Accounting, Organizations and Society Volume Issue 2012 [Doi 10.1016_j.aos.2012.01.003] Neu, Dean; Everett, Jeff; Rahaman, Abu Shiraz; Martinez, Daniel -- Accounting and Networks of

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Accounting and networks of corruption

Dean Neu a,⇑, Jeff Everett a, Abu Shiraz Rahaman b, Daniel Martinez c

a Schulich School of Business, York University, 4700 Keele Street, Toronto, Ontario, Canada M3J 1P3b Haskayne School of Business, University of Calgary, 2500 University Dr NW, Calgary, Canada T2N 1N4c HEC Paris, 1 rue de la Libération, 78351 Jouy-en-Josas, France

a r t i c l e i n f o a b s t r a c t

This study examines the nature and role of accounting practices in a network of corruptionin an influence-market setting. The study focuses on the Canadian government’s Sponsor-ship Program (1994–2003), a national unification scheme that saw approximately $50 mil-lion diverted into the bank accounts of political parties, program administrators, and theirfamilies, friends and business colleagues. Relying on the institutional sociology of Bourdieu,the study demonstrates the precise role of accounting practices in the organization of a cor-rupt network imbued with a specific telos and certain accounting tasks. The study illustrateshow accounting is accomplished and by whom, and it shows how the ‘skillful use’ of accounting practices and social interactions around these practices together enable corrup-tion. In so doing, the study builds on a growing body of work examining criminogenic net-works and the contextual, collaborative and systemic uses of accounting in such networks.

2012 Published by Elsevier Ltd.

Introduction

Corruption—the ‘misuse of public office for privategain’—has been variously referred to as a cancer, diseaseand scourge (Corell, 2003; INTOSAI, 2004; TransparencyInternational, 2005). Some authorities even consider itthe ‘‘single greatest obstacle to economic and social devel-opment’’ (World Bank, 2005a, 2005b, 2005c), citing billionsin government resources lost on account of it—resourcesthat would otherwise be spent on education, health, andother social programs (United Nations & World Bank,2007, p. 2). Yet, and contrary to popular perception, the

problem is not limited to the developing world. In Ger-many, for example, ex-Chancellor Helmut Kohl has beensubject to scrutiny about secret donations made to hisre-election campaigns. In the United States, complex andproblematic linkages continue to exist between govern-ment officials and private, for-profit firms (see Scahill,2007). And in Italy, recent allegations against billionaire-turned-Prime Minister Silvio Berlusconi raise questions asto how much has really changed since the Tangentopoli

(Bribesville) scandal of the mid-1990s (cf. Gundle & Parker,1996). These examples illustrate that corruption also oc-curs in countries that have well-functioning democraticsystems of government and seemingly strong anti-corrup-tion institutional structures.

Despite the fact that corruption occurs within suchcountries, very little is known about how it occurs, whois involved, and why it persists in the presence of appar-ently robust anti-corruption barriers. In part, this is be-cause anti-corruption advocates such as TransparencyInternational (2005) and the World Bank (2005a, 2005b,2005c) focus on developing world settings where weak

or non-existent barriers facilitate the direct selling andbuying of political influence. This focus has promoted afunctionalist view of accounting that emphasizes howaccountants help fight corruption by constructing institu-tional barriers, a view that in turn normatively positionsaccountants as virtuous actors in the anti-corruption fight(cf., Dye & Stapenhurst, 1998; Elliot, 1997; Everett, Neu, &Rahaman, 2007; USAID, 1999). This lack of knowledge alsopersists because corruption is tremendously difficult tostudy, as those involved do not want to draw attention toit and its investigation tends to undermine the public’sfaith in government (Klitgaard, 1988, p. 30). As a result,

0361-3682/$ - see front matter 2012 Published by Elsevier Ltd.doi:10.1016/j.aos.2012.01.003

⇑ Corresponding author. Tel.: +1 416 736 2100.

E-mail address: [email protected] (D. Neu).

Accounting, Organizations and Society xxx (2012) xxx–xxx

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Please cite this article in press as: Neu, D., et al. Accounting and networks of corruption. Accounting, Organizations and Society (2012),doi:10.1016/j.aos.2012.01.003

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very little is known about the processes of corruptionwithin developed world settings, and even less is knownabout the role of accounting in these processes. It is thisgap in knowledge that motivates the current study.

The study focuses on the Canadian federal government’sSponsorship Program, an initiative aimed at fostering na-tional unity in theface of a perceived separatist threat fromthe province of Quebec in the mid- to late-1990s. Whileapproximately $322 million was devoted to this objective,between $13 million and $50 million was diverted intothe accounts of political parties, program administrators,and their families, friends and business colleagues (the ex-act figure is unknown). This event not only captured newsheadlines, it also led to a federal government inquiry andprison sentences for a number of those involved. The in-quiry’s $32 million budget and legal standing producedbackground investigative research and a comprehensiveset of hearings where participants were legally compelledto testify under oath. This combination of financial re-sources and legal powers made visible a number of de-tailed, micro processes of corruption, processes whichwould have otherwise remained hidden. In this study wefocus on these processes and their specific connections toaccounting.

Our starting point is the institutional sociology of Bour-dieu (1990a, 1990b, 2005). Bourdieu’s work encourages usto consider the context of corruption, and how democraticsystems of government within advanced capitalist coun-tries are associated with specific types of accounting-basedanti-corruption barriers and characteristic games of influ-ence politics. In this context, accounting-based anti-corrup-tion barriers organize the field of influence politics bychanneling and limiting the exercise and sale of politicalinfluence. However, while barriers such as internal govern-ment controls, campaign financeregulations,andanti-brib-ery legislation may make the practices of corruption morecomplicated than the straightforward payment of a bribeor kickback, they do not eliminate them. Rather, theyencourageforms of corruptionthatdepend on collaborationwithin networks of politicians, bureaucrats and businessactors. Additionally, it is the ‘skillful’ use of accountingand accounting-implicated strategies that simultaneouslymakes corruption possible and organizes the emergentnetwork.

Bourdieu’s conceptual tools are particularly useful forexamining how accounting practices organize such net-

works, drawing our attention to the mediating role of hab-itus, the distribution of capital, and the spatial positioningof influential social actors within networks. More precisely,his work enables us to see how the initial configuration of the field and political party network makes possible thedevelopment of a corrupt network centered on a form of accounting imbued with a specific telos and certainaccounting tasks (cf. Bourdieu, 1990a, p. 53, 2005, p. 200).It illustrates howaccountingis accomplished andby whom,and it shows how accounting helps establish a corrupt net-work through particular patterns of accounting practicesand social interactions around these practices. Such prac-tices are incorporated into the field’s habitus and reper-

toires of its participants, and the skillful use of accountingcomes to be valorized as a form of symbolic capital. In this

way, the analysis demonstrates the precise role of account-ing practices in the organization of a corrupt network.

The study makes two primary contributions to ourunderstanding of accounting. First, it illustrates howaccounting simultaneously limits and enables corruptionwithin advanced capitalist countries. Our identification of three types of accounting-based anti-corruption barriersadds a degree of precision to the claims of pro-accounting,anti-corruption advocates. Typically providing a templatefor improving anti-corruption structures in both develop-ing and developed-world settings, these advocates oftenpoint to specific sites where accounting should be enlisted.Unfortunately, our analysis reveals that social actors oftenuse accounting-implicated strategies as a second-order re-sponse to work in and around the anti-corruption barriersthemselves (cf., Bourdieu, 2005, p. 196). In this way, theanalysis both challenges and extends the dominant per-spective of anti-corruption commentators, showing howaccounting can fight corruption while also facilitating it.

Second, the study highlights the centrality of account-ing within organized criminal networks. Organized crimi-nal alliances involving corruption (Di Nicola, 2003, 2006),money laundering (Beare & Schneider, 2007; Mitchell, Sik-ka, & Willmott 1998; Reuter & Truman, 2004) and systemiccorporate fraud (Baker & Hayes, 2002, 2004) at times relyon networks that are explicitly built around the accom-plishment of a specific set of accounting transactions. Forexample, in the case of Enron, a complex grouping of socialactors relied on the strategic use of ‘special purpose enti-ties’ to manage the information that would appear in thecompany’s financial records. Similarly in the case of moneylaundering, large-scale networks are often assembled tocirculate, hide and repatriate financial flows to their origi-nal owners (Beare & Schneider, 2007, p. 110). While priorstudies draw attention to the skillful use of bookkeepingpractices and how they might facilitate criminal activities,they do not consider the broader ways that these practicescome to actually organize and constitute such networks.The current study extends existing research by showinghow accounting organizes such networks, and by proble-matizing and destabilizing what we think of as skillfulaccounting practice. As the analysis highlights, the skillfuluse of accounting is central to the organization and func-tioning of criminal networks. At the same time, skillfulpractice is not limited to accounting professionals; rather,it appears to be an instrumental practice that can be ac-

quired and used by a variety of professionals. In theseways, the study both illustrates the importance of account-ing within criminal networks and suggests that accountingmay be a type of cultural capital (Bourdieu, 1990a) that canbe enlisted and utilized by a variety of social actors withinthese settings.

The remainder of the paper is structured as follows. Sec-tion two considers corruption within developed world set-tings, where influence is commonly bought and soldamong political and business actors, and it examines threetypes of accounting-based anti-corruption barriers thatcomplicatesuch exchanges. Correspondingly, the third sec-tion proposes that the collaborative use of accounting al-

lows corrupt actors to circumvent these barriers and atthe same time organize their networks. Section four pre-

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sents the data collection process and research methods.Then, in section five, we introduce and analyze the case,focusing on the accounting practices and interactions of two key business actors in the corrupt network: LafleurCommunications and Groupaction. Finally, section sixsummarizes our findings and discusses the implicationsof the study.

Corruption within developed world settings

The current study starts from the observation that cor-ruption involves the movement and flow of resourcesacross public and private domains. Government resourcesmove and circulate consistent with the business of govern-ment; that is, revenues flow in and expenditures flow outas governments set economic and tax policy, purchasegoods and services, and, occasionally, sell or privatize gov-ernment assets. However, it is the modification of theseflows in ways that allow groups of private actors to appro-priate a portion of them that is central to corruption. Suchmodifications might change who pays taxes and how muchthey pay (Ghuara, 2002, p. 371), who receives governmentcontracts and the value of the contracts (Rose-Ackerman,1999, p. 29; Tanzi, 1998), and who is given the opportunityto purchase government assets and the price of these as-sets (Kaufman & Siegelbaum, 1997; Wiehen, 2004, p. 9).In these interactions, corruption occurs when politiciansand/or bureaucrats use their influence in ways that arenot legally-condoned. This is typically the case when theseactors modify the flow of government resources, and whena portion of this resource flow is subsequently returned toindividuals or groups connected to them. This definition isconsistent with both the idea that corruption involves themisuse or abuse of public office for private ends or gains(Transparency International 2004; World Bank, 2005a,2005b, 2005c, p. 4), and that it is about the illegitimate sell-ing of government authority for private gain (Bukovansky,2006, p. 181; Thomas & Meagher, 2004, p. 2).

While all corruption tends to involve the modification,movement and flow of government resources, it is field-specific (Bourdieu & Wacquant, 1992, p. 104) in that it isinfluenced by context-based forms of political participationand a variety of anti-corruption barriers. Nevertheless, itappears that there are some family resemblances amongstits various types. Johnston (2005), for example, proposes atypology based on four different institutional settings:

influence-market, elite cartel, oligarch and clan, and officialmogul. Each of these settings is characterized by specificpolitical processes, configurations of participants, institu-tional structures and, hence, forms of corruption. In settingscharacterized by weak institutional structures and non-transparent political processes, the direct payment of bribes or kickbacks to politicians or government bureau-crats in exchange for some business advantage is the formwhich corruption is most likely to take. However, in what

Johnston calls ‘influence market countries,’ such as Canada,Germany, Japan, the United Kingdom and the United States,relatively strong institutional structures tend to discouragethe direct payment of bribes, which encourages a more

complex form of corruption. In these cases, corruption isabout who gets to influence and shape the specific rules

that determine how government is enacted: ‘‘the stakesarethe details of policy—whether a programwill be funded,a contract awarded, a group declared exempt from tax, orthe rules of a program changed’’ (p. 60, emphasis added).Corruption is also about how monies flow back to politi-cians and political parties in return for these favours ( John-ston, 2005). Thus, within influence-market countries, it ispoliticians and political parties that often put ‘‘their con-nections out for rent in exchange for contributions both le-gal and otherwise’’ (p. 42). These observations lead us topropose that such institutional features act as ‘‘objectiverelations that organize the field’’ (Bourdieu, 2005, p. 89),shaping not only how political processes work but alsothe types of opportunities that exist for private intereststo appropriate government resources.

Within influence-market countries, politicians, politicalparties, and business interests are interdependent andoverlapping. Electoral success within democratic systemsis always expensive, which creates the need for resourceinflows—what has been referred to as the ‘mother’s milk’of politics (cf. Eagles, 1994, p. 117). Not surprisingly, elec-toral success within influence-market countries such asCanada and the United States is highly correlated withthe ability to raise funds (Eagles, 1993, p. 117; Alexander,2005, p. 356). Furthermore, political parties cannot survivewithout a committed core of party workers and campaignconsultants who are an important part of the politicalmachinery (Thurber & Nelson, 2000, p. 11). As Geddes ob-serves, ‘‘in order to maintain their electoral machines, pol-iticians need to be able to ‘pay’ their local party leaders,ward heelers, precinct workers’’ (1994, p. 40). Without re-source inflows it is not possible to build and sustain theelectoral machine.

Corporations have been willing financial contributors.In Canada, for example, corporations have historically pro-vided about 50% of the funding received by the country’stwo largest political parties (Elections Canada, 2011a). Inpart, this is because political influence is potentially usefulto business. In its simplest sense, government is about themanagement of economic activity and politicians are theones making decisions about how that activity will occur.Political decisions about issues such as taxation and envi-ronmental, health, and safety regulations structure howbusiness will be conducted and impact the overall profit-ability of different industrial sectors ( Johnston, 2005).Moreover, governments are major purchasers of goods

and services, and are thus a significant source of businessfor businesses. For example, the Government of Canadaannually ‘‘purchases over $15B worthof goods andservicesfrom companies across Canada,’’ making it the largestbuyer of goods and services in the country (Governmentof Canada, 2011). These interdependencies between gov-ernment and business produce a situation where influ-ence-based exchanges among political and businessactors may be mutually beneficial.

While influence-market settings have these characteris-tics, they also have relatively strong anti-corruptionbarriers ( Johnston, 2005). These barriers can be viewed asimpediments that control the flow of government

resources, and they often enlist accounting and otheradministrative practices. However, they are not meant to

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eliminate the flows but instead channel and structure thequantity and manner in which they occur (p. 42). Inessence, these barriers are meant to define the rules of the game (Bourdieu & Wacquant 1992, p. 98) regardinghow political influence will be bought and sold. Three suchbarriers are relevant to the discussion at hand (a fourthtype, an independent media, relies less directlyon account-ing practices).

The first are internal control practices, andthese pertainto government purchasing and procurement. They attemptto limit the amount of the potential flows by requiring acompetitive bidding process for government contracts overa certain amount, stating who is eligible to bid on the con-tracts, and indicating whether the contract price will bedetermined by an open bidding process or whether it willbe some form of ‘cost plus’ pricing (cf., NASPO, 2008; Pitzer& Thai, 2009). These practices are intended to decrease thediscretion of individual bureaucrats and politicians by, forexample, dividing duties pertaining to the writing of ten-dering proposals; the handling of the bidding process;the selection of the winning bid; and the subsequent pay-ment for goods and/or services received. Ex-post monitor-ing activities, including the activities of supreme auditinstitutions (SAIs), such as the Auditor General’s office(Dye & Stapenhurst, 1998; Gilman & Stout, 2008; Siame,2002), are also viewed as essential for both the detectionand deterrence of corrupt practices. These barriers simul-taneously reduce the amount of government resources thatcan be appropriated and limit bureaucratic and politicaldiscretion regarding who receives such contracts. TheCanadian context includes all of the aforementioned typesof internal controls.

Campaign finance legislation operates as a second set of barriers, directing and limiting howresources flowthroughpolitical parties and affiliated organizations ( Johnson,2008, p. 326). At the time of the case, Canadian campaignfinance legislation focused on the campaign expendituresof individual candidates and political parties rather thanon the resources flowing into campaigns. Specifically, the1974 Election Expense Act imposed ‘‘limits on how muchparties and candidates could spend during election cam-paigns’’ (Elections Canada, 2011b). This legislation also re-quires that a public accountant audit any political donationreports as well as the electoral campaign spending reportsof the political party and the individual candidates (Elec-tions Canada, 2011b). For example, at the candidate level

an electoral campaign report that clearly identifies allmonetary inflows and outflows (Elections Canada, 2005)is required and must be accompanied by a public accoun-tant’s audit report that states that the electoral return ispresented fairly (Elections Canada, 2011b). Elections Can-ada also requires candidates to provide detailed supportfor the information contained in the electoral campaignreport: ‘‘section 451 (2.1) of the Act requires the officialagent to provide Elections Canada with documents evi-dencing expenses set out therein, including vouchers, bankstatements, deposit slips, cancelled cheques and the candi-date’s written statement concerning personal expenses.’’These ‘rules of the game’ (Bourdieu & Wacquant, 1992, p.

98)—a combination of spending limits, the auditing of campaign expenditures, and the public disclosure of con-

tributors—are expected to constrain the use of influencemonies in election campaigns.

The third set of barriers focus on business entities andtry to prevent illegal influence payments to political actorsand bureaucrats. Prior to 1996, Canada, the United King-dom, and the United States were part of a very small groupof countries in which the payment of bribes was both ille-gal and non-tax-deductible (OECD, 2011). This direct pro-hibition against participation was supplemented byother, more general financial reporting regulations per-taining to formal economic activity. Countries like Canada,which have well-functioning financial systems, usuallyhave extensive financial reporting requirements for incor-porated businesses. These include the need to maintainfinancial records; file accounting-based reports such assales taxes, payroll source deductions, and income taxes;and employ a public accountant if the company is a publiccompany (Neu, 2011). These financial reporting require-ments come to characterize participation in the formaleconomy—the legitimate market—and make it more diffi-cult for corruption to occur outside of the accounting re-cords (cf. Transparency International, 2009a, p. 2). Inthese settings the ability of a corrupt politician or bureau-crat to receive a suitcase full of money in exchange for theexercise of influence is more difficult, since the suitcase of money has to both physically come out of a financial insti-tution, which has its own matrix of regulations regardingthe withdrawal of large cash amounts (Beare & Schneider,2007, p. 148), and, figuratively, come out of the financialrecords of the entity paying the bribe. This web of financialreporting requirements, along with anti-bribery legisla-tion, constrains the movement of physical and figurativefinancial flows from business entities to political actors(cf. Transparency International, 2009b, p. 14).

The preceding proposes that there are three generictypes of anti-corruption barriers within developed worldsettings that directly implicate accounting practices. Thissituation contrasts with developing world settings whereinternal government anti-corruption barriers are weak,and where campaign finance and anti-bribery legislationis mostly non-existent (Transparency International,2009b; USAID, 2003, p. 30). These three sets of barriersorganize the field of influence politics by circumscribinghowinfluence can be exerted and how monetary resourcescan be repatriated to political actors. They do not, however,change what is at stake in the field (Bourdieu & Wacquant,

1992, p. 100), since political and business actors still havecompelling reasons to contemplate the selling and buyingof influence. Rather, these barriers encourage field partici-pants to structure their activities in relation to establishedinstitutional rules (p. 130). As is the case in other domainsof economic life, these institutional rules formthebackdropagainst whichsocial actors struggle to accumulateandcon-centrate their preferred species of capital (Bourdieu, 2005,p. 12).

Accounting and corrupt networks

Within countries that have seemingly robust institu-

tional structures corruption is still possible, and whileinternal controls within the public sector constrain bureau-



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cratic and political discretion, such discretion always con-tinues to exist (Bourdieu, 2005, p. 60; Johnston, 2005, p.134). Political influence can still be exercised, but it mustbe less obvious, more discrete, and it must enlist the activeor passive acquiescence of bureaucrats—political influenceis,as Johnstoncomments, in the details of government prac-tice. Additionally, it may be possible to enlarge the spacefordiscretion or to find a way for politicians and bureaucratstocollaborate in the exercise of discretion. Likewise, the pres-enceof barriersaround political partiesand aroundindivid-ual politicians creates a situation wherein it is difficult forresources to flow into the political party to be subsequentlyspent on political activities, though such barriers do notprevent resources fromflowing intodifferent entities beforebeing spent on such activities (cf., Johnston, 2005, p. 65). Fi-nally, while business actors are prohibited from payingbribes, and while all economic transactions are expectedto flow through the accounting records of the involved par-ticipants, flexibility and space do exist regarding decisionson how such accounting transactions will be structuredand recorded. Thus, through the exercise of discretion andthrough the careful structuring of activities it is possibleto sell political influence and repatriate a portion of the re-source flows. Such actions are not necessarily illegal,though there is always the chance they will go beyondthe bounds of the acceptable and into the domain of theillegal. It is these types of actions that are the focus of thecurrent study.

In these situations, corruption requires collaborationamong politicians, bureaucrats, and business actors. Unlikein developing world settings where politicians and/or gov-ernment bureaucrats can directly sell their influence, thepresence of institutional barriers within government andaround political parties and business entities makes it nec-essary to structure the sale of influence in ways that cir-cumvent existing barriers. Accounting practices help anetwork of corrupt actors redirect government monetaryflows through a series of apparently discrete legal andaccounting entities, thereby making it possible to returna portion of the flows to the politician or political party.

Just as in the case of money laundering (Beare & Schneider,2007, p. 110), these accounting-implicated strategies(Hopwood, 1987, p. 229; Neu, 2012, p. 16) require theenlistment of allies who administer the entity and receivea portion of the monetary flow as it passes through. Theuse of additional entities sometimes also makes it possible

to increase the proceeds of corruption—that is, the size of the resource flow originating from government. For exam-ple, the use of ‘cost plus’ pricing within procurement con-tracts makes it possible to accumulate cost in ways thatinflate the value of the contract (cf., Flower, 1966; UnitedStates Attorney, 2010). In such situations, the insertion of multiple accounting entities can be used to increase costsand, consequently, amplify proceeds.

The preceding analysis suggests that a group of politi-cians, bureaucrats and business actors can use accountingto circumvent anti-corruption barriers; however, whatare the specifics of these processes? Following from Bour-dieu, we propose that the role of accounting within the

processes of corruption needs to be examined and under-stood in relation to the organization and ordering of both

the broader influence-market field and the emergent cor-rupt network itself (cf., 2005, p. 196). The habitus of thefield and the corruption network, along with the configura-tion of capitals and social positions within the network in-form and shape accounting practices. However, theaccounting practices themselves also have the ability totransform the habitus and the configuration of the net-work. For these reasons, it is important to closely examinethese aspects of network functioning.

To illuminate these processes, we draw upon three of Bourdieu’s concepts: habitus, social position, and capital.Habitus refers to a form of practical sense and historicalinstitutional memory that is shared among participantsand that mediates ways of thinking, speaking and acting(Bourdieu, 1990a, pp. 54–57; Bourdieu & Wacquant,1992, p. 127). Social position is a relational concept thatdenotes specific social spaces within the corruption net-work and that can be characterized by the types of capitalthat are accessible from that social space, the activities thatare expected of the field’s members, and the modes of interaction with other participants (Bourdieu & Wacquant,1992, p. 229–230). Lastly, capital refers to the differentbases of influence that can be drawn upon by networkmembers. Bourdieu focuses on four types: cultural capital,which refers to contextually-useful knowledge or skills;economic capital, which denotes having access to financialresources; social capital, which is the ability to draw uponthe efforts and resources of a group of participants; andsymbolic capital, which is the profit obtained from pos-sessing the type of capital that those in the field deemlegitimate (Bourdieu & Wacquant, 1992, p. 119).

Accounting practices intersect with habitus, capital, andsocial position in different ways and at different momentsof time. First, the ability to imagine using accounting as away to circumvent anti-corruption barriers is connectedto one’s habitus, and, further, it is the combination of hab-itus and the actor’s specific social position that providesthe impulse for imagining certain accounting-implicatedstrategies; as Bourdieu states, it is ‘‘the encounter of habi-tus with the peculiar conjuncture of the field’’ that drivesstrategy (Bourdieu & Wacquant, 1992, footnote 83, p.129). Second, the ability to enact these imagined account-ing practices and make a corruption network functionaldepends on having access to social capital (a group of po-tential participants), cultural capital (the skill to use theaccounting appropriately) and symbolic capital (the ability

to convince other participants that the practices are legiti-mate). As we will see in the subsequent case, the social andsymbolic capital necessary to enact such accounting-impli-cated strategies and to develop a related, but distinct, net-work of corruption was linked to senior-elected politiciansand important party members, such as those involved inpolicy-making and fundraising. Third, different social posi-tions within the emergent network of corrupt actors areassociated with different activities and imply differenttypes and amounts of capital. These distinctions among so-cial positions condition the nature of the accounting prac-tices, as well as the nature of the interactions in whichspecific network participants are involved.

A key contention of the current study is that accountingpractices subsequently come to organize networks of cor-



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ruption. On one level, this occurs because accountingpractices make possible the generation, circulation andrepatriation of the proceeds of corruption among networkactors. Accounting practices not only embody the telos of the network, they also give it form, since it is the accom-plishment of the accounting transactions that allows thecorrupt network to exist in the form that it does. On a sec-ond level, this occurs because interactions among networkparticipants congeal around the accomplishment of theaccounting transactions. Much like the accounting cyclewithin firms, accounting practices within corrupt networksboth encourage and presume patterned forms of interac-tion. On a third level, the incorporation of these accountingpractices into the field’s habitus means that they becomepart of the repertoires of social actors, and are thus pickedup and used in different situations, which further ingrainsthese practices and the embedded telos into the habitus of the network (Bourdieu, 1990a, p. 55). Finally, the use of accounting within corrupt networks may change the distri-bution of capital. For example, it may create a situationwherein an accounting-related form of cultural capital isvalorized and re-valorized as a type of symbolic capital.It is in these specific ways that accounting practices mightcome to organize networks of corruption.

While Bourdieu’s institutional sociology emphasizesthe importance of situating accounting practices in relationto these other processes, it also encourages us to carefullyconsider what is meant by accounting’s ‘skillful use’.Accounting practice can be a skillful practice and thus aform of cultural capital in that it helps network partici-pants obtain what they value. However, this skillful prac-tice depends less on one’s ‘institutional cultural capital,’in this case the possession of an accounting credential,and more on possessing ‘embodied cultural capital’, thatis, the knowledge of how to use accounting in ways thatfacilitate corruption. One is reminded here of Beare andSchneider’s (2007) observation that money laundering de-pends on a new type of financial expert, but not one whonecessarily has a formal accounting designation. As we willsee in the subsequent case, the successful generation, cir-culation and repatriation of the proceeds of corruptiondid not require that those involved actually be accreditedaccountants; rather, it required only that they possess arudimentary knowledge of entity accounting and anunderstanding of the basics of bookkeeping. This distinc-tion between accounting as a form of institutional cultural

capital and a form of ‘in use,’ embodied cultural capitalsimultaneously problematizes the notion of skillfulaccounting practice and recognizes that this skillful use isnot limited to professional accountants.

The institutional sociology of Bourdieu stresses thestructured aspects of accounting practices within corruptnetworks; however, it also recognizes the role of agency(Bourdieu, 1990a, p. 55). The act of assemblingan illicit net-work, forexample, will be influencedby the wishes of socialactors occupying influential social positions or having closenetwork-proximity (Bourdieu, 1990b, p. 126), but it willalso involve the tentative and sequential working out of strategy by a multitudeof actorswho areattempting to sat-

isfy their resource needs at a specific moment in time, justas in other inter-organizational alliances (cf., Seal, Berry, &

Cullen, 2004, pp. 82–84). Once the network is assembled,the wishes of important participants will continue to influ-ence accounting practices, but these practices will be idio-syncratic as each participant struggles and strategizes toaccomplish his or her individual objectives within the con-fines of the network (cf., Free, 2007, p. 911, 2008, p. 646;Mouritsen & Thrane, 2006, p. 262). In these ways, the emer-gent accounting practices are shaped by the aforemen-tioned configurations and are the result of a series of diverse decisions made by a variety of social actors.

Data and method

As mentioned in the introduction, our theoretical fram-ing as well as our mode of analysis and method is informedby the institutional sociology of Bourdieu. This approachencouraged us to divide the research process into three re-lated phases. In the first phase, we attempted to map thefield of study in order to understand the contours of thefield and its objective relations (Bourdieu & Wacquant,1992, pp. 104–5). This initial mapping of the field startedfrom existing research and focused on the nature of thefield, the role of institutional rules, and the idea of strategyas a response to those rules (Bourdieu, 2005, pp. 89–126).The discussion of influence-markets and anti-corruptionbarriers, and the material on the role of discretion andaccounting-implicated strategies that were presented inthe previous sections, are the result of this mapping.

In the second phase, we reviewed the available publicmaterials on the sponsorship case. We used the materialsgathered by the Gomery Commission as our starting point,since this government inquiry conducted public hearingsinvolving the testimonies of 172 witnesses (Gomery,2005a, p. 3), numerous commissioned reports (KrollLindquist Avey, 2005), and a ‘‘vast quantity of documentaryevidence,’’ including emails. The materials examined in-cluded all of the major government reports as well asreports prepared by Ernst & Young public accountants andthe forensic auditors at Kroll Lindquist Avey.1 The forensicaudit report (Kroll Lindquist Avey, 2005) was of particular

interest, as it provided a way for our research team to follow

the flow of moneythrough a ‘‘complex web of financial trans-

actions’’ (Gomery, 2005a, pp. 5–7). Our initial review of the

available documents indicated the importance of foreground-

ing several ‘notable’ mini-cases within the larger case as a

way of making sense of its overall complexity (cf., Bourdieu,

2005, pp. 42–43). This motivated us to focus on two

important business actors—Lafleur Communications and

Groupaction—since they were the two largest recipients of

government sponsorship contracts, and because they illus-

trate different aspects of the network processes that are

involved in the accomplishment of the accounting transac-

tions. Appendix A provides a list of the key players.

1 Responding to an internal complaint, the Government’s internal audit

department hired Ernst & Young to conduct an audit of sponsorship

activities. This audit found evidence of anomalies, though the federal

government did not take action for approximately 7 years (Gomery, 2005b,

p. 262). The nature of these auditing practices and the politics underpin-

ning them (cf. Radcliffe, 1998; Radcliffe, 2008, 2011; Neu, Everett, &Rahaman, 2011) warrant a separate study of their own.





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In the final phase of the research, we examined the so-cial processes surrounding the accomplishment of theaccounting transactions involving Lafleur Communicationsand Groupaction. Transcripts and other previously gath-ered research materials, consisting of approximately 3000pages of documents that pertained to the two notablecases, were collected in an electronic research folder. Eachmember of the research team read the materials and addedtheir initial observations and coding suggestions. Thesenotes were then used to develop a list of thematic catego-ries. One member of the research team did the initial cate-gorization work based on the marginalia that other teammembers had provided. Other team members then re-viewed these categorizations and suggested changes andrefinements. This theory-directed, yet emergent, process(Everett, 2002, p. 74) continued in an iterative mannerthroughout the research and manuscript review process.The subsequent case analysis sections are organizedaround these theoretically-informed categories.

The evidence gathered by the Commission offers anexcellent opportunity to examine the social processesand networks through which the accounting was accom-plished. The Commission’s financial resources—it had abudget of $32 million—allowed it to undertake backgroundinvestigative research and conduct a comprehensive set of hearings where it could legally compel participants to tes-tify under oath. Thus, the available materials are both morein-depth and of broader scope than any information thatwe, as researchers, could have independently gathered.At the same time, it is important to acknowledge that theoutputs of the Commission—and especially the testimoniesof its participants—are not independent of broader gamesof influence politics and political power, as they are bornof the same field and dynamics (cf., Jacquemet, 1996, p.189, 193).2 These testimonies occur in a ‘fighting arena’and should be viewed as strategic utterances that attempt,

among other things, to retrospectively frame the events so

as to avoid legal liability, protect allies, and foreclose certain

interpretations on the part of the judge ( Jacquemet, 1996, p.

190). The partiality of the transcripts not only requires us to

be sensitive to the context of the testimony (Maynard, 1983,

p. 217; O‘Barr, 1982), it also results in a case analysis that is

in some places incomplete. We return to these issues in the

discussion section.

The case

The separatist threat

The case begins with a story about two flags, one with ared maple leaf and the other, four white lilies (a fleur-de-lis). The first symbolizes the country of Canada, a nationthat is at once the second largest and 36th largest countryin the world (depending on whether you are looking atland mass or population). The fleur-de-lis, in contrast, sym-bolizes the province of Québec, which, for many Franco-phones living in Canada, means membership in a distinctsociety, or membership in a nation within a nation (Sey-

mour, 2000). Since 1948, when the fleur-de-lis was firstflown, this symbol has inspired a nationalist yet ‘quiet rev-olution’ (1948–1960); a less-quiet decade of robberies,bombings, and attacks (which were followed by nearly500 arrests) (1963–1971); the passing of a French-onlyOfficial Languages Act (1977); and a referendum aimed atgauging the province’s receptivity toward sovereignty-association (1980), which would grant the province inde-pendence in most government functions.

Our analysis begins in 1994. The federal election of Octo-ber 1993 changed the Canadian electoral map and, onceagain, moved the topic of Quebec sovereignty to the fore.A new, pro-sovereignty Quebec-based political party, theBloc Quebecois, received over 50% of the popular vote inQuebec andwon the second-largest number of seats in fed-eral parliament, making it the Official Opposition to thenewly elected Liberal Party. At the provincial level, in therun up to the September 1994 election, the leader of thepro-separatist Parti Québécois promised to hold a referen-dum within 1 year if elected. The Parti Québécois won,and tabled legislation to hold a second referendum on sov-ereignty in October 1995. This combination of eventsencouraged the federal government to initiate an advertis-ing campaign aimed at swaying public opinion, a campaignthat eventually morphed intothe Sponsorship Program.3 Asthen Prime Minister Jean Chrétien stated, ‘‘whatever Que-

bec’s Parti Québécois government was doing which, in our

view, directly or indirectly promoted separation, we, as the

Government of Canada, would at least match to promote a

united Canada’’ (Chrétien, 2005, pp. 12506–12507). For the

government, the hope was ‘‘that there would be no winning

conditions for the proponents of separation’’ (Chrétien, 2005,

p. 12502). On this level the federal government was barely

successful, as only 50.6% said no to the four white lilies. How-

ever, the close vote meant that continual vigilance on the

part of the federal government was necessary to ensure that

the conditions for separation would not emerge.

The public story began in early 2000. In January, a seriesof newspaper articles and questions in the House of Com-mons began to raise concerns about misspending in one of the federal government’s largest departments, Human Re-sources Development Canada (HRDC) (Sutherland, 2003, p.187). The ensuing media and political frenzy did not abate,with the Minister of HRDC at one point being called a liarin the House of Commons (Sutherland, 2003, p. 195). Con-sequently, in August and October 2000, a journalist from

one of Canada’s national newspapers, the Globe and Mail

,wrote a series of articles detailing how firms with strongLiberal ties were charging commissions (for little or nowork) on sponsorship funds (Leblanc, 2000a, 2000b), andthese claims of misspending resonated with those follow-ing the ongoing HRDC scandal. The combined media andpolitical attention regarding apparent government mis-spending formed the backdrop to the November 2000 fed-eral election, ‘‘where the opposition campaign was waged

2

Jacquemet analyzes the social process surrounding the testimonies of participants in Italy’s organized crime trials of the 1980s.

3 During the referendum, the advertising programs were simply known

as ‘special programs,’ and it wasn’t until the spring of 1996 that these

became formally known as the Sponsorship Program (Gomery, 2005b, p.

325). Throughout our analysis we will refer to all of the programs as theSponsorship Program.





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on corruption issues and character politics’’ (p. 195).Although the HRDC scandal fizzled away when subsequentinvestigations did not find any evidence of misspending (p.214), the sponsorship activities of the Public WorksDepartment were more problematic. Reporters continuedto pursue the story, utilizing public access-to-informationlaws to request internal government documents (Gomery,2005b, p. 210, 431). Eventually this media attention borefruit; in 2002 the Office of the Auditor General was askedby the newly appointed Public Works Department Ministerto investigate the sponsorship program (Gomery, 2005a, p.11). Around this time, ‘‘the problems associated with theProgram became the subject of daily questions in theHouse of Commons and extensive critical media coverage’’(p. 11). This combination of circumstances set in motion aprocess that culminated in the referral of the case to theRoyal Canadian Mounted Police, the subsequent hiring of forensic auditors, and the appointment of a Commissionby the federal government.

Exercising discretion

Our theoretical framing proposes that while the exer-cise of discretion is an important part in the sale of politicalinfluence, internal government controls are often con-straining. In this section we consider how discretion isaccomplished; more specifically, we discuss how a spacefor discretion is created, the practices through which dis-cretion is exercised, and the participants in these pro-cesses. This analysis helps us to understand the tentativestarting points from which a network of corrupt actorsmay emerge.

Shortly after the 1993 election, the new Prime Ministerinitiated a series of organizational changes to the govern-ment bureaucracy that would make it easier to mount anadvertising campaign to sway public opinion (Guité,2004a, p. 5691). One of the first changes involved transfer-ring responsibility for the government’s advertising to thePublic Works Department (p. 5627), a department thatwas under the direct supervision of Warren Kinsella.Kinsella had been a key strategist for the Prime Minister’s1993 election campaign and was appointed Chief of Staff for Public Works when Chretien won the election. At thismoment in time the Advertising Group was quite small,consistingof fivestaff members, a small budget, andlimitedresponsibility for advertising agency selection, as theactual

procurement activities were the responsibility of anotherdepartment. The placement of advertising under the super-vision of a key Chretien confidant was arguably meant toensure that advertising activities would be consistent withthe strategic vision of the newly-elected Prime Minister.

Starting in March–April 1994, then Director of theAdvertising Group—Charles ‘Chuck’ Guité—started to workdirectly with Kinsella (p. 5628). Kinsella and Guité dis-cussed, among other things, ways to ‘streamline’ thebureaucratic rules pertainingto advertising, something thatGuité felt quitestrongly about (p. 5740) and something thatwas viewed as important by the federal government itself.In December 1994 these discussions and other delibera-

tions culminated in the formation of a new AdvertisingDepartment, which had control over both advertising

agencyselection andthe subsequent procurement activities(p. 5632). Guité was appointed the Director of this newdepartment without formal internal competition and atthe same time saw his job classification increase (p. 5638).As the executive summary of Guité’s new job descriptionexplicitly stated, some corners needed to be cut:

When events force the government into a reactive pos-

ture, the incumbent brings to bear a capacity for quickresponse, cutting red tape, influencing key media andother opinion leaders, delivering single messagesclearly, crisply and repeatedly. (Guité, 2004b, p. 6485,emphasis added)

From the very beginning, and because his job straddledthe two fields, Guité understood how the bureaucratic fieldand the field of politics were connected. He recognized, forinstance, that the awarding of government advertisingcontracts had always been ‘150% politically driven’ underpredecessor governments, and would continue to be underthe Liberals (Guité, 2005, p. 19778). However, the transferof advertising to Public Works where Kinsella was Chief of Staff, and the combining of advertising agency selectionand subsequent procurement activities within a singledepartment, not only signaled the importance placed onadvertising by the Prime Minister but also created an orga-nizational space where discretion could be exercised, sincethe two activities of selection and contract administrationwere now combined. This creation of an enlarged space fordiscretion is important because it facilitated the subse-quent sale of political influence.

Within this enlarged space, discretion occurred throughthe practices of sponsorship and advertising agency selec-tion. Guité states:

LAWYER: I take it that the process that you used, you,Mr. Guité, for sponsorships was that you prepared a listwhich had events, the agencies for the events and theamounts for the events; is that right?MR. GUITÉ: Correct.LAWYER: Who did you review those lists with?MR. GUITÉ: With the Prime Minister’s Office, Mr. JeanPellieter.LAWYER: You reviewed the lists which contained theevents, the agencies and the amounts with Mr.Pelletier?MR. GUITÉ: That is correct. . .[later]. . .the three peoplesitting at the table, which was myself and either Mon-

sieur Carle or Pelletier. So we went through the list.The list could have contained more events than therewere funds to do it. So we would go through the list.We would say ‘‘Okay, those we approve’’ and then wewould select the agencies and away we go. (pp. 5667–5669)

This quote and the other transcript material illustratehow the practices of preparing a list of potential sponsor-ship events and attaching advertising agency names influ-enced what geographic areas and what advertisingagencies would receive the benefits of government spon-sorship spending. It also highlights the sequential aspects

of discretion, in that Guité had partial discretion over theinitial list but the Prime Minister’s staff made the final





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decisions. It was through these bureaucratic/political prac-tices involving the exercise of discretion (Bourdieu, 2005,p. 130) that the modification of government resource flowsoccurred.

This mode of agency selection also made possible thesubsequent inflation of resource flows. In the absence of a competitive bidding process, the contract value of anyparticular project and the commissions payable to theadvertising agency became a matter of negotiationbetween Director Guité and the advertising agency. Thecontracts specified both the amount of agency commis-sions (a percentage mark-up on the overall sponsorshipcontract paid to the advertising agency to administer thecontract) and production expenses incurred by the agencyin undertaking the sponsorship. Thus, the bypassing of acompetitive bidding process had the effect of delegatingdiscretion over the contract details, including the final va-lue of the contracts, to Guité.

The preceding account illustrates how external eventsprovided the impulse and rationale for downgrading sup-posedly strong internal government practices pertainingto advertising agency selection and contract administra-tion, which increased the space for discretion and hencethe possibility for corruption. This observation is consis-tent with previous research on government procurementactivities during times of crisis, which suggests that exter-nal events often allow politicians and bureaucrats to arguefor the downgrading of bureaucratic controls (Culver,1984). It also reveals how discretion occurs through thedetails of practice—the changing of government organiza-tional structures, the selection of sponsorship events andadvertising agencies, and the decisions on the value of the contracts ( Johnston, 2005, p. 60). It also exposes thespecific high-level political actors who were involved inthe decision-making.4 Thus, while the changes created aspace for discretion, this discretion was accomplished

through the collaborative practices of ‘biddable’ politicians

and acquiescent bureaucrats, as opposed to through the sol-

itary actions of a politician or bureaucrat, as often happens

in developing world settings (cf. Johnston, 2005, p. 42). Fi-

nally, the quote by Guité suggests that the awarding of gov-

ernment contracts to ‘friends of the government’ was

perhaps a normal and acceptable part of the habitus of the

influence-market field, and thus one might naturally imag-

ine using accounting to circumvent the existing institutional

barriers in order to accomplish this.

Repatriations

As our theoretical framing proposes, a network of cor-ruption cannot exist without a way of repatriating a por-tion of the proceeds to the involved political actors. Inthis section, we examine the key roles played by the socialposition (Bourdieu, 1990a, p. 105) of political bagman inthese processes. We explore the way that symbolic capitalfirst makes the construction of a corrupt network possible

and, then, how the skillful use of accounting becomes animportant type of symbolic capital within the network it-self. Etymologically, the term political bagman originally re-ferred to someone who worked for organized crime andwas entrusted with the task of delivering payoffs to cor-rupt police precincts (Wikipedia, 2011). However it latercame to refer, more generally, to individuals who collectfinancial contributions from business people on behalf of politicians and political parties (see the US EmbassyCables, 2010).

Sometime in 1994–1995, Guité was summoned to theoffice of his political boss, the Minister of Public Works,where he was introduced to Jean Corriveau:

On arrival, Mr. Dingwall told him that he was going tomeet a gentleman named Corriveau who was ‘‘a veryvery close friend of the Prime Minister,’’ adding, ‘‘if everyou find somebody in bed between Jean Chrétien and hiswife, it will be Jacques Corriveau,’’ and that Mr. Guitéshould ‘‘look after him.’’ This message was repeated onother occasions: ‘‘look after this guy’’and ‘‘look afterthis

firm,’’ referring to Mr. Corriveau’s business.’’ (Gomery,2005b, p. 284)

Accompanying Guité to this meeting was Jean Lafleur of Lafleur Communications (p. 284), one of the advertisingagencies that were subsequently at the center of the cor-rupt practices. Over the course of the sponsorship program,Pluri Design received sub-contracts from Lafleur Commu-nications as well as from Groupaction, Groupe Everestand other involved advertising agencies totaling more than$7M (Kroll Lindquist Avey, 2005 p. 129).

The network of corruption could not have existed with-out the involvement of a political bagman, since this socialposition links together the activities of receiving and re-circulating the proceeds that are associated with the saleof political influence (cf. Noonan, 1987, p. 34). In this re-gard, Corriveau was perfect for the position, since he wasthe ultimate Liberal Party insider, having ‘‘been a Vice-President of the Quebec Liberal wing in the early-1980s,and the National Vice-President (Francophone) in the sameperiod’’ (Gomery, 2005b, p. 283). And, as the above quota-tion highlights, he was also viewed as a close personalfriend and confidant of the Prime Minister. Thus Corri-veau’s social proximity to the Prime Minister and hislong-term involvement with the Liberal Party, along withhis position as political bagman, provided him with access

to the symbolic and social capital needed to lay thegroundwork for a corrupt network.In its simplest form, the repatriations from the involved

business actors flowed through Corriveau and his companyPluri Design before a portion was returned to the LiberalParty. Corriveau had arrangements with the differentadvertising agencies. For example, with one group of agen-cies he received a ‘‘17.5% commission on all the sponsor-ships awarded by the Government of Canada for projectsproposed by Polygone and Expour’’ (Corriveau, 2005, p.17912). With Lafleur Communications, he was also paid aretainer that would be charged against non-specific con-sulting work (p. 18004). Corriveau buried these transac-

tions in the financial records by billing the advertisingagencies for designandconsulting services. Thisaccounting

4 During this time period, internal audit activities also became increas-

ingly politicized, both for the sponsorship program (Gomery, 2005b, p. 209)

and for other government departments such as Human Resource Develop-ment (cf., Sutherland, 2003, p. 199).





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treatment not only concealed the lobbying that was goingon, it also allowed the advertising agencies to includeostensive ‘design services’ as part of the contract, therebyallowing them to charge an agency commission on thepay-ments. When Corriveau was asked why the advertisingagencies would pay such commissions and fees, he statedthat the client ‘‘thought that I was really persuasive inexpressing such requests [for sponsorship work] to Mr.Guité’’ (p. 17895).

Corriveau was also persuasive in convincing the adver-tising agencies to cover other expenses of the Liberal Party.For example, Brault recounts how Corriveau asked him toput a Liberal Party worker on Groupaction’s payroll:

MR. BRAULT: the main point of the meeting with Mr.Corriveau was to ask me to take on, for a period of one year, a person who was highly thought of andwho was involved in a way that I cannot define, that Idid not know, with the Liberal Party of Canada.LAWYER: Had he spoken to you about Mr. Gosselinbefore?

MR. BRAULT: Not in that kind of detail, but let’s say thatwe were starting to sense that—we were starting to geta feel for what the miracle recipe was to get lucky[emphasis added].LAWYER: And what was the miracle recipe, to use yourexpression?MR. BRAULT: With respect to the sponsorships, and Iwant to stress that point, it meant to listen carefullyto certain requests made by the Liberal Party.LAWYER: Would you say that you generally did listencarefully and sympathetically to the requests made toyou?MR. BRAULT: Yes. (2005b, p. 15739)

A similar request occurred in 1998 when Corriveau re-quested that Brault find a job for ‘‘Maria-Lyne Chrétien, aniece of the Prime Minister, who was employed by one of Groupaction’s subsidiaries for about eight months in1998’’ (Gomery, 2005b, p. 256). Finally, in 1998, a requestwas made that Brault give employment to John Welch, aLiberal Party worker, who was unemployed. ‘‘Mr. Braultdid not know Mr. Welch at all but agreed to look afterhim and supplied him with a small office in Groupaction’spremises’’ paying him a salary of ‘‘$7000 per month for ayear’’ (p. 255).

Once the monies entered Pluri Design, the company

functioned as a bank in that senior Liberal Party insiderscould come and request operating funds. For example, inthe lead up to the 1997 federal election, theParty identifiedover 30 ridings where it would be difficult to field qualitycandidates and raise the needed financial resources. Beli-veau, who was the director of the Quebec Liberal Party,went to visit Corriveau and asked for $250,000–$300,000to help fund activities in these orphan ridings (Beliveau,2005, p. 20913). Several weeks later Corriveau providedhim with this money in a series of envelopes with smallbills. The small bills were subsequently distributed to indi-viduals in 38 different ridings and were never recorded inthe financial statements of the Party (p. 20917).

In this process, what is interesting is the way thataccounting not only connected together the emergent net-

work of corruption and the existing Liberal party networkbut also became part of the symbolic capital of both of these networks. Within the corrupt network, Corriveau’sability to both persuade business participants to makerepatriations and to structure the repatriations in a palat-able form—that is, one that made the funds tax deductableand that treated them as a sponsorship cost—was valuedby both the involved political actors and business partici-pants (cf. Brault, 2005b, p. 15878). And within the politicalnetwork of Liberal insiders it was tacit knowledge that Cor-riveau was the bagman who could deliver cash whenneeded—in the words of Beliveau, Corriveau ‘‘had a certainskill shall we say in terms of funding, and we knew that atthe Party level’’ (p. 20919, emphasis added). It was also ta-cit knowledge among Liberal insiders that, for ‘‘certainexpenditures, sometimes cash is useful’’ (p. 20926). Corri-veau was the person who converted notational resourceflows (in the form of accounts receivable and bank depos-its) into a suitcase full of cash that could subsequently bedistributed unencumbered by campaign finance regula-tions. These conversion activities moved the repatriationproceeds out of the formal accounting records of the busi-ness entity and kept them out of the financial records of the Liberal Party and individual riding associations. Conse-quently, these accounting practices made it easier to col-lect contributions from business allies and provided theLiberal Party and the individual riding associations withmuch needed financial inflows. For these reasons, account-ing was valorized as a type of symbolic capital within bothnetworks. As we will see in a subsequent section, the even-tual replacement of Corriveau with a different politicalbagmancreated problems in the network, since Corriveau’sreplacement was less adept at using accounting in waysthat lessened the after-tax cost of the kickbacks for the in-volved business allies.

The preceding discussion suggests that the social posi-tion of political bagman somehow depended on an abilityto use accounting skillfully; however, we use the term‘skillful’ in a very particular sense. First, this accountingability was a purposive skill that helped the political bag-man to achieve the specific objectives of the corrupt net-work—to repatriate and redistribute the proceeds of corruption. Second, it did not depend on the complex useand manipulation of accounting—such as in the case of En-ron, which involved the manipulation of financial deriva-tives—rather it depended on the mastery of a more basic

set of bookkeeping skills. Perhaps as a consequence of this,the ability to imagine and implement these accountingpractices was not limited to professional accountants—thatis, those with institutionalized cultural capital in the formof a professional accounting designation. Rather, a ‘skill inuse’ form of cultural capital could also be acquired andused by anyone possessing both contextually-specificknowledge (regarding the nature of the political gameand the existing anti-corruption barriers) and knowledgeabout the basics of bookkeeping. Finally, it was simulta-neously a technical and social skill. It was technical in thatit allowed the political network to acquire needed financialresources in a way that minimized costs to business partic-

ipants (both in terms of monetary costs and disruption).Yet it was also social, in that the interactions with business





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participants were, on the surface, friendly and frictionlessand there was no apparent conflict over the payment of kickbacks (cf., Brault, 2005a, p. 15822). In this sense, theadroit use of accounting by Corriveau ‘greased the wheels’of the corrupt network by providing the needed financialrepatriations in a way that was economically and sociallyacceptable to all participants.5 These observations simulta-neously highlight the importance of accounting to criminal

activity, illustrate the nature of skillful accounting use in

these contexts, and remind us that skillful practice is not

limited to professional accountants.

Many of the details of Corriveau’s activities are un-known, as he was not only an evasive witness but alsofinancially adept at minimizing the accounting traces thatwere available to the forensic accountants. For example, itis not known how much of the $7M that he received wasre-distributed to the Liberal Party. We also do not knowhow these financial resources flowed through the financialrecords of Pluri Design and were subsequently convertedto cash, since the majority of the financial records wentmissing and there were no peripheral financial traces thatthe forensic accountants could find (Kroll Lindquist Avey,2005, p. 133). At the same time, the information that isavailable makes visible some key aspects of the corruptpractices. For example, the available material illustrateshow Corriveau’s knowledge of the game of influence poli-tics along with his positioning within the Liberal Partymade it possible for him to both imagine and put into prac-tice a corrupt network. It also shows how his structural po-sition as a political bagman enabled him to link together alegitimate political network and an illegitimate corruptnetwork by circulating and repatriating the proceeds of corruption. Likewise, it illustrates the discrete practicesfor which the bagman was responsible: brokering thetransaction between the buyers and seller of influence,implementing and accomplishing the invoicing schemethat made these payments legitimate business transac-tions, converting the notational proceeds into cash, andultimately, distributing this cash to political actors andactivities. Finally, it highlights how the accomplishmentof these accounting activities came to be viewed by otherparticipants as a salient type of symbolic capital withinboth the corrupt and the political networks.

Enlisting business allies

The building of large networks of corruption typicallyrequires the selection and enlistment of business partici-pants, since financial flows must pass through some formof business entity prior to being repatriated. In this section,we consider howJeanBrault of the Groupaction advertisingagency came to join the network. Groupaction was one of the most successful advertising agencies, participating in$90M of sponsorship contracts over the life of the program(Kroll Lindquist Avey, 2005, p. 11). Two other agencies werealso very successful—Groupe Everest ($65M in contracts)and Lafleur Communications ($67M in contracts)—but the

principal actors in these agencies were unwilling to testifyas to the circumstancesthat ledto their participation. In re-gards to Groupe Everest, we know that Claude Boulay wasan ‘‘overtly. . .strong supporter of the Liberal Party of Can-ada’’ who had worked on the leadership and election cam-paigns for key Liberal cabinet ministers (Gomery, 2005b, p.389), whereas with Jean Lafleur of Lafleur Communicationsfew details are available.

In Brault’s case, it was a Liberal Party member who sawan opportunity and who offered to get him some govern-ment work in exchange for a commission. According toBrault, Alain Renaud said:

‘‘Jean, you’ve got a good business going. It doesn’t makesense that you have no business from the Canadian gov-ernment. You make 50 percent of your sales outside of Quebec. You create jobs here, you work in English andFrench. I havean inor I havesome alliances withthe Lib-eralParty of Quebec. . .I havean inthere. I havehadexpe-riences. I come from a tradition—we have been goodLiberals for a few generations.’’ He said, ‘‘I’m going to

see what wecan doinOttawa.’’ (Brault, 2005a, p. 15641)Renaud continued on, stating: ‘‘I’ll do some soliciting. If

I have any expenses, I’ll ask you to cover them. Don’t payme. I’ll show you what I can do and then we’ll sit down.’’This resulted in an agreement wherein Groupaction would‘‘reimburse Mr. Renaud for the expenses he incurred in hisattempts to obtain government business, but no salary orother remuneration would be paid to him until he pro-duced results’’ (Gomery, 2005b, p. 250).

To properly position Brault within the Liberal Party so-cial network, Renaud asked Brault to contribute in smallways to Liberal Party fundraising activities, while Renaudbecame more active in the grassroots activities of the Party(Brault, 2005a, p. 15644). These financial contributions,along with Renaud’s activities, allowed the collaboratorsto ask for a meeting with Jean Carle, one of the Prime Min-ister’s key staff members. Brault recounts: ‘‘Alain said, in somany words, ‘Jean, we have to make ourselves known atthe Prime Minister’s Office.’. . . Then I got an appointmentwith Jean Carle’’ (p. 15686).

Brault’s recollection of this meeting is informative inthat it highlights how Renaud expected that these financialcommitments to the Liberal Party would generate sponsor-ship work:

Mr. Carle invited us into his office. Alain began with

what I would call his pitch, ‘‘We’re good Liberals. Wework hard. We’ve got skills. What are the needs? Weshould do business.’’. . . He outlined, not in detail, mycompany’s commitment, financially, to the politicalauthorities and, in a respectful choice of words, sug-gested it would be natural for there to be some kindof opening. (p. 15687, emphasis added)

After some more discussion, Carle stated that: ‘‘Listen,go see—go to Chuck Guité’s office. . . They will all explainto you what to do’’ (p. 15687). The meeting concluded withCarle stating to Brault:

‘‘You know, doing business with the government is like

a large highway. There’s room for everybody. There are

5 The phrase ‘grease the wheels’ dates back to the mid 1500s, denoting

the act of ‘making things run smoothly’ by plying with bribe or protectionmoney (Etymology Dictionary, 2011).





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big trucks. There are small trucks. There are big cars.There are small cars. There are four-by-fours. Thereshould be room for everybody.’’ He let us go on thatnote, which we considered positive, and we left. (p.15688)

These specific comments, as well as the other transcriptmaterial, illustrate some key aspects of the enlistment pro-cess. For example they show how Brault, the businessper-son, came to occupy a social position from which he couldpotentially participate in the corrupt network. The kinshipties (Bourdieu, 1990a, p. 167) of Renaud, plus the demon-strated financial commitment positioned Brault in a cer-tain way. As Renaud comments, it was his kinship ties tothe Liberal Party—we had been ‘good Liberals for severalgenerations’—that put him in a position to vouch for a po-tential business participant. Such kinship ties are impor-tant because, in the words of Bourdieu, ‘‘one cannot callon absolutely anyone for any occasion’’ (1990a, p. 168),especially when potentially illegal activities are involved.However, the tie also had to be ‘‘criminally exploitable’’(Lampe, 2003, p. 11) in a way that was financially usefulto senior Liberal political actors. In this regard, the initialfinancial contributions demonstrated ‘investment in thegame’ (Bourdieu & Wacquant, 1992, p. 98) and signaled apotential willingness to continue to support the LiberalParty in the future. Yet, while these strategies created theconditions of possibility for the entry of a business actorinto the corrupt network, they did not change the primacyof kinship ties within the network. As subsequent sectionshighlight, this primacy of kinship and the resulting hierar-chy of social positions influenced the interactions that oc-curred around the accounting transactions. It also resultedin a situation where senior political actors were willing toremove business participants from the network if theirfinancial commitment wavered or if there were conflictsbetween a political clan member and the business actor.

Generating proceeds

The decisions to award sponsorship contracts to Liber-al-friendly advertising agencies and to have the politicalbagman persuade these participants to repatriate a portionof the proceeds were important components of the emer-gent network of corruption. But in many ways the poten-tial to generate proceeds from these contracts remained

unrealized. In this section, we consider how the enlistmentof additional participants facilitated the introduction andaccomplishment of a series of accounting-implicated strat-egies that helped to increase the size of the resource flowsfrom government.

Previously, we mentioned that the introduction of additional accounting entities and transactions provideda way to increase the value of the sponsorship contracts.This was one of the strategies that Lafleur put into prac-tice with respect to promotional materials, in purchasingthese materials from a company that was controlled byhis son. The use of a family member to provide promo-tional materials relied on a different set of kinship ties

than those previously discussed, but the effects were sim-ilar in that it helped to keep the proceeds within the

family, so to speak, and also minimized the potential fordetection (Lampe, 2003, p. 20). The son’s company wasincorporated in 1993 and worked out of the same officeas Lafleur Communications. On sponsorship contracts thatincluded merchandise, Lafleur would sub-contract themerchandise purchase to a company owned by his son(Kroll Lindquist Avey, 2005, p. 82), and that companywould purchase the merchandise, add a mark-up of 100%, and then bill Lafleur Communications. Lafleur Com-munications would then add a commission of 17.65% tothe invoice amount and bill the federal government forthis amount. The final invoice to the federal governmenton an item that could be purchased for $50, for example,would be $117.65.

In the case of professional services, it was Guité whointervened and used his influence, asking Lafleur to usethe services of Gosselin Communications, a company thatwas owned by a former civil servant and acquaintance of Guité (Gomery, 2005b, p. 354). As in the situation withpromotional merchandise, the lengthening of the transac-tion chain through the addition of participants (by Lafleurand subsequently by Gosselin) ensured that the maximumamount specified by the contract for services such as crea-tive work was billed. Since these contracts usually speci-fied a charge-out rate for each type of creative work, aswell as a total amount that could be spent on creativework, incentives existed to accumulate chargeable hoursand upgrade these hours, if possible, to higher-level crea-tive work. Thus, creative work was subcontracted fromLafleur Communications to Gosselin Communicationswhich, in turn, subcontracted the work to a company con-trolled by Gosselin’s wife. At the end of this chain, the per-son doing the work might receive $12–17 per hour (KrollLindquist Avey, 2005, p. 81). The company paying this per-sonwould then bill thenext companyin the chain$25–$35per hour and this company would in turn bill Lafleur Com-munications $60 per hour. Lafleur would then bill the fed-eral government for between $125 and $150 per hour,depending on what level of creative work they claimedthat the person was doing. In this way, Lafleur was ableto accumulate sufficient billable hours to use up theamount of available production expense monies. In thosecases where there were not sufficient chargeable hours inthe file, Lafleur arbitrarily added his own hours to the fileto ensure that all of the monies were spent (Gomery,2005b, p. 336).

These examples regarding promotional items and pro-fessional services reveal that these strategies were predi-cated on accounting. First, the insertion of multipleaccounting entities and multiple accounting transactionsmade it possible to aggregate upward and bill the federalgovernment in excess for something that had a much low-er cost. Second, this chain of transactions had the effect of partially concealing the mechanics of the practices. Forexample, if it was a Lafleur Communications staff persondoing the work, the connection between the person’shourly wage and the amount billed would be much moredirect and, consequently, much more auditable. By insert-ing intermediaries it was possible to at least partially con-

ceal these linkages—since in normal circumstances thefederal government had no way of entering the accounting





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records of third-party limited companies—and argue thatthe work being done was ‘specialized’ creative work andnot simply clerical work. Finally, these activities helpedto construct an appearance of normalcy and indeed, arm’slength, because Lafleur always had an invoice from anothercompany to support the purchase price. In these ways,accounting solidified and justified a series of arbitraryboundaries among elements of the transaction while par-tially concealing the ‘real’ cost of the provided merchan-dise and services.

Unfortunately, what the analysis does not show are theorigins of these accounting practices. Many of the involvedadvertising agenciesused, to a greater or lesser degree,sim-ilar practices to inflate the proceeds of corruption (cf., KrollLindquist Avey, 2005, p. 38). However, what is uncertain iswhether the practices emerged through discussions withthe involved political and bureaucratic actors—an effect of their social capital—or whether it was more spontaneous.For example, the business participants might have simplyrealized that there were no internal controls pertaining tothe value of the invoices, and thus, that it was possible toinflate the valueof thecontracts. While this is an importantquestion, all thatthe available testimony material allows usto conclude is that the different business participants usedsimilar accounting practices to inflate the proceeds of corruption.

Decentralized requests

Although a centralized repatriation channel existed,repatriation requests might also originate from elsewhere,as other involved political actors use the influence associ-ated with theirsocial positionin thepolitical networkto re-quest repatriations. In this section we examinetwo of theseinstances, including one where accounting was enlisted.

The Director of the Quebec Liberal Party, Beliveau, alsotook the opportunity to solicit funds from Jean Brault.The request was made through Renaud, who was by nowspending significant amounts of time at the Liberal Partyheadquarters and who was actively involved in the dailyactivities of the Party. Perhaps because of this proximity,Beliveau asked Renaud to approach Brault for a financialcontribution to the Party. Interestingly, this was one of the few times that Beliveau himself was directly involvedin the fundraising activities of the Party (Beliveau, 2005,p. 20903).

Brault reluctantly agreed but said that he did not wantthese donations to appear in his financial records. Thus:

Mr. Brault was persuaded to have Groupaction remit toMr. Renaud’s company $63,500 in payment of two falseinvoices, one for $55,000 and another for $8500, whichrefer to services rendered that are pure inventions. Thesum of $63,500 was then paid by Mr. Renaud’s companyto the Liberal Party and properly recorded as a politicalcontribution. (Gomery, 2005b, p. 262)

In subsequent years, Brault received similar requests.Once again these political contributions were paid throughintermediary corporations in order to disguise the fact that

they were political donations:

On January 6, 2000, and again on November 1, 2000,Commando invoiced Groupaction for $10,000 for ser-vices rendered but according to Mr. Brault, theseinvoices and the cheques in payment of them are evi-dence of political contributions that he was asked tomake, to pay unexplained expenses of the Liberal Partyin Quebec City. . .On October 1, 2000, Mr. Thiboutot(the sole shareholder of Commando) sent a further falseinvoiceto a Groupaction subsidiaryfor $50,000, describ-ing theservices renderedby Commando as research andanalysis. On October 13, 2000, only a short time beforethe federal election campaign commenced, the invoicewas paid, and Mr. Thiboutot acknowledges that the pro-ceeds were used to pay five employees of the LiberalParty for their work in the forthcoming election cam-paign. Each of the workers sent Commando an invoicefor the amount received. (pp. 263–264)

These examples once again illustrate how accounting-implicated strategies involving multiple accounting enti-ties and participants were used to move the proceeds

through the network and to thereby facilitate repatriation.In contrast to the previous examples, these strategies didnot involve circumventing the barriers pertaining to polit-ical contributions. Rather, they were intended to hide thefact that it was Brault who was making the financial contri-bution. Thus the insertion of

Documents

Accounting, Organizations and Society Volume Issue 2012 [Doi 10.1016_j.aos.2012.01.003] Neu, Dean; Everett, Jeff; Rahaman, Abu Shiraz; Martinez, Daniel -- Accounting and Networks of