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State-corporate crime

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  • Sudden Wealth Curse

    10 months ago: Russian President Vladimir Putin, center, and the Netherland's Prime Minister Jan Peter Balkenende, left, enter a hall for a signing of documents ceremony in the Moscow Kremlin, Tuesday, Nov. 6, 2007, with Dutch gas company Nederlandse Gasunie NV President Marcel Kramer, right, in the background. Russian and Dutch officials signed an agreement Tuesday to include Dutch gas giant Nederlandse Gasunie NV in the Baltic Sea pipeline designed to bypass several European countries and ship Russian gas directly to Germany. 

      State-trade terror 

    The Origins and Development of the Concept and Theory of State-Corporate Crime

    Ronald C. Kramer

    Raymond J. Michalowski

    David Kauzlarich

    The important contributions made by Richard Quinney to the study of corporate crime and the sociology of law, crime, and justice have influenced the development of the concept of state-corporate crime. This concept has been advanced to examine how corporations and governments intersect to produce social harm. State-corporate crime is defined as criminal acts that occur when one or more institutions of political governance pursue a goal in direct cooperation with one or more institutions of economic production and distribution. The creation of this concept has directed attention to a neglected form of organizational crime and inspired numerous empirical studies and theoretical refinements.

    Key Words: state crime • corporate crime • organizational crime


    2006 Marked by the Rise of the Corporate State:

    The IHT is running a year end wrap-up article about the biggest conceptual developments in business and economics that have helped shape our world in 2006. Among the most notable and troubling developments in 2006 was the return of the corporate state, as originally described by Andrei Illarionov (see Sean Guillory's balanced summary here)


    Return of the corporate state

    Karl Marx wrote that the state was nothing more than the executive committee of the bourgeoisie. But in Russia, President Vladimir Putin has stood Marx on his head: the state dominates many of the most important businesses, not the other way around. A new hybrid of country and corporation has been created, fusing the public and private sectors to serve the Kremlin. Andrei Illarionov, who in December 2005 resigned as an economic adviser to Putin, calls it "a corporate state."

    This goes way beyond mere cronyism. Dmitri Medvedev is both a deputy prime minister and the chairman of the state natural gas monopoly Gazprom, which controls one-fifth of the world's natural gas reserves. Igor Sechin, Putin's deputy chief of staff, was appointed chairman of the sprawling state-owned oil company Rosneft. The Kremlin has also tightened its control over other industries. In February, Putin consolidated Russian aircraft makers into one state-owned corporation. Last month, the secretive state arms trader Rosoboronexport grabbed a controlling stake in Vsmpo-Avisma, the world's largest maker of titanium, with Rosoboronexport's director, Sergei Chemezov, becoming the company's chairman.

    As Illarionov put it, "There is no free economic space remaining anywhere in Russia."

    The corporate state is more than a way for Putin apparatchiks to get rich — although it is certainly that. According to Keith Darden, a Russia expert at Yale University, it is in large part a solution to an enduring political headache for authoritarian rulers: how can you maintain enough of a market economy to generate wealth without allowing the creation of independent businesses that could grow to challenge your authority? First, Putin cracked down on oligarchs who had dared to cross him. Now the Kremlin seems to be consolidating control over the remaining potential bases of opposition.

    The corporate state shows no signs of withering away. Medvedev, the Kremlin's man at Gazprom, may well be Putin's pick to be the next president of Russia.

    — Gary J. Bass

    I think that this short IHT article underscores one of the primary misconceptions about the theft of Yukos, the Kremlin's aggression toward private businesses and organizations, and the growing role of the state in general: people actually believe that these assets are being "nationalized" for the "public good." This is actually not quite accurate. As Andrei Illarionov pointed out during a speech at the Cato Institute last month, in the case of Yukos, these energy assets were transferred by illegal means not from one private owner to the people, but rather from one group of individuals to another group of individuals. It is absurd to pretend that this is a real nationalization when it is only a small group of private individuals within the government lining their pockets with the rents from these businesses. In regards to the mechanics of this new corporate state, Pavel Baev writes the following:

    A particularly striking feature of this systemic corruption is the positive identification of personal profit with the passionately proclaimed “state interest.” This is typical for the St. Petersburg cadre that Putin brought into the colossal bureaucratic pyramid in order to enhance his control. These “Putin people,” with backgrounds in the special services, were expected to show discipline, efficiency, and above all clan loyalty. The resentment of losers in the privatization of the 1990s sustained their zeal in restoring the power of the state, but they were not immune to the temptation to mix business with pleasure. Easy access to overflowing streams of money has eroded discipline and efficiency, but it is the very real p rospect of Putin’s retirement that has deeply undermined their loyalty (Ezhednevny zhurnal, September 20). The so-called siloviki, or “power guys,” have turned into feuding gangs that settle their scores in the long Kremlin corridors.

    This war to capture the unraveling networks reached a climax in June, when one group of “loyalists” convinced Putin to sack the over-zealous Prosecutor-General Vladimir Ustinov, and another “team” quickly arranged his reassignment as minister of justice. After the summer break, the battles acquired a new intensity, as the cadre reshuffling in the judicial system has taken down Ustinov’s lieutenants who supervised the rigged investigation against the oil giant Yukos and its owner M ikhail Khodorkovsky (Kommersant, September 21). No explanation has been given for the chain of resignations and firing in the FSB central apparatus, but the leaks about internal corruption investigations and corruption in the department of internal investigations are growing into a deluge (Ezhednevny zhurnal, September 18).

    More attention should be paid to how private interests are being advanced in Russia under the mantle of “the public good.”





    With $40 billon, Putin ‘is now Europe’s richest man’

    December 22, 2007 · No Comments

    Compared to Mobutu Sese Seko, the dictator who plundered Congo, and Ferdinand Marcos, the former ruler of the Philippines. Putin has denounced the claims as “trash”

    Telegraph | Dec 22, 2007

    By Adrian Blomfield in Moscow

    President Vladimir Putin of Russia has been likened to an African plutocrat after a controversial political scientist claimed that he had acquired control of £20 billion in energy assets - enough to make him Europe’s richest man.

    Stanislav Belkovsky, a colourful figure on the political scene, claimed that Mr Putin had made a multi-billion pound fortune by controlling stakes in three Russian energy companies.

    The allegations – if true – would suggest that Mr Putin is one of the wealthiest men ever to hold public office.

    Mr Belkovsky alleged that Mr Putin had acquired $40 billion during his eight years in power, through a network of front-men.

    He compared the president to Mobutu Sese Seko, the dictator who plundered Congo, and Ferdinand Marcos, the former ruler of the Philippines.

    “Russia under Putin is not a version of modern democracy but a typical third world kleptocracy,” said Mr Belkovsky.

    But Mr Putin’s spokesman denounced the claims. “It’s nothing but trash,” said Dmitry Peskov.

    “Certainly it has nothing to do with seriousness; it has nothing to do with professionalism. It’s just trash.”

    According to Mr Belkovsky, Mr Putin controls a 37 per cent stake in Surgutneftegaz, an oil exploration company, as well as 4.5 per cent of Gazprom, the state energy giant, and at least 50 per cent of Gunvor, a Swiss-based oil trading company that has won a series of state contracts.

    Mr Belkovsky claimed his information had come from credible sources in the Kremlin - but admitted he had no documentary evidence.

    “European and U.S. special services have access to these documents but I don’t,” he said.

    Observers were sceptical.

    “In a system of state capitalism and total corruption, it would be strange if Putin was not rich,” said Leonid Radzikhovsky, a political analyst.

    “But the information about this treasure island seems a little exaggerated. Most Russians do not think about corruption at presidential level or do not want to think about it.”

    Mr Radzikhovsky added: “It is difficult to understand Belkovsky. He is known as a source of confusing information and it is hard to treat it seriously.

    “He is an adventurer. He may be driven by his own morbid ambitions. He really knows a lot of people in high places but who is he to know the secrets of the person who has all the possible and impossible ways to hide his secrets?”

    The endgame of Mr Putin’s presidency, and his plans for the succession, have been thrown off balance by infighting between rival Kremlin clans.

    At least three groups, two led by ex-KGB officials, have been in open warfare since October.

    On Oct 3, General Alexander Bulbov, deputy head of the federal drug agency, and a member of a hardline clan of “Siloviki” - former KGB and security officials - was arrested by a rival Siloviki faction.

    The “liberal” faction was damaged when Sergei Storchak, the deputy finance minister, was arrested last month.

    Far from being watertight, Mr Putin’s Kremlin now leaks like a sieve.

    The President is theoretically above the clans and tries to balance their clashes.

    If he does have a faction, it consists of businessmen who have become very wealthy under his rule.

    Mr Belkovsky named at least three of them as front-men for the president’s alleged fortune.

    He also cited Igor Sechin, a deputy chief of Kremlin staff, leader of the most hardline “Siloviki” faction and one of the country’s most powerful men.

    Mr Putin appeared to have sidelined Mr Sechin’s clan when he announced that Dmitry Medvedev, a relative liberal, would be his successor as president.

    Mr Sechin and other ex-KGB figures would never rally around Mr Medvedev.

    Mr Putin may calculate that he can keep their loyalty, leaving the new president isolated.

    Mr Putin may calculate that he can keep their loyalty, leaving the new president isolated.

    What game Mr Belkovsky is playing - and on whose behalf - is unclear.

    He has been accused of starting a smear campaign against the oligarch, Mikhail Khodorokovsky, a fierce critic of Mr Putin who was jailed in 2005.

    Mr Belkovsky’s allegations about the president’s money first emerged in a book he published last year.

    Categories: Crime & Corruption · Monopolies

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