The Biggest Bang for Your Bribe

It's tough being corrupt. You know you probably need to bribe lots of people to achieve your ignoble goals. But where, exactly, do you put your money? Do you invest more heavily in payoffs to politicians, to the police or to judges? Or would it be more effective to bribe the news media to ignore scandals and produce monotonously favorable coverage?

The answer is to invest in the news media, claim economist John McMillan of the Stanford University's Graduate School of Business and graduate student Pablo Zoido in a paper to be published in the fall by the Journal of Economic Perspectives.

They based their conclusion on a detailed study of an unusual data set: Records of bribes kept by Vladimiro Montesinos, the former head of Peru's secret service. Montesinos's goal was to protect his patron, then-President Alberto Fujimori. At the height of the spy chief's dirty dealing in the 1990s, he was dishing out payoffs totaling more than $3 million a month to police officials, key judges, opposition political leaders and the owners of the country's major television stations, according to records.

The money came from the public treasury. Most of the bribes were paid in U.S. dollars rather than Peruvian soles. "On one video Montesinos apologizes to the bribee for paying in soles, as he didn't have dollars on hand," McMillan said in an e-mail.

By virtue of their sheer volume and detail, the bribes and tape collection are noteworthy -- as well as a rich source of information for researchers interested in the economics of bribery.

"Montesinos kept meticulous records of his transactions," Zoido and McMillan recounted in their paper. "He required those he bribed to sign contracts detailing their obligations to him. He demanded written receipts for the bribes." And if that weren't enough to secure him a place of honor in the Hall of Shame, he "had his illicit negotiations videotaped."

That allowed McMillan and Zoido to tally up the bribes by institution and then compare them to see where Montesinos, in his "expert" opinion, thought it most effective to spend the most money.

It wasn't even close. "One single television channel's bribe was four times larger than the total of the opposition politicians' bribes," they found. "By revealed preference, the strongest check on the government's power was the news media."

The totals were staggering. Bribes to the owners of the six largest privately held television stations amounted to millions, with $1.5 million a month flowing to the owner of one station and $500,000 a month to another, while a third got a total of $9 million over an undisclosed period of time. Sometimes the bribes were payments for specific jobs: Montesinos paid the owner of one TV network $50,000 to fire two reporters critical of the government.

By comparison, politicians and judges came relatively cheap. Bribes to 21 judges came in the form of one-time payments that ranged from $2,500 to $55,000. Lawmakers were a bit more pricey: Dozens of opposition party legislators were paid bribes ranging from $10,000 to $50,000 a month, easily outstripping their monthly paychecks.

Newspapers were less of a concern because the overwhelming majority of Peruvians got their news from television, McMillan said. Still, Montesinos paid more than $2 million to the owners or directors of popular newspapers.

The implications of the economists' findings extend far beyond Peru. These findings suggest that if a society wants to prevent corruption, the best weapon is an independent and corruption-free media that can act as a check on the government.

It was poetic justice that Montesinos's videotaping habit ultimately proved to be his undoing. One of Montesinos's boodle videotapes -- showing him paying off an opposition party leader -- was broadcast in September 2000 by Peru's single untainted TV station.

Other tapes quickly surfaced. They soon became "Peru's own distinctive form of reality television," the researchers noted. Fujimori shortly fled to Japan, where he was granted asylum because his parents were Japanese-born. He resigned the presidency by fax.