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Crown Capital Eco Management International Relations - Tales

Posted in the Business News Forum

Since: Feb 13


#1 Feb 17, 2013
The Corruption Eradication Commission (KPK) recently named Prosperous Justice Party (PKS) chairman Luthfi Hasan Ishaaq a graft suspect, shocking the entire nation not only because the move against a party chief was unprecedented but also because of the party’s clean reputation.

Luthfi was allegedly involved in beef-import bribery where evidence suggests that he had misused his power as a political party chairman and a House of Representatives member to give privileges to certain parties for importing
beef by means of, among other things, recommendation to the agriculture minister.

Now that the next election is just around the corner, many believe this one incident will irreparably damage any chance the PKS had of winning.

Essentially, politicians are supposed to be the “agent” for the “principal”(citizens) in which the former must act on behalf of the latter.

Regarding this relationship, many experts believe that corruption occurs when the abuse of public resources by the “agent” to gain personal benefits takes place. Criminologist Donald R. Cressey used the term “trust violators” to depict such agents who misuse their principals’ trust for their own ends.

Luthfi, according to the KPK deputy chairman Bambang Widjojanto, is accused of “selling” his power as a party leader to unlawfully influence government officials in their decisions regarding the distribution of beef-import quotas.

For this “service” it is alleged that he was rewarded handsomely by third parties in the form of bribe money.

In anti-fraud studies, this is commonly known as a “rent seeking” transaction where someone with power provides an illegal service and sells his “product” to third parties for personal or group gains.

The “rent”, or in many cases,“political rent”, itself is associated with the “net benefits” the bribers obtain from engaging in an illegal transaction with corrupt politicians.

In the beef import case, for example, the alleged bribers were willing to pay a huge amount of money to the alleged bribees since the latter were presumably believed by the former to be able to assist them in obtaining financial benefits from beef importation.

The perceived “rent” in this case is the difference between the money paid for bribing and that acquired as a result of the importing activities. To be able to participate in the “bribery market”, a corrupt politician needs to have the ability to provide assets — or related benefits (e.g. huge business revenue) to the potential bribers.

This is where the “cost-benefit” consideration plays its role. Both bribers and bribees need to be sure that the costs of engaging in the bribery transaction, including the risk of being caught, will be outweighed by the benefits of doing so.

As happened in previous corruption cases, many were surprised when the KPK named a seemingly clean high-ranking politician a suspect.

Nevertheless, anti-fraud studies all around the world have established that unlike other types of crime, fraud is often perpetrated by apparently “unlikely” offenders.

Evidence suggests that major fraud cases around the world have commonly involved well-mannered and educated men of high social status, some of whom may appear outwardly religious.

The “why” element of fraud has long been studied by behaviorists to determine factors that may cause otherwise honest men to succumb to the temptation of fraud.

The desire for “living a luxurious life” has been identified by many studies as the most common reason to commit fraud.

Anti-fraud experts argue that the issue of corruption often circles around the issue of assets. Living a luxurious life, for example, also means that one must be in possession of a large amount of assets.

It is evident in many corruption cases in Indonesia that the offenders have possessed assets far beyond that which they could possibly earn from their jobs.

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