Tag Archives: state capture

Call centers, cash, and power: Georgia’s hidden political economy — Revised

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Yesterday’s post incorrectly identified a source of information on the Georgia call center scam and its relationship with current members of the government. It also failed to note it was authored by Giorgi Meladze, Associate Professor, Ilia State University School of Law, Visiting Scholar at Freie Universität Berlin.

Georgia’s recent corruption scandals are often described as an internal purge within Georgian Dream. That may be partly true. Former Prime Minister Irakli Garibashvili has been sentenced to five years in prison after pleading guilty to large-scale money laundering, following investigations in which officials said they seized more than USD 7 million in cash and valuables from properties linked to former officials. Former State Security Service chief Grigol Liluashvili has also been arrested on bribery charges, including allegations linked to the protection of scam call centers. These cases are real legal developments. But treating them only as corruption prosecutions may miss the larger political story.

In an interview, Givi Targamadze, former MP who chaired the Defense and Security Committee Chairman, offers a different reading. He explains that these arrests and reshuffles should not be seen as a genuine anti-corruption campaign but as symptoms of a deeper struggle over control of illicit finance, security institutions, and political loyalty. According to him, the current turbulence inside Georgian Dream reflects an attempt to reorganize the relationship between state power, criminal networks, and cash-generating schemes, especially Georgia’s now notorious scam call-center industry.

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Call centers, cash, and power: Georgia’s hidden political economy

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GAB welcomes this Guest Post by Giorgi Meladze, Associate Professor, Ilia State University School of Law, Visiting Scholar at Freie Universität Berlin.

Georgia’s recent corruption scandals are often described as an internal purge within Georgian Dream. That may be partly true. Former Prime Minister Irakli Garibashvili has been sentenced to five years in prison after pleading guilty to large-scale money laundering, following investigations in which officials said they seized more than USD 7 million in cash and valuables from properties linked to former officials. Former State Security Service chief Grigol Liluashvili has also been arrested on bribery charges, including allegations linked to the protection of scam call centers. These cases are real legal developments. But treating them only as corruption prosecutions may miss the larger political story.

In an interview, Givi Targamadze, former MP and now Director of the Media Center at the Georgian Strategic Analysis Centre, offers a different reading. He explains that these arrests and reshuffles should not be seen as a genuine anti-corruption campaign but as symptoms of a deeper struggle over control of illicit finance, security institutions, and political loyalty. According to him, the current turbulence inside Georgian Dream reflects an attempt to reorganize the relationship between state power, criminal networks, and cash-generating schemes, especially Georgia’s now notorious scam call-center industry.

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Fighting Grand Corruption: Naomi Roht-Arriaza’s Indispensable Guide to Combatting Its Scourge

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The literature on grand corruption, a/k/a kleptocracy or state capture, continues to expand at an ever-increasing rate.

Investigative exposes, think tank and NGO policy papers, academic books and articles, court cases and legal commentaries, and yes, blogs like this one make it hard for full-time students of the phenomenon, let alone policymakers, journalists and activists, to stay abreast of the learning this vast outpouring of thinking is producing.  

Thanks to University of California Law Professor Naomi Roht-Arriaza‘s new book, what we know about grand corruption, what can be done to curb it, and how to make its victims whole is now available in a single, readable, useful volume.

The title – Fighting Grand Corruption: Transnational and Human Rights Approaches in Latin America and Beyond – advertises two of its most important contributions.

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Why The FATF-Based Anti-Money Laundering System Fails to Catch the Proceeds of Corruption

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Today’s Guest Post is by Robert Barrington, Professor of Anti-Corruption Practice at the Centre for the Study of Corruption, University of Sussex (UK) and formerly the Chair of Transparency International’s International Council.

In recent years, anticorruption campaigners and policymakers have directed increased effort towards improving the global Anti-Money Laundering (AML) system.

Imagine this system were operating perfectly. Would it stop kleptocracy?

Of course not, no more than AML systems stop heroin production. AML laws and regulation are not designed to stop the acts that generate dirty funds; they are designed to stop the proceeds of crime from being disguised (laundered) and thus freely circulating around the world.

The more difficult question involves monies kleptocrats steal: if the global AML system were operating perfectly, would it stop these funds – the proceeds of corruption – from circulating around the world?

Two recent reports in the UK — from the Taskforce on Business Ethics and the Legal Profession and Spotlight on Corruption — answer the question with a resounding NO: when the proceeds of corruption derive from kleptocracy, when crooks have captured the state, the UK’s AML system is not capable of addressing these funds.  To be clear, even if the current global AML system were operating perfectly, the UK would be unable to deal with the proceeds of corruption arising from state capture.

To date the research is confined to the UK context and UK law; it has yet to extend to other jurisdictions. But given what is known about the globalised nature of illicit financial flows, we might conclude that other jurisdictions are no better at this than the UK.

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New Podcast Episode, Featuring Ketakandriana Rafitoson

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, host Tom Shipley interviews Ketakandriana Rafitoson, the Executive Director of Transparency International Madagascar and the Vice Chair of Transparency International. The interview focuses on the problem of “state capture” in Madagascar, emphasizing how this problem has manifested in key sectors such as natural resources, and how outside actors (countries and international firms) have contributed to the problem, and how civil society actors are using innovative approaches to fight back against networks of corrupt actors. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

New Podcast Episode, Featuring Sankhitha Gunaratne

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, host Liz David-Barrett interviews Sankhitha Gunaratne, Deputy Executive Director of Transparency International Sri Lanka. Ms. Gunaratne emphasizes how the recent economic crisis in Sri Lanka has laid bare the extent to which kleptocratic actors have captured key pillars of the state, and she provides more detail on the methods that these actors have used to effectuate their state capture, including the suppression of accountability institutions and militarization of key government positions.Ms. Gunaratne then outlines the strategies TI Sri Lanka has employed to respond to this challenge, including the use of strategic litigation and leveraging the influence of international financial institutions. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

Institutionalizing People Power: How Switzerland Overcame Systemic Corruption

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How do states escape pervasive corruption? Expanding the small set of success stories, a burgeoning line of research (see here, here, here, here, or here) seeks answers to this question through the study of polities that have achieved control of corruption before Second World War. This group of so-called “early achievers” mostly consist of Western and Northern European countries as well as territories that seceded from them. One lesson that has been drawn from the study of early achievers is that the gradual depoliticization of governance is an essential step on a society’s path to becoming free from endemic corruption. Indeed, some have suggested that transitioning to a robust democracy before building a sufficiently effective and clean state is a recipe for corruption and state capture, as political parties will organize on clientalist lines and focus mainly on capturing rents. The key to combating systemic corruption, on this account, is building a strong and professional class of civil servants and judges who are insulated from politics.

The case of Switzerland, which has received little attention so far, presents a puzzle in this regard. Now a textbook example of effective (domestic) corruption control, early nineteenth century Switzerland shared many of the klepocratic governance patterns we find in low- and middle-income countries today. Long dominated by a handful of wealthy families, from the 1830s onwards Swiss state institutions fell under the sway of a group of entrepreneurs involved in the financing and organization of railway construction. These “Railway Barons” dominated Swiss politics through a web of patronage networks and used the captured institutions of the state to assert their individual interests. But by the beginning of the twentieth century, Switzerland was free from such systemic corruption. Remarkably, and contrary to conventional thinking about early achievers, Switzerland accomplished this not by limiting democracy, but by doubling down on it. Continue reading →

State Capture: A “How to” Guide

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The Democratic Alliance, South African’s principle opposition party, has brought suit seeking a declaration a policy of the African National Congress, the nation’s ruling party, is “inconsistent with the Constitution. . . and the Public Service Act” and hence invalid.

The policy at issue is the ANC’s Cadre Deployment and Development Policy. It sets out how the party selects who will serve in the national, regional, and local levels of South Africa’s government, either in an elected position or as a member of the career service.  The DA alleges that the effect of the policy is to give the ANC “control over the functioning of critical institutions of government. . . blurr[ing] the lines between the ANC and the State and facili[tating] state capture. . . . .” The case’s founding affidavit, equivalent to a complaint in common law jurisdictions, asserts the policy has “inhibited the ability of the State to function effectively in order to promote the rights in the Bill of Rights [and that it] has eroded South Africa’s democratic founding. . . . “

Evidence developed by the Judicial Commission of Inquiry into Allegations of State Capture, established after ANC leader Jacob Zuma was forced to resign as South African president, is cited throughout the affidavit to show how he and ANC cronies implemented the policy and what its effect has been.* The policy reads as a “how to” manual for capturing the state in a weak or developing democracy. One can only hope this will be how the South Africa’s judges read it as well.

A copy of the policy is here for readers’ information. And more importantly, for those working on prevent state capture elsewhere, to help them thwart similar efforts.

*Earlier today South African Chief Justice Raymond Mnyamezeli Mlungisi “Ray” Zondo, the commission chair, spoke to the failure of the ANC to come to grips with Zuma’s behavior and expressed the fear the state could be re-captured were another Zuma-like figure elected president. Click here to listen to his to warning to South Africans of all parties. Thanks to a South African reader for alerting me to his extraordinary and powerful remarks.

New Podcast, Featuring Elizabeth David-Barrett

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After our holiday hiatus, I’m pleased to announce that a new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my Interdisciplinary Corruption Research Network (ICRN) colleagues Nils Kobis and Christopher Starke interview Elizabeth David-Barrett, Professor of Governance and Integrity and Director of the Centre for the Study of Corruption at the University of Sussex. In the interview, Professor David-Barrett discusses the concept of “state capture,” the mechanisms by which corrupt actors may capture the state, and the new forms of state capture that have been emerging in many countries, as well as how the concept of state capture relates to lobbying and machine politics. Later in the interview, she addresses various questions related to anticorruption reform measures, including the unintended consequences that some well-intentioned reforms might sometimes have, and where up-and-coming researchers can make the most valuable contributions to the anticorruption struggle. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Guest Post: How One Family Is Capturing the Sri Lankan State

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Today’s guest post is from Professor Liz David-Barrett, Director of the Centre for the Study of Corruption at the University of Sussex.

Sri Lanka, a fragile democracy that emerged from a 26-year civil war only in 2009, is on the verge of becoming a captured state, thanks to a concerted power grab by the Rajapaksa family. When Gotabaya Rajapaksa was elected president in late 2019, he appointed his brother Mahinda to serve as both premier and Finance Minister. He later relieved Mahinda of the latter role, but replaced him with another brother. A fourth brother is Minister of Irrigation, and Mahinda’s son runs another two ministries. All told, Ministries run by the Rajapaksa family control an estimated 24% of the state budget. And another six Members of Parliament are members of the family. The Rajapaksas have further extended their control by appointing allies (including other family members) to other high-ranking government jobs and leadership roles in state-owned enterprises.

Even more troubling than the extent of the Rajapaska family’s dominance over Sri Lankan government is the way in which the Rajapaksas are using the familiar state capture playbook to ensure that they stay in power:

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