Hun Sen (in power since 1985) has implemented a rather ingenious mechanism to practically force the business community and its tycoons, who enjoy the state’s protection, to pay back part of their enormous profits to the ruling party (Morgenbesser, 2018). They are ‘invited’ to pay for projects normally funded by the state and to foot the bill for all sorts of infrastructure projects. In return for loyalty and donations to the government, these “donors” can count on protection and favors such as profitable business deals (Sachsenröder, 2019a). In addition, opposition parties have little access to the media before and during the elections (Un, 2020) and an unregulated system of party financing that discriminates against the opposition, which is cut off from state duties (Croissant, 2016).

Political Finance in Electoral Democracies: Systems of Organized Impunity? Whereas in Cambodia, Singapore and Malaysia political finance regulations serve the interests of the ruling authoritarian elites, party elites in Southeast Asian democracies have created a political funding regime that cements their power as well. This said, the concrete regulatory regimes and the practices of political finance in Indonesia, Timor Leste and the Philippines are quite diverse. In Indonesia, member’s contributions, state funding, and private donations are the three sources of legitimate funding for political parties but members’ payments and state funding are hardly a significant factor. As a result, political parties are increasingly dependent on donations from wealthy supporters, or are specifically recruiting candidates who can finance their election campaigns out of their own pockets (Mietzner, 2013, p. 83), which strengthens the campaign’s focus on candidates and the tendency towards a “tycoon-centered” model of political parties and party politics. Moreover, Marcus Mietzner (2015) argues that Indonesia’s finance system is characterized by a consciously constructed and tolerated dysfunctionality. The political finance oversight regime was designed to be ineffective by a political elite united by its common interest in avoiding public scrutiny into its financial affairs, a phenomenon that he calls “impunity-by-consensus”. Illicit fundraising and the “oligarchization” (Reuter, 2015) of leading positions within

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parties have escalated especially since 2005, when the level of public funding to central party offices was drastically reduced. Similarly, the political parties in the Philippines remain poorer than the politicians. Traditionally, political dynasties dominated Filipino politics, that is, families whose members have held public offices for several generations and often rely on substantial landed or business wealth to sustain and advance their political interests.3 In recent decades, non-dynastic populists have become more prominent and successful, i.e. Presidents Joseph Estrada (1998–2001) and Rodrigo Duterte (since 2016). Local politicians rely on national politicians for funding (Teehankee, 2006), while national politicians depend on local politicians for mobilizing votes (Hasnain & Matsuda, 2011). Moreover, in a political environment in which “guns, goons and gold” remain important ingredients to electoral success (Linantud, 1998), it is difficult to establish an effective system of party finance and political campaign funding. Consequently, political parties are organizationally weak and depend on donations even for the most basic tasks. This makes most parties vulnerable to high levels of ‘turncoatism’, which means that when a new president comes into office, they have no problem in forming a new supermajority thanks to such party hoppers (Croissant & Lorenz, 2018). The attraction for the turncoat lies in the competition for development and infrastructure funds for that particular politician’s constituency, which are disbursed by the budget minister who is close to the president. All members of parliament are expected to secure a reasonable part of the national budget for their voters, a service which is known as ‘pork-barrelling’. The most common sources of pork barrel funds are discretionary funds allotted to congressmen and senators called the “Priority Development Assistance Funds” or PDAFs. Many reports indicate that pork-barreling is especially vulnerable for misuse of resources, political leaders, feel entitled to recoup the amounts they have previously invested into their party activities and election campaigns (Cruz, 2014). Moreover, in most rural centers in the Philippines, vote buying is prevalent, though vote buying has taken an increasingly different form in which politicians bypass power brokers and target voters directly with one-time payments or gifts at the time of the elections. This is in contrast to the long-term relationships that characterize traditional patron-client exchange (Stokes, 2005). In contrast to the system or organized impunity in Indonesia and the Philippines, policy-makers and constitution drafters in Thailand have repeatedly tried to 3

In the 15th Congress (2010–2013), political dynasties comprised 70 percent of legislators elected in congressional districts. These members of vested political families possessed higher net worth and won elections by larger margins compared to non-dynastic members of Congress (Mendoza et al., 2012).

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reform party financing. Not only has state support been introduced, but very harsh sanctions have also been imposed. These attempts to regulate political financing have failed. In addition, harsh penalties such as party bans and the removal of parliamentarians and members of the government from office have tended to weaken support for the fight against political corruption, as the affected elites and their voters perceived them as politically motivated (not without good reason). In Thailand, the financing of political parties has traditionally been either a topdown affair or a chore delegated to regional factions (Waitoolkiat & Chambers, 2015). Sources ranged from private donations by wealthy patrons to membership dues and state appropriations. Once parties are elected, they have tended to extract rent from the state and this has indirectly and disproportionately assisted their financing. At election time, party-linked vote canvasser networks distribute quantities of money (or promise the distribution thereof) to voters in return for the latter’s pledge to select the number representing the canvasser’s party on the ballot. Power relationships within factions are based on a central personality or financier who maintains his power through dependency relationships with factionbased politicians. These are especially important issues for the Thai party system where parties have traditionally been dominated by a small coterie of leaders who control party finances. In Thailand, there have traditionally been no centralized fund-raising organizations for party candidates. At the same time there have been no laws to prevent powerful donors from contributing however much they want to political parties. Thus, candidates have come to rely on private independent fund-raising and the backing of wealthy elites in order to get elected (Siripan, 2006, p. 95). As a result, Thai parties have often become the personal fiefs of their financiers. Thailand has, since 1955, passed six different laws that address these issues. The country’s most recent party laws (1998 and 2007) have specifically dealt with party finance, including, for the first time, state subsidies to parties. According to Waitoolkiat and Chambers (2015), legislators hoped that the subsidies would strengthen party organizations and, especially, lessen their dependency on factions for financing, and simultaneously, would increase transparency in political funding. Three realities of political life prevented these reforms from having their desired effect, however. First, because free radio and TV air time was reserved for parties with MPs, small- and medium-sized parties could not use this state subsidy to strengthen themselves in parliamentary politics. Second, since the 1998 Act had not limited the amount of funding for a single party’s annual subsidy allocation, large parties, already wealthy, disproportionately benefited from this fund. Third, the total amount of public funding was simply much too small to cover party expenses (Croissant & Chambers, 2010).

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In contrast to the other countries, Timor Leste combines a fairly transparent regulatory framework with relatively low levels of political corruption. Forms of political patronage, political corruption or vote-buying, which are prevalent in most of the region except Singapore, play a minor role in Timorese elections and party politics (Hicken et al., 2018). First of all, FRETILIN, the largest party in the country, can “call upon the kind of financial resources from an organised, formal membership base” (Hynd, 2017, p. 301). The party has a membership base of over 100,000 members and it is the only party that collects mandatory membership dues (of about 1 US Dollar per year) from its members.4 Moreover, its MPs are obliged to contribute 10 percent of part of their salary to the party. Other sources of funding include government subsidies and some donations from supporters in business. The large degree to which volunteerism and cooperation play a critical role to how FRETILIN sustains itself and organize events indicates the significance of the membership base to its entire existence (ibid.: 293). The second largest party, CNRT, has a formal membership base, there is no enforcement mechanism to ensure that members give money to the party. Instead, the party has close connections with several companies and businesses that have made substantial financial donations to the party 2 mio US Dollar for the 2012 campaign); big donors have been, then, rewarded with public contracts (ibid: 296). Other sources include contributions from party MPs and public party financing. Since 2008, sufficient public party financing for parties that have managed to enter parliament. The level is set annually by Parliament. Half of the total funding is allocated as a basic amount to all parties in parliament, the other half is divided among the parties according to the strength of their mandate (Art. 11 of the Party Financing Act 2008). The total volume of state funds paid to all parties amounted to USD 3 million in 2011 (Shoesmith, 2012; Croissant & Lorenz, 2018). In contrast to FRETILIN and CNRT, other political parties does not have a formal membership base and therefore lacks regular income from membership dues. Instead, they rely on government subsidies, volunteers, contributions from its MPs, and small-scale patron-client relations and (political) distributive networks (Hynd, 2017, p. 299). The key for most parties is “patron-client relations or distributive politics” (Hynd, 2017), either party-voters or party-voters-business.

4

The total population of East Timor is less than 1.3 million. Other parties also report impressive membership statistics (Ryan, 2007), but these are impossible to verify.

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Political Finance and Party System Institutionalization As Fig. 4 shows, the Southeast Asian party systems are institutionalized to varying degrees. According to most institutionalization criteria, only the party systems in Indonesia, Singapore and Malaysia can be regarded as relatively well institutionalized, whereas especially the Philippines perform poorly. The basic contours of party competition are volatile, party identification is low, and voter confidence in parties and in the integrity and effectiveness of elections is low. With a few exceptions, such as the Partido Nacionalista (founded in 1907) and the Liberal Party (1946), party organizations are short-lived. Generally speaking, parties are person-centered electoral associations that have neither well-developed party apparatuses nor a broad membership base. According to their purpose, they are voting machines. Local support groups or networks of relatives of individual candidates take over the task of the party organization. (cf. Ufen, 2012). Significant differences in degree of institutionalization do exist in East Timor, Singapore and Cambodia: while some parties such as FRETILIN, PAP and CPP are very well institutionalized, most other political parties are much weaker institutionally.

Political Corruption Index (v2x_corr)

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Myanmar

Cambodia Philippines

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Indonesia Thailand

0.7

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Singapore 0

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Fig. 4 Party Institutionalization and Political Corruption (2015). Note: the party institutionalization index (v2xps_party) is formed by adding the indicators for party organizations (v2psorgs), party branches (v2psprbrch), party linkages (v2psprlnks), distinct party platforms (v2psplats), and legislative party cohesion (v2pscohesv). The index was then converted to a range from 0 to 1 (Coppedge et al., 2019)

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Thailand, though its party system scored higher in the V-Dem index than Timor Leste, also lacks a well-institutionalized party system: most political parties are built around individuals and serve as electoral machines without broad membership bases or elaborate organizational apparatuses. With few exceptions, like the Democrat Party, founded in 1946; party organizations have a short lifespan. In the last parliamentary elections of May 2019, parties that had nominated candidates for the first time received more than 80 percent of the total votes. In contrast, political parties in Timor-Leste are not just organizational shells for the political ambitions of individual politicians, and their role in politics is not limited to the recruitment of political personnel. However, most political parties—with the notable exception of FRETILIN—remain weakly institutionalized and lack a strong organizational base (Shoesmith, 2011, pp. 325–326; Feijó, 2014, p. 88), but Fretilin and CNRT have developed a recognizable political program and campaign on policy issues (Shoesmith, 2012). The Varieties of Democracy dataset suggest that there might be a correlation between corruption and institutionalization in Southeast Asia: greater party system institutionalization correlates with less political corruption. Of course, the number of cases is too small to infer robust conclusions from the data. Still, the case evidence echoes findings of recent cross-regional studies (cf. Schleiter & Voznaya, 2018) in that (under-)institutionalization of political party systems could be a relevant factor in explaining the scope of political corruption: In well institutionalized systems, parties are able to develop clear reputations which allows voters to attribute responsibility and to unseat corrupt incumbents. In contrast, poorly institutionalized party systems impede accountability. They compromise the capacity of voters to attribute responsibility and undermine electoral co-ordination to punish incumbents for corruption. Voters are presented with an unstable set of choices and, as a result, responsibility, is obscured (ibid.) For example, in the Philippines, even the largest political parties are characterized by frequent party switching and overlapping membership, and voters are confronted with shortterm coalition building, as well as numerous party dissolutions and re-emergences from one election to the next (Teehankee, 2006; Croissant & Völkel, 2012). Yet, the lack of party system institutionalization not only complicates for voters the task of attributing responsibility for corruption, it also undermines electoral coordination, and thus the ability of voters to employ electoral choice effectively to oust corrupt incumbents and hold their representatives accountable (Quimpo, 2007). At this point in our analysis, any causal explanation of party system institutionalization in Southeast Asia must remain tentative (Croissant & Völkel, 2012; Hicken & Kuhonta, 2016). However, Fig. 5 exhibits the relationship

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Public Campaign Finance (v2elpubfin)

3 Thailand

Timor Leste

2.5 2 1.5

Singapore

Cambodia

Indonesia

1 0.5

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0

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Fig. 5 Public Campaign Finance and Party Institutionalization

between modes of political finance and party institutionalization is not linear. There are countries with relatively little public campaign finance and relatively well-institutionalized parties (Singapore, Indonesia, Malaysia); cases with more elaborated public campaign finance regime and moderately institutionalized political parties (Timor Leste and Thailand); and party systems which few (if any) public campaign finance and low institutionalization (Cambodia, the Philippines). Still, there is case evidence and theoretical arguments to support the idea of a positive relationship of public party finance and party institutionalization. The implementation of the regulatory regimes, especially in the areas of internal democracy and transparency of financial management, is by itself an important in step towards institutionalization. Moreover, the way in which political parties handle their internal finances depends on both their capacity and their political willingness. Parties, especially in young democracies, often struggle to establish a transparent and well-functioning control framework for income and expenditure due to a lack of financial management capacity. Political parties who have access to either sufficient public subsidies (i.e. Timor Leste) or other forms of in-kind support (i.e., Malaysia and Singapore) a less dependent on political tycoons, or factional leaders., who are able to support a solid apparatus, but regard the particular party as their personal property—which is actually true because the parties’ financing comes mostly from their private fortunes. Therefore, public subsidies can be used to strengthen party organizations. On the other hand, financially poor political parties are forced to rely on regional brokers such as

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informal, local political cliques (in Thailand: phuak, phakphuak) consisting of headmen, members of the local administration and councilors via vote canvassers (hua khanaen) (Croissant & Chambers, 2010; Waitoolkiat & Chambers, 2015). Finally, in political environments without meaningful differences between parties and programs, campaign promises are not credible and there are no ideological divides between parties that politicians can use to stake out positions (Cruz, 2014, p. 2). We would therefore expect a relationship between party (system) institutionalization and vote buying and clientelism: weaker institutionalized parties tend to have candidates who will rely more on vote buying (Cruz, 2014, pp. 16–17). However, it is important to note that public funding can strengthen the independence of party organizations who do not possess huge financial resources from individual leaders, but it can also be misused and may strengthen party cartels (Katz & Mair, 1995).

Conclusions This analysis of political finance and party institutionalization yield insights into how parties are financed, and how party finance is regulated in authoritarian and democratic Southeast Asia. On one hand, parties are granted freedoms as private associations and, hence, private donations (by businesses, interest groups or, more often, party leaders) remain the primary source of party funding. On the other hand, given their special ties to the state, political parties are also regulated and, in some cases, receive direct or indirect support. This paper has shown that there is no single Southeast Asian model for political finance. Rather, the social and institutional context of politics in each of these states has imposed particular features on the financial activities of political parties and candidates, as well as on state regulators. It is certainly true that across the region, lawmakers have assigned a greater role for the state in regulating the behavior of individual parties, as happens elsewhere in the world (see, e.g., Landfried, 1994). And it is certainly true that public opinion in the region is now swinging away from the toleration of past practices, since they have been shown to have led to some individuals accumulating unheard of wealth. Finally, many countries have now introduced the possibility of public party financing. However, the reason for this is not a lack of funding/shortage of money. But the reason for this is not shortage of resources. Rather it is because it allows the state greater access to control over party funding so as to ensure that it is increasingly transparent and legal.

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Two modes of political finance and its regulations characterize the Southeast Asian experience. First, there is a laissez-faire model of political financing under electoral authoritarianism, for example in Malaysia and Singapore. Their funding regulations are designed to bolster the dominant position of ruling parties or coalitions. This has also been the case in Thailand whenever the country has been governed by military regimes. Political parties close to the government enjoy many privileges and access to in-kind support (but not direct public subsidies), whereas opposition parties are cut off from the spoils of power and legitimate financial sources. To some extent, Cambodia also fits this model, though there are elements of the second model (i.e., public subsidies). The Philippines has more in common with this model than with the second type: there is very little (indirect) public support for political parties, and only weak regulations. However, the main source of party funding is private, that is, it comes from political families, or political entrepreneurs who self-finance their political parties or campaigns. The second model is on full display in Indonesia and Thailand. Under this mode, a mode of oligarchized (tycoon- or faction-based) party financing combines with public subsidies, and a detailed but flawed regulatory framework. As mentioned before, Indonesia’s young democracy and Thailand, during its frequent democratic intervals, have faced the much more complicated task of creating a level playing field for political contestants and insulate parties from oligarchic intrusion. While these two countries have established intricate sets of political finance regulations, these have been insufficient and unable to restrain illicit behavior. Their experiences, then, show that formal regulations alone are powerless to trigger meaningful change. Similarly, Timor Leste shows institutionalized public funding for political parties and a fairly developed regulatory framework, but the latter is more effective than in the other two Southeast Asian cases, whereas tycoons, party factions and wealthy political entrepreneurs are unknown. With regard to the issue of party and party system institutionalization, it seems evident that weak institutionalization remains the Achilles heel of political representation and accountability in democratic Southeast Asia, whereas it seems to contribute to the survival of autocratic governments in non-democratic countries. As of today, there have been few comparative studies that would link political finance and party institutionalization in Southeast Asia.5 In recent years, however, a series of new research projects have been developed that offer a wealth of data on political corruption, political finance regulation and party institutionalization as well as new opportunities for more systematic comparative research. Yet, the study of political finance and party system institutionalization remains 5

For exceptions see Ufen and Mietzner (2015); Sachsenröder (2019a, b).

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an under-theorized one, with few scholars making systematic efforts to find causal relationships or to make cross-national generalizations (Scarrow, 2007). As always, more research is needed. However, the tentative conclusion of this brief study would be that there is perhaps reason to assume that public political financing and party institutionalization are positively related. Which would lead us to hypothesize two causal mechanism connecting democracy and party finance regimes in Southeast Asia. One is a direct mechanism – smart political finance regulation can be a sharp tool for combating political corruption, which has positive effect on the democratic qualities of a political system. The second mechanism would run from party finance regulations via political party and party system institutionalization to democracy: ‘good’ party finance regulation can contribute to political party institutionalization, which then will contribute to a stronger democracy.

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Aurel Croissant is professor of Political Science at Heidelberg University. His research focuses on comparative democratization, comparative authoritarianism, civil-military relations, and Asian politics. He also serves as the co-editor of the journal Democratization and is regional coordinator for Asia-Oceania in the Bertelsmann Transformation Index (BTI) and the Sustainable Governance Indicators (SGI). Recent publications include Civil-Military Relations in Southeast Asia (Cambridge University Press, 2018), Comparative Politics of Southeast Asia (Springer, 2018) and co-edited volumes on Stateness and Democracy in East Asia (Cambridge University Press, 2020) and on Civil-Military Relations: Control and Effectiveness across Regimes (Lynne Rienner, 2019).

Part II Political parties, elections and corruption in South America

‘Culture’, Criminality and Collective Mindset: Political Financing in Brazil Elizangela Valarini

Introduction The issue of corruption has occupied a central place in Brazilian public life in recent decades. In 2016, yet another president1 of the republic was impeached on suspicions and charges of corruption. The problem of corruption seems to have become part of Brazilians’ daily lives causing a feeling of revolt in the society, strengthening anti-corruption policies and modifying the political landscap, in particular by the last presidential elections, with the victory of Jair Bolsonaro. How politics and business are linked in Brazil was exposed in recent scandals,

1

On 2 December 2015 began the impeachment of Dilma Rousseff, former president of Brazil, with a petition accepted by the Chamber of Deputies and continued into late 2016. Dilma Rousseff was in the 12th month of her second term. The reason for the impeachment was a charge on criminal administrative misconduct and disregard for the federal budget in terms of article 85 of the Brazilian Constitution and the Fiscal Responsibility Law. On May 1992 began an investigation on the accused former Brazilian president Fernando Collor de Mello about his involvement in an extensive corruption scheme operated by Paulo César Farias, his former campaign manager. On August 1992, the commission of inquiry confirmed the accusations and on 29 September 1992, the Chambers of Deputies voted (441 in favor and 38 against) to suspend the president powers.

E. Valarini (B) Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_5

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especially by Mensalão2 and Operação Lava Jato3 (Operation Car Wash), which was its modus operandi. Through informal relationship between politicians and businessmen, which in parts served to finance political parties and electoral campaigns, private enterprises gain a privileged position to have influence in the political sphere. Besides the illegal electoral financing, many studies have demonstrated the impact of electoral donations from legal entities on electoral results. Until 2015, when a new law was enacted for electoral financing, Law No. 13,165, the increased role of corporate donations could be clearly observed in the last presidential campaigns. The source of election financing through private corporations4 accounted for just over three quarters of the total donations made in the presidential campaigns between 2002 and 2014 (Mancuso, 2020). In terms of amounts, donations made by private companies increased from R$ 477.7 million to R$ 3 billion (from US$ 92 million to US$ 575 million) in this period (ibid.). However, the ‘unofficial’ financing system seems to play an even greater impact on the Brazilian political scene. According politicians and entrepreneurs accused and convicted in the Operation Car Wash, the illegal political financing system should be a legitimate and institutionalized form of exchange existing in the interaction across political and economic sector. The corrupt scheme is based on close relations, established over time, maintaining trust, reciprocity and friendship. Such relationships or ties, elements supposedly present in Brazilian capitalism, are bonds that can lead to forms of interaction considered both positive and negative, according to Lazzarini (2011). 2

The Mensalão scandal was uncovered in 2005, during the presidency of Luiz Inácio Lula da Silva. The name Mensalão is called in English as “big monthly payment”. The scandal was uncovered through a whistleblower, who noticed that the Worker Party (PT) paid monthly bribes to a large number of deputies (approx. USD 12,000) to make them vote for legislations that were in favour of the running coalition (Michener & Pereira, 2016). 3 Operação Lava Jato, started in March 2014 and has uncovered a large-established scheme of corruption, bribery, fraud in contracts of Petrobras with construction companies, money laundering and cartel building, involving the Brazilian state-controlled oil company Petrobras (Almeida & Zagaris, 2015). 4 The form of financing through legal entities was not the only form of electoral financing until 2015. Donations from individuals and the candidates’ own investment were allowed by law. In addition to private resources, national elections are also financed from public resources through the Special Fund for Financial Assistance to Political Parties. However, after the corruption scandals triggered in recent years by Operation Car Wash, which began in March 2014, a new law for electoral financing, Law No. 13,165 of 2015, was passed, bringing significant changes to the financing model in effect until then in Brazil. The main one is the prohibition of electoral contributions made by legal entities.

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The formal points of connection between economic and political actors are innumerable, forming a broad relational base, also called as clientelistic. In this context, channels of influence are created simply and directly, for example by exchanging public sector benefits for political support (Lazzarini, 2011, p. 43). Valuable social contacts would therefore be built, maintained and preserved by politicians, entrepreneurs, public servants, in order to have their institutional and personal claims performed. With the daily exposure of scandals and corrupt practices in the media, institutional changes in term of law enforcement those established channels of influence began not just to be questioned, but investigated and convicted. Corrupt practices have significant variation, since they are embedded in a historical, cultural and legal contexts whose critical rule should not be neglected for their understanding (Bezerra, 2018b). In that sense, the specific context, in which the corrupt practices occur, and are being judged, help explain the conditions for their evaluation as corrupt or not. This reveals the lack of consensus among societies and subgroups of the same society about when a practice is corrupt, and how serious it is, because corruption is “present in the most distinct social formations” (ibid., p. 26). In view of this, the illicit electoral financing, revealed and judged in the legal context, shows the relational basis of these practices judged as corrupt. But how are such relationships and practices interpreted and evaluated by their protagonists? The objective of this chapter is to reconstruct the collective mindset in use of politicians and entrepreneurs involved in corruption—indicted and convicted in the context of Operation Car Wash— and to understand, in which cognitive and normative institutions the accessed collective mindset action is rooted. Considering that the electoral financing seen as illicit would be only one of the outcomes of this relational base established between the two sectors, the objective of this chapter is not to discuss the form of political financing itself, much less the legitimacy of its legal evaluation, but to reconstruct, from the perspective of those involved, the way relations between the state and the economic sector are interpreted and evaluated. As Bezerra (2018b) points out, an analysis of corrupt relations would have as its premise, that such conduct and practices themselves would be corrupt. In view of this, this chapter aims to contribute to the understanding of the social relations maintained between the Brazilian economic and political elites, and to reconstruct the “cultural pattern” accessed by these actors, which guides their practices. As a cultural pattern, Alfred Schütz refers to a set of values, institutions, and orientation systems that characterize a society or social subgroups at a given time in its history (Schütz, 1971, 1972). The cultural pattern would be the interpretation’s and action’s guide of the members of a society or certain social group, considering that the systems of relevance of meanings would be different

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among subgroups of the same society. This would mean that the cognitive and normative structures guiding the conduct of a specific group, will not necessarily be orienting the thinking and attitudes of another group. Thus, a sociological analysis like the one proposed here can contribute to the understanding of how the interaction between political and economic elites is interpreted. Focusing on the central question of this essay, it intends to contribute in a more general way to the understanding of the limits that separate the conducts considered legitimate and illegitimate, legal and illegal. From a perspective of the sociology of knowledge, these borders between legal and illegal would be socially constructed, i.e., related to the collective mindset in use by social actors. For the analysis, a criminal case5 was selected from the gigantic universe of criminal trials of Operation Car Wash, in which social relations between members of the Brazilian economic and political elites became the target of investigation. The chosen case is only a sample of a much broader reality of practices that cut across the state (and society) and, are liable to be denounced as irregular (Bezerra, 1994). The actors involved in the case were charged with crimes of concealment of assets, corruption and money laundering. However, the basis for the ‘favors’ rendered was the long-standing relationship between the defendants. In the selected criminal record, 13 people were accused in total, among them members belonging to the economic and political elites: former Brazilian president Luiz Inácio Lula da Silva, executives from the Odebrecht group and the OAS group, two construction companies active in public procurement in Brazil. For the reconstruction of the collective mindset, statements from the accused and defense witnesses in the case were selected by the following criteria: (i) they are or have been political agents; (ii) they are or have been executives of the companies involved; (iii) they have as their narrative content the existing relationships between the actors involved in the case. A total of 12 testimonies6 were selected and analyzed with the support of the MAXQDA7 software. The analysis was based on the hermeneutic analytical method, in original language “Deutungsmusteranalyse” (Oevermann, 2001a, b; Pohlmann et al., 2014). The aim is to reconstruct the collective interpretative pattern accessed by social actors, when they are questioned about their (corrupt) interaction. 5

Criminal trial 5021365-32.2017.404.7000. All documents analyzed in this article are available online for public access at the website of the Federal Justice of Paraná: https://www.jfpr.jus.br/. 7 MAXQDA is a software program designed for computer-assisted qualitative and mixed methods data, text and multimedia analysis in academic, scientific, and business institutions. The program is used mostly in qualitative research to categorize and analyze larger numbers of interviews, texts as well as audios and videos files. 6

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As for the use of the testimonies, one cannot disregard the fact that they are provided under particular conditions, reproducing a situation of defense and asymmetrical relations; thus, the tone is marked by self-defense, as well as eventually by the defense of friends and allies. By using official documents, produced by criminal investigations of Operation Car Wash, it should be recognized that the use of such documents produced for non-academic purposes—containing the rationality and evaluation of the social context in which they were produced, i.e., the justice system—may produce analytical inferences (Eifler & Pollich, 2014). However, such documents can be appropriate for the purpose of this research for many reasons: (i) they contain reports on the interaction between executives and politicians (on the business, meetings, trips, etc. that they conducted), which would not be portrayed in other contexts, which, therefore, offer information on the principles of action, conduct and values of these groups and; (ii) the reports carry the evaluation of the practices under investigation of different perspectives (of the accused and the law enforcers). Furthermore, the use of documents produced by the justice system is devoid of any concern to recover or construct a supposed truth. This is undoubtedly the object of dispute between the agencies and agents involved. The analysis of the actor’s narrative must be independent of disputed truth and the context, in which the documents are being produced must be considered as part of the analysis. Thus, the documents used in this chapter could be “perceived as a particular kind of social construct” (Bezerra, 2018b, p. 33). Following this introduction, the second section will present the Operation Car Wash and the selected case “Alethéia”. In the third section, the indictments will be analyzed, with the objective to reconstruct the collective mindset of political and economic actors, when they are questioned about their business interaction. The analysis follows the interpretative steps developed by Pohlmann, Bär and Valarini (2014). In the fourth section, the result of analysis will be explained on the basis of cognitive and normative institutions, in which the accessed cultural pattern is rooted. In that sense, selected features of the Brazilian political and economic context will be discussed. In addition, anthropological and cultural approaches that can explain the historical interaction between both groups will be also introduced. Furthermore, I will also discuss why the regulative changes can not achieve the expected compliance of the political and economic actors with the new rules in this section. The fifth section aims to explain the institutionalized interactions model in the light of the institutional and sociology of knowledge approaches, considering that the way economic and political actors interact is part of the institutionalized “cultural pattern”, accessed by this social

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subgroup. Finally, the chapter will conclude with a brief, general discussion and embedment of the results.

Operation Car Wash and the “Alethéia” Case Operation Car Wash, which began in March 2014 in Brazil, has become internationally known mainly for the number of politicians and businessmen involved, members of the Brazilian economic and political elites, accused and in parties convicted of crimes of passive and active corruption, money laundering, public procurement fraud, cartel formation, among others. Until the preparation of this article, 553 people were denounced by the Federal Public Ministry and 217 convicted in 245 criminal actions, distributed among the Federal Courts of Paraná, São Paulo and Rio de Janeiro, as well as the Federal Supreme Court in Brasília.8 According to the Federal Police and the Federal Prosecutor’s Office, the investigations exposed a vast scheme of corruption, whose objective—under others—was to procure financial resources for electoral campaigns and political parties. In exchange, the companies involved in the scheme were guaranteed participation in major Petrobras9 and government projects. In some cases, part of the bribes was destined for personal enrichment. The investigations were able to deconstruct a web of valuable relationships and contacts among key members of Brazil’s economic and political elites, revealing the informal interaction between the public and private sectors. Defendants, in their statements, confirm that bribes’ payments by private companies, from overpriced contracts, would be the “rule of the game”. The narrative of the actors involved points to the existence of a social network, which allows access to the necessary material resources and restricted areas of state domination. Such relations dismantle the principles of impersonality and universality of the state, as democratic principles ascribed in the Brazilian constitution and of a modern society. Although the “rules of the game”, explained by the defendants, were supported by a network of “valuable contacts”—built among key players in the public and private sectors—the focus of the investigations is on payments of bribery made in exchange for public contracts. Under various investigations, one of them not 8

http://www.mpf.mp.br/grandes-casos/lava-jato, accessed on 16.11.2020. Petrobras (Petróleo Brasileiro S.A.) is a Brazilian state-owned Brazilian petroleum industry, with headquartered is in Rio de Janeiro. Petrobras, before the corruption scandal has been revealed, was ranked under the largest public company in the world.

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only highlighted the role of social relations, but also placed them as the basis for the investigations: The Operation Alethéia,10 which name was taken from Greek mythology and means “the unveiling of truth”. In it, 13 people were indicted, among them: (1) the former Brazilian president Luiz Inácio Lula da Silva, (2) Emílio Odebrecht, former president of the board of directors of the Odebrecht Group, (3) Marcelo Odebrecht, former president of the Odebrecht Group, (4) Alexandrino Ramos de Alencar, former executive director of the Odebrecht Group and former president of Braskem,11 (5) Carlos Armando Guedes Paschoal, former director of Construtora Norberto Odebrecht (CNO), (6) Emyr Diniz Costa Júnior, former contract director of Construtora Norberto Odebrecht (CNO), (7) José Adelmário Pinheiro Filho, former president of the OAS Group, (8) Agenor Franklin Magalhães Medeiros, former executive director of the OAS Group and (9) Paulo Roberto Valente Gordilho, former technical director of OAS Investimentos. The charge is split into two parts. The first part concerns corruption, through the receipt of undue advantages from the Odebrecht Group and OAS, allegedly related to contracts established with Petrobras, and carried out in the form of reforms at a weekend property located in Atibaia in the state of São Paulo. These make up the second group of practices referred to in the accusation related to money laundering. Therefore, the criminal action no. 5021365-32.2017.404.7000 has as its focus the reforms made at the farmhouse located in Atibaia, for the benefit of the former Brazilian president Luiz Inácio Lula da Silva. The renovations would have been carried out first by the Odebrecht Group, with investments of R$ 700,000.00 (US$ 135,582.000) and later by the OAS Group which would have spent approximately R$ 170,000.00 (US$ 32,930.000). The Federal Public Ministry (MPF) attributed the reforms in the farm to an existing “credit” from the contractors to the former Brazilian president. The “open credit” would be a remainder of the bribes to be paid, residue from contracts executed from Odebrecht and OAS by Petrobras. Part of these amounts, which would not have been given to holders of public office at Petrobras in exchange of specific benefits, would be directed to maintain a credit account to the Workers’ Party (PT), called by the MPF the “general kickback account” kept by the companies. Furthermore, 10

Operation Alethéia began on 4 March 2016 and constituted on the 24th Phase of the Operation Car Wash. Among all targeted were the Brazilian former president Luiz Inácio Lula da Silva, his relatives and any friends. The coercive conduct of Lula drawn the attention of the international press. 11 Braskem is a Brazilian enterprise headquartered in São Paulo and the largest petrochemical company in Latin America. Its Ownership Structure is formed from Odebrecht 50,1% (voting capital), Petrobras 47,0% (voting capital) and others 2,9% (voting capital). For more information see: http://www.braskem-ri.com.br/profile-and-history, accessed on 21.01.2021.

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to the former Brazilian president was imputed the crime of passive and active corruption. Due his position as Brazilian president and partisan leader, he would have an influence on the award of public contracts, appointment of directors and executives from state-owned enterprises, such as Petrobras, for the purpose of obtaining financial resources for PT, expensive electoral campaigns, buying votes of parliamentarian as well as for his personal gain. With that, the MPF puts the former Brazilian president in the middle of the corruption-scheme, imputing to him the role as the “boss” of a criminal group. In that sense, his political and personal relationship were questioned, as well as attitudes and tasks that belong to the presidential position, such as the professional indication for positions in the public administration. The testimonies point against the existing corrupt social and personal relations between the former president of the republic and the executives of the organizations involved. The services provided are reported from the point of view of retribution of favors, as well as gestures of gratitude for the support received. “[…] because the president asked me to. I could not deny [even] our relationship, for all he did for the company I had to attend.” (José Adelmário Pinheiro Filho, criminal trial no. 5021365-32.2017.4.04.7000, hearing 09/11/2018, p. 6) In an informal setting and in some cases not only between executives and politicians, but with people belong to the circle of personal relations from the former president and/or businessmen. “[…] talking to her [Marisa Letícia12 ], she said: ‘Alexandrino, I am in need of a favor from Odebrecht’, I say: ‘What is it, Ms. Marisa?’, ‘I am reforming a farm and I am having difficulty in the reform’[…].” (Alexandrino de Salles Ramos de Alencar, criminal trial no. 5021365-32.2017.4.04.7000, hearing 05/11/2018, p. 4) The prosecution also questions other benefits, not formally mentioned in the case, but questioned directly in the depositions. These would be related to benefits received by the Odebrecht Group, through the petrochemical company of the Braskem group, in regards to political-economic decisions related to the privatization law nº 9.478/9713 (Lei do Petróleo). The benefits would go beyond the risk of re-nationalization of the sector, involving structural administrative changes within 12

Marisa Leticia was the wife of former President Luiz Inácio Lula da Silva and the defendant in two criminal actions for passive corruption and money laundering in 2016 at Operation Car Wash. She died on February 3, 2017, victim of a stroke. 13 Law nº 9.478, August, 6, 1997 regulates the petroleum industry in Brazil. “Deals with the national energy policy, activities related to the oil and gas monopoly, creates the National Council for the Energy Policy and the National Petroleum Agency and makes other provisions”. Available: http://www.planalto.gov.br/ccivil_03/leis/l9478.htm, and https://www.ariae. org/sites/default/files/2017-05/cartilha_lei_9478_ingles.pdf. Accessed on 22.01.2021.

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Petrobras during the administration of José Eduardo Dutra, such as the change of former director of the supply area, Rogério Manso, so that relations between Petrobras and Braskem could be improved. […] what was being questioned, what was being asked was a better disposition of Dr. Manso and openness to understand the specific problems… legitimate problems that the petrochemical sector needed to consider, which the sector was going through, but not that Dr. Manso’s departure had been requested. It was questioned the way he conducted the business, which we understood, at the time that he did in prejudice to the interests of petrochemical companies (Pedro Augusto Ribeiro Novis, criminal trial no. 5021365-32.2017.4.04.7000, hearing 15/06/2018, p. 6).

The illicit electoral financing, present in all the processes of Operation Car Wash, as the main reason for corrupt practices, was also investigated. The companies Odebrecht and OAS are charged with the generating and administration of a general account intended for illegal payments to the PT and at times to the former president himself. Marcelo Odebrecht, former executive president of the Odebrecht group and José Adelmário Pinheiro Filho of OAS explain to the judicial authorities how the administration of this general account, managed personally, in which amounts destined for political financing in the form of slush funds, as well as other types of political and personal claims were debited. So, we had a current account, that is, at each invoicing of each work of this one, we had to make the payment of 1% of the value that we received. But then, it wasn’t paid immediately, sometimes it added a little more, and Vacari determined: “I want you to pay me with slush fund; I want you to make donations to the national directory of the PT, to the state directory such, to help such a politician”; and so, it was. (José Adelmário Pinheiro Filho, criminal trial no. 5021365-32.2017.4.04.7000, hearing 09/11/2018, p. 7) We had since the 80’s more or less one or two people, or sometimes more people, who made all sorts of unaccounted-for payments, most of it slush fund, and it’s not necessarily about bribery, there was slush fund, undeclared bonuses and everything… (Marcelo Odebrecht, criminal trial no. 5021365-32.2017.4.04.7000, hearing 07/11/2018, p. 3)

Electoral financing through unofficial payments and therefore not accounted for by the party or donor companies is updated as something institutionalized in the political and business environment. The use of unrecorded resources both to generate cash and to “donate” to political parties is presented as something necessary and pragmatic, without moral judgment. The way of organizing and managing the unaccounted resources destined for the parties is particular to each company.

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I would like to answer you in a more specific way: campaign support and undue payments related to business interests, respect for public officials or authorities, not only in Odebrecht, but in all other contractors that have a relationship with the public power in Brazil, always existed. (Pedro Augusto Ribeiro Novis, criminal trial no. 5021365-32.2017.4.04.7000, hearing, 15/06/2018, p. 4) Actually, slush fund’s operation has one lung, one reserve. And this reservation is directed to the various businesses where they had these illegalities. So, it was this resource that was sent to this work or any other that requested. (José Adelmário Pinheiro Filho, criminal trial no. 5021365-32.2017.4.04.7000, hearing 09/11/2018, p. 6)

Mapping Social Relations Between the Public and Private Sectors What knowledge structures are accessed by members of the political and economic elites to justify the imputed corrupt practices and relationships? From the accused’s point of view, the relationships established between the political and economic sectors are legitimate and necessary for the achievement of common objectives. For the political sector, the relationship with economic power means the guarantee of electoral financing and with it the perpetuation of political projects, the maintenance of political and public positions, as well as the economic development of the country, based on Keynesian fundamentals, which reinforce the importance of the role of the state for economic growth, and one of the strategies is to support national enterprises. For private companies, “partnership” with the state means securing the growth of the organization itself through participation in development projects, infrastructure, etc. The relationships established between the two sectors are based on trust, mutual knowledge, loyalty, and are formed in a long-standing basis, elements that are present in relationships established in daily life. They differ from other forms of exchange based on, short-term engagement and for commercial purposes. Campaign financing in this context is understood as something inherent in the relationships between the two sectors, but not the major objective of this interaction. Private companies meet the political and financial demands of the largest Brazilian political parties through official and unofficial election financing. This strategic and historically established form of relationship with the political sector permits the maintenance of political relations with parties of different ideological fronts and increases their chances of rising to power. The illegal financing of political parties and electoral campaigns is devoid of a moralistic vision, from the point of view of those involved, and considered one of the essential elements for the functioning of politics.

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Political-Economic Interaction as a Growth Strategy The narrative of the defendants analyzed in the statements given by the former Brazilian president and entrepreneurs of the two largest industrial engineering and heavy construction companies in Brazil shows an interdependence between the state and the economic sector. The mutual relationship is interpreted as necessary for the implementation of a developmental project: economic growth, strengthening of the national industry and, consequently, the advancement of an international economic policy project. The reconstructed cognitive logic of collective mindset shows first of all that the established interactions have a personal character. They are not trading relationships, established for short-term economic purposes or occasional ones of exclusively personal or business interest. Both sides involved in the relationships are valued for their social relevance and political position, as well as their personal acquaintance. In addition, the longevity of the relationship is emphasized in the sense of being transferred from generation to generation, as if the “baton” were passed on to the “newcomers”, that is, to the new generation of executives and politicians, who are committed to continuing the established interaction. No, the political issue is the following, at least Odebrecht’s relationship with the public power has always been based on a tripod that I say, the following, first we had to perform, we had to be a compliant company, and the authorities, the politicians, the people in charge liked Odebrecht in the sense that it was a company that fulfilled what it promised, it performed the works with quality, on time, at cost, and everything else, now in addition to that there is the question, you have to have the confidence of this public agent, So you have to perform, but you have to create a relationship of trust, and we had several people who had a relationship of trust with several people who were cultivating over time and you maintained, and the third is the following, it’s no use you perform and have the relationship if at the time of the campaign you do not help the guy to get elected, so it was the third tripod that I say, which was the contribution of the campaign that in Brazil, at least at the time, much was box two. (Marcelo Bahia Odebrecht, criminal trial 021635-32.2017.404.7000, hearing 07/11/2018, p. 12–13) Emílio was one of the most competent Brazilian businessmen, by the way, an inheritance of his old father who was an exceptional figure, whom I had the pleasure to meet. My relationship with Emilio was one of a man concerned not only with the development of Brazil, but concerned with the development of the Brazilian economy in relation to the world, Emilio Odebrecht had a relationship… when I was a candidate in 89, I was already traveling to Latin America and Brazil only had two ambassadors abroad, in fact one was the representative of the Bank of Brazil, which had almost everywhere, and the other was the representative of Odebrecht. Where I had a meeting there was a guy: “Hey, Mr. Lula, I’m the representative of Odebrecht”. So Odebrecht had a lot of representation in Latin America, it had a lot of representation in Africa,

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even because it was the only company that worked in Angola at the time of the civil war. It served both the interests of José Eduardo, who won the civil war, and of the leader of the opposition, they were able to live together. (Luiz Inácio Lula da Silva, criminal trial no. 5021365-32.2017.4.04.7000, hearing 12/11/2018, p. 37)

A second cognitive element is related to the selection’s criteria of the companies interacting with the state. From the companies’ point of view, there is no preference for a specific party. However, the political sector selects the participating companies based on defined criteria because it understands their participation as essential for the articulation of specific and general interests for economic development, as well as the realization of party-political ideals and objectives. The criteria for choosing “partner” companies are based primarily on their ability to play a proactive role before the government in order to bring concrete solutions and strategies for economic development. In that sense, the tradition of the company plays an important criterion for the recruitment of companies ‘associated’ with the government. ‘Tradition’ can be translated as trust; therefore, traditional companies, whose founders and generations of executives are known and have longstanding relationships with the government, are well-regarded. High economic performance, sector influence and international presence would be criteria based on economic performance data. The last criterion for the companies’ recruitment is the capacity of the company, or of the entrepreneur, to act in a nonpartisan way in the political field and, therefore, financing the political system through electoral investment, through ‘good’ resourcefulness in relations with parties and candidates of position and opposition. I had to say in my reports inclusive that this comes… first this is in every company, I challenge a Brazilian company that doesn’t have, according to this comes from the time of my grandfather, my grandfather, my father, I mean, always had this with several purposes, I think it is important to characterize this Dr. [judge], for you to realize one thing, the most important thing for us in this matter, mainly when we went a lot… it was the company that went abroad earlier, we had in several countries serious problems, Iraq, Colombia, Angola in a civil war, this all demanded for the integrity of our personnel to use these resources, this was… Look, that was fundamental…and campaigns, campaigns in which sense, the worst thing, you know that jealousy of men is worse than jealousy of women, so really one candidate knowing that he received less than the other this is not positive, so we tried to keep the balance around […]. (Emilio Alves Odebrecht, criminal trial 021635-32.2017.404.7000, hearing 07/11/2018, p. 4)

The company not only places itself as a protagonist in political sphere, but also assumes a position of authority in its participation in the state, since it actively acts

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in favor of its corporate interests. Its authority is justified through its high economic performance and its history of political participation and legitimate business interests to achieve collective, i.e. corporate ends. […] we were discussing, the agenda was very clear, it was the issues that we thought were relevant to the relationship between Odebrecht and the government, or Odebrecht with other countries that had, Brazilian geopolitics, some issues that we always took to contribute with the president in an institutional way, with the country, I mean, it was nothing to do with contract, I at least think that my father also never discussed contracts, these things, with the former president. (Marcelo Bahia Odebrecht, criminal trial 021635-32.2017.404.7000, hearing 07/11/2018, p. 9) […] with the president always I was the one who treated, now I never took these issues to his level, what I took were the nationalization issues, that was, since the first director in his mandate, that was that Sergipan who ended up dying, the Dutra, who… I don’t remember his first name, I know it was Dutra, he was the president, he with the structure he set up was wanting to suffocate the company for it to have difficulties and they buy it back, and then I really went and showed, I proved, he even made a meeting there summoning the minister of mines and energy who at the time was Dilma, And I don’t remember who the other participants were, I took Alexandrino, I took the president director whether it was Pedro Novis, if I’m not mistaken at the time, and we had this meeting, did all this exposition, everybody debated, etc. he [president] said: “I’m going to talk to my people and I’m going to give a definitive orientation”, and said that Dilma would be responsible, through Dilma, and she, speaking on behalf of the government, said: “It’s to continue the model that is there, that comes from the past government”. (Emilio Alves Odebrecht, criminal trial 021635-32.2017.404.7000, hearing 07/11/2018, p. 6)

The mutual interaction established between the company and the state also makes up the normative logic of this collective mindset. It is a general national conjuncture, historically established and indispensable for business survival and growth, as well as the development of political-economic strategies. Companies must take an active posture in search of relevant and necessary strategies for their sector, and for themselves.

Beyond Institutional Relations The main element of this collective mindset, is based on long-standing personal relationships between the actors of the political and economic system. Personal contacts are both the key to, and the reason for, institutional and individual claims. The monetary element is placed in the background, not being characterized as

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the reason or cause of the exchange, but rather the maintenance of the longestablished personal relationship is placed as the main element, which justifies the monetary exchange. The character of the relationship is the central element for economic organizations to freely enter the political sphere. It is not an impersonal, formal, and strictly professional relationships, but instead, is a warm and trusting interaction, whose participants have a name, a face, and a history that allows reciprocity to happen. Long-standing personal knowledge justifies the legitimacy of the conduct. They are not strangers, but acquaintances, partners and friends. Then I went to him [Lula] personally during his term of office and said, “Look, do you remember that conversation of ours? I kept investing, doing it, it doesn’t give”, and he actually called a general meeting once and gave guidance that that was government guidance already since his government plan, and it was really circumvented, but that just didn’t, the issues abroad, for example, several authorities visited Brazil and he also went to some countries where we operated, so I always asked and he always did: “Look, we were there with other companies, always reinforce the Brazilian companies, if you increase the image this will facilitate our programs in these countries”, then an intangible asset that has no price, so, as I said to Alexandrino, I said: “Alexandrino, you bring me this [farmhouse’s reform] I have not even how…. even if I wanted to deny it, I have no way to deny for all these intangible assets of more than 20 years of living with the president”. (Emilio Alves Odebrecht, criminal trial 021635-32.2017.404.7000, hearing 07/11/2018, p. 3) No, no, I wasn’t surprised because I wasn’t a big contractor doing a renovation. It was a person with whom I had a relationship for over 20 years… (Luiz Inácio Lula da Silva, criminal trial 021635-32.2017.404.7000, hearing 12/11/2018, p. 26) I have known the president since 1993, 1992 and our relations, OAS was a company from Bahia that was entering the São Paulo market at this time. One of our partners was the son-in-law of Antonio Carlos Magalhães, Senator Antônio Carlos. We had some problems with the oppositions in Bahia, because of this relationship there was this. So, within a long-term strategic project of the organization, we glimpsed the possibility of the PT coming [to power], not least because it had already won the São Paulo city hall, Mayor Erundina. We did two works there for the city hall, the sambódromo and the palace of industries. And we would have to open this relationship in a closer way. A question of alternative power. And then I met the president, I was with him a few times. I had a lot of guidance from his strategic vision point of view. When he assumes the presidency, he helped me personally, that I had a relationship with him in several things, in enterprise, in our business abroad; in Petrobras, that we had many problems. We were not part of the Petrobras [cartel] club. We were prevented from acting in Petrobras, it was a very big fight for us to be able to participate. And that’s where this relationship comes from. (José Adelmário Pinheiro Filho, criminal trial 021635-32.2017.404.7000, hearing 09/11/2018, p. 6)

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Long-standing relationships need to be “passed on” to new members of the elite. As such, they are transferred from “generation to generation”, according to changes in organizational structure and political leadership. The important thing is that the “transfer” is completed, and that the relations can be preserved from potential problems and maintained by the new political and entrepreneurial leadership, because to give up such relations means to stop growing economically. Therefore, the business sector works actively to build and maintain close relations with the political sector. Yes, I asked exactly, they were the last two, it was if I’m not mistaken in October, in the beginning of October, and then I even asked the president to help me to make the transfer to Marcelo, that I wanted to take Marcelo because I, as I being related with him, was the only one in the organization, even because he and Marcelo had some differences, I asked the president to help me make this transfer, and she [Dilma] didn’t feel despised, hurt, because I who related to him, would stop relating to her and Marcelo would pass, and he really helped me in this, it was in this meeting at the end of the year, had this goal, set at the October meeting. (Emilio Alves Odebrecht, criminal trial 021635-32.2017.404.7000, hearing 07/11/2018, p. 7)

The normative logic present in this collective mindset is the positively valued, personal character of the interaction for the establishment of important relationships. The personal element is important for the loyalty and trust, necessary for the interaction across the sectors. The relationships are important for the functioning of the governmental gear and for the economic success of enterprises.

Construction Sector, Political-Economic Model and ‘Cultural’ Knowledge To understand the collective mindset in use by members of the Brazilian economic and political elites it is necessary to examinate how knowledge structures, i.e., cognitive and normative institutions, are rooted in the patterns of interpretation. The examination of the actors, who activate the reconstructed collective mindsets, in terms of their generation, career and position, makes it clear that they are members of the elite, occupying the highest social, political and economic positions of Brazilian society. They are founders and entrepreneurs of the largest Brazilian companies with broad national and international business-operations and/or occupy the highest political positions in Brazilian government. Regarding

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their biographical data, they are a group of men,14 the majority of whom are between 65–75 years old. That means, they were socialized in a business and political environment, in which there was a need to use interventionist government strategies, to further the economic growth of Brazilian companies as well as to access personal network in order to secure loyalty and thrust for the interaction. Even for the small number of people involved, who are in a younger age group, it becomes clear that their embedment in this environment, through the “transference” of the business model from generation to generation, becomes clear. A brief analysis of the companies involved shows that both are founded in Bahia, a state of the North East region of Brazil, also the region, in which the former president was born. The founder of both enterprises has long-standing relationship with the PT and with the former Brazilian president. Furthermore, the enterprises belong to the top 100 biggest Brazilian industrial companies. They were market leaders on the services related to industrial engineering and heavy construction; and, both have the tradition of executing public works. The interaction across both sectors can be understood through many elements co-existing at different levels in the Brazilian political, economic and cultural context. The cognitive and normative institutions, which give orientation for the interaction between government and private companies could be rooted on the Brazilian political-economic model. Brazilian industrialization and economic development had a strong influence of Keynesian ideas which support the intervention of the state on the other spheres as positive and indispensable (Colistete, 2001; Dias Pereira, 2011; Versiani, 1987). The diffusion and establishment of some ideas and mindsets can be dated back to a very early phase of Brazilian capitalistic development, for example, by the transition’s process from agrarian Brazilian society to the industrial one. Many phases and political turns were marked by political-economic development strategies, which prioritized the expansion and strengthening of national industry (Colistete, 2001; Fonseca, 2004; Versiani, 1987). The developmentist policies, following the Brazilian economic development, can be divided into different periods; yet they all carry constant elements institutionalized in the social stock of knowledge. Such elements are related to the role of the state in terms of supporting and influencing the economy, especially to promote the growth of national industry. Even though the political periods gain different “labels”: populism, developmentalism, neo-developmentalism, etc.—all of them reproduce similar interpretive schemes that guide the actions of members of the political and economic elites. “Protection” and “further” could be 14

Except Marisa Leticia Lula da Silva, former president Lula’s wife, only men were involved in this case.

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understood as knowledge institutions, rooting in the social stock of knowledge and accessed from actors belonging to the political and economic sectors (Valarini, 2018). This established economic model served as the basis for economic policies, especially during the rule of the PT government. The relationship between the construction sector and the state is also configured by specific elements, historically built throughout the development of Brazilian capitalism. Regarding the relations between top executives of the industrial sector and the state, I have identified that the collective, guiding the actions of the Brazilian economic elites, activates cognitive and normative structures related to the political role that should be assumed by the company, justifying its interaction with the state. Mutual interaction would not only be understood as a possibility, but as an obligation, i.e., the company’s need to grow and perpetuate in the Brazilian political-economic environment. Both the state intervention in the economy and the “proactive” engagement of the companies in the interaction with the state are understood as positive and necessary. The interaction between government and construction companies has been particular examined from many authors. These studies supporting the understanding how deep the analyzed interaction seems to be institutionalized in the examined context. Regarding the construction sector, Campos (2017) points out that the deliberate action of construction companies on the Brazilian state is anchored in the form of a relationship between the two sectors that has been historically configured. Their mechanisms of action would have been settled in a period prior to the 1964 military dictatorship,15 initially through structures and organizational entities which served several purposes: (i) organization of collective action in the face of labor policies of the sector; (ii) division of public works with the purpose of avoiding competition and maximizing their profit rates among themselves; (iii) joint elaboration of public works projects, inscribing them in public policy agendas, thus creating needs for works related to their interest; and (iv) coordination with other groups of the dominant class for the development of collective action (ibid.). While during the dictatorial period, the construction companies’ strategies were direct and concentrated with power agencies and Armed Forces officials, during the transition period they focused on their relationship with congressmen, commissions, and political parties (Campos, 2018). Its coordinated action focused on the formulation of parliamentary amendments, influence on the funds allocated to the Union budget, and electoral financing. As a way to maintain a “policy of good relations”, that is, a broad political relationship, the construction companies 15

The authoritarian military dictatorship was ruled from 1th April 1964 to 15 March 1985. It began with a coup d’état led by the Armed Forces against the government of João Goulart.

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invest simultaneously in different political parties, regardless of their ideological base, thus financing the electoral process (Bezerra, 2018b; Campos, 2018). This form of strong action in electoral financing is part of a collective and organized strategy with the objective of asserting their particular interests on the public agenda. Furthermore, the analysis of the historically interaction between construction sector and government suggests that corrupt practices and irregularities are structural features and characteristic of the sector’s own dynamics, inserted in the logic of capital accumulation. Therefore, such practices are not an anomalous deviation, but are rather forms of institutionalized interaction and exchange in the sector, and in the context of its interaction with the state. As a pattern, the corrupt practices have three reasons, which can be found both in an isolated and/or related ways: (i) different forms of irregularities in public works for the maximization of profit rates for companies in the sector, (ii) irregularities in public works involving bribery, payment of kickbacks, i.e., division of values, and (iii) irregularity involving different forms of deviant competition among companies in the sector and monopolistic practices (Campos, 2017). The deliberate action of the construction sector under the prism of corruption can be observed in several case studies, showing the active performance of this sector in the budgetary planning of the state. While political disputes are articulated with their interests related to the search for electoral financing, companies actively “recruit” politicians, congressmen and public administration employees in key positions to form a broad base with the state, thereby acquiring influence at various levels of government and public administration (Bezerra, 1994). The companies actively engage in the shaping of new relationships, through gifts and visits, but also in the maintenance of important established relationships. The cultivation of good relations with politicians would be important for the defense of the interests of the company with the public administration. In this context, electoral financing would be understood by the company as an obligation, as it guarantees the prioritization of company-interests in the government, as well as the establishment of a relationship of “trust”. As reciprocity is also an important dimension in relations between sectors, financial support for campaigns would therefore be only one element of this system of exchanges between companies, candidates and public administration (Bezerra, 2018b). The same author also points out that the overlapping of economic and political interests, as well as the fluidity of its borders allow the actions of parliamentarians with companies not to be interpreted as irregular, but rather understood as routine (Bezerra, 2017). For this author, the personal relations established across the political and economic sectors are not only instrumental. They constitute a kind of social capital,

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which can be used in certain circumstances, and recourse to this capital seems to be a socially accepted strategy, which enables private and public people and groups to achieve their objectives using personal acquaintance situated on the formal relationships’ level. The mobilization of personal connections takes the form of personal/social networks through which goods, services, favors, information and people, circulate. (Bezerra, 2018b). The analysis above shows, therefore, the reproduction of such institutionalized interaction, but not of new forms of interaction. Moreover, the interaction between the political and economic sector brings to light basic elements of personal and social relationships established in daily life, such as trust, loyalty and mutual acquaintance of both sides. The role of personal relations as a structural element in Brazilian society appears in the study of different authors of traditional Brazilian social thought. “[T]he well related, everything; to individuals (those who have no relations), the law” (DaMatta, 1997a, p. 24). The relationships of trust, reciprocity, loyalty and acquaintance established between the political and economic sectors should also be observed within the Brazilian historical context. How such relationships have developed and what role they play, are in parts observed through the way Brazilian society is structured, and the role of personal and social relationships as a link between structures. Roberto DaMatta emphasizes that the relationships of trust, would have a role of ordering the Brazilian society, because they are based on personal traits; that is, based on the biographies, acquaintance, recipients of singular treatment. Unlike societies in which individualism, characterized by impersonal relationships based on legal and formal principles—is synonymous with equality and universality before the state and law—the concept of individual gains has a negative connotation in Brazilian society. The individual represents someone without relationships, excluded and “entirely submitted to the impersonal laws and decrees and regulations that govern the masses who have no relationship” (DaMatta, 1997a, pp. 23–24). As the unit of Brazilian society is not the individual, but the relationships, that is, the family, groups of relatives and friends, the social actors’ expectation is that their problems and needs are not treated by universal and impersonal rules and laws, but as unique, that is, in a personalized way (DaMatta, 1997b). This relational basis is also called by some authors a “personalist culture” (Holanda, 1936). The emergence of this relational base is described in the figure of the “Cordial Man”, would be a remnant of the colonial structure, which did not offer an impersonal formal-legal system as an arbitrary agency. Therefore, no alternative would be in the colonial context but to conduct economic transactions based on personal relationships, which served as a basis for the development of

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trust and loyalty. Such type of relationship determines the type of rules that come into force in social and economic transactions (ibid.). A “personalistic culture” would render difficult to replace personal values with impersonal ones. In Brazil’s case, difficulties in dealing with impersonal principles would be based on the constitution of public institutions established in the Brazilian society that would carry the “mentality” of those who held public positions, based on “particular wills”, establishing themselves as the shaping element of behavior in different social layers (Holanda, 1936). Personalism, therefore, can be understood as a pattern of coexistence and control developed and transferred from generation to generation, obviously undergoing changes over time (Ferreira, 2014). This personalist and relational base can be found also today, according to Lazzarini (2011). The Brazilian capitalism itself would be an important element to understand the established interaction across private and political sectors. Thus, the Brazilian economic system itself is shaped by elements of cognitive and normative structures, which carry the fluidity of limits between public-private relations as well as the importance of personal relations and connections in this context. Political and business connections can be observed in different ways in the Brazilian context, without considering illicit forms. Indeed, the political and economic sector has several licit channels of connection, which allow the direct and indirect interference of one sector in the other, as well as access to power and influence (ibid.).

Institutional Changes and the Outside View Reports about the participation of the political and economic elites in corrupt practices and illegal campaign financing, brought by Operation Car Wash, are not new in Brazil, as they have been regularly reported for decades by social scientists, press agencies and parliamentary commissions of inquiry. The novelty brought by Operation Car Wash is a narrative on corruption elaborated from judicial instances, thus disposing of the capacity to repress traditionally tolerated behaviors (Bezerra, 2018a). According to the same author, filing charges and opening legal proceedings against the business and political elites would shift accusations of corruption beyond the political game’s own control. If the corrupt practices are not something new in Brazilian society, and therefore known by the internal agents of the political and economic sectors, and possibly by agents of the justice system too—since such practices have been “denounced” for decades by different media,

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but without becoming a matter of social daily life, as it became from the investigations that took place in the scope of Operation Car Wash—why only now have such practices denounced and “fought”? In terms of anti-corruption policy, Brazil has seen a scenario of institutional increase in the last decade, (Aranha & Filgueiras, 2016). Political changes would be triggering element for this development, according Taylor and Praça (2014), which is characterized by strengthening the institutional capacities of existing bodies, as well as the implementation and creation of new (Da Ros, 2019; Rico, 2014). Such set of external and internal administrative controls and other structures and procedures that compose the “national integrity systems” (Speck, 2002) build the “mechanisms of accountability” (Mainwaring, 2003, p. 20), playing different roles in a broader system. The constitution of 1988 would have meant the first critical juncture, characterized by the triggering of several changes in the set of competencies of the institutions that make up the accountability cycle, according to Aranha and Filgueiras (2016). The critical conjuncture is considered an exogenous factors, which provoke the addition of new rules, implying in redefinitions of competences and changes in institutional practices. This can be attributed to a greater capacity to unveil and make public different corruption scandals, which in turn have made possible conjunctures of changes in the rules that have strengthened the role played by these institutions in society (ibid.). With the unveiling of corruption in the public sector, the mechanisms of control and accountability are being strengthened (Praça & Taylor, 2014) and there is a growing spiral of institutional incrementalism with the addition of new functions for accountability institutions (Aranha & Filgueiras, 2016). The endogenous factors concern the organizational changes within these institutions. These imply changes related to the behavior of agents, who, endowed with greater autonomy, exerted control over activities and processes of interpretation of the norms that placed them as fundamental political agents of Brazilian democracy. The agents are executors, but they begin to participate in the process of creating rules and procedures, influencing the implementation of these rules and mobilizing resources for their application. They control relevant information from the public sector and choose the manner in which institutional choices will be made (Aranha & Filgueiras, 2016). Other exogenous factors are changes related to the international anti-corruption movement. In this context, international agreements, which Brazil has ratified and internalized in its legislation, have played an important role in understanding and treating crimes of corruption, money laundering, criminal organization, among others (Dantas de Araujo, 2012). The international anti-corruption movement encompasses criminal and administrative measures and norms, which have

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qualitatively modified the traditional perspective of what was understood as corruption. Although corruption continues to be treated as a moral problem to be solved through internal criminal policies, through the punishment of isolated individuals, it also becomes an administrative concern, involving concepts such as state reform, political reform, prevention, transparency and administrative sanctions. In addition, the focus to “fight” is directly addressed to groups holding high positions in the social pyramid, as well as to the “great corruption” (ibid.). The enactment of the Foreign Corrupt Practices Act (FCPA) in 1977 was the first of its kind to prohibit bribery of foreign officials, and for many years the United States was the only one to have such a law. After some failed attempts, the nations of the Organization for Economic Cooperation and Development (OECD) summit were convinced by the U.S. argument to rewrite tax rules and sanction bribery of foreign officials, signing a multilateral act in 1997 (Saglibene, 2014). Since then, international organizations such as the IMF and the World Bank have established a normative vision of good governance, and have subsequently played a key role in disseminating ideas of public administration using their influence to drive reforms (Brinkerhoff & Brinkerhoff, 2015). The implementation of mechanisms and norms of international law for the treatment of corruption reinforces republican concepts of separation between the public and private spheres, emphasizing and criminalizing in a severe way the practices which deviate from these principles. Such institutional changes not only bring improvements in the regulative and normative institutions responsible for dealing with the crime of corruption, but eventually also generate a crisis in the way to understand and interpret relationships hitherto considered as “acceptable” in the interaction across political and economic sectors. For members belonging to other social subgroups, such as ordinary Brazilian citizens, academic researchers and also law enforcers, their accessed cultural pattern does not have the authority of a tested model, because they do not share the same strong historical tradition by which it has been built, just as they are not an integral part of their biography. In that sense, law enforcers would be “[the] foreigner therefore approaches the other group as a newcomer in the true meaning of the term” (Schütz, 1971, p. 122). Law enforcers, as well as others subgroups, do not share the same knowledge structures as political and economic actors, and members of the Brazilian elites.

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Corruption: A Necessary Evil? This case study showed that even practices considered corrupt are anchored in structures of knowledge and meaning, established in societies or social subgroups. Such structures make up the collective stock of knowledge, which provides rules of interpretation and action for the actors who share the same stock (Schütz, 1971). The knowledge that compose the interpretative patterns derives from a supra-subjective framework, including guides for acting, rules, norms, etc. (Berger & Luckmann, 1967). Members of Brazil’s economic and political elites access a common cultural pattern, which orients their practices and transactions. The term cultural pattern designates all the peculiar values, institutions, and orientation systems: moral standards, laws, habits, customs, etiquette, etc. which would build a social group at a particular historical moment (Schütz, 1972, p. 118). The knowledge rooted in the cultural pattern is organized according to its relevance to the actions, and new elements are grouped and selected, thus being altered over time. Even the accessed system of knowledge appears—for outsiders—incoherent, inconsistent and only partially clear. For the members of the social group which share it, it gains an appearance of coherence, clarity and consistency, once they feel understood and recognized in their action. Every member born or raised within this group accepts the ready-made and interpretation’s pattern rooted in the cultural pattern, without questioning it. The knowledge transmitted in parts through the process of socialization becomes unquestionable and guides the situations of everyday social life, being considered as reliable “recipes” for interpretation of the world and action (Schütz, 1972, p. 121). In this context, the reconstructed collective mindsets in use by political and economic, highly ranked actors, brings elements of knowledge acquired and accessed by them, when they are confronted with problems and everyday situations related to the interaction across political and economic sectors: such as obtaining electoral funding, remaining in political power, but also how to secure the economic growth and development of economy through/and enterprises. Although this type of action causes strangeness when observed by other social groups, not socialized in the same context as the members of the political and economic elites, it is known and recognized among members belonging to the same group and therefore considered legitimate. For Berger and Luckmann (1967), as institutions are designated the establishment of a daily reality in the sense of social order—stability, predictability and regularity of interpretation’s forms, rules of action and norms, rooted in a society—which is constantly produced and

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reproduced by social actors. According that, the institutionalization’s process of knowledge stocks would play a central role in the construction of reality (ibid.). Following the sociology of knowledge approach, the ‘corrupt’ practices in the analyzed case can be understood as cognitive and normative institutions, rooted in the stock of knowledge accessed by the members of the political and economic elites. Even though regulatory institutions may generate new ‘recipes’ i.e., patterns of interpretation and action through implementation of laws and rules, which will be followed by the actors for exerting pressure, the action, in this case, informal interaction between political and economic sector, can still remain the same, deviating from the rules. Even with the development process of the Brazilian state, with its adherence to liberal principles and modernization, cognitive institutions,16 due to their anchorage in social stocks of knowledge, continue to serve as legitimate ways to interpret and justify actions.

Conclusion The analysis undertaken in this chapter showed that the corrupt practices hover over an undefined field, i.e., a “grey area”, in which the interaction across political and economic sector can be considered illegitimate and at the same time legitimate. Illegitimate, when the practices and relationships are qualified according to the key functions and positions occupied for these group within the state and economic sector. Furthermore, the “foreigners”—law enforcers—expected political leaders and economic elites to comply with liberal principles such as impersonality, formality and universality, elements that guarantee equality in the treatment and chances of different social actors. From the point of view of ‘insiders’, their practices are legitimate, because they are based on cognitive and normative institutions, rooted in the stock of knowledge in use, containing principles related to form of interaction necessary for Brazilian economic development, but also elements guiding the everyday relationships, such as acquittance, particularism, exchange, loyalty and trust. The discussions and definitions regarding corrupt practices, as a rule, incorporate the idea that they involve a form of exchange that presents singular properties, assuming that corrupt exchanges would be distinguished from other forms of

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Cognitive institutions constitute collectively accepted and shared conceptions of social reality through systems of belief and meaning, accepted as obvious, offering the actors collective schemes of interpretation and action (Scott, 2001, 2003).

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exchange-mercantile or present-effects within society. However, this work suggests that the corrupt relationship in obtaining material resources is based on webs of relationships, based on trust and loyalty and established for a long time, and on social mechanisms such as the exchange of favors and gifts, widespread in the Brazilian society. Seen from the angle of modernization theories, corruption is linked to stages of development, suggesting the idea of dysfunction within social systems, which is responsible for the reproduction of a type of predatory social structure, configured by the use of illegal behavior (Eisenstad, 1968). The phenomenon of corruption would therefore be more evident in societies little developed in relation to the criteria of modern capitalism. Thus, societies whose structure is characterized as traditional, the phenomenon of corruption would be, in essence, the very norm (Merton, 1970). A broad scenario of corruption would also define societies with low political institutionalization (Filgueiras, 2006). Thus, societies imbued with modernization, but with low political institutionalization, would be more subject to corruption practices, because between modernization and institutionalization, there would be a political gap, in which corruption occurs, enabling an action oriented to obtaining goods and illegal advantages (Scott, 1969). Would the corruption problem in Brazilian society then be a matter of low level of modernity? Examining the phenomenon of corruption disconnected from normative theories of law is a difficult task, since this perspective dominates the major part of academic disciplines (Filgueiras, 2006). Understanding corruption is imbued with the positivist approach, which considers it as an act of individual, moral and ethical deviation. This hinders other forms of explanation of the phenomenon. This draws inspiration in its analysis of ‘corrupt practices’ from others perspectives such as hermeneutic. From the perspective of anti-corruption policies, the results of the analysis on the corrupt interaction permits to understand, why the implementation of new mechanisms and enactment of laws alone cannot stop the problem of corruption. The regulative changes should be interlaced with changes on the cognitive and normative institutions. This can ensure that changes on the regulative spheres could reach the cognitive and normative ones.

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Mainwaring, S. (2003). Introduction: democratic accountability in Latin America. In M. Scott & W. Christopher (Eds.), Democratic accountability in Latin America (pp. 3–33). Oxford University Press. Mancuso, W. P. (2020). The incomplete transition: A review of the recent changes in Brayil‘s electoral financing model. In M. Pohlmann, G. Dannecker, & E. Valarini (Eds.), Organization, Management and Crime - Organisation, Management und Kriminalität. Bribery, Fraud, Cheating: How to Explain and to Avoid Organizational Wrongdoing (1st ed., pp. 121–144). Springer Fachmedien Wiesbaden. Merton, R. K. (1970). Sociologia: Merton RK (1970): Teoria e Estrutura. Mestre Jou. Michener, G., & Pereira, C. (2016). A great leap forward for democracy and the Rule of Law? Brazil’s Mensalão Trial. Journal of Latin American Studies, 48(3), 477–507. https://doi. org/10.1017/s0022216x16000377. Oevermann, U. (2001a). Die Struktur sozialer Deutungsmuster: Versuch einer Altualisierung. Sozialersinn, 1, 35–81. Oevermann, U. (2001b). Zur Analyse der Struktur von sozialen Deutungsmustern. Sozialersinn, 1, 3–33. Pohlmann, M., Bär, S., & Valarini, E. (2014). The analysis of collective mindsets: Introducing a new method of institutional analysis in comparative research. Revista De Sociologia E Política, 22(52), 7–25. Praça, S., & Taylor, M. M. (2014). Inching toward accountability: The evolution of Brazil’s anticorruption institutions, 1985–2010. Latin American Politics and Society, 56(2), 27–48. Rico, B. (2014). O Papel do Controle Interno no Combate à Corrupção: A Experiência da Controladoria-Geral da União no Executivo Federal Brasileiro. In J. Á. Moisés (Ed.), O Congresso Nacional, os Partidos Políticos e o Sistema de Integridade. Konrad Adenauer Stiftung. Saglibene, D. (2014). The U.K. Bribery Act: A benchmark for anti-corruption reform in the United States. Transnational Law & Contemporary Problems, 23(119), 119–145. Schütz, A. (1971). Gesammelte Aufsätze: Das Problem der sozialen Wirklichkeit (Bd. 1). Springer Netherlands. Schütz, A. (1972). Der Fremde: Ein sozialpsychologischer Versuch. In A. Schütz (Ed.), Gesammelte Aufsätze II: Studien zur soziologischen Theorien (pp. 53–69). Marinus Nijhoff/Den Haag. Scott, J. C. (1969). Corruption, machine politics, and political change. American Political Science Review, 63(4), 1142–1158. Scott, W. R. (2001). Institutions and organizations. Thousand Oaks. Scott, W. R. (2003). Institutional carriers: Reviewing modes of transporting ideas over time and space and considering their consequences. Industrial and Corporate Change, 12, 879–894. Speck, B. W. (2002). Caminhos da Transparencia: Análise dos Componentes de um Sistema Nacional de Integridade Campinas. Editora Unicamp. Valarini, E. (2018). Management in Brasilien. Karriereverläufe und Handlungsorientierungen im Zuge der Globalisierung. Springer VS. Versiani, F. R. (1987). O Impacto de Keynes no pensamento econômico latino-americano. Análise Econômica, 6, 39–47.

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Elizangela Valarini is a Postdoctoral researcher and Assistant Professor at Max-WeberInstitute of Heidelberg University, from where she holds a Master’s degree and Ph.D. in Sociology. She is a member of the research group HeiGOS (Heidelberg Research Group for Organization Studies) and coordinates the research project Corporate Crime and Systemic Corruption in Brazil (funded by DFG – FAPESP). She studied Psychology at the Universidade Estadual de Maringa (UEM), Brazil. Her research areas span organizational sociology, the sociology of management, and economic sociology, and themes related to Brazilian economic and political development.

Fighting Criminal Corruption in Brazil: Its Potential Effects on the Electoral Arena Fabiana Alves Rodrigues

Introduction The debate about corruption in Brazil has been on the agenda of major newspapers and magazines and also fills an extensive amount of time on radio and TV news. It has functioned as a banner of competition between politicians and parties. For some time, it has been taking many academics to delve not just into causes and consequences of corruption, but also into processes and institutions related to the struggle against corruption. In recent years, part of the research on the accountability1 institutions in Brazil has come to recognize the strengthening of control institutions that occurred since the 1988 Constitution, mainly at the federal level, but the conclusions further pointed out the poor performance of the federal judiciary concerning criminal punishment for political corruption (Power & Taylor, 2011).

1

The concept of accountability refers to the ability to ensure that public agents are accountable for their conduct, justify and inform the decisions taken, and the possibility of punishment for deviations. It operates through elections (vertical) and is complemented by constant control by the media and civil society (social), in addition to that exercised through the network of interstate agencies to ensure that the performance of public agents is following the constitutional and legal framework (horizontal).

F. A. Rodrigues (B) University of São Paulo, Sao Paulo, Brazil © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_6

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Lava Jato Operation2 took this debate to an unprecedented level in the country, given the impressive results it achieved and for generating extra-procedural effects that challenge opinions on several disputes in different social sectors. Between 2014 and January 2020, 113 complaints were filed in the Federal Court of Curitiba alone, after 68 operations through which 1,302 search and seizure warrants and 327 precautionary arrests warrants were carried out. Out of the 484 people accused, 159 have already been sentenced in the second instance, including executives from large companies and middle and high-ranking politicians. The branches of the operation reached other Judiciary instances, including the Supreme Federal Court, where 126 people have already been accused, and 183 cooperation agreements have been ratified (Brazil, 2020a). This massive block of criminal procedures, which is part of one of the most extensive anti-corruption operations in the world, reached executives from major Brazilian/national contractors such as Camargo Correa, OAS, Andrade Gutierrez, and Odebrecht. It also reached several financial operators that led to the location of intense movement of funds in other countries. Furthermore, it arrived at parliamentarians linked to large political parties such as PP, PTB, PMDB and PT, former governors of Rio de Janeiro (PMDB) and Paraná (PSDB), and even the arrest and conviction of the former President Lula (PT), with charges of corruption, something unprecedented in the republican history of the country. In the academic world, some studies consider that the advances in the fight against corruption led by the justice system and other supervisory bodies have played a decisive role and helped to consolidate beliefs and institutions that are favorable to democracy, and not contrary to it (Alston et al., 2016). Other studies ponder that Lava Jato Operation and the Mensalão case3 are a watershed 2

Lava Jato Operation is the largest Brazilian initiative to fight corruption and money laundering. It encompasses dozens of investigations and criminal actions on embezzlement of public resources involving financial operators, large national companies, notably in the construction business, and middle and high-ranking politicians. The first and foremost unit of the operation focused on deviations linked to Petrobras, a state-owned oil company, but there were dozens of developments for other state agencies. The name Lava Jato was used from the identification of a gas station used for illicit financial transactions, which led to the “jet wash” pun as a reference to the high dimension of the volume of resources involved, something large enough to wash a jet. The English translation loses its original meaning, because “lava jato” in Portuguese can mean “jet wash” or “car wash”. 3 The Mensalão case was a criminal action whose object was an alleged scheme of bribes paid monthly—hence the nickname “monthly fee”—to federal parliamentarians to vote in favor of the government, then chaired by Luiz Inácio Lula da Silva, of the Workers’ Party. The criminal action was brought before the Federal Supreme Court against 40 people, including parliamentarians from PT, PTB, PP, PL, and PMDB. The Court took almost two years for the

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that represents advances for Brazilian democracy. These studies consider that the courts showed a willingness to challenge the ruling party, arrest large business people and indicate that corruption as a modus operandi will no longer be tolerated in the political process (Taylor, 2017). On the other hand, studies such as those by Avritzer and Marona (2017) and Oliveira and Couto (2016) elaborated criticisms of justice’s politicization. Like Kerche and Feres Jr (2018), there are still others who pointed out the contradictions and limits of the Lava Jato Operation itself. Avritzer (2016, 2019) not only criticizes the excesses committed by agents of the justice system, but he also discusses how the politicization of justice contributed to the impasses of Brazilian democracy. Even further, if considered the pendular movement that would characterize our political regime, this politicization could be regarded as a factor responsible for the regressive inflection that marked the last few years. The criticisms formulated by Schilling and Koerner (2018) follow the same path, since they identified the selective and aggressive use of accusations of corruption, handled as tools of political struggles, as one of the factors that end up preventing the expansion of transparency in governmental decision-making processes, considering it blocks public debate about political reform and the assessment of best ways to control corruption. This chapter does not intend to participate in this dispute. Instead, it presents an analytical frame of the main gateways into system interference by the federal criminal justice on the electoral chessboard. These gateways primarily implicate the Judiciary’s scope in criminal control of high-level corruption, which does not have precise control mechanism to prevent the criminal process from being used as a tool to influence the electoral arena. This gray area in the justice system’s behavior makes it challenging to recognize illegalities practiced by its actors, which, in turn, attributes more relevance to the identification and systematization of this type of behavior. We present this analytical framework based on the identified evidence of strategic action by the agents involved with Lava Jato Operation. However, we do so without indicating a causal relationship between Lava Jato and the scenario of electoral competition in Brazil. The evidence is presented as examples illustrating the analytical framework proposed in this chapter, such as the general characteristics of the operation and some specificities of the charges involving former President Lula, who was excluded from the 2018 presidential election due to the conviction at Lava Jato.

main trial and appeals phases, in 69 plenary sessions that received high media coverage and led to the conviction of 24 people.

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A previous work on the Lava Jato Operation (Rodrigues, 2019) is part of the analysis exposed in this chapter. That work explicitly presented a dense research on the working structure of the operation in the Federal Court through the analysis of the processing of 144 criminal actions in the units of Curitiba, Rio de Janeiro, and Brasília, established between April 2014 and December 2018, when 96 ostentatious phases of police operations took place to comply with 1,860 search and seizure warrants and 493 arrest warrants. With this analysis, we concluded that the results of Lava Jato were achieved by the combination of institutional improvement and learning, added to the voluntarist strategic action of the actors of the justice system. The relevance of these themes goes beyond national borders, given the existence of a recognized movement for the internationalization of Criminal Law (Machado, 2004; Cordini, 2018), which finds reflexes in the fight against money laundering and corruption, with potential effects on electoral competition. Moreover, even in changing the balance of political and party forces. Three sections compose this chapter, besides this introduction. Section 2 presents a brief description of Federal Justice in Brazil and its process of institutional construction. In Sect. 3 we present the main elements of the Brazilian institutional framework that gives potential interference action by the criminal justice system in the electoral scenario, divided into four categories: administrative autonomy; institutional competences; the jurisdictional activity of interpreting and applying laws; and deficiency in the checks and balances mechanism. The last section brings some final considerations.

Federal Justice in Brazil The specialization of the justice branches in a structure that reflects the federal system characterizes the Brazilian Judiciary organization. This specialization involves a complex division of powers between the courts. In addition to common justice (federal and state), there are three specialized justice segments (labor, electoral, and military). Except for military justice, the other branches have regional appeal courts, overlaid with higher courts that, in addition to some specific competences, have the function of standardizing the law’s application in each of its branches. The Supreme Federal Court overlaps the entire structure of the Judiciary, with several original and appeal powers, and exercising the function of Constitutional Court. Figure 1 shows a simplified organization chart of the Brazilian Judiciary,

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Supreme Federal Court

Superior Court of Justice

ESTATE

FEDERAL

27 State Courts

5 Regional Federal Courts

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Superior Labor Court

27 Regional Electoral Courts

24 Regional Labor Courts

Electoral Judges

Labor Judges

Superior Military Court

Military Judges

Fig. 1 Organigram of the Brazilian Judiciary. Notes:(1) State and Federal small claim courts are not included, which are competent to judge small value cases and infractions of less offensive potential. Also not included are Military Courts of Justice in 3 states and Councils of Military Justice in 27 states

with common justice on a white background and specialized courts on a gray background. Federal Justice has gone through a long, but discontinuous process of institutional construction and development. Introduced in the passage from the Monarchy to the Republic in 1890, the Federal Court was subsequently abolished in 1937. It was recreated by the post-1964 military regime and maintained by the 1988 Constitution. The 1988 constitution expands and decentralizes the Federal Justice, divided into five regions with its respective Federal Regional Courts, operating as courts of appeal. Federal Courts had 376 units in 1998, but increased to 743 in 2008 and reached 988 units in 2016 (Brasil, 2019a). The forms of selection and entry into the federal judiciary have also undergone significant changes since the Federal Justice creation. The initial selection process made by the President of the Republic, which was eminently political, was gradually replaced by selection through public tenders. Law 5.010/66, which even today presents the institution’s primary statute, started to provide that admission

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to positions should be preceded by a public exam of tests and titles, with participation of the Brazilian Bar Association (Ordem dos Advogados do Brasil – OAB).4 However, the first appointments still followed the President of the Republic’s rite of choice, with approval by the Federal Senate, by express provision in the transitional constitutional dispositions introduced by Institutional Act No. 2, of October 27, 1965.5 After seven national public tenders for judges held between 1972 and 1987, each Federal Regional Court (Tribunal Regional Federal – TRF) started to hold its selection to fill judges’ positions (Freitas, 2004). Since then, each Federal Regional Court has held 14 to 19 regional public tenders (Brasil, 2020b). Public tenders’ existence does not mean that the doors to political influence in the selection of new judges have been closed. In addition to filters resulting from the need to graduate in law, a course that only recently had a significant expansion in the country,6 some public tenders foresaw an interview behind closed doors with subjective questions. This practice occurred even after the edition of the Resolution of the National Council of Justice no. 75 of 2009, which provides an oral test in a public session to discuss technical knowledge (Haidar, 2012). Furthermore, a fifth of the Federal Regional Courts vacancies is aimed at lawyers and members of the Federal Prosecution Service (Ministério Público Federal – MPF7 ), which gives scope for eminently political choices, since the 4

Brazilian Bar Association is a federal agency that exclusively performs registration and selection of law graduates qualified to practice law in the country. 5 This was the second institutional act issued by the military dictatorship, which lasted from 1964 to 1985. The normative act signed by Marshal Castelo Branco transferred to the National Congress the power to elect the president of the republic and expand the powers of the president, extinguishing the political parties then in existence and transferring political cases against civilians to military justice. 6 According to Silva (2000), between 1891 and 1925, the first private courses (“free colleges”) in Law were created, in Bahia, Rio de Janeiro, and Belo Horizonte, since until then only São Paulo and Olinda/ Recife were based the courses that inaugurated legal education in the country under imperial government. The author points out that, in 1962, after the first expansion process started in 1945, 60 Law courses started to operate, a number that increased to 122 in 1974 and 130 in 1982. The data released by the National Institute of Educational Studies and Research Anísio Teixeira - INEP, indicate an intense expansion process from the mid-1990 s. The number of courses went from 235 in 1995 to 442 in 2000, 1,091 in 2010, and 1,172 in 2015. The number of students enrolled in the Law degree, which was 215,177 in 1995, increased to 694,447 in 2010 and reached 853,211 in 2015. Available at: . Accessed on: 23 jun. 2019. 7 We chose to translate the names of institutions and public offices as indicated by the Federal Prosecution Service (Ministério Público Federal - MPF). At the first instance of each of these

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only objective criterion is the requirement of ten years of experience, and the President of the Republic makes a choice. This choice occurs within a list of three candidates drawn up by the Federal Regional Court members, who select them from a list of six names presented by the representative body of the lawyers and Federal Prosecutors (Procurador da República) (Article 94 of the Federal Constitution). There was a considerable expansion of the Federal Justice’s criminal action in the 1988 constitutional regime, all of which are provided for in Article 109 of the Constitution. The provision contains a general clause referring to any crimes committed to the Union’s direct detriment, its autonomous government agency, and public companies. The other competences involve indirect interests of the Union, related to a national character’s political issues or that involve state sovereignty, which includes crimes against the national financial system and crimes provided for in international treaties or conventions that were partially committed in the country. The influence of the Federal Court’s competence design on its participation in political conflicts has been little studied. Indeed, the existence of public tenders since 1972 is a relevant factor for the current situation to differ significantly from that existing during the First Republic (1889 to 1930), in which the choice of judges opened space for negotiations between Justices (Ministros) of the Supreme Federal Court, the oligarchies state and the President of the Republic. They made choices to ensure control of federal positions by the dominant oligarchies of the states described by Koerner (1998). Besides, factors relevant to defining the participation of the Federal Justice in political conflicts, such as the competence to judge political crimes and the recurrent use of federal interventions, lost space in the constitutional regime after 1988. However, extensive criminal operations, involving corruption of the political class can produce significant effects on the political game board, either due to the existence of rules that provide for cases of ineligibility as a result of criminal convictions or due to specific characteristics of the institutional design that confer agenda power and margin of discretion in the management of criminal cases by the Courts. In the last decades, Brazil has experienced an essential institutional development concerning the fight against corruption, notably at the federal level. The

terms, we will present the original term, followed by the official acronym, if there is one. To access the list of official translations as presented by the Federal Prosecution Service, cf. http://www.mpf.mp.br/atuacao-tematica/sci/dados-da-atuacao/links-tematicos/traducoesoficiais-do-mpf. Accessed on: 30 jul. 2020.

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country went through the creation and improvement of several agencies that operate in the network of accountability institutions, such as the Comptroller General of the Union (Loureiro et al., 2012) and the Federal Court of Accounts (Tribunal de Contas da União—TCU) (Speck, 2011), in addition to the Federal Police and the Federal Prosecution Service (Arantes, 2007, 2011a, b; Sadek, 2012). The Federal Justice was not left out of this scenario of improving the institutional anti-corruption repertoire, since there was an expansion of its physical and material structure and the implementation of several measures with the potential to expedite criminal investigations and procedures. Emphasis is given to the training of human resources, specialization of judicial bodies, intensification of control over the duration of processes, and the development of various technological tools aimed at analyzing financial data and streamlining investigations and criminal actions. The Lava Jato operation, recognized as the most massive anti-corruption operation in the country, some say in the world, comes after this long process of institutional improvement, not only from the Federal Justice but from the other federal institutions involved with the monitoring and investigation of acts harmful to public coffers. However, these institutional advances are not enough to explain the impressive results achieved, unprecedented not only by the figures involved but also by the high number of people investigated and convicted, including great business people and high-ranking politicians. The actors’ extreme voluntarism in the justice system, including and especially in the Federal Justice, was an essential factor for the cases to be processed before a court that had unique characteristics that ensured the priority handling of some pivotal processes. This was part of a strategy that suggests the purpose of obtaining cooperation agreements from major entrepreneurs to achieve the punishment of members of the political class, with the ultimate target of former President Luiz Inácio Lula da Silva (Rodrigues, 2019). This voluntarist action may suggest the possibility of selective interference by the Judiciary in the electoral arena in an almost surreptitious way, or with hard identifiable potential illegality, either due to the performance linked to the subjectivity margins in the application of legal rules, either by the non-uniform exercise of administrative powers of the courts or by deficiencies in the control mechanisms.

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Institutional Design: Opening for Interference of the Criminal Justice System in the Electoral Competition The Brazilian institutional design encompasses some legal institutes that give the criminal justice system the power to exclude actors from electoral competitions temporarily. The definitive sentence for crimes against the public administration to penalties equal to or greater than one year implies the loss of public function or elective mandate. Besides, Complementary Law 64 of 1990 started to establish ineligibility for three years, as a consequence of the definitive criminal conviction for several crimes, among which crimes against the public administration and the financial market. In 2010, the legal text was hardened, with the imposition of ineligibility for eight years in convictions involving a long list of crimes and the anticipation of these effects on the decision rendered by a collegiate body, even without final judgment. Within the expanding Brazilian scenario of sizable anti-corruption operations, the rules that allow the exclusion of politicians from the electoral competition with second-instance criminal convictions give actors in the criminal justice system the authority to select which political actors will be excluded within the electoral calendar. This selectivity is possible. There is evidence to suggest its occurrence in Lava Jato Operation, by directing criminal cases to courts with higher state capacity to speed up proceedings or increase this capacity without following criteria that ensure uniformity of criminal control in the country. The main aspects of institutional design that open the door to this selective interference involve administrative autonomy, rules on competence, subjectivity in applying laws, and deficiencies in the checks and balances mechanisms. Table 1 summarizes the characteristics of the institutional design associated with each of these categories and their potential effects on the electoral arena, which will be addressed throughout this chapter.

Administrative Autonomy The Federal Regional Courts enjoy administrative autonomy to define several endogenous rules that greatly influence the state’s judicial units’ capacity to act more quickly and efficiently in criminal cases. The courts’ governing bodies have

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Table 1 Analytical framework of the reflexes of criminal activity in the electoral scenario Categories

Institutional Design

Potential effects

Administrative autonomy of the courts

Specialization of Courts

Absence of national uniformity in the efficiency of high-level corruption control

Temporary change in process distribution rules Temporary changes in the allocation of human resources

Jurisdiction

Direct electoral reflexes of Loss of mandate if the criminal conviction sentence is equal to or greater than one year Ineligibility after second instance conviction

Interpretation and enforcement of laws

Deficiency in the checks and balances mechanisms

Preponderance of Federal Justice

Federal control over state and municipal politicians

Reach of rules regulating the connection between processes

Selectivity and lack of uniformity in the effectiveness of control over politicians

Ambiguity and vagueness Lack of uniformity in the of criminal norms treatment of investigated politicians Normative deficit of legal institutes

Modeling of institutes with mitigation of controls over the legality and selectivity of judicial activity

Instability of judicial interpretations

Selectivity in the control exercised over politicians

Absence of rules on choosing priorities in investigations

Selectivity in control over politicians Non-traceable illegalities practiced by the justice system actors

Inadequate controls over informal mechanisms for international cooperation Lack of rules on the pace of criminal investigations and actions

(continued)

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Table 1 (continued) Categories

Institutional Design

Potential effects

Deficiency in the control of judicial impartiality Deficiency in the control over selective disclosure of ongoing processes Source: prepared by the author

the authority to define when and how the specialization of courts8 takes place and the criteria for the distribution of cases of the judicial units responsible for sensitive cases involving high-level corruption.9 The exercise of this selective administrative autonomy occurred in Lava Jato Operation through the edition of successive normative acts by the Federal Regional Court of the 4th Region, with effect from December 19, 2014, which allowed the judge responsible for Lava Jato in Curitiba only receive processes related to the operation, as there was a suspension of the distribution of other cases, which was expected to last at least until February 5, 2020. The normative acts do not indicate which criteria were used to support the decision. The Rio de Janeiro court received temporary reinforcement from officials and the assistance of a second judge and the temporary suspension of the distribution of cases not linked to Lava Jato, also without public record of the criteria that guide the changes. These measures in search of efficiency were not replicated in the Court of São Paulo, which received the first Lava Jato cases (3rd Court) and had a collection of lawsuits in progress well above that of its counterparts. Figure 2 shows the history of processes distributed annually in the courts responsible for Lava Jato, between 2014 and 2019, while Fig. 3 shows the balance

8

The specialization of federal courts in Brazil began in 1985 and followed a non-uniform trajectory, whose characteristics suggest that specialization arises from adjustments to the volume of cases that reach the Federal Court doors. The courts specialized in financial crimes and money laundering were installed in the Federal Court units of the state capitals in 2003. Subsequently, this movement of specialization was encouraged by international mechanisms of constraint to the implementation of measures to combat money laundering and corruption, such as FATF, under the G7, and MESICIC, under the Organization of American States. 9 The decision on the specialization of courts rests with each of the five Federal Regional Courts, reaffirmed in the laws that created new courts starting in 1999.

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2000 1800 1600 1400 1200 1000 800 600 400 200 0 2014

2015

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2018

13th Paraná Court

7th Rio de Janeiro Court

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2019

Fig. 2 Processes distributed annually. Source: TRF2, 2020; TRF3, 2020; TRF4, 2020. Graph by Author

1600 1400 1200 1000 800 600 400 200 0 2014

2015

2016

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7th Rio de Janeiro Court

3th São Paulo Court

6th São Paulo Court

2019

Fig. 3 Proceedings in progress in December. Source: TRF2, 2020; TRF3, 2020; TRF4, 2020. Graph by Author

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of processes pending each year. In São Paulo, the first accusations of embezzlement and fraud in biddings were with the 3rd Court, while the 6th (specialized) Court received the cases that contained money laundering charges. Understanding the differences between the judicial units would require a more in-depth study of the nature of the cases and the history of these units, but the data show little uniformity between the courts that received Lava Jato cases. The adaptations made by each court are not based on national rules that contain general parameters to be used to determine whether a case should receive priority treatment and for how long. Nor are there any rules ensuring national uniformity in the use and effectiveness of the Public Prosecution and Federal Police task forces formed at the beginning of the investigations. These task forces present very different characteristics among the various operation cores, whether concerning participants’ number, whether regarding the regime of dedication to cases (Souza, 2019). The Curitiba unit had a structured and harmonious task force from the Federal Prosecution Service and the Federal Police. Several members of this task force shared experience in a team formed for a significant financial crime operation in the first half of the 2000s, called the Banestado case.10 The first Brazilian cooperation agreement was signed in the process of this case, and there was intense international cooperation with the United States. About ten years after the Banestado case, cooperation agreement and international legal assistance were essential tools for the results achieved by Lava Jato Operation in Curitiba, which possibly relied on the experience of the actors in the justice system who centralized cases related to Petrobras in the Court of Curitiba, where judge Sérgio Moro conducted the two operations. The ad hoc change of rules on the distribution of cases is able to transform aspects related to the state capacity of judicial units with the potential to undermine the rule of equality in the treatment of actors in the political system. This potential is notable in cases where politicians are competing in the electoral arena, while they are subject to investigations and criminal actions pending before different Federal Justice units in the country. The temporary suspension of the receiving of new cases by a particular judicial unit, for example, reduces the backlog of cases and allows higher speed in the handling of cases in progress. The administrative autonomy to define which judicial units will receive this type of priority treatment transfers to the courts’ 10

The Banestado case was the subject of investigations and criminal procedures related to alleged illegal remittances abroad of more than US $ 120 billion. Approximately 24 billion would have been remitted through the use of non-resident accounts (called CC5) held in several banks. However, especially at the Banco do Estado do Paraná (Banestado).

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governing bodies an agenda power that is beyond the control of the political class. This autonomy also enables the judicial units to define which politicians investigated by the criminal justice system will be subject to faster criminal actions, anticipating the effects of eventual convictions that make participation in the elections unfeasible.

Jurisdiction (Competences) The Brazilian institutional design involves a complex federative model that combines centralization and decentralization elements in intergovernmental relations (Almeida, 2005; Viana et al., 2002). In a very simplified way, it can be said that there is a concentration of tax collection in the hands of the Union, with provision for several mandatory transfers of revenues to states and municipalities, to which are added several mechanisms for voluntary transfers of federal funds for carrying out works and provision of public services. As we have seen, the Federal Court is competent to judge crimes that violate goods, services, or interests of the Union, its autonomous government agency, and public companies. This institutional frame brings the Federal Court counters several investigations and criminal actions involving the corruption of politicians from the municipal and state spheres. If the diverted funds include federal transfers, the Union’s interest becomes a prime criterion for defining the competence of the Federal Court, which becomes a decisive element in the definition of the actors who are excluded from the electoral competition. Furthermore, even if there are no federal resources involved, acts of corruption at the state or municipal level can be transferred to the jurisdiction of the Federal Justice if the actors in the justice system understand that these illegal acts were carried out in the same factual context of federal crimes, which, in legal jargon, means the connection between crimes. For example, this can occur if it is stated that the acts of state corruption are connected with the federal crime of undeclared maintenance of assets abroad (evasão de divisas) or with transnational money-laundering acts, considered federal crimes by the forecast in international treaties signed by Brazil. This was one of the grounds pointed out by the Federal Court of Paraná to embrace the entire operation that has state corruption crimes at its core since Petrobras is not a public company, but a mixed-capital company. The rules that describe the cases of connection do not provide metrics that allow uncontroversial solutions. The main rule used to justify the concentration of the cases of a significant operation before the same court authorizes this

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unification when “the proof of an infraction or any of its elementary circumstances influences the proof of another infraction”, what is designated as evidential connection. The evaluation of an evidence relevance in one process for its use in another involves analysis with a high degree of subjectivity since it presupposes the meaning that the actors attribute to documents and testimonies that are considered evidence. The Brazilian case illuminates this opening for selectivity based on the design of competences, notably because of the potential to be manipulated by the justice system actors without leaving traces of illegality. This type of expansion of the Federal Court jurisdiction occurred in the Curitiba unit of the Lava Jato Operation, which embraced state crimes of corruption practiced in the national territory by Petrobras managers. Such crimes would be the responsibility of the State Justice of Rio de Janeiro, headquarters of the state-owned company. However, they remained under the federal baton because there was recognition of a connection with money laundering crimes allegedly practiced with transnationality. There was also recognition of an evidential connection between the 124 charges filed between March 2014 and March 2020. In cases where the alleged evidential connection exists, the procedural law provides that the unit of Federal Court responsible for the cases is the one where there was the consummation of the most severe crime and, if there are several with the same seriousness, jurisdiction is defined by the location where most crimes occurred. The complaints presented in the Federal Court of Curitiba do not specify the places where all crimes were consummated. However, it seems reasonable to assume that several of them occurred in Rio de Janeiro, Petrobras headquarters, and in São Paulo, the country’s financial center and headquarters of the most significant part of the contractors involved in the alleged deviations. This assumption is compatible with the police report’s content on the fulfillment of the first ostensive phase of Lava Jato, where it can be seen that most of the addresses dealt with are in the cities of São Paulo and Rio de Janeiro.11 Does the Federal Court in Curitiba has complied with these rules? It is not known because the decisions hide the place where the crimes were consummated. They only show it in the rare instances presenting a fact that occurred in a city under the jurisdiction of that court, which sometimes does not even have relevance in terms of the consummation of the crime, as the location of some of the various works contracted by Petrobras (Refinaria Getúlio Vargas).

11

cf.: Lava Jato Operation report, available at: . Accessed on June 9 2020.

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In almost all criminal cases, the jurisdiction of the Federal Court in Curitiba was challenged. However, all were denied by the decisions of Judge Sérgio Moro, responsible for Lava Jato in Paraná until he assumed the post of Minister of Justice in the Jair Bolsonaro (PSL) government, which defeated PT in the second round of the 2018 elections. These decisions are not subject to appeal in the criminal action course, as allegations of incompetence must be formulated at the end of the action, to be considered in the appeal. The first trial of an appeal that considered the issue of jurisdiction occurred when there were already ten cases judged in the first instance, including people serving sentences provided for in cooperation agreements. In addition to the contested decisions omitting the location of all criminal facts, the division of the operation into several criminal actions made it difficult for the courts to measure the number of related crimes practiced in each city, adding to the high political cost that would be assumed when a court reconsiders a conviction within an anti-corruption operation that has broad popular support. It is also noteworthy that the procedural law provides that, even if the judge recognizes the presence of a connection, the separation of cases will be optional “when, due to the excessive number of accused and not to prolong their provisional detention, or for another reason relevant, the judge considers the separation convenient.” The money laundering law also gives the judge the prerogative to decide whether to unify the processing and judgment of money laundering charges and previous crimes. This rule provides a highly subjective margin for the judge to decide whether related cases will remain under the same court, as there are no objective parameters to establish the meaning of “relevant reason”, in addition to the almost arbitrary decision to separate the charges of money laundering from previous crimes. The activity of the justice system that makes use of this wide margin of subjectivity can produce highly selective results in the criminal control of highlevel corruption since there is no uniformity in the administrative structure of the various federal courts, nor of the federal bodies dedicated to investigations (Federal Police and Public Prosecution). The differences in the results of criminal control, possibly associated with regional differences in the state capacities of the courts and the institutions involved in the investigations, appear when the three main units of Lava Jato are compared: Curitiba, where the operation began and which centralized the cases related to Petrobras, a state company linked to the federal government; Rio de Janeiro, which included investigations into embezzlement in public works from the state government of Rio de Janeiro; and São Paulo, where investigations are

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underway on embezzlement in road works by the state government where the country’s financial capital is located. Table 2 presents some relevant information about these three units of the operation. The data on the respective task forces refer to their creation and the initial number of public prosecutors who made up the task force. For each of the operation’s units, the results produced regarding the number of phases of police operations, the complaints presented, and the trials at the first (sentences) and second levels (appeals) are also indicated, all of those within two years and six months of the creation of the respective task force. The processes of Lava Jato Operation related to the alleged embezzlement of Petrobras—which occurred while the PT occupied the federal government—were kept jointly in one of Curitiba’s federal courts. This court uses entirely digital processes since 2010, while the courts of São Paulo initiated the digitization process in 2019, and the Court based in Rio de Janeiro had a tortuous trajectory in the choice of the electronic platform to be adopted, until reaching the digitization of new cases in June 2018. The solution for the unification of processes in the same court with a cohesive task force was not replicated in the units of Operation Lava Jato created for the cases of deviations involving road works in the state of São Paulo—which occurred while the government was occupied by PSDB, a historic rival of the PT. In addition to the difference in the structure of the task forces, they opted for the separation between the money laundering processes and the previous crimes, which were presented to two different courts in the Federal Court of São Paulo (6th court for money laundering crimes and third court for crimes of embezzlement, bidding fraud, and others). The criminal justice system in São Paulo, using the margin of subjectivity to determine the unification of related cases, has ceased to follow the recipe for success of the Curitiba court, which has implications, especially for the speed with which governments of different parties will face the results of criminal proceedings. These factors possibly help to explain why the Lava Jato unit in Curitiba filed the first accusation against former President Luiz Inácio Lula da Silva in just two years and five months after the creation of the task force, while in the same term the unit of São Paulo did not reach any political leadership linked to the state government.

Road Works

Rio de Janeiro

São Paulo

Source: prepared by the author

Petrobras

Road Works

Curitiba

Main Object

Lava Jato Operation Unit

PSDB

PMDB

PT

Government Party

Jul./2017

Jun./2016

Apr./2014

Creation

Task Force 10 4

3

35 6

29

8

43

53

Complaints

Results in 2 years and 6 months Initial Formation Police Operation

Table 2 Differences between the three main units of Lava Jato Operation

2

16

22

Sentences

–

1

3

Appeals

170 F. A. Rodrigues

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Interpretation and Application of Laws According to Mahoney and Thelen (2010), the ambiguity created by laws and regulations gives political actors ample discretion in implementing and applying formal rules, which guarantees them the space to act without technically violating the law. This same reasoning can be applied to the analysis of the Judiciary’s behavior in the exercise of high-level corruption control activities. We found potential gateways for criminal cases processing with masked purposes of interference in electoral competition in at least two situations: semantic vagueness of legal text and a legislative deficit of legal institutions. From a legislative point of view, the performance of the criminal justice system operators moves from the unambiguous legal prohibition of practicing a particular action to the mandatory behavior. Between these two extremes, there is a wide range of possible behaviors, which include some gray areas on the fence or imposition and a residual field of authorized but not imposing behaviors. Pre-procedural detention stands out as one of the most relevant tools used in sizable operations to combat Brazil’s corruption. It is difficult to deny its ability to generate reputational damage to politicians who are fighting for positions in the scenario of electoral competition, especially when accompanied by the disclosure that the politician subject to the arrest warrant is being investigated for participating in a criminal organization focused on the practice of acts of corruption. Brazilian prison legislation provides four categories of risks that authorize preprocedural arrest, defined in the following terms: the guarantee of public order, guarantee of economic order, convenience of criminal instruction, and ensuring the application of criminal law (articles 312 and 313 of Criminal Procedure Code). The semantic vagueness of the terms used by the law makes it opportune to appropriate the teachings of Sartori (1970) on the abstraction ladder in forming concepts and their quantification. According to the author, the concepts have different levels of abstraction, which increase as the set of properties that determine the things or situations to which the word applies is reduced, that is, more abstract concepts make use of terms that denote more comprehensiveness and amplitude, with loss of precision. If applied the reasoning behind the analytical model of Sartori (1970), it can be said that the high level of abstraction of the terms used in the law confers a wide range of classes of facts that conform to it. Moreover, insofar as judicial decisions do not follow scientific methodologies, the breadth of possibilities given to the justice system can easily be managed with rhetorical arguments, including the appropriation of the judge’s moral choices.

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Table 3 Number of warrants issued in the ostensible phases in 2 years and 6 months (grand total and average per phase) Federal Justice Unit

Pre Trial Detention

Temporary Arrest

(n. of phases)

Search and Seizure

Curitiba (35)

716

20,5

62

1,8

106

3,0

Rio de Janeiro (29)

446

15,4

168

5,8

43

1,5

São Paulo (6)

73

12,2

–

–

15

2,5

Source: prepared by the author

There is no denying that differences in how the crimes investigated are committed, and the quality of the evidence produced may lead to different results in the incidence of pre-trial detention in each of the units of the operation. On the other hand, it seems reasonable that the margins of choice resulting from the vagueness of legal terms have contributed to the significant differences observed in the use of pre-trial detention by the Lava Jato units, as can be seen in Table 3. The breadth of possibilities in applying rules with a high level of abstraction enhances the risks of different treatment between politicians who respond in different judicial units since there are great independence and autonomy of the judiciary in the exercise of their core activities. Also, the flexibility afforded to Law operators to interpret the rules on defining jurisdiction by connection provides scope for strategic action by the actors in the justice system, which can make it possible to direct cases considered a priority to Federal Court units that are known more or less prepared to impart agility and/or rigor in criminal investigations and actions. This strategic behavior is able to produce selectivity in controlling political corruption without technically violating the legislation. In Curitiba, Lava Jato Operation also shows that the criminal justice system actors exercised intense creative activity using a legislative deficit on the cooperation agreement. This deficit is easily observed by reading the only article of the law (in the original wording) that deals with the cooperation agreement content. The device has 76 words and requires only that the agreement contains “the report of the cooperation and its possible results”, “the conditions of the proposal” of the investigative bodies, the stipulation of protective measures for the cooperating defendant, the declaration of acceptance of this defendant and the signatures of those involved (Article 6 of Law 12.859 of 2013). In the absence of legal parameters for the cooperation agreements’ content, the Lava Jato task force formalized agreements that provide for penalties that do not exist in the Brazilian system. Instead of containing proposals for deprivation

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of liberty in the imprisonment conditions provided for by law (closed, semi-open and open), the Lava Jato agreements created conditions called “differentiated”, all home-based, fulfilled in substitution to legal imprisonment conditions, with provision for compliance of the agreements’ sentences even before the trial of the judicial processes, which also has no legal provision. The investigators also took advantage of the absence of legal regulation to include a clause that prevents the cooperating defendant from appealing the sentence if the judge applies the penalties provided for in the agreement. This clause prevented the courts from exercising control over the agreements’ content since the Federal Supreme Court understands that the people incriminated in the agreements by the cooperating defendant cannot contest their clauses. Besides, the agreements did not estimate the penalties that would be applied if all the facts confessed were subject to convictions, something necessary to assess the reasonableness of the penalties provided for in the agreements, but which is not expressly required by law. The absence of legal rules on the extent of the facts that can be included in the same agreement led the task force to include criminal acts that would be outside the jurisdiction of the Federal Court in Curitiba, and excluded the examination of the legality of the agreements by the judges who would be competent for the trial of the crimes confessed in them. The absence of detailed legal rules on the cooperation agreements gave the investigators who formalized the agreements with the investigators a wide margin of discretion, mainly because they had the endorsement of Judge Sérgio Moro, responsible for the almost unrestricted approval of the agreements, in a manner which was replicated by other Lava Jato units. We highlight the judicial behavior of the flexibility in recognizing late cooperation and deference to the Public Prosecution when applying the penalties proposed in the agreements. Judicial behavior, supported by the legislative deficit of the institutionalization of the cooperation agreements and the strategy of including clauses that reduced the control of agreements by the courts, possibly generated security for those who began to consider the possibility of joining the cooperation, encouraging new adhesions and avoiding control by the revision courts. Only at the end of 2019, part of these strategies was subject to control by the political system, with the approval of a law that expressly forbade that the cooperation agreement contemplates penalties not provided for by law and that establishes the waiver of the right to challenge the approval of the agreement, in addition to restricting the cooperating defendant’s obligation regarding the extent of the facts confessed, requiring only those that have a direct relationship with the facts investigated.

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The Constitutional Court’s failure in defining the constitutionality of laws generates a scenario of legal uncertainty and, more significantly, can be manipulated to ensure that anti-corruption operations achieve particular results in the electoral arena only during specific periods. In the course of the Lava Jato operation, the Supreme Federal Court revised the position adopted in 2009 and began to authorize the execution of the sentence before adjudging on the last appeal, even without the decree of provisional arrest (Brasil, 2016). Rodrigues and Arantes (2020) analyze the two Supreme Federal Court judgments and conclude, based on the reasons set out in the votes, the context of the judgments, the exercise of the Court’s agenda power and the influence exercised by Lava Jato Operation, that the performance of the Court aimed at remodeling the institutional arrangement of criminal justice, with an increase in the incentive to conclude cooperation agreements. This is because the prospect of anticipating the beginning of the sentence’s execution increases the incentive to search for the agreement, one of the main tools used to obtain the condemnation of politicians. The complaint presented in the process that led to former President Lula’s first conviction, for example, had ten cooperating witnesses and four cooperating defendants (Brasil, 2017). The Court’s position was again modified in November 2019, when Justices Dias Toffoli and Gilmar Mendes resumed the previous position that prevented prison before the res judicata, which became the majority again (Brasil, 2019b). A constitutional court’s paradigmatic decision that prohibits specific actions in criminal proceedings has very different effects than the one that simply authorizes situations framed in a category outlined in the preceding one, without imposing the practical realization of this framing to all the pending processes in the Judiciary. While the first leads to the standardization of legal solutions in all criminal cases, as the prohibition is endowed with universality, the second has great aptitude to produce different results in similar criminal actions. The court ruling on detention before the final judgement illustrates this problem well. When the Supreme Federal Court authorized the sentence’s execution before the ruling on the last appeal, the judges were authorized to determine the fulfillment of the sentence in the second instance, which does not ensure equality among all those who have already been convicted by a collegiate body. With the prohibition on the execution of the sentence before the last appeal, on the other hand, the expected result will be the absence of defendants serving time before the judgment of the last appeal. If the justice system already has several factors that produce selectivity in the results of criminal control of corruption, this

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situation is aggravated by the constitutional court’s oscillating behavior, especially when issuing prescriptive commands that allow different legal solutions in concrete cases without objective parameters that justify different results. This scenario is especially relevant if we consider that, in the typology about institutional weakness developed by Brinks, Levitsky, and Murillo (2019), the authors argue that institutional instability should be considered as a variable and one of the relevant dimensions of the institutional strength of democracies, as a category in which they include judicial interpretations. According to the authors, judicial interpretation in response to contingencies can add the institutional structure necessary flexibility. However, it can also provide a vestige of legitimacy and legality for a violation of the rules or manipulation to produce results in response to changes in preferences. The authors’ typology seems to fit like a glove when we analyze the behavior of the Federal Court and the Supreme Federal Court in Operation Lava Jato. The justice system actors acted strategically, supported by the legislative deficit on cooperation agreements and the ambiguity created by the laws. Moreover, they promoted endogenous ad hoc changes that transformed the primary judicial unit of the operation into an island of excellence in terms of process agility and the possibility of being more careful when analyzing cases and giving reasons for decisions.

Deficiencies in the Checks and Balances Mechanisms The flow of investigations and criminal proceedings follows procedures provided for by law that bring several mechanisms to control the acts practiced by the justice system’s actors. Those investigated have a constitutional right of access to documented procedures, which provides for constant surveillance of the legality of investigators, prosecutors and Judges, and the possibility of using judicial appeals or complaints before the justice system’s administrative supervision bodies. Operators of the criminal justice system also receive institutional missions of reciprocal controls. The Public Prosecution carries out external control activities of the police, and both have access to the Judiciary and correctional bodies to point out abuses in investigations and criminal actions. The claims of the investigative bodies that most directly affect sensitive rights of the people investigated, such as privacy, physical integrity, and property, almost always depend on prior intervention by the Judiciary, which exercises control over the legality of invasive measures such as search and seizure, assets freezing, and provisional arrests.

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However, the existence of this institutional framework of controls does not ensure that criminal investigations and actions are not used as instruments of interference in electoral competition. The Lava Jato operation brought up problems that suggest a deficiency in the criminal justice system’s control mechanisms. First, there are no controls on the choice of priorities among the cases that will be adequately investigated. The first phase of the Lava Jato operation included four units of foreign exchange market operators, but what was observed was the deepening of investigations on just one of these money changers, Alberto Youssef,12 who led Lava Jato to the intricacies of Petrobras. Although the fruitful results justify (a posteriori) for the rationality of deepening a line of investigation, there are no adequate controls to prevent the removal of cases from the priority list being moved by the purpose of protecting certain politicians or party organizations. The insufficiency of controls over the choice of priorities is also observed in informal acts of international legal assistance, characterized by contact between researchers from two countries to obtain prior information to guide future formal requests for assistance. The Brazilian media reported that the institution confirmed trips by members of the Brazilian Public Prosecution to Switzerland, but there are no minutes of meetings and records of the list of documents to which that Brazilian prosecutors had access. Informal communication was confirmed by two members of the Lava Jato task force (Dallagnol & Aras, 2015). The absence of content registration of these communications and the completeness of the analyzed material prevents the control of the choices made from the analyzed material to be carried out, especially on what was no longer requested in the legal assistance request that was later formalized. Without this control, there is no way to rule out the possibility that documents are selected for the purpose of exclusively targeting certain politicians or people linked to specific parties. The same type of deficiency in controls arises from the lack of institutionalization regarding criminal proceedings’ pace. There are no adequate mechanisms that prevent the judge responsible for conducting several cases from printing a different rhythm between them, which can lead to selective agility with essential consequences for politicians who will be excluded in advance from electoral 12

Alberto Youssef acted as an operator in the foreign exchange market. He was already known to the Paraná unit, as he was one of those who signed the first cooperation agreements in the country in the investigations related to the Banestado case, but he was accepted again as a Lava Jato cooperating defendant, even though he did not comply with the previous agreement. Until December 2018, Youssef was sentenced by Lava Jato in Curitiba to 126 years and 6 months in prison, replaced by the penalty of the 3-year closed conditions, with immediate progression to open conditions.

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Table 4 Time taken for the actions and appeals involving Lula at Lava Jato Paraná (in days) Process Object

Defendant Arrested

1st instance sentence

Appeal

Court average: 641(1)

Court Average: 282(2)

Guarujá Apartment(3)

no

301

154

Lula Institute

no

without trial (1.264 days until may 2020)

–

Atibaia property

no

625

196

Source: prepared by the author Notes: (1) Average duration of 22 cases without arrested defendants judged until December 2018. The 26 cases with arrested defendants had an average duration of 199 days (2) Average duration of all appeals (34) trialed until December 2018. There was only one appeal trialed more quickly than Lula’s case, in 138 days, but it involves the appeal of only one defendant while the former president’s case included a reassessment of the situation of seven defendants (3) Process that led to Lula’s ineligibility

competitions due to ineligibility. The processing of lawsuits against the former president Lula of the Lava Jato unit in Paraná is a suggestive example of arbitrariness in defining the pace of the proceedings, according to data compiled in Table 4. Figure 4 shows the duration of appeals in Lava Jato cases in Paraná until December 2018, taking into account the number of defendants who had their situation reviewed by the Court. It is essential to highlight the agility in the processing of the process that led to Lula’s exclusion from the 2018 presidential election, as the second instance conviction occurred in time to render him ineligible. The Lava Jato Operation also raised discussions about the possible consequences of a distortion of the judges’ role in criminal investigations and actions. The judges’ engagement in the handling of cases may suggest a commitment to the outcome of the proceedings, which represents a violation of the judge’s guarantee of impartiality. Brazilian procedural rules start from the assumption that the judge interested in the outcome of the process or particularly committed to the person’s fate investigated in the criminal action will voluntarily acknowledge his suspicion. There is no empirical evidence to suggest that we can expect such judicial behavior, and it is not exactly difficult for a partial judge to succeed in building narratives in defense of his alleged neutrality.

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12

10

Number of defendants

Mendes Jr. 8

Odebrecht

OAS 6

Engevix Andrade Galvão Engenharia

4

2

0

Camargo Correa

0

100

Lula

200

Contractor

300

400

500

600

700

Parliamentary Inquiry Comission on Petrobras

800

900

Other

Fig. 4 Duration (in days) of appeals in Lava Jato Paraná cases until December 2018. Source: Graph by author

The topic is essential, given the expected difficulty in proving the judge’s bias, which helps explain the preliminary diagnoses that point out that the Brazilian Courts are reticent to recognize it (Abreu & Mazza, 2019; Konchinski, 2019). Some situations in which there may be coordinated action between investigators and judges may lead to the occurrence of illegal situations with the withdrawal of control, by the review Courts, of the legality and constitutionality of jurisdictional activities. The most striking example occurred in Lava Jato Operation’s cooperation agreements, ratified with dubious legality clauses because all discussions about the agreements remained exclusively between investigators and first instance judges, in addition to the cooperating defendant staying in an uncomfortable position of losing the benefits of agreement in the event of a judicial challenge to the agreement. At this point, it is worth mentioning the fact that the Brazilian Public Prosecution is endowed with ample autonomy and independence, with the same prerogatives as the judiciary, but is subject to few accountability mechanisms

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(Arantes, 2011b; Moncau et al., 2015; Kerche, 2018), which are further weakened if there is a context of alignment of the judiciary with the prosecutors’ claims. Finally, the absence of effective mechanisms to prevent the selective disclosure of investigations by actors in the criminal justice system must be highlighted. Judicial decisions that authorize the breach of court secrecy of ongoing investigations and actions may have the purpose of unbalancing the electoral competition scenario, especially when they involve reports by cooperating defendants, which under Brazilian law have no evidential value. Several examples occurred in Lava Jato, but we highlight the decision of Judge Sérgio Moro, six days before the first round of the 2018 election, which authorized the disclosure of an excerpt from the speech of Antônio Palocci, a former minister of the Lula government who attributed responsibility to the former President for the diversions from Petrobras.13 The purpose of interference in the electoral scenario can also be achieved by the leakage of classified documents, using the near impossibility of identifying the authors of the leak. There are expected difficulties in identifying those responsible for the disclosure of confidential documents or procedural documents since usually more than one person has access to such documents, and the journalist responsible for disclosure has the constitutional guarantee of maintaining the confidentiality of the source. This context produces comfortable ground for the justice system actors to promote the dissemination of harmful content to particular politicians, including the choice of timing for the disclosures according to the electoral calendar. During the Lava Jato Operation, there were numerous disclosure cases in the press of confidential documents harmful to the politicians investigated or appointed by whistleblowers, which did not lead to adequate procedures to seek to identify those responsible for the leaks. In addition to the actors in the justice system involved with Lava Jato having defended the use of marketing strategies in anti-corruption operations (Moro, 2004; Dallagnol, 2017), the Attorney General himself acknowledged that part of the material was leaked to the press by members of the Public Prosecution (Janot, 2019, p. 135). This reinforces the hypothesis that there has been strategic disclosure of classified information to harm certain actors who compete in the electoral scenario or, at the very least, indicates that there are no effective control mechanisms to avoid this type of interference. 13

cf. Balthazar, R and Martins, R. M. (2019, July 29). Messages Suggest Moro Had Little Faith on Palocci’s Plea Deal Allegations Released before Election. Folha de S. Paulo. Retrieved June 9, 2020, from https://www.folha.uol.com.br/internacional/en/brazil/2019/07/messages-sug gest-moro-had-little-faith-on-paloccis-plea-deal-allegations-released-before-election.shtml.

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Final Considerations Competition within the rules of the game presupposes that the institutional design is modulated so that the criminal control of corruption falls more or less equally on all competitors. We can consider that structural differences in the justice system integrate the elements of uncertainty that are part of political actors’ calculations. It is not part of the democratic game, however, the stratagems adopted by actors in the justice system who act in a gray area subject to few controls over undue interference in the electoral scenario through corruption processes. Lava Jato Operation intensified the public debate about the political use of high-level criminal control of corruption to interfere in electoral competition. This theme gained relevance in particular because the trajectory of the operation is intertwined with a context of increasing polarization in Brazilian society and significant changes in the balance of political forces in the country, against the anti-corruption discourse background. There are several aspects of institutional design that open doors for the justice system to selectively mobilize criminal investigations and prosecutions and make use of gray zones of doubtful legality or through behaviors subject to few control mechanisms. We have a context determined by the following elements: the lack of institutionalization on the prioritization of investigations; the lack of clear rules on the exercise of administrative autonomy by the Courts; a wide margin of subjectivity in the interpretation of laws and in the definition of the judicial unit responsible for conducting a major anti-corruption operation. This context can transfer to a few members of the Judiciary the almost imperial authority to define which political actors can be quickly condemned and, consequently, which can be excluded from electoral competitions. The exercise of this state capacity of the justice system goes beyond the mere solution of concrete cases, the main activity of the Judiciary, and transforms some actors from the intermediate and lower levels of the Judiciary into actual designers of public policies to combat corruption (policies), with the capacity to define the rules of the game (polity) or to interfere in the electoral competition (politics).

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Koerner, A. (1998). Judiciário e Cidadania na Constituição da República Brasileira. DCPUSP/ Hucitec. Konchinski, V. (23 July 2019). Esperança de Lula, suspeição de juiz é rara no Brasil. UOL. https://www.bol.uol.com.br/noticias/2019/07/23/esperanca-de-lula-para-deixar-pri sao-suspeicao-de-juiz-e-raridade-no-stf.htm. Loureiro, M. R., Abrucio, F. L., Olivieri, C., & Teixeira, M. A. C. (jan./jun 2012). Do controle interno ao controle social: a múltipla atuação da CGU na democracia brasileira. Cadernos Gestão Pública e Cidadania, 17(60). Machado, M. R. (2004). Internacionalização do Direito Penal: A Gestão de Problemas Internacionais por Meio do Crime e da Pena. Editora 34/Edesp. Mahoney, J., & Thelen, K. (2010). A Theory of Gradual Institutional Change. In J. Mahoney & K. Thelen (Eds.), Explaining Institutional Change: Ambiguity, Agency, and Power (pp. 01–37). Cambridge: Cambridge University Press. Moncau, L. F., Michener, R. G., Barros, M., & Velasco, R. B. (2015). Avaliação de transparência do Ministério Público. Rio de Janeiro: Escola de Direito e Escola Brasileira e Administração Pública e de Empresas da FGV. Moro, S. F. (2004). Considerações sobre a Operação Mani Pulite. Revista CEJ, 26, 56–62. Oliveira, V. E., & Couto, C. G. (2016). Politização da justiça: quem controla os controladores? In 40º Encontro Anual da Anpocs, Caxambu (MG). Power, T. J. & Taylor, M. M. (2011). Introduction: accountability institutions and political corruption in Brazil. In T. J. Power & M. M. Taylor (Eds.), Corruption and democracy in Brazil: the struggle for accountability (pp. 1–28) Notre Dame: University Of Notre Dame Press. Rodrigues, F. A. (2019). Operação Lava Jato: aprendizado institucional e ação estratégica na Justiça Criminal. (Master Dissertation in Political Science) – Faculdade de Filosofia, Letras e Ciências Humanas, Universidade de São Paulo, São Paulo. Rodrigues, F., & Arantes, R. B. (2020). Supremo Tribunal Federal e a presunção de inocência: ativismo, contexto e ação estratégica. Revista de Estudos Institucionais, 6(1), 21–54. Sadek, M. T. A. (2012). Ministério Público. In: Avritzer, L., Bignotto, N., Guimarães, J., & Starling, H. (Org.), Corrupção: ensaios e críticas (2. edn., pp. 454–460). Belo Horizonte: Editora UFMG. Sartori, G. (1970). Concept Misformation in Comparative Politics. American Political Science Review, 64(4), 1033–1053. Silva, E. M. T. (2000). Ensino de direito no Brasil: perspectivas históricas gerais. Psicol. Esc. Educ. (Impr.), 4(1), 307–312. Schilling, F., & Koerner, A. (2018). El derecho regenerará a la República? notas e indagaciones sobre la política y la racionalidad jurídica de la actual ofensiva conservadora en curso en Brasil. Revista Voces em el Felix, 69, 56–63. Souza, A. (25 June 2019). Além da Lava-Jato, 21 forças-tarefa do MPF atuam no país. O Globo, Rio de Janeiro. https://oglobo.globo.com/brasil/alem-da-lava-jato-21-forcas-tar efa-do-mpf-atuam-no-pais-23902127. Speck, B. W. (2011). Auditing Institutions. In Power, T. J., & Taylor, M. M. (Ed.). Corruption and democracy in Brazil: the struggle for accountability (pp. 127–161). Notre Dame: University Of Notre Dame Press. Taylor, M. M. (2017). Corruption and accountability in Brazil. In: Kingstone, P. R. & Power, T. (2017). Democratic Brazil Divided. Pittsburgh: University of Pittsburg Press.

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TRF2. (2020). Tribunal Regional Federal da 2ª Região. Estatísticas processuais. https://por taldeestatisticas.trf2.gov.br/Pages/Publicacao/. TRF3. (2020). Tribunal Regional Federal da 3ª Região. Estatísticas processuais. https://www. trf3.jus.br/estatistica-da-justica-federal-da-3a-regiao/varas-federais/. TRF4. (2020). Tribunal Regional Federal da 4ª Região. Estatísticas processuais. https:// www2.trf4.jus.br/trf4/controlador.php?acao=estatistica_nova_provimento2. Viana, A. L. D., Lima, L. D., & Oliveira, R. G. (2002). Descentralização e federalismo: a política de saúde em novo contexto - lições do caso brasileiro. Ciênc. saúde coletiva, 7(3), 493–507.

Fabiana Alves Rodrigues is a federal judge at the 10th Criminal Court in São Paulo, specializing in financial crimes and money laundering. She is a PhD student in Political Science at the University of São Paulo and her research investigates the behavior of politicians in making anti-corruption policies. She is graduated in Law and Economic Sciences and holds a master’s degree in Political Science from the University of São Paulo. Her currently publication is Lava Jato: aprendizado institucional e ação estratégica na Justiça by editor WMF Martins Fontes, 2020.

Balancing Representation Political Financing: The Regulation of Competing Legal and Illegal Organizations Resources in Colombia Nicolás Jaramillo Introduction Financing of political parties is not only a matter of money but also of political representation. Some deficiencies in current democracies are understood as the product of insufficiencies in roles advanced by parties to represent citizens’ interests in politics properly. The lack of representation of some social groups (e.g. social minorities) and overrepresentation of others (e.g. powerful economic sectors) have been remarked as one main problem in contemporary democracies. Likewise, giving money to electoral campaigns and parties’ performances have been understood as ways to participate in politics. Who and in what quantity is allowed legally for contributing to those activities determines in great part which actors may be involved in electoral processes beyond their rights to vote and be elected. Because of this, some states have designed specific regulations regarding this point. Nonetheless, suspicions on big donors’ expectations have been on the rise, due to the particular benefits they could receive on the basis of their contribution, at the cost of those who do not finance political activities. Therefore, parties’ financing and its regulations have an impact on their role to serve as bridges between civil societies and states, directed to embody properly citizens’ interests. That means that political parties functioning and financing show a tension between conflicting interests exposed, among other processes, in political campaigns, electoral processes and laws directed to control them. N. Jaramillo (B) Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected]; [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_7

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In this essay, this tension is going to be analyzed as it was presented in debates in the Colombian Congress that finally endorsed the 1475 act approved in 2011, which currently controls political campaign financing for elections with the exception of the competition for Presidency. Specifically, I am going to address the special parts of the law focused on political financing, one of the main axis of this law (Senado de la República, 2010a), and some aspects of organization of political parties and their responsibilities about this particular issue. Which actors are not allowed to give money for political campaigns? What are the limits, and why? Analyzing answers to these questions as were given by members of Colombian Congress are going to permit to comprehend tensions between conflicting interests which are seen as illegal, and why.

Political Financing as a Matter of Citizens’ Representation Political parties have to perform contradictory tasks. When current democracies developed as the appropriate form of government, parties the perception of parties changed from that of ‘dangerous organizations’ to necessary actors, and part and parcel of those regimes, due to their role as funnels of demands from societies to states (van Biezen, 2004), following a liberal perspective. Nevertheless, parties are not necessarily the voice of the general interest, but are, instead, voluntary associations representing specific groups or sectors: they have been developed traditionally as private associations functioning with resources of their members and supporters. On the other side, parties have tried to avoid improper influences of states in their private realms. However, once elected they have to decide how to regulate, or not, themselves legally. Two issues emerge: how to represent the constituents’ voices if political parties enhance interests of certain groups within societies? How, if desirable, may they regulate their functioning and competition to get electoral support? Parties need resources to organize themselves to secure electoral mobilization, interest articulation and aggregation, formulation of legal and policy solution for demands presented by citizens, recruitment of future leaders (Pierre et al., 2000) and of course, to win elections. In order to accomplish those requirements, they have advances two non-exclusive organizational models. The first focusses on building strong and close face to face relations between electors and politicians; the last looking for providing specific and sometimes personal benefits to the formers, who rewards them with their votes. These tasks demand necessary infrastructures to keep them in touch basically in times close to the election day, including enough resources to be given to constituents and people in charge of

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maintaining their contacts. The second one connects politicians with distant electors using means available by the use of communication technologies and mass media. Here, the goal is to construct an attractive political image for electors, to move them to support parties on the election day. In both cases, costs to keep up contacts between politicians and electors have increased: access to mass media, transportation tools, hiring of experts in political marketing and/or local politics, etc. (Pinto-Duschinsky, 2002; Paltiel, 1981). What is more, though competitive elections are good for democracies, it demands in part of contestants more economic resources to keep up on the game (Casas-Zamora, 2013): the grow the number of candidates, electors and/or parties, the more money needed to organize themselves searching for votes. Considering the decrease on fees paid by party members (van Biezen, 2004), and that voters can only persuade politicians in a direct way each time partisans run in elections (Strauss, 1994), roles advanced by those who give money on everyday politics have been highlighted. Private donors and states usually have been seen as suitable financing solutions, but with some attendant problems. Contributors usually prefer to cover their true concerns by other members of society, leaving political debates behind closed doors in front of constituents (Burke, 1997) and by this way, concealing from electors their actual interests. Likewise, donors’ constantly influence politics on a regular basis and not only at electoral times. Due to political parties’ need for resources to finance their organizations they are sensitive to their demands and could be captured by them (Barndt, 2014; Strauss, 1994). Thus, donors’ interests tend to be concealed to the public, but continually defended. On the other side, appealing to state resources has been perceived as a way by parties to not be captured by big sponsors’ influences, especially in Latin America where this issue has been noticed (Barndt, 2014; Casas & Zovatto, 2011). But this sort of getting money is not free from critics: 1. Receiving money from states may minimize parties’ autonomy from the state, because resources given have to be controlled by public authorities and enforce parties to follow their requirements; 2. State resources do not deter some politicians to receive illicit resources; 3. Parties became more dependent on States and discourage them to recruit new members and membership dues; and 4. State money may create inequality between parties with members in elected public offices and those outside them, hampering changes to the status quo (Casas & Zovatto, 2011; van Biezen, 2004; PintoDuschinsky, 2002; Pierre et al., 2000; Pujas & Rhodes, 1999; Paltiel, 1981). Then: how to avoid risks produced by receiving money from big contributors and states? As mentioned, parties have difficulties to represent a common will. If it were not the case, financing would be only an economic problem. But probable different interests defended by voters and contributors, remarks the roles of political

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parties to regulate their own organization, channels of donors’ and state financing. But, who is allowed to control parties financing? Following the analysis done by Jacob Eisler (2016) two probable solutions are on the table. The first one states that constituents’ autonomy is the principle of democracies, and donors have the right to participate in politics in exchange of their contributions. Then, voters are the only allowed to control them in polls: if electors realize that certain partisans defend contributors’ illegitimate or undesirable interests, they are not going to support them. The second one perceives representatives are allowed to regulate parties’ financing, due to their role as defendants of citizens’ interests and integrity of electoral processes. Constituents are seen as not properly equipped to identify unsuitable influences propelled by big donors, justifying the role of Congresses to control them (Eisler, 2016). At the same time, controlling incomes and expenditures of political parties may unbalance their truly competence to run in elections and represent constituents. No regulations at all may leave politics in hands of parties supported by big donors, severe and unfeasible regulations may leave them in hands of veiled interests, and a strong financial role by states may promote hitches mentioned before. By these ways, representations’ roles advanced by political parties may be obstructed, becoming only the makers of the most powerful donors and/or majoritarian interests anchored in the state. In this scenario autonomy is searched by political parties through political financing legal regulations. Although influenced or limited by citizens and contributors; after all, politics in Congresses and Governments are led by politicians. Legal decision-making gives them the chance to win some self-determination in front of big donors. Likewise, it is reasonable to expect that each party tends to defend laws agreeable with their finances and if possible, disadvantageous for those of their competitors; but without neglecting the possibility of representing and getting as many voters as possible (Nwokora, 2014; Scarrow, 2004): without enough money it is not feasible to win elections in competitive parties systems, but constituents may reject politicians suspicious of representing illegitimate interests of their contributors. But extremely powerful parties and politicians also undesirable. When parties become so much stronger than businesses organizations and states by themselves, they could have the chance to either extort money from companies and/or exploit state resources (Pierre et al., 2000; Pujas & Rhodes, 1999). When that is the case for politicians due to their access to money or followers, it may brake parties’ cohesion and self-determination, leaving politics in hands of few political clusters. Then, through financing rules are observed balances (or unbalances) between roles of political parties, big donors, states’ resources and voters’ expectations, in the representation of interests in civil societies.

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Therefore, parties’ financing regulations influence their forms of organization and their activities directed to secure the money required to get votes. Specifically, political financing laws pursue to make modifications on parties’ founding resources and by this way, effects on parties’ organization and representation of interests done by them. These are passed by political parties trying to achieve a certain degree of autonomy required to arbitrate conflicting interests among constituents, although the risk of too powerful parties is always present.

The Case of Colombia: Context of the Reform The Law 1475 has regulated financing of political parties1 since 2011. Its understanding is facilitated through a brief comprehension of Colombian political history since the second half of 20th Century, specifically, that of political parties and their relations with illegal actors. With a short period (1953–1957) of a moderate dictatorship, Colombia has usually been defined as a democracy with adjectives (e.g. restricted, controlled, in danger, etc.) coexisting with an internal armed conflict, or in the eyes of some groups: a terrorist threat. This highlight Colombian exceptional political path compared with their neighbors. This country did not experience military dictatorships as most Latin American ones from 1960s to 1980s, but after 1990s democracy did not evolve as expected in contrast with some previous authoritarian regimes in the region. In part, it has happened due to forceful restrictions to plenty exercise of political and civil freedoms, difficulties to construct political pluralism and frequent murder of journalists, social and political leaders within the framework of Colombian political violence (CAAP, 2019; Betancur B, 2010; Echeverry Uruburu, 2007; Bejarano & Pizarro Leongómez, 2002; Buschnell, 1994). Democracy and violence as main features of Colombian political regime have allowed politicians and illegal actors to impinge on electoral and political processes. In 1957 constituents ratified by referendum an agreement done by Liberal and Conservative parties which allowed the beginning of the National Front period (1958 to 1974). This was the solution purposed by their leaders to overcome the years known as “The Violence”, where they had confronted each other in an undeclared civil war. As accorded, they distributed equally almost all state offices and positions of popular elections, including the alternation of Presidency 1

In accordance with Colombian legal framework, political parties, political movements and representative groups of citizens are allowed to present candidates for elections. In this paper all of them are going to be labelled as political parties, considering that sections of the bill under analysis addressed them with no differentiation.

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(Echeverry Uruburu, 2007; Buschnell, 1994). Armed confrontations between them ended, but new rules of political competition propelled parties’ fragmentation through intra-party rivalries: due to each traditional party had assured positions in state offices, each politician had to compete in elections with his partners (not with members of the opposite party) to develop a political career. Besides, party identification lowed progressively making more difficult for politicians to obtain electoral support appealing to that identity. From 1974 to 1991 the state’s practices continued to be led by those parties, though some changes began. Presidents in this period appointed approximately the same proportion of Conservatives and Liberals in public offices, with the exception of the Liberal Government 1986–1991, which promoted a government—opposition system. Although some alternative forces took part in electoral game as in the previous period, they did not obtain significant electoral support (Buschnell, 1994) and traditional forces continued to control Congress. However, citizens asked progressively the presence of alternative political forces beyond those parties, which have been labelled as insufficient to represent properly peoples’ interests in part due to the prevalence of clientelist networks (Martz, 1997; Leal Buitrago & Dávila, 1990), and the exclusion of various social sectors who questioned the legitimacy of Colombian political regime (Dávila Ladrón de Guevara, 2002). However, some changes regarding electoral competition and parties’ regulation began soon thereafter. With the purpose of guarantee more equality among candidates, freedom in politics, institutionalization of political parties and more transparency in parties’ financing was passed Law 58 of 1995. This rule, the first one directed to regulate political parties, allowed indirect financing of political parties by the state (mainly help for advertising) and established limits to private contributions, though vast majority of money came from private actors. Besides, demands on decentralization and a broader democracy propelled the approval of Legislative Act N° 1 of 1986, which authorized the popular election of mayors since 1988. Demands for a more open party system and regulation of parties financing were among the factors that stimulated the writing of a new political constitution in 1991 (Díaz Arenas, 1993). Since then, legal regulations impacted electoral competitions. Constitution relaxed the requisites to conform a party or a movement that wanted to take part in elections. Likewise, since that time, senators have to be elected in a unique national electoral district; measure directed to break local clientelist networks. But results were not as expected. The rocketing of number of parties transformed

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system from bipartidism to a multi-fragmented one.2 Besides, in order to reduce costs, candidates for Senate tended to build local electoral ‘bunkers’ (fortines electorales)3 usually in some neighborhoods of big cities, instead of developing campaigns in the whole country. After 1991, in order to avoid dependence of parties in big contributors, influence of illegal actors, and promote equality among parties, it allowed state funding for elections and stated not only limits for private donations but for electoral expenditures. Those regulations were developed in Law 130/1994. Later, the political reform in 2003 reduced the number of parties and candidates, in part due to the introduction of an electoral threshold and the restriction of one list of candidates per party. However, legal efforts done to make parties responsible for disobeying laws regarding with political financing did not prosper. Thus, after 2003 the number of parties was reduced meaningfully, but hard competition between candidates tended to remain and parties were not legally responsible for the election funding adopted by their members. This situation has aided the need for more money on elections (Botero et al., 2016; Restrepo, 2011; Pizarro Leongómez, 1998). Those legal frameworks have facilitated the usual ways advanced by parties for their organization. The increasing prominence of candidates in electoral competitions moved them to appeal to face to face relations based on local clientelist networks sustained in exchange of basic goods and services for votes (Leal Buitrago & Dávila, 1990), complemented in some cases with election fraud practices and vote-buying. Although clientelism was not new, since the National Front increased its role as link among candidates and electors. Politicians were linked together from local to the national level by leaderships of called “natural leaders” (jefes naturales), who organized them in a pyramidal hierarchy (Duque Daza, 2006). As a result, electoral competition became more an issue of candidates, and natural leaders could decide which politicians would be included in electoral lists (Botero et al., 2016). Over time, these nets have become more expensive and natural leaders’ roles decreased (De la Calle, 2003). Clientelist relations are not static due to the changes in power relations, resources interchanged and the meanings produced by their actors, particularly about their roles as political actors (Jaramillo, 2003). Because of this, clientelist relations are not always stable and their members look for ways to improve the terms of transactions, moving actors 2

In the case of Senate, before 2003 its members came from more than 40 political organizations, and in some cases each senator within each party behave as a party by himself. Even a total of 800 lists were registered to compete for seats in Senate and House, handicapping states’ control tasks (Botero et al., 2016; Pizarro Leongómez, 1998). 3 This is an informal but common name given to those places where a party or candidate usually has a remarkable strong electoral support in comparison to competitors.

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to compete as the best option to be included within a particular network. After 1991 in some big cities independent electors from those relations grew up. Those voters (in Colombia known as opinion voters) pay more attention to the public image of candidates, their proposals and are more jealous with law enforcement. Politicians who ask for their support promote campaigns based on their exposition in mass media, advertising and investment in political marketing, looking for sustain a clear political message (Barreto Rozo, 2010). However, those ways to obtain electoral support have not contributed to the strength of political parties and development of a proper infrastructure functional to their internal democratization. Also, rising costs of real parties’ functioning has demanded progressively more resources to maintain them. As a result, financing elections became difficult, which facilitated the entrance of more private money, pressed for contributions from the state and allowed access of illegal actors in campaigns. Parties financing has become mainly from private donations, issue that also have been under discussion to the strong suspicions related with inappropriate influences. This, because of connections between some ruling class and businesspeople by political financing and informal contacts directed to get particular benefits from the state (Evertsson, 2009; Eslava & Meléndez, 2009; Ogliastri, 2008). For politicians, this generated resources for personal and/or electoral benefit and for entrepreneurs, better conditions for developing their economic activities. Therefore, at least some private businesses have shown their interests to participate in politics using informal channels of influence and by economic contributions to campaigns. Other sources for financing were (and is) the use of state offices to offer jobs and direct public policies to clienteles, along with giving contracts both to politicians’ donors or private companies in exchange of economic retributions, and money directly given from state’s budget to congresspeople (Leal Buitrago & Dávila, 1990).4 Nonetheless, state resources were and are not enough to support the increasing costs of political campaigns, propelled also by the high autonomy of local political leaders to compete for seat.5 Likewise, the more money inverted by state and private actors the more 4

Until 1991 these were known as parliamentary helps (auxilios parlamentarios), whose purpose were to be inverted in development projects. Nonetheless, in not few cases this money ended in politicians’ pockets or electoral campaigns. Although parliamentary helps were forbidden, they were revived in practical terms by other legal form named indicative quotas (cupos indicativos) (Álvarez Álvarez, 2018). 5 In 2014 a report stated that average cost of a senate campaign was COP 3,000 million (USD 1,499 million approx.), varying from COP$400 million to no more than 12,000 million (USD 199,889–5,997 million approx.). Those costs emphasize the issue of controlling electoral financing, considering that the maximum allowed by National Electoral Council was COP$740

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inflation in campaigns. Those factors opened progressively doors for the entrance of drug-dealers and illegal actors’ money in politics. Like in some Latin American countries, Colombia experienced by the mid1980s a challenging situation: drug-trafficking raisings and demands for a more democracy, that requires financing for its development (Casas-Zamora, 2013). Relationships between drug dealers and politicians have not always had the same features. Sometimes those illegal actors just stand aside from politics and public administration as best as possible, focusing only on their businesses. In other cases, traffickers give bribes to judges, police or public officers searching specific retributions like local protection against national official authorities, access to particular state’s organizations (e.g. custom offices) or facilitate money laundering activities. However, they contribute to campaigns when they want longstanding ‘friendship linkages’ with politicians, looking for beneficial legal decision-making results once they exert as executive or legislative officers. Indeed, sometimes drug dealers have had enough influence upon lawyers and congressional staff who design specific bills looking for their approval. Brokers, in exchange for some retributions, are used by traffickers and politicians, becoming functional to them: the first often prefer anonymity as contributors and the second ones want to keep their distance avoiding future scandals. When politicians financed by drug-dealers try to betray them, they threaten them with a public scandal or resort to violence. Even, its direct use instead of offering money or get involved directly in politics have been ways used by criminals to defend their interests: those may be summarized as build a proper political environment to develop their economic activities. Politicians not only receive money for campaigns. In other cases, they reach traffickers free submission to justice and decreasing of violence in some regions at least in short periods of time (Rubio, 2013; Casas-Zamora, 2013; Restrepo, 2011; Casas & Zovatto, 2011; Lee III & Thoumi, 1998). However, dealings between politicians and illegal actors have not always ended as expected.6 million (USD 369,796), 18% more than the previous electoral competition. The same source asserts that each vote that is bought by some politicians goes from COP$40,000 (USD 20 approx.) to $120.000 (USD 60 approx.), depending on the infrastructure designed by the campaign to warranty of elector’s fidelity, a goal not always achieved (Cifras y conceptos. Netherlands Institute for Multiparty Democracy. PNUD, 2014). Although these elections happened after the approval of Law 1475/2011, factors remained the same as before 2011. Then, it is strongly probable that what occurred in 2014 resembles previous electoral costs issues. Exchange rate used was the average of exchange representative rate for 2014 year, using data from Colombia’s central bank (Banco de la República, 2020). 6 Just some examples. Pablo Escobar, leader of the Medellín’s Cartel although got a seat in House of Representatives in 1982–1983, finally was murdered in a persecution deepened by Colombian authorities with the support of the United States. Brothers Gilberto and Miguel

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Armed internal conflict has been part of Colombian politics, allowing illegal armed actors to bear on it. Among them after the second half of the 20th century have been recognized guerrilla movements (e.g. FARC, ELN) and anti-subversive ones (paramilitaries) (Rodríguez Pico, July 2015), who advanced different kind of relations with politicians. Without leaving aside the specific regional particularities and subgroups, left-guerrilla movements have tended to behave as actors out of state’s organizations, becoming part of it only after peace processes (e.g. M19 in 1990 and FARC in 2016); and paramilitaries have tended to develop close relations with members of the Army, politicians and support from some economic elites at national and regional levels, and some sympathizers within society although without give to them an overtly approval (García-Peña Jaramillo, 2005; Lee III & Thoumi, 1998). Since 1960s paramilitaries developed as legal citizen bodies directed to protect their goods mainly against guerrillas threatens and attacks. Other ones advanced as illegal, flexible, and hired assassins’ nets in complicity with some army officers (Centro Nacional de Memoria Histórica, 2018). However, from 1995 to 2002 High Supreme Court and Constitutional Court decisions maintain guerrilleros as political rebels, but moved progressively to judge paramilitaries as conspiracy movements to commit crimes. Due to high costs of an open legal confrontation between the state and paramilitaries, government decided to make an agreement with them in 2003 and judge their crimes following Law N° 975/2005 (González Londoño, 2016). On 2006 the parapolitics (parapolítica) scandal emerged. This term was used by mass media to point out formalization of ties between paramilitaries and politicians toward pacts and arrangements, although not free of disagreements and with regional particularities (Barrera & Nieto Matiz, 2010). Those relationships highlighted inappropriate influences of the formers over the lasts.7 Those politicians have promoted their careers with the financial, logistical, military and political support of paramilitaries, grouped now by the organization named Unified SelfDefenses forces of Colombia (Autodefensas Unidas de Colombia – AUC). They Rodríguez Orejuela (chiefs of Cali’s Cartel) financed the electoral campaign of the candidate Ernesto Samper, although when he became elected they were captured and put in prison. At the same time, some congresspeople were found guilty of illicit enrichment, after receiving money from that Cartel, and others due to their relationships of mutual support with paramilitaries (Rubio, 2013; Restrepo, 2011). 7 At least 60 congresspeople were financed by paramilitaries or people close to them; later, on 2010, 32 senators had been seen as suspects of illicit relations with those criminals (Jost et al., 2010). What is more, on 2011 Ávila and Velasco (2012) identified 106 candidates linked with criminal activities in 29 previously selected departments and 82 municipalities. To see a brief discussion about some conceptual frameworks used to study these kinds of relations see (Barrera & Nieto Matiz, 2010).

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controlled some bureaucracies at regional and local levels, also with the acquiescence of some cattle farmers, landowners and drug dealers, and adding to their anti-subversive purposes, others closer to financial enrichment goals (Avila & Velasco, 2012). Those issues just were the surface of deeper ones with strong roots in some regions, were paramilitaries and drug dealers occupied violently some lands. There, they searched political leaders to support their will to negotiate with national government, either by agreements or intimidations. Paramilitaries’ successful strategies were related with parties’ fragmentation: the more competition among them, the more incentives to accept candidates with doubtful backgrounds, but with strong chances to be elected (Rodríguez Pico, July 2015). In other cases, paramilitaries and politicians built regional parties aside of traditional ones with profitable results and by this way, the last loose majorities in Congress in a few years. In fact, politicians with lack of tradition in electoral competitions won high numbers of supporters, and when they were publicly known as associated with criminal actors, the last just replaced them with others less visible to public opinion (Valencia, 2007). In Colombia electoral competitions are led more by candidates than parties, although after 2003 the last have won more importance for citizens. This, along with more sophisticated clientelist relations and appeals to build good image in mass media (to convince opinion voters) have increased the costs of political campaigns. Then, more resources licit or illicit from the state or private companies became necessary. In those regions where drug-dealers and illegal armed groups evolved into important actors, they could offer money and other ways to support politicians in exchange of regional or national legal protection. The new economic support threatened the poor image of political parties and the presence of some traditional political leaders in some regions. Therefore, demands about the strengthening of political parties in comparison to their members, avoiding illicit resources in politics and securing enough resources to finance electoral campaigns and party politics, were main causes highlighted by the national government and majorities in Congress to regulate political financing. Those were the main political motives behind the approval of Law 1475/2011, instead of modifying the ways that parties organize by themselves.

From Bill to Law 1475/2011 The immediate antecedent of this law was the constitutional modification done in 2009. Among its main purposes were to establish sanctions against politicians found guilty for linkages with illegal actors (Acto Legislativo 1 de 2009). This

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in the direction to hold parties and their directors responsible for illegal acts and strengthen them in terms of their democratic procedures, representativeness and legitimacy in front of constituents (Cámara de Representantes, 2010b). Objectives mentioned were product of the political reform table convened and presided by the national government integrated by the parties of the national unity coalition (Senado de la República, 2011a) that shaped the majority in Congress: Partido de la Unidad Nacional, Partido Conservador, Partido Liberal, Partido Cambio Radical, and Partido de Integración Nacional (Jost et al., 2010). The first three parties conformed 65.8% of Senate and 72.4% of the House of Representatives (Botero et al., 2016), guaranteeing that topics included in the bill were not going to suffer significant obstacles to be passed.8 The following pages contain the main reasons that supported those agreements in the particular topic of political and electoral financing. This as a factor that bears on mechanisms developed by political parties not only to control financing, but to impinge by this way in their organization. Both directed to advance their roles as representatives of constituents.

Legal Electoral Financing by Illegal Actors Resources from illegal actors and people found guilty of crimes against public administration, humanity, and democratic participation became prohibited (Ley Estatutaria 1475 de 2011). During debates this issue was not controverted due to

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Currently Colombian Congress is divided in two Chambers. The House of Representatives is made by candidates elected by territorial constituency (33 Departments and the Capital District) and four especial ones: two members for afro descendants, one for natives and one for Colombians who live abroad. The Senate is made by national constituency: legally each senator represents electors of the whole Country. In addition, since 2018 to 2026 FARC political party has 5 seats in Senate and in the House of Representatives correspondingly, and the second most voted in Presidential elections has an additional seat. Both chambers are elected by direct vote and seats are distributed by a variant of the D’ Hondt Method among those parties above the electoral threshold. Besides, each Chamber is divided in seven permanent thematic Commissions. The pass of a bill into a law requires: 1. Official publication of the bill by the Congress; 2. Its approval in the respective thematic commission after its discussion either in Senate or in House of Representative; 3. Approval in the Plenary of the respective Chamber; 4. Steps 2 and 3 in the other Chamber; 5. Appointing of a Conciliatory Commission, when necessary, that reconstruct the bill including modifications done in the former debates, which is approved later by plenaries of Chambers; 4. Presidential signature and; 5. Constitutional revision by the Constitutional Court. For special laws of higher hierarchy like Statutory ones, as the bill under analysis, constitutional control is required before presidential signature (Ley 5 de 1992; Constitución política de Colombia. 1991).

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it was one of the main reasons supported by the coalition and some civil organizations. In a public audience Pedro Santana (member of Viva la ciudadanía organization) stated that contributions done by mafias in politics led to two scandals: that of 1995 due to the money received by presidential campaign advanced by liberal candidate Ernesto Samper, and parapolitics (Senado de la República, 2011b). It is probable that only on 2010 this issue was debated and prohibited explicitly, because parapolitics evidenced the emergence of political leaders whose influence was going beyond the regional and local levels. It was clear that paramilitaries tried to act as a coordinated and united group looking for expanding their political power, of course with the acquiescence of some drug dealers, business people and state officers. However, debates in congress showed worries about the chances to compete in elections with leaders financed with illegal money. The reason: the more resources to invest in elections, the more opportunities to be elected. Malfeasance in electoral organizations and frauds committed by electoral bodies reinforce the power of money in regions were mechanism of control are scarce. Likewise, clientelist networks highlight the power of money where constituents search a retribution in exchange of their support. In fact, some politicians have recognized that without it some voters do not give support to nobody.9 As a consequence, they recognize that these behaviors have propelled organizations focused on guarantee certain number of votes in exchange of a fixed quantity of money. Hire people to work in an electoral campaign is not illegal, but facilitate the investment of money by informal ways, which may not be included in formal accounting books. Sometimes, those employees work months before the election day. Those procedures have increased the costs of electoral processes, moving them in some circumstances to disdain previous agreements within each political party at regional and local levels. As an example, one Representative declared that some local partisans of his party supported candidates of other ones in exchange of economic benefits in his region. Likewise, some town council people supported presidential candidates of other political parties searching some kind of remuneration, including public offices. Then, congresspeople recognized that the strong electoral competition between clientelist networks and electoral entrepreneurs, that is to say, the way

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Roberto Gerlein, an ex-Senator who worked in the Legislative branch for approximately 44 years and took part on debates regarding with this law, stated it publicly in an interview. Although his words were strongly rejected by some members of the audience, his assertions also evidenced the real mechanisms developed in some regions to win votes in electoral campaigns. Of course, if there are people prone to receive personal benefits valued on money, there are candidates ready to give them (Colombia elige, 2020).

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politicians organize themselves, facilitates the arrival of money from illegal organizations. Unfortunately, due to the lack of evidence, often political leaders and citizens who know how those relations work cannot denounce them to legal authorities (Senado de la República, 2011a; Cámara de Representantes, 2010c). Money from illegal actors was legally forbidden, but its actual entrance in elections was seen as difficult to avoid.

Illegal Electoral Financing by Legal Actors The problem proper electoral and political financing had to be addressed. Some civil organizations remarked that private contributions are a legitimate way to participate in politics (Jost et al., 2010). However, as happened with illegal actors, the lack of control of private resources in politics could lead the control of state activities in hands of some sponsors, and reach some kind of inequity in the competence between candidates. Safeguarding of public officers’ autonomy in front of legal private interests was addressed.10 Particularly, the probable privileged position of companies who contribute to electoral campaigns. Contracting Cartels (carteles de la contratación) is the popular name for those companies who “win” tenders as an exchange of their contributions, once candidates become elected public officers. This issue was on the media agenda due to a corruption scandal emerged in Bogotá, regarding with malfeasance of public resources in favor of Nule Group’s construction company (Grupo Nule) (Senado de la República, 2011c; Cámara de Representantes, 2010c). That is why, role of private companies who make contracts with state organizations came into play. It was (and is) known that these kind agreements usually happen: tenders are given to those companies who invest in electoral campaigns. However, some congressmen asserted, that hampering businesses’ contributions may restraint them to give money legally for electoral financing, or move them to avoid donations if they want to win tenders. Besides, cannot be assumed that all 10

This topic was also under debate parallel bill discussed within the same time framework of this project, finally approved as the Anticorruption Statutory Law. Companies – including their legal representatives and board of directors – who have financed political campaigns for Presidency, provincial Governments or Mayoralties with contributions up to 2,5% of the total amount allowed for candidates, were unable to sign contracts with public entities in the respective administrative level (Ley Estatutaria 1474 de 2011). This prohibition was modified on 2016 with the Antibribery Law. Among changes introduced, restrictions were extended to companies that give money to candidates running for a seat in Congress and reduced the amount to 2% (Ley 1778 de 2016).

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private donations look for receiving an illegal or illicit public contract, remarked others. Nevertheless, those statements did not change in an important way the main content of the sentences that restricted contributions made by companies who sign contracts with state’s organizations: those that receives subsidies and revenues of state’s contracts are not allowed to make contributions, if the total amount of that money represents 50% or more of their total income during the year before the election day. This prohibition also includes companies that run state’s monopolies or games of chance (Senado de la República, 2011a). The article regarding with general limits of private financing was approved in the same direction proposed in the bill with some minor modifications (Ley Estatutaria 1475 de 2011; Cámara de Representantes, 2010c). Nevertheless, a great discussion arose due to one attempt to eliminate it. In the full session of the House of Representatives, after no discussions regarding with its impact the suppression of this article was rapidly approved: 86 representatives supported it and 8 were against. Among this minority within the chamber, only one was member of the governing party (Partido de la Unidad Nacional), the other 7 represented alternative forces not included within the national unity coalition: Polo Democrático Alternativo and Partido Verde, who voted following a party direction. That meant that private donors could invest in electoral campaigns without any limits (Cámara de Representantes, 2010d). In the public audience advanced after that suppression, members of civil society regretted that and demanded that limits of private donations to electoral campaigns be included again as part of the bill. Without those restrictions, they stated, politics may become a matter or purely economic incentives favoring elites, and leaving elected public offices in hands of powerful corporations or stores. This risk was perceived more dangerous for government posts: it was probable that one private sponsor finances all electoral campaign of one candidate, who after become elected as a Mayor or Governor only serves its interests. They also remarked the risks that after elections, the company who contributed with the campaign may be found guilty of illegal activities, diminishing the sense of confidence in constituents in democracy. Besides, unlimited contributions enhance the role of money in campaigns, making more difficult even for traditional politicians to keep up with the competition either for government or corporate posts (Senado de la República, 2011b, 2010b). Members of civil society also affirmed the need to develop a special regulation to clarify responsibilities and sanctions for donors involved in illegal campaign financing. Besides, they suggested the need to sanction those companies who use political financing as an anticipated bribe: support to an electoral campaign in exchange of future public contracts, subsidies

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or legal regulations favorable to private sponsors. To sum up, without those measures increases risks prone to leave state only in hands of private companies (Jost et al., 2010). Then, senate included again the article in the bill (Senado de la República, 2011a), but discussions about its content exhibited changes in its main goal. Before the attempt to its suppression, the project limited individual contributions for more than 5% of total expenses of an electoral campaign (Cámara de Representantes, 2010a). This restriction was sustained, as mentioned before, as a measure to make more equitable the running for electoral public offices; considering that usually donations are done not only following ideological or financial interests, but friendship relations. After its first discussion this limitation was increased from 5 to 10% only for relatives of the candidate. One representative argued, that people who do not have wealthy friends often look for resources within his relatives and personal assets in order to have enough money to finance an electoral campaign. Then, it was projected that family members up to the fourth degree of consanguinity and second degree of affinity could donate until 10% of the maximum allowed. At the same time, it was declared that candidates did not have any restrictions to finance their campaigns with their own personal resources. Then, equity was counterbalanced by the goal of more autonomy for candidates. The final content of the article states that individual contributions cannot be more than 10% of the maximum allowed, but financing with personal resources of the candidate, partners and relatives until degree permitted by law do not have any restrictions, beyond the total amount allowed to develop an electoral campaign. (Cámara de Representantes, 2010b, c; Senado de la República, 2010c). As a result, a balance between equity among candidates and autonomy of them from private interests was behind this particular debate. The last was reinforced in front of interests aside his/her relatives, but the goal of equity was not fully accomplished. This, because though private contributions remained limited, those derived from personal or familiar assets became unrestricted. This part of the law promotes family-run electoral campaigns and interests.

Public Resources for Electoral Campaigns The principle of equity and possibility to participate in elections were the main points behind discussions about the financial support of campaigns with public sources. This source allows more transparent and equitable financing of electoral debates. For some congresspeople state funding of electoral campaigns is the only way to allow common people to compete for electoral public offices. In this

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sense, only forbidding private funding and enforcing that each candidate receives the same amount of money from the state, guarantee that ordinary people may really compete in elections. This also considering the higher costs to run for an elected public post. (Senado de la República, 2011a; Cámara de Representantes, 2010c). Following regulations previously approved for presidential elections (Ley 996 de 2005), this bill projected advances for political parties to be used in other political competitions. Members of political parties that participated in the last running for Presidency could be part of the game, thanks to those advances, without which it would have been strongly difficult to compete. Because of this, here this measure was replicated for the other campaigns. The initial project stated that for the case of contenders for corporations, parties could ask until the 80% of the authorized funding with public money if they presented their candidates in a closed list, otherwise they could ask advances until 50%. The main reason to make this difference was to promote the strengthening of political parties. As was mentioned before, in Colombia political parties have not been able to consolidate as organizations more powerful and protagonists than candidates, leading not only to make more expensive electoral campaigns, but making harder the proper control that those political organizations have under their affiliates. However, this disparity was changed allowing an advance of 80% for all parties without considering if lists are closed or with preferential vote. This change was expected due to the great majority of congresspeople were elected using the last mechanism (Cámara de Representantes, 2010a, c, d; Senado de la República, 2011a). Besides, this decision reflects the distrusts that some politicians have over political parties as organizations. The passed law (1475/2011) allowed political parties to transfer those advances to candidates in competition. These are part of the whole public money parties receive at the end of electoral campaigns, in accordance with the total number of votes finally obtained. But it could be the case, that one candidate takes more money in advance that the money he/she deserves at the end of the campaign, due to lack of votes as previously expected. The opposite also can happen. That is why, also congresspeople were agree in let candidates free to decide if they use advances or not. If they disagree with the option of take advances, they gain all the money they deserve at the end of the electoral process, in accordance with the total number of votes received. The main reason to back this option was that it is not easy for each political party to calculate the level of electoral support each candidate is finally going to receive. What is more, some representatives argued that some political parties had not paid to candidates the quantity of money they deserved, indeed for more than one election (Cámara de Representantes, 2010d). However, difficulties in the relations between parties and

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candidates are also evidenced in discussions related with political party financing aside electoral processes.

Funding Political Parties by the State Though one of the main goals of political parties is to win elections, they also have to promote their ideologies, programs and set up their leaders. Besides, they have to coordinate activities developed among their members in public offices, militants, followers and citizens. This bill divided resources that may be employed in campaigns, and those allowed to finance parties in their routine activities. The last has been identified as a debility in Colombian political system: parties have been recognized as experts in winning elections, but several citizens do not see in them vigorous organizations that defend their interests (Cámara de Representantes, 2010d). In pursuance of strength political parties, this bill allowed distribution of public sources explicitly to support those organizations, balancing the principle of equity among all parties registered and the right of those who are more representatives of constituents, following their electoral support. At the same time, were considered the need to promote participation of two segments of society seen as underrepresented: women and the youth. In the following table could be seen the differences between what the bill projected and the final decision taken by Congress regarding with the public distribution of resources among political parties (see Table 1). Changes in the distribution of the percentage in numeral 1 were done in order to fortify minority forces but without permitting the increment in number of political parties. Natives and afro descendants have special differentiated circumscriptions. Usually they are represented by minority parties that hardly get more than 3% of total valid votes. Because of this, some congresspeople supported the idea of raising the initial percentage projected (5%) indeed to 25%. However, the risk of multiplication of political parties as in the period 1991–2003 moved the Congress to reject this idea. Though representatives of minorities, it was perceived that one party that do not reach at least the 3% of total votes leaves many doubts about their truly capacity to represent constituents, even of minority sectors. Due to this, that 25% was rejected but the percentage stablished get to 10%, giving more money to parties that represent minorities, but restricting the chances to build up parties that may not be sufficiently representative indeed of those minorities (Cámara de Representantes, 2010d). Variations in the content of numbers 2 to 4 (2 to 5 in the law) looked for award those parties in accordance with the

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Table 1 Distribution of state funding Distribution of state funding Bill

Law

1. 5% equally distributed among all parties and political movements with legal status; 2. 20% equivalently assigned among those organizations, which have received 3% of valid votes in the last election for Senate of House of Representatives; 3. 45% proportionately given in accordance with the number of seats in the las election for Congress; 4. 20% in accordance with the number of seats in municipal councils; 5. 5% in correspondence with the number of women elected in public corporations and; 6. 5% in proportion with the collection of resources of political parties’ product of members contributions and other particular incomes

1. 10% equally distributed among all parties and political movements with legal status; 2. 15% equivalently assigned among those organizations, which have received 3% of valid votes in the last election for Senate of House of Representatives; 3. 40% proportionately given in accordance with the number of seats in the las election for Congress; 4. 15% in accordance with the number of seats in municipal councils; 5. 10% in accordance with the number of seats in departmental assemblies; 6. 5% in correspondence with the number of women elected in public corporations and; 7. 5% in correspondence with the number of youngers elected in public corporations

Source: (Cámara de Representantes, 2010a) Source: (Ley Estatutaria 1474 de 2011)

votes obtained in the respective last electoral campaign; that is to say, respecting the rights of majorities. Because of this, the inclusion of members elected as deputies in departmental assemblies was easily accepted: they are also elected public officers. Then, modification on percentages searched balance between equity and majorities as grounds for parties functioning (Cámara de Representantes, 2010c). Women and the youth were recognized as special sectors underrepresented in elected corporate bodies. The inclusion of the former was not debated, but the issue regarding the youth was. Most legislators linked the special role of the youth in the promotion of political parties. Several members of this age group (from 18 to 26 years old in accordance with Colombian laws) have not felt represented in political parties. This situation was perceived by some congresspeople as a cause for the incursion of the youth in dissident and armed groups in the past, and a handicap for the continuity in time of stablished political parties. Then, the recognition of 5% because of those elected may motivate political organizations to

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pay more attention in adding junior members who want to contribute with construction of Colombian democracy (Cámara de Representantes, 2010d). Finally, as could be seen the item of collection of funds by political parties was excluded as a criterion for receiving state resources. Some sectors of civil society stated that it was necessary to give incentives to political parties to collect supplies by themselves, and leave aside the idea that transparency only can be reached when public sources are under control (Jost et al., 2010). However, between the debates advanced in the plenary of the House of Representatives and the first one in Senate this aspect was suppressed, highlighting the importance to promote political participation of the youth (Senado de la República, 2010a). To sum up, distribution of state resources finally favors majority parties, but gives a minimum quantity of money to those ones that search for represent new programs and minority forces. If they want to receive more resources of the state, they have to obtain progressively more electoral support. Something similar happens with the special recognition done to include women and the youth in partisan politics. Minority parties have less chance to elect them in corporate bodies in comparison to majority ones.

Organization of Political Parties and the State The first intention to give more advances to parties which compete in close lists versus those that choose preferential vote looked for fortify political parties as organizations in front of politicians. Nevertheless, the initiative did not have enough support. The approval of resources from the state had also the purpose of strengthen parties. In fact, they are not allowed to use resources received by the state in electoral campaigns, aside of advances which are part of the right to receive economic compensation for the number of votes received at the end of elections: for political parties that receive 50% or more of the election threshold for corporate bodies and 4% or more for individual posts. Resources of parties financing by the State can only be utilized for performance of their structures, inclusion of women, the youth and minorities in political processes, centers for research and study, support for their groups in elected bodies, promotion of their political projects, and the functioning of democratic mechanism as asserted in their regulations (Ley Estatutaria 1474 de 2011). However, funds received from the State have to be under its control. This opened the debate about its right to supervise parties’ resources, without interfering in their particular organization but propelling them to perform in accordance with democratic functioning and their roles as representatives of citizens’ interests.

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Though always regulations could be improved, some members of civil society remarked that here for the first-time political parties had to be legally responsible, at least in part, due to failures regarding with their organization and financing (Cámara de Representantes, 2010c). This objective evidenced two main positions about the proper role of the state in front of regulation of political parties functioning and financing. Some of them, though respective of law, asserted that political parties as organizations must not be regulated by the state. Forcing them to organize in a democratic or other way is contrary to the freedom an organization has to decide its proper way of functioning. This is because they are civil organizations aside the state, free to decide who are going to take decisions and how. Then, people are free to decide if they want to militate, follow or vote for candidates nominated by them. In this sense, the final decision has to be in hands of electors, but not on regulations promoted by legislators. What is more, following political Colombian history and the ‘iron law of political parties’, these organizations at the end reinforce leaderships or bossism over militants and beyond any kind of regulation; although state authorities tend to obligate them to function in a democratic or other way. Other negative effect of regulating political parties by law or constitutionally, is that if parties are obligated to follow certain kind of organization, at the end all parties are going to function in the same way without any differentiation among them. On the other hand, promoters of democratization within political parties stated that they have to work at least following democratic principles. In the particular Colombian case, only more democracy within parties’ organization would move their members to support close lists in running for elections at elective corporate bodies. For some members of civil society and politicians, only closed lists may lead parties to fortify themselves over their members. However, partisans who defend the idea of preferential vote argue that those kinds of lists only are going to be feasible when political parties be truly democratic. Otherwise, they are going to come back to the system conventionally known as “the practice of pen” (la práctica del bolígrafo) before 1991 Constitution: here, main political leaders (natural chiefs) of each party designated the list of candidates. Then, without leaving aside contras of preferential vote, this could only be leaved aside once parties became truly democratic in their ways of functioning. Therefore, only more democratic parties will produce more fortified ones, and state regulations could guide parties in that direction (Senado de la República, 2011a). The last perspective is the line followed by Colombian constitution and laws. In this sense and considering that political parties also operate with state resources, the majority in Congress supported the idea of establish more responsibilities and sanctions to political parties and their managers. On the topic of

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financing, they have to answer when their affiliates be found guilty of crimes against public administration, break limits of incomes and expenditures authorized by law, and receive illegal financing. Besides, parties began to be under control of the General Comptrollership of the Republic. Nevertheless, in the case of electoral campaigns this control is not easy to follow, due to the permission some candidates have to handle their electoral campaign accounts: when these are private founded and over 200 current monthly legal minimum wage (Cámara de Representantes, 2010a, c).

Conclusion: Minimum Equality and Unequal Resources Political and electoral financing not only has a bearing on parties’ economic resources, but in how they organize themselves searching for more autonomy; both directed to win votes and be the representatives of citizen-interests. Colombian political parties since 1950s have been weaker compared to its members, thanks to successful clientelist networks and mass media campaigns. However, their economic sustainability has demanded more and more resources not covered by private contributions from legal businesses and later by the state. This opened doors for the entrance of resources provided by drug dealers and armed illegal actors. Parapolitics scandal highlighted those issues that were matter of discussions in the approval of parties’ financing regulation passed on Law 1475/2011. Illegal contributions have been functional to those forms of organization and financing advanced by some politicians, which in turn have been functional to them to win elections. Nonetheless, decisions made in Congress stressed more on how to avoid illegal financing than on modifying politicians’ organizational patterns through parties’ financing regulation; although the last has had a strong influence on the first. This issue is explained, following the previous pages, due to the scandal was more about illegal actors, than about weakness of parties and candidates’ performances. Second, congress people identified that regulating organizational patterns have more handicaps than financial ones, owing to the limits of state to regulate parties’ organization. And third, it was strongly improbable that politicians tried to give a great strengthening to parties giving them strong control on candidates financing. That is why, parties were fortified until a certain point: only making them responsible along with politicians was the measure adopted to avoid, or try to avoid, not legal money in electoral campaigns. Then, autonomy and strength of candidates remained in a better position than of political parties.

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If resources derived from illegal activities were going to be more controlled, then, how to fill the gap between money needed and the legally available? Private financing for elections remained allowed, but with a nebulous limitation due to the permission received by candidates and their relatives to finance their campaigns with the only limit of restrictions on expenditures that each campaign has to respect. The other source allowed is the chance to receive advances by the state, and Money-for-Vote Replenishment Mechanism. By this way, minority parties and those candidates who do not have personal resources were beneficed. Nevertheless, due to the distrust of politicians on parties and the risks associated to take advances from the state, it was strongly reasonable that campaigns became financed by private contributors with the prominence of family groups.11 As a result, electoral regulations prohibited representation of illegal actors but stimulated that of family interests through electoral financing. Likewise, organizational features of candidates advanced to compete in elections were not essentially modified, facilitating their autonomy from political parties and their competition toward clientelist networks and vote-buying. What is more, contests among politicians within the same party, as happened in National Front times, continued promoted by preferential voting (Cifras y conceptos. Netherlands Institute for Multiparty Democracy. PNUD, 2014). Considering that this was also an issue that facilitated financing by illegal actors, it is not rare that scandals continue to come on the rise (Caracol, 2019; Valbuena, 2019). Fortifying political parties in the Colombian case has to overcome the difficulty of recover the confidence of politicians in their organization. The issues related with the close lists versus preferring votes illustrates that point. In the absence of a verifiable democratic and transparent process in each political organization, partisans are going to prefer to win the support directly from their constituents. At the same time, recent political tradition has driven persons to become politicians (candidates) first than members of political parties. Then, at the time the Law was discussed it was hardly probable that politicians would change the rules of game they know how to play. As a result, parties were only fortified in those issues related with the political scandal at the time and that threatened (and threat) participation of some powerful political leaders: illegal armed groups, drug traffickers and mafias. Thus, due to the current existence of those 11

Just as examples, in 2015 the sources of financing in local electoral campaigns came mostly from candidates and family budgets (64%), followed by private donations (24,9%). Advances from the state represented only 0,2% of the total. (MOE, 2015). In elections for Congress advanced in 2018, 36,82% of incomes came from candidates’ budgets and credits, and 46,57% from private donations and credits. Advances from the state represented 6,18% (Transparencia por Colombia, 2019).

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groups, hand in hand with political parties, arises the question of how their relationships have shaped the construction of Colombian democracy and the internal armed conflict.

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Financiamiento/dream%20weaverr/INFORMES%20NACIONALES/Informes%20PDF/ Colombia%20Informe%20final.pdf. Díaz Arenas, P. A. (1993). La Constitución Política Colombiana (1991). Proceso, estructuras y contexto. TEMIS. Duque Daza, J. (2006). Partidos divididos, dirigencia fragmentada. Los partidos Liberal y Conservador colombianos 1974–2006. Convergencia, (41), 173–209. Echeverry Uruburu, Á. (2007, enero-junio). Orígenes y desarrollo de la violencia en Colombia. Revista IUSTA, I(1), pp. 136–151. Eisler, J. (2016). The deep patterns of campaign finance law. Connecticut Law Review, XLIX(1), 55–117. Eslava, M., & Meléndez, M. (2009). Politics, Policies and the Dynamics of Aggregate Productivity in Colombia. Working paper No. 4633. Inter-American Development Bank. Evertsson, N. (2009). Informe de la encuesta sobre financiación de las campañas electorales y la corrupción política en Colombia. Departamento de Criminología. Universidad de Estocolmo. García-Peña Jaramillo, D. (2005). La Relación del Estado Colombiano con el Fenómeno Paramilitar: por el Esclarecimiento Histórico. Análisis Político, XVIII(53), 58–76. http:// www.scielo.org.co/scielo.php?script=sci_arttext&pid=S0121-47052005000100004& lng=en&tlng=es. González Londoño, L. (2016). Las caras del paramilitarismo a la Luz de Justicia y Paz. Trabajo de grado para optar por el título de magister en historia. Pontificia Universidad Javeriana. Facultad de Ciencias Sociales, Bogotá. Jaramillo, N. (2003). Clientelismo y Poder. Cambios en las relaciones clientelistas en Colombia (1960–1990). In Tesis de pregrado. Bogotá: Universidad Nacional. Jost, S., Sarachaga, M., & Vargas Restrepo, J. C. (Eds.). (2010). El Financiamiento de la política en Colombia. Si bien la democracia no tiene precio, sí tiene un costo de funcionamiento. Bogotá: Konrad Adenauer Stiftung. Transparencia por Colombia. Misión de Observación Electoral. Leal Buitrago, F., & Dávila, A. (1990). Clietelismo: el sistema político y su expresión regional. Tercer Mundo Editores. Lee III, R. W., & Thoumi, F. E. (1998). El nexo entre las organizaciones criminales y la política en Colombia. Revista Ensayo & Error (4). Martz, J. D. (1997). The politics of clientelism. Democracy & the State in Colombia. Transaction Publishers. MOE. (2015). Financiación de campañas electorales en Colombia. Misión de Observación Electoral. https://moe.org.co/wp-content/uploads/2019/03/3.-Financiaci%C3%B3nde-Campa%C3%B1as-Locales-2019.pdf. Nwokora, Z. (2014). The distinctive politics of campaign finance reform. Party Politics, XX(6), 918–929. Ogliastri, E. (18 de Abril de 2008). Los polivados, sector público y sector privado en la clase dirigente colombiana 1972–18. Recuperado el 1 de Marzo de 2017, de INCAE. Business School. http://conocimiento.incae.edu/~ogliaste/polivados.doc. Paltiel, K. Z. (1981). Campaign Finance: Contrasting Practices and Reforms. In D. Butler, H. R. Penniman, & A. Ranney (Eds.), Democracy at the Polls. A comparative study of competitive national elections (pp. 138–172). Washington and London: American Enterprise Institute for Public Policy Research.

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Pierre, J., Svåsand, L., & Widfeldt, A. (2000). State subsidies to political parties: Confronting rhetoric with reality. West European Politics, XXIII(3), 1–24. Pinto-Duschinsky, M. (2002). Financing politics: A global view. Journal of Democracy, XIII(4), 69–86. Pizarro Leongómez, E. (1998). Financiamiento de las campañas electorales en Colombia. Revista de Derecho Público, (9), 23–55. Pujas, V., & Rhodes, M. (1999). Party finance and political scandal in Italy, Spain and France. West European Politics, 41–63. Restrepo, H. N. (2011). Financiamiento de los partidos, movimientos políticos y campañas electorales en Colombia. In P. Gutiérrez & D. Zovatto (Eds.), Financiamiento de los partidos políticos en América Latina (pp. 188–224). México: UNAM.IDEA.OEA. Rodríguez Pico, C. R. (July 2015). La instrumentación de los partidos políticos en Colombia: relaciones entre paramilitarismo y la política. Paper presented in the 8th Latin American Congress of Political Science. Latin American Association of Political Science. Pontificia Universidad Católica del Perú (pp. 1–25). Lima. http://bdigital.unal.edu.co/50584/1/La% 20instrumentaci%C3%B3n%20de%20los%20partidos%20pol%C3%ADticos%20en% 20Colombia%20Clara%20Roc%C3%ADo%20Rodr%C3%ADguez%20P.pdf. Rubio, M. (2013). Colombia: Coexistence, legal confrontation, and war with illegal armed groups. In K. Casas-Zamora (Ed.), Dangerous Liaisons. Organized Crime and Political Finance in Latin America and Beyond (pp. 76–106). Washington D.C.: Brookings Institution Press. Scarrow, S. E. (2004). Explaining political finance reforms. Competition and Context. Party Politics, X(6), 653–675. Senado de la República. (2010a). Gaceta del Congreso. Año XIX - N° 984. Bogotá. D.C.: Imprenta Nacional de Colombia. Senado de la República. (2010b). Gaceta del Congreso. Año XIX. N° 1050. Bogotá D.C.: Imprenta Nacional de Colombia. Senado de la República. (2010c). Gaceta del Congreso. Año XIX. N° 1092. Bogotá D.C.: Imprenta Nacional de Colombia. Senado de la República. (2011a). Gaceta del Congreso. Año XIX - N° 38. Bogotá D.C.: Imprenta Nacional de Colombia. Senado de la República. (2011b). Gaceta del Congreso. Año XIX - N° 60. Bogotá D.C: Imprenta Nacional de Colombia. Senado de la República. (2011c). Gaceta del Congreso. Año XX. N° 77. Bogotá D.C: Imprenta Nacional de Colombia. Strauss, D. A. (1994). Corruption, equiality, and campaign finance reform. Columbia Law Review, XCIV (4), 1369–1389. Transparencia por Colombia. (5 de March de 2019). Financiación de Campañas Políticas 2018. Recuperado el 02 de September de 2020, de Transparencia por Colombia. https:// transparenciacolombia.org.co/2019/03/05/financiacion-de-campanas-politicas-2018/. Valbuena G, J. F. (9 September 2019). Amenazas y atentados: así es hacer campaña en las regiones ‘calientes’. Retrieved from El Tiempo. https://www.eltiempo.com/elecci ones-colombia-2019/violencia-en-colombia-para-las-elecciones-regionales-del-27-deoctubre-409912.

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Valencia, L. (2007). Los caminos de la alianza entre los paramilitares y los políticos. In M. Romero (Ed.), Parapolítica. La ruta de la expansión paramilitar y los acuerdos políticos (pp. 11–58). Bogotá D.C.: CEREC. Corporación Nuevo Arcoiris. van Biezen, I. (2004). Political parties as public utilities. Party Politics, X(6), 701–722.

Nicolás Jaramillo is Ph.D. student in Sociology at Heidelberg University. Master in Sociology and Political Scientist from Universidad Nacional de Colombia. Current scholarship holder of KAAD. Previous beneficiary of COLFUTURO, scholarship holder of DAAD, and Universidad Nacional de Colombia. Selected publications (Spanish): Rulling Class and Political Corruption: 1837–1839 in New Granada (Colombia), In D. Hernández, E. Cruz Rodríguez, & N. J. Jaramillo Gabanzo, Ensayos de Teoría Política; State and Class Struggle: Karl Marx contributions to its Socio-political and Empirical Analysis, In J. Quiñones Páez (Ed.), Repensar a Marx hoy. E-mail addresses: [email protected]; [email protected]

Corruption Trials in Argentina: Justice Delayed? Friederike Elias and Sebastián Pereyra

Introduction This chapter1 is devoted to the role of the judicial system in Argentina’s corruption problem. Argentina has been dealing with the problem of political corruption on a recurring basis for three decades. Complaints, scandals and judicial investigations have cyclically targeted governments and officials from the 1990s onwards. Over the years, a large number of judicial cases have been opened in corruption cases with high public visibility, but they have not yielded results, thus generating a significant gap between the volume of complaints and the results of judicial decisions. Why is it so difficult for the judiciary to condemn corruption sentences? What factors play a role in this? Although there are clear guidelines on how long individual stages of the proceedings may last, investigations concerning corruption offences in the vast majority of cases drag on for decades and often end with a prescription and without the accused being convicted. Against this background, the main argument to be examined here is that the failure to convict corruption 1

The research was made possible by mobility funding from Heidelberg University as part of the Excellence Initiative. First we would like to thank all interview partners for their time, trust and interest in our work. Elizangela Valarini, Subrata Mitra and Matthias Kleinhempel gave helpful comments on an earlier draft of this article.

F. Elias (B) Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] S. Pereyra Universidad Nacional de San Martín (UNSAM), Buenos Aires, Argentina © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_8

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offenders can be understood and explained as a form of organizational2 deviance. In the context of this chapter, we will also examine the possible solutions that Argentinean actors see to this problem and the extent to which the concept of organizational deviance is capable of opening up a new perspective on the role of the judiciary regarding corruption in Argentina. This would allow us to use this alternative approach to demonstrate new possibilities for action to solve the problem. Since the organization of the Argentinean state and the institutions involved in the fight against corruption has a few peculiarities, the organization is presented in a diagram and the tasks and limitations of the institutions are briefly described. In a second step, the interviews were evaluated with regard to problem analysis and in a third step, with regard to approaches for solving the problems. Argentina has adopted a significant number of transparency and anti-corruption laws in recent decades. The creation of the Anti-Corruption Office in 1999 highlighted the unsuccessful efforts of the national state to develop controls in the functioning of the public administration and to prevent acts of corruption. These policies, however, are dissociated from the scandals and denunciations that mostly refer to forms of gran corrupción, occurring at the highest levels of government, and that generate an expectation of response and judicial treatment of cases (Pereyra, 2019). In criminal matters, the legislation was also reinforced in the late 1990s by increasing the penalties for crimes against public administration (Law on Ethics in the Exercise of Public Service, 1999). On the other hand, in recent years, other relevant legislations have been adapted. Important changes are the “ley de arrepentido”,3 Ley 27.304 from 2016 and the “ley de la responsabilidad penal de personas jurídicas”, Ley 27.401 from 2017. The “ley de arrepentido” is a leniency program that allows a person who has committed a crime to be granted leniency in exchange of receiving information. The information provided must be substantial so that it can be used to recover assets or obtain a criminal conviction against someone who is more important than he is in the criminal network under investigation. The extension of criminal liability law to legal persons, as laid down in the “ley de la responsabilidad penal de personas jurídicas”, is another important milestone in the fight against corruption. For example, national and international bribery of public officials by a legal person under private law or for their benefit can be punished with a fine of two to five times the unlawfully obtained advantage, calculated in monetary terms. The ‘legal 2

In an analytical sense, we consider both the judicial system as a whole and the individual chambers of the courts, with their presiding judges and their staff, as organization. 3 The law is called “La ley de arrepentido” in the media as the “law of the repentant”.

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person’ (corporate entity) may also be convicted if it was not possible to identify or prosecute the natural person involved in the offence, provided, it is established that the offence could not have been committed without the acquiescence of the company’s bodies. However, it appears questionable whether these legislative changes are capable of resolving the problem of corruption, since one of the main problems seems to lie in the judicial system. A report of OCDAP (Oficina de Coordinación y Seguimiento en materia de Delitos contra la Administración Pública) states that a corruption case in Argentina has an average duration of 11 years (2012).4 Out of 21 cases reported, 6 cases were still in the phase of introduction (average duration of this cases 122 month), 9 cases were still open (since 111 month), 3 cases ended with a prescription (after 152 month) and only 3 cases came to a decision (after 152 month). This numbers shows a clear problem: Argentina’s justice works slowly. Is this the reason for Argentina’s corruption problem? Looking at the rules a process has certain time limits to cope. After a crime has been reported to a Judge, he has to decide within 24 h whether to start an investigation or not, and to inform the prosecutor. The investigation stage of the trial is the written investigation which should take 4 months—two additional months are possible. In this phase, the facts are to be reconstructed and the prosecutor decides to bring the case to court hearing. The intermediate part takes places in which the evidences, which are used in the trial, have to be presented in a written form. Finally, a court hearing happens, in which investigation, evidences and defenses are presented and in the end the judge delivers his judgement. As the following chart shows in all stages of the process—even in those with a clear time limit—a huge amount of time is needed (Fig. 1). The judicial system was chosen as the focus of the investigation because of the fact that even the major corruption cases in Argentina, which receive a great deal of media attention, have no criminal consequences for those involved. Ten qualitative interviews with experts were conducted, which were analyzed in a qualitative content analysis. The present study follows a deductive approach as it is based on empirical findings on the duration of corruption trials in Argentina, which explains these quantitative results inductively in more detail within the framework of a qualitative design, supplemented by the experts’ descriptions.

4

It is important to note that the problem of the length of criminal cases in the country is not only linked to the causes of corruption. In other types of crimes, it has also been observed that the duration of the cases (particularly the pretrial investigation process) is very dispersed and that the scheduled procedural times are not respected, but, rather exceeded (Marchisio, 2004).

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Incident

Report of the crime to judge

3,3 years (40 months)

Introduction trial

7,2 years (86,8 months)

Intermediate part

Oral trial

0,9 years (11 months)

5 years * (60 months)

* only 3 complete cases

Fig. 1 Average duration of trail stages (data from OCAP (Oficina de Coordinación y Seguimiento en materia de Delitos contra la Administración Pública) 2012)

The article first gives an overview of the state of research, the methodological approach and the theoretical basis. The result of the qualitative study is presented in three parts. First, the interviews were used to identify which institutions need to be involved inside and outside the judicial system to understand the problem.

State of the Art The usual definition of corruption is, often with reference to Nye (1967), a deviation from formal duties of a public role or office, with the object or intent to acquire a private benefit. In the Código Penal de la Nación Argentina, the Argentine nation’s criminal code, the offences to be included under corruption are defined as crimes against the public administration and include misdemeanors that always took place with the participation of state officials. This definition focuses on the perpetration of acts of corruption by public officials and inspires—to a large extent—a classic criminal approach to the problem. The most current views tend to emphasize systemic or organizational approaches to understanding corruption, and define it more in terms of the development of corrupt exchanges (Granovetter, 2007). Those approaches are present in a reform proposal of the penal code, which was presented in 2019, and that includes, for example, corruption between two private actors (Comision para la reforma del código penal de la nación, 2019). This shows that until now the corruption problem in Argentina has a strong link to public administration. Volosin (2019) assumes that corruption is seen as a sign of institutional weaknesses in the political system, which is designed in such a way that it can be used in the interests of those in power. Political corruption could be analyzed, then as the result of, on the one hand, recurrent political instability

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and, on the other hand, a presidential institutional design that concentrate power on the executive branch, posing problems to the division of powers. Recurrent collusion between political and economic power also flourished because of this institutional design. Since Argentina’s return to democracy in 1983, the country has been repeatedly shaken by large-scale corruption scandals, most of which reach up to the highest levels of government. Since 1989, the issue has increasingly moved into the public eye in Argentina, particularly due to the immense growth in the wealth of Menem’s government employees, but also due to the establishment of new, independent media and international legal and policy standards (Moreno Ocampo, 1993, p. 47; Krastev, 2004; Pereyra, 2013). Because of its widespread distribution, corruption in Argentina is described as structural (Volosin, 2020) and often endemic (Volosin, 2019). At the same time, high level figures (presidents, state secretaries, etc.) recurrently involved on corruption allegations and scandals obstruct independent judicial investigation. Judges and prosecutors often choose not to investigate reported cases while the defendants are in office. Thus, cases often do not move forward for several years and investigations begin once the individuals in question leave the government. A number of articles deal with the role of the judicial system in dealing with Argentina’s corruption cases. Fundamental criticism against it is that the judicial system is socially discriminatory because corruption offenders, who usually come from the higher strata, are not convicted, while everyday crimes are quickly investigated, leading to conviction, and prison sentences are often imposed (Delgado & Elía, 2016). The Argentinean judiciary has a hard time with white-collar crime, so that corruption offences often end up in the statute of limitations and the offenders go unpunished. This is attributed to a class alliance that exists in the background, which continues to exist due to similar social origins and common circles of judges, prosecutors, lawyers and defendants. With regard to corruption trials, the NGO Asociación Civil por la Igualdad y la Justicia (ACIJ) notes numerous problems (ACIJ, 2009). These include a lack of strategic planning of investigations, inefficient use of existing resources, vacation periods during which investigations are suspended, lack of cooperation with the public prosecutor’s office and the anticorruption office, failure to meet trial deadlines, excessive formalism in communication and investigation procedures, delaying use of procedural tools, and lack of cooperation between judges and accounting experts. The slowness of the processes in particular is often criticized. This is attributed to the predominantly written form of the proceedings and the low staffing levels; however, influence by wealthy persons is also assumed (Blake & Lunsford Kohen, 2010, p. 36). In the view of the ACIJ (2011), the long

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duration of proceedings could be resolved by reforms to the procedural code. In particular, it would be appropriate to better adhere to ridges with regard to the stages of proceedings and appeals, to replace written with oral procedural steps, and to improve the personnel situation. Possible measures would be the creation of more administrative posts in order to be able to process files more quickly, the creation of more positions for judges and the rapid filling up of vacant positions. In their case analysis of the verdicts in three well-known corruption cases, Piana and Arévalo (2019) point out that there are numerous difficulties in convicting corruption offenders, for example, in applying specific criminal offences to actual events, in proving that assets have increased through unlawful enrichment in office, and in assessing the discretionary powers of state employees. Older studies on the effectiveness of criminal law emphasized the need for a leniency program and an extension of criminal liability law to legal entities to enable the conviction of corruption offenders (Rusca, 2012). The fact that these regulations became legal norms shortly before respectively shortly after the interviews were conducted in Argentina the effects of these norms has not yet been studied. Ciocchini (2014) analyzes the narratives represented by different actors regarding the delays in the Argentinean judicial system. He is particularly interested in the tactics and strategies behind these narratives and the reforms they lead to. Two perspectives are central: the violation of human rights by defendants who, sometimes in prison, have to wait excessively long for a verdict, and the problem of impunity. These narratives are associated with overcrowding in prisons and with a risk for public safety. He states that with the transition from inquisitorial to accusatory trials, the discourse shifts towards attributing the long duration of the process to the extensive appeal possibilities. The introduction of pretrial hearings will shift the responsibility for the speedy handling of trials to the judicial staff and instead of the laws, the strategies of the actors involved will become decisive for reaching a verdict. The background to these reforms is the desire of the political level for better control, especially of the judicial activity. With regard to the rationalities that guide the actions of judges, Piana and Arévalo (2019) note that judges not only have to assess and classify the facts. They have to take care also for their relationship with the government because of its ability to control the Council of Magistrates and the Congress, which could lead to an indictment or dismissal of the judge himself. The judges are heavily dependent on the government, which explains why only former members of the government are usually investigated. Even the Supreme Court has been repeatedly appropriated and politicized by Argentine presidents throughout history (Sabsay, 2004).

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Over half of Argentinians assume that even judges are corrupt (Pring, 2019). Moreno Ocampo notes that corruption always ties itself to power. There are therefore examples of judges who use their power for personal gain (Moreno Ocampo, 1993, p. 50). Buscaglia (2001) works on causes of court-related corruption. In his study he uses surveys of lawyers, judges, and litigants on the perceptions of frequencies of corrupt practices in the judicial sectors of Argentina, Ecuador, and Venezuela. A high number of procedural steps and a great variance in the duration of trials increase the perceived frequency of corrupt practices, while the extensive computerization of trials has the opposite effect, and increasing the salaries of court employees has no effect on the perception of corruption. A judicial reform is currently under discussion that is considered central to the problem of corruption, since currently less than 1% of those investigated for corruption are convicted (Ruiz, 2020). However, this reform is controversial because it is suspected of extending the government’s political influence on the judicial system. For example, the opposition fears that by expanding the number of judges at the national level, through the appointment of politically loyal judges, influence could be exerted on the pending corruption trials against the vice president (Buenos Aires Times, 2020).

Data and Method The following statements are based on a content analysis of interviews with Argentine judges, public prosecutors, lawyers, representatives of nongovernmental organizations, companies and government agencies, as well as with journalists whose activities focus on the topic of corruption. A total of ten qualitative interviews were conducted to explore the topic of corruption with a focus on the role of the legal system. Due to the targeted selection of interview partners, the selection is not representative in a statistical sense but is able to give a balanced view of the problem by including both insiders and outsiders of the legal system Eight of the ten interviewees had a degree in law. The remaining two interview partners had studied business administration and political science. All interviewees had many years of professional experience in the field of anti-corruption or criminal law, and most of them had gained different professional experience in different positions inside and outside of the judicial system. The timing of the interview in spring 2017 turned out to be particularly favorable, since the last change of government had already taken place a year and a half

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earlier and the new president Mauricio Macri5 had given top priority to the fight against corruption. Admittedly, this announcement was already a tradition when the Argentine presidents took office. However, the social call for a more effective fight against corruption had become increasingly loud during Cristina Fernández de Kirchner’s term of office.6 The immense increase in the Kirchner’s private wealth was increasingly questioned, and the case of Lázaro Báez7 led to nationwide protests in 2013. The case of José Lopez8 in 2016 revived the discussion about corruption among Kirchner’s governments. The interviews followed an interview guideline, which was used flexibly in order to maintain the natural flow of conversation. A biographical question about the professional career served as an introductory question in order to ensure an entry into the conversation as open as possible. The thematic blocks of the interview were (1) the perception of the corruption problem, (2) the fight against corruption and (3) global trends and regulations in the field of anti-corruption. The interviews were conducted in the native language of the interview partners to avoid communication difficulties during the course of the interview. Due to the presence of a foreign scientist, there was a natural necessity for the interviewees to elaborate on certain particularities which had an impact on the interview. In the course of the interviews, Germany was frequently used as a comparative example to clarify certain aspects of the descriptions. The transcriptions of the nine Spanish and one German-language interview were carried out completely and literally by native speakers. The evaluation was based on the structuring qualitative content analysis according to Philipp Mayring (2008) and served to extract topics, content, and points of view from the material. Based on deductive categories, the category system was refined and extended by several passes through the material. The interview passages were coded and evaluated with the help of MAXQDA.

5

President of Argentina between 2015–2019. Cristina Fernández de Kirchner was President of Argentina between 2007 and 2015. 7 The building contractor Lázaro Báez benefited particularly from public contracts during Nestor Kirchner’s presidency. He is said to have been involved in a large-scale financial manipulation by members of Kirchner’s closest circle of friends and acquaintances, involving the transfer of some 55 million euros to Switzerland and other foreign tax havens. 8 José Lopez, former Secretary of State in the government of Cristina Fernandez de Kirchner, was arrested in the early morning hours of June 14, 2016, when he tried to throw six large plastic bags with banknotes over the wall of a monastery. 6

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Theoretical Appoach From a theoretical point of view, we approach the topic with an organizationalsociological focus. We are convinced that explanatory approaches that focus on a power elite that places its own prosperity at the center of its actions, or cultural theories that attribute deviant behavior to unfavorable value constellations, and historically misguided developments, obscure the view of effective organizational mechanisms in the juridical system as a hole as well as in the chambers of the courts. From our point of view, these organizational mechanisms must be taken into account in order to understand the real impact of organizations for the corruption problem in Argentina. In the following, we will try to show an alternative explanation using neo-institutional approach in order to open the view for new possible solutions. Whether or not we succeed in doing so must ultimately be judged by experts in the field of anti-corruption, who are left to draw practical consequences from our theoretical considerations. The sociological neo-institutional approach focuses on the role of institutional contexts and organizational fields for development of organizations. According to Scott (Scott 2014, p. 33) “Institutions consist of cognitive, normative, and regulative structures and activities that provide stability and meaning to social behavior”. The adaptation of formal structures of an organization is seen as a reaction to impulses from the institutional context respectively the organizational field, to which it is necessary to react adequately in order to ensure the stability and legitimacy of the organization and its long-term survival. It is common that the formal structure of organizations is decoupled from the structure of their activity, in order to continue with usual activities without losing legitimacy and support. At the same time, decoupling leads to a minimization of control possibilities. We see, in fact, that judicialization of corruption is conducted formally in Argentina, but these processes are not pursued further as a first indication of such a decoupling, which makes the use of neo-institutional considerations seem reasonable.

The Results of the Empirical Study Since the interviews often referred to different institutions within, but also outside the judiciary, the following is a diagram illustrating the structure of the Argentinean state, followed by a brief description of the individual offices and their tasks (Fig. 2).

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Fig. 2 Organization of the Argentine State. Source: Authors

At the Cámara Nacional de Apelaciones en lo Criminal y Correccional Federal de la Capital Federal (Chamber of Appeal of the Federal Criminal Court) in Buenos Aires, the focus is on corruption cases in Argentina, as these are usually cases involving inconsistencies in the award of public contracts to national and international companies. It comprises a total of 12 chambers and two appeal chambers, each of which is composed of three judges. This jurisdiction is housed in the Comodoro Py building, whose name is also used in the vernacular for the judicial representatives working there. The Corte Suprema de Justicia de la Nación Argentina (Supreme Court of Justice) has original jurisdiction over certain matters governed by Article 117 of the Constitution, including those involving foreign ambassadors, ministers and consuls, and also for litigation between Argentine provinces. The Supreme Court and the lower courts of the nation have jurisdiction to hear and decide all cases involving matters governed by the Constitution and national laws, with the exception of cases corresponding to provincial jurisdiction and international treaties. The Supreme Court is the court of appeal for national jurisdiction and decides on the constitutionality of presidential decrees. The Cuerpo de Peritos Contadores Oficiales (Corps of Official Accounting Experts) is a technical unit with an expert character and purpose, operating under the supervision of the Federal Judicial Assistance Center of the National Supreme Court. Its task is to decide on issues of the field of expertise that are submitted to

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it for consideration at by national and federal judges and prosecutors with jurisdiction in criminal matters. In exceptional cases, the judges of other jurisdictions may also request its intervention. The assistance of accounting experts is often necessary for the handling of corruption cases. The Consejo de la Magistratura de la Nación (National Judicial Council) is responsible for the selection of judges by public competition and their dismissal for reasons provided by law. According to the Constitution, the Council must be composed in such a way as to ensure a balance between the representation of the political parties resulting from the elections, judges at all levels and the lawyers of the Federal Register. In addition, it shall include persons from the academic and scientific fields. The tasks of the Procuraduría de Investigaciones Administrativas (PIA, public prosecutor’s office for administrative investigations) are purely investigative tasks. Although it provides data on cases of corruption and can thus draw attention to certain risks, it has no preventive function. Since cases of corruption often fall under the jurisdiction of different courts and prosecutor’s offices due to the segmentation of the Argentine judicial system, the PIA has also coordinating tasks. The work of the public prosecutor’s office is limited, however, by the inaccessibility of certain databases. For example, information that is subject to tax secrecy is not made accessible by the Administración Federal de Ingresos Públicos (AFIP), the Argentine tax authority. Another complex issue is access to the sworn declarations of assets of government officials, which are managed by the Anti-Corruption Office. The Oficina Anticorrupción (AO, Anti-Corruption Office) is an executive body created at the end of 1999 to ensure the application of the law of public ethics9 in the executive branch, within the framework of centralized and decentralized national administration. It has similar tasks to the Procuraduría de Investigaciones Administrativas (PIA, public prosecutor’s office for administrative investigations), but although it can take witness statements, conduct preliminary investigations and file complaints, it does not have the same powers as a public prosecutor’s office. The AO intervenes directly in corruption cases and coordinates investigations at the national level. In addition, the prevention and planning of transparency policies is a central task of the office, especially the prevention of conflicts of interest. This includes administering the system of affidavits, especially those of the 1400 officials of the highest rank, and reviewing their declarations of assets. In the event of new appointments, jobholders are informed of the legal requirements regarding 9

The “law of public ethics” establishes the rules of conduct to be followed by all public officials and regulates the submission of affidavits and incompatibilities of officials.

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conflicts of interest, in particular the provisions of law of public ethics. Another task is to monitor compliance with international conventions against corruption of the OAS, the United Nations and the OECD Anti-Bullying Convention. The head of the office is appointed by the President of Argentina; functionally and financially it reports to the Ministry of Justice. Other players are the compliance offices in state-owned companies. Their central task to monitor that public tendering procedures are carried out correctly. To this end, the usual market price is determined in advance to determine if the price is higher than the market price. If a company is awarded the contract, the execution of the contract has to be monitored. Public construction contracts have a long duration and include important details, such as partial payments due as construction progresses. During the phase of acceptance of the work or when additional costs are approved, bribes may be paid to the building inspector. Especially in Argentina, which continues to have high inflation, the time frame of the contracts is an extremely decisive factor. Even if all parties involved in a construction project are properly paid in the end, it is the delicate decision under risk aspects as to who is paid first and who later. To give a complete overview of checks and balances within Argentina’s political system the following two entities are to be named even if there were not mentioned in the interviews. The Auditoría General de la Nación (AGN, National Audit Committee) is a technical support body of the Congress, whose mission is to assist the legislature in the external control of the national public sector in its patrimonial, economic, financial and operational aspects. This includes the control of the budgetary, economic, financial, asset and legal management, as well as the opinion on the financial reports of the central administration, the decentralized bodies, the state companies and entities, the public service regulators, and the municipal administration of Buenos Aires. The Senate proposes three members of the body, while the Chamber of Deputies proposes the other three. The seventh member is the President, proposed by the opposition party with the largest presence in Congress. To be appointed as an auditor, it is necessary to have a degree in Economics or Law, with experience in financial administration. The independence of the body is limited by the fact that the work plan has to be coordinated with the congress (Lamberto 2017). The Sindicatura General de la Nación (SIGEN, National General Audit Office) monitors that the administration of the national public sector achieves the government’s goals through the appropriate use of resources within the applicable legal framework. It advises the president and reports directly to him. It is a parliamentary body whose leadership is shared with the opposition parties according to their

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representation in Congress and which exercises external control and can control the highest national authorities

Problem Analysis According to the interviewees the judicial system plays a decisive role in the fact that corruption crimes very rarely lead to a conviction. Jurisdiction as well as procedural channels are poorly organized. The weaknesses of the system can be exploited by the actors involved according to their interests and lead to excessive length of proceedings. The long duration of the trials is first of all explained by the way the cases are handled by the judges of the Cámara Nacional en lo Criminal y Correccional Federal. Overall, the number of 12 judges at the federal level is very low, given the scope of its broad jurisdiction over drug trafficking, human trafficking, economic crime and crimes against humanity (S2, 43; S3, 8). In particular, the different nature of the cases is attributed the decisive role. Cases are given priority, when victims are concrete and thus public attention is more focused. This is the case in the crimes of the Argentine military dictatorship, which continue to occupy the judiciary to a great extent. In contrast, the victims of corruption cases often remain diffuse. If there are real victims, such as in the case of the train accident at the “Once”—train station,10 the bereaved and the press exert pressure. In these cases, trials proceed swiftly, verdicts are passed and prison sentences are imposed (N2, 10). Personnel bottlenecks are seen as another problem. If a judge is working on a complex case of organized crime, he cannot deal with any other case because the judges and prosecutors each have only a small staff (S2, 47). Experts who can investigate the accounting side of corruption cases are available at the Supreme Court, but a medium-scale audit takes about a year—a year in which the process stops (S1, 51). More specialists are needed to actually audit the cases, e.g., administrative lawyers to verify the correct conduct of public tenders (S2, 53). Another key explanation for the long duration is deliberate delays in the process flow. The more powerful the accused person or company is, the better the

10

The train accident at the “Once” station, commonly known as the “Tragedy of Once”, was a train accident that occurred in Buenos Aires on February 22, 2012, in which 51 people died and 789 were injured. The accident could be attributed to a failure of the braking system; maintenance had not been carried out and the funds earmarked for this purpose had been misappropriated.

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lawyers are. The expensive law firms are specialized in making full use of the possibilities offered by Argentine criminal procedural law. The national model of criminal procedural law is structured like a spider’s web: the small insects are caught, the large insects destroy the web (S1, 55).

If the defense lodges an appeal, the process is passed on to the next higher instance. While this instance decides on the appeal, the actual process stops. The defense continues to appeal until the case is at the Supreme Court. This can delay a trial by up to 15 years (N3, 38). In addition to the possibility of appeal, attempts are often made to obtain declarations of nullity in criminal proceedings (A1, 5). On the website of the Public Prosecutor’s Office for Defence of the province of Jujuy this strategy is explained: “Raising a nullity in criminal process is a traditional way of defense, because there are repeated and numerous essential formal errors in the acts of the process by officials who are in charge of conducting criminal investigations. Examples of this can be found in invented anonymous calls, false statements, police arrogance, clandestine investigations, lack of reports on personal search and arrest or the lack of a search warrant”.11 If nullity is declared, the corresponding process steps must be repeated. Argentine criminal procedural law is very recursive and a good lawyer can delay a trial for years and keep it in the written phase until the statute of limitations comes into effect and the accused get no conviction in this way (S3, 8; N2, 10). As a result, penalties for corruption are rarely actually imposed, and in the few cases where a verdict is actually reached, the penalties are suspended (N3, 17). As a prominent example of impunity ex-president Carlos Menem was named, who was convicted in 2013 but did not serve his prison term. But delaying strategies can also be applied at the judges’ side: they can advance certain cases or put the files aside at their own discretion (A1, 21; N3, 50). The inquisitorial system allows the judges to take their foot off the accelerator when they want to, and to push it again when it suits them (N3, 50).

11 http://mpdpjujuy.gob.ar/nulidades-derecho-penal/. The Public Prosecutor’s Office for Defense is an institution for the defense and protection of human rights, which guarantees access to justice and comprehensive legal assistance in individual and collective cases, especially for persons in vulnerable situations.

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In addition, there are peculiarities in the Argentinean legal system or in the code of criminal procedure that are capable of explaining the enormous length of proceedings. In the inquisitory criminal procedure, which is applied in federal corruption trials in Argentina, the judges lead the investigation. What is needed, following the statements of some interviewees, is a reform of the code of criminal procedure towards an adversarial system.12 Then it would be up to the prosecutors to investigate and advance the investigation, while the judges would have the opportunity to observe the trial impartially. Such a reform would relieve the burden on judges, lead to better investigation results and more trials. At the provincial level, the change to the accusatory type of procedure has already been implemented (U1, 53). However, the main problem of the Argentine judicial system seems to be on a higher level. Due to a lack of separation of powers in the organization of the Argentine state the judiciary cannot work completely independently of politics. The disadvantages of the presidential system are evident here. The judges of the federal criminal court -those in charge of investigating corruption allegations- work in close interaction with the political class. Judges use corruption investigation as a resource for negotiating with political power. When a change of power takes place, corruption investigations, some of which have been dormant for years, pick up speed again (A2, 13). The judges’ personal interests thus come into conflict with the strict application of law and order. There are not enough people, there is not enough money, there are not enough resources, there is an overload of work, there is not enough education. All this is true for us, the main problem is still the lack of political will to move forward in these cases, because if the political will really exists, even with a bad system, with a lot of work, with few resources, etc., interesting results are obtained (N3, 32–33).

Another problem is the influence of executive branch in the judicial system. The National Judicial Council is usually denounced by judges as a gateway for political influence in the judicial system. The Council strengthens the power of the political system, for example, by deviating from objective criteria and the role of the legislative branch in the selection of new judges. At times, half of the judges’ positions at the federal level were unfilled. The solution of deputy judges makes them vulnerable to pressure because of their uncertain position. Many of the judges themselves are not uncontroversial (A1, 7; N1, 22; N2, 10). However, it is often not clear whether the accusations made against the judges in the press for 12

A corresponding amendment to the procedural code at national level has already been adopted but not yet implemented in 2014.

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example are justified or are part of media campaigns to discredit the person in question (N1, 34). The public prosecutors are also in a position to act in accordance with political interests. The public prosecutor could advance or slow down cases, for example by forgetting to appeal in cases of unlawful enrichment of high-ranking officials. If no appeal is lodged, the first-instance judgment becomes final (S3, 8). Within the framework of the fight against corruption, the Anti-Corruption Office has the important task of examining possible conflicts of interest among state employees and, by examining their property, ensuring that no personal enrichment has taken place or is taking place. In order to carry out this audit, the law of public ethics, released in 1999, stipulated that public employees must make an annual affidavit regarding their possessions. Since the management of the Anti-Corruption Office is appointed and dismissed by the president himself, this institution acts in dependence of the political power. Correspondingly, control by the Anti-Corruption Office affects fewer current government employees, but instead increasingly affects the governments that were voted out and their apparatuses (A2, 25). Only the executive branch is implementing the law; the judiciary and legislative branches do not implement the provisions of the law of public ethics (S3, 8/N2, 40). The Anti-Corruption Office does not have the capacity to control the enrichment of judges. There is no mechanism for such control within or outside the judiciary. Moreover, the implementation of the law of public ethics is only very partial. Certainly, the level of implementation of the law also differs between state organizations and organizations at the provincial level (S3, 8). According to the experts, the media does not take an impartial and objective stand. Commercial interests and therefore political reasons also played a role here. The focus of reporting in most cases is on the state side of corruption while companies were protected by removing the intensity and drama from the private side (S1, 11). To make matters worse, politicians and members of the government apparatus are often the authors of corrupt operations, which explains why there is no political interest in resolving the institutional deficits. Establishing control mechanisms also becomes a problem for governments. Since it is a presidential system, whoever comes into government has a number of resources to govern. Making decisions to control corruption then implies self-limiting those resources of power and thus giving ground to the political opposition. No government then has any incentive to make such a decision. Some areas of public policy in particular have a long tradition of reporting corruption. This is the case with the investment of the national state in public works. There, interviewees state that corruption by government officials is the order of the day, especially in public procurement. On the initiative of the public

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servants themselves, a kind of tariff is set for the companies that were awarded the contract for public services, whereby they had to pay a certain percentage of the profit they made. Of course, since the entrepreneur always works with a very tight budget to win the tender, he has to find a public official who pays him more to make this extra profit (A2, 15). A very honest and respected Minister of Economy of Argentina, Roberto Lavagna, said at a dinner of the Chamber of Construction that in Argentina public procurement works like a corruption cartel (A2, 15).

All new governments in Argentina put the fight against corruption on their political agenda. Nevertheless, all presidents who have held office for a long time over the past four decades have sooner or later faced accusations of corruption. When Carlos Menem13 took over the government in 1989, he carried out major reforms in every respect. In the course of the neoliberal reforms of the Menem government, the control mechanisms were also weakened, for example, the Procuraduría de Investigaciones Administrativas (PIA)—the public prosecutor’s office for administrative investigations—was practically shut down (A2, 27). During the Menem government, numerous state enterprises were sold on extremely unfavorable terms for the Argentine state, while a small group of entrepreneurs benefited significantly, a situation that is also referred to as “robbery for the crown”. In addition, numerous extensive corruption scandals occurred during Menem’s reign, such as the IBM –Banco de la Nación case. In the Siemens case, Menem is said to have personally received bribes from Siemens for a contract concerning an electronic system for border controls, digital ID cards, data collection and voter lists (Ott, 2010). During his reign, Carlos Menem expanded the Supreme Court by four seats. Of the nine supreme judges, six were close to the government. Fernando de la Rúa14 won the election in late 1999 with the promise of greater transparency and the fight against corruption as the main theme of the political campaign. Thus, in part in response to international mechanisms such as the InterAmerican Commission against Corruption, of which Argentina was one of the signatories and which called for the creation of such agencies, the Anti-Corruption Office was created (S2, 13). However, accusations of corruption soon became widespread here as well. In 2000, President Fernando de la Rúa needed approval for the deregulation of the labor market so that the international monetary fund 13

Argentine lawyer and politician who, as a member of the Peronist Party, was President of Argentina from July 9, 1989, to December 10, 1999. 14 The doctor of law, a member of the Unión Cívica Radical party, was president of Argentina from December 10, 1999, to December 21, 2001.

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would grant the country a loan. In this context, senators of the opposition party are said to have received a bribe of about $ 5 million to enable the passage of this law. Despite the testimony of a former parliamentary secretary of the Senate, who explained in detail how the payments had been made, an acquittal was granted in December 2012 for lack of evidence. When Nestor Kircher15 came to power, the judges suspected of corruption were replaced. Under the government of his wife Cristina Fernández de Kirchner,16 more and more accusations of corruption were voiced; its focus was on construction contracts in southern Argentina (A2, 15). Illegal enrichment, which was suspected due to the increase in assets during Nestor’s term of office, was not comprehensively investigated (A2, 35). As an interviewee states corruption in the Kirchner administration’s environment had been necessary to maintain power: Extensive resources were needed to struggle with corporative firms (in the media, rural and finance sectors) who were against government economic and other specific policies. (S1, 9). In that context, anticorruption agenda that were build by civil society and partially implemented during the 90s was clearly relegated. The impact of the global anti-corruption movement on Argentina should have been felt much earlier; the measures that had somehow been agreed upon were halted by the previous government’s lack of interest in this problem (U1, 67).

There were many problems with conflicts of interest in the government under Mauricio Marci,17 as he brought numerous business representatives into the government (N3, 53). One of Macri’s first official acts was to appoint two judges for the vacant seats on the Supreme Court. Since he made this appointment by decree and did not follow the prescribed procedural path, this led to social controversy. Macri is also subject to numerous accusations of unlawful enrichment and taking advantage in office for the benefit of companies owned by his family. In addition to the points mentioned above, informal, cross-sectoral networks are seen as a central reason for the lack of legal processing of corruption offences. 15

He worked as a lawyer before becoming president of Argentina for the Peronist Party on May 25, 2003. He handed over his office to his wife Cristina Fernández de Kirchner on December 10, 2007. 16 Like her husband, the politician is a member of the Peronist Party and worked as a lawyer before taking office as president of Argentina. She ruled two terms until December 10, 2010, and was a member of the Argentine National Congress between 2017 and 2019. Since the presidential election of 2019 she is the vice president of Argentina. 17 The conservative politician of the Propuesta Republicana (PRO) party was mayor of Buenos Aires from 2007–2015 and president of Argentina from 2015 to 2019. Before his political career, he was an entrepreneur and at times president of the sports club Boca Juniors.

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First, it is reported that there is a fundamental inequality of treatment in criminal prosecution with respect to common offences and the prosecution of white-collar crime, and especially with respect to cases of corruption (N2, 8). This is attributed to socio-structural similarities and the resulting informal networks. That is why, some interviewers consider that judges, prosecutors and attorneys also act as part of an elite because of similar social origins, common educational paths and common social circles. Most of them come from long-established upper class families have known each other since university days, and are members of the same clubs, and practice the same sports (A1, 7; N2, 8). Delay strategies can therefore be observed in corruption processes at all stages of the proceedings and starting with all participants. Overall, the interlocutors noted that the focus of public discussion of the corruption problem in Argentina is on the side of the state. Although the representatives of the government apparatus are passive-as bribes are accepted by a civil servant but given by a businessman-the misconduct on the side of the civil servants is perceived as much more serious because they are elected representatives of the people, elected by the citizens to defend their interests. The role of the businessman is to represent his commercial interests, even if he does so by illegal means (N2, 21). Overall, this view of corruption, which is limited to persecuting the state side, contributes to perpetuating the problem, because although the elections change the officials, it does not change the businessmen, who always remain at the center of power (N3, 46).

Possible Solutions Transparency is seen as a central starting point for solving the problems in the judicial sector, especially with regard to the excessive length of proceedings. The information about a corruption scandal that comes to public’s attention, for example through the Supreme Court’s database, is very limited. Trials are held behind closed doors (N3, 15). The change from an inquisitorial to an accusatory type of procedure would mean opening the processes.18 Since this would make the 18

The main difference between the inquisitorial/instructive procedure and an accusatory/adversatory procedure is the question of who conducts the process (Ambos, 2008). In the instructorial procedure the court is responsible for the taking of evidence (e.g. Germany) while in the adversarial procedure the parties obtain the evidence themselves and present it in the main hearing (e.g. USA, England and other common law systems). In Argentina, this change is linked to the hope that the judges themselves will be exonerated and that the cases will be heard more often in public.

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work of judges more transparent, they are often opposed to change, as this would make their activities controllable (N3, 53; S3, 8). Greater transparency would also make it clear that the proceedings linger excessively long at the written stage. This would force the judges to explain why the proceedings cannot be moved forward and thus certainly accelerate the conclusion of the proceedings (N2, 37). It would also be extremely useful in other parts of the judicial system to achieve the publication of all documents. For example, the competitive procedures for the appointment of judge would have to become more transparent so that the criteria for recruitment can be understood. The property declarations of state employees should be made available for inspection and should also include consumption, in order to make unlawful access to assets visible. Overall, citizens should have the opportunity to control the work of the government. The more public transactions are carried out, the less opportunity there is for corruption (S2, 33). The media is currently seen as one of the few ways to exert public pressure on the government and the judicial system regarding corruption cases and processes. The greatest risk for corruption offenders is public exposure, not necessarily a criminal conviction. In Argentina, the main risk of being discovered is not to pay a phenomenal fine or go to jail, but to have the media write about it (U1, 63).

Much information about corruption cases and processes only reaches the public because members of the judicial system have passed it on to members of the press (N3, 15). Non-governmental organizations in the field of anticorruption already make use of the various possibilities for intervention in court proceedings (N3, 17). In many legal disputes of public interest, NGOs do not appear in court, but work through the press, issuing statements on the issue or consulting international bodies on the cases. There is also the possibility of direct participation. In the role of “friend of the Court”, any human or legal person with recognized competence in the matter under discussion can participate in litigation if there is a public interest. Still this possibility is very limited because judges and prosecutors can decide which information they make available. A second possibility for the NGOs is to intervene as plaintiff. Then the organization is able to propose certain measures on which the judge must ultimately decide, e.g. searches. This strategy was used primarily in the crimes of the military dictatorship, but not in cases of corruption and economic crime, because the NGO needs an adequate infrastructure to do so. The judges can set a specific time

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period for the plaintiff to provide evidence. Since NGOs work mainly with volunteers, they are unable to do so due to a lack of full-time staff. Furthermore, if they lose the case, they could be sentenced to a fine. There are not enough funds available for this either. Shortcomings are seen in the institutional design of the state’s anti-corruption efforts. Here, however, the question arises which model of anti-corruption authority a country chooses: whether it is a single, powerful authority or an inter-agency approach with an intelligent and coordinated combination. Argentina has neither one nor the other, it has neither a single powerful agency nor a meaningful combination of agencies it clearly has a clearly deficient multi-agency approach (U1, 53).

Moreover, the Anti-Corruption Office does not have the necessary political independence. The head of the anti-corruption agency can be appointed and dismissed directly by the president (S2, 13). The Anti-Corruption Office should report directly to the president and have sufficient staff (U1, 53; S3, 4). Although there are various bodies that control the executive branch, there is no authority to control the legislative or judicial branches (U1, 53). All institutions must work to exercise their control function (N3, 46). There should also be clear ethical guidelines in the case of the legislature: here, for example, conflicts of interest should result in affected parliamentarians not being able to vote on certain issues (S3, 8). With regard to the sentencing of corruption offenders, the most important changes in Argentina’s criminal law have already been made. As a central point the legal liability of companies is seen. At Odebrecht, there were not 80 managers who decided to do this on their own; it was a corporate decision. So when that happens, it’s good to have a compliance program, but it won’t prevent it. Odebrecht had a code of conduct, all major companies, Siemens, Skanska. So it’s good that they have these internal controls that can be useful, the same goes for laundry controls, etc. But given the reality of the companies that choose to commit these crimes, the most important control must come from outside, from the state. From administrative and criminal law (N3, 13).

There must be penalties for companies that reach an appropriate level so that there is an incentive to prevent corruption in the company (U1, 53). This is the difference […] between the individual decision of the employee and crime as a business decision when corruption becomes a cost factor (N3, 62).

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In order to achieve the effectiveness of the law, there must be a parallel possibility for self-denunciation, which has a mitigating effect on the penalty. This has also been implemented with Ley 27.304, the “Ley del arrepentido”. The effectiveness of this combination can be seen in other countries (S2, 27). In Argentina, however, it remains to be seen whether the new laws are actually applied (U1, 53). In addition, sufficient protection for whistleblowers has been lacking to date (N3, 62). The criminal liability of companies stipulates that the company is responsible if one of its employees commits the offence and the company had no compliance program (N3, 13). In recent years, compliance departments have also been established in Argentinean state-owned companies. There are some particularly risky administrative healers where this is especially important. These are, for example, those that manage a very large budget, which have a very pronounced territorial spread. Argentina is a federal state, but some authorities are located not only in the country’s capital, but in each of the points of its extensive territory, so there is a large budget, territorial dispersion, a large number of people and the risk of interaction with the private sector (U1, 18). Public sector compliance measures are primarily about ensuring that officials are aware that one of their duties is to report a crime or misdemeanor and that they are aware of some ethical guidelines that should guide their daily work (U1, 44–45). All ministries should have internal audits, their office should set rules for the preparation of tender documents, have legislation that prevents and resolves potential conflicts of interest. Especially if 90% of the senior officials in a government come from the world of business. Then conflicts of interest arise, and legislation is not prepared for this (S2, 29). There are numerous cases in which conflicts of interest have been identified, but there is no systematic evaluation. Guidelines must be drawn up to show state employees the scope for action (S3, 8). With regard to the different effects, it is important to adapt the penalties to the social or professional position of the offenders. Punishment as prevention in the sense of deterrence would be effective in the case of acts of corruption, since the risk of discovery and imprisonment would change the cost-benefit calculation of the actors (N2, 19) Politicians and well-known entrepreneurs in particular experience social ostracism when they are convicted of corruption. It would be a big humiliation for people in the middle or upper classes to have to go to prison (N2, 19). The officers remained in their functions despite the indictment against them, and if a sentence is minor, i.e. less than three years in prison, it can be suspended

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on probation (S1, 33) or, if good behavior is shown, converted to a suspended sentence after 8 months. For unlawful enrichment of officials, the maximum sentence is 6 years, only for embezzlement of public funds the maximum is 10 years. In order to change the rationalities of action of those involved in the judicial sector, it is essential to make clear the damage caused to society as a whole by corrupt practices. A fundamental problem is, that tax evasion, money laundering and capital flight are not condemned by Argentine society as harshly as murder, robbery or rape, for example (N3, 9). The fact that a huge social damage arises because the embezzled funds are often not recovered is too abstract (N3, 17). The whereabouts of the funds are often not clarified in the course of the protracted corruption trials (N2, 17; A2, 35). It is important to make clear that corruption harms the weakest members of society, as it deprives them of resources that the government could use to finance social welfare to help those who cannot help themselves. (N3, 9). On the whole, democracy is weakened when institutions lose credibility, such as faith in the judiciary, and when citizens’ demands are not taken seriously (N2, 8; N3;9) The problem of corruption is often attributed to a lack of control. The lack of control leads to laws not being perceived as binding, but rather as a list of recommendations for behavior (S3, 12). Similarly, better training and further training of all those involved in the process and better coordination between them would increase the quality and efficiency of the procedures. Judges should have to attend regular training courses to keep up to date with legal and technical innovations. The lack of willingness among judges to undergo further training is perceived as problematic (N1, 17). Defense attorneys also need to be better trained to recognize that, for example, money laundering is involved (N3, 37). Prosecutors need to be trained in the sense that they can better investigate where the money is going (N3, 33). In the university, case work should be better addressed so that students learn how to relate evidence to the law that is being applied. Interdisciplinary teams should work on the cases so that prosecutors and lawyers can explain their theories on the case to the auditors and the auditors then are able to tell them what to look for. Auditors should also be present during searches, so that evidence is sought specifically and not mountains of files have to be confiscated (N3, 34). There was manipulation through direct intervention in the administration software of the justice system. As a result, individual cases were assigned to specific judges. Due to the design of the software, the authors of these interventions could not be identified (N1, 28).19 19

https://www.lanacion.com.ar/opinion/posible-manipulacion-de-los-sorteos-de-jueces-nid 1988678.

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Nevertheless, a comprehensive digitization of all processes would be extremely useful. If investigations were to be software-supported and appropriate databases created, great progress could be made in terms of the quality and efficiency of investigations (N1, 18).

Discussion of the Results With regard to the results, patterns can be identified. There is a broad agreement on the massive organizational problems within the Argentine judicial system, which lead to excessive duration of corruption processes. Here the personnel situation in the judicial system as well as the regulations in criminal procedural law, which are used by the actors as a delaying factor, are considered. A power-theoretical explanation is given exclusively by NGO representatives, who see close collaboration between the sub-elites on both sides of the corruption cases as an important reason for the delays in the corruption trials. The representatives of the state agencies attribute the corruption problem to cultural variables, while the other interviewees blame institutional weaknesses for the persistence of the corruption problem. Political influence on the judicial system is seen as one of the main problems. In particular, the controlling bodies—the Anti-Corruption Office and the National Judicial Council—do not have the necessary political independence. The fact that the state representatives themselves, even those at the highest levels of government, are responsible as authors of corrupt actions is cited as one explanation for the fact that the organizational problems at the operational level of the judiciary and the institutional deficits in the separation of powers have not yet been resolved. One approach to solving these problems, which was mentioned by all interviewees, is transparency. Opening up the processes would make the work of the judiciary controllable from outside, expose the perpetrators of corruption to greater social pressure and make it more difficult for political influence to be exerted on individuals and institutions involved. In any case, this greater publicity of the judicial cases must have reasonable parameters since the partial filtration of documentary pieces can attempt against the right to the privacy of the people.20 20

That was the case with the dissemination of telephone tapping in the so-called “notebook case” in which former President Cristina Fernández de Kirchner is under investigation. See: https://www.perfil.com/noticias/politica/tras-acordada-corte-kirchnerismo-exige-respuestasafi-escuchas-ilegales-operacion-puf-caso-dalessio.phtml?fb_comment_id=278492876157 9005_2787193688019179.

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While government agencies and lawyers emphasize the role of law enforcement in solving the corruption problem as a whole, NGOs focus their arguments on social control and the recovery of funds lost through corruption. While better education and further training would benefit in particular the recovery of embezzled funds, comprehensive digitization would have a positive effect, particularly with regard to the transparency within the system and efficiency of processes. The inability to actually convict corruption offenders certainly leads to a perpetuation of the problem of corruption, since there is no threat of punishment for these offenses. Part of the problem seems to lie in the organization of the judicial system and could be remedied relatively easily through reforms, for example, personnel bottlenecks at all levels or an adjustment of the procedural code in the direction of accelerating processes. However, these measures would not affect the basic constellation of political influence. The public debate surrounding the current judicial reform in Argentina confirms this analysis. The reform is suspected of extending the government’s political influence on the judicial system for the sake to save Cristina Kirchner from being convicted for corruption. The modification of the federal criminal jurisdiction is a central element of the controversies surrounding the reform. While detractors argue that the modifications to the federal criminal jurisdiction are an attempt to disarm the causes of corruption currently underway, its defenders argue that the federal criminal justice system suffers from many operational problems, particularly with respect to its political and corporate functioning (given the small number of judges who accumulate significant power) and also with respect to the allegedly spurious relations between these judges and the intelligence services.21 Part of the problem of the protracted court proceedings in the corruption cases can certainly be explained by the weaknesses of the presidential system and by enigmatic elite coalitions. In this view, politicians, entrepreneurs, judges, prosecutors and lawyers are part of a powerful elite that uses the state organization for its own purposes. As Volosin states “It also means that most social agents—politicians, companies, unions, the media etc.—get to extract rents, so that there are no incentives to change the status quo from which they all benefit” (Volosin, 2019, p. 151). In our view, the thesis of an elite alliance is not viable on its own, since the judges and prosecutors have a certain social heterogeneity, which makes a unified alliance with the political and economic elite unlikely. On the other hand,

21

On the relationship of the federal justice system with the intelligence services, see: https://chequeado.com/el-explicador/la-afi-y-el-espionaje-ilegal-los-casos-masimportantes-durante-el-kirchnerismo-y-el-macrismo/.

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the attitude of the central actors in the judicial system remains the same, even though a fundamental change in political direction has taken place. Some authors also take individual deviation into account, as for example Buscaglia (2001) when he states: “In this context, corruption can spread in an easier fashion within each court where the judge and law clerk control everything from promotions and vacation time, to budgetary issues and strategic planning. In this context, ‘whistleblowers’ are less likely to emerge” (Buscaglia, 2001, pp. 242– 243). But would it really be likely that all judges and prosecutors are corrupt? We don´t think so. We therefore postulate that a large portion of the delays is due to factors inherent to organizations, which must be taken into account if the problem is to be solved. Looking at the complex presented in this article, it seems promising to use the neo-institutional approach (in the following especially DiMaggio & Powell, 1983) in order to grasp the complex process as comprehensively as possible, with a uniform explanatory approach. Within a social field, there are often adjustments of the organizations that operate within it. This tendency, called isomorphism, can have different reasons. It can be forced by formal or informal pressure from other organizations on which the organization itself depends. This is certainly the case due to the high dependence of the judiciary on the executive. On a closer look, it is striking that none of the 12 judges who deal primarily with corruption cases seems to stand out in their behavior. Why none of the chambers is able to judge cases more quickly? There seems to be a very strong mechanism at work to ensure that the behavior of the judges is aligned. From an organizational sociological point of view, organizations tend to adapt to the expectations of their environment and to align themselves in the long run. Cognitive, normative and regulatory institutions regulate, stabilize and normalize the behavior of social actors. The actors of the justice system react to the expectations of their institutional environment. In addition, during their training and professional activity, the legal staff internalize the informal rules of the judicial system. Thus, it seems rational for judges to refrain from pursuing corruption trials in order, for example, not to jeopardize their own position and further careers by not allowing political opponents to grow up. The judges rationalize their own behavior by pointing to the overwork, low staffing levels and accumulation of tasks. This argumentation legitimizes judicial behavior to the outside world and work as an organizational myth (Meyer & Rowan, 1977) as nearly everyone in the sample pointed to that explanation. What might have begun as an individual rational behavioral strategy becomes an institutionalized behavioral pattern

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through the alignment of behaviors within the organizational field. The processes of adjustment within the field lead to a collective effect, the protraction of corruption trials. Moreover, organizations are embedded in an institutional context where there are expectations about what an efficient organization should look like. These expectations are rationalized in the sense that they appear to be reasonable from the perspective of the respective stakeholders in order to achieve their goals. If this basic assumption of neo-institutional theory is applied to the Argentine judicial system, it can serve as an explanation for the fact that the Argentine judicial system is blind to the misconduct of the social elite. For this group, crime is blue collar crime. These must be dealt with by the means of the judiciary. Rationality in this view is not a universal concept, but rather the concept is specifically shaped according to the expectations of the stakeholders and the institutional environment. The central notion of rationality within Argentinean society seems to be the idea that it makes sense to grant the political level a great deal of control. The path taken in hyperpresentialism continues in a huge influence in the judicial system and in the institutional design of the Anti-Corruption Office. The establishment of an Anti-Corruption Office itself can also be fully explained in this approach. Important stakeholders in the organization’s environment expect the establishment of such an institution—the lack of one would trigger pressure to justify it. It is not important whether the institution actually serves the purpose for which it was set up. It is sufficient to formally meet the expectations of the institutional environment in order to enjoy legitimacy and further support. The signing of the relevant anti-corruption agreements by international organizations is a good example of this. In the actual design of the anti-corruption office, however, the central notion of rationality is retained, with the unit reporting directly to the president. As noted above, the planned reforms to the judicial system and basic laws will presumably change little of the fundamental problem under consideration here, but they are capable of increasing the legitimacy of the judiciary in society as a whole, since changes have been made in accordance with expectations. Although the corruption offenders are not convicted, the trials against them are conducted formally, which can be understood as a decoupling of the formal structure from actual activities. Within this theoretical approach, the call for transparency seems reasonable. Institutionalized organizations try to evade scrutiny because the discrepancy between formal structure and level of activity becomes obvious. This explains the judges’ defensive attitude towards the desire to open up the processes.

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The “ley del arrepentido”, on the other hand, appears to be a reform that starts with the practices of those involved and is capable of breaking the informal rule of silence. In the notebook scandal22 numerous participants on both sides, the state and private sector, testified and uncovered an extensive network of corruption in the awarding of state contracts, at the center of which ex-president Cristina Fernández de Kirchner appears to be at work. However, it remains to be seen whether this will lead to a conviction of the parties involved or whether the trial will once again fall asleep in the formal structure of the judicial system to end up in prescription.

Conclusion The legal system in Argentina has a considerable influence on the problem of corruption, since corruption offenders are rarely convicted for their crimes. Certainly, elite coalitions, political strategies and career-strategic considerations, as well as the individual disposition of the actors, play a role in explaining this fact. However, given the uniformity of actions and results, it seems reasonable to consider an explanation that starts at the level of organizations. In this chapter we have shown that considerations based on neo-institutionalism are able to explain a large part of the problem. Sociological neo-institutionalism provides an explanation for the perpetuation of the corruption apparatus, which continues to exist despite changing governments, international trends and extensive anti-corruption efforts. However, further studies would be desirable to examine more closely the ‘rationality’ of action at all levels of the judicial system. The analyses presented here are only of limited value in this respect, since they are, on the one hand, a content analysis that merely allows a systematization of the statements made in the interviews and, on the other hand, would require a more comprehensive inclusion of actors from the justice system itself. Further research should focus on the level of activity, on the everyday practices and procedures of the Argentine judicial system, in order to develop effective reform approaches. From the perspective of neo-institutionalism, structural reforms, such as the creation of new courts or the establishment of new supervisory bodies, are situated at the level of institutionalized rules and serve 22

In 2018, eight notebooks became known, in which a chauffeur had kept records of his journeys for senior officials of the governments of Néstor and Cristina Fernández de Kirchner. In the course of these trips, large sums of bribes were transported between Argentine entrepreneurs and members of the government.

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only to respond to the expectations of the institutional environment in order to generate legitimacy.

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Marchisio, A. (2004). La duración del proceso penal en la República Argentina. A diez años de la implementación del juicio oral y público en el sistema federal argentino. Fundación Konrad-Adenauer. Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations. Formal structure as myth and ceremony. The American journal of sociology, AJS, 83(2), 340–363. Moreno Ocampo, L. (1993). Una propuesta de acción. In M. C. Grondona (Ed.), La corrupción (3. edn., pp. 42–54). Buenos Aires: Planeta Argentina. Nye, J. S. (1967). Corruption and political development: A cost-benefit analysis. American Political Science Review, 61(2), 417–427. https://doi.org/10.2307/1953254. OCAP (Oficina de Coordinación y Seguimiento en materia de Delitos contra la Administración Pública). (2012). Los procesos judiciales en materia de corrupción. Los tiempos del proceso. Estado de situación. http://www.oas.org/juridico/pdfs/mesicic4_arg_proc. pdf. Accessed 12 June 2020. Ott, K. (2010). Siemens soll Menem bestochen haben. In Süddeutsche Zeitung, 17 May 2010. https://www.sueddeutsche.de/wirtschaft/korruptions-verdacht-siemens-sollmenem-bestochen-haben-1.582405. Accessed 7 Sept 2020. Pereyra, S. (2013). Política y transparencia. La corrupción como problema público. Siglo Veintiuno Editores (Sociología y política). Pereyra, S. (2019). Corruption scandals and anti-corruption policies in Argentina. Journal of Politics in Latin America, 11(3), 348–361. https://doi.org/10.1177/1866802X19894791. Piana, R. S., & Arévalo, M. (2019). La corrupción y el control judicial en Argentina. Su estudio a partir de los fallos de Emir Fuad Yoma, María Julia Alsogaray y Cristobal Lopez. Revista Digital Constituição e Garantia de Direitos, 11(2), 136–154. Pring, C. (2019). Global corruption barometer, Latin America & the Caribbean 2019 citizens’ views and experiences of corruption. Transparency International. Ruiz, I. (2020). Corrupción. Menos del 1% de los investigados son condenados en Comodoro Py. In La Nacion, 12 July 2020. https://www.lanacion.com.ar/politica/corrupcionmenos-del-1-de-los-investigados-son-condenados-en-comodoro-py-nid2395587. Accessed 3 Sept 2020. Rusca, B. (2012). La persecución penal de la corrupción - reflexiones y propuestas de política criminal. In Revista de la Facultad de Derecho (Universidad National de Cordoba), 3(2). https://revistas.unc.edu.ar/index.php/refade/article/view/5996. Accessed 28 July 2020. Sabsay, D. A. (2004). El juicio político a la Corte Suprema en la República Argentina. In Anuario Iberoamericano de Justicia Constitucional (8). https://recyt.fecyt.es/index.php/ AIJC/article/view/50728. Accessed 1 Sept 2020. Scott, W. R. (2014). Institutions and organizations. Ideas, interests and identities (4th edn.). Sage. Volosin, N. A. (2019). Argentina’s corruption machine: Toward an institutional approach. In R. I. Rotberg (Ed.), Corruption in Latin America (pp. 127–161). Cham: Springer International Publishing. Volosin, N. A. (2020). Corruption in Argentina. Towards an institutional approach. Routledge (Routledge Corruption and Anti-corruption Studies).

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Internet Sources https://www.argentina.gob.ar/justicia/derechofacil/leysimple/responsabilidad-penal-de-laspersonas-juridicas.

Friederike Elias is postdoctoral researcher and lecturer at Heidelberg University, Max Weber Institute for Sociology. She studied sociology and economics at Heidelberg and Madrid (Universidad Pontificia de Salamanca, Campus Madrid). After her PhD on globalization and neoliberal tendencies in management using the example of Argentinean industrial companies, she is currently working on the digital transformation from the perspective of organizational, labor and technological sociology as well as on the social significance of artificial intelligence. In addition, she heads a project on digital science communication in the Collaborative Research Center 933 “Material Text Cultures”. Sebastián Pereyra holds a PhD in Sociology from the Ecole des Hautes Etudes en Sciences Sociales (Paris-France). He is Researcher at the Argentina National Research Council (CONICET). He is Director of the PhD Program in Sociology and Professor of Contemporary Social Theory at the IDAES, Universidad Nacional de San Martín (Argentina). His studies have focused on social movements, collective action and social problems in contemporary Argentina. He has published several papers and books, among others “Entre la ruta y el barrio”, “La experiencia de las organizaciones piqueteras” (Biblos, 2003), “Política y transparencia” and “La corrupción como problema público” (Siglo XXI Editores, 2013).

Money, Politics, and the Judicialization of Electoral Processes in Brazil: A Political Science Approach Wagner Pralon Mancuso, Vanessa Elias de Oliveira, and Bruno Wilhelm Speck Introduction Democracy presupposes accepting the outcome of a clean and free electoral process as an underlying premise for its existence and operation. The possibility of contesting fraudulent procedures and results must be granted and ensured. Still, if the losing side contests every electoral process or outcome by strategically resorting to the courts even in the absence of any signs of irregularities, this could lead to growing instability and ultimately render the democratic game unfeasible. Therefore, there is a thin line between legitimacy and illegitimacy when it refers to the judicialization of electoral processes. The judicialization of electoral processes, defined as the use of judicial institutions to question the electoral process and outcomes, is located at the grey fringes of democracy, where the boundaries between legitimacy and illegitimacy are blurred. The judicialization of electoral processes, in turn, inseparable from a broader context involving the increasingly prominent role of the judiciary and other legal institutions in politics (Shapiro & Stone-Sweet, 1994; Tate & Vallinder, 1995; W. P. Mancuso (B) School of Arts, Sciences, and Humanities, University of São Paulo (USP), São Paulo, Brazil E-Mail: [email protected] V. E. de Oliveira Engineering, Modeling and Applied Social Sciences Center (CECS), University of ABC Region (UFABC), São Paulo, Brazil E-Mail: [email protected] B. W. Speck Department of Political Science, University of São Paulo (USP), São Paulo, Brazil © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_9

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Ginsburg, 2007; Hirschl, 2004, 2008, 2011), has wide-ranging implications for contemporary democracies and the political game. Many issues merit attention in this debate, which is still underexplored by the literature on the judicialization of politics. Among these issues, we shall focus on one in particular: how do actors mobilize judicial institutions to alter the electoral game? In other words, how has the judicialization of electoral processes developed in Brazil? Has judicialization favored compliance with the rules of free and fair elections or, on the contrary, dismantle them? This chapter addresses this issue through an analysis of litigations that reached Brazil’s electoral courts and which specifically comprise the relationship between money and politics. We address electoral judicialization by emphasizing three elements: the issues, the judicial instruments, and the phase of the electoral process when it occurs. We start from the assumption that judicialization is present in the partypolitical competition process, as proposed by Ferejohn (2002). According to the author, “(…) judges have been increasingly willing to regulate the conduct of political activity itself—whether practiced in or around legislatures, agencies, or the electorate—by constructing and enforcing standards of acceptable behavior for interest groups, political parties, and both elected and appointed officials” (Ferejohn, 2002, p. 41). Marchetti’s (2013) analysis of the Brazilian case is based on the same assumption as he addresses the influence of the judiciary on the definition of the rules of the electoral game. Having identified the phenomenon within the political scenario of contemporary democracies, our next step will be to understand its causes and effects. This chapter is divided into three parts, following this introduction. In the first section, we present a brief review of the literature on the judicialization of politics, focusing on the judicialization of electoral processes, addressing how electoral governance in Brazil enables the judicialization of the outcome of elections. In the second section, we present data regarding the relationship between money, politics, and electoral litigation. The database includes charges before the Brazilian electoral court on the following topics (a) abuse of economic power in elections; (b) corruption or fraud; (c) illegal fundraising or expenditure of electoral resources; and (d) donations above the legal limit. Candidates and campaign donors are affected by the prospect of judicialization of the electoral process at different times during an election. This may happen through a wide range of judicial instruments available both to public actors, such as the electoral prosecutor, and to political actors, such as candidates and political parties. In the third section, we discuss the underlying factors behind the judicialization of electoral processes in the country and propose a roadmap for further analysis of our dataset. We summarize the findings in our closing remarks.

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Judicialization of Politics, and Electoral Processes The debate regarding the judicialization of politics is not novel and has made significant advances within the political landscape in recent decades. Defined as the use of courts and legal tools to settle disputes involving politics and public policies (Hirschl, 2004), the intense participation of judicial actors in political matters has been widely criticized, given the fact that they are non-elected actors interfering in the performance of public agents elected into office by the popular vote. The so-called “politicization of justice” may have serious and undesired consequences for democracy, mainly due to the lack of mechanisms for holding judicial actors accountable, which is the central focus of these criticisms. Two opposing arguments were brought forward in this debate: first, the assertion that the judiciary’s interference in politics is unavoidable given the expansion and constitutionalization of political and social rights, as well as the growing access to justice in contemporary democracies (Tate & Vallinder, 1995; Ginsburg, 2007). Second, the acknowledgment that elected officials, whether in the executive or legislative branches of government, can propose and approve laws or constitutional changes to alter the rules of the game and, therefore, contest and potentially annul legal decisions (Couto and Oliveira, 2019, p. 141). Beyond normative issues, judicialization of politics has not only become one of the main political phenomena of the 21st century, but has also grown increasingly complex, according to Hirschl (2008; 2011), by expanding the spectrum of issues affected by judicial interference. Despite this complexification, the term has been used indiscriminately to address different processes. One such development is what Hirschl defined as the “judicialization of mega-politics”: the judicialization of core political issues that define whole polities, such as moral predicaments, collective identity, international politics involving war and peace agreements, or even electoral outcomes. When explicitly addressing the participation of the judiciary in electoral processes, Hirschl writes that: “In terms of jurisprudence, courts are frequently called upon to decide on matters such as party funding, campaign financing, and broadcast advertising during election campaigns; the redrawing of electoral districts; and the approval or disqualification of political parties and candidates” (HIRSCHL, 2011, p. 260). The judicial dispute of electoral processes and outcomes entails changes in the configuration of a country’s political and social forces, with subsequent consequences for politics and public policies. Following Hirschl’s footsteps to conceptualize and investigate the different types of judicialization and their particularities, we now advance the definition and operationalization of a still imprecise concept, namely the judicialization of

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electoral processes—one of the types of judicialization of mega-politics. The concept of judicialization of electoral processes stems from a broader discussion, linked to electoral governance. Mozaffar and Schedler (2002) defined electoral governance as a set of activities related to the institutional framework created for electoral processes, operating at three levels a) rulemaking; b) rule application; c) rule adjudication (Mozaffar & Schedler,2002, p. 7). Rulemaking is the process by which the basic rules of the electoral process are defined. Rule application refers to the management level of the electoral process, involving the implementation of rules, as well as the application of their principles (fairness, transparency, etc.). Lastly, rule adjudication concerns the management of conflicts between contestants—i.e. disputes arising from the electoral process—, judging and resolving them to ensure the proper application of the rules established at the rulemaking level. According to the authors, the judiciary plays a central role at this stage of the electoral governance process, mediating conflicts and defining electoral outcomes. It is at this electoral governance level that the judicialization of electoral processes takes place. A crucial dimension of the judicialization of politics concerns the need to ensure the existence of “independent judiciaries as an ‘insurance mechanism’ for the political elites confronted with electoral uncertainty. In this case, those in power who expect to lose the elections must believe that independent courts are an insurance mechanism that would protect their rights and preferences once they become political minorities” (GINSBURG, 2003). The independence of courts is vital to the judicialization of electoral processes since without such independence rule adjudication would not take place in a context of impartiality, essential for the politically neutral (or as neutral as possible) application of the rules of the game as defined in the rulemaking. The possibility of mobilizing the courts to safeguard the rights of defeated candidates in electoral processes does not mean that political actors will always resort to this mechanism in electoral disputes. While the possibility does exist, we still need to understand when, how, and for what reasons it occurs. Thus, the choice to resort to the judiciary does not derive from institutional rules alone, but also from the context within which relevant political actors operate. It depends on the choice of these actors, the political context in which they operate, and what they may gain or lose, even if symbolically, and not only in a concrete case, by judicializing the result of the electoral game. In this regard, we follow Ribeiro and Argueles (2019) when they state that “a significant part of the variation of what will become the object of judicial contestation, who will appeal to the STF [Supreme Federal Court] and how, when, and how much the court will be mobilized is explained by factors that are contingent upon political

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dynamics.” (p. 3). For our discussion, it suffices to replace the term “STF” with “courts” as we are dealing with a range of different judicial bodies involved in the judicialization of the electoral process. In this context, we define the judicialization of electoral processes as the mobilization of institutions within the justice system, particularly the electoral public prosecutor’s office, and the electoral court, to question the process and the outcome of elections. The questioning of the electoral process includes contesting who can run for office and the behavior of candidates throughout the race. The questioning of the electoral result aims at changing the results of the election, or at least impose political costs on the winner if changing the outcome seems unlikely. There is sparse academic literature on the judicialization of electoral processes in Brazil. Paranhos et al. (2014) divided the literature on electoral judicialization in Brazil into three groups: (1) works focused on understanding electoral governance and, more specifically, rulemaking, such as Zauli (2011) and Marchetti (2013) who explore the interference of the judiciary in the process of defining the rules of the electoral game; (2) works related to specific interventions by the judiciary on the electoral process, such as Marchetti and Cortez (2009) and Pozzobon (2009), who analyze the verticalization of coalitions and party loyalty, respectively; and (3) works that analyze the normative powers of the judiciary, focusing on the electoral court and its regulatory role in the political game. Furthermore, some case studies have addressed subnational contexts. Among these, the works of Zalamena (2013), Barboza (2015), and Silva (2016) stand out, as they explore electoral judicialization in the Brazilian states of Rio Grande do Sul, São Paulo, and Rio de Janeiro, respectively. These works reveal how local political disputes, across different contexts, have repeatedly suffered the intervention of the electoral court. Consequently, the judicial arena has stood out as an additional arena for political competition. However, there are no studies on the judicialization of the electoral process which analyze the Brazilian reality from a national perspective. This is our proposal, in an attempt to understand the phenomenon beyond its state and/or local dimensions. As we explore the judicialization of the electoral processes in Brazil, we specifically focus on court lawsuits that deal with the relationship between money and politics.

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Money and Politics as Catalysts for Electoral Judicialization in Brazil The shadowy relationship between money and politics—including illicit electoral financing—is not only at the center of recent major corruption scandals in Brazil, such as Mensalão, Lava Jato, and JBS, but also reappears, in different ways, in the everyday electoral process across the most diverse regions of the country.1 In this empirical section our objective is to analyze the relationship between money and politics as a trigger of judicialization of electoral processes in Brazil. The idea is to analyze the phenomenon based on legal actions brought to the electoral court, a branch of the Brazilian judicial power comprised by three instances: the electoral judges (one judge for each of the 2,644 electoral zones currently existing in the country2 ), the Regional Electoral Courts – TREs (one court for each of the 26 states and one for the Federal District), and the Superior Electoral Court – TSE. Among many attributions, electoral judges, the TREs, and the TSE, within their own jurisdictions, are tasked with judging all electoral disputes, including those emerging from the relationship between money and politics. To this end, we asked the TSE for a spreadsheet containing the identifying elements of all litigations filed across all instances of the electoral court over a period of 23 years, between 01/01/1995 and 31/12/2018,3 and available for query in an electronic system used by the electoral court, the Document and

1

The Mensalão scandal (literally, “big monthly allowance”) broke out in 2005 and involves the purchase of political support from congressmen by the Brazilian government. The scandal known as Lava Jato (literally, “Car Wash”), first revealed in 2014, concerns a corruption scheme at Petrobras, a Brazilian state-owned oil company. The scandal of JBS, a large Brazilian company in the animal protein processing industry, surfaced in 2017, and refers to the corruption of several politicians and public officials to favor the company’s interests. 2 http://www.tse.jus.br/eleitor/cartorios-e-zonas-eleitorais/pesquisa-a-zonas-eleitorais. 3 All date formats in DD/MM/YYYY.

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Process Monitoring System – SADP.4 Based on these identifying elements, we downloaded the files from the institution’s website with the use of a scraping bot. There are many motivating factors for filing an electoral litigation. As previously stated, our interest lies in litigations motivated by the relationship between money and politics. To identify them, we used the “subject” field in the process headers in the SADP. However, within the period covered by our research, we found that electoral justice officials did not follow pre-established criteria when filling out the “subject” field, thus making it difficult to identify the litigations of our interest. This information field has become further standardized since the publication of TSE Resolution No. 23.184/2009, which “addresses the notary’s procedures for registering and recording the facts, within the scope of the Electoral Court”. This resolution defined a list of possible legal subjects5 and determined the identification of the specific subject of each electoral litigation registered since 01/01/2010.6 In practice, therefore, the data presented in this chapter corresponds to the SADP litigations filed between 01/01/2010 and 31/12/2018. From an wide list of litigation subjects defined by TSE Resolution No. 23.184/2009, the four subjects we sought, associated with the relationship between money and politics, were the following: “abuse of economic power”, “illicit fundraising or expenditure of financial resources from election campaigns”, “corruption or fraud”, and “donation of resources above the legal limit”. Regarding the abuse of economic power, the Brazilian Constitution establishes that the normality and legitimacy of elections must be protected against the influence of economic power (art. 14 § 9). The “Brazilian Electoral Glossary”, available on the TSE website, defines abuse of economic power as the “unwarranted use, before or during the election campaign, of material or human resources

4

We sent similar requests to all 27 TREs asking for the court litigations originating from these agencies and the electoral zones of their respective states or the Federal District. We compared the information sent by the TREs with the information sent by the TSE. In some cases, some litigations identified by the TREs were not listed on the TSE. We included these litigations in our search. Due to obvious logistical difficulties, we did not ask the TSE and TREs for older litigations, on paper. We also asked the TSE for the same information regarding litigations available for query in the Electronic Judicial Process, the PJe, a different system gradually adopted by the Brazilian electoral court, especially since 2017. However, access to the PJe requires a captcha response, which makes it difficult to automatically scrape information with the help of bots. The database with the PJe litigations is under construction and the material will be analyzed in later stages of our research. 5 See appendixes II, III, and IV in Resolution TSE N. 23.184/2009. 6 Resolution TSE N. 23.184/2009, article 9, item X.

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that represent economic value, seeking to benefit a candidate, party, or coalition, thus affecting the normality and legitimacy of the elections”.7 In line with the national legal system, authors such as Salgado (2009) and Agra (2013) conceptualize the abuse of economic power, in electoral matters, as the exacerbated use of economic power, beyond the limit established by law, thus impairing the normality and legitimacy of the election. The illicit fundraising or expenditure of campaign financial resources consists in irregularities when gathering or using electoral resources. As for the reception of resources, irregularity means obtaining funds from prohibited sources (article 24 of Law N. 9.504/1997 – Electoral Law), or even gathering them inappropriately from legal sources (for example, without accurately declaring them to the electoral court). As for the expenditure of resources, irregularity involves disregarding the rules that define the use of funds raised for election campaigns, such as disbursing expenditures prohibited by the electoral legislation8 (Barcelos, 2015; Nogueira, 2019). Among the surveyed subjects, corruption or fraud is the most wide-ranging and encompasses different conducts under the same label. Article 299 of Law No. 4.737/1965, i.e. the Electoral Code, prohibits electoral corruption. The article defines electoral crime as the behavior of “providing, offering, promising, soliciting, or receiving, for oneself or for others, money, gifts, or any other advantage to obtain or cast a vote and to obtain or pledge abstention, even if the offer is turned down”. Electoral fraud, on the other hand, encompasses a varied set of irregular conducts, including “slush funds”, which is when a political agent submits a false declaration of the campaign’s accounting records to the electoral court by omitting gathered resources.9 Finally, regarding donations above the legal limit, the Brazilian electoral legislation establishes limits for electoral campaign contributions. For individuals the limit is 10% of their gross income obtained in the year prior to the election (Law No. 9.504/1997, article 23, § 1, item I). For private companies the limit was, until 2015, 2% of the gross revenue obtained in the year prior to the election (Law No. 9.504/1997, article art. 81, § 1). A decision by the Supreme Federal Court (STF) in September 2015 proscribed private companies from financing election campaigns. 7

http://www.tse.jus.br/eleitor/glossario/termos-iniciados-com-a-letra-a. Article 26 lists the electoral expenditures established by Law No. 9.504/1997. 9 Therefore, litigations classified as “corruption or fraud” may sometimes include situations that do not refer to electoral corruption or "slush funds", but to certain types of fraud in which the relationship between money and politics is not as explicit. To make this distinction, the project team is currently analyzing the content of the litigations. 8

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As for candidates, Law No. 9.504/1997 allowed them to donate their own resources to their own campaigns up to the maximum expenditure defined by their parties for each competing office (Article 23, § 1, Item II). This concession remained in force until the approval of Law No. 13.165/2015, which deprived parties from the power to define the maximum amount of electoral expenses for competing offices. The new law set the maximum amount as a percentage of the highest expenditure, in the previous election, for the same office in the same constituency. The candidate was still allowed, however, to make self-donations up to the limit defined by law. After Law No. 13.488/2017, candidates now received the same treatment as other individuals, and were allowed to donate up to 10% of their gross income obtained in the year prior to the election, respecting, in the case of self-donations, the new maximum value for electoral expenses established by law for the competing offices. Lastly, Law No. 13.878/2019 determined that “the candidate may use their own resources in the campaign up to a total of 10% of the limit defined for campaign expenses for the competing office”. There are several different classes of electoral litigations.10 In our research, we specifically focused on four litigation classes: criminal action (CA), action of electoral judicial investigation (AEJI), action for impugning an elective mandate (AIEM), and representation (Rp). The electoral CA is filed against electoral crimes. The AEJI can be filed between the registration of the candidacy, and issuance of the electoral diploma. The AIEM can be filed within 15 days after the issuance of the electoral diploma. The deadline for filing a Rp (representation) varies according to the motivating reason. In total, the database we used for writing this chapter contains 211,753 electoral litigations belonging to the four aforementioned classes, filed between 01/01/2010 and 31/12/2018, from which a subset of 30,568 cases (14.4% of the total) contains subjects connected to the relationship between money and politics. This subset will be our focus from hereon. Table 1 shows the distribution of litigations according to subject and class. Table 1 shows that the donation of resources above the legal limit (DRALL) is the subject in the vast majority of electoral litigations motivated by the relationship between money and politics: 23,416 legal actions (76.6% of the total) deal exclusively with this subject. In other words, just over three quarters of all electoral litigations related to money in politics were against donors who exceeded the legal limits for electoral contributions. In theory, finding this illegality is easier for agents who inspect the transparency of the electoral process, such as the electoral 10

These classes are listed in appendix VI of TSE Resolution No. 23.184/2009, which specifies them for the TSE, TREs, and electoral courts.

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Table 1. Electoral litigations, by subject and class (2010–2018) Subject

Class

TOTAL

CA N DRALL AEP IFEFREC CF

AEJI %

4

0.0

N

% 25

0.1

AIEM

Rp

N

N

% 0

%

N

%

0.0 23,387 99.9 23,416 100.0

26

0.5 4,048 78.3 216

4.2

882 17.1

5,172 100.0

12

1.0

254 22.0

0.9

877 76.1

1,153 100.0

270 56.1

91 18.9

AEP+IFEFREC

1

0.6

111 67.3

IFEFREC+DRALL

0

0.0

AEP+CF

6

8.7

29 42.0

AEP+DRALL

0

0.0

14 48.3

3

4.3

10

74 15.4

46

9.6

481 100.0

11

6.7

42 25.5

165 100.0

0

0.0

67 95.7

70 100.0

32 46.4 0

0.0

2

2.9

69 100.0

15 51.7

29 100.0

IFEFREC+CF

3 33.3

3 33.3

2 22.2

1 11.1

9 100.0

AEP+IFEFREC+CF

0

1 25.0

2 50.0

1 25.0

4 100.0

TOTAL

322

0.0

1.1 4,579 15.0 347

1.1 25,320 82.8 30,568 100.0

Source: Data provided by the TSE and the TREs and organized by the authors

prosecutor’s office, as it only demands crossing two pieces of information related to donors: on the one hand, donations registered by the electoral court and, on the other hand, the income tax return. Representation is the litigation class of almost all legal actions motivated by the donation of resources above the legal limit. The abuse of economic power (AEP) is the second highest motivator for electoral litigations regarding the relationship between money and politics: 5,172 cases (16.9% of the total) deal only with this issue. In this case, the clearly predominant litigation class is the action of electoral judicial investigation (AEJI). In third place we find litigations motivated by the illicit fundraising or expenditure of financial resources from electoral campaigns (IFEFREC). This was the sole subject in 1,153 electoral litigations in the analyzed period (3.8% of the total). Here, the preponderant litigation class is representation. Corruption or fraud (CF) was the exclusive subject in 481 electoral litigations (1.8% of the total). In these legal proceedings, the most frequent litigation class is criminal action.11 11

We reiterate, however, that litigations catalogued as “corruption or fraud” may refer to certain types of fraud that have no direct connection with the relationship between money and politics, such as, for example, voter registration fraud or fraud in the gender quota for candidacies, among other subjects. We are currently analyzing the content of each “corruption

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Finally, a residual number of litigations (346 cases; 1.1% of the total) simultaneously addressed two or more subjects covered in this chapter. The header of the electoral litigation files in the SADP does not commonly specify the election year of the event that led to the corresponding litigations. To identify the precise election year, one needs to read the entire contents of each legal process, a staggering task that is still underway by our research team. Nevertheless, the header does indicate the year in which the litigation was filed, which allows us to analyze the distribution of litigations over time, as shown in Table 2. Brazilians head to the polls every two years, in all even years. In the years overlapping the Olympics (2012 and 2016 for the period covered in this chapter), elections are held for mayors and city councilors in the country’s 5,568 municipalities. Mayors and city councilors serve four-year terms. In the years overlapping the World Cup (2010, 2014, and 2018 in the period under analysis) elections are held for state deputies (or district deputies, in the case of the DF), federal deputies, senators, and governors in all 26 states of the country and in the DF. State Table 2. Electoral litigations, by subject and year (2010–2018) Year

Subject

TOTAL

DRALL N

AEP %

N

%

IFEFREC

CF

N

N

%

%

N

%

2010

304

1.3

382

7.4

97

8.4

33

6.9

816

2.7

2011

4,146

17.7

74

1.4

122

10.6

39

8.1

4,381

14.5

0.2 2,479

2012

43

47.9

314

27.2

126

26.2

2,962

9.8

2013

3,882

16.6

184

3.6

160

13.9

71

14.8

4,297

14.2

2014

21

0.1

259

5.0

96

8.3

32

6.7

408

1.4

2015

11,716

50.0

28

0.5

41

3.6

20

4.2 11,805

39.1

2016

76

0.3 1,600

30.9

188

16.3

128

26.6

1,992

6.6

2017

3,017

12.9

110

2.1

127

11.0

25

5.2

3,279

10.8

2018

211

0.9

56

1.1

8

0.7

7

1.5

282

0.9

TOTAL 23,416 100.0 5,172 100.0 1,153

100.0

481 100.0 30,222 100.0

Source: Data provided by the TSE and the TREs and organized by the authors

or fraud” litigation to identify those that actually deal with electoral corruption or the type of fraud of our interest – accounting records fraud, also known as “slush fund".

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elections happen alongside the national elections for president. All these representatives also serve four-year terms. City, state, and national elections always take place on the first Sunday in October.12 In case of a second round, the new round of elections always takes place on the last Sunday in October.13 Table 2 shows a clear concentration of litigations motivated by the donation of resources above the legal limit in odd years. This happens because this type of litigation depends on the campaigns’ final accounting records14 and, secondly, on cross-checking electoral donations registered in the financial records with the revenue or income obtained from donors in the year prior to the election. 17.7% of litigations under this subject were filed in 2011, after the 2010 state and national elections, and 16.6% in 2013, after the 2012 municipal elections. The peak occurred in 2015, after the 2014 state and national elections, when 50% of such litigations were filed. In 2017, the year following the 2016 municipal elections, 12.9% of litigations were filed. We therefore find a greater concentration of litigations of this type in the years following state and national elections. This pattern contrasts, as shown below, with litigations motivated by the other three subjects, mostly concentrated in municipal election years or in the following year. One possible explanation for this contrast, which still demands further analysis, is that state and national elections attract larger donations than local elections, thus generating more lawsuits for donations above legal limits. In turn, the drop in litigations of this type in the SADP from 2017 may be tied to two factors: first, 2016 was the first electoral year after the STF banned campaign donations from private companies. Consequently, we find no new litigations regarding donations above the legal limit by private companies in the 2016 elections or any subsequent elections. Secondly, as previously stated, the electoral justice system gradually adopted a new electronic system—the PJe—especially from 2017 onwards. Perhaps this new system includes records of new litigations denouncing donations above the legal limit, as our team is still analyzing the data.

12

Due to the Covid-19 pandemic, the 2020 municipal elections took place, exceptionally, on November 15. When necessary, cities held a second round on November 29. 13 Runoff elections are possible for president, state governors, and mayors in cities with over 200 thousand voters. The second round occurs when no candidate amasses over half of the valid votes in the first round. The two leading candidates from the first round continue to the second round. 14 Candidates who do not run in the second round must submit the final accounting records of the campaigns by the thirtieth day after the first round. In case of a second round, candidates must submit the final accounting records of both rounds by the thirtieth day after the second round of elections.

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As for litigations alleging abuse of economic power, we found a high concentration in electoral years, especially when coinciding with municipal elections: 47.9% of such litigations were filed in 2012, and 30.9% were filed in 2016. In 2010, 2014, and 2018, years with state and national elections, we found, respectively, 7.4%, 5%, and 1.1% of litigations under this subject. There are four possible explanations for this. First, abuse of economic power is a phenomenon typical to municipal elections, especially in smaller municipalities, as noted in the literature (Silva, 2018. Second, the amount of competing offices in municipal elections is much higher than in state and national elections, thus the amount of litigations tends to increase according to the number of competing offices and candidates. For example, in the 2016 municipal elections, 469,054 candidates ran for 69,085 offices (5,568 for mayor, 5,568 for vice mayor, and 57,949 for city councilor). In the 2018 state and national elections, 26,079 candidates ran for 1,682 offices (1 for president, 1 for vice president, 27 for governor, 27 for vicegovernor, 54 for senator,15 513 for federal deputy, and 1,059 for state or district deputy).16 Third, as previously stated, the predominant litigation class is AEJI for litigations alleging abuse of economic power, and the deadline for filing this type of action falls between the registration of the candidacy and the issuance of the electoral diploma for the elected candidates, which usually occurs in the election year itself. Finally, the fourth reason refers to the abovementioned issue regarding the electoral courts’ adoption of the PJe, which intensified from 2017. The temporal distribution of litigations alleging illicit fundraising or expenditure of financial resources from electoral campaigns is slightly more homogeneous than litigations alleging abuse of economic power. 27.2% and 16.3% of the litigations motivated by illicit fundraising or expenditure were filed, respectively, in 2012 and 2016. Once again we found a predominance of years in which municipal elections took place, albeit less intense than in litigations for abuse of economic power. Next, we have 2013 and 2017, with 13.9% and 11% of total litigations. The data indicates, therefore, that a significant share of litigations for illicit fundraising and expenditure of campaign resources was filed in years that encompass or succeed municipal elections. A possible explanation for this finding refers, once again, to particularities in the prevailing litigation class in actions of this type: representation. According to Article 30-A of the Electoral Law, the deadline for filing a representation for illicit fundraising or expenditure of electoral resources is 15 days counting from the date the winning candidate receives the 15

The Federal Senate of Brazil has 81 seats. Elections are held every four years, for one third or two thirds of the seats in the House, respectively. 16 http://www.tse.jus.br/eleicoes/estatisticas/estatisticas-eleitorais.

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electoral diploma. Whenever the issuance of the electoral diploma occurs in the second half of December, the deadline for legal representations under this subject goes through the following year. In the 2010–2011 biennium, 8.4% and 10.6% of litigations of this type were filed, respectively, while 8.3% and 3.6% of litigations were registered in the 2014–2015 biennium, suggesting, once again, that the smaller number of competing offices and candidates in state and national elections affects the relative amount of electoral litigations in these elections. In this case, the most intense drop in litigations filed in the SADP, possibly due to the migration to the PJe, occurred from 2018. Lastly, corruption or fraud litigations are also more concentrated in local election years: 26.2% in 2012 and 26.6% in 2016. In other years within our research period, the proportion of litigations is more evenly distributed, varying from 4.2% in 2015 to 14.8% in 2013. One exception is 2018, in which we found a comparatively very low proportion of filed litigations (1.5% of the total), probably due to an increased use of the PJe. We reiterate that criminal action, which aims to punish electoral crimes, is the predominant litigation class in cases of corruption or fraud. An investigation precedes the opening of a prosecution, and the ensuing rite may induce a less concentrated temporal distribution of litigations in this class. In summary, the empirical section of this chapter detailed the progressive course of our work to investigate the judicialization of electoral processes as induced by the relationship between money and politics in Brazil. We emphasized two dimensions: the relative importance of the four subjects most connected to the money-political relationship for the judicialization of electoral processes and the distribution of litigations motivated by these issues over the course of the analyzed period. We concluded that: (i) the standardization of procedures for filing electoral litigations favors the analysis of an important empirical material still underexplored by political scientists; (ii) the money-politics relationship is a significant factor in the judicialization of electoral processes in Brazil, although evidently not the sole determinant for this phenomenon; (iii) most electoral litigations regarding money-politics accuse defendants of exceeding the legal limits of electoral contributions, possibly because verifying this particular irregularity is easier and depends solely only on crossing information provided by the electoral court and the Internal Revenue Service to the electoral prosecutor’s office. However, a portion of litigations

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also target candidates, parties, and coalitions accused of abusing economic power during campaigns, collecting irregular revenues, incurring irregular expenses, or committing electoral crimes consistent with voter corruption or fraud, such as “slush funds”; and (iv) several factors affect the temporal distribution of litigations, whether political, such as the election level (state, local or federal) or the number of competing offices and candidates; legal, such as changing laws or deadlines for filing the appropriate litigation class for each type of offense; or even administrative, such as changes in the electronic system adopted by the electoral court.

Further Exploring Electoral Judicialization in Brazil: Potential Directions for Future Investigations This chapter represents an initial step for analyzing still unpublished data on the judicialization of electoral processes in Brazil. Thus far, we have only focused on the tip of the iceberg. Challenges still lie ahead for future investigations into the factors affecting our phenomenon of interest. There is also a need to design appropriate research strategies to comprehend the effects of such factors. Hence, we must also draw attention to what lies below the surface. This section offers clues for tackling these challenges. As discussed in the previous section, we find at least five factors affecting the judicialization of electoral processes in Brazil: (i) the type of election held; (ii) the legal topic in question; (iii) change in electoral rules; (iv) the behavior of public and political actors; and (v) administrative matters of the electoral court. The frequency of electoral judicialization varies according to the type of election as well as the number of candidates. In turn, the number of candidates depends on the type of elected office and district magnitude (the number of seats to be filled). Large municipalities have more city councilor chairs, and large states have more chairs for state and federal deputies. One possible strategy for controlling the effects of variation in the numbers of seats and candidates on the study of electoral judicialization is to compare elections for the same offices, in the same places, across different years (for example, two or more elections for city councilor in municipality x, for governor in state y, or for president in the country as a whole). Another option is to compare entire electoral cycles (for example, comparing electoral judicialization between 2010–2012 and 2014–2016). The legal topic is another influencing factor for electoral judicialization, including the relationship between money and politics. For example, litigations for

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donations above the legal limit are much more common than legal accusations of corruption or fraud. Thus, we tend to better understand the temporal dynamics of electoral judicialization once the comparison between elections is also controlled by the legal topic of the litigations. Changes in electoral rules is another influencing factor for the amount of judicialized situations. Since the law draws (and redraws) the line between legal and illegal behavior, rule changing has two possible effects: actions that were previously legal become illegal, or vice versa. Changes in both directions influence the incidence of litigations filed with the electoral court. During the period analyzed in this chapter, several significant changes occurred in electoral rules, including new rules concerning campaign resources. These changes stemmed from bills passed in Congress as well as judicial decisions. Undoubtedly, a crucial change was the ban on corporate donations as ruled by the Supreme Federal Court (STF) in 2015. Since the 2016 elections, other significant changes include the introduction of new ceilings on electoral expenditure and a substantial increase in public resources allocated to campaigns. Therefore, elections held since 2016 took place in a very different context regarding the rules of electoral financing. These changes tend to influence the frequency of litigations, for example, abuse of economic power or illicit fundraising or expenditure of financial resources. The takeaway is, we must bear in mind the effects of electoral rule changes when analyzing the judicialization of electoral processes and its evolution in Brazil. The behavior of public and political actors is another factor that needs to be factored in. The proportion of effectively detected and prosecuted transgressions committed by political actors in the electoral court varies according to the agency of the electoral judicial system itself. Thus, the drop or surge of reported cases does not necessarily denote a lower or higher rate of violations. The politicization of justice, which consists in arbitrary and discretionary actions for specific cases, may be a relevant form of action of this agency, but it is not the only one. A potential rise in the number of litigations filed with the courts by prosecutors may result from institutional changes, such as the creation of specialized taskforce for electoral crimes, the use of new investigative techniques, novel initiatives for cooperation and data cross-checking with other public institutions, or new understandings of the law. The impact of the agency of the actors within the judicial system for explicit/abrupt or subtle/gradual changes on the amount of cases filed with the courts is a crucial field of investigation. Interviews with actors within the justice system and the study of jurisprudence could bring valuable contributions to this field.

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The agency of the political actors themselves also matters. Candidates, parties, and coalitions running may opt to either accept the process and the outcome of the election or resort to legal action. The general discussion regarding the judicialization of political processes encompasses the specific hypothesis that political actors themselves increasingly resort to legal action as an additional channel to secure their rights or interests. Even if all other abovementioned factors remain stable, the incidence of judicialized cases may vary depending on the propensity of candidates, parties, and coalitions to resort to justice. There are two different readings for the judicialization of elections by political actors. The first interprets this judicialization as driven by the pursuit of rights, striving towards a fair and balanced electoral process. This interpretation assumes that judicialization serves the purpose of closing the gap between what the law mandates and what happens on the ground. The second interpretation perceives judicialization as a mean to impose additional costs on the winners, raising doubts as to the legitimacy of their mandates, hampering the exercise of representation, or even attempting to reverse the electoral result. In this case, judicialization runs counter to improving the electoral process. It is rooted in the reluctance of parties and candidates to accept the rules of the game, in case of electoral defeat, and leads to instrumentalization of litigation, which again depends on financial resources to initiate a lengthy legal battle. The practical difficulty lies in differentiating between legitimate contestation and instrumentalized judicialization. Regarding the judicialization of electoral processes by political actors, some relevant questions still warrant further investigation: are the most heated disputes, with tighter results, more judicialized? Are there cases of judicialization initiated by candidates despite low prospects of success? Do defeated candidates with more expensive campaigns judicialize more often? Do defeated candidates in a race for reelection find it more difficult to accept defeat and thus more often resort to judicialization? We conclude with a warning as to the importance of the administrative organization of the electoral court and how it influences the data gathering process. The number of detected cases greatly depends on how the electoral court indexes and provides electoral litigations. For instance, in this chapter we showed the paramount importance of elements such as standardizing the subjects of litigations—or the inclusion of captcha tests—for identifying litigations and accessing their content. While our research team has taken extreme caution to standardize the procedure for filtering their cases of interest, some issues are defined internally within the electoral justice system and were beyond our control. While researchers may try to circumvent these problems by considering, for example, litigations filed by the same electoral justice body within a same year, this would limit the

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external validity of the research. The exchange between academics and electoral court officials, in an attempt to facilitate access to electoral litigations, could yield promising results for the production of scientific knowledge, as already observed in the case of records on campaign financing. In fact, the improvement in the organization of reports on party and campaign financing, as well public access to detailed datasets, favored the exponential increase in the academic production addressing electoral financing. The same could hold true for the topic of illicit electoral financing, provided data are easily accessible to researchers.

Conclusion In this chapter we discussed the judicialization of electoral processes in contemporary Brazil, with a special focus on judicialization resulting from the relationship between money and politics. As we pointed out, judicialization can be understood as a double-edged sword. It may be legitimate when used to contest fraudulent electoral practices, thus favoring democracy. On the other hand, it may be illegitimate, when it is used as a desperate resource for unresigned defeated candidates, although there is no evidence of any malpractice from their winning competitors, or even when judicial actors take advantage of judicialization and act politically in favor of parties or candidates. Therefore, the judicialization of electoral processes is a phenomenon located at the grey fringes of democracy and, as such, it deserves more attention from social scientists than it has received so far. Upon defining the core concept used in our work, and relating it to a more general debate on the judicialization of politics, we addressed the phenomenon empirically, based on tens of thousands of electoral litigations filed in the country between 2010 and 2018. We then compared the relative importance of four issues as catalysts for electoral judicialization and explored the elements that affect the distribution of these litigations over the analyzed period. We found that the potential for judicializing electoral processes affects both competitors (candidates, parties, and coalitions) as well as donors. Moreover, this happens at different times of the electoral process by mobilizing different judicial instruments available to actors, who resort to the judiciary in an attempt to halt illicit behavior, or simply impose political costs upon competitors, thus potentially altering electoral outcomes. Subsequently, we addressed several influencing factors for the judicialization of electoral processes and discussed strategies to explore these factors in future research. The future challenges include (i) extend the analyzed period, (ii) further explore judicialization from each specific subject addressed in this chapter, and

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(iii) investigate the pattern of judicial decisions on litigations motivated by the relationship between money and politics. Major corruption scandals have practically monopolized the attention of analysts focusing on the interface between money and politics in Brazil. We hope to have shown that the study of electoral litigations from a political science perspective is a relevant and original approach to this topic as we continue to chart a broad and yet underexplored terrain.

References Agra, W. de M. (2013). Postulados teóricos para a diferenciação entre abuso de poder econômico e captação ilícita de sufrágio. Estudos Eleitorais, 8(1), 81–102. Barboza, D. P. (2015). As denúncias de compra de votos como estratégia eleitoral. Análise da relação entre denúncias de compra de votos e a dinâmica de competição eleitoral nas eleições municipais de 2012 em São Paulo. [Master’s thesis in Political Science. Universidade de São Paulo]. Barcelos, G. R. C. (2015). “O artigo 30-A, §2°, da lei nº 9.504/97: uma análise à luz da proporcionalidade”. Revista Ballot, 1(1), 236–248. Couto, C., & Oliveria, V. E. (2019). Politização da Justiça: atores judiciais têm agendas próprias? Cadernos Adenauer, XX(1). Ferejohn, J. (2002). Judicializing politics, politicizing Law. Law and Contemporary Problems, 61, 41–68. Ginsburg, T. (2003). Judicial review in new democracies: Constitutional courts in Asian Cases. Cambridge University Press. Ginsburg, T. (2007). The global spread of judicial review. In K. Wittington & Daniel Keleman (Eds.), Oxford handbook of law and politics. Oxford: Oxford University Press. Hirschl, R. (2004). Towards juristocracy: The origins and consequences of the new constitutionalism. Harvard University Press. Hirschl, R. (2008). The judicialization of mega-politics and the rise of political courts. The Annual Review of Political Science, 11, 93–118. Hirschl, R. (2011). The judicialization of politics. In R. E. Goodin (Ed.) The oxford handbook of political science. [s.l.]: Oxford University Press. Marchetti, V. (2013). Justiça e Competição Eleitoral. São Paulo: Editora UFABC. Marchetti, V., & Cortez, R. (2009). A judicialização da competição política: o TSE e as coligações eleitorais. Opinião Pública, 15(2), 422–450. Mozaffa, R., & Shaheen e schedler, A. (2002). The comparative study of electoral governance - introduction. International Political Science Review, 23(1), 5–27. Nogueira, A. J. A. (2019). A judicialização da competição eleitoral municipal no Brasil: uma análise da relação entre a Lei da Ficha Limpa e as eleições suplementares de 2004 a 2016. Revista de Estudos Empíricos em Direito, 6(1), 84–107. Paranhos, R., Nascimento, W., Dias, A. C. A., Carvalho, R. B., & Gomes Neto, J. M. (2014). O que é que a judicialização eleitoral tem? Cadernos Adenauer, XV.

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Pozzobon, P. H. (2009). O Supremo Tribunal Federal e a Judicialização da Política no Brasil. Revista da Faculdade de Direito UniRitter, 10, 97–118. Ribeiro, L. M., Arguelhes, D. W. (2019). Contextos da judicialização da política: novos elementos para um mapa teórico. Revista Direito GV, [S.l.], 15(2), e1921, set. Salgado, E. D. (2009). A influência do poder econômico nas eleições e a impugnação de mandato. Estudos Eleitorais, 4(Número Especial), 43–56. Shapiro, M., & Stone-Sweet, A. (1994). The new constitutional politics of Europe. Comparative Political Studies, 26, 397–420. Silva, M. C. da. (2016). Aos amigos tudo, aos inimigos a lei: disputas eleitorais e judicialização da política no estado do Rio de Janeiro (1988–2016). [Doctoral dissertation in political sociology. Universidade Estadual do Norte Fluminense]. Silva, S. A. da. (2018). Relação entre abuso de poder econômico e despesa de campanha nos municípios brasileiros (2012–2016). [Master’s thesis in political science. Universidade Federal de Minas Gerais]. Tate, C. N., & Vallinder, T. (1995). The global expansion of judicial power. In C. N. Tate & T. Vallinder (Eds.), The global expansion of judicial power (pp. 1–10). New York: New York University Press. Zalamena, J. C. M. (2013). Judicialização, competição política local e eleições municipais no Rio Grande do Sul. [Master’s thesis in political science. Universidade Federal do Rio Grande do Sul]. Zauli, E. M. (2011). Justiça eleitoral e judicialização das eleições no Brasil. Revista Brasileira De Estudos Políticos, 102, 255–290. https://doi.org/10.9732/133.

Wagner Pralon Mancuso is professor of Political Science at the School of Arts, Sciences and Humanities of the University of Sao Paulo (USP). His main field of interest is the interaction between business people and the state in Brazil and other countries. He is particularly interested in two kinds of interaction that are extremely common in Brazil: lobbying (through companies and/or business associations) and legal and illegal campaign financing. Vanessa Elias de Oliveira holds a Ph.D. in Political Science from the University of São Paulo. She is professor of Political Science at the Bachelor of Public Policy and director of the Graduate Program in Public Policy at the Federal University of ABC Region (UFABC). Develops research on the judicialization of politics and of public policies in Brazil. She is an associate editor of the Journal of Sociology and Politics from the Federal University of Paraná (Brazil). She was Visiting Professor at the University of Duisburg-Essen, Germany, in early 2020. Bruno Wilhelm Speck is professor of Political Science at University of USP (State University of São Paulo, Brazil) and currently coordinates the graduate program in Political Science at the same University. He holds a doctorate in political science from the University of Freiburg im Breisgau (1995). From 2003 to 2009 Speck joined Transparency International (a network of nonprofit organizations fighting corruption worldwide, based in Berlin) as a senior researcher. In 2010 Speck went back to teaching and research at Unicamp, where

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he acted as Head of Department of Political Science (2010–2013). In 2013, he was a visiting researcher at the Massachusetts Institute of Technology (Boston, USA) and in 2014 he joined the Department of Political Science of USP (State University of São Paulo, Brazil).

Misuse of Public Office for Organizational Gain? Brazilian Political Parties in Corruption Scandals Maria Eugenia Trombini

Introduction In Brazil’s democratic history, two corruption scandals have exposed political parties and politicians to the public opinion and law-enforcement like no others. The first, Mensalão, roughly meaning “big monthly stipend” was coined to describe clandestine payments made by the Workers’ Party (PT) to congressional allies in return of support for its legislative agenda and occurred during the first term of president Luiz Inácio Lula da Silva’s presidency. The second, Petrolão, alluding to Brazil’s state-controlled oil giant, Petrobras, started in 2014 and unveiled a web of illegal payments connecting public contractors, civil servants and politicians channeling money from deals into secret slush funds. At the center of both lies party finance: ranging from official electoral campaign donations to kickbacks from corporations through bank loans, political marketing and legal services. But as organizations are not criminally liable, it is their members who face charges before law-enforcement, leaving the link between individual decisions and political parties as an open field for scientific investigation. The question within the scope of this chapter is: What can be learned about party dynamics in Brazil when legal rules and actual behavior of party members do not correspond? While sidetracking a normative view of the phenomenon of deviance, the case study of two Brazilian political parties involved in corruption scandals compels us to: (a) summon our knowledge concerning informal procedures within parties operating M. E. Trombini (B) Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_10

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in a given political context; (b) understand how a political party and its individuals engage in rule-breaking and whether behavior in pursuit of organizational or egoistic goals. To carry out this research question on rule deviation by members of partisan organizations, the parties selected exemplify two opposite trends in Brazil’s party dynamics which is highly fragmented, volatile and weakly institutionalized. Whereas the Workers’ Party (PT) founded in 1980 by São Paulo unionists and independent Marxists has been pointed out as an outlier in terms of commitment to ideology and organization, the Progressive Party (PP) is rooted in a party that supported the military regime in 1964-85 and gained a non-programmatic and catch-all status since redemocratization, jockeying for space by standing beside the government of the day. Apart from the PT being the government party when both scandals were uncovered, at the Mensalao, members of the PT were overrepresented, whereas at the Petrolão, the PP is the party with the highest number of people under investigation. Surprisingly, and to account for the persistence of rule-breaking in the political arena, two members of the PT and the two of the PP were tried twice for their involvement in both the Mensalão and the Petrolão, therefore by two different jurisdictions, regarding different criminal charges. We will depart from there and proceed to identify individual contributions to the schemes uncovered and their usefulness in light of the political parties at hand. To build our sample, we took these 4 individuals who were tried for involvement at Mensalão and, some years later, at the Petrobras scandal as nodes of a web encompassing other party members. The final decisions on the criminal cases in which they were sentenced—5023135-31.2015.404.7000, 504524184.2015.404.7000, 5022182-33.2016.404.7000, 5030424-78.2016.404.7000, and 5030883-80.2016.404.7000 from the 13th Federal Court of Curitiba and Supreme Court’s AP 470—compose the dataset. Sentences add up to 9066 pages and were retrieved as PDF files at the official websites where they are publicly available. In addition, the final reports of the Parliamentary Commission of Inquiry (PCI) of the Correios (Brazilian Postal Service) will be considered for the Mensalão and the Prosecutor General’s Indictments 3.989 and 4.325 regarding the investigations of members from the PP and the PT respectively on the charge of integrating a criminal organization related to Petrolão. From them, we will focus on the members to the partisan organizations and the unlawful activities carried out between 2002 and 2016.1 Other members of the two parties were condemned at different 1

The time frame from Mensalão starts with Lula’s electoral victory in 2002, while the Indictment concerning the PT investigates acts between 2002 and 2016 and the indictment against the PP refers to acts happening between 2004 and 2015.

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criminal cases and some are awaiting trial in the context of Carwash Operation, or Lava jato, the biggest investigation on corruption in Brazil with repercussions to the whole Latin American region. Nonetheless, we will only mention them if their role at the “political nucleus” of the scheme was referred to; otherwise, both groups—(1) of people who were charged in the six sentences under examination whose political affiliations were, at the time of the facts, outside PT and PP; and (2) the ones from the parties in exam who were tried in Carwash but outside the six sentences comprising the dataset—will be either absent or appear collaterally in the data presented. For the analysis, direct speech of party members will be prioritized to avoid a normative account if relying on secondary sources alone. We are considering in this chapter corrupt practices to be those treated by the justice system as such, and labeled in the official sources used. We will assess if the definition of ‘misuse of public office for private gains’ (Lipset & Lenz, 2000; Rose-Ackerman, 2008) describes the behavior of members of political parties sentenced at Mensalão and Petrolão. Most definitions of political or bureaucratic corruption refer to the position of the bribee, a public agent, who, against the interests or preferences of the principal (its public organization), acts in favor of a third part (the briber) (Della Porta & Vannucci, 1999). Abridged variations of this view of corruption as a principal-agent problem, the most widely used, include “abuse of public power for private benefit” (World Bank) and “misuse of entrusted power for private gains” (Transparency international). To sidestep issues of morality, Joseph Nye (1967) established that motives for deviating from the formal duties of a public role would be grounded on reasons of “private regarding (personal, close family, private clique) pecuniary or status gains; or violates rules against the exercise of certain private-regarding influence” (Nye, 1967, p. 419). He emphasized that the unlawful exploitation of public-office may relate not only to the office-holder, but people in proximity to him. In terms of searching for rationales for rule-deviation, explanations of political corruption on cultural and moral terms are abundant. Most of them emphasize rational choices that take place in individual incidents of malfeasance, implicitly assuming the “opportunistic agent” acts against the “principled principal” (Marquette & Peiffer, 2015). Specifically on Latin catholic countries a southern mentality would be associated with the ‘amiguismo’ among the Spanish, Italians’ ‘l’arrangiarsi’, ‘l’arrangement à la française’ among the French, and Brazilians´‘jeitinho’ (See Pujas & Rhodes, 1999, on Brazil see Spalding, 2017). Few studies dismiss the social and legal standards charting holders of governmental roles to acknowledge agency and review how those dubbed corrupt justify their practices in regards to their organizational affiliations. I put forward a research

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question that even if individuals benefit from corruption, the primary beneficiary in the two episodes involving PT and PP are the organizations. The organizational crime research agenda advanced here is in line with the work of Ashforth et al. (2008, p. 671) defining it as “the illicit use of one’s position of power for perceived personal or collective gain”. I assume, with scholars approaching the phenomenon of rule-deviation in search for the role organizations play in the emergence and reproduction of illicit activities (Ashforth & Anand, 2003; Pinto et al., 2008; Klinkhammer, 2015), that when collective forms of deviance are benefiting the organization, they can be institutionalized as its “clever customs”. Previous studies on economic organizations whose illicit practices were uncovered in Carwash Operation have emphasized the role of informal rules in the interplay between corporations and the state administration (Valarini & Pohlmann, 2019). If the classic definition of misuse of public office for private gains is not entirely true for the political corruption scandals under scrutiny, elements of pro-organizational behavior will be incorporated as part of the explanation and findings will be discussed in light of the Sociology of Organization literature. Parties mediate executive-legislative relations, engage in coalitional bargaining, and respond to external challenges, so they simultaneously shape the political landscape and are shaped by it at one and the same time. (Strom, 1990; Maor, 1999). For the purposes here, it is useful to set aside the function they carry out from their setting as partisan organizations. On the first topic, “modern democracy is a party democracy” (see e.g. Aldrich, 1995; Diamond, 1997; Katz, 1980; Manning, 2005; Van de Walle, 2003) and that political parties are indispensable ingredients for a democratic political system stands as an assumption. On the second, intra-party life is structured by behavior that depart from formal rules and procedures. Reluctant to reckon that, most of the scholarship on political parties so far has not advanced on rule deviation because the tradition of party institutionalization emphasizes compliance with rules and therefore fails to capture behavior patterns that are informally routinized from a non-normative perspective (Levitski, 1998). A closer study of these set of informal behavioral patterns might unveil what degree of leverage do political organizations give when its members commit infractions and provide us with relevant information on modern parties in Brazil. Is there a pattern in rule-deviation by a political party and its members and, if so, what does it signal about the functioning of the democratic system? Confident that concrete evidence allows us to learn about the functioning of party-politics, the remaining of the chapter has been organized as follows. Section 2 will offer an account of the political and electoral setting of Brazil and then provide an outlook

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on the two parties under investigation: the PT and the PP. Section 3 will present the data, starting with a narrative analysis of each episode, the Mensalão and the Petrolão, followed by the categorization of misuse according to types of gain and a discussion of the findings in regards to party-members and their rationales for engaging in the course of action under investigation. To conclude, limitations of the present work and avenues for future research will be outlined in Sect. 6.

Brief Account of Brazilian Political and Electoral Landscape The existence of party-related corruption is hardly new (Heywood, 1995). It appears financial resources are the oil that greases the wheels of party politics and paying attention to it is key to “ensuring good governance and combating corruption” (Heidenheimer, 1970). Election campaigns and party activities have grown increasingly specialized and monetized (Manin, 2012), which imposes an expectation that political parties rely on qualified staff to meet the demands of the electoral market and secure their subsequent survival. As evidenced by burgeoning scholarship, professionals, from political consultants to lawyers and accountants, have remade the landscape of electoral politics (Kolodny & Logan, 1998; Thurber & Nelson, 2000; Sheingate, 2016). When searching for rationales for corruption in Brazil, history offers some cues on the role of money in politics and why ruledeviation is just as common as ever. Since the corruption scandal that got the first democratically elected president in almost thirty years, Collor de Mello, to resign in 1992 (and avoid impeachment), electoral accounting was placed in a pivotal position to arrive at and topple a regime.2 Entitled “P.C. scheme” on behalf of its mastermind, the campaign treasurer Paulo César Farias who fueled Collor’s rise from virtual political obscurity on an anti-corruption platform: promising to combat “maharajahs” and moralize the state administration as a candidate. Acting as a “bagman”, Farias collected campaign contributions from large businessmen “to avoid the election of Lula or Brizola”, who expounded anti-market discourses. As a means, an apparently legitimate operation was offered, where corporations channeled “first box” funds to Farias’ front enterprise, Empresa de Participações e Construções (EPC), in return 2

Despite Collor’s resignation to preserve his political rights and thus be eligible to run for office in 1994, the Senate decided to continue the proceedings, convicting him on charges of official misconduct and suspending all of his political rights for eight years. By then, the Attorney General had brought criminal charges for “passive corruption” and “criminal association”. Vice-President Itamar Franco was named acting president for the remaining two years of Collor’s term.

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for false receipts for “services rendered”—such as consulting fees and frequent charter air service by PC’s dummy charter flight enterprise. In a testimony to the Senate, during Collor’s impeachment Parliamentary Commission of Inquiry in 1990, the ex-President’s campaign treasurer affirmed that the large sums of money used for illegal operations had not come from kickbacks, extorsion, etc., but rather were leftover campaign funds from 1989 (see Fleischer, 1997). Shortly after the transition from military regime to democracy, this episode exposed the new government’s difficulty to address the accusations of corruption and shed light on an institutional setting in which a novel set of actors were given a chance to engage in corrupt practices. (Blake & Morris, 2010, p. 97). A new regulation on electoral finance was approved following the scandal by which the parliament allowed corporate financing as a means to remedy politicians from using rigged government contracts to generate cash for their campaigns.3 But even if Collor’s ouster may have served as a cautionary tale for a while and new laws emerged, the “bending of rules” was “too strongly engrained in the electioneering practices of a broad gamut of politicians to be relinquished” (Weyland, 1993, p. 27). From the perspective of a confluence of political-business interests, a strong relation between irregular campaign financing and political corruption has been stressed as a source of explanation for the persistence of corruption in Brazil (Fleisher, 1997). In the years private donations were admitted (1994–2014) corporate money predominated incontestably in the country’s election campaigns (Santos, 2009; Mancuso et al., 2016). Indeed, money matters, but not just any money, particularly corporate donations (Cervi, 2010). Interestingly, looking at successful candidates at the 2008 municipal elections, the percentage of corporate donations had a greater impact on valid votes than the total amount of campaign resources. Junckes et al. (2019) identified, through network analysis of corporate donors powering electoral campaigns, an increased performance of candidates who received donations from a core of enterprises with a direct interest in state behavior. Besides official donations, duly declared to electoral justice, unofficial donations to political campaigns—what in Brazil is called caixa dois, literally, an ‘unofficial cash till’—have been long acknowledged amid the democratic history. Nonetheless, most, if not all, empirical studies focus exclusively on official donations, while recognizing the importance of academic investigations that focus on the dark side of political funding in the country (Mancuso et al., 2016). 3

Congress approved new election legislation (Law Number 8713) on September 30, 1994, allowing campaign contributions from businesses (but not labor unions) of 2% of their gross 1993 income, up to a limit of US$205,000.00. Some argue the new regulation actually made matters worse. (Fleischer, 1997).

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With respect to further structural elements at play, Brazilian party system is depicted as highly fragmented, highly competitive, highly volatile, and weakly institutionalized (Ames & Power, 2007). Writing about the country’s party system, Scott and Mainwaring (1999) associated weak party institutionalization with high levels of electoral volatility, the rise of personalistic or neo-populist leaders, policy instability, low accountability, and poor representation of popular sector interests. With the exception of the Workers’ Party (PT), which has been dubbed “easily the best organized political party in democratic Latin America”, Brazil’s major parties are portrayed as informal organizations, which lack budgets, professional staffs, or national headquarters, and whose national leaderships “rarely meet and have little real power”. His explanation was that institutional variables as the open list proportional representation system, decentralized candidate selection processes, and the absence of mechanisms of party discipline hinder party building and favor the cultivation of personal constituencies and individual autonomy. Figueiredo and Limongi (2000) suggested that the executive branch may possess greater legislature leverage than Mainwaring (1999) allows, emphasizing the need to consider the president’s legislative powers and the internal organization of the legislative work as relevant variables to understand the Brazilian, and any, political system. Drawing on data from 1989–1997 they argue that the overall rate of approval of executive bills is high, rejection of executive bills is lower than that of legislators’ proposals and bill-processing of those introduced by the executive is much faster than the processing of bills of its own. For securing the votes they needed in congress, presidents would obtain political support by building government coalitions through the distribution of ministries to political parties. This fashion of obtaining support in a cooperative strategy by presidents with legislative powers would be more or less the same as that of prime ministers, a conclusion in dispute with students of presidential democracy following the work of Juan Linz (1994). The authors also challenge Giovanni Sartori’s claim that no country would be as antiparty as Brazil,4 presenting data on party discipline and evidence that rather than rampant individualistic behavior of legislators, political parties would be meaningful collective players. Similarly, Levitski (2001) has argued the institutional “weakness” of many Latin American parties may, under 4

They are particularly addressing Sartori’s (1994) quote: Probably no country in the world currently is as antiparty, both in theory and in practice, as Brazil. Politicians relate to their parties as a partido de aluguel, or a rental party in the Portuguese term. They freely and frequently change party, vote against party line, and refuse any kind of discipline on the ground that their constituency cannot be interfered with. Thus, parties are powerless and volatile entities, and the Brazilian presidents are left to float over a vacuum, an unruly and eminently atomized parliament.

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some circumstances, help them survive crises or periods of rapid change. It would be mistaken to take Brazil’s party constellation (33 parties registered in 2020) for an amorphous complex. Braga (2008), Amaral (2011), and Bolognesi (2013) have argued that at least some of Brazil’s political parties have a real function of representation and are able to establish control mechanisms over candidates and elected officials. In terms of the interaction between the executive and the legislative, Brazil’s institutional setting favor a preponderance of the former over the latter. Party dynamics for the incumbent in Brazil is associated with a need to cement coalitional support through cabinet appointments and patronage, better explained in the expression coalition presidentialism (Abranches, 1988). Because our focus is not on the Executive branch alone, what matters about this genre of presidentialism is that it forces political parties to face an intertemporal choice between attempting to capture exclusive control of the government in the future and sharing control in the present (Figueiredo & Limongi, 2000). Looking at the legislature of 200711, Pinto (2015) found that parliamentary leaders are incapable of influencing decisively the behavior of their own bench, leaving the government to define the configuration of the political chessboard of the Chamber of deputies. Thanks to this mobilizing power, the executive branch would take advantage of powerful resources put at its disposal, such as control over the budget of the Union and access to thousands of freely appointed positions in state administration, to determine the choice and maintenance of the leaders of party groups who make up its support base and to co-opt deputies from the opposition. Despite the persistence of corrupt practices on the ground, regarding institutional constraints on unlawful activities there is consistent evidence of an increased willingness and readiness of state bureaucracies to reveal, investigate and prosecute corruption in Brazil, even of high-level politicians and entrepreneurs. As to the causes of success of recent law-enforcement efforts, among the optimistic literature, some have attributed it to an incrementalism in the country’s accountability institutions, (Praça & Taylor, 2014) and strengthened capacity and enhanced inter-agency coordination between different entities within the lawenforcement strategy (Arantes, 2011). Media coverage of corruption scandals and social accountability also may have contributed to induce the integrity systems to perform more efficiently (Rico, 2014), even if computational propaganda tactics in recent episodes of Brazil’s turbulent political history shaped the debate about corruption (Arnaudo, 2017). Narrowing the causes to political parties, and in a view emphasizing the positive externalities of the political system, some have argued that Brazil’s fragmented multiparty model provided incentives to bolster

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transparency mechanisms (Michener, 2015) and that fragmented majority coalitions/internecine competition assist the inquiry process on political corruption (Balán, 2011).

An X-Ray of the Organizational Settings of the Two Parties Involved at Mensalão and Petrolão It is known that different types of party attract, select and promote their militants to prominent political positions in very different ways. Analyzing the complex internal gearing of each the PT and the PP is beyond our scope (for that point see Gallagher & Marsh, 1988; Rahat & Hazan, 2001; for a discussion on Brazil, see Bolognesi, 2013). We will, however, introduce elements to situate the partisan organizations more thoroughly before moving to outline their role in the corruption episodes under investigation.

Progressive Party (PP) Historical roots: Grand-son of the pro-military party in 1964-85, it has had five different names: Aliança Renovadora Nacional (ARENA), then Partido Democrático Social (PDS), then in 1995 it merged with the Progressive Reform Party (PPR) and the Progressive Republican Party (PRP) to give rise to the Brazilian Progressive Party (PPB) and, finally, Partido Progressista (PP) after 2003. Position in the ideological spectrum: right-wing (Figueiredo & Limongi, 2001; Rodrigues, 2002; Perissinotto & Bolognesi, 2010). Socioprofessional profile of successful candidates: politicians from the PP are predominantly entrepreneurs (adding up to 68%, the political party with a largest representation of entrepreneurs, as opposed to 2% of teachers, according to data from the 51st legislature (Rodrigues, 2002). Trajectory at democratic regimes: In 1985 the PDS was divided into two groups, that of the then minister Mário Andreazza5 and that of the former governor of Sao Paulo, Paulo Maluf,6 both disputing the presidency under the maintenance of the military regime. With Maluf’s victory at the Convention, 5

A supporter of the military regime, served as Minister of Transport (1967–1974) and then as Minister of Interior (1979–1985) and died in 1988, in the wake of democracy. 6 A historical figure of the right-wing Democratic Social Party, Maluf was elected mayor of São Paulo (1969–1971), then governor of the state with the city´s name (1979–1982), and federal deputy (1983–1987). After losing the presidential elections he was elected mayor of

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the party disintegrated: one side migrated to the PFL (Liberal Front Party) and allied with the Party of the Brazilian Democratic Movement (PMDB) to support Tancredo Neves, who turned out to be the successful candidate, while the other followed its path until defeat at the Electoral College. In 1995, after the fusion with the Progressive Reform Party, the Brazilian Progressive Party (PPB) came to life. Members that had helped founding the Progressive Republican Party (PRP) in 1993, like Jair Bolsonaro, currently the president, followed to the new partisan organization. Facing the democratic rules, the PP redefined itself in an attempt to restore its status prior to democratization, when the party detained more than half of the deputies at the House of Representatives. At the first government of president Fernando Henrique Cardoso,7 whose election was supported by the PP, the leaders of the party have threatened several times not to vote on the government’s main proposals in the National Congress if they were not granted posts. The work of the PPB in the National Congress in 1996 was decisive in matters of concern to the government. The PPB senators prevented, for example, the opening of a Parliamentary Commission of Inquiry (CPI) to investigate the federal government’s program of financial aid to banks and contributed to the approval of the social security reform. The press even reported that to vote with the government, the PPB had benefited from the renegotiation of the debt of the municipality of São Paulo, whose then mayor was Paulo Maluf. When voting on the amendment allowing re-election to executive positions, José Lourenço,8 one of the party’s deputies said: “I told you that the PPB was not born to be opposition”, which stood to be the truth: since re-democratization, the party has always stood by the president (CPDOC). In terms of a record with illicit practices, the PP has been dubbed a “colector of scandals” by the Brazilian press.9 At the 2002 and 2006

São Paulo again (1993–1997) and then served as federal deputy. His political trajectory has been controversial due to corruption allegations in the dictatorship and democratic periods. 7 Served as president from January 1st , 1995 to December 31st , 2002. Brazil’s second democratically elected president who had been appointed by Itamar Franco as Minister of Finance after Fernando Collor de Mello’s impeachment and ran as candidate in the 1994 elections for a coalition comprising the PSDB (Partido da Social Democracia Brasileira), PFL (Partido da Frente Liberal) and the PTB (Partido Trabalhista do Brasil). 8 A leadership from the state of Bahia who served as federal deputy from 1987 to 2003: originally as a member of the PDS, joined the PP after its formal creation in 1993. 9 Since 2015 newspapers like Veja (2015), Globo (2017), Congresso Em Foco (2017), El País (2018), Exame (2018) have been reporting the involvement of the party and its members in corruption scandals meanwhile its influence in the parliament (the second largest bench at the Lower Chamber in 2018) and in the municipalities (in 2016 the party won 20 city halls, going from 476 to 496 cities) increases.

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Table 1 Progressive Party’s representativeness at the Congress PP

2002

2006

2010

2014

2018

Chamber

49

41

44

38

38

0

1

8

9

6

Senate

Source: Chamber of Deputies and Senate

presidential elections, PPB did not formally colligate with the PT, but their collaboration granted them positions at the direct and indirect State Administration: notably the Ministry of Cities and, as Petrolao underlied, Petrobrás (Table 1). Organizational strength: Medium. Wide territorial coverage, considerable organizational complexity and an average number of members (Bolognesi et al., 2019).

Workers’ Party (PT) Historical roots: Founded in 1980 by a grassroots coalition of labor activists, Christian base communities, and leftist intellectuals, the PT struggled from outside the official political system against the military dictatorship. Created from the bottom-up, considered an externally mobilized party in opposition to the others, which had their origins in parliamentary factions, personalistic movements, intraregional rivalries, or military tutelage (Ames & Power, 2007). Position in the ideological spectrum: left-wing with a more catch-all strategy subsequently, associated with conquering and securing electoral appeal (Hunter, 2010). Socioprofessional profile of successful candidates: Politicians from the PT are predominantly blue-collar workers and teachers. At the 51st legislature they were one third of teachers as opposed to 3% of entrepreneurs (Rodrigues, 2002). A proximity to civil servants persists (Amaral, 2011), but an increased representativeness of the middle class and a diminished capacity to push forward blue- and white-collar workers into institutional polity has been reported (Bolognesi et al., 2019). Trajectory at democratic regimes: In the post authoritarian years, PT expanded its support base beyond the urban South and Southeast. Luiz Inácio Lula da Silva, a Metalworkers’ union leader from the industrial suburbs of Sao Paulo and founding member of the Workers’ Party who first ran for office as candidate for

278

M. E.Trombini

governor of São Paulo in 1982, led national efforts for direct presidential elections. Buoyed by popular support, Lula was elected federal deputy in 1986 and ran as PT’s presidential candidate in 1989 against Fernando Collor and in 1994 and 1998 against Fernando Henrique Cardoso. His electoral defeats redefined the party and moderated its ideological inclinations (Goldfrank & Wampler, 2008; Hunter, 2010). This new direction was thanks to José Dirceu’s contribution, another founding member of the party who had actively participated in the campaign for democratization and who served as secretary general of the party between 1987 and 1990 before his election as federal deputy. By the 2002 presidential election, the PT had become a national and electorally integrated party with a renewed political strategy far more ideologically heterogeneous, including centerright to right wing parties such as the Partido Liberal (PL). Prior to the electoral victory, Jose Genoíno, future party president (and a defendant at the Mensalão), encapsulated the leadership’s new outlook in his statement, “It’s now time to win, not just to stake out our ground”. The strategy turned out to be successful and the PT’s emphasis on social equity resonated among people who were not necessarily petistas, but voted for Lula. After having gained office, the coalition stretched to encompass other parties such as the pragmatic Partido do Movimento Democrático Brasileiro (PMDB) and center-right wing Partido Progresista (PP). Such alliances have been criticized for having promoted a sharp centrist turn and accommodation with the status quo (Table 2). Organizational strength: Very strong (Bolognesi et al., 2019) the only so-called mass party in Brazil (Ames, 2001; Mainwaring, 1999). For Lula’s fourth electoral competition, aside the wide alliances, political advertising played a pivotal role. When the Workers’ Party stepped into the presidential palace in 2002 it carried a debt for having hired marketing publicist Duda Mendonça, a famous professional in the field after having successfully managed Paulo Maluf’s electoral campaign to Sao Paulo’s mayorship. According to Mr. Mendonça’s testimony to the Parliamentary Commission of Inquiry (PCI) of the Correios, in 2002 he was hired to provide a package of marketing services which included, in addition to television commercials and regional Table 2 Workers’ Party’s representativeness at the Congress PT

2002

2006

2010

2014

2018

Chamber

91

83

86

68

54

Senate

15

16

17

12

6

Source: Chamber of Deputies and Senate

Misuse of Public Office for Organizational Gain?

279

programs, the campaigns of President Lula, Congressman Genoíno, Senator Mercadante and Governor Benedita and revolved around R$ 25 million reais (roughly 7 million USD at the time). As Lula steps into office, the debt with the publicist was approximately 4.4 million dollars, which later were exposed and brought the higher strata of the party, the publicist, his business partner and the men who helped to operationalize the illicit transactions under criminal prosecution before the Supreme Court (Boas et al., 2014).

Overview of the Two Corruption Scandals Having outlined the organizational contexts of the political parties that have been implicated in two of the largest investigations on corruption in Brazil, I will now use official data to summarize the plots of the schemes uncovered. Then, I will discuss the role of the parties and their members, particularly the four individuals sentenced at both criminal cases: José Dirceu and Delúbio Soares, from the Workers’ Party, and Pedro Corrêa and João Genu, from the Progressive Party.

Mensalão Synthesis: “a money-laundering-cum-legislative-vote-buying” scheme taking place between the second semester of 2002 and June 2005 which started after Roberto Jefferson, federal deputy and chairman of the PTB (Brazilian Labour Party), accused Mr. Delúbio Soares, PT’s treasurer, of paying monthly “allowances” to Congressmen in exchange for political support during a Parliamentary Commission of Inquiry on the Brazilian Postal Service (PCI of Correios). Scope: Besides the PT (with 10 individuals at the indictment) and PP, other three parties, namely the Brazilian Labour Party (PTB), the Liberal Party (PL) and the PMDB had members put under investigation.10 The Congressmen were said to have benefited in exchange for support with the social security (PEC 40/2003) and fiscal reform (PEC 41/2003) bills which had a remarkably fast passage through Congress.

10

Other episodes borrowed the name, the most famous of which was the Mensalão Mineiro implicated former Partido da Social Democracia Brasileira (PSDB) Governor of Minas Gerais, Eduardo Azevedo, for misusing public resources and illegal campaign contributions. With Lava Jato, politicans like governor Sérgio Cabral reported the existence, at the State level in Rio de Janeiro, of practices of monthly payment to parliamentarians.

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Defendants: 38 People, among which executives, civil servants and party members. Trial: carried out by the Supreme Court (STF), since the Brazilian constitution provides a special standing (foro privilegiado) for high-level officials. This criminal case was the longest trial of the court’s history and took 69 sessions of the full bench before coming to an end in 2012. Benefits: Congressmen received approximately USD 12,000 per month at the time, the PT payed some of its debts and the executives were benefited with contracts with the state administration. Losses: According to Brazil’s Public Ministry, the country’s Federal Police and the Brazilian Court of Audit, the huge cash-for-votes case involved some R$ 100 million ($43 million) siphoned from taxpayers’ money. Defense argument: The defense suggested that their acts would only represent the practice of “caixa dois”, and these were only funds to enable the payment of campaign expenses, without any pretense of trafficking in the exercise of the civil service. Legal argument for conviction: corruption was inferred without a smoking gun with the aid of ‘dominion of the act’ (Tatherrschaft) from German jurist Claus Roxin which stipulates the crime of responsibility in a hierarchical fashion and is more amenable to indirect evidence. Output: Of the 38 defendants, 25 were convicted, 12 were acquitted, one made a deal with the Public Prosecutor’s Office (Sílvio Pereira, from the PT) and another died in the course of investigations (José Janene, from the PP). Prison sentences for the mensaleiros totalled 283 years and 22 million reais (about US$10 million dollars at the time). Among the politicians, some lost their mandates as federal deputies. For the organizations, a debate on suspending the registration of the PT emerged at the Congress but did not prosper.11 Also, despite the negative spill-overs, the party secured Lula’s 2006 reelection and the largest representation at the Chamber of Deputies in the 2010 elections.

11

See, for instance, the declaration of Senator Álvaro Dias, rapporteur of the Parliamentary Commission of Inquiry on the Mensalão: “I don’t agree… the PT as an institution, I believe, does not have that responsibility. The men are passengers, corrupt, honest, decent, indecent, pass, and the party as an institution remains. And that is what we want, because the PT has history, the PT has importance, the PT is a party that has a lot to offer the country after this cleaning that will certainly happen.”

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Petrolão Synthesis: The scheme revolves around construction companies aiming to secure contracts in the oil, nuclear and public-infrastructure sectors (many of which involving Petrobrás) through bribes to public officials and members of political parties. Scope: Three Petrobrás’ business units were attached to political parties from the ruling coalition: (a) Refining and Supplies: responsible for the planning of new projects, such as modernization and construction of refineries, oil-platforms, etc., occupied by Paulo Roberto Costa, an appointee of the Progressive Party (PP); (b) Corporate Services unit: responsible for the bidding-procedures, occupied by Renato Duque, an appointee of the Workers’ Party (PT); and (c) International unit, occupied by Nestor Cerveró, between 2003 and 2008, nominated by MDB. The business units received “cash-for-contracts” from private companies supplying Petrobras, or “commissions” calculated between one and three percent of the contract value.12 Defendants: At the time of writing this paper, 500 people had been indicted at Operation Carwash, among them, civil servants, executives and members of political parties. Trials: The cartelization and commissioning system involving Brazil’s stateowned oil company were uncovered at the scandal that started in 2014 by the Federal Prosecution in Paraná, a state of the federation that set up a task force entitled “Car Wash”, and grew into the largest anti-corruption campaign in the history of Brazil and, arguably, Latin America. At least other 12 countries started investigations on the facts reported by the Brazilian justice system (MPF, 2020). Benefits: It is estimated the economic groups benefited paid at least R$ 377,267,122.83 on bribes to the political and administrative nucleus of the criminal scheme. According to Paulo Costa, an executive of the state-owned oil 12

“Such a scheme started with the person of José Janene, leaving initially to the declarant the job to make the receipt from the contractors. This dynamics would have started when it was agreed that the contractors hired by PETROBRAS would pay a percentage 0.5 to 1.0% of the value of the contract which was to be assigned to the Progressive Party- PP; that the transfer was 1.0% and only exceptionally less than that; that, this value served to pay costs and taxes, related to the issuance of notes being the remainder directed to the declarant, to Paulo Roberto Costa and to the - PP, through the leader of this bench, as determined by José Janene; That at that time the leader of the PP were the deputies PIZZOLATI or MARIO NEGROMONTE; That, at that time, was the leader of the PP, the rule was that the PP money would be handed over by the declarant himself or by his agents at Janene´s residence, after the declarant had promoted the withdrawal of the resources through the people who were assisting him.” (Alberto Youssef´s Term of Collaboration n. 03).

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M. E.Trombini

company, out of the three percent of the contract value paid in bribes in his business unit, two percent should be transferred to PT and one percent to PP. (Paulo Roberto Costa, criminal trial no. 5026212–82.2014.404.7000, events 1025 e 1101, doc. 12). Losses: The cartelized action before Petrobras implied losses to the State that may reach USD 8.9 billion according to the TCU (Federal Court of Accounts) (administrative trial no. 005.081/2015-7, TCU-Acórdão 3089/2015). Output: At the time of writing this paper, 210 people were convicted in the context of Petrolão, at the jurisdictions of Paraná, Rio de Janeiro and São Paulo. The first politician condemned was PT’s deputy André Vargas, and the most remarkable was former president Lula. At party-level, the PP has the biggest number of people put under investigation. The party’s summit is facing a criminal suit before the Supreme Court, justifying the nickname “quadrilhão of PP”, Portuguese vernacular for criminal association. Around 1 billion dollars were returned to the public coffers. According to a statement by one of the repeated players involved in both scandals, Pedro Corrêa, the Mensalão and the Petrolão were a single thing. Below each of the four characters convicted in both investigations are individually presented: José Dirceu Biography: Federal deputy for Sao Paulo at the Legislatures of 1991–1995, 1999–200, Lula’s Chief of Staff (2003–2005) and a founding member of the Workers’ Party. As a consequence of the Mensalão, lost his mandate and had his political rights suspended between 2005-2015 and was a consultant and militant of the Workers’ Party when Petrolão started. Convictions: • At AP 470: for active corruption and quadrilha to 7 years and 11 months at semi-open regime • At 5045241-84.2015.404.7000: for passive corruption, money laundering and criminal organization to 23 years and 3 months of imprisonment. • At 5030883-80.2016.404.7000: for passive corruption and money laundering to 11 years and 3 months of imprisonment Delúbio Soares Biography: Treasurer of the PT (1999–2005) always integrated the party bureaucracy and never held a mandate, despite having been defeated in a dispute as federal deputy in 1986 Convictions: • At AP 470: for active corruption and quadrilha to 6 years and 8 months at semi-open regime • At 5022182-33.2016.404.7000: for money laundering to 5 years

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283

Joao Claudio de Carvalho Genu Biography: Legislative assistant at the House of Representatives, man of trust of the high strata of the PP, never held a mandate Convictions: • At AP 470: for passive corruption and money-laundering, no penalty due to temporal prescription of the crimes • At 5030424-78.2016.404.7000: for passive corruption and criminal association to 8 years and 8 months Pedro Corrêa de Oliveira Andrade Neto Biography: Federal deputy by Pernambuco (PE) at the Legislatures of 1979–1987, 1991–1999, 1999–2006 and a founding member of the Progressive Party. As a consequence of the Mensalão, had his political rights suspended between 2006–2014 Convictions: • At AP 470: for passive corruption and money laundering to 7 years and 2 months at semi-open regime • At 5023135-31.2015.404.7003: for passive corruption and money laundering to 20 years and 3 months of imprisonment

Now that the specifics of each scandal were presented, a few imputations of corrupt practices were extracted from the court records to exemplify the type of gain that they yielded to the involved parties. To answer whether the alleged misuse was predominantly oriented to personal or organizational ends, the agent and his membership were considered. First, I processed the data searching for self-interested motives, aligned with the literature on political corruption anchored on the principal agent approach. Besides enrichment, or conducts in pursuit of immoral values either against the constituents or against the party, in a parallel with occupation crime, evidence of electoral donations to candidates seeking mandate and coverage of expenses related to the professional activity was computed as personal gain. As to misuse for group-oriented gains, accounting practices and alliances where the collective entity benefits outweighed eventual individual ones were considered. Whereas the language of the first empirical indicator signaling classic misuse for private gain is in the singular of the first-person, “I”, the pronoun associated with organizational gains is the plural form “we”. The following excerpts have been extracted from the official files under examination—from Petrolão: 4 criminal cases sentenced by the 13th Federal Court of Curitiba and administrative improbity indictments 3.989 and 4.325 against the two political parties; b) from Mensalão: Supreme Court’s AP 470, and the final report of the CPI dos Correios. They were selected for being illustrative of the research question, and do not exhaust the plethora of practices that such investigations unveil.

Asking for Personal party funds to secure electoral campaign

Mensalão PT

Source

Speech before House of Deputies

Organizational Final report PCI Correios, p. 505

Gain

Using unlawful campaign donations to pay party’s debts

Party Misuse

Mensalão PT

Case

MR. JOÃO PAULO CUNHA: I asked my wife to get 50,000 reais from the Rural Bank to pay for [electoral] research in the region where I had influence. I spoke textually, I wrote! Who did I ask? To whom should I ask. I asked the treasurer of my party, correctly! Close the circle here. The comrade, who was the coordinator of the PT in the region, says the following in court: “I asked for the money for João Paulo”. Delúbio Soares says: “I received the request from João Paulo”. Marcos Valério says: “I received the command from Delúbio”. My wife says: “I got the money. I gave it to Mr. Gelson”. Gelson speaks—all in judgment, he is here—“I took the money”. “You did what?” “I paid for the research”

MR. DELÚBIO SOARES: […] I have decided to seek the General Prosecutor of the Republic to explain to him a fact that, until then, we had not admitted. And I, as I was responsible, want to explain to you all about it and to the Brazilian Nation, I felt an obligation not to harm people who are being accused unduly, people who have had some commitment and are being accused unduly, as well as their family members, advisors, party leaders, I felt in the obligation to clarify that the Workers’ Party, during 2003 and 2004, used an unaccounted fund to pay off debts from our several members of the directories, several members of the PT in the States and several members of the Allied base. We used those funds to pay off those debts

Exemplary quotations

284 M. E.Trombini

PP

Petrolão

Obtaining campaign donations

Receiving Personal financial help to cover legal expenses

PP

Petrolão

Personal

Personal

Transferring money of dubious origin to family members

Mensalão PP

Gain

Source

Indictment 3.989

Indictment 3.989

AP 470 p. 55980

Organizational AP 470, p. 53571

Requesting support as members to the presidential coalition

Party Misuse

Mensalão PP

Case

MR. PEDRO HENRY received undue advantages, disguised as “official” electoral donations, in 23/8/2010, in the amount of R$ 100,000.00 (one hundred thousand reais), from the contractor QUEIROZ GALVÃO for his reelection campaign

Federal deputy JOÃO PIZZOLATTI received money from “official” campaign donations and benefited from QUEIROZ GALVÃO, with the coverage of an expense of R$ 560,000.00 (five hundred and sixty thousand reais) with lawyers

[I note] among the various transfers made with the resources allocated to the Progressive Party, via Banval/Natimar, the amount of R$ 15,000.00, on April 28, 2005, in favor of Daniele Kemmer daughter of the accused JOSÉ JANENE and that there is news in the file (see CPMI report) of a transfer in favor of the deputy’s wife

MR. JOSÉ JANENE: There was a meeting between the President of the Progressive Party, Pedro Corrêa, and our leader, at the time, Deputy Pedro Henry and Deputy José Genuíno, who was chairman of the PT to make an agreement not financial, but a political agreement to support the government and that included a political alliance and never a financial alliance. What occurred at the time is that this political alliance was an alliance that should have unfolded for the municipal elections and the Workers’ Party, who pursued a lot of lawsuits against two deputies ours, one of whom had lost his mandate, the second also lost his mandate, the PT was responsible for these actions and remained to make a financial contribution to pay the Congressman’s lawyer, Paulo Goiás, who confirmed, that he finally received, with receipt, all lawfully

Exemplary quotations

Misuse of Public Office for Organizational Gain? 285

PP

PP

Petrolão

Petrolão

Gain

Source

Securing strategic positions to prevent the scheme from being uncovered

Organizational Pedro Corrêa, Term of collaboration n. 10 (Indictment 3.989)

Profiteering Organizational Pedro Corrêa, Term of from collaboration n. 25 administering (Indictment 3.989) public offices

Party Misuse

Case

Exemplary quotations

The Progressive Party has always had a very large stake in the Mine and Energy Commission; even the chairmanship of the Mines and Energy Commission was normally occupied by member of the Progressive Party; when Parliamentary Commissions of Inquiry (CPls) on PETROBRAS were set up, their respective members were chosen from the political parties responsible for the nomination of directors of PETROBRAS; since the dictatorship, the political parties indicated directors of PETROBRAS; (…) as already reported, the Party Progressive has appointed Director of Supply of the PETROBRAS starting in 2004; the Progressive Party participated in the political articulations carried out to avoid adverse consequences deriving from the actions of both the Mine and Energy Commission and its Commissions of Inquiry in regards to PETROBRAS; the objective of these efforts was to shield and protect the directors of PETROBRAS responsible for the matters investigated

MR. MÁRCIO FORTES took up his new position in the Ministry and appointed executive secretary as the person appointed by Deputy PEDRO HENRY […] and PP began, as was already planned, to authorize the Ministry and its secretariats to collect kickbacks from companies that were hired or provided services, in addition to secure projects for the benefit of the municipalities in order to strengthen politically the parliamentarians who were able to secure the projects

286 M. E.Trombini

PT

Petrolão

Collecting money to cover party´s cash needs

Party Misuse

Case

Gain

Source

Exemplary quotations

Organizational Bumlai’s testimony JOSÉ CARLOS BUMLAI: I went to the bank, I got there and found a (502218233.2016.4.04.7000) table made up of Dr. Hélio, candidate for mayor of Campinas, MR. DELÚBIO, Mr. Carlos Eduardo Schahin, Sandro, Armando, and I got there, I was told that they needed cash for the second round of Campinas and MR. DELÚBIO said that he needed, he needed cash and he needed another one, the sum of which gave some 12 million reais, which was a little more broken down because of taxes. Then I was in a tight skirt, as I said, because I, you know, “No, because you have to have a record, you have to be solid to take the loan, but we’ll pay it back quickly”, the PT told me, so “That’s fine” PROSECUTOR: But then, just to make it clear, he was there as an emissary of the Workers’ Party, was that it? Because the money from the Campinas campaign was for a candidate of the Workers’ party, correct? JOSÉ CARLOS BUMLAI: No, the money for Campinas, the vice candidate was a coalition with the PT, and these other 6 million that was asked of me was for his cash needs, from Mr. Delúbio, which I didn’t get into, no.

Misuse of Public Office for Organizational Gain? 287

PT

Petrolão

Party fundraising

Party Misuse

Case

Gain

Source

Exemplary quotations

Organizational Ricardo Pessoa’s testimony PROSECUTOR: You also mentioned, in your term of cooperation, (5045241-84.2015.404.7000) that Mr. João Vaccari was raising funds for the party even before he was appointed treasurer, starting in 2007. RICARDO PESSOA: Yes, sir. PROSECUTOR: Is that correct? RICARDO PESSOA: Yes. PROSECUTOR: But he collected those resources in a way… RICARDO PESSOA: As if he were treasurer. PROSECUTOR: Through official donations? RICARDO PESSOA: I had no idea if he was treasurer or not, he was there PROSECUTOR: And those values that were passed on to him, to the party, were in what way, you mentioned that they had official donations and also a part… RICARDO PESSOA: The great majority, about, the great, overwhelming majority of the resources given to Vaccari were made through contributions to the Workers’ Party, at a time when there was even no electoral campaign, they were all made this way, very few times were resources given in kind to him

288 M. E.Trombini

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289

Discussion Individuals as the Unit of Analysis: Principal Agent or Collective Action? To disentangle the behavior of different actors within parties we will borrow from Katz and Mair’s (2009) distinction between the party in public office (PPO) and the party in central office (PCO) given its utility for understanding the engagement of each functionary. The first, PPO, includes the party both in parliament and in government and the latter, PCO, is constituted by the permanent bureaucracy, national executive organs, and so on. As to members of the PCO, only pro-organizational behavior has been identified. In regards to the PT, narrowing down to the actions of treasurers—Delúbio Soares and later his successor João Vaccari—the rationale was paying party debts and supporting past, present and future cash needs of the partisan organization. Their contribution in the two episodes suggests that rule-deviation was oriented towards meeting organizational goals, like providing money for campaign expenditures and financially helping its directories. This behavior within a political party as strong as the PT in the context of the first electoral victory is in line with the discussion that the more loyal the staff are to the organization, the greater their willingness to engage in pro-organizational behavior (Umphress & Bingham, 2011; Matherne & Litchfield, 2012). Given the turbulent times, having to cope with the costs of the presidential victory, formal rules, as often happens in organizations (Gebhardt, 2020), are rendered irrelevant and ineffective, leading the party functionaries to resort to informal means of problem-solving. By selectively disregarding formal rules on party finance and diverging from overly rigid regulation too costly to comply with, they incurred in so called “useful illegality” (Luhmann, 1964). The emerging normative conflict between the formally established expectation of the organization to act legally and the informal rules could have been resolved by the emergence of superficial politics and superficial practice, acknowledged only by a particular group inside the organization. The passage below illustrates the existence of multiple arenas in the party-dynamics: Delúbio Soares: Of the loans accounted for, the whole Executive knew. So much so that it is approved and signed by all members of the Executive and approved in the National Directory. […]The unaccounted loans, the R$ 39 million, which started with a little more than R$10 million, I don’t remember by heart, because this is an operation that we requested and Mr. Marcos Valério agreed, through his companies, to request this loan from Banco Rural and BMG […]. And since it was unofficial information,

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M. E.Trombini

because it was not information the demands that came from states, Party members and members of the Allied base, we wouldn’t discuss that in Executive. (PCI Correios, final report, p. 508)

The split of organizations in front and back stages is a mechanism to dramatize ritual commitments made by their participants, a perspective commonly used to explain, in view of the actor, supportive acts to an organizational’s ceremonial façade meanwhile “making things work backstage” (DiMaggio & Powell, 1991, p. 59). In their defense, members from the directive who did not hold public office while the unlawful acts of Mensalão took place refer to hierarchical strain in the partisan organizations and deny having exercised control over the situation. Other testimonies corroborate that, like Roberto Jefferson’s, the snitch from PTB who denounced the big monthly-allowance scheme. He declared that José Genoíno, then President of the PT, did not have the autonomy to “hammer the gavel” in the agreements, which should be ratified in the Civil House by Minister José Dirceu. (AP 470, p. 4219/4227). Mr. Genoíno, cited by José Janene (PP) as an interlocutor in the forging of a political alliance with the PP, was condemned even so. PT’s then Minister of Communications, Luiz Gushiken, received a different treatment: since no proof of contribution to the scheme was found, the Prosecution requested his acquittal, and Supreme Court Ministers granted it. Some years after, in the context of the Petrobrás scandal, Delúbio’s speech touched on ‘bounded rationality’ (Simon 1991) and asserted that individual learning in organizations is, indeed, as predicted by Simon (1991), not a solitary, but rather a social phenomenon: “I never did anything in the PT that I didn’t have authorization from the board, so I couldn’t do it on my own behalf. I, Delúbio Soares, come to a place and ask “Would you lend me 12 million reais? and the person will lend me. It’s not like that” (Testimony, Delúbio Soares, min. 2:19/Part 2). His individual circumstance and position in the intra-organizational setting casts light onto the attainment of collective goals, a central element for organization-level theories of misconduct. Similarly, vigorous commitment to the party reappears in the performance of Delúbio´s successor in the Workers’ Party Treasury: João Vaccari. Sérgio Moro, the sitting judge at Carwash, explicitly states that PT’s treasurer at the time of the investigated facts did not benefit directly from the scheme: “Even considering that João Vaccari Neto did not receive these values, the agreements were made with his participation” (5045241-84.2015.404.7001, p. 243). In spite of a recognition of the organizational dimension in the referred criminal case, Vaccari was condemned to 9 years for passive corruption. Having established that traditional party functionaries (from the party in central office, PCO) behave pursuant to orders of the organizational elite, or rather

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without a refusal of the party’s leadership, an assessment of other subunits in the organization is now necessary. Even if most members of the PT in our dataset have reported engaging in “politics as usual”, not all denied participating in illicit activities. Federal deputy João Paulo Cunha, convicted at the Mensalão, confessed that to further his political goals on the ground he “correctly” asked the treasurer for money (See Table 4.1). To legitimate his behavior, as Delúbio did before the PCI of Correios admitting to have used unaccounted funds to pay off party debts, Mr. Cunha articulated why his acts are justifiable or excusable exceptions to the norms (Ashforth & Anand, 2003). However, differently from the treasurer, Mr. Cunha had a mandate when the corruption scandal came about. Holders of public office, as federal deputies, both himself and José Dirceu emphatically stressed to fellow Congressmen their partisan membership, their clean records and an absence of personal enrichment in response to the Mensalão accusations. Such statements address their peers, members of the same professional community, but also the general public. As a defense narrative, framing the conducts in the realm of electoral politics means remaining at the grey zone (Heidenheimer, 1990) in the eyes of the population. Thus, it prompts a concern with the constituencies, since misconduct detached from private gain has lower risks of leading to rejection on the ballot box (Avenburg, 2019). While Cunha said he “lived in the same house for 21 years in the outskirts of the city of Osasco”, Dirceu emphasized his biography and argued “The PT did compose a broad base. It is not true that this base of support was composed by considering favors that are not legitimate. It is not true that there was vote buying. It is not true that there has been bargaining that has shamed this House.” That direct personal enrichment has been almost absent, with the exception of expenses with real estate and charter flights for José Dirceu in the Petrolão, is conducive to support our hypothesis. All in all, for individuals of the Workers’ Party, the idea that those who engage in political corruption would act in their sheer interest was underrated. Conversely, we may speak of collective deviance, for the individual actors who enact the relevant behavior do so within a dense network whose authority structure brooks no refusal to act in the illegitimate fashion (Goode, 2007). As systems of interrelated roles, organizations provide its members with heuristics on how to reason about the problems and decisions that face them. Evidence on the conduct of members of the PT provided insight on the understanding of a role as “a system of prescribed decision premises” instead of “a system of prescribed behaviors” (Simon, 1991) where the premise to advance the party’s agenda was the most important element in the performance of job roles.

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In regards to the PP, João Claudio de Carvalho Genu and Pedro Corrêa de Oliveira Andrade Neto were tried for having participated at both scandals. The latter is a member to the PP since 2003, federal deputy by Pernambuco (PE). Besides him, his daughter, Aline Corrêa de Oliveira Andrade was also ellected federal deputy and faced criminal charges at Carwash (Petrolão 502313531.2015.404.7001/PR). As to the latter, despite not formally an employee to the party in office, since Mensalão João Genu served as a “man of trust of the high strata of the PP: José Janene, Pedro Corrêa and Pedro Henry” (p. 51793, AP 470). Genu first worked as a Legislative Aide to Janene and later remained as a trustworthy emissary to receive payments. Following the Public Ministry’s narrative, Mr. Genu was responsible for collecting undue advantages and intermediating the transactions between executives, Petrobrás, and the Progressive Party. When confronted, he denies having worked in PP’s Treasury, but confesses knowing that the money he received came from “the things they were doing there” (Petrolão 5030424-78.2016.404.7000/PR). As an actor, Genu can be equated with the ‘business politician’, in charge of organizing the transfer and distribution of bribes and kickbacks and becoming the privileged intermediary of illicit transactions (See Pujas & Rhodes, 1999). He does not fit the category of traditional party functionaries and neither does he fall under Katz and Mair’s PCO typology, for his attachment to the organization was personal, rather than ideological. About the implications trust has on corruption, Tonoyan (2003) argues there is a “dark side” of trust, which refers to the particularized trust toward kin and friends, found to support unethical or unlawful behavior. This appears to be true for two of the members of the PP: Mr. João Genu and Mr. Ivan Vernon. Both worked as aide for party leaders in the Congress, the latter being Pedro Corrêa’s legislative assistant. When inquired about his participation in the scheme, Mr. Vernon, sentenced at Petrolão, defended himself by saying: Ivan Vernon: Look, I had it more than as wrong, I had it as illegal, it was contrary to all my principles that I was educated. Federal Judge: And why did you agree to do that? Ivan Vernon: I agreed because it’s common practice in the chamber. (Testimony 5023135-31.2015.404.7000, p. 74)

Once again, the sociological perspective of organizational behavior is illustrated. Instead of devious, corrupt procedures become part of “business as usual” to which individuals, after entering the field, adapt and gradually reproduce as

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“normal” routines (Ashforth & Anand, 2003). Worthy to point out that this statement relates to assisting Pedro Corrêa in the appropriation of the salaries of a parliamentary adviser who was forced to pass on half of her sallary to the political agent. The same practice of embezzlement happened with a domestic maid formally sitting as parliamentary adviser, but who in reality never worked in the Congress. Together with transactions in favor of José Janene’s daughter from the Mensalão, these episodes concerning Mr. Corrêa’s behavior show personal enrichment has occurred for members of PP’s leadership. Further research is advised, but perhaps the medium organizational strength of PP, as opposed to PT’s very strong organizational setting, may account for some of the differences encountered. Despite occasional evidence of personal gain, in these few occasions no evidence of corruption against the party-organization was present. This came as no surprise considering that income from spoils can benefit the party and the individual at one and the same time, which is not the case with company level corruption, where individuals frequently benefit at the expense of the organizations, such as occupational crime. Even if similarities could be drawn between extended firm survival and extended time in office, both sorts of collective gain cannot be equated. While the advantages arising from corrupt acts committed on behalf of the company—such as price-fixing collusion and improved firm profitability— translate indirectly into significant personal gain (Aguilera & Vadera, 2008) for parties more direct benefits are envisioned, especially for professional politicians. Party affiliation presumes an interest—be it programmatic, ideological, identity or pragmatic (Scarrow, 1996)—so individual gratification might arise from non-pecuniary accomplishments for members holding a mandate or not. Take, for instance, Dirceu’s speech to the House of Representatives in response to the Mensalão: My party has made mistakes, but if we put everything that the PT has done—as many parties have done here, each in their own way—into the balance for Brazil’s political, social and economic life, for Brazil’s social, economic and political advances, we will see that the PT has more credit than debt, and the people will know how to judge this in the next elections (Dirceu, 2013).

As a subtype of interest groups, political parties are driven by the considerations of their members, and are thus both self-interested and of restricted scope. They differ from the market, an open forum guided by self-interest, and the kin, a group of limited scope with an ‘other-regarding ethos’ (Mikkelsen, 2013). Among a political platform, the utility function of obtaining group benefits is higher for the holders of a position in public office that implicates partisan affiliation and

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support, than to members of the party’s bureaucracy who do not share candidacy aspirations. Narrowing the analysis to the corruption scandals at hand, rather than being involved in a “Gramscian process” of state-capture to diffuse the ideals of socialism, as argued elsewhere (see Mussi & Bianchi, 2020), PT used money to collect funds and perpetuate the party’s political project (Schwarcz, 2020). The fact that while in opposition the party had campaigned on an anti-graft platform, and once in power adopted distributive support-building strategies, increased its reputational costs. Ironically, in 1992 the PT was the only party in favor of opening the Parliamentary Commission of Inquiry in the “P.C. Farias case”, through its leaders in the Senate and the Federal Chamber, Eduardo Suplicy and José Dirceu. One decade later, as Chief of Staff Minister, Dirceu would lose his political rights for breach of parliamentary decorum after Mensalão’s PCI. As Brazil’s democracy evolved, the PT followed the dynamics of bureaucratization and oligarchization that occurred in other mass parties (Ribeiro, 2009) among which a gradual distancing between the leadership and the bases of the party (Bolognesi et al., 2019). Despite incorporating characteristics to sustain the organization’s electoral appeal, individual PT politicians remained committed to partisanship and, relatively to “did not start to behave like the self-interested careerists found in abundance in other Brazilian parties” (Hunter, 2007, p. 441).

Inter-party Dynamics and the Role of Party Elites In Brazil, pork operates through multiple pipelines: centralized and decentralized, through individuals and party affiliations, at the national and subnational levels (Desposato & Scheiner, 2008). As a pork-centric context, the ability of parties or candidates to deliver government resources in the form of goods (such as jobs) and local public goods or club goods (such as infrastructure projects) that are delivered to targeted groups and regions is expected to determine the result of elections. The findings presented above suggest that since re-democratization, such ability of the incumbent and his/her political party influences the survival of the government between elections alike. For the analysis of the interaction between the PT and the PP as framed in the illicit activities uncovered, separating different types of particularistic governing, which occurs whenever other spheres, like the economy, encroach on the supposedly open and other-regarding domain of the state (Mikkelsen, 2013, p. 367), should help. Some facts outlined above are examples of clientelism, like the transactions between the party in office and parties in the dominant coalition, whereas others of patronage, such as the interplay

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between the political nucleus and staff in the state administration (state ministries, state-controlled enterprises, etc.). Before moving further and unknotting the bonds between individuals and the organizations to which they pertain, the role of party elites is worth discussing. A coordinated action agreed between the upper-strata of parties would be indicative that individuals are somewhat interchangeable, for it is the strategic position they occupy that matters. In modern democracies, the cartel party theory suggests that parties will be drawn toward the more risk-averse option of working together, otherwise referred to as inter-party collusion, rather than possibly losing their political power (Katz & Mair, 1995, 2009). Responsiveness between partisan organizations would be a reasonable means to find an equilibrium that suits most of their own “private” interests. But to provide continuant support and overcome the challenge of lack of exchange simultaneity in the political playing field, short-term, non-iterative transactions between party members would not suffice. Instead, they would be better off if construed by the partisan elites. As Mr. Janene puts it in a description of Mensalão, agreements between party chairmen meant “a political alliance and never a financial alliance”. Thanks to repeated interactions over time, politicians and parties can make reasonable predictions about the other’s behavior, without which coordination of covert activities would be impossible. Cementing durable governing coalitions relies on a strategic allocation of coalition goods, and in Brazil’s democratic trajectory, “presidents and party leaders gradually improved their ability to offer—and honor—incentives” (Pereira & Melo, 2012). From PT’s side, participation in the government provided them with access to resources that individual legislators need for their political survival: policy influence and patronage (Figueiredo & Limongi, 2000). From PP’s angle, being granted access to coalition goods was not equivalent to taking for granted that it would remain so, increasing their incentives to sustain the status quo. On bargaining the patronage system with the Executive, Pedro Corrêa declared that Severino Cavalcanti, a member of the PP and President of the Chamber of Deputies, forced the appointment for the Ministry of Cities, expressing, directly to President Lula, that, if the PP was not answered in this plea, he would take the so-called “bomb schedules” (bills contrary to the interests of the government) to the Plenary as well as stressing that he had filed thirteen impeachment requests against Lula (Indictment 3.989). Indeed, in 2005 the PP managed to appoint Márcio Fortes13 to the referred position and the following chapters were retold by 13

Although he had no party affiliation, Mr. Fortes approached the PP for his work together with Pratini de Morais (FHC’s Minister of Agriculture 1999–2002), when he obtained recognition for his technical profile.

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Pedro Corrêa in the remaining of his collaboration term (Refer to Table 4.1. above). Unlike patronage, clientelism need not relate to appointments for public office, though appointments can be one of the benefits distributed in return for support like has been identified. Historically, clientelism has been popular among foreign scholars describing Brazil and has been a wide-reaching concept (Carvalho, 1997). Clientelistic relations take place between asymmetric parties in terms of status and power, where the stronger controls access to benefits the weaker partner desires. Intra-elite exchanges, such as those between political parties’ elites, can be subject to clientelist relations, provided that despite unequal reciprocity, both sides accrue some benefits. As a strategy, clientelism has been described in terms of practices towards obtaining or sustaining political support, rather than a means toward administrative control (Mikkelsen, 2013). With the aim to secure the coalition, or the “allied base”, to use Mr. Delúbio Soares’ terminology, the PT agreed to “pay the bills that were fair”, but not those of the opponent parties. Integrating the coalition meant exchanging favors both at the federal and local levels, like the episode, uncovered during the Mensalão, of PT paying the defense attorney of federal deputy Ronivon Santiago in a dispute which the PT had moved against him at Acre, one state in the Federation. Pedro Corrêa explained to fellow Congressmen: “In a coexistence between our parties in Acre. It wasn’t fair that we were here supporting the actions of President Lula’s government, and there the PT massacred our comrades” (PCI final report, p. 817). As a general rule, organizational players high up in a hierarchy define informal expectations or tolerate deviant practices (Ashforth & Anand, 2003; Palmer, 2012; Campbell & Göritz, 2014). Both the Mensalão and the Petrolão illustrate that managing the expectations of participants in political alliances is not a role accessible to any party members, but a task of the upper-strata. Findings on the behavior of PP’s and PT’s elites show they became the main brokers in the bargaining between the Executive and the Legislative, stretching to entities that are directly or indirectly controlled by the Brazilian federal administration (Petrobrás and Correios, the postal services). This posits a new trait of modern clientelism emerged in Brazil, reported to be absent in individually dominated clientele networks existing since 1985 (Mainwaring, 1999, p. 179). Due to the nature of their work-role, employees of the party bureaucracy rely on colleagues active in public office, either at the Executive or the Legislative, but mostly at the federal level, to operationalize agreements related to the coalition. Rule-deviation occurs as a top-down phenomenon where a particular elite group, also referred to as top management team in the specified literature, undertakes, directly or through

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their subordinates, collective and coordinated actions for the primary benefit of the organization (Pinto et al., 2008). Alternatively, other practices are better described with patronage, which is based on a self-regarding transaction where obedience is provided in exchange for a public position.14 According to Indictment 3.989, after negotiations with the government’s party it was agreed that the PP would appoint positions in the following bodies: (i) Chief Financial Officer of the Institute of Reinsurance Brazil—IRB (nominated: Luiz Eduardo Pereira de Lucena); (ii) Secretariat of Strategic Affairs of the Ministry of Health (nominated: Luiz Carlos Bueno de Lima); (iii) Ministry Of Cities; and (iv) the Supply Board of the PETROBRÁS (nominated: Paulo Roberto Costa). While appointments of loyalists can provide a crucial stepping stone for corrupt enrichment, they are not themselves corrupt. Except that in Brazil’s case with the Petrolão, the nominations were used for the obstruction of justice (PP and PCI of Petrobrás) or collecting kickbacks from public contractors (PP and Ministry of Cities), rendering patronage equivalent to crime. When holders of public office act to prevent the illicit activities from being investigated, the reasons of private regarding (Nye, 1967) are manifest. In an example of “supportive” corruption, two deputies from the PP held, from 2007 to 2014, the presidency of the Mines and Energy Commission of the Chamber of Deputies, which allowed them to carry out “maneuvers” to avoid parliamentary commissions of investigation on suspicious activities within Petrobrás. Apart from the typologies of particularistic governing, what stands out are the results achieved through unlawful practices. Turning such oversight efforts with no practical effects costed companies from the cartel around 2.5 million dollars in bribes. The support of construction companies was channeled to specific purposes, like blocking investigations into the scheme or bid-rigging, or general ones, like providing campaign donations to a party’s national directory. According to the data collected by the Public Ministry and subsiding their charge against the Progressive Party, the number of Odebrecht’s official donations to the PP as accounted in the years 2010, 2012 and 2014 jumped from 6 to 42, meaning the nominal value was multiplied by 7 and the global value increased by 512.5%. If we take the distribution of responsibilities for nominations in Petrobrás and the influence of the Progressive Party in this domain as truth, it follows that the primary beneficiary of contributions, electoral or not, should be the PP. Had the party indicated to which individual the donation should go to, the liaison would continue to be mediated by the organizational level, as happened with contributions funneled to Pedro Henry (PP’s leader at the House of Representatives 2003–2005), 14

In contrast to nepotism, patronage is not based on other-regarding ties like family or kinship.

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José Janene (2005–2006), João Pizzolatti (2010–2011). Katz and Mair’s proposition (2018) that as the party in public office gains ascendancy within the party as a whole, its particular interests will be treated as being the interests of the party writ large. Looking at how the leadership of the two parties performed when their illicit activities were exposed is supportive of that. By acknowledging the role of partisan elites in the two episodes an initial effort to cease to view clientelism as a ‘stage’ of development, and understand it as a mode of control and utilization of political resources is expressed (Campello de Souza, 1976). In hindsight, looking at the similarities between the Mensalão and the Petrolão, traits of partisanship have surfaced in the covert activities investigated, suggesting Brazil does not have “papier-mâché party-platforms” as argued elsewhere (Michener & Pereira, 2016). Nonetheless, a monolithic, conflict-free conception of parties, or any other organization, and its goals should be avoided. Political parties are not homogeneous. Examples of heterogeneity can be found in both partisan organizations. In the course of Mensalão, the acts uncovered were reprehended by the left block of the Workers’ Party in a public communication expressing “their strongest public repudiation of the criminal campaign financing scheme progressively revealed” and addressing the Congressmen under investigation in 2005 by saying “such procedures confront ethics in politics, betray the hope of more than 52 million votes granted in 2002, and frustrate and prevent the real commitments historically assumed by the PT in its political trajectory in the country.”15 This stresses the separation between party elites and other members. On the existence of conflicting opinions in regards to joining (and remaining) in the presidential coalition, the Progressive Party illustrates well. While indicting PP as a criminal organization, the Public Prosecution cites cooperation with the interests of the Federal Government by Congressmen of the PP’s summit (Pedro Corrêa, Mário Negromonte, João Pizzolatti and Nelson Meurer) as evidence of their role in the Allied base. Yet this is a superficial account given that other Congressmen from the PP, such as Jair Bolsonaro, did not favor the alliance with the Workers’ Party: he voted against the social security and fiscal reforms in 2003— allegedly the reason why the incumbent government bought legislative support from the coalition—besides openly attacking members of the PT in the context of the Mensalão, and briefly leaving the PP to return only in 2005.16 Another historical example of internal conflict is that of the transition from dictatorship back to 15

Available at: https://www.camara.leg.br/noticias/69818-nota-divulgada-pelo-bloco-de-esq uerda-do-pt/. 16 When Bolsonaro migrated from the PP to the Social Christian Party (PSC) in 2016 he alleged there was no space in the PP for him to conquer upper positions in the political ladder. (CPDOC).

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democracy, when the Progressive Party (then under the name PDS) split in two: one block supporting Paulo Maluf and the other Tancredo Neves’ candidacies.

Conclusion Some remarks on the teachings of both episodes on the underpinnings of political finance in competitive parties in Brazil are worthy to mention. The Mensalão triggered campaign finance reforms like the Accounting System of Campaign Financing (Sistema de Prestação de Contas Eleitorais, or SPCE in the Portuguese acronym). Thanks to this disclosure of campaign expenditures, overwhelming corporate contributions could be noticed. This picture may have been conducive to the prohibition on donations coming from private legal entities determined by the Supreme Court in 2015 as a result of a lawsuit (ADI 4650) filed by the National Bar Association. Exploiting loopholes in campaign finance remains a possibility for the political class even so. Apart from cumbersome regulation and frequent changes in the rules of the game, the way law-enforcers and politicians understand corrupt exchanges is often in disagreement. In the eyes of the Prosecution, the ambivalence between “official” and “unofficial”, legal and illegal campaign contributions can be noticed in the excerpt below, from the indictment against the PP as a criminal organization: Aguinaldo Ribeiro received an undue advantage, disguised as an “official” electoral donation, in the amount of R$ 50,000.00 (fifty thousand reais), transferred by the National Directory of the Progressive Party, which had received the amounts through “official” electoral donations as well, from contractor Queiroz Galvão, for his reelection campaign that year. (Indictment 3.989)

In principle, the candidate who received donations that had been accounted for at the party’s expenditures, is not necessarily incurring in unlawful acts—at least it was not at the time of the events, when corporate donations were accepted. The causal links between certain donors and certain parties stretches far beyond episodic evidence and are often suggestive of undue influence, but unless they are established by the accusation, law-enforcer’s claim that political finance and corruption always overlap can be deemed over-dramatic. As certain transactions move in and out of acceptable behavior, and the boundaries of what is legitimate are softened, reaffirmed or redrawn, just like studying political corruption is like following a moving target (Nelken & Levi, 1996), prosecuting is as well. To what extent do solutions prompted by law-enforcers, who embody a specific

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worldview, reflect the underlying problem of political corruption? Further research on the relationship between social-control agents and wrongdoers at the individual level from a labeling theory approach could gather scientific knowledge on organizational misconduct and how to address it (Greve et al., 2010). Framing corrupt practices as pro-organizational behavior has become part of Brazilian law-enforcers’ anti-corruption strategy. According to the 2006 indictment launching the Mensalão trial, the “criminal organization”17 within the PT had the aim of buying political support from other political parties and the future and past financing of their own election campaigns (Indictment n. 2245, p. 16). One decade later, at the Petrolão, the PT and the PP were accused18 of constituting criminal organizations to commit crimes against the state administration that had been ongoing before and since the Mensalão. According to law enforcers, the protagonists of the anti-corruption fight, no subordination or hierarchy would exist among the partisan members, being a relationship of adherence to common interests, marked by a certain autonomy of each participant. However, one must bear in mind that to develop a theoretical model for understanding misconduct in political parties relying on the normative account is insufficient, and often misleading. Criminal organizations and organizations that, occasionally, commit crimes are not synonymous, even if for prosecutorial ends there is a purpose in presenting it that way. Political parties are not a subtype of organized crime enterprises distributing illegal goods or services. (Southerland and Potter, 1993) Rather, they act on the spectrum of legitimacy, and crossing the boundaries is an illegal sideline for an otherwise legal enterprise. 17

In Brazilian legislation, according to §1 of art. 1 of Law no. 12,850/2013 "a criminal organization is considered the association of 4 (four) or more persons structurally ordered and characterized by the division of tasks, even if informally, with the objective of obtaining, directly or indirectly, the advantage of any nature, through the practice of criminal offences.”. When appreciating this charge against members with political party membership, the sitting judge states that: “Of course, this is not an organized criminal group like the Italian Cosa Nostra or the First Command of the Capital, but a criminal group involved regularly, professionally and with a certain sophistication in the practice of crimes against Petrobras and money laundering. This is enough for the legal framework.” (case 5045241-84.2015.404.7000). 18 In terms of liability of organizations for unlawful behavior of its members, Brazil’s Anti-Corruption Law established that criminal acts of employees of corporations generate repercussions in the civil and administrative spheres to companies. These provisions, however, do not apply to political parties, and a debate has been taking place in the Congress to alter the Law of Political Parties (Law 9.096/1995) determining them to set up and abide by integrity programmes. Meanwhile, issuing administrative improbity lawsuits to hold political parties accountable for unlawful acts of its members when the party was favored by the misconduct, such as here, has offered an alternative route.

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Our findings on the two scandals challenge the principal-agent approach to corruption for its incompleteness to explain the behavior of members to political parties participating in the schemes. Instead of intentionally making unethical decisions motivated by greed (Bishara & Schipani, 2009), the choices to engage in corrupt acts in the two episodes assessed appear to have been closely associated with membership to partisan organizations. It may still hold true that persons involved in corrupt transactions believe that the potential gains outweigh the costs associated with such activities (Collins et al., 2008; Luo, 2005). Following a rational choice perspective, it appears the utility function governing decisions of party members on whether or not to breach the law is not a product of individual factors alone. Rather, “useful illegality” stands at the party dimension, and the rationales behind unlawful acts by Brazilian party members cannot be fully addressed without a careful look to partisan elites. To answer the research question, I posit the definition of corruption as ‘misuse of public office for private gain’ is illequipped to handle the phenomenon unless one takes misuse as deviations from rules of any kind, private as encompassing “private clique”, and gain as both personal and organizational benefits (see Mikkelsen, 2013 for a theoretical approach) Departing from this generous concept, further studies comparing political agents and civil servants, like those integrating state-owned companies as Petrobrás, and across a variety of organizations and settings, would provide more insight on the shortcomings and potentials of comprehending corruption in such a way. Following the approach presented here, there is no reason to focus exclusively on individuals as the gains from political corruption are often funneled into the coffers of political parties and partisan elites. If we reckon that running political parties is generally capital intensive and that not just Brazil’s democracy is reliant on generating resources for party-organizations and electoral campaigns, perhaps we can better understand the different roles that money plays in politics. Further research should not be blind to legal underpinnings surrounding corruption or discouraged from carrying out empirical studies on the phenomenon. Behavior that is non-compliant with regulation—be it electoral, administrative or criminal—has been long neglected by most of the scholarship on political parties. Is rule-deviation a specific trait of certain democracies, presidential ones, with a particular party-structure, less institutionalized ones, and loosen electoral regulation, or is the story of misconduct for organizational gains applicable to other contexts with party competition? Instead of focusing on institutionalized practices within party-systems, inquiring patterns that are informally routinized from a nonnormative perspective, as attempted here, remains a promising avenue of research. What role do formal and informal rules play when the political setting is more or less encroached by economic interests? Scrutinizing empirically the conduct of

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other Brazilian parties and individuals who engaged in corrupt activities belonging to the PMDB (Party of the Brazilian Democratic Movement) or the PDT (Democratic Labour Party)19 would be helpful to the agenda on organizationlevel theories of misconduct. A comparison between other relevant competitors in the democratic game can shed further light on the usefulness of rule-deviation in Brazil. One might ask how our proposed theoretical model of organizational corruption at political parties can help policy makers. The two episodes, Mensalão and Carwash, engendered a widespread mistrust of politics among the Brazilian population. In regards to public attitudes towards corruption in Brazil, a depressing partisan sympathy among citizens and responsiveness to short-term government performance has been reported. (Winters & Weitz-Shapiro, 2013). Sérgio Moro, Petrolão’s central figure and the sitting judge in the criminal cases here, stated in an academic article: “Just as in Italy, the political class does not enjoy great prestige among the population, and there is great frustration over unfulfilled promises after democratic restoration. On the other hand, the Brazilian judiciary and Public Ministry enjoy significant formal independence from political power” (Moro, 2004, p. 61). He is alluding to the episode of Mani Pulliti in Italy at the 1990s, where Milan was presented as Tangetopoli, or “Bribesville” in English. Its success not only diffused anti-corruption representations focused on an opposition between the corrupt political class and the virtuous magistrates, who are supposed to relay the growing discontent of the population (Favarel-Garrigues, 2009, p. 276) but also ultimately led to the demise of Italy’s two most powerful political parties—the Christian Democrats and the Socialists. Given recent changes in regulation, more on campaign finance is worthy of discussion, and whether or not the new framework has been effective. Establishing what could be the best clearinghouse over party finance, too, is a pressing issue. Decisions on the interplay between money and politics should be taken with popular participation, for they touch on the legitimacy of institutions and the functioning of the democracy. Instead of being imported, they are to be tailor-made for the needs of the country in question. Because law creates artificial dichotomies between behavior, it can express an over-ambitious ideal of the relationship between citizens and the State (Nelken & Levi, 1996). As a consequence of this decade’s wave of scandals, anti-party sentiment is escalating among the Brazilian electorate, to challenge Schattschneider’s famously asserted proposition that 19

Two have been filed by the State’s Prosecutor: one for its members at the Senate (4.326) and one for its members at the Lower Chamber (4.327). This approach has been replicated by Prosecutors sitting at the local level, as in the context of the Carwash in Rio de Janeiro, filed against the PMDB, PDT and PSD.

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“modern democracy is unthinkable save in terms of the parties”. Given this scenario, the question of Katz and Mair (2009) on future models of party organization remains, considering that for contemporary Brazil it makes increasingly more sense for politicians to avoid the image of ‘partyness’ by locating themselves within loosely defined electoral and governing ‘alliances’ instead of presenting themselves as party leaders at all.

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Internet Source https://www.theguardian.com/world/2017/jun/01/brazil-operation-car-wash-is-this-the-big gest-corruption-scandal-in-history https://www.economist.com/the-economist-explains/2013/11/18/what-is-brazils-mensalao

Biographies https://www.camara.leg.br/deputados/74431 http://www.fgv.br/cpdoc/acervo/dicionarios/verbete-biografico/pedro-henry-neto http://www.fgv.br/cpdoc/acervo/dicionarios/verbete-biografico/pedro-da-silva-correia-de-oli veira-andrade-neto http://www.fgv.br/cpdoc/acervo/dicionarios/verbete-biografico/jose-dirceu-de-oliveira-esilva Agência Câmara de Notícias: speech by federal deputy João Paulo Cunha. Sessão: 411.3.54 in 11/12/2013 Agência Câmara de Notícias: speech by federal deputy José Dirceu. Sessão: 411.3.54 in 11/12/2013. Available at: https://www.camara.leg.br/internet/SitaqWeb/TextoHTML. asp?etapa=5&nuSessao=318.3.52.O&nuQuarto=14&nuOrador=2&nuInsercao=11&dtH orarioQuarto=19:30&sgFaseSessao=OD&Data=30/11/2005

Maria Eugenia Rodrigues Trombini is Ph.D. candidate at the Max-Weber-Institute for Sociology in Heidelberg University, researcher of the Organizational Crime Studies group and member of the Corporate Crime and Systemic Corruption in Brazil project (DFG – FAPESP). Holds a Bachelor of Law from the Faculty of Law of Curitiba, a Bachelor in Social Sciences and an M.A. in Political Science from the Federal University of Paraná (UFPR), Brazil.

Lawyers as Enablers of Wrongdoing: Challenges Faced by Democracies Regarding Corruption and Money Laundering Mario H. Jorge Jr. Introduction Lawyers swear an oath to abide by ethical standards, and in most countries, they have a comprehensive code of conduct. We argue that even before reaching the parameter of illegal conduct there is a reasonable number of situations where they do not comply with what could be seen as the optimal outcome for society in general, and that, their actions have a damaging effect on democracy. Regarding compliance, we try to present the context behind the grey area in the process of lawyers’ professional activities which makes this slippage possible, and explain the context behind the enabling of wrongdoing. This is significant, especially due to their role as gatekeepers regarding matters of civil, tax, commercial and administrative law and not due to the traditional view of functions performed as a criminal defense attorney in court. Wrongdoing, in this chapter, refers to activities in the range from (merely) unethical to (blatantly) illegal. The characteristics of the adversarial system could be at fault, where parties battle each other’s arguments in court and the lawyer must therefore be partisan and has no moral responsibility for the client’s goals or how the client decides to proceed. However, as Luban puts it (p. 23), supporting his argument on the shoulders of Brandeis (1914), “powerful private interests must be balanced and neutralized, in the legal sphere as in all others, if democracy is to be possible”. Lawyers should not be able to use the mantle of legality, known loopholes or adopt “willful blindness” to favor a client’s interest if they can decline to M. H. Jorge Jr. (B) Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_11

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engage. Lobbying for regulatory reform and better standards of legal practice is an ongoing legislative crusade, however lawyers need not wait until it happens. Self-regulation is a vital tool, but also a product of incentives that are established through formal regulation. In Brazil, the Ethics and Discipline Court of the Brazilian Bar Association of São Paulo (OAB-SP) are analyzing the situation of lawyer F.W., who works for the family of President Jair Bolsonaro. The lawyer kept the former parliamentary advisor F.Q. in hiding—F.Q. is investigated for embezzlement and money laundering in favor of members of the Bolsonaro Clan—in one of his properties, which he recently converted into a lawyer’s office (Vasconcellos, 2020). This conversion grants the place more privileges against investigative warrants, since Law Firms hold documents protected by attorney client privilege. On another recent Brazilian case, R.T. was the lawyer of former President Lula and is accused of having assisted him in promoting acts of money laundering for the construction of the Lula Institute and the purchase of an apartment in the city of São Bernardo do Campo. The scheme involved exchanging political favors in favor of construction companies, which would “pay” for it with these deals (see Table below). The lawyer was at first convicted and subsequently acquitted on the Appeals Court for lack of sufficient evidence, pending further appeals. Recently, R.T. and C.Z. (Lula’s current lawyer) came under investigation for money laundering and traffic of influence in Brazil’s higher courts (Nogueira, 2020). R.T.’s defense states the lawyer has no knowledge of any crime and points out that all his actions were within the legal and ethical limits of the law. They claim that the prosecution does not have a long experience in the practice of law and that there is a clear misunderstanding about the role of the professional lawyer. That the services he provided are of an exclusive legal nature: “all were lawful acts, regulated by law, carried out in a public manner, in the light of day, through the proper instruments, with the blessing of the Judiciary, when necessary, with the endorsement of the Real Estate Registry” (Martinez, 2018). This is a central point to our argument, since everyone can agree that when intent is present (willingly and knowingly), there should be no doubt about prosecution and when the lawyer’s conduct is neutral, he should not be considered to be involved, being merely an unsuspecting tool acting lawfully and most importantly unaware in someone else’s schemes. The cases we observe, however, have more shades of grey than black and white. Ethical standards are not a technicality, and it does not rely solely on legality (they require a normative assessment). Another added aspect of the cases mentioned above and that in general affect a lawyer’s conduct is the involvement of politically exposed persons (PEP) or senior foreign political figures, as they are

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known in financial regulation, meaning a person entrusted with a prominent public function, as defined by the Financial Action Task Force (FATF, 2013). These are people deemed to have a high potential or risk in being involved with corruption, money laundering, terrorism and bribery, due to the position or influence they hold. This label extends to close associates and family members, meaning that lawyers should be on the lookout when PEP, both domestic and foreign, have an interest in opening an account, hiding their beneficiary status, buying property or moving assets around that are not on par with their earnings (Judah and Sibley, 2018). Some examples, though, might bring us closer to our main topic and highlight how enabling behavior from lawyers might not only disrupt business and damage the general public, but affect democracies worldwide. In an article titled “All the President’s Lawyers: A Chart of Misconduct and Possible Crimes Revealed by Mueller Report” (Goodman & Potcovaru, 2019) we are presented with findings from the investigation into obstruction of justice and ethical misconduct of lawyers representing individuals in high positions, most notably potential wrongdoing by US President Trump’s personal lawyers. Among the investigated conducts are false assertions of conflict of interest, false statements to the press, manipulation of statements provided to Congress and suggestions of presidential pardon in case of cooperation. If taken at face value, this implicates that institutions and democratic governance are under an increased risk of being overtaken by particular interests and lawyers’ conducts could be enabling it, given their position of intermediary. This chapter adopts a normative assessment and an overview over the most pressing matters regarding enabling behavior from lawyers with implications into democratic systems and institutions by pointing out concrete examples, regulative frameworks and a specific case study of Brazil. In the next section, we will discuss the relationship between corruption, money laundering and democracy, followed by our take on narrow legalism and loopholes. We overview the grey area in the process of lawyers’ professional activities which makes this slippage possible and attempt to explain what might be done to curtail this kind of deviance. From then on, we analyze the conduct of lawyers involved in Brazil’s most recent corruption scandals and the inescapability from the promotion of pragmatic regulative changes combined with the setting of higher ethical and disciplinary accountability, both inside and outside the lawyer’s professional corporation—intra and extra corporis.

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Ethical Dilemma: Lawyers as Gatekeepers Be it in a common, civil, customary or theocratic legal system, societies have organized themselves to be able to solve conflicts and enforce rights. What first started not as a contractual bond between client and representative, but as an instrument of rhetoric and patronage, developed into an organized profession by Roman times. Generally speaking a lawyer is nowadays someone with legal qualification obtained through a Bachelor of Laws or Juris Doctor degree, although there are subtle differences between terminology and tasks, where some can be referred to as solicitors, barristers or—if they passed a Bar Exam—attorneys. The Brazilian Federal Constitution, for example, describes the lawyer as having an essential function inside the justice system and “indispensable to the administration of justice and inviolable for his acts or manifestations in the exercise of his profession, within the limits of the law” (art. 133). Lawyers are therefore tasked as guardians of principles, such as those related to human dignity and legality, and the most important constitutional guarantees in a Democratic Rule of Law. Market economies such as today’s globalized democracies also depend on the role of lawyers as “nodes in the networks of the decentralized world, connecting individuals to firms, firms to each other, and all to the public and private bodies that recognize, coordinate and regulate these relationships” (Hadfield, 2007, p. 405). Despite the importance and enormity of the task, the profession’s reputation is far from ideal and known to spark up jokes related to greed and mischief, which goes to reinforce the idea here presented related to ethical dilemmas or unlawful behavior. Although the common man cannot claim not to know the law (ignorantia legis) in order to avoid legal consequences for his actions, society does not presume that he can also stand before the court without any kind of aid to be able to navigate the intricate legal system and interpret its provisions. That is also one of the duties of the lawyer, to make sure that values and norms are respected, that statutes and procedures aren’t abused or misinterpreted against the defendant; to give council and to represent his client’s interests, when the situation so requires. Nonetheless it does not mean that a lawyer is able to put his clients or his own interests above the law (acting illegally) or act unethically, although not illegally. Just like medical professionals swear a Hippocratic Oath, lawyers also swear to follow ethical rules. The main difference here is that, unlike doctors, lawyers are also agents of the client’s will and can have their integrity compromised if acting in a project they do not believe in or trying to convince others of a prevailing view they do not share, involving them in hypocrisy. David Luban examined this subject to its core philosophical roots in a book titled Lawyers and Justice: An Ethical Study (1988)

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and attests that “lawyers, no matter how high-minded their private concerns and commitments, are professionally concerned with the interests of their clients, not interests of justice. And taken as a totality, the activities of lawyers can scarcely rise higher in the pursuit of justice than the projects of their clients. Justice is left to the largesse of the “Invisible Hand”. He adds that this is not a simple matter of ethics or moral dilemmas constricted to the lawyers’ conscience or honor but turn into social and political problems for the general population (p. 18). Arguments against the demand for lawyers to take the communities’ concerns to heart usually relate either to the theory of role morality, which states that specific roles adopt a different standard and it takes precedence before the general morality, such as is observed for the role of soldiers, journalists, among others1 or to the characteristics of the adversarial system, which could set the lawyer in a partisan position, engaging in favor of his client without a disposition to perform due diligence or decline to assist (Hall and Holmes, 2008). In order to support the argument that lawyers should aim towards neutrality and not partisanship in their ethical behavior—at least in a considerate amount of tasks they are currently responsible for—, we need to explore the concept of gatekeeping. Gatekeepers are independent professionals responsible for verifying and assessing disclosures received. Someone with authority or capacity to control access to particular information from and to different decision makers. As an example, John Coffee (2003) lists “(1) the auditor who provides its certification that the issuer’s financial statements comply with generally accepted accounting principles; (2) the debt rating agency that evaluates the issuer’s creditworthiness; (3) the securities analyst who communicates an assessment of the corporation’s technology, competitiveness, or earnings prospects; (4) the investment banker who furnishes its “fairness opinion” as to the price merger; and (5) the securities attorney for the issuer who delivers opinion to the underwriters that all material information of which the attorney is aware concerning the issuer has been disclosed properly” (ibid., p. 1296). A law firm, for example, acting as an external auditor who attests to financial statements will have skin in the game (i.e. will have to deal with the consequences of their actions) and more to lose if the audited corporation is involved in fraud. Their credibility and the repercussions (if regulations foresee any) serve as factors that affects their incentive to partake in manipulation (Langevoort, 1993). They offer, therefore, an instrument to deterrence. Depending on their independence, it is easier for them to act in accordance

1

See Gibson, 2003, and Wasserstrom, 1975, for specific examples and Merton, 1967, for sociological background.

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with the law and ethical standards than corporations, executives and managers themselves, who can profit more from misconduct (Coffee, 2003, p. 1297). As we will observe further ahead, lawyers have duties to their clients, especially those representing clients in court or in litigation, since confidentiality and apt representation are also pillars of due process and a democratic rule of law. Is there actual compatibility between lawyers and gatekeeping? They do not lack the expertise, since their knowledge of the law and experience makes them more capable of detecting foul play than an accountant or a banker, for example. However, some activities that lawyers perform are undoubtedly more vulnerable than others and require a stricter standard when it comes to preventing deviance (Levi and Monty, 1999). Corporate lawyers, for example, facilitate economic activity and are present in almost all business deals. They offer advice on different topics, from marketing campaigns to financial disclosure (Brooks, 2019). In a multinational setting, it is impossible not to have legal counsel into environmental, health, safety, antitrust and tax regulation. But is a corporate lawyer, handling securities, for example, supposed to act as a hired gun for his client or instead act as a buffer against his client’s illegitimate desires that would in end damage the companies’ public investors? Wouldn’t it be advisable for an attorney to resign if their integrity is otherwise compromised, regardless of the legality or neutrality of their actions? Another aspect for consideration is conflict of interest, as there are cases of firms acting as auditors while simultaneously hired as consultants, therefore diminishing their capacity to act contrary to the client’s interest when auditing. A survey back in 2002 had already found that auditing firms received on average triple the income in consulting as they did by auditing the same clients. Only now, in 2020, is there any sign of a correction to this market. In the UK, the Big Four (Deloitte, EY, KPMG and PwC) now have until June 30, 2024 to split their audit arms from other consultancy services (Hodge, 2020). This is made not only to ensure a better quality to the audits, but to avoid conflict of interest generated by the conjoined revenue. In 2019 the UK Financial Reporting Council handed out a record £43 million (U.S. $ 54.1 million) in fines for sub-standard audits (Hodge, 2020). Parker and Evans (2007) list some of the major ways in which lawyers—especially corporate—have been involved in facilitating or covering up misconduct “while acting as adversarial advocates”: (a) using their legal skills uncritically, be it intentionally, negligently or subconsciously and refraining from asking hard questions to guarantee plausible deniability. In essence, a good formula for both managers and their lawyers is to argue that the manager acted on advice and the lawyer provided such advice without having all the information and therefore limited in scope; (b) pro-active corporate lawyering, i.e. commercial savvy that

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uses beneficial laws to promote business. Basically, the inhouse legal department attains a duty to generate profits through aggressive strategies, among the best being tax planning—or even avoidance—, intellectual property protections and takeover litigation. Another example would be establishing a compliance sector to guarantee benefits in case of prosecution while at the same time effecting as little changes to governance as possible; and (c) abusing lawyer-client confidentiality protections to cover up misconduct and obstruct justice.

The Relationship Between Corruption, Money Laundering, Lawyers, and Democracy While the focus of this chapter is on the lawyer’s conduct, it is important to acknowledge the end result of whatever transaction they are enabling. With institutions like the World Bank pushing for more action to be taken against corruption (Koechin, 2013), research and policy on the subject have both been on the rise since the 90’s (Pertiwi, 2018). Corruption is one of the most pressing matters of our time and it is widely assumed that it has damaging effects on functioning institutions and the economy. It is responsible for the maintenance of questionable leaders in power as well as lack of investment in key basic areas such as health, education, sanitation and public safety. If corrupt governments are questioned by their civil society by means of protests, it usually leads to violence, repression, censure and divisiveness, leading to a vicious circle of further institutional weakening, if not full revolution, until there is change in power. The effects on development, aid provision, quality of public service, reach and dynamic of social assistance or welfare programs are all felt when corruption is present, since it breaks the principle of equality provided by bureaucracy, meaning that some get preferential or privileged treatment due to corruption. High levels of corruption can distort the operation of social justice and the fair distribution of resources. Corruption is also often seen as a ‘local’ problem—as a form of crime that requires ethical, legal or managerial mechanisms to prevent, contain or eradicate it, or as a failure of individual morality or traditional norms when vulnerable people are placed in a position of temptation (Clammer, 2012).

There are some scholars who point to the link between levels of corruption and the degree of democracy. Montinola and Jackman (2002) link high competition between political actors—also meaning higher replaceability through the democratic process—as a factor for the prevalence of corruption in partially democratized

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countries, in comparison to fully democratized. Burdensome regulation and bribepaying are also widely regarded as being correlated (Djankov et al., 2002), the burden being used as a framework for several rankings, such as the Doing Business and the Global Integrity Index, where full democracies tend to stand out as not imposing unnecessary obstacles that would lead people to search for ways around such regulations, be it directly or through an intermediary, such as a lobbyist or a lawyer. This aspect is important because it highlights how lawyers can be used as “problem-solvers” to “make things happen”. In these cases, where the lawyers are adamant in solving their client’s problem and will try to circumvent formal rules, regulation can only go so far as to provide incentives for compliance and the professional class need additionally to self-regulate and shun those involved in wrongdoing. Estimates from the World Bank about how much is paid in bribes every year reach 1 trillion dollars, and according to the World Economic Forum, the global cost of corruption is around 5% of the global gross domestic product (United Nations, 2018). A part of the sums that are received as illicit payments are most definitely laundered to be reintroduced in the economy as licit gains. So, although the focus on the thematic of corruption has increased, the importance about the role of institutions such as law firms and banks cannot be understated. This is particularly one of the main problems in Brazil, where lawyers involved in corruption scandals are almost always facilitating money laundering, as I will demonstrate further below. Another threat that has been recurrently identified is foreign black money being invested in western democracies to subvert the political system or support political campaigns, in an attempt to manipulate policy. A report by Barnett & Sloan titled Democracy in the Crosshairs: How Political Money Laundering Threatens the Democratic Process (2018) presented three case studies to demonstrate this point, being: (a) 20–30 million euros in media spending in support of AfD (Alternativ für Deutschland) in the campaign of 2016–2018; (b) the largest-ever political donation in British history, in favor of leaving the EU before the Brexit referendum and; (c) mass automated donations under the 200 dollars threshold for anonymous donations now injecting millions into the American election campaign system without any traceability. The weaponization of foreign black money by hostile countries adds to other concerns, such as social media bots and fake news. The aforementioned examples involve the exploration of loopholes in the electoral systems of different countries. This exploration is rarely possible without some form of legal counseling on how to move funds and how the law is interpreted in the courts. In the U.S., under current campaign finance laws, “a foreign adversary can transfer money to a 501(c) organization that can in turn contribute

Lawyers as Enablers of Wrongdoing …

317

funds to a super PAC (Political Action Committee) without disclosing the foreign source of money. A foreign owned Limited Liability Company can contribute to a 501(c) or a super PAC without those entities ever disclosing the true owners of the LLC” (Weintraub, 2019). Going back to the example from the Global Witness undercover report, the connection between the lawyer’s role and anonymous foreign funds and how they can affect normal democratic procedures turns clearer. Another key factor in this discussion is globalization, and it leads us to observe corruption in regard of state capture and kleptocrats. A kleptocrat is a leader who uses their power or influence to loot domestic resources or to pervert institutions in his favor (Bullough, 2018). Where do the looted resources go and how are they moved? The Panama Papers scandal gives us insight into that question. It was one of the most significant data leaks of our time and allowed us to analyze how those with enough resources use tax havens to hide their wealth, given the need for several layers of anonymity. The leak came from a Panamanian law firm called Mossack Fonseca. According to BBC (2016), the files show how Mossack Fonseca’s clients were able to buy properties in different countries, launder money, dodge sanctions, hide assets, pass on inheritance money and evade taxes. At least 12—now former—heads of state and government were in the files, including dictators famously accused of being responsible for the demise and looting of their own countries. The article states further that “more than 60 relatives and associates of heads of state and other politicians are also implicated”. Once money obtained through illicit means in any country of origin are laundered, they are detached from the source and can reappear as any form of investment, such as luxury real estate in developed countries. These transactions are facilitated by professional intermediaries, such as lobbyists, public-relations agents, brokers, investment bankers and lawyers. The intermediaries are generally not considered to be violating any laws, in fact, they are usually respected professionals in their field and use their “professional capital” (prestige, background, reputation) accordingly (Middleton & Levi, 2005). Although there are borders for people, money knows few, and those with the necessary means can shop around legal counsel in order to bring them the best cocktail of jurisdiction, leaving their country of origin to foot the bill. This is not only done for personal enrichment. The resources deviated from their original purpose will later serve as sway for political purposes and influence (Weintraub, 2019). Many kleptocrats act against civil societies’ interests, freedom and liberties in their home country, while funding their political campaigns with illicit gains and advertising themselves as anticorruption beacons. The media campaigns and philanthropy are themselves also funded through slush funds. Their investment abroad, although anonymous, can also welcome a complex web of cross-border ties (Cooley et al., 2018).

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M. H. Jorge

Global Witness is an international organization, much like OCCPR and Transparency International, dedicated to challenging corruption and trying to guarantee the prevalence of accountability. In 2016 they approached – undercover - thirteen different law firms in NY for preliminary interviews, posing as an adviser for an African politician seeking to bring clearly suspect funds into the United States, maintain anonymity from beneficial ownership and convert the funds into capital items (Global Witness, 2016). The story involved a country in a region famous for corruption and a high-ranking government official with assets that did not match his position. They gave strong suggestion that the funds were a mixed bag between licitly and illicitly acquired assets, claiming that “the money represented payments to him for helping companies receive mining concessions in his country” (p. 1). Their findings were the following: 12 of the 13 law firms visited suggested using anonymous companies or trusts; among the suggestions, some were to use “the law firms’ own bank accounts, as this would provide a further layer of anonymity to keep banks from determining who the money really belonged to. Another was to have the lawyer act as a trustee of an offshore trust and use this position to open a bank account”. Other options involved resorting to smaller banks, that are usually less scrupulous with the ‘know your customer’ (KYC) protocol. It is indeed legal in several countries not to disclose the beneficial owner of a company, where it can also be considered a day to day business practice, responsible for large amount of investment income. There is also a further discussion to be had around the subject of tax havens and the benefits of anonymity against tyranny in a globalized world, but these tools can clearly be abused and are a known instrument for criminals to hide their assets—from tax evaders to organized criminal organizations and corrupt politicians. Without accountants, banks, consultants, and lawyers, most of these deals would not go through. Banks already have more strict due diligence duties in place, imposed, for example, by the Bank Secrecy Act (BSA), 31 U.S.C. § 5311. Like bankers, lawyers are to be seen as gatekeepers too. In the U.S. they are only required to report cash payments that exceed USD$ 10,000. Following the tactics suggested by the lawyers interviewed by Global Witness, one finds a clear loophole, for example, in escrow account deposits made in the name of the lawyer or firm. Si Aydiner (2020) is one of the attorneys who took part in the federal investigation into some of the lawyers in this case and as he put it, the “gap” here in identifying beneficial ownership stems from the tripartite relationship between lawyer, escrow account and bank. The KYC procedure will happen between bank and lawyer and not bank and whoever the lawyer is holding the money for. The lawyers’ client, the person actually entitled to the accounts’ funds, will have to pass no scrutiny. This means that one of three stages of money laundering—placement—becomes

Lawyers as Enablers of Wrongdoing …

319

less of a vulnerability for the launderer, since lawyers “are a basis for reduced vigilance”. The reason for lawyers to perform due diligence is quite clear: to allow council to evaluate risk in order to assume or refuse representation and, in terms of compliance and eventual disciplinary proceedings or criminal investigation, to provide proof of effort. Especially due to the fact that evidence in economic crimes are usually facts that contextually, together, will tell a story. Very rarely can a single transfer of funds be negatively valued, but if it was made into the Law Firm’s account, without due diligence, without specification of the legal service provided, in cash, by a representative of company X, which is owned by company Y, whose beneficial ownership is unknown, due to it being from a country with strict secrecy policies, are all hints that the lawyer could have avoided implication in illicit activity (American Bar Association Formal Opinion 463 and ABA’s Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering and Terrorist Financing). Assessing beneficial ownership, hiring third parties to perform due diligence, or doing it as an in-house service can be costly, but this can be charged to the client. Another interesting factor which has not been thoroughly empirically analyzed is which kinds of firms are more vulnerable. One can instinctively attest that solo or small firms have less control and more flexible risk-assessment protocols than larger firms. Comparatively, Brazil, Israel and the U.S. have the most lawyers per capita in the world. In Brazil, the Bar Exam can be taken even before graduation and the difficulty is not extraordinary, meaning that quantitatively it won’t be a challenge to find a lawyer to be instrumentalized. The case described by the Global Witness report also led to two public censures based on violations of the Model Rules of Professional Conduct (ABA, 1983), more specifically, rules 1.2(d) and 8.4(b), counseling a client to engage, or assist a client, in conduct that the lawyers knows is criminal or fraudulent and engage in any other conduct that adversely reflects on the fitness to practice law (In re Koplik, 168 A.d.3d 163 (1st Dept. 2019); In re Jankoff , 165 A.D.3d 58 (1st Dept. 2018). Striking, nonetheless, is not only the use of the account-lawyer-bank loophole, but the inadequacy of regulations and how lawyers’ ethical accountability has been left underwhelmingly unaddressed. The result is clear, dirty money can enter a country—in this case, the United States—while evading safeguards. Another example of the exploitation of this legal loophole happened in the 1MDB Scandal (1 Malaysia Development Berhad), a fund set up in 2009 to promote economic development. According to U.S. investigators, at least $4.5 billion were stolen in funds and laundered by ex-prime minister Najib Razak’s associates. One of them, Jho Low, moved millions of dollars into the United States using client

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M. H. Jorge

accounts of two major U.S. law firms. None of the law firms broke any antimoney laundering rules (Hays, 2018). Unreflective lawyering “occurs not so much because of failures of personal ideals as because of narrow legalistic training and culture that do not equip corporate lawyers to know how to put ethics into action in real-life corporate contexts, or even to recognize ethical issues when they arise” (Parker & Evans, 2007, p. 217). If not a global trend, in Brazil, for example, it used to be extremely unusual for a lawyer to advise his client to co-operate with law enforcement by reaching a deal. In fact, some law firms would flat out deny negotiating plea deals or whistleblowing (e.g. the case of Rodrigo Roca, former lawyer to ex-governor Sergio Cabral – Coelho, 2018). Indeed, rights such as the right to remain silent are of the utmost importance. That is not to say that the legislator did not see fit to reward those who confess, plea, testify or regret their actions. Instruments such as plea deals and leniency agreements, based on new compliance standards, have all popped up to invert the logical reasoning that cooperating is more damaging than beneficial. The objective is that ethical behavior and cost-benefit calculations reach the same result. This, of course, depends greatly on other independent factors such as the quality of the underlying investigation. The role of the intermediaries or fixers can be fulfilled completely legally, and although the critique about ethical standards brushes these practices too, it is the involvement of lawyers in illicit conduct that has brought the most attention recently, in several countries, but especially in Brazil, due to Car Wash Operation.

Case Studies from Brazil Brazil is not shy when it comes to political corruption scandals that involve weakening institutions, bribery in order to pass legislation, laundering money diverted from public sources originally intended for health and education or utilizing slush funds to finance electoral campaigns.2 The most recent scandal, Car Wash Operation, tackles one of the largest corruption networks in history. Since 2014, it uncovered a web of crimes involving more than 14 countries in the Americas and Africa. The crimes include bribery, corruption, tax evasion, cartel, fraud, illegal campaign contributions, money laundering and obstruction of justice. It led to the indictment of three former Brazilian 2

See scandals such as Anões do Orçamento, Rural Bank, Bancoop, Cases Erenice Guerra and Celso Daniel, Sanguessugas Scandal, Scheme PC Farias, Mensalão, Mensalão Tucano, Mensalinho, Operations Satiagraha, Saqueador, Castelo de Areia, and Irmandade, Máfia dos Vampiros etc.

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321

presidents, three former Peruvian presidents, a Guatemalan president, several former ministers, members of Congress, lobbyists, lawyers, financial operators, state and private company executives, managers and political party operatives, according to the Brazilian Ministry of Justice. Its most famous predecessor was the Mensalão Scandal, a vote-buying scheme in favor of the then ruling Workers’ Party (PT), which would have paid a number of deputies a monthly sum to vote for legislation. The scandal broke out in 2005 and had its conclusion in 2015, with 24 convictions. Funds related to advertising budgets from state companies were channeled through a criminal organization, formed by an executive, a lawyer, and a bank manager, among others (Michener & Pereira, 2016). Therefore, being the most discussed corruption scandals in Brazil of all time, and related for the most part to democratically elected officials, they were deemed apt to serve as basis for an overview into the participation of lawyers in scandals that threaten the Democratic Rule of Law. We have analyzed the court records from both Car Wash and Mensalão scandals—i.e. Federal Police indictments, Public Prosecutors’ Office complaints and Judge’s sentences,3 if not restricted by judicial secrecy, in which cases—3 in total—we consulted news reports on the arrests or indictments)—and listed the lawyers supposedly involved in illicit conduct, the actions for which they are being or have been investigated and/or prosecuted and the case file. Since some of these cases are still pending appeal or have not come to final judgement (res judicata), all names have been abbreviated, with the exception of known public political figures and companies who have made leniency agreements. In total, we were able to recognize 22 different cases (21 being a development of Car Wash Operation and 1 from Mensalão), distributed along 33 case files—since some cases involve more than one file. Among the 22 cases, 33 different lawyers are mentioned, some of them being prosecuted in more than one of the 22 cases. The timeframe relates to that of the scandals, meaning that conducts transpired between 2003 and 2019.

The Legal Framework Before addressing the cases (Table 1), we describe the legal framework which lawyers are subjected to. Regarding provisions that regulate the profession and set the legal ethical standards in Brazil, law n. 8.906/1994 deals with the activities of lawyers, their rights, administrative matters, sanctions, and disciplinary 3

Available online at http://www.mpf.mp.br/grandes-casos/lava-jato/acoes and http://portal. stf.jus.br/processos/detalhe.asp?incidente=11541.

Lawyers Involved

R.T.

R.T.D.

N.

1

2

Car Wash File ns. 5013130-08.2019; 501333911-2018; (add .404.7000)

Mensalão File n. (AP) 470 – STF

Operation and Case Files

Table 1 Description of the cases

(continued)

Is accused of keeping at least eight accounts on behalf of offshore companies in four different countries (Antigua, Spain, Switzerland and Singapore) and moving about $ 338 million for bribing state officials and money laundering on behalf of Odebrecht S.A. between 2010 and 2016. The documents also point to suspicions of tampering with documents to mislead authorities abroad. (see also 5054787-95; 5015608-57.2017; 5019961-43.2017)

R.T. partnered with businessman M.V. and bank managers to create a scheme to use their companies for the transfer of resources for political campaigns, whose origin was simulated as loans from a bank but have been shown to be a form of spraying public money embezzled through advertising contracts. He was also involved in the delivery of money to politicians under the justification of legal advice, seeking to exclude the bank from parliamentary investigations. Convicted of active corruption and money laundering. Sentenced to 8 years and 5 months in prison and payment of $56 thousand in fines

Reported Conduct

322 M. H. Jorge

Lawyers Involved

R.F.

M.M.

A.A., T.A.

N.

3

4

5

Car Wash File n. 0133004-71.2017.4.02.5101

Car Wash File n. 5009558-2019.404.7000

Car Wash File ns. 0507227-82.2018.4.02.5101; 0231438-95.2017.4.02.5101

Operation and Case Files

Table 1 (continued)

(continued)

A.A. and T.A. used their Law Firm to launder money received from bribes pertaining to Sergio Cabral, Rio’s ex-governor. T.A. was also involved in obstructing investigations, forging ideologically false documents and manipulating a collaborator by proposing a concert of versions to be presented to the investigative bodies (See also File n. 0015979-37.2017.4.02.5101)

Appointed as the supposed agent of the money laundering of $4 million in company contracts acquired through bribes. Attempt by the law firm to circumvent the Financial Activities Control Board (Coaf) by means of fractional withdrawals below $20 thousand in cash, which, added together, reach around $2 million. The Federal Revenue Service found that between 2011 and 2013, the law firm received about $4 million from E. Group companies, without effectively providing any service

Received bribes from companies, through his office, by providing overpriced legal services, or even fictitious contracts, and payed bribes on behalf of the companies to his clients, according to the plea deposition of former governor Sergio Cabral. For the services, he received monthly, between $20-$30 thousand. The governor also accused him of using Cabral’s “political prestige” through his law firm, trying to make nominations for the position of judge and minister of higher courts, in addition to asking for favors from senators in favor of his clients. Cabral also admitted that he was his advisor and legal counsel, worked on his campaigns and had been operating slush funds

Reported Conduct

Lawyers as Enablers of Wrongdoing … 323

P.L.M.P.

C.A.R. Car Wash, Sand Castle and Appius and others File is under Judicial Secret. Source: Veja (2019)

7

8

Car Wash File n. 0005579-24.2019.403.6181

Car Wash – Eficiência File n. 0501634-09.2017.4.02.5101

F.G., A.A.

6

Operation and Case Files

Lawyers Involved

N.

Table 1 (continued)

(continued)

The Federal Police (PF) and the Public Prosecutors Office launched an operation at the end of 2019 which aims at securing evidence from documents at Law Firms possibly responsible for money laundering and negotiating kickbacks on behalf of construction company Camargo Correia to an ex-Superior Court Judge (STJ), which allegedly received the kickbacks for the annulment of Operation Sand Castle. Launched in April 2009 and annulled in 2011, Sand Castle Operation was investigating an alleged scheme of foreign exchange fraud, money laundering, financial crimes and illicit transfers to politicians

According to N.S.M., former institutional director of H. company, who provided statements and documentary evidence, several fictitious contracts were made between said legal entity and the Law Firm from P.L.M.P., without the proper provision of services, all in order to conceal improper payments made to the then Senator P.R.B., from 2013 to 2015

E.B., a Brazilian businessman and ex-billionaire, in unity with his lawyer and right hand man F.G., promised ex-governor Sérgio Cabral a bribe corresponding to the amount of $16,592,620.00 to act in order to favor the private interests of E.B.’s companies. F.G. was responsible for designing the financial operation. On another occasion, due to solicitation of bribe by Sergio Cabral, F.G. then contacted A.A. and adjusted, through her Law Firm, in order to pay the kickbacks, the simulation of legal services

Reported Conduct

324 M. H. Jorge

Lawyers Involved

M.F.L.

R.T., F.B.

C.A.P.C.

N.

9

10

11

R.T. was the lawyer and judicial advisor from ex-president Luís Inácio Lula da Silva and his family. R.T. was involved in the acquisition of an asset supposed to be payment for favors from construction companies Odebrecht, OAS and Schahin to the ex-president. F.B. was represented by R.T. and acted as beneficiary of such asset. R.T was also one of those allegedly responsible for money laundering acts, celebrating contracts through his Law Firm, that were intended to conceal the origin of the values employed by Odebrecht in favor of the ex-president, such as the terrain acquired for the Lula Institute

In order to operationalize the payment adjustment and the collection of bribes from several companies, ex-senator and minister E.L. appointed his son, M.L., who operationalized the receipt of such amounts in kind, at least between 2008 and 2014, in Rio de Janeiro, in the law firm of his wife, M.F.L. According to the investigation, more than $2 million would have been delivered to this address by the E. Group and Odebrecht alone, in order to acquire governmental contracts

Reported Conduct

(continued)

Car Wash File ns. 5028608-95.2015; C.A.P.C was the author of the contract that hid the involvement of the late 5083401-18.2014; 5083351-89.2014; ex-deputy José Janene in an investment and participated in a money laundering (add .404.7000) scheme lead by financial operator Alberto Youssef on behalf of politicians and executives. He also had full knowledge that the values were José Janene’s, although hidden. Alberto Youssef and the politician Jose Janene were both pivotal to unleashing Car Wash Operation investigations and were already previously involved in the Mensalão Scandal. C.A.P.C. acted as right-hand, frontman and independent judicial advisor to Youssef (See also Files n. 5047229-77.2014; 5025699-17.2014)

Car WashFile ns. 5021365-32.2017.404.7000; 5063130-17.2016.404.7000

Car Wash – Galeria File n. 5036513-15.2019.404.7000

Operation and Case Files

Table 1 (continued)

Lawyers as Enablers of Wrongdoing … 325

C.M.S.J.

A.C.O.R.

13

14

Car Wash File n. 5037800-18.2016.404.7000

Car Wash File n. 5037093-84.2015.4.04.7000

A.C.F.B.P. Car Wash File n. 5083401-18.2014.404.7000

12

Operation and Case Files

Lawyers Involved

N.

Table 1 (continued)

(continued)

A.C.O.R., former city councilor for the Workers’ Party, met P.F., who had just taken over the treasury of Party. After leaving the Party and opening a Law Firm, he asked P.F. to refer clients to him. Thus, from 2009 on, P.F. started to indicate companies that had debts with him or with the Workers’ Party so that A.C.O.R. would receive the values by means of dissimulated acts. As a rule, A.C.O.R. used companies he opened or his own Law Firm to formalize simulated contracts. Afterwards, he would allegedly pass on the amounts to his personal account and after retaining the percentage due to him for the service (about 40% in case of overpriced contracts and 30% in case of simulated contracts), delivered the rest to P.F.

Former director of Petrobras Renato Duque was accused of money laundering and passive corruption. He participated in a scheme to favor an Italian company in a contract with Petrobras. To do so, Renato Duque used lawyer C.M.S.J., among others, as operators and frontmen, to make bank transactions in the accounts of Hayley/SA, a Uruguayan offshore company that maintained accounts in Switzerland and subsequently remitted the amounts as a simulation of investments in its subsidiary Hayley do Brasil

Argued to be responsible for laundering money on behalf of Alberto Youssef, construction company Camargo Correia and others, using his position as a lawyer to help conceal the actual holder of the resources

Reported Conduct

326 M. H. Jorge

Lawyers Involved

V.V.S.

J.D.O.S., G.R.

N.

15

16

The lawyer is accused of having signed, in collusion with lobbyist L.A.Z., a fictitious contract for legal counsel about a construction consortium to justify the transfer of $1.3 million in kickbacks. The amount, according to the investigations, corresponds to 1% of the value of the contract, fixed by the lobbyist to allow the release of the resources in the Ministry of Cities. Two other investigation fronts were opened with the arrest of the lawyer and the seizure of a document in her office attesting to other millionaire transfers to the office, made by contractors Andrade Gutierrez, Odebrecht and Unamon (nuclear assembly consortium), and her participation in a scheme that allowed the use of judicial bonds, during the Cabral government, for the settlement of tax debts, a market that would have moved more than $80 million

Reported Conduct

(continued)

Car Wash File n. J.D.O.S., ex-president of the Workers Party, ex-Minister of Luís Inácio Lula da 5045241-5018091-60.2017.404.7000 Silva, was a lawyer and had a consultancy company which was used to receive money from bribes and pay expenses. In one of those dealings, dissimulated the origin of $75 thousand originated from the crimes of cartel, bid rigging and corruption, practiced by the executives of Engevix, to the detriment of Petrobrás, by transferring the value to the account of another Law Firm, L. & R. (belonging to G.R.), for the purpose of making partial payment of the headquarters of his consultancy through a fictitious legal contract

Car Wash – Rio 40 Graus File n. 0174071-16.2017.4.02.5101

Operation and Case Files

Table 1 (continued)

Lawyers as Enablers of Wrongdoing … 327

Lawyers Involved

L.J.M.A.

T.C., L.A.O., B.C.G.

N.M.J.

N.

17

18

19

Car Wash Case File n. (AP) 996 STF

Car Wash File n. (INQ) 4075

Car Wash File n. 5019285-27.2019.404.7000

Operation and Case Files

Table 1 (continued)

(continued)

With the help of his sons, the former parliamentarian N.M., who was a member of the Progressive Party, received kickbacks to give political support to the maintenance of Paulo Roberto Costa on Petrobras’ Board. N.M.J., one of the parliamentarian’s sons and a lawyer would receive some of the funds in his own Law Firm

Accuses the Minister of the Court of Auditors of the Union (TCU), A.C., the lawyer T.C., his son, and two other lawyers, L.A.O. and B.C.G., of the crime of influence peddling. According to the complaint, T.C., acting with his father, requested and received payment from R.P., president of the contractor UTC Engineering, on the pretext of influencing two lawsuits in progress in the court of accounts and in interest of the company

The investigators claim that the financial operator R.S. was involved in moving criminal earnings originated from corruption in contracts of Petrobras International, Engineering and Services areas. Evidence indicates that in addition to evading Brazil, R.S. also sought to hide his illegal assets with the help of L.J.M.A., which made it possible through expedients that characterize money laundering crimes, acting as a legal representative for offshore companies. They allegedly concealed and disguised the nature, origin, and ownership of values for a total amount of at least e3,025,000.00

Reported Conduct

328 M. H. Jorge

F.A., M.M.

R.F., Car Wash – Capitu – TRF1 File M.M.L.G., under Judicial Secrecy (Falcão, 2018) M.L.M.A., I.C.P., M.P.P., F.M.P.P.

21

22

Car Wash – SJDF File n. 1016557-35.2018.4.01.3400

Car Wash – Patmos and TRF1 Judicial Secrecy (Metropoles, 2018)

W.T., J.C.C., F.A.

20

Operation and Case Files

Lawyers Involved

N.

Table 1 (continued)

According to the police, the operation aimed to dismantle a scheme of corruption, money laundering and obstruction of justice that was supposed to be articulated by J.B. (JBS Company). Also arrested were R.F., former Secretary of Agricultural Defense and several lawyers. Six law firms are being investigated for obstruction of justice. One of the lawyers supposedly sought out a lobbyist being investigated in order to warn him and possibly destroy evidence, since Car Wash Operation was about to uncover the scheme

Federal Police indicted a lawyer and a former prosecutor for alleged corruption. According to the Federal Police, F.A. (Legal Director - JBS Group) corrupted M.M. to help in the plea deal of executives from JBS. Two other lawyers, although investigated for aiding and supporting the deal, were not prosecuted further

J.C.C., the president of the Brazilian Federal District Bar Association (OAB-DF), became the target of a complaint by the Federal Public Prosecutor’s Office for active corruption and money laundering. J.C.C., along with W.T. and F.A. (Legal Director for the JBS Group) would have participated in buying off a State Attorney in favor of the J&F Group (Landim, 2019). The meetings happened at the mansion of lawyer W.T, which serves as the headquarters for his office. The address is famous in Brasília, being regarded as a place where lobbying and parties took place (Época, 2017).

Reported Conduct

Lawyers as Enablers of Wrongdoing … 329

330

M. H. Jorge

infractions (Legal Profession Bylaws and the Brazilian Bar Association regulations). In addition, there is a Code of Ethics and Discipline that determines the duties of the attorney with the community, as well as relations and duties with clients and other professionals. The bylaws bind lawyers to the Code of Ethics (art. 33), which in turn has several provisions that are intended to prevent misconduct such as the ones seen in Car Wash Operation. For instance, it is a lawyer’s duty not to use undue influence, in his or his client’s behalf (Art. 2, p., VIII, a)), to not contribute or lend his name for unethical or shady causes (Art. 2, p., VIII, b) and c)), to seek equality and fair decisions (art. 3) and to remain independent (art. 4), only to name a few. Briefing of the cases indicted and charged in the Mensalão and Operation Car Wash

Discussion: Anti-money Laundering and Anti-corruption Measures Among the complaints, the cases fall under one of three categories of allegations: (1) obstruction of justice, in the form of: (i) destruction of evidence, (ii) forging ideologically false documents and (iii) manipulating a collaborator by proposing a concert of versions to be presented to the investigative bodies; (2) money laundering, by (i) using the firm as a secure place for cash drops from kickbacks, (ii) creating a scheme alongside bank managers and simulated advertising contracts to embezzle money and illicitly finance political campaigns or pay off politicians, (iii) moving funds through shell-companies and hiding beneficial owners, acting as brokers or front-men and (iv) by creating fictitious contracts for legal service in order to receive amounts derived from kickbacks; (3) corruption, in the form of bribing or facilitating contact with prosecutors in order to arrange a better plea deal or privileged information. The number of lawyers involved represents approximately 7% of those prosecuted in Car Wash Operation. In the Mensalão scandal there was 1 lawyer involved out of 24 convictions, totaling a low 4.1%. Family ties, i.e. lawyers who are family members to a PEP, are also a common feature in these cases, which could point towards a more planned or organized form of criminality, instead of incidental, although it could likewise be just a correlation between being part of the elite (a career politician) and have an associate or family members who is a lawyer, since Brazil is also one of the countries with the highest number of lawyers per capita in the world, alongside Israel, Switzerland and the United States (Kazun & Yakovlev, 2014; Garcia-Navarro, 2014).

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Money laundering, clearly being the most common practice among lawyers in Car Wash Operation, is a sequence of acts—placement, layering and integration—to disguise or mask the origin and control of assets by means of commercial transactions in varying degrees of complexity in order to reinsert the wealth into the formal economy and appearing to have a legitimate and lawful origin. Money laundering is a tool that allows criminals to influence the Democratic State of Law through financial leverage. Stated more clearly, the money laundered through means of intermediaries, such as lawyers, turns in several cases into illicit campaign funds. Modernity, globalization, and technology have only made these transactions easier, since legislation does not evolve as fast to keep up with the tactics used to launder money and subsequently influence political campaigns. Nonetheless, the oldest tricks in the book are still very much in use, such as simulating a contract for the provision of legal counsel. Several cases have a pinch of what Joe Kelly (2012) refers to as “operational solidarity”. He goes on to list several factors that could lead a lawyer to pervert the clientprofessional relationship into an author-accomplice relationship. Among them, he argues that emotional aspects of law school and criminal defense lawyering are somewhat overlooked in discussions about ethics and it can empirically play a significant role in decision making. Another factor includes the generality of Codes of Conduct, which do not clarify duties sufficiently (p. 592). Emotional and loyalty arguments could possibly be evoked when addressing obstruction of justice infractions, although this would need further in-depth analysis. Among the cases on our table, however, there is a majority of cases where there was a clear personal benefit to the lawyer for brokering the illicit conduct, mostly in the form of a percentual fee for the service provided. The United States Department of State (2020) produces a report titled the International Narcotics Control Strategy on money laundering and financial crimes with a dossier of countries vulnerabilities and anti-money laundering strategies. Their report states that methods used in Brazil include “the use of banks, real estate and financial asset markets; remittance networks; shell companies; phantom accounts; illegal gaming; informal financial networks; and the sale of cars, cattle, racehorses, artwork, and other luxury goods. Criminals also use foreign tax havens to launder illicit gains”. Brazil is a member of the Financial Action Task Force (FATF) and of a similar regional intergovernmental action task force (GALIFAT), which develop and promote anti-money laundering policies (see Recommendation 22), following directives such as the ones from the European Parliament and Council (Directive 91/308/CE and later 2001/97/CE—which determines there should be registration obligations also to forensic professionals,

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including auditors, external accountants, tax consultants, estate agents and notaries, when these professionals are involved in services, such as the provision of assistance, purchase and sale of real estate, fund management, etc.—Article 2(A)(5)). Directive 2005/60/CE maintained the obligations expressed to professionals who provide consulting services, excluding those in their role of defense in court, bringing, moreover, further dispositions about legal advice: it remains subject to the obligation to professional secrecy, “unless the legal advisor participates in activities of money laundering or terrorist financing, if you provide consultation for the purpose of money laundering or the financing of the terrorism or if the lawyer is aware that the client requests his services for these purposes” (n. 20) (Kawakami, 2015). Lawyers in Brazil can assume several activities simultaneously and it is hard to separate their duties into subcategories to identify whether they should—although are not obliged—to communicate suspect activities. In reality lawyers in Brazil are legally never free from the duty of keeping attorney-client communications in secrecy, except in the case of a state of necessity to defend the dignity or legitimate rights of the lawyer himself, or to conjure up current and imminent danger against himself or others, or even when accused by the client himself (Romano, 2015). In this regard, the secrecy could be waved in case a lawyer is wrongfully implicated by his own client in a money laundering scheme. As far as our analysis shows, however, this has not happened in the cases mentioned above. According to Resolution 24 from the Council for Financial Activities Control (COAF), Brazil’s Financial Intelligence Unit, professionals who are not regulated by their own professional regulations (lawyers are) should keep client records, as well as classify the risks of operations, be in communication with COAF and keep important documents. This makes lawyers an ideal “privileged” profession to instrumentalize in order to use these services, such as consulting, accountancy, auditing, counselling, or assistance services. According to art. 9 of Anti-Money Laundering Law no. 12.683/12 these conditions would apply to lawyers too, but it has been legally contested and is currently thoroughly discussed in the literature, since it also brings up discussions on other fronts, such as being recipients to tainted fees (Caram and Silva, 2016), i.e. being paid by their clients with money derived from crime, illicitly attained (see neutral actions, in Greco, 2004) and their participation in the laundering of others. In the cases presented on the table, if the accusations are deemed to be true, the picture is slightly less grey and more straightforward: several lawyers would have knowingly used their offices to receive money and simulated contracts in order to mask the origin of the money derived from kickbacks.

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Regulation by the Brazilian Bar Association (OAB) into these topics would be most welcome, as done by the American Bar Association. So far, the Federal Council of the OAB issued a statement that the duty to report transactions would violate the professional secrecy duty of lawyers and therefore would not regulate money laundering prevention in the sector. They have stood their ground, but such a stance could lead to stricter impositions coming from the legislative—trying to adapt to European standards—rather than something voluntarily elaborated by the Association. The lack of regulation could keep harming particularly lawyers who provide non-litigation advice in corporate, tax and commercial law. The lawyers who did not have knowledge of the full operation could still suffer judicial lawsuits for participating in money laundering and have their reputation tainted. A Guide of Good Practices with clear steps and protocols could be relevant to define if the analysis of the crime reaches subjective imputation, i.e. existence of intent, or not and the following procedural instruction. If the lawyer followed protocols of conduct strictly, the judicial procedure and subsequent reputational damage can be avoided (Estellita, 2012). Taking the example of R.T. again, ex-president Lula’s lawyer who brokered the acquisition of one of the properties used as a means to payoff previous favors to construction companies, he could be unfairly involved due to the inability to report the suspicious transaction to COAF. The real estate broker, for his turn, would have already mitigated his risk by making the communication and might completely avoid any charges. Such rules would benefit the lawyers themselves—since it would not affect the litigation activity—, offering them more security and being in line with the goals of international law enforcement standards, justifying it as another effective way to prevent money laundering.

Conclusion The misconduct presented here is only a fraction of what happens in the everyday activities of lawyers. There are several other deviant acts, such as embezzling money from clients, practicing law while suspended, among others. As we have noted, lawyers swear an oath to abide by ethical standards and their code of conduct and the cases presented show a picture of how they are failing to comply, in the context of either ethical dilemmas—in the so called grey areas—or straight into illegality, deviating from the preferred outcome for society and negatively impacting democracies. The impact, as extracted from the cases above, is that representatives from the executive, legislative and judiciary have someone they can hire to make sure their actions go unchallenged, their profits are secured, their

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assets hidden, the State does not recover his wealth, the public receives worse services, and the elections are tainted by money flowing from illegal activities, i.e. they can hire enablers of wrongdoing. The slippage is possible due to a lack of self-regulation and a lack of incentives brought by formal regulation. The ethical dilemma regarding client’s will vs society should be more strictly encompassed inside their duties in court related to due process. Gatekeeping activities closer to functions in matters of civil, tax, commercial and administrative law would benefit from more oversight from their own professional class as well as formal regulation. Lawyers should not be able to use the mantle of legality based on known loopholes to favor a client’s interest if they can decline to engage. Lobbying for regulatory reform and better standards of legal practice is an ongoing legislative crusade, however lawyers need not wait until it happens (Barbera, 2005; Di Nicola and Zoffi, 2005; Krishnan, 2020). What is central to the legitimacy of the Bar Association in Brazil is their Ethics and Discipline Tribunal. The capacity to judge a rising number of infractions by lawyers was recently studied and came under questioning, since it takes several years to reach a conclusion. Complaints about the agility of judicial procedures also lose their strength if even their own Tribunal suffers from the same structural problems (de Mello & Barroso, 2011, p. 368). These remedies could go be another push for additional accountability in scrutiny in gatekeeping positions. When intent is present there should be no doubt about investigation and prosecution and when the lawyer’s conduct is neutral, he should not be considered to be involved, being merely an unsuspecting tool acting lawfully and most importantly unaware in someone else’s schemes. When politically exposed persons (PEP) or senior foreign political figures are involved as their clients, the standards for service should be stricter too, since they have legitimate interests as citizens to demand transparency and immaculate conduct without violating their duties as lawyers, meaning that role ethics does not need to play a crucial part in determining conduct in gatekeeping activities. These are people deemed to have a high potential or risk in being involved with corruption, money laundering, terrorism, and bribery, due to the position or influence they hold. This label extends to close associates and family members, meaning that lawyers should be on the lookout when PEP have an interest in opening an account, hiding their beneficiary status, buying property, or moving assets that are not on par with their earnings. Sums received through corruption are most definitely laundered to be reintroduced in the economy as licit gains, so the importance about the role of institutions such as law firms and banks cannot be understated. A more audacious law proposal in Brazil (5836/2019) would have the lawyer or attorney being investigated for committing a crime to have his professional

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secrecy broken. It is currently under analysis but will hardly come into Law. Under the current law, the lawyer is entitled to the inviolability of his office or place of work, as well as work instruments and written, electronic, telephone and telematic correspondence, as long as they are related to the exercise of the legal profession. Congresswoman Paula Belmonte (Cidadania-DF), author of the Bill, manifested her intention not as a matter of encouraging the violation of prerogatives, but of giving prestige to the Code of Ethics. She alleges that the lawyer’s inviolability, as of today, is used as a subterfuge to hinder investigations into possible criminal practices, as occurred in Operation Greenfield and the Parliamentary Inquiry into the National Development Bank investment initiatives, where access was denied to important documents from one of the investigated, a former company legal director, even despite himself having admitted participating in the crimes under investigation (Focus, 2020). However, maybe initiative from the Brazilian Bar Association would be a way faster to a point of equilibrium and an efficient remedy. Future research could also analyze the level of current disciplinary action taken by the Brazilian Bar Association regarding lawyers with criminal convictions. Another strategy several nations have adopted is the creation of incentives to comply, which slowly but effectively alter the mindset of how lawyers conduct their counsel. There is moral and practical value aggregated into acting on the most desirable way for the community (confessing, be it spontaneously or through a deal or agreement) and in achieving factual truth, a principle that limits the power of the state to punish (ius puniendi) or, in other words, guarantees a fair sentence based on the events transpired. The cost-benefit rational calculation, if applied, can change the equation towards overlaying its result with ethical behavior. This was, however, not analyzed in further detail. Brooks (2019) tries to separate the literature on the subject between expected and absent notion of behavior regarding legal ethics and those more specifically related to “professional conduits of corruption”, i.e. legal representatives acting corruptly due to the position they hold in criminal justice systems. It is a challenge to separate the subjects, even if involving serious organized crime, which normally includes money laundering. Legitimate enterprises “can behave in an illegitimate and illegal way far beyond aggressively using the international tax system, and organized crime/terrorism can use the legitimate financial sector, with the assistance from lawyers and bankers. The ‘upper-world’ and ‘underworld’ sometimes inhabit and use the same institutions.” (p. 237). This is evident by the fact that money laundering in the cases presented are, according to the investigations, done through means of simulating legitimate contracts and legitimate activities. In the

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case of Mensalão, the Progressive Party (PP) tried to justify the money transfers by claiming that it used the money received from the Worker’s Party (PT) not for illegitimate reasons, but to pay attorney fees, which were way above the value of ordinary fees and all in cash, delivered in suitcases to an intermediary before supposedly reaching the lawyer. Due to the evidentiary burden on the prosecution and the ease of declaring legal counsel as responsible for expenditures, it was only due to a complex combination of evidence that the prosecution of party members was possible. Since 2018 political parties have increased their spending in millions of dollars with attorneys and since 2019 there is also a provision that allows political parties to use public funds in order to pay for party expenses, including attorney fees (Estadão, 2019). Parties have long required more in-depth control, but since they have legislative power, it is an uphill battle for civil society to create a demand for better self-regulation and active compliance.4 Most importantly, legal ethics are insufficient to deal with the second category of professionals, those “professional conduits”, since if knowingly being a party to a crime does not deter, there is no Code of Ethics that will be a sufficient substitute.5 In taking part in this chain of illicit, lawyers associate themselves with kleptocrats or corrupt executives and facilitate the weakening of democratic institutions.

References Aydiner, S. (2020). Money laundering, lawyers, and escrow: The case for voluntary due diligence. Law.com. New York Law Journal. 01 April 2020. https://www.law.com/new yorklawjournal/2020/04/01/money-laundering-lawyers-and-escrow-the-case-for-volunt ary-due-diligence. Barbera, K. L. (2005). Using corporate lawyers to reduce executive corruption: A psycholegal perspective on mandated reporting (Order No. 3179449). ProQuest Dissertations & Theses Global: The Humanities and Social Sciences Collection. (305357183). https://search.pro quest.com/docview/305357183?accountid=11359. Barnett, N., & Alastair, S. (2018). Democracy in the Crosshairs: How Political Money Laundering Threatens the Democratic Process, Atlantic Council, Sept. http://bit.ly/2LQ 8g6Z. Brandeis, L. D. (1914). Business – A profession. Small, Maynard & CO.

4

This is explained more thoroughly in another chapter of this book. See Trombini, Maria. Brooks (2019), p. 241, quoting Abel, Richard, Lawyers on Trial: Understanding Ethical Misconduct, 2011, p. 456.

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Brooks, G. (2019). Criminal justice and corruption. State power, privatization and legitimacy. Palgrave Mcmillan. Bullough, O. (2018). Moneyland: why thieves and crooks now rule the world and how to take it back (S. 298). London: Profile Books. Caram e Silva, G. (2016). Lavagem de dinheiro e honorários advocatícios. Revista Pensar Direito, July, 7(2). Clammer, J. (2012). Corruption, development, chaos and social disorganisation: Sociological reflections on corruption and its social basis. In Corruption: Expanding the Focus. ANU Press. Coelho, G. (2018). Sérgio Cabral decide fazer delação premiada e advogado deixa o caso. Consultor Jurídico – Conjur, 23. December https://www.conjur.com.br/2018-dez-23/ser gio-cabral-decide-delacao-premiada-advogado-deixa. Coffee, J. C. (2003). The Attorney as Gatekeeper: An agenda for the SEC. Columbia Law Review, 103(5), 1293–1316. Cooley, A., Heathershaw, J., & Sharman, J. C. (2018). The rise of Kleptocracy: Laundering cash, whitewashing reputations. Journal of Democracy, 29(1), 39–53. De Mello, M. P., & Barroso, M. R. C. (2011). Profissão e corporação: limites éticos da atuação do advogado. Sociologias, Porto Alegre, 13(28), 346–369. Di Nicola, A., & Zoffi, P. (2005). Italian lawyers and criminal clients. Risks and countermeasures. Crime Law, Social Change, 42, 201–225. Djankov, S., La Porta, R., Lopez-De-Silanes, F., & Shleifer, A. (2002). The regulation of entry. Quarterly Journal of Economics, 117(1), 37. FATF. (2013). FATF Guidance on PEP Legislation. Politically Exposed Persons (Recommendations 12 and 22). June 2013. Estadão. (2019). Partidos ampliam em 48% os gastos com advogados. Estado de Minas. Política. https://www.em.com.br/app/noticia/politica/2019/10/01/interna_politic a,1089316/partidos-ampliaram-em-48-os-gastos-com-advogados.shtml. Estellita, H. (2012). Lavagem de capitais, exercício da advocacia e risco. Consultor Jurídico – Conjur.com.br. 27 September 2012. https://www.conjur.com.br/2012-set-27/heloisa-est ellita-lavagem-capitais-exercicio-advocacia-risco. Falcão, M. (2018). Jota.info. Em ação com nova prisão de Joesley, PF mira escritórios de advocacia por nota fria. 11 November 2018. https://www.jota.info/justica/em-acao-comnova-prisao-de-joesley-pf-mira-escritorios-de-advocacia-por-nota-fria-09112018. Focus. (2020). Advogado investigado por crime terá sigilo profissional quebrado, diz PL. Focus.jor.br. 1st January 2020. https://www.focus.jor.br/advogado-investigado-por-crimetera-sigilo-profissional-quebrado-diz-pl. Garcia-Navarro, L. (2014). Brazil: The land of many lawyers and very slow justice. National Public Radio. 5 November 2014. https://www.npr.org/sections/parallels/2014/11/05/359 830235/brazil-the-land-of-many-lawyers-and-very-slow-justice?t=1598899196827. Gibson, K. (2003). Contrasting role morality and professional morality: Implications for practice. Journal of Applied Philosophy, 20(1), 17–29. Global Witness. (2016). Lowering the bar. How American lawyers told us how to funnel suspect funds into the United States. January 2016.

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Goodman, R., & Alex, P. (2019). All the President’s lawyers: A chart of misconduct and possible crimes revealed by Mueller Report. JustSecurity.org. 14 May 2019. https://www.justsecurity.org/64023/all-the-presidents-lawyers-a-chart-of-mis conduct-and-possible-crimes-revealed-by-mueller-report/. Greco, L. (2004) Cumplicidade através de ações neutras: a imputação objetiva na participação. Renovar. Hadfield, G. K. (2007). Don’t forget the lawyers: The role of lawyers in promoting the rule of law in emerging market democracies. DePaul Law Review, 56(2), 401–422. Hall, K., & Holmes, V. (2008). The power of rationalisation to influence lawyers’ decisions to act unethically. Legal Ethics, 11(2), 137–153. Hodge, N. (2020). Will U.K. mandate that Big Four separate audit units make a difference? Compliance Week. 7 July 2020. https://www.complianceweek.com/accounting-and-aud iting/will-uk-mandate-that-big-four-separate-audit-units-make-a-difference/29159.art icle. Judah, B., & Nate, S. (2018). The enablers: How Western professionals import corruption and strengthen authoritarianism. Hudson Institute. September 2018. Kazun, A., & Yakovlev, A. (2014). Who demands collective action in an imperfect institutional environment? A case study of the professional community of attorneys in Russia. International Centre for Study of Institutions and Development, Higher School of Economics (HSE), Working Paper Basic Research Programme 54, Sociology. Kawakami, C. Y. (2015). Lavagem de dinheiro e Advocacia: Dos deveres jurídicos do advogado à cumplicidade mediante ações neutras. Dissertação (Mestrado) – Faculdade de Direito, Universidade de Coimbra, Coimbra. Kelly, J. (2012). The genesis of corruption in criminal lawyers. Georgetown Journal of Legal Ethics, 25(3), 591–608. Koechlin, L. (2013). Corruption as an empty signifier: politics and political order in Africa. Leiden: Brill. Krishnan, J. K. (2020). International Lawyers as Disrupters of Corruption: Business and Human Rights in Africa’s Most Populous Country—Nigeria, Northwestern Journal of Human Rights, 18(2), 93–136. Landim, R. (2019). Why not: Como os irmãos Joesley e Wesley, da JBS, transformaram um açougue em Goiás na maior empresa de carnes do mundo. 1ª Ed. Intrínseca. 441p. Langevoort, D. C. (1993). Where were the lawyers? A behavioral inquiry into lawyers’ responsibility for clients’ fraud. Vanderbilt Law Review, 46(1), 75–120. Levi, M., & Monty, R. (1999). Anti-corruption a signpost for transactional lawyers. Business Law International, 1999(1), 80–106. Luban, D. (1988). Lawyers and justice: An ethical study. Princeton University Press. Martinez, F. (2018). “Não conhecem advocacia”, diz defesa de Roberto Teixeira sobre MPF. Consultor Jurídico – Conjur. 21 October 2018. https://www.conjur.com.br/2018-out-31/ defesa-roberto-teixeira-mpf-nao-conhece-advocacia. Merton, R. (1967). On theoretical sociology. Free Press. Middleton, D., & Levi, M. (2005). The role of solicitors in facilitating ‘organized crime’: situational crime opportunities and their regulation. Crime, Law and Social Change, 422(2–3), 123–161.

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Montinola, G. R., & Jackman, R. W. (2002). Sources of corruption: A cross-country study. British Journal of Political Science, 32, 147–70. Metrópoles. (2018). MPF denuncia presidente da OAB-DF por corrupção no caso do Grupo J&F. Metrópoles. 15th May 2018. https://www.metropoles.com/distrito-federal/politicadf/mpf-denuncia-presidente-da-oab-df-por-corrupcao-no-caso-da-jbs. Michener, G., & Pereira, C. (2016). A Great Leap Forward for Democracy and the Rule of Law? Brazil’s Mensalão Trial. Journal of Latin American Studies. Cambridge University Press, 48(3), 477–507. Nogueira, I. (2020). Advogados de Lula são alvos de operação sobre desvios no Sistema S; defensor ataca juiz. Folha de São Paulo, 9 September 2020. https://www1.folha.uol.com.br/poder/2020/09/escritorio-de-advogado-de-lulae-alvo-de-operacao-sobre-influencia-no-judiciario.shtml?origin=folha. Oliver, B. (2018). The Origins of Modern Kleptocracy, National Endowment for Democracy, Power 3.0 (blog), 9 January 2018. https://www.power3point0.org/2018/01/09/the-originsof-modernkleptocracy. Parker, C., & Evans, A. (2007). Inside lawyers’ ethics. Cambridge University Press. Pertiwi, K. (2018). Contextualizing corruption: A cross-disciplinary approach to studying corruption in organizations. Administrative Sciences, 8, 12. Rocha, M. (2017). Advogado preso na lava jato pagou R$ 27 milhões em mansão usada por Palocci para fazer lobby. Época. 5th June 2017. https://epoca.globo.com/politica/exp resso/noticia/2017/06/advogado-preso-na-lava-jato-pagou-r-27-mi-em-mansao-usadapor-palocci-para-fazer-lobby.html. Romano, R. T. (2015). O STJ e o dever de sigilo do advogado. Jus.com.br. May 2015. https:// jus.com.br/artigos/38959/o-stj-e-o-dever-de-sigilo-profissional-do-advogado. United Nations. (2018). Global Cost of Corruption at Least 5 Per Cent of World Gross Domestic Product, Secretary-General Tells Security Council, Citing World Economic Forum Data. Security Council 8346th Meeting (AM) SC/13493. 10 September 2018. https:// www.un.org/press/en/2018/sc13493.doc.htm. United States Department of State. (2020). International Narcotics Control Strategy Report. Volume II: Money Laundering and Financial Crimes. Bureau of International Narcotics and Law Enforcement Affairs. March 2020. Veja. (2019). PF deflagra segunda fase de operação que investiga fim da Castelo de Areia. https://veja.abril.com.br/politica/pf-deflagra-segunda-fase-de-operacao-que-invest iga-fim-da-castelo-de-areia/ Vasconcellos, Jorge. (2020). Advogado de Flávio Bolsonaro, Fred Wassef, vai ser investigado pela OAB-SP. Correio Braziliense. June 19, 2020. https://www.em.com.br/app/noticia/pol itica/2020/06/19/interna_politica,1158108/advogado-fred-wassef-vai-ser-investigadopela-oab-sp.shtml. Wasserstrom, R. (1975). Lawyers as professionals: Some moral issues. Human Rights (American Bar Association), 5(1), 1–24. Weintraub, E. L. (2019). Letter to Senate Judiciary on Illegal Foreign Contributions. 18th June 2019. Directed to Lindsey Graham, Chairman, and Dianne Feinstein, Ranking Member. United States Senate.

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Mário H. Jorge Jr. is a lawyer by training, and a researcher, member of the Organizational Crime Studies Group at the Max-Weber-Institute for Sociology of Ruprecht-KarlsUniversität Heidelberg. Ph.D. Candidate at the Law Faculty of the Humboldt Universität zu Berlin, Master of Laws (LL.M.) from Augsburg Universität, Bachelor of Laws from the Faculdade de Direito de Curitiba with a post-graduate specialization in Corporate Criminal Law from Universidade Positivo. His research focus are the areas of corporate wrongdoing, compliance, and criminology.

Part III Political financing and corruption in Europe

Party Financing Scandals in the History of the Federal Republic of Germany: The “Flick” Affair and CDU Donations Affair Jens Ivo Engels

Corruption and illegal party financing are not exactly the same. Commonly, corruption is defined as the abuse of a public office for private gain.1 Bribery is at the heart of corruption practices. Relating to politics, this would mean that political decisions are in a sort sold to the highest bidder. History provides some examples of that. In the famous Panama Affair in France during the 1880s, over hundred members of the French parliament had been bribed for voting for a specific law.2 In the first days of the Federal Republic of Germany, a similar event can be found. To the surprise of the public, the Bundestag (Federal Parliament) voted for the town of Bonn as the seat of government in 1949 (instead of Frankfurt, where authorities had just begun to construct a representative building for parliament).

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For more general discussions of the notion of corruption see Engels, Jens Ivo: Corruption and Anticorruption in the Era of Modernity and Beyond; in: Kroeze, Ronald/Vitória, André/Geltner, Guy (eds.): Anticorruption in History. From Antiquity to the Modern Era, Oxford 2018, pp. 167–180; Johnston, Michael: The Search for Definitions. The Vitality of Politics and the Issue of Corruption: in: International Social Science Journal 48 (1996), pp. 321–335; Engels, Jens Ivo/Monier, Frédéric: Pour une histoire comparée des faveurs et de la corruption: France et Allemagne (XIXe-XXe siècles); in: Engels, Jens Ivo/Monier, Frédéric/Petiteau, Natalie (Hrsg): La politique vue d’en bas. Pratiques privées et débats publics 19e-20e siècles, Paris 2011, pp. 127–148. 2 Mollier, Jean-Yves: Le scandale de Panama, Paris 1991. J. I. Engels (B) Institut für Geschichte, Technische Universität Darmstadt, Darmstadt, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_12

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Not only the notorious love of chancellor Konrad Adenauer for his native Rhineland where Bonn is located had been decisive, but more so the buying of votes from a handful of backbenchers from Bavaria.3 However, apparent bribery in parliament is a relatively rare event—at least in Western democracies during the last hundred years. Fraud and financial misconduct of politicians, however, are not. So, when we debate the ‘cleanliness’ and the moral reliability of our political systems, then we include different sorts of malpractices. One of them is lobbying. Lobbying is not against the law, of course, and it is integral part of modern political life. However, since the early beginnings of modern lobbying in the second third of the 19th century, it has been interpreted as a problem, potentially securing uncontrollable political influence to businessmen—due to the money lobbyists are channeling into the political system.4 This observation relates to illegal party financing. Whenever political parties earn money not from membership fees but donations, the question arises as who gives the money and with which intention to do so. Party financing thus has a reputation for endangering the independence of a political party. No one denies parties need money to exist and to campaign. Yet this need risks to pave the way for undue influence. The standard example here would be the practice of early 20th century creation of Peers in Great Britain. At the time of liberal party leader David Lloyd George, it was common use that the King would raise the most important donors of the party to nobility. They literally bought themselves right into the House of Lords.5 It is therefore not surprising that different forms of financial misconduct in high politics are often related. In many cases, they are all publicly debated under the headline of “political corruption”. Bribery, lobbying, personal enrichment in office, unfair party financing—they all bear the problem of undue political influence for those who pay money. 3

Engels, Jens Ivo: Alles nur gekauft? Korruption in der Bundesrepublik seit 1949, Darmstadt 2019, pp. 25–43. 4 Ebhardt, Christian: Interessenpolitik und Korruption. Personale Netzwerke und Korruptionsdebatten am Beispiel der Eisenbahnbranche in Großbritannien und Frankreich, 1830–1870, Göttingen 2015; Courty, Guillaume: Le lobbying en France. Entre dénonciation et énonciation d’un problème public; in: Mattina, Cesare/Monier, Frédéric/Dard, Olivier/ Engels, Jens Ivo (eds.): Dénoncer la corruption. Chevaliers blancs, pamphlétaires et promoteurs de la transparence à l’époque contemporaine, Paris 2018, pp. 201–218. 5 Hanham, Harold J.: The Sale of Honours in Late Victorian England; in: Victorian Studies 3 (1960), pp. 277–289; Macmillan, Gerald: Honours for Sale. The Strange Story of Maundy Gregory, London 1955; Cregier, Don M.: The Lloyd George Political Fund; in: Research Studies 35 (1967), pp. 198–219.

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At the example of the history of the Federal Republic of Germany it will be analysed how illegal party financing has been debated. Special attention will be paid to two major scandals, i.e. the “Flick”-affair of the 1980s and the “CDUSpendenaffäre” (Christian Democratic Party donations affair) of 1999/2000. Both left their marks on public debates on the state of political culture. In combination with other factors, these affairs contributed to the emergence of a fundamentally critical perception of party politics and the questionable morals of the political elites. The first example is the Flick-affair.6 The scandal is named after Friedrich Karl Flick, (1927–2006), a German industrialist. Flick had inherited a vast fortune of industrial holdings from his father. This inheritance was problematic. It was widely known that the father had earned his fortune in wartime, including close collaboration with the Nazi Regime and the exploitation of forced labourers.7 However, in 1975 Flick sold a big block of shares of Daimler Benz, worth some 2 billion German Marks. The German law offered the possibility to get a reduction of income tax normally due for this deal, provided the Federal minister of Economics certified that the sale benefited the national economy. During the subsequent years, Flick’s senior manager Eberhard von Brauchitsch used to frequent politicians and high government officials in order to get the minister’s certification passed. Brauchitsch pulled out all the stops of lobbying, including secret meetings, splendid restaurant invitations, expensive gifts—and donations to parties and party leaders. Of course, Brauchitsch’s activities were not public knowledge. The party donations changed hands in cash or were transmitted via a system of dummy organisations, one of them operated by a catholic monastery. Or both: first money passed the catholic foundation and then came back in cash to be distributed in Bonn. Whereas secret meetings and invitations were not illegal, the financial transactions were. Since 1968, political parties had to declare donations larger than 6

Interestingly there is no historical academic monograph on the Flick affair, one of the biggest scandals in political life of West Germany before 1990. For most of the information given in this paper see Engels, Jens Ivo: Alles nur gekauft? Korruption in der Bundesrepublik seit 1949, Darmstadt 2019, 105–142. Cf. also Kroeze, Ronald: Lockheed (1977) and Flick (1981– 1986): Anticorruption as a Pragmatic Practice in the Netherlands and Germany; in: Kroeze, Ronald/Vitória, André/Geltner, Guy (eds.): Anticorruption in History. From Antiquity to the Modern Era, Oxford 2018, pp. 279–292 or Wirsching, Andreas: Abschied vom Provisorium. Geschichte der Bundesrepublik Deutschland 1982–1990, München 2006; Darge, Ekkehard: Korruption in der Bundespolitik Deutschlands. Fälle und Bekämpfungsstrategien, Oldenburg 2009. 7 Frei, Norbert/Ahrens, Ralf/Osterloh, Jörg/Schanetzky, Tim: Flick. Der Konzern, die Familie, die Macht, München 2009.

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20.000 Marks, which they had not done. Second, the scheme was constructed in a way that the donor—the Flick holding in this case—paid no taxes. Yet the Constitutional Court had ruled, as early as 1958, that donations to parties were not exempt from taxation. In this sense, laws were broken twice.8 The three dominating political forces, Christian Democrats, Social Democrats and Free Democrats, systematically had built up a complex system of money laundering organisations. Obviously, many donors were only ready to give money in total secrecy and if the sums could be exempt from taxes. Although that was unlawful, party treasurers kept running the game for years. For the Christian Democrats, for examples, the roots of the system dated back to the early 1950s, when Konrad Adenauer’s friend and banker Robert Pferdmenges founded the socalled “Staatsbürgerliche Vereinigung” (Association of Citizens). Officially, this association was dedicated to political education, donations to it were therefore tax exempt. Actually, it supported the Christian Democrat Party financially. For the Social Democrats, it seems that the “Verein zur Förderung der Demokratie und der Wiedervereinigung” (Association for Democracy and Reunification) and the “Friedrich Ebert Stiftung” played similar roles. Insiders perfectly knew these practices; over decades, tax offices systematically turned a blind eye to these. But this changed at the turn to the 1980s.9 The Flick scheme came to light step by step from 1981. By chance, tax investigators had first found out the fraudulent nature of transactions in the monastery of the Steyler Missionare in the town of Sankt Augustin near Bonn. The clergymen had mounted nothing other than a money laundering organisation. Fortunately for the investigators, Flick holding company had hired a diligent bookkeeper who had noted every transaction including donations to major politicians—roughly 1 million Marks per year. Furthermore, Eberhard von Brauchitsch was found to have kept a sort of lobbyist’s diary (he curiously called “Tageskopien”—“daily copies”). In these documents he detailed every step taken to convince government for tax exemption in the Daimler case. Moreover, and worse for the parties, public prosecutors gained a deeper insight into funding practices and funding machines. The outbreak of a public scandal did not take long, once the news magazine Der Spiegel started reporting the investigations. Public indignation was triggered not only by the facts which came to light, but all the more because party leaders 8

On the legal situation cf. Bartholmes, Thomas: Die "Flick-Affäre". Verlauf und Folgen, Speyer 2003, pp. 9–13. 9 See, fort the Christian Democrats Bösch, Frank: Macht und Machtverlust. Die Geschichte der CDU, Stuttgart 2002.

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tried hastily, at the end of 1981, to pass an amnesty law in parliament. This law would have absolved, with a stroke of the pen, all those involved in illegal party financing.10 Heavy criticism in public and in their own ranks prevented the law in 1981. A second attempt for amnesty in 1984 suffered the same fate. However, these actions increased general mistrust in the governing parties and their representatives. Roughly, the Flick affair kept the attention of parties, the press and the wider public between 1981 and 1987. First, several extremely high-ranking politicians and business leaders were brought to justice between 1983 and 1987, including former Federal ministers of Economics Hans Friderichs, Otto Graf Lambsdorff and Eberhard von Brauchitsch. Although some of them were accused of active or passive bribery, these charges could not be proved. However, Lambsdorff and Friderichs were heavily fined for tax fraud. Von Brauchitsch was even sentenced to two years of imprisonment (a suspended sentence). Moreover, the Court ruled that there had been strong indications that politicians had accepted illegal funding from the Flick ‘company’, including Willy Brandt, Helmut Kohl, Franz Josef Strauß, Walter Scheel and many others. Second, the German parliament set up an Investigation Committee (Untersuchungssausschuss) in order to shed light on the affair. The Committee met between 1983 and 1986. Literally every politician of notoriety, many businessmen and prosecutors were questioned by the committee. By the parliamentary committee’s work Brauchitsch’s Tageskopien became public. Moreover, the Committee together with investigative journalism, uncovered the unlawful funding structures.11 Third, there were two driving forces behind these disclosures: journalists and a new political force, namely the Green party. The Greens, funded in 1980, entered parliament for the first time in 1983.12 The Greens were the only party without any participation in illegal party funding. They were free to attack without tactical caution. In addition, the Greens conceived themselves an “anti-party-party” and heavily criticized the political system of the Federal Republic. The Greens of that time represented the new social movements which had fought for ecology, women’s rights and against nuclear armament. These movements were in some protest movements. Their members considered that the parties 10

Dann kann man sie nicht mehr hängen; Der Spiegel 07.12.1981. Burchardt, Rainer/ Schlamp, Hans-Jürgen (eds.): Flick-Zeugen. Protokolle aus dem Untersuchungssausschuß, Reinbek bei Hamburg 1985. 12 On the history of the Green party Mende, Silke: Nicht rechts, nicht links, sondern vorn. Eine Geschichte der Gründungsgrünen, München 2011. 11

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in place did not at all take into consideration their concerns. The result was a feeling of distance to the party system. The parties in place were considered close shops, distant from the people, irresponsible in view of ecological and military dangers. The Greens advocated direct democracy and a complete reform of political representation. At the time, the Greens’ world view was heavily influenced by left-wing ideas. The Flick affair seemed to prove capitalists had politicians in their clutches. The Flick scandal was in a certain way a godsend, as it displayed the ugly side of the ruling parties, attesting that the suspicions against them had been sound. In their 1987 election program they would claim having proved the “dependency of the old parties on the big money of some companies”.13 For all these reasons Green politicians tried to turn the Committees work into a sort of tribunal against the dominant parties. In the first place, it was the former lawyer Otto Schily, now a parliamentary member for the Greens, who pushed forward the Committee’s investigations and who delivered alarming speeches in the Bundestag.14 To a very large extent, the Greens and critical press dominated the interpretation of the affair, although senior representatives of the old parties deplored witch-hunts. The Flick affair caused several secondary scandals involving the former leader of the Christian Democratic Party, Rainer Barzel, who had to resign from his office as president of the Bundestag. Even chancellor Helmut Kohl just barely escaped from being dethroned in 1986 because he had given false information to an investigation committee in the Federal State of Rheinland-Pfalz. However, the Flick affair caused a general crisis of credibility in the political system of West Germany. Otto Schily deplored “criminal cooperation” between business and parties, a sort of “political prostitution” and he feared a “destruction of the democratic-parliamentary institutions”.15 Criticism of the party system spread more and more beyond the ranks of the new social movements and was generalized. Journalists from Der Spiegel wondered if not many grievances like environmental pollution were the effects of venality in politics.16 Interestingly, the conservative political press like the Frankfurter Allgemeine Zeitung was very reluctant, initially, to condemn the politicians in place. Instead, it criticized the Greens for being pharisaic.17 But as the facts became undisputable, 13

Die Grünen: Bundestagswahl Programm 1987, Bonn 1987, p. 4. Cf. his book Schily, Otto: Politik in bar. Flick und die Verfassung unserer Republik, München 1986. 15 Schily, Otto: Politik in bar. Flick und die Verfassung unserer Republik, München 1986, p. 161. 16 Kilz, Hans Werner/ Preuß, Joachim (Hrsg): Flick. Die gekaufte Republik, Reinbek 1984, p. 317. 17 Bescheidener werden, Frankfurter Allgemeine Zeitung 28.11.1984. 14

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it stopped defending the political elites. However, Frankfurter Allgemeine Zeitung was one of the few newspapers that emphasized, after the trials and the end of the Bundestag Committee’s investigation, that no bribery and no corruption had been proven.18 Of course this was correct, but von Brauchitsch’s minutes had shown to the public that he had, at least, tried to get influence through money. However, credibility of the leading personnel was heavily disputed, and the state of the party system became a matter of criticism and concern in the public discussion. Even the head of state, Bundespräsident Richard von Weizsäcker, deplored, some years later, that the parties were “hell-bent on power” (machtversessen) and did not take care of the will of the people.19 As early as 1982 he had deplored the parties considered the State as a “booty”.20 Regardless of these discussions, Flick affair did not determine election campaigns or the outcome of the ballot. In 1987, the ruling coalition of Christian Democrats and Free Democrats won the elections and Helmut Kohl remained in office. Parliament, however, adjusted party financing rules. Party donations from associations of political education or other institutions were forbidden and the need to publicly declare donations bigger than 20.000 Marks were made obligatory, so that splitting of the sum was prohibited.21 However, illegal party financing caught up with Helmut Kohl at the turn of the century, only a few months after the end of his mandate. What happened from 1999 to 2002 is called the “Christian Democrats donation affair” (CDUSpendenaffäre).22 To a large extent, the scandal related to the personal conduct of Helmut Kohl in accepting illegal donations. But, again, investigations disclosed a system of illegal financing, including lobbyists and the suspicion that political decision makers had been corruptible. This time, other parties were not affected. In 1999 and the following years it came out that party leader Kohl had continued to encourage and to accept illegal money for his party after the Flick affair. At least 20 to 40 Million Marks had been paid illegally since the 1980s. This time, money was not transferred via special organisations like the Staatsbürgerliche Vereinigung. Instead it was, so to say, more mafia like. Whenever Kohl (or other 18

Halb so schlimm?, Frankfurter Allgemeine Zeitung 14.03.1986. Wo bleibt der politische Wille des Volkes?, Die Zeit 19.06.1992. 20 Wirsching, Andreas: Abschied vom Provisorium. Geschichte der Bundesrepublik Deutschland 1982-1990, München 2006, p. 200. 21 Engels, Jens Ivo: Alles nur gekauft? Korruption in der Bundesrepublik seit 1949, Darmstadt 2019, p. 123. 22 Cf. Lindemann, Kai: Korruption als Skandalierung informeller Einflusspolitik. Fallstudien aus der „CDU-Spendenaffäre“, Berlin 2005; Schwarz, Hans-Peter: Helmut Kohl. Eine politische Biographie, München 2012. 19

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party leaders) received money, always in cash, it would be handed over to one of the special party treasurers Kohl trusted personally. After that, money would be moved between different bank accounts in Germany and abroad. In many cases, party staff drove cases full of cash across the Swiss border and deposited it on anonymous bank accounts. Again, like in the 1970s and 80 s, everyone knew this was illegal. For example, a member of the executive board of Siemens gave money although the shareholder meeting had ruled, long before, that the company should stop party financing. Several special cases where disclosed, leaving a smell of corruption. In 1998, property entrepreneur Karl Ehlerding donated no less than 5.9 million Marks in cash in an office of the party’s headquarter. Some time ago, the same Ehlerding had purchased a hundred thousand public housing apartments from the State at a very attractive price.23 Another sub-scandal was called the “tank affair”, including personal enrichment on the middle level politicians. In 1991, the government had granted the export of a number of tanks out of the German army’s possession to Saudi-Arabia. This decision had been very controversial for political reasons. Yet Helmut Kohl had personally pushed for it against resistances from the Ministry of Foreign Affairs. Several consultants and lobbyists had paved the way for this deal, and industry paid no less than 220 million Marks commission. A secretary of State from the Ministry of Defence took 3.8 million Marks and would be sentenced to jail later on. At least one million Marks were transferred illegally to the Christian Democrat Party.24 Again, not in any of these (and other) cases direct venality of top politicians could be proved. But all these stories fed the impression of financial collusion. Obviously, Kohl used this money as a kind of special fund to his own advantage. The slush fund enabled Kohl to “doing good” inside his party. Often, he gave the money to local or regional party leaders or party sub-organisations. Doing this, he could enjoy the gratitude of local and regional politicians. Giving money was part of Kohl’s special style of ruling. Of course, these practices were intended to increase personal loyalty to the chancellor inside the organisation. Journalists and politicians began to talk about the so-called “Kohl system” of party rule which included different techniques of patronage, clientelism and networking. Kohl had demanded absolute personal loyalty from other party members in return for a 23

Darge, Ekkehard: Korruption in der Bundespolitik Deutschlands. Fälle und Bekämpfungsstrategien, Oldenburg 2009, pp. 69–71. 24 Lindemann, Kai: Korruption als Skandalierung informeller Einflusspolitik. Fallstudien aus der „CDU-Spendenaffäre“, Berlin 2005.

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share in power.25 Whoever dared contradict the boss was swiftly expelled from the inner circles. Although it had been known before, the lack of transparency and authoritarianism inside the party were debated now, not the least because Kohl’s successors at the head of the CDU wished to change things. The problem with Kohl now was that he massively harmed the party, due to a completely wicked PR strategy of Kohl in view of the accusations. This was Kohl’s “second fall”, as the Frankfurter Allgemeine Zeitung put it.26 Unlike in the Flick affair, Kohl now was found responsible for several transactions. The former chancellor had to declare publicly that he in person had accepted cash money from different individuals between 1993 and 1998, in sum between 1.5 and 2 million Marks. He undoubtedly had broken the law, while still in office as head of the government. Of course, Kohl could have collaborated with prosecutors and, so to say, journalists by disclosing the names of the donors and the sums transferred. But Kohl refused ostensibly putting forward the argument that he had given his word of honour to the donors to keep everything secret—which was, again, against the law because party donations had to be declared. Worse, Kohl presented his word of honour as mandatory, and more binding than the laws of the Republic. Today it seems possible that Kohl never had received money from individuals in the 1990s, but that the cash which had passed through his hands was very old slush money, perhaps dating back to the eve of the Flick affair.27 Disrespect for the law was a problem for the supporters of the conservative party. The new leaders around Wolfgang Schäuble tried to force Kohl to disclosure, but he refused. Tumbling, Kohl took with him Wolfgang Schäuble, reporting that his successor had also accepted cash. Angela Merkel, distancing clearly from Kohl, replaced Schäuble at the head of the party and forced Kohl to lay down his honorary chairmanship of the party. In the aftermath of the scandal, the party not only suffered from a damage to its image, but also had to pay fines of about 40 million Marks due to the regulations of the party law that had been passed in the aftermath of the Flick affair. Kohl in person was fined 300.000 Marks.

25

Leyendecker, Hans: Helmut Kohl, die CDU und die Spenden. Eine Fortsetzungsgeschichte; in: Leyendecker, Hans/Stiller, Michael/Prantl, Heribert (Hrsg): Helmut Kohl, die Macht und das Geld, Göttingen 2000, pp. 13–245; Narr, Wolf Dieter/Roth, Roland/Vack, Klaus: Politische Korruption, korrupte Politik am Beispiel: “System Kohl”, Köln 2000; Pflüger, Friedbert: Ehrenwort. Das System Kohl und der Neubeginn, München 2000; Rathje, Klaus/Sacht, Jürgen: Das kleine Helmut-Kohl-Lexikon, Berlin 2002. 26 Kohls zweiter Sturz, Frankfurter Allgemeine Zeitung 20.01.2000. 27 This is what Wolfgang Schäuble insinuates Das Ehrenwort, Der Spiegel 02.12.2017.

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Almost all journalists and many politicians considered the donation affair a repeat offence. They deplored that the Christian Democrats had not learned from Flick affair and had proven unteachable. Of course, these debates represented a breeding ground for growing mistrust in the parties and the political elites in general, although, this time, the other parties were not concerned. However, contexts had changed since the times of Flick. From the early 1990s onwards, a new political debate had arisen in Germany as well as on an international level: the fight against corruption. Corruption was more and more regarded as a common problem in many societies. In Germany, for instance, different legal experts as well as journalists claimed that bribery and venality were a common problem in the administration. Since 1993, a new non-governmental organization campaigned against the dangers of corruption: Transparency International.28 Its international headquarters was in Berlin (and still is). In fact, many experts warned that the problem was underestimated if not systematically hushed up in Germany and worldwide.29 Kohl’s behaviour seemed to confirm this diagnosis. Again, fraudulent party financing is not the same as bribery. However, Transparency International explained, in a press release, why Kohl effectively was corrupt. Corruption, they stated, implies the abuse of power for private gain. Kohl did not use hush money for private expenses or luxurious life. But as the money played an important role in the Kohl system it helped him to hold power inside the party. For this motive being personal (keeping power), he had had individual gain, and therefore it was corruption, Transparency International declared.30 Obviously, this interpretation is debatable. But it illustrates how the public discussed the donations affair. Meanwhile, party politics had more and more become a synonym for unruly behaviour, enrichment and corruption. Both scandals have highly influenced the public image of political parties in Germany. They showed that the financial conduct of political parties had been

28

Sampson, Steven: The Anti-Corruption Industry. From Movement to Institution; in: Global Crime 11 (2010), pp. 261–278; Sousa, Luís de/ Larmour, Peter: Transparency International: Global Franchising and the War of Information against Corruption; in: Burke, Ronald J./Cooper, Cary L. (eds.): Research Companion to Corruption in Organizations, Cheltenham 2009, pp. 269–284. 29 Roth, Jürgen: Der Sumpf. Korruption in Deutschland, München 1995; Alemann, Ulrich v. (eds.): Dimensionen politischer Korruption. Beiträge zum Stand der internationalen Forschung, Wiesbaden 2005; Schaupensteiner, Wolfgang J./ Bommarius, Christian: Filz und Speck. Ein GesprächKorruption. Kursbuch 120, Berlin 1995, pp. 36–44. 30 Eigen, Peter: Das Netz der Korruption. Wie eine weltweite Bewegung gegen Bestechung kämpft, Frankfurt a.M. 2003, p. 156.

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illegal over decades. The second affair proved, at least with respect to the Christian Democrats, that party leaders had learned nothing from the Flick scandal. In fact, Helmut Kohl’s behavior seemed to demonstrate that he did not care about legal rules, at least in the field of party funds. Acting illegally was one accusation brought forward in public. The other accusation regarded potential venality. Although no hard evidence could be found, in the end, that any political decision had been bought, suspicions remained. Why was that the case? First, both scandals showed the close personal relationships between lobbyists and politicians. And, second, they highlighted that these relationships were deliberately kept in the dark. All concerned did not want to see their ties and linkages displayed in public. In its suspicion, the public responded to a very old tradition in the European culture of gift-giving. Since the late Medieval Age, two sorts of gifts to office holders had been distinguished: gifts handed over publicly versus gifts given in secret, the former being accepted, the latter called bribery.31 No surprise that secret donations had a very bad image. Journalists, prosecutors and the public in general were no longer willing to accept the existence of a certain “secret of the mighty”, which had existed, to some extent, in the decades before. During the Flick scandal, the first calls for “transparency” in party financing came up in Germany.32 Over the following decade, transparency would become one of the most debated concepts for reforms of the State and for markets and business life—not only in Germany, but worldwide.33 The name of Transparency International was but one example for this. The two big party financing scandals in Germany are representative for a broader process of loss of legitimacy of the party system. Since the 1980s and the emergence of the Greens, calls for more direct democracy have been repeated. During the years after 2000, the internet and the short-lived party “The Pirates” advocated new forms of direct participation in politics. During the last years, populism has called into question the power of the existing parties. So, these two scandals must be interpreted in the light of a (very slow) erosion of the party system in place. Of course, these incidents provided arguments for growing distrust in the political elites.

31

Groebner, Valentin: The City Guard’s Salute. Legal and Illegal, Public and Private Gifts in the Swiss Confederation around 1500; in: Algazi, Gadi (eds.): Negotiating the Gift. PreModern Figurations of Exchange, Göttingen 2003, pp. 247–267. 32 Bachmann, Kurt/Carlebach, Emil: Kauf’ Dir einen Minister! Hintergründe zum FlickSkandal, Frankfurt a.M. 1985. 33 Fenster, Mark: The Transparency Fix: Advocating Legal Rights and Their Alternatives in the Pursuit of a Visible State; in: University of Pittsburgh Law Review 73 (2012), pp. 443–503.

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Kroeze, R. (2018). Lockheed (1977) and Flick (1981–1986). Anticorruption as a pragmatic practice in the Netherlands and Germany. In R. Kroeze, V. Ronald, A. Vitória, & G. Geltner (Eds.), Anticorruption in history. From antiquity to the Modern Era (pp. 279–292). Oxford. Leyendecker, H., & Helmut, K. (2000). die CDU und die Spenden. Eine Fortsetzungsgeschichte. In H. Leyendecker, M. Stiller, & H. Prantl (Eds.), Helmut Kohl, die Macht und das Geld (pp. 13–245). Göttingen. Lindemann, K. (2005). Korruption als Skandalierung informeller Einflusspolitik. Fallstudien aus der „CDU-Spendenaffäre“. Macmillan, G. (1955). Honours for sale. The strange story of Maundy Gregory. Mende, S. (2011). Nicht rechts, nicht links, sondern vorn. Eine Geschichte der Gründungsgrünen. Oldenbourg Verlag. Mollier, J.-Y. (1991). Le scandale de Panama. Narr, W. D., Roth, R., & Vack, K. (2000). Politische Korruption, korrupte Politik am Beispiel:“System Kohl”. Pflüger, F. (2000). Ehrenwort. Das System Kohl und der Neubeginn. Rathje, K., & Sacht, J. (2002). Das kleine Helmut-Kohl-Lexikon. Roth, J. (1995). Der Sumpf. Korruption in Deutschland. Sampson, S. (2010). The anti-corruption industry. From movement to institution. Global Crime 11(2010), 261–278. Schaupensteiner, W. J., & Bommarius, C. (1995). Filz und Speck. Ein Gespräch. In Korruption. Kursbuch 120 (pp. 36–44). Berlin. Schily, O. (1986). Politik in bar. Flick und die Verfassung unserer Republik. Schwarz, H.-P. (2012). Helmut Kohl. Eine politische Biographie. Sousa, L. de., & Larmour, P. (2009). Transparency international: Global Franchising and the War of Information against Corruption. In R. J. Burke, & C. L. Cooper (Eds.), Research companion to corruption in organizations (pp. 269–284). Cheltenham. Wirsching, A. (2006). Abschied vom Provisorium. Geschichte der Bundesrepublik Deutschland 1982–1990.

Jens Ivo Engels is a full professor of modern and contemporary history at the Technical University of Darmstadt since 2008. His research includes the history of corruption, transparency and patronage in the era of modernity, with a special focus on Germany and Western Europe since the late 18th century. He is the author of “Die Geschichte der Korruption” (2014) and “Alles nur gekauft? Korruption in der Bundesrepublik seit 1949” (2019). He also contributed to environmental history and the history of technical infrastructures. Since 2016 he is the spokesperson of the interdisciplinary research training group “KRITIS” (Critical infrastructures) in Darmstadt.

Party Financing in Germany: A Critique Hans Herbert von Arnim

Introduction Political parties in Germany are financed primarily from three sources: contributions from their members, donations and government grants. While membership fees are unproblematic; donations run the risk of giving the ‘big money’ an excessive influence on politics, causing democracy to take on plutocratic traits. In the case of public funds (as well as the rules as a whole), the parties concerned decide themselves in their role as legislator or budget-maker on the funds allocated to them. Controls and barriers are therefore essential. The Basic Law originally assumed that the parties should be financed purely by private sources and requires transparency. But in 1958, the Federal Constitutional Court—under the leadership of Judge Gerhard Leibholz—surprisingly declared state funding of the parties admissible. In 1966, however, the Court had to limit the rapidly soaring state subsidy to the reimbursement of campaign expenses and demand the legal regulation required by the Basic Law, so that in 1967 the “Party Act” was finally enacted. The judgment of the Federal Constitutional Court of 1992, which was handed down after various back and forth and is still relevant today, now allowes state funding in general, but provided for upper limits. In addition, the grants should reward the roots of the parties in society. Since then,

A previous version of the text has been published in 2019, in German, in the journal “Die Öffentliche Verwaltung”. H. H. von Arnim (B) Universität Speyer, Speyer, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_13

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state funding has been measured according to the votes obtained by the party in the previous election and up to a certain account to their membership fees and donations. Up to this amount, the grants are also tax-deductible. While the narrower party financing is regulated by the Party Act, there is no legal regulation for the party foundations, only authorisations in the budget. The financing of the parliamentary groups and the members of the Bundestag and the 16 state parliaments is determined by a federal law and 16 state regulations (including the respective public budgets), which, however, have considerable shortcomings, especially there are no upper limits. Therefore, this indirect state financing of the parties is now much higher than the public funds granted under the Party Act and marks considerable political and constitutional problems. With state money, the parties in their role as legislator or budget-maker are in the tempting position of being able to decide for themselves how much they will receive. When effective controls are lacking, there is no longer a limit, producing parties, remote from normal citizens and which no longer need the support of their base. The colloquial term is ‘self-service’. Applying to the legal definition of the status of the parties in general, this is particularly clear in the case of selfapproval of money. There is a connection between the procedure and the content of decisions: if the procedure is one-sidedly dominated by certain interests, then, in the absence of effective abutments, the results will generally also be skewed and inaccurate in terms of content. This is especially true if there are no clear substantive correctness criteria, such as the level of policy financing. The people’s representation has always been regarded as a protective authority against undesirable developments, as a controller which prevents abuses by other state powers. A completely different problem arises with the state financing of the parties. Now the fundamental question arises, that philosophers have been preoccupied with ever since Plato and Socrates: Who guards the guardians? In relation to our topic: Who prevents abuse by the House itself? The Federal Constitutional Court has assumed this role, at least ostensibly. The development of party financing is largely determined by its decisions. In other fields our legal system indisputably inhibits colliding interests of such sort. No official or judge may act when personaly involved. This is to prevent officials to pursue their own instead of the public interest, or the semblance of such decisions. In contrast, parliamentarians are allowed to act in self-allowance. Decisions are made by law or budget, and legislator is the Parliament. For this reason and because, regarding financial self-allowance, parties often decide in agreement and without opposition, there is an increased need for controls and ceilings.

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The Parliamentary Council did not yet have the resulting problems on its screen, so it did not take any precautions. It saw only the danger of major donations, which is why the Constitution obliges the parties to publicly account for the origin of their funds. State subsidies for political parties did not even occur to the Parliamentary Council. And there were no personal staff of members of parliament or party foundations at that time—with the exception of the Friedrich Ebert Foundation of the Sozialdemokratische Partei Deutschlands (SPD), founded in 1925. Hence, the legal framing is in the hands of the parties themselves, whose treasurers regularly guide the legislator in matters of party financing, and the Federal Constitutional Court which controls them. But whether this has led to an effective limitation or whether the court has actually created and exacerbated the problem in the first place is another question. This will come in for a detailed discussion later in the chapter. A great difficulty with the topic is, however, that party financing in Germany is extremely complicated and opaque. This may even be the reason why—despite the enormous scale that has accumulated, and despite many meaningless and unconstitutional regulations—the public has not yet gone on the barricades. Hardly anyone oversees it. This is also due to the fragmentation: party financing is regulated in many laws and a myriad of federal and state budgets. Numerous court rulings are also relevant. In short, there is an absolute lack of clarity and transparence. In view of the complexity of party financing, it is best to start with the history of its development.

Government Grants When, 70 years ago, the constitution was installed, its creator, the Parliamentary Council, had still assumed that the parties financed themselves exclusively from their own resources. State financing was considered dubious under constitutional law. It was all the more surprising when the Federal Constitutional Court, in a ruling of 1958, out of the blue, pointed out that the granting of state subsidies was permissible after all. The quote cam be translated as: “Since the holding of elections is a public task and the parties have a decisive role to play in carrying out this public task by virtue of the constitution, it must also be permissible to provide financial resources from the state not only for the elections themselves, but also for the political parties supporting the elections”. The court fatally did not mention any limits or controls. This happened in a case that concerned something quite different. The fateful clue bore the signature of Judge Gerhard Leibholz, who had drafted the judgment

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as a rapporteur and had always advocated the state financing of the parties, which perhaps also explains his repeated appointments to the court by the parties. Leibholz had relied on his rather absurd party-state doctrine, which equated parties with the people and the state, and which in the meantime has long since been abandoned, even by the Federal Constitutional Court itself. Backed by the power of authority, the governing parties immediately introduced the state subsidies. This was an absolute novelty in Europe in 1959, a European premiere so to speak—and would even have been a world premiere if Costa Rica and Argentina had not already had state funding for the parties. The SPD was still firmly against it at the time. Their member of the Bundestag, Hermann Schmidt-Vockenhausen, called the financing from the state treasury a “cancer disease that used to be limited to Central and South American countries”.1 And Herbert Wehner, the legendary chairman of the SPD parliamentary group in the Bundestag, complained that state financing demotivated party members and made the party leadership independent of their support.2 Nevertheless, the public funds increased by leaps and bounds from year to year, and much more was planned for the future. That is why the court had to limit them.

Substitute Parties as Recipients of State Funds But the parties circumvented this limitation by redirecting the state money on a large scale to their aid organizations in the Federation and in the States: • to their factions (this is how the “parties in parliament” are called) • and the personal staff of the Members of Parliament who were only created at that time. Since these payments are also sensibly counted as party financing, political science expands the narrow concept of so-called parties on the ground to include parties in public office. In the following I will speak of “substitute parties”. In this sense, the practice also sees the separation between parliamentary and partypolitical work as a “fiction”, which in reality has “long since disappeared”. The former Secretary General of the CDU, Heiner Geißler, openly admitted this years ago. Others speak of “faction parties” and thus emphasize the unprecedented

1 2

Deutscher Bundestag, 4th election period, session of 15.4.1964, page 5756. Page 5777/8.

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increase in the importance of the factions, which is fueled by the unlimited access to state resources. The subsidies to of party-related foundations were also greatly expanded, although the CSU’s Hanns-Seidel-Foundation had yet to be established, so that this party also received a recipient for the rising state money.

No Limitations Since the beneficiaries themselves decide how much money they receive and no limit is set here—in contrast to the parties in the narrower sense of constitutional law—the state payments to all three addressees escalated enormously, just as they did to the parties when they had not yet been capped.

Public Control Switched off “Self-service” has been (and still is) further facilitated by the fact that public control, i.e. criticism by the media, is undermined. Only one title in the federal budget is changed for increases. The change then goes under in the thousands of titles of the budget, particularly since it is made only shortly before the final discussion of the budget in the plenum of the Bundestag. Since everyone profits, hardly anyone has an interest in increased publicity to bring party and election financing up for discussion, even if the quantity granted increases excessively. The members of the Bundestag, for example, have secretly increased their ‘dynamic remuneration’ which is linked to the general income growth funds for employees for 2016 by e30 million (plus 17.6%). Another relevant case is the increase in global grants for party-related foundations by e16 million (plus 13.8%) in 2014. It is different for the actual parties. If their state money is to be increased, the party law must be changed. This requires a separate bill, two specially related public negotiations in the Bundestag plenum and the publication of the new amount in the Federal Law Gazette. It is therefore much more difficult for them to withdraw unfounded increases from public observation. However, even if the legal reservation (Gesetzesvorbehalt) is observed, there is no real guarantee of effective media criticism. Even with “blitz laws”, in which the Bundestag simply ignores the deadlines between the stages of the legislation, public control can be eliminated, especially if this happens on the eve of a major event such as the Olympic Games. In any case, the political groups, foundations

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and members of parliament have serious control deficiencies. They are able to approve state money without hindrance. This reminds us of the fairytale of the golden donkey, which can spit out gold at any time, at the request of its owner, from the front and the back. Konrad Schily saw things in a similar light. When he entered the Bundestag, he was astonished to notice that the money would fall “like manna from heaven”. And for the political scientist Wilhelm Hennis, the enormous expansion of the parliamentary groups, which, as he wrote, had been made possible by the “absolutely fantastic explosion” of state subsidies since the end of the 1960s, was historically speaking, a scandal.3 Hennis knew what he was talking about. For he himself had been a scientific assistant to the SPD parliamentary group in the Bundestag, in the early 1950s. Since there is neither a legal reservation nor a limit for groups and members of parliament’s staff, nor for the global subsidies to party foundations (to be used domestically), they have grown to around e 800 million a year at present. This is more than four times the e 190 million that political parties annually receive. Recently, the oversized Bundestag and several state parliaments had also contributed to a sudden increase in financial flows for parliamentary groups and members of parliament. Since the electoral law has not yet been adapted to the changed party landscape, the Bundestag alone has grown to 709 members. If the electoral law is not changed, the many overhang and compensatory mandates4 will probably inflate the next Bundestag in 1921 to over 800 members. Therefore, in September 2019 a large number of professors of public law appealed in an open letter to the Bundestag to reform the electoral law as soon as possible so that the Bundestag will again receive its planned size of 598 members at the next election. Of the e 800 million, payments for staff of the Bundestag alone account for more than half. This is practically unknown to the public. The fact that representatives of the people have employees who support them “in carrying out [their] parliamentary work” is okay. The problem is rapid, uncontrolled growth and inappropriate use for the parties. Each individual member of the Bundestag has over e 25,000 per month for personal employees alone (including employer social security contributions) and typically hires six or seven people. The 709 members

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Frankfurter Allgemeine Zeitung, 11.3.1996. In Bundestag elections, the voter has two votes. A party receives overhang mandates (Überhangmandate) if it wins more of the 299 constituencies with the first vote than it is entitled to according to the proportional ratio of its second votes. In order to bring the distribution of seats back into line with the ratio of the second votes won, the other parties receive compensatory mandates (Ausgleichsmandate).

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of the Bundestag have about 4500 personal employees. In addition, there are the employees of members of the state parliament. Parliamentarians have this employee fund in addition to their (dynamised5 ) taxable salary. This amounts to e 10,083 monthly at present. In addition, there is a (dynamised) tax-free sum of e 4418, their (also dynamised6 ) non-contributory pension scheme, which gives them a pension entitlement of e 252 per year as members of parliament, and some other financial advantages. A comparison with the many staff members of the US Congress, which at first glance may seem obvious, is not appropriate. Because Congress members—in the absence of a legislative initiative by the American President—also have to draft all the laws, whereas in Germany this is usually done by the government with its ministerial administration, which also brings in most of the laws. The flow of money has led to a shift in the financial and political weightage towards the substitute parties. With all that money, they can relieve the mother parties of some of their tasks. One example is the public relations work of factions, which they are allowed to do according to their self-made faction laws. In press releases and advertisements from the parliamentary groups, citizens automatically see announcements from the mother parties and attribute them to them. Also, the many thousands of employees, who mostly belong to the party of their deputy, are not only used for parliamentary work, but mainly in the electoral district. Their activities overlap all the more with those of their parties because their use is not subject to any control. The Member of Parliament, his staff and his party all share the same aspiration: to use their manpower for the good of the mother party. At the local and regional level, members of parliament form the backbone of the party organization, as a political scientist openly admits. In 2017, the Federal Constitutional Court issued a reminder that employees should be subject to a check. And late in 2019 the Bundestag named some activities that are forbidden to the staff.

Weakening of Other Controls as Well In view of the excessive increases, the controls, which would be double important in the Bundestag’s decisions on its own, are all the more lacking. As the Federal Constitutional Court has also pointed out, there are four possible ways of doing this: 5 6

Linked to the general development of nominal wages. Linked to the general cost of living.

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Firstly, control by the public Secondly, control by independent experts, Thirdly, control by the General Accounting Office, and Fourth, control by the Constitutional Court itself.

The public, which—according to the Federal Constitutional Court—represents the only effective control of parliamentary decisions on its own behalf, was practically undermined because, as already mentioned, the amount of approval is only written into the budget—at the very end of the budget procedure. That is why the title can be increased almost unnoticed. In its party financing ruling of 4 April 1992, the Federal Constitutional Court also recommended that the Bundestag be advised by independent experts. This also took place. In the summer of 1992, Federal President Richard von Weizsäcker set up a seven-member “Commission of Independent Experts on Party Financing” (of which I was also a member). Among other things, this commission stated that “the public money received by the political groups must be specified precisely by type and amount” in a special law. There is a “constitutional reservation of the law”. The amount of employee financing and foundation grants was also “subject to the proviso of the law, which requires the regulation of numbers in a substantive law separate from the budget”. The Commission’s urgent recommendations, most of which are still relevant today, have, however, been ignored by politicians and the Commission has instead been deliberately ridiculed. The treasurer of the SPD, Inge Wettig-Danielmeier, described the commission as a “layman’s party” that had misjudged the “real party structures” and accused the commission of adopting an exaggerated critical stance. Here the dilemma of expert commissions becomes quite clear: Either they speak according to the parties in which case their recommendations can lead to the problem of ‘contaminated’ expertise, or, on the other hand, the experts are really independent and recommend restrictions and controls to the parties, which are easily discredited by politicians. The General Accounting Office’s audit of the members of parliament’s staff is also undermined. The Bundestag simply denies access, and the Accounting Office allows it to put up with that. The Federal Court of Auditors does audit the parliamentary groups. However, the law passed by the parliamentary groups forbids it—contrary to the case law of the Federal Constitutional Court—to control the necessity of parliamentary group expenditure. He also keeps his objections in this regard under wraps—and also contradicts the requirements set by the Federal Constitutional Court. The parliamentary groups finally secured this secrecy by

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smuggling a restriction of the Freedom of Information Act into an amending law in 2013. Thus, the Federal Constitutional Court remains as the controlling organ. Since its attempts to activate other counterweights were disregarded, one might expect the court to carry out the job itself. But that is not the case. This raises the question for the Federal Constitutional Court—and here in particular: Who guards the guardians? As we have seen, the court itself opened the door to state party financing. Later it did not oppose the excessive state financing of the parliamentary groups, the party foundations and the members of parliament. It neither required limits nor controls. In the proceedings involving fractions or foundations, the court has been holding back on the question of whether a reservation of the law is constitutionally necessary. In other respects, too, it rejected a limitation of the substitute organisations of the parties on legal grounds and decided without public trial that it would not decide. Controlling party financing, the Constitutional Court—despite its independence guaranteed by the Constitution—often depends on the parties. Thus, the Bundestag (that is, the parties controlling it) grants the court the necessary public funds. In addition, the Bundestag is the master of the Federal Constitutional Law, which determines the position of the judges and the procedural sequence. Above all, however, the parties have completely drawn the election of the judges to themselves. These must be elected by a two-thirds majority in order to prevent politically unilateral interests. However, this is of no use when it comes to areas in which the parties in the Bundestag and the Bundesrat agree, as is often the case with the funding for parties, parliamentary groups, etc. and with the weakening of the necessary controls. Then the problematic self-decision of the parties also has an impact on the election of judges. Of course, the Second Senate of the Court, which is responsible for policy financing, also has other issues to deal with. But the raising of one’s own money and other rules of power, such as the election law and the practice of staffing offices, are of particular importance for the parties and are therefore likely to play a special role in the selection of judges. All this makes it more difficult for judges to take a stand against the parties on fundamental issues. The US Supreme Court has the authority to reject a decision in particularly sensitive areas from the outset, also in order to avoid “excessive political battles”. The German Federal Constitutional Court has no such legal authority. However, the circumstances that lead the court to exercise restraint are not different here.

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Fully Funded State Parliaments In the course of a reform triggered by the finance decision of the Federal Constitutional Court in 1975, the parliaments of most German states declared themselves full-time parliamentarians and raised their salaries sharply. This met with harsh criticism from the then Federal President Walter Scheel and the rapporteur of the financing judgement: The state parliaments had misunderstood the verdict. Even insiders, such as state parliament directors, observe that state parliament mandates normally require only part-time employment. The overpayment also benefits their parties, in which the deputies usually also perform functions at the various organisational levels. Full alimentation allows MPs to do party work day in, day out, as former Bundestag President Kai-Uwe von Hassel put it. In Rhineland-Palatinate, 2017 even saw an enormous increase in the diet with a fraudulent argumentation: It was justified with the claim that the state parliament had to keep up with the development of civil servants’ salaries over the last 20 years. The truth is that in the past the salaries of RhinelandPalatinate state parliamentarians had grown just as strongly as the salaries of civil servants. Absurdly, public control is also weakened by the fact that a right-wing party founded in 2013, the “Alternative für Deutschland (AfD)”, is now represented in all German parliaments and usually votes against increases, including in Rhineland-Palatinate. Many journalists then seem to think three times whether they will accept the criticism of the AfD, parts of which were turned into a test case by the Office for the Protection of the Constitution, and thus, as they fear, give this party ‘political tailwind’. For those who denounce grievances, which are also criticized by the AfD, the classic saying therefore applies: “God save me from my friends, with my enemies I can deal alone”.

Back to the Actual Parties Let us now take a closer look back at public financing of parties in the sense of the Political Parties Act. The Federal Constitutional Court has set up barriers in order to limit them halfway and to keep them close to the citizens, but some of the parties do not comply with them. First, the court has set an absolute upper limit: The state financing may be adjusted to the price development. However, further increases are only permissible if the existing situation undergoes a “drastic change”. But in June 2018 the

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CDU/CSU and the SPD passed a “Blitz law”7 to increase state party funding from e 165 million to e190 million p.a. Thus the absolute upper limit was exceeded by far. That could have been a great excitement. The increase, however, was made immediately before the football World Cup. One of the reasons given for the raise was digitalisation, which can hardly justify crossing the border. In fact, the point was that both parties had lost considerably in the 2017 federal elections and therefore received much less state money than before. After all, one criterion for the calculation is the number of voters. Since the subsidy mainly goes to the party headquarters, the reduction was particularly painful for the party leaders. One wonders what may have prompted the coalition to fight through such a constitutionally dubious regulation against opposition, especially since it was foreseeable that the opposition parties would sue, which then happened. Perhaps the grand coalition is hoping for a softening of the court’s former standards. After all, with the election of particularly close-to-party constitutional judges, like the former Prime Minister of the Saarland, Peter Mueller, the parties achieved that the court rejected the examination of the unconstitutional state financing of parliamentary groups, foundations and staff of deputies for formal reasons. Have such “successes” in eliminating effective controls caused the Bundestag to hope for a concession also with the excess of the upper limit? If, however, the Federal Constitutional Court declares the increase unconstitutional at some time, the parties can—as in previous rulings—retain what they have obtained so far. The attempt of the ruling parties to extend the limits of what is permitted and to test the court’s willingness to resolve conflicts will therefore be “worthwhile” in any case. Secondly, the Federal Constitutional Court has established a relative upper limit: State financing must not account for more than half of total income of each party. However, the limit is largely invalidated by the fact that the court does not include the tax relief on membership fees and donations in the state share, nor does it include “party taxes”, even though they are indirectly financed out of the diet. Otherwise, the 50% limit would be far exceeded by all parliamentary parties. Smaller and newly emerging parties with few members, but some voter approval, however, were threatened by the upper limit to take some of their state funding. They therefore fell into the trick of selling objects, for example gold, to increase private income so as to exceed the relative limit. Because the incomes

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“Blitz laws” or “Lightning laws” I call laws that whip the parties through Parliament at lightning speed—if possible by passing the public—in which they do not observe the normally observed deadlines between the various stages of the legislation.

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were calculated on a gross basis, so the necessary expenses were not deducted. The legislator has now closed this gap in the party law. Thirdly, the court has limited state subsidies for contributions and donations. It may only be made for contributions in an amount that can also be afforded by recipients of “average income”. In fact, however, the Bundestag also favoured higher contributions with a 1994 law and thus far exceeded the limit. The main motive for this was that the treasurers feared that otherwise the payment of party taxes would be refused, which could be considerable for the SPD and the Greens, for example. Today, the Bundestag subsidises grants of up to e 3300 through a state subsidy of 45% to the parties, and the donor is again subsidised by tax purposes (also up to e 3300 for married couples).

Donations Prohibitions Contributions to parties and members of parliament, which are called “donations”, are unlimited in Germany. This applies even if they originate from corporations and even if they are large donations. No civil servant is allowed to accept any money or other amenities. In contrast, one can deliver a whole bagful of money to a delegate or a party, without contravening appropriate laws. Here again the problem arises that the parliament itself decides on the relevant laws. For decades delegate bribery was not even illegal.8 Now, there is a criminal offence, § 108e of the Criminal Code. But it is so narrowly formulated that it is hardly applicable to any Member of Parliament. The parties are prohibited from accepting donations “recognizably granted in expectation of or in return for a certain economic or political advantage”. However, this is hardly ever provable. In the 1990s, for example, entrepreneur Karl Ehlerding donated the equivalent of almost three million euros to the CDU, which was mentioned in the annual report. In the same year, a group of companies in which he had a stake was awarded the contract to purchase 30,000 railway worker apartments, even though a competitor had bid more. A CDU minister was responsible. There were investigations, but they were “much ado about nothing”

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I still remember a detective in Constance very well. He quit his job because, as he said, he felt morally incapable of enforcing criminal laws that might have been passed by corrupt parliamentarians.

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Transparency The Constitution merely demands that the origin of the funds must be published. This is based on the experience that in the 1920s and 1930s the National Socialists and other parties hostile to democracy were secretly financed by the economy. According to the party law, donations of more than e 10,000 with the name and address of the donor must therefore be mentioned in the statement of accounts. This should enable voters to identify the donors behind the parties and draw their own conclusions. Since the publication of the report can take one or two years, donations over e 50,000 have to be published immediately. However, there are always donors who do not want to be named at all. In 1999 former German Chancellor Helmut Kohl confessed that he had collected a good DM 2 million, promising to the donors to keep their names secret. Kohl had to resign as honorary chairman of the CDU and his party had to pay a million DM fine to the Bundestag. But Kohl neutralized this by raising DM 6 million for his party with an open donation campaign (to which he himself contributed DM 700,000). The television magazine Panorama reported another case in 2003: Daniel Hechler and Adrian Peter, two journalists, had pretended to be potent businessmen and offered large donations to parties in Bavaria that were subject to publication requirements—provided that they remained anonymous. Treasurers of the CSU and the FDP had allegedly responded. The co-chairwoman of the AfD, Alice Weidel, was involved in a donation affair in 2018. A trustee in Switzerland had transferred a total of e 150,000 to her local party in Constance. Whether the donation was made by foreigners, which is forbidden, and whether the donation, which was later repaid as more than e 50,000 should have been reported in time, is questionable. Another paragraph of the party law, that illegalizes the concealment of party finances, is at stake. Public prosecutor’s office and Bundestag president investigate. How to avoid transparency was already demonstrated in the mid-1990s by a supporter of the later Chancellor Gerhard Schröder. Before the Lower Saxony state elections of 1998, he published full-page advertisements in all Lower Saxony newspapers in favour of Schröder, then Primeminister of Lower Saxony, who allegedly knew nothing about who organized and paid for the campaign. Schröder won the election by a considerable margin and became challenger to Chancellor Kohl. Later, it turned out that Carsten Maschmeyer had paid for the DM 650,000 ad series, a billionaire primarily famous for marrying the actress Veronika Ferres. The people behind such campaigns do not yet have to be made public. This gap in the party law, which should have been closed long ago, still exists. The AfD has also profited from this in its election campaigns of recent years, by carrying

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out campaigns worth millions in its favour, but allegedly without its knowledge, whose donors remained in the dark.

Urgent Reforms There is a whole series of sensible reform proposals, for example from Transparency International Germany or from Lobby Control. For example, donations from corporations should be prohibited, because there are always people behind them. Large donations should also be banned. Anyway, some corporations stopped their donations. Obviously, they switched over to party sponsoring, which up to now they don’t have to make public. Nevertheless, it seems important that a report should be presented every year on all funding. Such a report would clarify the connection between the many pieces of the jigsaw puzzle of party financing and provide greater transparency—which is precisely why the parties are probably reluctant to do so. Furthermore, the publication limits for donations must be lowered. It makes no sense that only donations over 50.000 must be published immediately. Smaller donations, starting from e 10,001, which are made for example before elections, appear only in the report, which is often published only one and a half years later. That contradicts the sense of the publication. Donations under e 10.000 (which must not be published so far) can have a major influence, if they go to a local party organization or to a delegate, this should not be withheld from the public. Also, the control, which up to now was mainly in the hands of the President of the Bundestag and auditors, should be improved. Because the independence of both is more than questionable. The Council of Europe’s Anti-Corruption Unit (GRECO) has repeatedly made similar recommendations. Only recently it has reminded us that many of its proposals have been delayed for years and that Germany lacks the will to reform.

Party Taxes Party taxes also constitute a considerable source of income. These special contributions must be paid by parliamentarians and other officials in addition to their normal membership fees, and no one can evade them if they do not want to risk the support of their party and thus their political career. Paradoxically, party taxes have to be paid out of their diet to their parties that take advantage of their dependence on the party, although the emolument is intended to ensure the

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independence of the elected representatives. That is why the Commission of Independent Experts on Party Financing considers such obligations unconstitutional. However, the fact that these highly problematic payments are awarded a double financial reward, through state bonuses for the party and, for public officials, through tax waivers, is a bottomless pit. The statutory support intends to recompense the rooting in the population too financially. In the case of party taxes, however, there can be no word of being rooted in the population, so that their support is unconstitutional, even absurd.

Government Share Almost 100 Percent Considering that membership fees and party taxes as well as smaller donations are tax-privileged up to 50%, the party taxes payed of the compensation and the giant “substitute parties” are almost entirely subsidized by the state, the result is a state quota of the parties that tends towards 100%.

The Federal Constitutional Court as Guardian of Competition When they decide on their own behalf, parties tend not only to have more and more state money and less and less control, but also to use their legislative power to gain advantages in political competition, i.e. to keep competing parties as far away as possible from state money. The Federal Constitutional Court has therefore always had to ensure fair competition. So, it had forced the Bundestag to participate smaller extra-parliamentary parties in state financing. The parties in parliament had originally reserved their direct state financing for themselves. The Federal Constitutional Court had to collect this regulation, so that smaller parties today also participate in state financing if they have attained at least 0.5% in Bundestag or European elections or at least 1% in a Landtag election. However, their disadvantage due to the enormously high replacement financing of the parliamentary parties (in which extra-parliamentary parties do not participate) was not taken into account. Voter communities (Wählergemeinschaften) at the municipal level that usually are not parties are excluded from party financing anyway. When the Bundestag in 1955 (against the votes of the SPD) issued an enormous tax benefit for donations to political parties, which was also unique in international comparison, the regulation excluded extra-parliamentary parties from the tax benefit from the outset. In addition, the regulation discriminated against parties such as the SPD, as large donors hardly sympathized with this party. The

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Christlich Demokratische Union/Christlich Soziale Union and the Freie Demokratische Partei, on the other hand, were able to benefit from the big money because of their economic friendliness. The Federal Constitutional Court therefore declared the regulation unconstitutional in 1957 and 1958—due to a violation of the principle of equality which is to be strictly applied here—and repealed it. The court also had to enforce equal rights for free voter communities.

Overall Evaluation What is the overall evaluation of the development? The parties themselves decide on party financing and their legal regulations. The same problem can also be seen in the electoral law and in the disposal of state offices of all kinds. A political class has emerged that seems to be primarily concerned with maintaining and improving its financial and other status. Since most of the parties are in agreement political scientists also speak of a development towards “cartel parties”. This makes effective controls all the more necessary. But the parties try to weaken or completely eliminate these. Here, too, they ultimately act on their own behalf. This is where the classic constitutional question comes in: Who guards the guardians? The resulting extreme party state, in which the parties rule the state and the entire public life and not only participate in the political will-formation of the people, as stated in Article 21 paragraph 1 sentence 1 of the Basic Law9 is probably one of the reasons for the creeping loss of trust that our democracy suffers from. Excessive state funding and the simultaneous approval of millions in donations reduce the parties’ dependence on the grassroots and remove them from it. The impression that some ordinary citizens get of the parties that their own shirts are more important than their public welfare touches on confidence in democracy and fuels disenchantment with politicians. The Federal Constitutional Court may have had great merits overall, but in terms of party financing it has played an unfavourable role. When it came to averting the danger of an uncontrolled ever-more, preventing the crossing of borders and creating and enforcing the necessary bans, the court largely failed. This also applies to the Court of Auditors and to the Councils of Experts, where the problem of contaminated expertise can be particularly evident. With regard to party financing, Stefan Ruppert, parliamentary director of the FDP parliamentary 9

von Arnim, Die Hebel der Macht und wer sie bedient. Parteienherrschaft statt Volkssouveränität, 2017.

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group in the Bundestag, in September 2019 wrote in the FAZ: “Those who make unjustified use of [their power to serve themselves] endanger our order to the same extent as those who attack it from the right and left. The German financing of political parties and parliamentary groups depends on clever self-restraint.”10 Unfortunately, however, this self-restriction of the parties cannot be relied upon. This is made quite clear by developments to date. Often attempts are made to subsume abusive “self-service” of the parties and the usual prohibitions. Is it a case of corruption when parties help themselves? In a criminal sense: no. The legislator has taken care of this, i.e. the parties in parliament. One must therefore free oneself from the self-made definition of the parties. This is why Transparency International has defined a general concept of corruption that is independent of those affected and that the social sciences have adopted. Accordingly, corruption is “the abuse of a position of power for private gain”. Do the parties fall into this category if they unjustifiably take the money, as James Madison, a father of the American constitution, has described the danger of parliamentary decisions on their own behalf? The questionable increase in public funds for parliamentary groups, members of parliament and party foundations is certainly an abuse of a position of power. Corruption is usually a bilateral relationship. But so-called auto-corruption also falls under the term. But is the abuse also for private gain? After all, it is for the benefit of the parties, and these are, legally speaking, organisations under private law. The rule of law (Rechtsstaat) says that no man or woman is above the law. But how is it to be judged when one does not need to break any laws to enrich oneself because one can make them by himself or herself? How is it to be judged if one can free oneself from the principles of the rule of law, defuse the control institutions and take control of the controllers? It is a matter of conflicts of interest on a huge scale. That is also at the heart of the ban on corruption and abuse of authority. It is about using entrusted power to the advantage of oneself. In any normal profession which is responsible for looking after the interests of others, it is forbidden and even punishable to abuse one’s special powers and instead promote one’s own interests. In the case of party financing, however, all this is tolerated. Is the situation here perhaps similar to that of “systemically relevant” banks? Are the parties “too big to fail”, and too big to admit mistakes, fix them and think about remedies?

10

Stefan Ruppert, Wie Wahlergebnisse nivelliert werden, Frankfurter Allgemeine Zeitung, 7.9.2019, p. 10.

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Remedies that could be considered are, for example • That, changes to party financing are only permissible if they only apply from the next parliamentary term, as James Madison had already suggested for parliamentary allowances, where Parliament also acts on its own behalf.11 Then the decision is discussed in the election campaign, which should have dampening repercussions on the decisions of Parliament. • Direct democracy could also be an effective counterweight, as can be seen in Switzerland, where there is practically no state-funded party financing.

Hans Herbert von Arnim studied law and economics in Heidelberg. After the state examination in law and his degree in economics, he did his doctorate there in labor law on the forfeitability of company pension entitlements. From 1968 to 1978 he also gained political experience as head of the Karl-Bräuer-Institut of the Association of Taxpayers. In 1976 he was called to a chair in public welfare and group interests at the University of Regensburg for constitutional and administrative law, finance and tax law. After a professorship in Marburg, he held the chair for public law and constitutional studies at the German University for administrative sciences in Speyer. 1993-1995 he was rector of the university and at that time also judge at the constitutional court of Brandenburg. He retired in 2005, but still regularly holds “democracy conferences” in Speyer, now 17 in number, which are published in conference proceedings.

11

See for example Leo Wieland, Mit Madison wider die Selbstbedienung bei der Diätenerhöhung, Frankfurter Allgemeine Zeitung vom 22.5.1992.

Criminal Liability for Corruption in German Parliaments Kristina Peters

Introduction Since the 1990s, the fight against corruption has been a very popular topic in German criminal law. However, the discussion is hardly ever related to parliaments, but almost exclusively concerns bribery in business dealings and among public officials. When it comes to elected representatives, there is a complex tension between a broad political freedom of action and the integrity required specifically by article 38 of the German constitution. This distinguishes elected representatives from public officials: While public officials should make their decisions as nonpartisan a manner as possible, parliamentarians are meant to be rooted in society, and to be in contact with the population they represent and to keep that connection. In other words, parliamentarians are supposed to be influenced. Also, they are elected to represent certain interests—that is, they should act in an interestbased manner. Therefore, there is a particular danger of hindering their day-to-day work by excessively threatening punishment.

K. Peters (B) Ludwig-Maximilians-Universität München, Munich, Germany E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_14

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This article will present how German criminal law tries to strike a balance between these conflicting notions. It will focus on the most important offense in relation to political corruption in Germany: The bribery of elected representatives, regulated in section 108e of the German Criminal Code. This section has mostly been overlooked in academic writing.1 One reason for this may be that the law addresses only certain individuals: The members of the German federal parliament (Bundestag), the state parliaments (Landtag) and other directly elected representation of the people and those interacting with them. In addition, some are convinced that these people are particularly law-abiding citizens and that corruption simply does not occur. And if it were to occur, bribery is still a crime without immediate victims, so offences would rarely come to light.2 Therefore, section 108e is an offence that is very difficult to investigate whilst affecting only a small fraction of the population and has so far been much neglected by criminal law science. My focus will be on three questions: First, what is corruption—and in particular political corruption—from the perspective of criminal law? Second, how often do such crimes occur? And third, what is punishable under the current criminal law against bribery?

1

Exceptions are e.g. Müller, Bockemühl/Gierhake/Müller/Walter/Knauer (Ed.), Festschrift Heinschel-Heinegg, 2015, p. 325; Eckhardt, Novellierung der Abgeordnetenbestechung, 2016; Busch, Ist die strafwürdige Beeinflussung und Beeinflussbarkeit von Bundestagsabgeordneten durch § 108e hinreichend geregelt?, 2017 and Peters, Korruption in Volksvertretungen: Eine Untersuchung zu ihrer strafrechtlichen Bekämpfung unter besonderer Berücksichtigung des § 108e StGB, 2017, focusing on the new version of the law implemented in 2014 and Epp, Die Abgeordnetenbestechung - § 108e StGB, 1997; Becker, Korruptionsbekämpfung im parlamentarischen Bereich: unter besonderer Berücksichtigung des § 108e StGB sowie der Verhaltensregeln des Bundestages, 1998; Heisz, Die Abgeordnetenbestechung nach § 108e StGB, 1998; Überhofen, Korruption und Bestechungsdelikte im staatlichen Bereich, 1999; Schaller, Strafrechtliche Probleme der Abgeordnetenbestechung, 2002; Heinrich/Hilgendorf/Mitsch/Sternberg-Lieben (Ed.), Festschrift Weber, 2004, p. 217; Härtl, Wahlstraftaten, 2006; Kalbfell, Kommunale Mandatsträger und Wahlbeamte im Spannungsfeld zwischen Kooperation und Korruption – Eine Untersuchung der Reichweite von §§ 331 ff. StGB, 2009; Hartmann, Reformmodelle zur Abgeordnetenbestechung, 2013, focusing on the old version implemented in 1994. 2 Beck/Nagel, Graeff/Grieger (Ed.), Was ist Korruption?, 2012, p. 31 (37); Rose-Ackerman, 120 Yale L.J. Online 2010, 125 (125).

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Political Corruption in Criminal Law What is corruption—specifically political corruption—from the perspective of criminal law? In criminal law science, this question is the subject of ongoing discussion. So far, the term “corruption” is not a legal term in the Criminal Code. There is no element of “corruption” or “corrupt” behaviour in the current law. Nevertheless, the term has found its way into the scholarly discussion: Legislators have stated several times that new laws aim to reduce corruption, making it clear that it is considered punishable.3 I follow a suggestion of Klaus Volk, who defines a corrupt person as someone who is entrusted with power, violating the rules which exist for the exercise of this power, to his or her own benefit.4 In addition to the “economic phenotype”, the term has a “socio-ethical dimension”, meaning that the behaviour is morally condemned.5 This understanding of corruption is reflected by criminal law science’s interpretation that the core of all bribery offenses is a so-called “unjust agreement” (Unrechtsvereinbarung).6 Elected representatives are entrusted with power, but the question is which rules exist for the exercise of this power. Regarding the most important case, bribery, the answer is quite simple: Elected representatives are not allowed to take orders for performing specific acts or omissions in the exercise of their mandate. For members of the Bundestag, this is a consequence of article 38 section 1 sentence 2 of the German constitution which obliges them to make all decisions connected to their mandate according to their beliefs.7 Members of other representative bodies are governed by similar provisions.8 So, although there are far fewer responsibilities for elected officials than for public officials, they are not exempt from all responsibility. 3

Bundesgesetzblatt (Federal Law Gazette) 1997 I, p. 2038; 1998 II, p. 2327; 2015 I, p. 2025; 2016 I, p. 1254. 4 Volk, 61. Deutscher Juristentag 1996, L 51, II.4, Volk, Gössel/Triffterer (Ed.), Gedächtnisschrift Zipf 1999, p. 419 (423); many scholars approve of this definition, e.g. D¨olling, Zeitschrift für die gesamte Strafrechtswissenschaft (ZStW) 112 (2000), 334 (345); Ambos, Juristenzeitung (JZ) 2003, 345 (349); Knauer/Kaspar, Goltdammer‘s Archiv für Strafrecht (GA) 2005, 385 (393, 394). 5 Volk, Gedächtnisschrift Zipf (Fn. 3), 419 (421). 6 Ambos, Juristenzeitung (JZ) 2003, 345 (349); Knauer/Kaspar, Goltdammer‘s Archiv für Strafrecht (GA) 2005, 385 (393, 394). 7 E.g. BeckOK/GG-Butzer, 41th ed. 2019, Art. 38 Rn. 94, 96; Maunz/Dürig/GG-Klein, 87. EL 2019, Art. 38 Rn. 195; Münch/Kunig/GG-Trute, 6th ed. 2012, Art. 38 Rn. 88, 89; Sachs/GGMagiera, 8th ed. 2018, Art. 38 Rn. 46f. 8 E.g. § 43 I Gemeindeordnung Nordrhein-Westfalen.

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Frequency of Occurrence Is bribery of elected representatives actually a problem in Germany? It can be safely assumed that there are incidents of bribery in Germany—although this is repeatedly questioned by parliamentarians9 (while some legal scholars argue that a “do ut des” is just part of everyday political life and should not be banned10 ). It is in fact a problem that there are no reliable figures on political corruption. The reason for this is quite simple: No criminal law against bribery of elected representatives existed from 1954 until 1994 and therefore nobody was convicted during this period of time.11 Although there was a broad consensus in the Bundestag regarding the need to punish bribery among elected officials,12 parliamentarians could not agree on the scope of criminal liability for decades. It was not until 1994 that a criminal offense law was finally passed.13 According to the new section 108e, “buying or selling” a vote was punishable—a phrasing that was actually dating back to the French code pénal of 1810 and was difficult to handle.14 Until this phrasing was finally abolished in 2014, there was great uncertainty amongst courts and legal scholars on the scope of criminalisation. At the same time, the law was not very relevant: Between 2006 and 2014, a total of three persons were convicted under this law.15 Unfortunately, for the years of 1994 to 2005 there is only a breakdown regarding the group of sections 107 to 108e of the Criminal Code. However, the figures for all offences in this group are remarkably

9

E.g. Winkelmeier-Becker, Bundestag Protokoll (minutes of the Bundestag) 18/15, P. 1119 (A); Lischka, Bundestag Protokoll 18/18, P. 1382 (D). 10 Bockelmann, Niederschriften u ¨ ber die Sitzungen der Großen Strafrechtskommission, vol. 13, p. 271; Barton, Neue Juristische Wochenschrift (NJW) 1994, 1098 (1098); Ransiek, Strafverteidiger (StV) 1996, 446 (452); Zieschang, Neue Juristische Wochenschrift (NJW) 1999, 105 (107); van Aaken, Zeitschrift für ausländisches öffentliches Recht und Völkerrecht (Za¨oRV) 2005, 407 (443); H¨artl, Wahlstraftaten, 2006, p. 205. 11 Bundesgesetzblatt 1953 I, p. 735, 740. 12 Bundestag Drucksache (legislative materials of the Bundestag) 1/1307, p. 41; Bundestag Protokoll 2/149, p. 3. 13 Bundesgesetzblatt 1994 I, p. 84. 14 Regarding the history of section 108e StGB see Peters, Korruption in Volksvertretungen, 2017, ch. 1. 15 German Federal Statistical Office (Statistisches Bundesamt), Fachserie 10 Reihe 3, 2008, p. 26, 27; 2010, p. 26, 27; 2011, p. 26, 27; no convictions in 2006, 2007, 2009, 2012, 2013 and 2014 (https://www.destatis.de/GPStatistik/receive/DESerie_serie_00000107).

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low as well: only 57 people were convicted, 11 received a prison sentence.16 Although the German Police registered a higher number of investigations, it was not as high as one would expect: According to the yearly report on corruption Bundeslagebild Korruption published by the German Federal Criminal Police Office (Bundeskriminalamt) since 2000, 98 offences were registered for section 108e from 2000 until 2014.17 Implementing a new version of section 108e in 2014 has not really changed much so far: One single conviction was registered from 2015 up to and including 201818 and the German Federal Criminal Police Office registered 58 offences from 2015 until 2018.19 It seems safe to assume that there are quite a few unreported cases. The truth may lie somewhere between these statistics and the frequent press reports on corruption especially at the local level. One reason why the number of convictions under the new law is so low could be that another new law was implemented in 2014: According to section 120b German Judicature Act (Gerichtsverfassungsgesetz), all cases concerning section 108e must be brought before the Higher Regional Court (Oberlandesgericht).20 This may constitute a higher emotional threshold for prosecutors to bring bribery cases forward. Since so little is known about parliamentary corruption, a survey about corruption among parliamentarians of the Bundestag and two Landtage was carried out by the author in 2014.21 However, the sample was only a small one and therefore 16

German Federal Statistical Office, Fachserie 10 Reihe 3 (Fn. 15), 1994, p. 17, 68; 1995, p. 19, 70; 1996, p. 19, 70; 1997, p. 19, 70; 1998, p. 19, 70; 1999, p. 19, 70; 2000, p. 19, 70; 2001, p. 21, 72; 2002, p. 20, 77; 2003, p. 23, 82; 2004, p. 27, 86; 2005, p. 27, 86. 17 Bundeskriminalamt, Bundeslagebild Korruption, 2000, p. 13, 17, 19; 2001, p. 16, 21, 24; 2002, p. 4, 18, 20; 2003, p. 27; 2004, p. 24; 2006, p. 7; 2007, p. 8; 2008, p. 8; 2009, p. 8; 2010, p. 9; 2011, p. 9; 2012, p. 4; 2013, p. 6; 2014, p. 4; no specific figures are given for 2005 (10 offences registered in „politics“, p. 7, which could concern § 108b instead of § 108e, p. 1) (https://www.bka.de/DE/AktuelleInformationen/StatistikenLagebilder/Lagebi lder/ Korruption/korruption_node.html). 18 German Federal Statistical Office, Fachserie 10 Reihe 3 (Fn. 15), 2016, p. 26, 27; no convictions in 2015, p. 26, 27, 2017, p. 26, 27 and 2018, p. 26, 27. Based on the statistical material, it is not possible to say whether convictions are based on the new or the old version of Section 108e. 19 Bundeskriminalamt, Bundeslagebild Korruption (Fn. 17), 2015, p. 4; 2016; p. 6; 2017, p. 4; 2018, p. 4. Based on the statistical material, it is not possible to say whether registered offences are based on the new or the old version of Section 108e. 20 Bundesgesetzblatt 2014 I, p. 411. 21 The survey was carried out in the course of the author’s dissertation; however, it should be noted that the thesis had a theoretical approach, not an empirical one, and the author is no expert in survey methodology.

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not representative for scientific analysis. It would be desirable if a wide-ranging, representative survey was conducted in the future, ideally including local elected representatives as well. As long as no such surveys exist, the information gathered in 2014 might serve as an indication even though evaluation of this information requires caution when it comes to its representativeness. Questionnaires were sent to all members of the Bundestag, the Landtag of Bavaria and the Landtag of North Rhine-Westphalia—a total of 1048 persons— of whom 146 (around 14%) participated in the survey.22 Unsurprisingly, 98% denied that they have ever been offered any monetary benefits in return for voting according to the interests of a benefactor, while 2% did not give any information. On the other hand, however, only 45% were certain that no decision of their respective parliament was influenced by such advantages, while 31% considered it possible.23 More than half, 53%, were of the opinion that behaviour according to “parliamentarian customs” should be exempt from criminal liability for bribery.24 It is also notable that 71% did not consider the statement in article 38 of the German constitution or corresponding provisions25 to be binding them to their conviction. Only 16% answered this question with “yes”. As numerous additional remarks included in the responses to the surveys indicate, this is often due to the participants’ understanding of the so called “discipline of the parliamentary group” and the distinction between “questions of conscience” on the one hand and “free” decisions on the other. It is also noteworthy that there were additional comments on the questionnaires revealing that many participants did not know that a law criminalising bribery of parliamentarians existed before 2014.26 It is quite clear that—even though there are few reliable figures—corruption indeed does occur in German parliaments. Although there is uncertainty about the exact frequency, it can nevertheless be stated that the existence of stable democratic structures is not a perfect safeguard. By taking a closer look at those structures, it becomes quite clear why: Those structures are inherently vulnerable regarding corruption. On the one hand, it is necessary for the political decision-making process that elected representatives form parties and parliamentary groups. On the 22

Questionnaires entailed closed as well as open questions and were sent to all members of the respective bodies by email; participants could choose to either respond by email or anonymously by mail. 23 24% did not make a statement. 24 35% did not consider this necessary, 12% did not make a statement. 25 13% did not make a statement. The members of the Landtage were asked this question referring to the provisions covering their respective parliament (article 13 par. 2 of the Bavarian constitution and article 30 par. 2 of the North Rhine-Westphalian constitution). 26 For more details on the survey see Peters, Korruption in Volksvertretungen 2017, pp. 617.

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other hand, this can promote a culture in which parliamentarians “sell” a vote for a public office or a favourable spot on the party ballot during the next election. German law allows elected representatives to take employment outside the parliament. This can strengthen the independence from the party and thus limit the effects mentioned—but at the same time it can lead to influence of the businesses and lobbying organisations. Finally, party funding through donations prevents elected representatives from becoming “state officials” and strengthens their rooting in society, but can also lead to a problematic influence of strong economic agents.

Criminal Liability In the new millennium, numerous demands were made for an extension of criminal liability: Not only by Transparency International,27 but also by institutions such as GRECO28 and last but not least German judicature29 and criminal law science.30 In addition, Germany committed itself in several international agreements to extend criminal liability.31 It took some time, but Germany finally fulfilled these requirements with a new law against bribery passed in 2014.32 Until now, there are very few court decisions and little scholarly literature on the new version of section 108e. The existing literature mostly raises questions about the scope of the law whilst much remains unclear. 27

Transparency International Deutschland e.V.: Eckpunktepapier Abgeordnetenbestechung, 11.03.2008. 28 Group d’´ etats contre la corruption, see e.g. GRECO Evaluation Report, Third Evaluation Round, Theme 1, 04.12.2009, par. 107, 124 iii.; GRECO Compliance Report, Third Evaluation Round, Theme 1, 09.12.2011, par. 15, 23, 24, par. 73 (https://www.coe.int/en/web/greco/eva luations/germany?). 29 BGH NJW 2006, 2050 (2055), Rn. 45 to 47. 30 E.g. MüKo/StGB-M¨ uller, vol. 3, 2nd ed. 2012, §108e Rn. 6, 7; SK/StGB-Rudolphi, 53. Lieferung 2001, § 108e Rn. 2, 3; Barton, Neue Juristische Wochenschrift (NJW) 1994, 1098 (1100); D¨olling, 61. Deutscher Juristentag (DJT) C 83 f., 113; Schaupensteiner, Neue Zeitschrift für Strafrecht (NStZ) 1996, 409 (415); von Arnim, Neue Zeitschrift für Verwaltungsrecht (NVwZ) 2006, 249 (252 f.); Peek, Zeitschrift für die gesamte Strafrechtswissenschaft (ZStW) 120 (2008), 785 (808 f.). 31 OECD Convention on combating bribery of foreign public officials in international business transactions, 21. November 1997, published in Bundesgesetzblatt 1998 II, p. 2329 f; Council of Europe, Criminal Law Convention on Corruption, 27.1.1999, SEV-No. 173; United Nations Convention against Corruption, 31. October 2003, A/RES/58/4. 32 Bundesgesetzblatt 2014 I, p. 410.

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The new phrasing is very different from the old law based on the 19th century French code pénale. It now seems to be very similar to the offenses against bribery of public officials (sec. 331-334 StGB) and bribery in the course of business (sec. 299-299b StGB). Now, a punishable offense is committed by “anyone who, as a member of a representative body on the federal or state level, demands or accepts a promise for or receives an unjustified advantage for himself or a third party in return for performing or omitting an act by order in the exercise of his mandate”. The penalty is imprisonment up to 5 years or a fine. By including the “demand” and “accepting of a promise” of an advantage, criminal liability is established at an early stage and does not depend on whether the parliamentarian actually does receive the advantage or performs any acts due to the wishes of the benefactor. The person offering, promising or giving the bribe is equally punished according to paragraph 2. In addition to the members of the Bundestag and the Landtage, criminal liability extends to various other parliamentarians, which are listed in paragraph 3, such as local elected representatives or members of the European Parliament. The bribery offenses are among the most complicated laws in the Criminal Code, which is why this article will only provide a summary of the main aspects of the preconditions of criminal liability. Their core is the so-called “unjust agreement”, which consists of three elements: (I) the advantage, (II) the desired behaviour of the counterpart and (III) the link between advantage and desired behaviour. This article will mainly focus on the advantage, as it entails the biggest problems of section 108e. I The Advantage Within the framework of the criminal laws against bribery, a consolidated legal concept of the nature of advantages has been developed by courts and legal scholars.33 According to this, an advantage is any contribution that materially or immaterially improves the economic, legal or even personal situation of the recipient or a third party. Therefore, referring to the political sphere, an “advantage” may also be, for example, a better spot on the ballot of the party,34 party donations or even low-value benefits such as a dinner invitation.35

See eg. Bundesgerichtshof, 10.3.1983–4 StR 375/82 = Neue Juristische Wochenschrift (NJW) 1983, 2509 (2512); MüKo/StGB-Korte, vol. 5, 3rd ed. 2019, § 331 Rn. 82; NK/StGBDannecker, 5th ed. 2017, § 299 Rn. 54. 34 Fischer StGB, 66th ed. 2019, § 108e Rn. 22; NK/StGB-Kargl, 5th ed. 2017, § 108e Rn. 16. 35 Fischer StGB, 66th ed. 2019, § 108e Rn. 22. 33

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A significant difference to the criminal laws against bribery in the private sector and among public officials is the addition in section 108e that the advantage must be “unjustified”. This phrasing was previously unknown to the German Criminal Code. According to the legislative materials, it is intended to form a dogmatic anchoring of the belief that the political establishment has certain peculiarities, certain “parliamentary customs”, that are not to be criminalized.36 The handling of this new element raises great uncertainties that have not yet been clarified.37 According to section 108e paragraph 4, it is not considered an “unjustified advantage” if the acceptance of the benefit is in accordance with the regulations concerning the legal status of the elected representative. In particular, it shall not be considered an unjustified advantage if a political mandate or a political function or a donation permitted under the Party Law or corresponding laws is granted. This raises some serious problems. A political mandate is given by the people as a whole and not by a single individual, therefore it cannot be given to anybody as an advantage. The provision simply makes no sense. It apparently tries to refer to the appointment as a candidate for a political party. As the constitutional principle of legal certainty in criminal law (article 103 par. 2) has to be observed, even if the current phrasing makes no sense, the addressees of the offense may assume that the exemption extends to the appointment as a candidate. Therefore, such appointments have to be excluded from criminal liability. In addition, the law is excluding “political functions”, but is not giving a definition. Does this only include public offices in the political sphere like the position as a minister, or also positions in political parties, lobbying associations or political foundations?38 Finally, the exclusion of donations is not feasible:39 The German Party Law regulates in section 25 paragraph 2 Number 7 that donations given to the party evidently in expectation or in return for a certain economic or political advantage are not permitted. Therefore, donations within the definition of the offense of bribery are never permitted under the Law on Parties.

36

Bundestag Drucksache 18/476, p. 7. For criticism see e.g. BeckOK/StGB-Heintschel-Heinegg, 44. Ed. 01.11.2019, § 109e Rn. 15; Fischer StGB, 66th ed. 2019, § 108e Rn. 38, 39. 38 So far most scholars do not define the scope but only give examples, e.g. Fischer StGB, 66th ed. 2019, § 108e Rn. 44; MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 28; NK/StGB-Kargl, 5th ed. 2017, § 108e Rn. 19; Schönke/Schröder/StGB-Eser, 30th ed. 2019, § 108e Rn. 18. 39 MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 29. 37

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The isolated exclusion of certain advantages from criminal liability, without considering the behaviour of the parliamentarian given in return, is the basic problem of section 108e.40 It simply makes no sense: For example, parliamentarians are allowed to carry out employments outside the parliaments—even if it is highly-paid. This permission, however, does not include that the elected representative in return “sells” a certain behaviour in the parliament. The same applies to the acceptance of donations, cabinet positions or dinner invitations. The legal wrong malfeasance of a bribe stems from the exchange, the “sale” of a certain behaviour that is prohibited from being “sold”—not from an isolated consideration of the respective advantage. Also, when political functions are given as advantages, the wrongdoing seems even greater: not only is the exercise of the mandate being sold, but also the political function, such as a ministerial position. It cannot be argued that such behaviour is necessary for the functioning of a democracy; rather, such behaviour encourages frustration and mistrust among citizen. In many cases, these problematic provisions of section 108e will prevent an effective pursuit of the stated goal of this law. It is therefore necessary to interpret the provision about justified advantages as narrowly as possible. In addition, according to the legislative materials, advantages are also permitted if their acceptance is “in accordance with parliamentary customs”. As this is not reflected by the wording of the offence, it should simply be ignored.41 It remains to be seen how the “unjustified” advantage will be handled by courts and legal scholars in future. The legal technique used here has failed to a great extent. II The Desired Behaviour What kind of behaviour of the elected representative can be the subject of a punishable bribe? section 108e requires a specific future action or omission.42 Thus, two constellations in particular are not covered: subsequent rewards for previous behaviour that has not been influenced and the so-called “grooming”. Even though such behaviour might be dangerous to the integrity of the representative, the agents do not agree on a breach of the obligation of the parliamentarian to act according to his or her beliefs, which is why a main criminalising factor is missing. Accepting any advantages with a connection 40

Similar criticism by Fischer StGB, 66th ed. 2019, § 108e Rn. 25, 39; T. Zimmermann, Das Unrecht der Korruption 2018, p. 616. 41 MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 31; NK/StGB-Kargl, 5th ed. 2017, § 108e Rn. 17; Schönke/Schröder/StGB-Eser, 30th ed. 2019, § 108e Rn. 18. 42 Fischer StGB, 66th ed. 2019, § 108e Rn. 35; T. Zimmermann, Das Unrecht der Korruption 2018, p. 622.

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to one’s mandate is forbidden outside of criminal law, namely in the parties’ law, the delegate’s law and Code of Conduct. Regarding the specific kind of behaviour that is covered, the law requires that the elected representative must act “in the exercise of the mandate”. So far, the scope of behaviour covered by that phrasing is quite unclear. There is no doubt that the law covers casting a vote in the respective representation,43 but what about the committees and other organisational bodies of the parliament or the parliamentary groups? Does the law cover important components of the parliamentarian work, such as the filing of a bill or requests, or influencing other parliamentarians? The—shortened—answer is a restrictive handling of section 108e as it is a criminal regulation intervening in a very sensitive area: The behaviour—the act or the omission—only falls under the scope of the law, if the parliamentarian is actually exercising the power entrusted in him by his election. Therefore, the necessary connection to the mandate is interpreted in a functional way. Thus, the interpretation approaches the concept of corruption developed in the beginning, since it is limited to the scope of entrusted power. As a result, in addition to votes in plenary, for example the introduction of a bill by parliamentarians and the filing of requests are covered.44 Same goes for corresponding behaviour of a representative in the committees of a representative body45 and in committees outside the representation if their members are—at least in part—elected representatives chosen by the representation, such as the Vermittlungsausschuss46 or the Gemeinsamer Ausschuss.4748 Not included is influencing other mandate holders or any behaviour in party committees or in the context of a secondary employment.49 To answer whether acts in the parliamentary groups are also covered 43

Fischer StGB, 66th ed. 2019, § 108e Rn. 19; MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 32; Schönke/Schröder/StGB-Eser, 30th ed. 2019, § 108e Rn. 20. 44 Fischer StGB, 66th ed. 2019, § 108e Rn. 26; MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 33. 45 Fischer StGB, 66th ed. 2019, § 108e Rn. 19; Schönke/Schröder/StGB-Eser, 30th ed. 2019, § 108e Rn. 20. 46 A mediation committee which aims for compromise in case of a dissent between the Bundestag and the representation of the states, the Bundesrat, and which members are in part members of the Bundestag. Other than the Bundestag, members of the Bundesrat are not elected by the people and therefore not covered by sec. 108e. 47 An emergency parliament which members are in part members of the Bundestag. 48 MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 32. 49 Bundestag Drucksache 18/476, p. 8; 18/607, p. 8; MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 34; sceptical: Fischer StGB, 66th ed. 2019, § 108e Rn. 27, 28.

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is more difficult.50 In the scholarly literature their inclusion was repeatedly demanded51 and the legislative materials explicitly proclaim that they are in fact included.52 This is certainly supported by the fact that a separation of the decision-making processes in plenary and in parliamentary groups is legally constructible, but in fact hardly possible. Nonetheless, it is hard to accept this interpretation without any reservations since such behaviour in parliamentary groups is actually not an exercise of a mandate, but its preparation. III The Link The law says that the advantage must be required “in return for” a behaviour of the parliamentarian who acts “by order” of the counterpart. As a result, section 108e requires a double causal link between the advantage and the desired behaviour of the parliamentarian: It must be agreed that the advantage is to be granted because of a certain behaviour of the parliamentarian and that this behaviour is performed due to the granting of an advantage in accordance with the wishes of the benefactor.53 These requirements are much narrower than in other laws against bribery. This can with good reasons be criticized,54 but it ensures that criminal liability only applies if the agents agree on a violation of the obligation of the parliamentarian to act according to her or his beliefs.

Conclusion Even though we lack reliable figures, it seems safe to assume that corruption does occur among elected representatives in Germany. Drawing a line between behaviour that ought to be punished and behaviour that is politically adequate is, within a criminal law that is the ultima ratio, quite unproblematic, since only

50

For inclusion e.g. Fischer StGB, 66th ed. 2019, § 108e Rn. 19; Schönke/Schröder/StGBEser, 30th ed. 2019, § 108e Rn. 20. 51 E.g. LK/StGB-Bauer/Gmel, vol. 4, 12th ed. 2007, Rn. 3; SK/StGB-Rudolphi, 53. Lieferung 2001, § 108e Rn. 2; Hoven, Zeitschrift für Internationale Strafrechtsdogmatik (ZIS) 2013, 33 (35 f). 52 Bundestag Drucksache 18/476, p. 8; 18/607, p. 8. 53 MüKo/StGB-Müller, vol. 3, 3rd ed. 2017, § 108e Rn. 36, 37; some scholars argue that the same link as for sec. 332 is necessary, e.g. Fischer StGB, 66th ed. 2019, § 108e Rn. 34; NK/StGB-Kargl, 5th ed. 2017, § 108e Rn. 23. 54 Hoven, Neue Zeitschrift für Strafrecht (NStZ) 2015, 553 (555); Jäckle, Zeitschrift für Rechtspolitik (ZRP) 2014, 121 (122).

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the very core of wrongdoing is covered: If there is an agreement, that a parliamentarian, in return for receiving an advantage, will violate his or her obligation to act according to their beliefs, this cannot be considered politically adequate behaviour. On the occasion of the introduction of the new law against bribery of elected representatives in 2014, the German magazine ZEIT published a guest commentary by Thomas Fischer, who at the time was a judge at the German Federal Supreme Court, titled: “This law is a joke”.55 This seems to over-simplify the problems law-makers face when implementing a criminal law concerning the complex political sphere. The new version of section 108e finally integrates the law against bribery of elected representatives into the legal concept of bribery offences in the Criminal Code. It has the potential to sufficiently establish adequate criminal liability, as it takes into account the particular status of elected representatives while at the same time punishing clear cases of bribery. Nevertheless, the provision is in part insufficient and in need of reform, in particular when it comes to the element of the “unjustified advantage”.

Kristina Peters is a junior academic at Ludwig-Maximilians-University (LMU) Munich. She studied law at the Westfälische Wilhelms-University Münster, holds a doctoral degree in law from LMU Munich and was a visiting researcher at University of California, Berkeley. Her dissertation on political corruption was awarded the 2016 faculty award by the law faculty of the LMU and received a print subsidy by the VG Wort. She was granted doctoral scholarships by the Konrad-Adenauer-Foundation and the LMU mentoring program for outstanding junior academics. Dr. Peters teaches and writes in the areas of criminal law, criminal procedure, constitutional law, the political economy of corruption, and the philosophy of law.

55

Fischer, DIE ZEIT No. 27/2014 (https://www.zeit.de/2014/27/abgeordnetenbestechunggesetz).

The Financing of French Political Life: From Self-control to Self-interested Regulation Éric Phélippeau Introduction This chapter discusses the production of new rules of the political game and their effects on the functioning of this field. It therefore deals with particular rules, produced by and for those they concern. In the light of these problematic conditions of production, it covers the institutionalization of a legislation that is often left vague, or with loopholes, which the courts clarify a posteriori—and therefore coproduce—at the end of disputes arising from its application. The adoption of these rules—which in this case concern the financing of elections and political organizations—raises at the same time the question of their effects on the functioning of the political game, and by ricochet, that of their use by the main parties concerned. However, the entry into force of these new rules is far from being reflected in their pure and simple respect. Every rule—and the rules of the political game are no exception to this rule—is the subject of usage and instrumentation. In line with Foucault and his issue of the management of illegality, human activities also function partly because useful illegality is permitted or tolerated. And in so doing, they invite us to explore the dark side or the hidden face that also characterizes all democratic life. The purpose of this chapter is precisely to show to what extent the French political elites have been reluctant to codify a new law to regulate the financing of their political life and how, when they had to resign themselves to it, they did so like their counterparts in many other countries: by leaving loopholes in the É. Phélippeau (B) Institut des sciences sociales du politique, Université Paris Nanterre, Nanterre, France E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_15

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legislation, as well as margins open to interpretation. All of this certainly ends up weighing on political conduct, campaigning methods and the way partisan organizations are run. Political know-how adapts. A new art of accounting concealment is being invented. Ways of formally complying with the rules are being developed in response to these new… formal requirements. In a way, a whole art of keeping up appearances is being established, calling on new experts and new accounting, legal and political know-how. And it is the professionalization of politics, for which Weber (1919) once provided the first analytical frameworks—without neglecting its financial dimension—that continues to reinvent itself as this new great legal transformation takes place. Returning to France, laws regulating political finance were there first promulgated between 1988 and 1990. They established spending caps for candidates in districts with at least 9000 inhabitants and contribution limits, banned certain campaign contributions and types of spending, and introduced direct and indirect public funding. They also set accounting and disclosure requirements, transparency rules, and mandated the establishment of a national commission for campaign and political finance (CNCCFP). As with other countries, these rules have been constantly fine-tuned. But the purpose of this chapter is not to offer a legal and technical presentation of the transformations involved. Rather, my intention is to reflect on the overall direction of an evolution, from a form of self-control to the manufacture of rules driven by the personal interest of their authors. These reforms issued by the French government in 1988 and in the decades that followed reshaped political exchanges, from campaign finance to financial disclosure requirements, in a manner that would check behaviors that had fueled so many scandals. And the regulations themselves included the formation of institutions for oversight, the definition of specific behaviors as crimes and misdemeanors and the setting of appropriate punishments. But what happened in France in 1988, as Atkinson and Mancuso demonstrated (1992) for the United States and Britain, was an unprecedented shift from “etiquette” to “edicts”, in the way that a logic of internalized self-regulation (“etiquette”) gave way to a system built around rules and oversight institutions (“edicts”). This sudden political change, which is radical in some respects, deserves to be taken seriously. In a political system governed by informal rules, “Etiquette” relies on the importance of honor as a cardinal value. Public officials are considered as an elite which is supposed to value the common good over personal interests and is therefore given much leeway to engage in behaviors that are broadly viewed as ethically questionable. On the other hand, “Edicts” involves an array of written rules put in motion by

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an institutional system to ensure conformity with preset definitions of the permissible and sanctions that determine the response to specific straying from them. In this sense, to employ Elias’ term (2000), the political shift initiated in 1988 from above and by state decision can be considered as a real process of political “civilization”. Like many other countries that have forged such legislation, these laws governing political finance have been shaped by and for elected officials. Previous research that analyses such reforms and the debates surrounding them show perfectly how much political strategies and institutional arrangements can shape the outcomes of debates over political finance reform (Scarrow, 2004). And more generally, on the adoption of related measures concerning the probity of political elites, even when ideology is likely to have a strong influence, the positions of power and interests very often shed light on the opposition and support of parliamentarians for one aspect or another of these reforms (Rosenson, 2003). It is therefore not surprising that the laws adopted in France and elsewhere in the field of political financing are not very threatening. Often, they are full of loopholes. Nowhere in the world, however, do political elites monopolize the making of these laws alone. Like any public problem, these issues raise the problem of co-ownership issues (Gusfield, 1963). To suggest only a few of these co-management problems, the Constitutional Council may or may not give its imprimatur at the end of the legislative procedure. Just as the implementation of imprecise and vague laws, which are subject to interpretation, these open also the way to contentious battles and the creation of decisions and case law that refer to the co-production work of administrative courts. It remains to be seen how this co-management of the problem is reflected, and how it affects, the conduct of political elites. Since Weber, we have known how professional politicians only comply with the rule of law when they have an interest in complying with it. As classic studies have shown, politics is a matter largely guided by pragmatic norms (Bailey, 1969), which can lead these actors to respect the law, or on the contrary to avoid it. And for some, the whole art of politics is to know how to play with the rules of law, or with their limits. Michel Foucault’s (1975) work on how elites learn to manage illegality is an illustration of this. In the field of public probity and political financing, more recent research suggests that political elites develop political knowledge that is based on “deviant normality” (Briquet, 2014) and can become masters in the art of diluting “transgressive behavior […] in the generality of deviant and illegal practices in the political environment” (Lascoumes, 2011). And as Jonathan Mendilow points out in his introduction to the Handbook of Political Party Funding (2018), we must be careful not to believe that there may be a legal

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framework or institutional form that could drastically change these political ways of doing things. In order to provide some answers to these issues, this chapter is organized into three parts: it will first comment on the length of time it took France to codify political finance rules. During this period, the preference was to rely on the wisdom and common sense of political elites. This will be followed by a consideration of the extent to which these elites, when forced to legislate on this issue, became co-producers of “loopholized” rules. Finally, it will be attempted to gauge the extent to which these elites learned to master the rules and to comply with them, at least formally. In doing so, our aim will be to highlight dynamics—the socio-genesis of the body of laws regulating political finance, its socio-political conditions of production, its uses and effects which are obviously not specific to the French case alone.

To What Extent Has France Been Slow to Codify These Rules and Why? Although French authorities neglected the legislation of a framework for the regulation of political finance, they did not remain inactive on other related questions. Under the Third Republic, especially before 1914, political elites passed laws setting the organization of fair universal suffrage (Garrigou, 2002). As an example, in the 1880s, in order to fight against the economic influence of notables, a law was adopted to oblige candidates to present a platform (Profession de foi) that would serve as a basis of their campaign rather than financial pledges or even the purchase of individual votes. Somewhat later (1902), a universal suffrage commission was formed in the Chamber of Deputies. It was at the origin of several reforms aimed at repressing electoral fraud (03/1902), promoting the secrecy of the vote through the introduction of voting booths (07/1913), framing election advertising and combating corruption and electoral pressure (03/1914). All these reforms were not without consequences on what candidates and partisan organizations were able to do and spend. However, these rules set the limits of intervention, as if the financial anchoring of politics were taboo. In consequence, the system remained based on the presumed self-control of its major units. This should not come as a surprise. Until 1958, on a subject as sensitive as the settlement of electoral disputes, the same logic was at work. Before that date, the system that applied was that of the vérification des pouvoirs, which, since the French Revolution, had placed the settlement of electoral disputes in the hands of parliamentary assemblies. All elections, disputed or not, had to be verified by

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the assemblies, i.e. by deputies and senators who had to pass judgement on the validity of their colleagues’ elections. This system, based as it was on the legislators’ desire for independence from other powers, was not arbitrary in principle. Nevertheless, in practice it proved to lack impartiality, and political considerations too often took precedence over legal requirements. In this way, the elected representatives of France have for a long time resisted the introduction of specific rules regulating political finance. Box 1 shows that such reforms were introduced in France much later than in other democracies. Box 1: Sociogenesis of the legal framework for the financing of political life United-States 1867 Great-Britain 1883 Sweden 1966 RFA 1967 Finland 1969 And Israel Italy 1974 Spain 1985 France 1988

Nevertheless, a draft law was introduced in the Third Republic (1892), as a distant echo of other reforms adopted in the 1880s in the United Kingdom. This initiative, which aimed to limit election expenses in the Chamber of Deputies, was presented by the deputies who promoted it to Parliament as an enterprise of election morality and a rigorous instrument in the fight against corruption. It laid the foundations for the regulations that would come into being a century later. Box 2: Main provisions of Bill 2452 appended to the sitting of the Chamber of Deputies on 12 December 1892 limitation of candidates' campaign expenses in the Chamber of Deputies, definition of election expenses, institutionalization of the role of electoral accountant, development of a document making it possible to certify sincere and genuine expenses to be filed at the clerk's office of the civil court, right to communicate this statement, within certain time limits, to voters in the constituency so wishing, recognition of their right to criticize it, creation of offences and sanctions (fines and ineligibility penalties), including criminal sanctions, both with regard to candidates and their accounting officers.

In the absence of systematic research on this point, it is not certain whether other initiatives of this type were launched in the aftermath. Anyway, a systematic

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search conducted for the period 1958–1970 does not make it possible to find such legislative proposals (Phélippeau, 2018). But between 1970 and 1987 (the first legislation regulating political finance having been adopted in 1988), some thirty reform proposals were put forward. None were finally adopted. Box 3: Chronology and synthesis of French reform initiatives (1970–87) Date

Issues of the Law

PPL 1663 16/04/71

Ensure equal opportunities for candidates in parliamentary elections and regulate electoral propaganda

PPL 1664 16/04/71

Facilitate the work of the Constitutional Council in relation to the offences listed in proposal 1663

PPL 2043 3/11/71

Amend the rules for filing candidates for legislative elections and introduce a limit on election campaign expenses

PPL 378 15/05/73

Ensure equal opportunities for candidates in parliamentary elections and regulate electoral propaganda

PPL 2170 16/03/76

Complete the Electoral Code in order to limit the expenses incurred by candidates in legislative elections

PPL 2281 30/04/76

On the financing of political parties and elections in France

PPL 2283 4/05/76

On political party resources and electoral propaganda

PPL 214 20/12/76

Ensure the control of election expenses by the citizen

PPL 287 23/05/78

On the financing of election campaigns and political parties

PPL 531 28/06/78

On the financing of public life

PPL 606 30/09/78

On the financing of electoral campaigns during legislative, cantonal and municipal elections

PPL 586 13/10/78

On the financing of campaigns for the election of the President of the Republic

Projet 1302 24/09/79

On the public financing of political parties

PPL 1320 24 09 1979 Limit the expenses incurred by candidates in legislative elections PPL 361 4/08/86

On the financing of electoral campaigns during legislative, cantonal and municipal elections

PPL 594 18/12/86

On the transparency and moralization of political parties in France

PPL 646 16/03/87

On the transparency and moralization of the financing of political life

PPL 765 13/05/87

Introduce public financing and financial transparency for political parties, transparency of election expenses and of any political campaign

PPL 879 16/06/87

On the transparency of the financing of political parties and electoral campaigns in France

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Date

Issues of the Law

PPL 89 10/11/87

Relating to the financing and transparency of party election expenses

PPL 1070 20/11/87

Relating to the financing and transparency of party election expenses

PPL 1189 16/12/87

Ensure transparency of the assets of elected officials and political leaders, equal access for candidates to universal suffrage, pluralism of information and the status of elected officials

PPL 1164 17/12/87

On the election of the President of the Republic

Source: Phélippeau (2018)

This is not the place to explain the variety of these initiatives, to show how their content reflected the political constraints and experience of their authors and therefore also their practical interests as politicians. However diverse, their approaches to political finance were standardized and homogenized. As such they integrated income and expenditure from party organizations as well as candidates in all types of elections. Suffice it also to observe that not one of these reform proposals was discussed in the Chamber, and that they all demonstrate a broad consensus among the political elites to do nothing about it. It is most likely that even the initiators of these proposals knew what to expect. Their effort to mobilize parliamentary support were therefore highly symbolic. What is observable is the gap between the strong ethical references included in the titles of these laws and their often more vague contents. Especially prominent is the effort to avoid exposing elected officials to severe sanctions, thereby limiting the political risks associated with their promulgation.

How Politicians Became Co-producers of Political Finance Rules with Loopholes When parliamentarians or governments legislate on the financing of political life, these actors are obviously, more than on many other issues, in a situation that could be described as a conflict of interest (Piccio, 2014). However, these reforms involve public officials who are driven by very heterogeneous motivations and interests. Reform proposals that enter the parliamentary arena force hostile actors to join in their development. Parliamentary groups may find themselves divided and coalitions are likely to weaken. Unexpected alliances are also being forged. As a result, what is finally adopted is only seldom identical with what was

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submitted to debate. Legal provisions are often vague so as to allow interpretations (especially by the by the courts in future litigation) that do not expose political actors to excessively severe criminal and electoral sanctions (Dwyre & Farrar-Myers, 2008). On measures of technical appearance, such as the reporting perimeter of partisan organizations, the solutions adopted by French parliamentarians illustrate the extent to which the manufacture of laws can be oriented towards the production of loopholes. These then give rise to circumventions and uses of the law that are open to interpretation by the courts and therefore also to a margin of play. An elected deputy from the National Front, working in parallel as a chartered accountant, thus intervened twice in 1988 during parliamentary debates to obtain more precise information on the certification of the accounts of political organizations and candidates. His questions were technical. They remained unanswered. And we see behind these exchanges a whole art of accounting concealment in which parliamentarians could excel: Box 4: Loopholes in the reporting perimeter of political parties “Mr. Minister, once again, I will have to ask you questions pertaining to ‘the accounts of each party are certified by two auditors’. The accountants at this meeting will be very interested to know which accounts need to be certified, because auditors do not certify just anything, as you should know! What is being imposed on the parties? Some of them have sections in all municipalities, in the overseas territories and departments, or even abroad. Will the accounts we will have to certify be the accounts of all these locals, or do you plan to have us certify only the accounts at headquarters? It would be interesting for us to know that. In addition, what is the nature of the accounts to be certified? Will there have to be a balance sheet with assets and liabilities, and an income statement? Will it simply require a cash account showing income and expenditure? Will it be necessary to certify detailed accounts on a sum-by-sum, day-by-day basis or only summaries by nature of revenue and nature of expenditure? It would be interesting to know this because all this cannot be decided by regulation and the Assembly must decide on this point. Mr. Mazeaud had, it seems, some insights on the subject, but I still haven’t heard him share them with us. Above all, I am waiting for the Minister’s answer, who seems to me to be much more concerned that the auditors should be able to respect the ethics of the profession”. [M. Pierre Descaves, AN S3, 04-02-1988, p.203]. These questions remained unanswered!

The question of the cap on campaign expenses raised similar debates. It was a strong act to “level the playing field” to some extent by preventing wealthy candidates from overcoming their opponents by virtue of their financial strength. When asked by one of his colleagues what was meant by “expenditure to be included in the candidate’s campaign account”, the rapporteur certainly appealed to his knowledge of comparative law. But the definition he put forward had the consequence of emptying the ceilings set by the new legislation of any meaning, since they could be swallowed up by a flow of expenditure made by third parties for the benefit of a candidate without having been made on his behalf. Box 5: The parliamentary art of slipping loopholes in: the issue of expenses to be included in candidates’ accounts and their cap

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Mr. Dominique Bussereau: “Mr. President. Before we vote on Article 9, I would like to know the meaning of the expression ‘on its behalf’ in the second paragraph of the article. This must be apparent from our preparatory work”. Mr Pierre Mazeaud, Chairman of the Committee, rapporteur: “The question asked by Mr Bussereau is indeed important. As the Minister of the Interior said in his introductory statement, it is appropriate to retain only the expenses incurred by the agent: indeed, it is not possible to retain all expenses incurred without the candidate’s knowledge, which could even have been incurred through malicious intent. None of the expenses of political parties, formations or groups, associations or others, made without the candidate’s knowledge, are naturally taken into account. A comparative law analysis will allow me to be more precise, Mr. Bussereau. American legislation, for example, including Supreme Court decisions, clearly shows that all expenses without the candidate’s knowledge are considered independent. In our preparatory work, we must have exactly the same analysis” [AN, 04-02-1988, S1, p.134].

These problems are compounded by the fact that these provisions provide for a repressive arsenal (the imposition of fines, prison sentences, ineligibility sentences and the like) that is often limited in scope. And today, the sanctions to which political actors who violate these rules are exposed are mainly financial (delisting, fines). They tend to be slight in comparison with penalties meted to criminal convictions or ineligibility penalties (see Rambaud, 2018, pp. 120–22). We will therefore limit ourselves to making a few observations regarding the institutions created to enforce these rules and the courts responsible for interpreting them. The CNCCFP is the main institution responsible for enforcing this complex regulation. Since its creation, in particular, it has published a guide for financial agents and their candidates, which has grown considerably. Whereas the financial and human resources of the institution are far from being exaggerated, in post-electoral periods work can become heavy and tense. Relatively short deadlines in particular can pressure the audit of campaign accounts. Even if the heads of this institution are not used to complaining, their budget remains rather modest (five million euros in 2018) for a team of nearly fifty agents. This has not prevented other observers from criticizing the Commission’s lack of resources: “In recent years [have] been years of stagnation in its capacity to act […]. [It] does not have the staff necessary to carry out [its] missions”. “[It] was possible [to] observe on the spot the consequences on the audit of the accounts of an insufficient number of staff, aggravated by an excessively flexible framework for the presentation of the campaign accounts of candidates and political parties” (Senate File, November 22, 2012, p. 26). It was not until the Commission’s insight, blind to the offences related to the Bygmalion case, made public by investigative journalists, was called into question, that its current President finally defended his institution by declaring, with great caution, that “the Commission had done its work with the means at its disposal, legal and material means. We have no investigative powers over the parties’ accounts, nor over bank accounts and even less over the accounts of service providers” (statement by François Logerot on 27/05/2014).

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In the wake of decisions made by the CNCCFP, other jurisdictions may anticipate elite expectations and act accordingly. The example of litigation concerning the payment of election expenses by a person other than the financial agent may serve as an illustration: this practice is strictly prohibited, and is a substantial rule on political finance from which there can be no exception. Thus, the fact that a candidate pays one of his campaign expenses directly results in the rejection of the campaign account, the ineligibility of the candidate who contravenes it, and, if necessary, the annulment of his election or his compulsory resignation. The law on election campaign finance is therefore clear on this point: it recognizes the right of the candidate to incur expenses for the election, and the right of his financial agent to collect funds and pay the expenses incurred. But in the context of list elections such as municipal ones (in large cities, a list includes a good fifty candidates who are supposed to respect this ban), compliance with this rule can become complicated. And it has happened that financial agents leave in the documents sent to the CNCCFP traces of expenses incurred directly by running mates, resulting in account rejections and disputes. The courts then considered that the applicable sanctions could be disproportionate in view of the discrepancies committed by certain candidates. Decisions began to endorse this situation by allowing out-of-pocket expenses to be paid, provided they were “both low in relation to the total amount of expenses recorded in their campaign accounts and even lower or negligible in relation to the ceiling of authorized expenses in the riding” (Maligner 2006a, pp. 130–36, 2006b, pp. 1510–1513). A government Order was finally issued in 2003 to amend the law. Article 2 of Order 2003–1165 (8 December 2003) provides that “expenses incurred prior to [the appointment of the agent] shall be reimbursed by the agent and shall appear in his bank or postal account”. This process of co-producing this political right, which is at the center of this section, could not be more evident. Even more problematic is the fact that jurisdictions have finally succeeded in establishing the violation of a rule, but that their anticipation of the sometimes serious consequences of their decision has led them to forgo reporting the offences. An example is what happened in the 1995 presidential election. The Constitutional Council already approved the financial reports of Jacques Chirac and Edouard Balladur when its members were informed that the two candidates had exceeded the authorized spending limits and that the legality of certain major donations was seriously questionable. When the rapporteur recommended that J. Chirac and E. Balladur were found guilty of violating these rules, the Chairman of the Board ordered that the reports be amended to demonstrate that the candidates had complied with them. A majority of the nine members of the Council, some of whom later revealed it, feared creating a regime crisis should Chirac, the newly

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elected President, be found guilty of violating election financing laws (Collombat & Servenay, 2012). By a secret five to four vote, the Council preferred to approve accounts it knew were in violation of the laws. Beyond the ability to shape vague rules, elites are able to find valuable allies within the legal institutions. Should cases law turns against them, politicians can claim the privilege of rewriting the law as a last resort. More often than not, there is no need to reach such an end. Politics, after all, are not based on mere legal rules. What they call for is the mastery of pragmatic rules: put in other words, the knowledge how to play with the rule of law.

To What Extent Does the Development of Rules Claiming to Govern Political Finance Lead Candidates and Leaders of Partisan Organizations to Learn to Formally Comply with these Rules? The fact that violations are regularly reported by the media, after the CNCCFP has validated the campaign accounts of candidates or those of partisan organizations, raises doubts as to the media, and in turn the public, are questioning the usefulness of this kind of institution. Candidates, leaders of partisan organizations and their auxiliaries in charge of keeping their accounts have learned to cope with this new legal constraint. Some show sometimes greater dexterity than the agents in charge of controlling them. The institution of the rue du Louvre must not, however, be dedicated to moaning, nor should the seriousness of its work be called into question. Its agents carry out their controls as best they can, depending on the constraints they face. And neither their commitment nor their obstinacy should be questioned a priori. For many candidates’ financial agents, relations with the CNCCFP have left the impression of a tense showdown. The Commission is perceived as a powerful entity and the threat of the consequences of its control is omnipresent. A survey of financial agents, some of whom have held this responsibility several times, reveals that agents are faced with requirements that are becoming more cumbersome. For example, it is now necessary to justify the origin of the funds corresponding to a candidate’s personal payment and to transmit the bank’s loan contract, whereas before, the Commission only requested a copy of the bank’s cheque. Other questions relate to the rental of campaign offices. In this respect, it is no longer possible to “rent a campaign office by mutual agreement” or to simply send to the CNCCFP as proof “a rental contract written on a piece of paper with the owner”. The Commission’s requests for explanations come with rather clumsy formulas,

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such as “I would like to draw your attention to the fact that these irregularities are likely to result in the rejection of your account”. “Reading this is not pleasant: our expenses are far from exceeding the ceiling, we have no questionable revenues and yet we look guilty. The Commission thinks I’m a bandit”, says a financial proxy (Phélippeau, 2018). In any case, “the Commission is developing a state of permanent suspicion; elected officials are potential suspects. It is not easy to respond to their observations, and I am not talking to you about the wording of their letters”, complains one representative. “They think they’re Robespierre”, says another. “I spent about ten hours with my party’s public accountant. My work is also bordered by the party, and yet the CNCCFP is always a problem. We deposit the accounts wondering where they will trap us”. It must be noted, however, that in France, the financing of election campaigns gives little reason for the imposition of sanctions. The most resounding scandals have a different origin. Their revelations are more due to leaks—resulting from exchanges of blows between political opponents, strategic uses of the rules, the investigative work of journalists and police forces—than from the work of the Commission in charge of enforcing this legislation. But in a way, if one looks at the statistics produced by the CNCCFP (Table 1), one might be tempted to think that the legislation is rather known and respected, and that candidates and Table 1 Review of decisions rendered by the CNCCFP (legislatives 1993–2012) Years

Number of candidates

Rejected accounts

Accounts not filed

Counts off-time

Reformed accounts

Sum of the accounts presenting anomalies

1993

5 254

110 (2,09%)

141

403

582

1 236 23,52%

1997

6 359

136 (2,13%)

89

49

1 294

1 568 24,65%

2002

8 444

308 (3,64%)

254

37

1 346

1 945 23,03%

2007

7 634

191 (2,50%)

239

76

1 510

2 016 26,40%

2012

4 382

95 (2,16%)

109

31

2 090

2 325 53,05%

2017

5 612

107 (2%)

185

59

2 645

2996 53,38%

Source: CNCCFP

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their financial agents comply with it. During legislative elections, the number of accounts that the CNCCFP favors rejection (column 3) is indeed low when compared to the number of candidates. But the official data of the CNCCFP can be read in a more nuanced way, by considering the accounts that may have been problematic, even without incurring serious penalties other than monetary fines rather than those accounts that were actually rejected by the Commission. The comparison of columns 3 and 7 of Table 1 is telling. The reasons for contesting accounts are obviously massive. But the opportunities to severely sanction accounting embodiments are much rarer. The political actors who shaped these laws have ensured that this is the case. In fact, transgressions that expose candidates, elected officials, and even partisan organizations to severe sanctions are rare. During the 2017 legislative elections, for example, the CNCCFP referred 351 cases to the Constitutional Council. 285 candidates were punished with one to three years of ineligibility, while 5600 candidates competed in these elections (Table 2). The official data provide a clearer picture of the main violations that drove the 107 discharges from the CNCCFP (not all were sanctioned by the Council, which validated only 101 of these 107 referrals and considered 12 referrals to the CNCCFP as warranting a lesser penalty than ineligibility). Nevertheless, this is an indication of the importance of legal formalism. The main reason for ineligibility was the failure to present the account by a chartered accountant, or a late approval from the latter! (Table 3) Obviously, not all accounting errors or misstatements are detected by the Commission and the jurisdictions. Caution should always be exercised when handling official data. The proceedings that were brought against S. Dassault for vote buying, corruption, money laundering, illegal taking of interest in Corbeil-Essonnes (of which he was mayor between 1995–2009), suggest a completely different Table 2 Penalties of ineligibility actually imposed by the Constitutional Council during the 2017 legislative elections Referal from the CNCCFP

Decisions of ineligibility issued by the Constitutional Council

Rejected accounts

107

89

Accounts not filed

185

152

Counts off-time Total Source: CNCCFP

59

44

351

285

402 Table 3 Number of candidates subject to a sanction of ineligibility by the constitutional Council according to the irregularities sighted by the election judge during the 2017 legislative elections

É. Phélippeau

Sanctions of ineligibility Failure to submit by a chartered 55 accountant or late visa Absence/irregularity related to the agent’s bank account

2

Deficit account

2

Unsigned account

2

Account not presented in review status

2

Direct payments

7

Insincere account/expenses omitted

7

Irregular donations from individuals

1

Donations or contributions in kind from corporate entities

3

No proof of payment of expenses

3

Incompatibility of the financial agent’s function

1

Revenue transiting outside the agent’s account

4

Total (5612 candidates)

89 (+12 No ineligibility proceedings)

Source: CNCCFP

accounting system. Table 4 reproduces the campaign accounts of that candidate for municipal elections in 2008–2009, which were validated and published by the CNCCFP. The magistrates were interested in the campaigns from 2008 to 2010 in Corbeil-Essonnes, first won by Dassault, then by his right-hand man, J.-P. Bechter. In its decision to cancel the 2008 election, the Council of State ruled that monetary donations to voters were a proven fact, without pronouncing itself on their extent. Le Canard enchaîné reported in December 2012 that e 1.7 million in cash was reported to have transited via Lebanon before reaching intermediaries who were charged with distributing it to activists and voters a few weeks before the 2010 municipal elections. Significantly, the transaction was made with

The Financing of French Political Life … Table 4 Official expenses declared to the CCCCFP by Dassault/Bechter for their municipal elections (2008–2009) in euros

403

2008

2009

Total revenue

68 233

57 573

Individual donations

7 565

5 310

Party donations

0

0

Contributions in kind

1 037

2 218

Other resources

0

0

Candidate personal contribution

59 631

50 045

Source: CNCCFP

the knowledge that in this constituency, campaign expenses were then to be capped at an amount of around e 70,000. The judges in charge of the case then reported 7 million euros of suspicious payments between 2008 and 2010 and the existence of a list of voters with the mentions “paid” and “unpaid”. This is a far cry from the amounts officially declared by the two candidates to the CNCCFP and the authorized expenditure limits. Cash is often not traceable by the institutions responsible for auditing accounts. The above example is probably exceptional in terms of hidden amounts. However, interviews with financial agents reveal a multitude, if not of constant and deep violations, small abuses and cover-up, and the development of knowhow to play with the rules governing election financing. Here, once more, caution must be exercised: a social science researcher is not a controller of the CNCCFP, but the financial representatives of candidates have no more reason to entrust him with the secrets of their accounting backrooms than to an agent of the Commission (Phélippeau, 2018). A number of expenses—relatively modest, according to interviews with financial agents—are therefore made without being carried forward in the accounts sent to the CNCCFP. Cash, in particular, makes it impossible for some of them to be traced. At the same time, they may not give rise to any public reimbursements by the State. To this inventory, it would also be necessary to add the situation of incumbent candidates who often benefit from material and human resources linked to their mandates and political responsibilities. With the opening of the official campaign, the use of these procedures becomes delicate. Because the candidates must declare the material and human resources invested in their campaigns (the latter are converted into euros by CNCCFP agents). But all candidates have learned to cover themselves: from the first days of the official campaign, they rent an electoral office, open a specific telephone subscription, travel with a private or rental vehicle, taking care to record their mileage, etc. As long as their amount

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does not exceed the authorized limits, these expenses will be scrupulously declared to the CNCCFP. This official face of their campaign will serve to conceal the discreet use of all the other public resources already at their disposal (public offices, service vehicles, political collaborators, etc.), without raising suspicions (Phélippeau, 2018, p. 110). Public officials are certainly not all housed in this way. Some candidates are incumbents (sometimes for a long time). Their collaborators can also be seasoned auxiliaries. As a parliamentary leader observed as early as 1989, precisely in the context of debates on the framework for the financing of French political life, even business leaders “know perfectly well—and complain about it—the four main techniques used to finance political life, namely false invoices, the overvaluation of invoices, the employment of unnecessary staff and the payment of unjustifiable invoices…”. The conclusion is ironic, testifying to his know-how as a cured politician: “Some [elected officials] are caught, most often by inexperience, which is a serious weakness in this area. Others, who have more experience or practice on a larger scale, allowing them to equip themselves more appropriately, do not get caught” (Pierre Joxe Sénat, séance du 14-11-1989, p. 3255).

Conclusion French political life has a shadowy side to it. And many unofficial practices, illegal but useful, continue to flourish in the shadow of the official and public image under which this political life is portrayed. But these practices are not easy to detect: not only because those who carry them out develop practical skills and know-how useful for concealing them; but also because the institutions or offences created to curb them prove insufficient to do so. Thus, unofficial practices continue to play a role in the workings of official institutions involved in modern democracies (Briquet, 1995). But because they are depreciated in relation to the dominant models of legitimate politics, thoses practices are led to withdraw to the unofficial arenas of the political domain. And their increased public denial (notably through the promulgation of new rules claiming to establish public probity) pushes for the invention of new tricks to better conceal their permanence. Understanding the concrete function of the rules governing political finance is not simple. Too many studies are confined to an examination of the statements of the rules of law (without considering their conditions of production, uses and effects, omitting to take into account the litigation and case law that results from their application). Most quantitative analysis are limited to mobilizing official financial data, produced in bulk by the institutions responsible for the formal audit

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of accounts (without further questioning their conditions of production, uses or the biases they may contain). Research on political finance requires additional substantial investment. The information and analysis offered here invite reflection on the financial data collected and produced by institutions such as the CNCCFP and, more generally, on the significance of the statistics published by institutions responsible for implementing these policies. The analysis suggests that the information offered must also be based on a comprehensive effort to question ordinary users of these rules by seeking to understand the constraints they face, and the practical issues they encounter. When they emerge and transform, these regulations disrupt the political field, its actors and the know-how they possess, by redefining the general economy and conditions for political professionalization. Therefore, the avenues of research to be pursued remains very open.

References Atkinson, M., & Mancuso, M. (1992). Edicts and Etiquette: Regulating conflict of interest in congress and the house of commons. Corruption and Reform, 7, 1–18. Bailey, F. G. (1969). Stratagems and spoils: A social anthropology of politics. Basil Blackwell. Briquet, J.-L. (1995). Les pratiques politiques «officieuses». Clientélisme et dualisme politique en Corse et en Italie du Sud. Genèses, 1995(20), 73–94. Briquet, J.-L. (2014). Le syst`eme des pots-de-vin. Normes et pratiques des e´ changes corrompus dans l’Italie de Tangentopoli. In F. Dard & F. Monier (Eds.), Faveurs et politiques dans l’Europe contemporaine (pp. 229–243). Armand Colin. Collombat, B., & Servenay, D. (2012). Campagnes de Chirac et Balladur en 1995: souvenirs d’une arnaque. Les Inrockuptibles (electronic edn.), 23 Feb 2012. Dwyre, B., & Farrar-Myers, V. A. (2008). Limits and loopholes. The quest for money, free speech and fair elections. CQ Press. Elias, N. (2000). The civilizing process. Sociogenetic and psychogenetic investigations. Blackwell (First published 1969). Foucault, M. (1975). Surveiller et punir. Gallimard. Gusfield, J. R. (1963). Symbolic Crusade. Status politics and the American temperance movement, Urbana (Ill.). University of Illinois Press. Maligner, B. (2006). “Dépenses de campagne engagées par le candidat: ‘menues’, ‘faibles’ et ‘négligeables’. À propos de l’arrêt CE 17 juin 2005, Denoual”. Actualité juridique. Droit administratif , 23 janvier 2006, pp. 130–136. Maligner, B. (2006b). Compte de campagne et inéligibilité: l’indulgence du juge. Actualité juridique. Droit administratif, 27, 1510–1513. Piccio, D. R. (2014). A self-interested legislator? Party regulation in Italy. South European Society and Politics, 19(1), 135–152. Lascoumes, P. (2011). Une démocratie corruptible. Arrangements, favoritisme et conflits d’intérêts. Seuil.

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Mendilow, J. (2018). The party funding paradox and attempts at solutions. In J. Mendilow & E. Phélippeau (Eds.), Handbook of political party funding (pp. 1–12). Aldershot: Edward Elgar. Phélippeau, É. (2018). L’argent de la politique. Presses de Science Po. Rambaud, R. (2018). La pénalisation du financement de la vie politique en France: un système à bout de souffle? In E. Forey, A. Granero, & A. Meyer (Eds.), Financement et moralisation de la vie politique (111–122). Paris: Institut Universitaire Varenne. Rosenson, B. A. (2003). Legislative voting on ethics reform in two states. The influence of economic self-interest, ideology, and institutional power. Public Integrity, 5(3), 205–222. Susan, S. (2004). Explaining political finance reforms. Competition and context. Party Politics, 10(6), 653–675. Weber, M. (1963). Le savant et le politique, Paris, Union Générale d’Éditions, (German ed. 1919).

Éric Phélippeau is professor and co-chair of the Department of Political Science at Paris Nanterre University and member of the Institute for political social sciences (CNRS). His research focuses on public integrity policies, political professionalization, campaign finance laws and practices, policy evaluation. He recently published L’argent de la politique (Presses de Science Po 2018), and co-edited (with Jonathan Mendilow) Political Corruption in a World in Transition (Vernon Press 2019), and the Handbook of Political Party Funding (Edward Elgar 2018).

Non-compliance, Organizational Deviance and Useful Illegality: Towards a Unified Agenda of Research Subrata Mitra, Markus Pohlmann, and Elizangela Valarini Introduction The essays that we have brought together in this volume are intended to reassess the significance of partial compliance in public life. The conference which set the momentum for this volume had focused on illegal campaign and party financing. However, in the process of putting the papers together as an edited volume, we have expanded the scope quite radically, taking on a number of additional themes. In the event, the book takes our analysis beyond the political arena into market transactions, involving, in the cases we have examined, acts of infringement of the law. This epilogue lists some of the lessons learnt, in the form of a brief exegesis of partial compliance across the North-South Divide, and offers an agenda for future research.

S. Mitra (B) Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] M. Pohlmann · E. Valarini Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany E-Mail: [email protected] E. Valarini E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 E. Valarini et al. (eds.), Political Corruption and Organizational Crime, Organization, Management and Crime—Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-34374-3_16

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The Lessons Learnt The empirical evidence from several countries of the world stretching from South and South-East Asia, South America to Europe has advanced our knowledge of ‘useful illegality’ and partial compliance in many important respects. The authors have considered the general issues of organizational deviance in ‘their’ countries, in a cross-national, cross-cultural and inter-disciplinary perspective. The interaction of experts drawn from Sociology, Law, Political Science and South and South-East Asian area studies has shown that the mono-disciplinary approach to party and electoral finance, market transactions and organizational deviance segregates knowledge. The results of our analysis led to the deepening and broadening of our knowledge in three main areas of political and economic organization: partial compliance, the interaction of structure and agency, and global versus local knowledge. Our collaborative research has helped us connect non-compliance and organizational deviance to a more comprehensive understanding of ‘useful illegality’ than what one can achieve, when seen from the perspective of specific disciplines. In terms of policy implication, we have noticed that incidents of non-compliance can act as a challenge for a deeper comprehension of ‘wrongdoing’ and, help design laws and institutions that pave the way towards greater compliance. The lessons learnt can be summed up under three rubrics. In the first place, the analysis of contravention of the law in political transaction, financing of political parties and campaigns, and market transactions that are connected to the government and political parties can be grouped together under the generic concept of ‘partial compliance’. Cross-national analysis shows that it happens both in the Global South as well as in old, established democracies of Europe. Partial compliance, in this sense, is integral to the political process. Secondly, one can notice from the course that evolution of electoral laws and designing of appropriate institutions takes, non-compliance can act as an incentive for change in norms. Non-compliance and organizational deviance thus emerge as catalysts of institutional evolution. In the third place, non-compliance, emerging from the tension between ‘local knowledge’ and ‘global knowledge’, can become the basis of the hermeneutic of ‘wrongdoing.1

1

The results of this project thus join those emerging from a previous study whose outcome was published under the title Bribery, Fraud and Cheating: How to explain and to avoid organizational wrongdoing, eds. Markus Pohlmann, Gerhard Dannecker and Elizangela Valarini, which forms part of this book series. (Springer, 2020).

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‘Partial Compliance’ as Integral to the Political Process Compliance is an essential feature of orderly rule. Non-compliance with rules— the sine qua non of the Rechtstaat—sets alarm bells ringing in the minds of the keepers of order such as the police, magistrates and enforcers of law. Partial compliance—which involves sporadic (as opposed to systematic) breaking of the law, or violation of some laws but not all laws—still riles law-keepers. However, social anthropologists, students of political movements and activists defending the rights of the vulnerable, see non-compliance of this genre, differently. Seen from these angles, the intention behind the act of noncompliance and the circumstances under which this takes place, are of critical importance in understanding its significance to overall political order and legitimacy. Our authors, dealing with the issue of corruption, bribery, influence-peddling and illegal cash have focused on the actors’ motivations through the analysis of their discourse. They have attempted to glean their cognition of the act which, seen through the prism of the legal framework, comes across as non-compliance of the law out of this source. The reflexivity that the authors bring to their analysis of the gap between the normative and the cognitive, helps substantiate the basic assertion that people who disregard the rule for whatever reason, are not necessarily mad, stupid or irrational. If the actor breaks the rule, then it is incumbent on the observer to understand the reasoning that led her to that decision rather than simply assuming wrongdoing, from the high moral ground of the legal standpoint.2 Reflexivity ordains the need to understand not just the fact of non-compliance but see it as the tip of the iceberg, and focus attention on the cluster of factors that constitute its facticity, which lurks under its legal perception, and needs to be reconstituted through close empirical investigation.3 2

James Scott “Exploitation in a rule class relation: A victim’s perspective”, Comparative Politics, 7, pp 489–532, July 1975 illustrates the hiatus of actor’s and observer’s categories. He has followed up on this theme in his subsequent Weapons of the Weak: Everyday forms of peasant resistance (New Haven: Yale University Press; 1985). The actor’s perspective is extremely important for understanding the reasons why aggrieved folks do not always rebel. Paul Greenough writes how people “died in the streets in front of shops bulging with grain”, with not a shot fired against food riots, which were familiar in 18th century Europe, under conditions comparable to the Bengal Famine. See Nanavati Papers, ‘1944–45: Memoranda and oral proceedings before the Famine Commission’, mss. (New Delhi: National Archive of India), cited in Paul Greenough, “Indulgence and Abundance in Asian Peasant Values: A Bengali Case in Point”, Journal of Asian Studies, 42(4), p. 847. 3 This argument, succinctly asserted by Elizangela Valarini in this volume (chapter four) is the leitmotif of the volume. It connects our findings to Scott 1975, Vaughan (1999) and Pohlmann et al. (2020).

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Why do men and women across cultures and continents break the law?4 Our empirical case studies show that people at all levels of the hierarchy of power are susceptible to non-compliance. The extent of non-compliance does vary across culture and context. However, the issue of non-compliance—or ‘useful’ illegality from the actors’ point of view—has become an integral part of the political process across the North-South divide, and by people who are generally law abiding. This is puzzling.5 This puzzle can be illustrated with a simple example. Few love the tax man. But few would dispute the legitimate need of institutions of the state which the tax revenue sustains. The tax dodger is thus also a contented consumer of public services such as law and order, the regular flow of traffic, orderly elections and the smooth functioning of social, economic and political transactions, supervised by civil servants who are paid from the tax income of the state. A moment’s reflection reveals the link between paying taxes—used here as a signifier of the obligation to comply with state-prescribed laws and norms—and orderly social life. And yet, non-compliance, ranging between minor acts such as littering to more serious crimes such as tax fraud and bribery are frequent occurrences. Why do people choose not to comply with norms prescribed by established authority? And, since individual non-compliance and organizational deviance are closely related, why do decision-makers, making key decisions for the organizations they lead, deviate from norms? Diane Vaughan (1999, p. 274) provides some valuable insights into the process that leads to non-compliance.6 Whatever the role of chance or system breakdown, much organizational deviance is a routine by-product of the characteristics of the system itself. Organizational deviance, in its generic form, can be understood as routine nonconformity: a predictable and recurring product of all socially organized systems. …Analogically, sociological theories and concepts … assert that the system responsible for the production of routine nonconformity includes (a) the environment of organizations, (b) organization characteristics (structure, processes, tasks), and (c) the cognitive practices of individuals within them. (Emphasis added).

The concept of ‘useful illegality’ (Luhmann, 1995) provides a connecting thread for the insights we get from Vaughan. These serve as a heuristic tool to unpack 4

Seidman (1978), “Why do people obey the law? The Case of Corruption in Developing Countries. https://www.jstor.org/stable/pdf/1409847.pdf. 5 Rreference: Global corruption index. 6 Diane Vaughan, “The dark side of organizations: Mistake, Misconduct and Disaster”, Annual Review of Sociology, 1999, 25:271–305.

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the process of negotiations and transactions that underpin electoral politics, especially with regard to campaign financing, or the complex chain that connects entrepreneurs, civil servants, lobbying, buying of influence, and of course, illegal cash. Markus Pohlmann (2020, p. 14) builds on this foundation. “…organisational deviance is a pre-requisite for organisations to function. No organisation will survive just by sticking to formal rules alone”. He adds, “…not all organizational deviance from formal rules is unlawful. Once organizations have become used to specific kinds of deviance, unwritten rules emerge that streamline activities as well. Some of these unwritten rules thrive in the legal grey area of organisational activities, others are utterly illegal.” Below, we shall extend this argument to the electoral process, campaign financing and grey areas of market transactions.7

Electoral Laws and Regulatory Institutions as ‘Recipe Knowledge’8 Elections are a crucial component of the capacity of democracies to self-regulate, to generate cohesive policy options, and look for a process of collective choice free of violence, corruption and coercion takes place in an orderly manner, compliant with the constitution of the state. Most democracies have legal norms and agencies (such as the politically independent Election Commission of India) that regulate political party financing, both during and outside of election periods as well as campaign financing. The purpose of such regulation is to encourage greater transparency of political party activities and ensure a fair electoral competition 7

While most of the essays included in this volume have some connectivity to illegal campaign and party financing, the essays most directly connected are those of Mitra and Pohlmann, Croissant and Suri. The European examples of illegal campaign financing are quite revealing of useful illegality under the veneer of the Rechtstaat. In the German case, we learn from Jens Ivo Engels that not only Chancellor Helmut Kohl broke the law regarding campaign cash, “his behaviour seemed to demonstrate that he did not care about legal rules.” 8 “Since everyday life is dominated by the pragmatic motive, recipe knowledge, that is, knowledge limited to pragmatic competence in routine performances, occupies a prominent place in the social stock of knowledge.” Berger and Luckmann 1985 [1966], p. 56. They use the example of a telephone whose use requires only a few procedures about its actual use, and not a deep knowledge of the complex engineering that underpins it. The Election Commission of India has developed a ‘model code of conduct’ for millions of karyakartas— campaign managers—who run the actual process of campaigning, without necessarily having the knowledge of the institutions that sustain the aggregation of ballots into the mandate that issues of out of an election. We argue below that the recipe knowledge of elections derives from the early formulation of the process by the British statesman and theorist Edmund Burke.

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that limits the advantages enjoyed by those with more money.9 However, such norms are not always implemented with force and clarity, and sometimes, they fall behind times in terms of new methods of self-regulated party and campaign funding and methods to reach out to the voting public. As such, a contrast of the recipe knowledge of elections and the reality on the ground brings to light issues and processes that lie beyond the ken of received ideas about democracy as a process based on the aggregation of individual preferences into social choice and its transformation into public policy.10 The highly moral undertone of Edmund Burke, particularly his formulation of a political party as ‘a body of men united for promoting by their joint endeavours the national interest,’ based on some common programme, though made two centuries ago before the onset of modern mass politics, continues to feed into the rules and institutions that govern electoral politics.11 However, what goes on in the real world of contemporary politics is quite often at variance with this idealised view of parties and party competition. Reports on elections, as much in the media as in academic writings, are replete with allegations of electoral fraud, illegal campaign cash and noncompliance of electoral rules in myriad ways. Here, instead of merely resolving to punish wrongdoing, we must ask: why is the recipe knowledge not adequate to the task of running elections according to the norm? In the example we get from Berger and Luckmann, one gets by with recipe knowledge with regard to the complex technology of telephones. However, in case of a breakdown, one needs to go the next step and delve into the critical knowledge that underpins the simple procedures of working a telephone. One will need to do the same with the understanding of elections as a complex process. Politics rides as much on abstract ideas and ideals as on the concrete interests of groups and individuals, and on the shadowy world of crime entrepreneurs, for whom, ‘national interest’ is not the main motivating factor. Similarly, the organisation of parties and election campaigns has moved beyond the volunteer amateurs 9

The Indian Election Commission, for example, keeps a sharp watch over ‘black money’— unaccounted for money which circulates outside banking channels—which further reinforces criminal behavior and networks. 10 Understanding the role of the fixer, ensconced as entrepreneurs of crime in corporations, parties and electoral campaigns can help us gain a more realistic understanding of how parties, organisations and campaigns work. Pohlmann (2020, p. 6) refers to the parallel existence of state and market organisations and the mafia as “hidden partnership”. 11 This is the spirit that underpins India’s ‘the representation of the people Act, 1951’— a comprehensive text of 117 printed pages—that governs the norms of elections in India. See legislative.gov.in/sites/default/files/04_representation of the people act%2C 1951.pdf, downloaded on Oct 14, 2020.

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and brought in the corporate culture and organisations, manned by professionals. Parties and elections today are run by professionals who are salaried employees, media strategists and publicity specialists in the pay of corporations, trade unions and interest groups. Beyond them are less visible presences such as fixers, crime syndicates and cartels, located at the fringes of political systems based on money, guns and other forms of illicit transactions. The situation is further complicated by the presence of populistic movements which have emerged as vehicles of protest against the control that special interests exercise over elected governments, often through illegal campaign contributions and other forms of corruption. The sources of funds that support such ‘grassroots’ initiatives remain unclear and unaccounted for.

‘Campaign Cash’ as Catalyst of Electoral Participation What, then, is the basis of party support and electoral partisanship today? In the imaginary world of Edmund Burke, abstract principles and general convictions guide people towards political support and partisan preference among competing parties. Burke does not discount the role of social and economic interests in politics. That landholders would stand by conservative parties and workers would gravitate towards radical politics and prefer socialist parties can be explained in terms of broad ideologies of conservatism and socialism. Be it ideology or interest, party politics runs on norms of partisanship and participation based on them that are consistent with the general norms of the political system. These ideas have trickled down to the liberal democratic West where the linkage of social cleavages and party preference is the staple of main texts on the subject (Campbell et al., 1960; Butler & Stokes, 1974). In the typical analysis of political behaviour and electoral choice in liberal democracies, one uses ‘party identification’ as a bridge between the actor and behavior relating to political choice. Individuals get socialized into supporting ‘their’ political parties through families, unions, associations, workplace cultures and so on. The party ID—short for identification12 —becomes the decisive long-term factor, along with short term factors as personality of candidates, the state of the economy and media exposure and so on that determine support and partisanship. 12

Riker and Ordeshook (1973) refer to this as the D term which denotes the innate satisfaction of showing support on the part of actors for turning up to show support for ‘their’ political party, or more generally, doing their citizen duty of voting. Once again, one can see the long shadow of Burke on the received ideas of party politics and electoral choice in Western democracies. See Greene (1999) for the use of party identification as an explanation of partisan choice.

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Modern political organisations and idealistic convictions are the two fundamental props of the liberal democratic paradigm. Seen through its ontological and epistemological lenses, scandalous behavior of the kind that one comes across all too often in the real world of politics would be dismissed as necessarily aberrant and criminal behaviour, calling for exemplary punishment. However, if punishment could deter organizational deviance once and for all, we would have had a level playing field cleansed of deviant behaviour long since! The very resilience of useful illegality is puzzling. Analysts of contemporary politics can ignore these at their peril. Though the quantum of this grey penumbra around open, transparent and constitutional politics varies along cultures and contexts, its presence, as one can infer from our essays spread across three vast continents, is universal. The toolkit of political analysis that the authors of this volume employ, admits motives and means that are much less honorable than the standards set by Burke. This extended toolkit for the analysis of electoral campaigns and party finances draws on fresh insights from disciplines ranging from organizational sociology, organizational crime and corruption studies, psychology and political science, focused on party competition, elections and campaigns, and laws governing electoral behavior and party finance. An orderly political life pre-supposes the existence of binding norms and a high probability of norm compliance on the part of actors. However, the reality beyond the rarefied world of legal texts and abstract canons of the judiciary is contingent on choices of leaders and followers of political parties, managers of campaigns and their sources of finance. As such, in the final analysis, the legitimacy of norms and their binding character depend on the choices of individuals and the aggregation of these preferences in elections, and the transmission of these outcomes to norms embedded in institutions. Elections and political parties thus function as conduits that help articulate the will and preferences of society, and aggregate individual preferences into social choice. Seen in this context, one can very well understand the motivation of entrepreneurs under pressure to generate and invest campaign cash to be strategically disbursed to candidates, against possible support in future. These in turn surface as new laws, institutions and policies of the state. The focus of this volume rests on the fact that the reality of the political process does not always conform to the ideal type of democracy where issues and ideas are the main basis of electoral choice, and where principled convictions matter and money and muscles play only a marginal role. Politics is not, of course, all crime. But crime exists, and understanding the criminal fringe of normal politics can help us gain a more realistic insight into the policy process. The acknowledgment of the presence of useful illegality is indispensable to undertake legal and political reform and devise appropriate institutions

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and processes that can eradicate such practices that are beyond the ken of legality. This extended toolkit that takes into account both compliant and non-compliant choices on the part of strategic actors chasing after their goals is necessary to bring the Burkean liberal paradigm in line with the reality of contemporary politics. Even more urgently, this is essential to devise the necessary institutional rearrangement, in order to render political competition transparent and compliant with the rules of transaction. Party and campaign finance opens a window into this grey area of politics. A typical problem here is the alacrity with which parties conceal the sources of their income.13 With this wider objective, this volume opens a window into the inner architecture of political systems and help us engage in studying how institutions and political parties work, how parties and politicians are made accountable, whether campaigns and the electoral process are free, fair, uncorrupt, and efficient. In the following sections, we develop this main idea further through three connected arguments: why rational actors choose means that are non-compliant; what the sociology of organisation can offer as coping mechanism, and, how collective mindsets accommodate deviance within the body of political culture.

Making Elections Work Why do people bother to turn up to vote when voting is not compulsory and in constituencies that are sometimes very large and demographically diverse, with little chance of making a difference with a single vote? The insights we get from 13

A report in the Indian media is revealing: An analysis of their Income Tax Returns (ITR) and donations statements filed with the Election Commission of India (ECI) showed that the sources remained largely unknown. Political parties have collected Rs 11,234 crore [1.340.355, 79 Euro] from unknown sources in the last 15 years, according to election watchdog, Association of Democratic Reforms (ADR). An analysis of their Income Tax Returns (ITR) and donations statements filed with the Election Commission of India (ECI) showed that the sources remained largely unknown. At present, political parties are not required to reveal the names of individuals or organisations donating less than Rs 20,000 [237, 01 Euro], neither those who donate via electoral bonds. As a result, more than 67 per cent of the funds cannot be traced as they come from ’unknown’ sources. See “Parties collected Rs. 11,234 crore from unknown sources in last 15 years: Report” in the Indian Express, Mar 10, 2020. See https://www.newindianexpress.com/nation/2020/ mar/10/parties-collected-rs-11234-crore-from-unknown-sources-in-last-15-years-report-211 4927.html. We learn from the same report that the amounts received by the Bharatiya Janata Party, in power at the Union level and in many of India’s major regions is 1.5 times more than all the other parties taken together! That fact alone suggests the linkage between power, financing and the solicitude at concealment of the sources of income.

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rational choice theory offer an important extension of the liberal-democraticmindset. In the Downsian view, political support, particularly in an electoral context, is meant to increase the probability of an outcome favorable to the voter (Downs, 1957; Riker & Ordeshook, 1973). However, in a general election with electorates numbering in hundreds of thousands, one vote—except in very tight races—has a very small probability of making a difference. Voting is a costly activity in terms of the time to register (in the American context where people have to register to vote), collect information about candidates and their manifestoes, and actually having to turn up to vote. The ‘cost’ of voting might outweigh the infinitesimally small ‘benefit of voting’ in terms of the difference one’s vote makes to the policy outcome. The decision to vote and collect necessary information to make a reasoned choice can take time and resources which could be put to other lucrative or pleasurable alternatives. So, why do people vote at all, or for that matter, what is the incentive to support a party, and to take part in elections? In the face of this ‘illogic of voting’ what is the incentive to turn out to vote at all, even less than voting for a specific party? The first answer in terms of the ‘D’ term -civic duty and ideological reward, apply more to stable liberal-democratic societies with long traditions of elections. This is less relevant to societies where elections are of recent origin, socialization of voters into party identification is low and vote switching from one election to another is rife. The second answer would be a material incentive in the form of a gift, free transport, guaranteed baby-sitting and costlier incentives, including the threat of violence which are of dubious legality. Mitra (2001, p. 189) has formulated a third decision to turn out “not as an act of faith” but rather as “a limited commitment, conditional on performance”. (Fig. 1) The model in Fig. 1 can be seen as a representation of compliance in political systems in general. In the ideal type liberal-democratic paradigm, A extends to the entire system where all transactions are legally compliant; in the Hobbesian state of nature, it is all C, where no transaction is rule bound as there are no rules and life is ‘solitary, poor, nasty, brutish and short’. In reality, we have a combination of all three, where, depending on the context, we have an area of compliant, rule bound space, beyond which are areas of partial compliance into which compliant actors have access through the intermediation of fixers (Reddy & Hargopal, 1985; Mitra, 1991; 1994, Pohlmann, Bitsch & Klinkhammer, 2016; Pohlmann, 2020), who connect them to illegal funds, violent and coercive politics, and crime cartels of various descriptions. By putting these arguments together, we can begin to see the rudiments of a model where party competition and electoral choice are located in the midst of a circle of legal/transparent/compliant politics, surrounded by a grey fringe.

Non-compliance, Organizational Deviance and Useful Illegality… Fig. 1 Fixers as ‘crime Entrepreneurs’, the Political System and Levels of Compliance

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A. Compliant B. Parally compliant C. Noncompliant

The fixers can operate only if there is a market for them. The market for ‘fixers’ emerges when: • demand greatly exceeds supply, such as at times of scarcity when and punishment for black marketing is light or not enforceable; • when there is a cultural hiatus between donors like the World Bank and recipients who are illiterate, isolated and uninformed of their rights; • when political competition is tight and votes have to be bought or coerced • when personal efficacy exceeds trust in parties and elections • when a mafia like organisation offer an alternative route to goods and services (Brass, 1983) We have some evidence to offer from the Indian case. In India, trust in political parties and legislatures—the work-horses of democracy—remains low compared to social and religious organisations.14 Besides, in a context where the formal rule of the government runs parallel to that of radical organisations or criminal

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In India, we learn from survey data that trust and confidence in political parties tends to be much lower than the armed forces and religious organisations. Parties do not have regular, bureaucratic organisations. Nor are their long-term supporters of parties as in old, European democracies. As such, candidates often turn to fixers to get the vote out. See table on Trust and Confidence in electoral and non-electoral institutions in India (2006, 2012) in Pohlmann and Mitra, in this volume.

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networks, getting a job done sometimes involves the engagement of intermediaries who can help transact business in tacit cooperation with anti-government forces.15

Organizational Deviance as an Incentive for Designing ‘Appropriate’ Institutions Faced with criminality, the response of the keepers of order and vote-hungry politicians, often is ‘zero tolerance’. However, while this policy is politically convenient and electorally rewarding, such rhetoric does not give social actors their rightful room to manoeuvre, and can, in the end, prove socially wasteful and politically expensive. The function of critical sociological inquiry should be to deconstruct the reification16 of social reality and to reveal the underlying process. The deconstruction of simple criminalisation of deviant behaviour and exploration of the underlying cluster of facts, beliefs and information on the basis of which people act, can help create “a new paradigm”.17 Some of the essays included here show how the fact of criminality might actually underpin a clash of restrictive norms and individual and collective entitlements. To that extend, amendment of rules and creation of appropriate institutions can enhance social order, legitimacy and administrative efficiency. 15

In the districts affected by Maoist insurgency, one finds a kind of dual rule that is noticeable in other parts of India affected by insurgency. In these parts of India, the state functions normally in terms of administration, taxation, holding of elections and normal operation of market transactions. However, in parallel, the insurgents hold their form of judicial trials, execute summary judgement, extort protection money and have quasi-regular forces that periodically carry out spectacular assaults on the forces of order, people they consider to be police informers and cut off communication by blasting improvised explosive devices (IED). Brass (2003), working out of his case analysis of riots in Aligarh, a North Indian city, suggests that an ‘institutionalised riot system’ underpins the failure of the agencies of law and order. The existence of local entrepreneurs of power who see an opportunity in mobilising their riot-network and their linkage with higher level leaders is critical to the outbreak of inter-community riots. 16 Berger and Luckmann formulate reification (“Verdinglichung”) as an attempt to elevate facts into a level where their facticity can be taken for granted. This they do to explain how a mechanical emphasis on social ‘facts’ can lead to taking the tip of the iceberg as the whole and in the process, miss out on a proper understanding of the world of the actor. To quote: “…a purely structural sociology is endemically in danger of reifying social phenomena. Even if begins by modestly assigning to its constructs merely heuristic status, it all too frequently end by confusing its own conceptualisation with the laws of the universe.” (1966[1985: p. 208]). 17 “This is where the criminological concept of organisational deviance and the sociological concept of useful illegality merge and create a new paradigm.” Pohlmann, op. cit., p. 16.

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Beyond its rhetorical appeal, lawmakers, administrators and keepers of law and order soon realise that hands that wield the big hammer, the reach of their authority and resources that go into funding them are all limited. No state can have as many police personnel as men and women, and even if it did—Quis custodiet ipsos custodes?—“Who will guard the guards themselves?” A more efficient way to protect order is to understand the grounds of rule-infraction, and take them into account in designing appropriate rules and institutions that combine regulation and self-regulation. The theme of how systematic norm-infractions eventually lead to norm evolution has been dealt with at length in this volume.18 In the European context, we have several authors who have enlightened us with empirical examples of norm evolution, under the specific impetus of systematic exercise of useful illegality by people, or for that matter, organizational deviance. Thus, Hans Herbert von Arnim speaks about how in Germany, “parties concerned decide themselves in their role as legislator or budget-maker on the funds allocated to them”. He makes a case for urgent reforms in the norms of campaign finances. On similar grounds, in the French case, Éric Phélippeau makes a case for transforming “Etiquette”—informal rules—into “Edict”, which, as formal, institutionalized rules would have more binding power. Based on his concept of “Sociogenesis”, he shows how France has been preceded by other countries such as the United States, Great Britain, Sweden Germany, Finland, Israel, Italy and Spain have already made a similar move in the direction of institutionalization of appropriate norms. Aurel Croissant, based on a number of Southeast Asian cases, suggests that “smart political finance regulation can be a sharp tool for combating political corruption.” K. C. Suri, and Subrata Mitra and Markus Pohlmann, based on the Indian case, have shown how the rules on electoral campaigns, including, in particular, campaign cash, have evolved and how innovative methods of ‘electoral bonds’ and ‘model code of conduct’ have come about to smoothen the process of voting and keep electoral behaviour within the framework of electoral laws. From Latin America, Mario H. Jorge Jr., Maria Eugenia Trombini, Wagner Pralon Mancuso, Bruno W. Speck and 18

Based on Sigmund Freud, Civilization and its Discontents, (London: Penguin; 2014), p. 88. (First published as Das Unbehagen in der Kultur, by Internationaler Psychoanlytischer Verlag 1930) we have argued in footnote 1, in the introductory chapter that compliance with the norm necessitates a balance of the ego which tends towards gratitification at any cost, regardless of the norm and the superego that becomes an internal controlling mechanism. This idea has found articulation in many of our case studies where authors analyse the discourse of lawbreakers and show their reasoning, attempts at self-control and occasional failture to give into temptation or to take the risky path, ending up in prison! The occurrence of non-compliance become the incentive for law makers to modify norms, combining the carrot of incentives for compliance with the stick of stern punishment.

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Vanessa Elias de Oliveira, and Fabiana Alves Rodrigues have shown how the judicial process can get enmeshed with the orderly conduct of elections. They make a case for greater understanding of the context of rule application and its conflation with the process of rule-making. Finally, in the Colombian case, Nicolás Jaramillo shows how new legislation can seek to rein in “electoral financing by illegal actors”.

The Tension Between Local Knowledge and Global Norms, and the Hermeneutic of ‘Wrongdoing’ The Rechtstaat, thanks to the force majeure at its disposal, assumes the binding norms of the state to be the sole arbiter of the rightness or wrongness of an act.19 This assumption has been critically examined by Clifford Geertz (1993) in his seminal essay on “Local knowledge: Fact and Law in Comparative Perspective.” (Geertz, 1993, pp. 167–234). Geertz points out the crucial role of local knowledge when it comes to norm specification and norm application: “Like sailing, gardening, politics and poetry, law and ethnography are crafts of place: they work by the light of local knowledge….Whatever else anthropology and jurisprudence may have in common…they are alike absorbed with the artisan task of seeing broad principles in parochial facts.” (Geertz 1993, p. 167). However, the facticity of facts is not given nor self-evident, for facts are constituted and constructed on the basis of an ensemble of supplementary ‘facts’, beliefs, mores and customs. “The realization that legal facts are made not born, are socially constructed…by everything from evidence rules, courtroom etiquette, and law reporting traditions, to advocacy techniques, the rhetoric of judges, and the scholasticisms of law school education raises serious questions for a theory of administration of justice… If the ‘fact-configurations’ are not merely things found lying about in the world and carried bodily into court, show-and-tell style, but close-edited diagrams of reality the matching process itself produces, the whole thing looks a bit like sleight-of-hand.” (Geertz, 1993, p. 173). Law and belief systems might point in conflicting directions. Clifford Geertz (1993, p. 180) adds cryptically: “How, given what we believe, must we act: what, given how we act, must we believe.” Faced with these conundrum of multiple 19

With reference to a caste study from Indonesia, Geertz (1993) refers to the “Western view… that there are rules that sort right from wrong, a phenomenon called judgment, and there are methods that sort real from unreal, a phenomenon called proof, appears as only one mode of accomplishing this fact”. Pp. 174–175. The local actors are just as likely to consider the local norms as the arbiter of right and wrong.

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realities,20 (ibid., p. 232) asks at the end of a series of comparative cases from different locales and different religious contexts, “What, [then], will do?” The irreconcilable gap between the normative and the cognitive germane to transitional societies (which used to be known as ‘modernizing’ and ‘developing’ societies of the ‘third world’) or modern ones with large sub-populations of migrants, legal and otherwise that Geertz talks about need not remain as an inchoate end state for societies evolve and collective mindsets change under the diffusion of values, dialectic of competitive politics and conscious, explicit, strategic state action.21

An Agenda for Future Research Must we live with the ‘modern’ mafia (Pohlmann, Dannecker & Valarini, 2020), like one is resigned to living with cockroaches, which lurk in the crevices of ultra-modern buildings? The scenarios discussed earlier with regard to deviant practices in political and corporate behaviour can be conceptualised in terms of agendas for future research. One can consider three issues in particular. First, how to understand the incentives for partial compliance? Secondly, how organizational deviance re-shapes institutional rules? And, in the third place, how to understand non-compliance, useful illegality and organizational deviance between legal and cultural rules? These questions open up other issues. Can the whip of enforcement eliminate crime entrepreneurs altogether? Is reform necessary and possible, and if yes, then how? These issues are beyond the remit of our volume, and, should be added to the agenda for further research. However, at this stage of the state of the art, the need to bring research on useful illegality, individual partial-and-noncompliance, and organizational deviance into an integrated theory, one needs to pay heed to the wake-up call of Diane Vaughan (1999, p. 298): 20

Geertz formulates multiple realities as a world of “various places”, “various between lawyers and anthropologists, various between Muslims and Hindus, various between little traditions and great, various between colonial thens and nationalists now; and much is to be gained, scientifically and otherwise, by confronting that grand actuality rather than wishing it away in a haze of forceless generalities and false comforts.” (1993: p. 234). 21 Thus, under the impact of migration and cultural flow, the Marshallian concept of shared sense of citizenship that has been held to be fixed in form and content, can change over time. See, “The Idea of Citizenship and its Institutionalisation: Significance of India for the Korean Case” in Markus Pohlmann, Jonghoe Yang and Jong-Hee Lee, eds., Citizenship and Migration in the Era of Globalisation: The Flow of Migrants and the Perception of Citizenship in Asia and Europe (Heidelberg: Springer; 2013), pp. 211–226.

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Studying the dark side of organizations exposes the operational inadequacy of society’s institutional bases. It increases our understanding of social structure, showing that routine nonconformity, mistake, misconduct, and disaster are not anomalous events, but systematic products of complex structures and processes. Consequently, it challenges not only Weberian notions of rationality, but also the decontextualized, means-ends orientation of rational choice theory, showing that behavior is rational within situational contexts and that social context can decouple rational choice from outcomes, so organizations produce unanticipated negative consequences that deviate from formal design goals and normative standards and expectations. (Emphasis added)

Hiatus of the normative categories of observers and cognitive categories of actors is at the heart of the gap in our understanding of non-compliance as a social phenomenon. Deploring such behaviour from the high moral grounds of normative rectitude can be, as Niklas Luhmann pointed out in his debate with Jürgen Habermas, only the first order observation of personal non-compliance and organizational deviance.22 The second order is to look at the submerged parts of the political iceberg, not visible to the naked eye of non-specialists. The middle ground between the normative and the cognitive is where methodological reflexivity should draw its analytical categories from, in order to have a grip over society in terms of analytical concepts that are endogenous, culturally authentic and yet connected to norms set out by competent authority. As we move on with the setting up of a research agenda for future work, it is important to keep in mind the advice of Vaughan (1999, p. 298). Individual perception and choice behaviour are at the heart of organisations. When it comes to individual choices, the perception of risk and uncertainty are of fundamental

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The German sociologist Niklas Luhmann, in his debate with Jürgen Habermas, described the normative way of approaching social reality as ‘first-order observation’ and argued that there should be a shift from that to ‘second-order observation’, which refers to observing how other observers observe social reality. Reflexivity entails that the analysist of social reality should try to understand social actors in terms of their cognition of reality, and then look under them to generate explanatory categories and models that underpin the social construction of reality. Niklas Luhmann, “(2002a). ‘I See Something You Don’t See’, in William Rasch (ed.), Theories of Distinction: Redescribing the Descriptions of Modernity, Stanford, California: Stanford University Press. 2002.) “Luhmann’s concept of ‘second-order observation’ points to the need to describe how societal problems are constructed, instead of criticizing specific social structures as repressive, illegitimate, or unjust. In a nutshell, Luhmann denied that sociology had any political role, rejecting Habermas’s critique of his systems theory as inherently conservative.” See David Seidl and Hannah Mormann, “Niklas Luhmann as Organization Theorist”, in Adler, P., du Gay, P., Morgan, G., Reed, M. (eds) Oxford Handbook of Sociology, Social Theory and Organization Studies: Contemporary Currents. (Oxford: Oxford University Press; 2015), p. 3.

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importance. Just as important are ‘ethno-recognition’ (Vaughan 1999, p. 298) and ‘local knowledge’23 (Geertz, 1993). Vaughan adds some more considerations: …we might hypothesize that in virtually all socially organized settings, routine nonconformity is met with efforts to keep it from becoming publicly identified as mistake, misconduct, or disaster. What is the social organization of this clean-up work, and what is the effect on social structure? [further] how do understandings develop about what is an incident of routine nonconformity, who gets to decide what is and what is not, and how is routine nonconformity converted to mistake, misconduct, or disaster? Finally, there is the unresolved question of when conditions combine to produce the bright side and when they culminate in the dark side of organizations. … Answers are likely to be forthcoming when scholars examine how the conjunction of environmental, organizational, and socio-cognitive elements combine to produce variation in individual choice and action. Necessarily, this agenda would add to and draw from historical sociology, investigating changes in law, science, technology, and knowledge that affect the incidence of unanticipated adverse outcomes, understandings about what is culpable and what is tolerable, and social definitions of what is normative and deviant at a particular historic moment; economic sociology, for research on markets, competition, institutionalized inequality, and social costs; rational choice sociology, examining the disjunction between rational choice and outcomes; and cultural sociology, for analysing how culture mediates environment, organization characteristics, cognition, and choice. Much can also be learned from the strong theoretical interdisciplinary work on the dark side of organizations. (Emphasis added).

Berger and Luckmann (1985, p. 211) anticipated the voice of Vaughan. “…sociology must be carried on in a continuous conversation with both history and philosophy or lose its proper object of inquiry. This object is society as part of a human world, made by men, inhabited by men, and, in turn, making men, in an ongoing historical process.” The function of critical social inquiry should be to cut through the reification (Verdinglichung—Berger and Luckman, ibid, p. 225, note 58) of reality and reveal the underlying structure process and agency that together lead to partial compliance. The reduction of an act seen as ‘useful illegality’ by the actor, to mere criminality transforms what we have called the grey zone into the rhetoric of ‘zero tolerance’—a vote winner for ambitious politicians—but, as we hold in this book, a missed opportunity to innovate new institutions and 23

Geertz’s influential work (1993) on culture as a system of meanings and symbols is critical to our understanding of an insight into why people choose the way they do in a given context. See, Robin Koning”Clifford Geertz’s Account of Culture as a Resource for Theology” in Pacifica: Australasian Journal of Theology (2010) https://doi.org/10.1177/1030570X1002 300103. However, while local knowledge and culture provide an ontological core of values, the actor might still have a room to manoeuvre within this matrix in terms of his perception of the opportunity structure and calculation of the cost and benefit of his choice.

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practices. That alone can give the state and the actor the best room to manoeuvre, negotiate and converge—and, in the process—create a body of compliant citizens, ensconced in a strong and orderly state.

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Subrata Mitra Ph.D. (Rochester), is emeritus professor of Political Science at Heidelberg University. His main areas of research include South Asian and comparative politics, rational choice, research methods, governance, citizenship and political theory. His books include Kautilya’s Arthashastra: An Intellectual Biography – the Classical Roots of Modern Politics in India (2017), Citizenship and the Flow of Ideas (2012), Reuse: The Art and Politics of Integration and Anxiety (2012), Politics in India: Structure, Process, Policy (London: Routledge, 2017, second edition), When Rebels become Stakeholders (2009), the Puzzle of India’s Governance (2005). Professor Mitra edits the Routledge Advances in South Asian Studies and Modern South Asian Studies; and, ‘Society, Politics, Economy’, NOMOS (Baden Baden, Germany). His ‘Governance by Stealth: the Ministry of Home Affairs and the Making of the Indian State’ will appear from Oxford University Press in 2021. Markus Pohlmann is full professor of Sociology at Max-Weber-Institute of Heidelberg University and currently Fellow of the Marsilius Center for Advanced Studies. Prior to his current position, he was Professor at the Friedrich-Alexander-University in Erlangen, and Research Director of the ISO-Institute in Saarbrucken, Germany. His research areas span organizational sociology, the sociology of management, and economic sociology. Currently, he leads the research groups for Organizational Deviance Studies and International Management Studies. Elizangela Valarini is a Postdoctoral researcher and Assistant Professor at Max-WeberInstitute of Heidelberg University, from where she holds a Master’s degree and Ph.D. in Sociology. She is a member of the research group HeiGOS (Heidelberg Research Group for Organization Studies) and coordinates the research project Corporate Crime and Systemic Corruption in Brazil (funded by DFG – FAPESP). She studied Psychology at the Universidade Estadual de Maringa (UEM), Brazil. Her research areas span organizational sociology, the sociology of management, and economic sociology, and themes related to Brazilian economic and political development.