3. Family for Corruption

Harminder Phagura, a former police officer in Yuba City, California, received an 18-month federal prison sentence after pleading guilty to one count of bribery related to federal programs in a drug trafficking sting operation (U.S. Attorney’s Office, Eastern District of California, 2016, 2017). Phagura confessed to misusing his authority by trading sensitive law enforcement information for money. His cousin, Gursharan Phagura, acted as the intermediary, linking him to a government informant pretending to be a cocaine trafficker. From July 2014 to March 2015, Gursharan, unknowingly, worked with the undercover informant to gather information about police activities in specific regions, with Harminder providing insights through his official access, for their clients to evade detection. On numerous occasions, agents witnessed their meetings—sometimes in a police vehicle—while Gursharan communicated via coded texts with the informant. In a recorded incident, agents triggered an alert through the Yuba City Police dispatch system, and shortly thereafter the informant got confirmation from Gursharan about police activity in the area. Throughout various undercover operations, the informant paid a total of $6000 for this information. Gursharan was essential in facilitating these exchanges and relaying intelligence, effectively keeping Harminder from direct interaction with the informant and hiding his cousin’s identity. Both men were indicted in 2015; Harminder was released on a $100,000 bond, whereas Gursharan remained in custody without bail due to being regarded as a flight risk and a community danger. In 2017, Harminder was sentenced to 18 months in federal prison for the bribery conviction; however, no accessible updates indicate a final sentencing for Gursharan. The investigation was a collaborative effort by Homeland Security Investigations, the FBI, and the Yuba City Police Department.

As this Yuba City example suggests, actors in family for corruption cases are typically financially motivated, leveraging familial ties to minimize the risks and uncertainty associated with corrupt transactions. Family for corruption is predominantly an instrumental and interest-based use of the family. Nonetheless, there is a certain ambivalence and interplay between the sociability and instrumentality aspects of utilizing these relationships (Ledeneva, 2018, p. 9). As the cases in this chapter suggest, although these family associations are sociable, typically involving immediate or extended family members, such pre-existing intimate ties are used to obtain financial benefits. This is in contrast to corruption for family patterns, discussed in the following chapter, when corruption is not mainly driven by personal profit; instead, it serves as a means to reinforce family ties.

Participants in family for corruption often act like they run a mini-informal family enterprise. Unfortunately, it is hard to find empirical details about how the money is typically shared among family members. Below, I borrow concepts and ideas from new institutional economics (Lambsdorff et al., 2005). According to transaction cost economics, a subfield of institutional economics, corruption involves the transfer of a service between the bribe-giving client and the bribe-taking agent (Husted, 1994). Corruption can be seen as a high-risk contractual situation, where uncertainties are considerably greater than in legal market exchanges. This approach is useful for this chapter because it explains why and how trust-based relationships, such as family ties, reduce corruption’s transaction costs.

Rational actors in any transaction tend to be opportunistic, often cheating their partners whenever the opportunity presents itself as the most profitable alternative. To protect against such opportunism, parties must rely on contractual safeguards rather than mere promises (Husted, 1994). Transaction costs in legal business relations encompass searching for partners, establishing contract terms, drafting a contract, monitoring partner behavior to guard against opportunism, and ensuring the agreement is enforced by authorities (Lambsdorff et al., 2005). These costs can be significantly higher in the context of corruption, where legally enforceable contracts are absent. Corrupt actors must expend additional time and resources to keep their activities hidden, such as partner searches, negotiations, behavior monitoring, and deal enforcement (Lambsdorff et al., 2005).

Corrupt arrangements place partners at the mercy of one another, as both parties are aware of the other’s illegal practices (Lambsdorff & Teksoz, 2005). Even after a deal is struck, they often remain in binding relationships characterized by mutual dependence. Consequently, there is a natural inclination among corrupt actors to cultivate an environment conducive to securely exchanging their corrupt favors, and family provides a viable solution (Lambsdorff et al., 2005). The organized arrangement of the family, with all its built-in advantages, offers a safe vehicle for the corrupt exchange, including group enforcement mechanisms (Lambsdorff & Teksoz, 2005). These relationships are typically long-term and resistant to change and usually outlive the duration of a particular transaction. Family members can also act as brokers by providing relatives access to third-party corrupt agents and offering a guarantee against the opportunistic behavior of either party.

The cases discussed below suggest that family ties may play different roles in financially motivated corrupt transactions. The typical pattern here is that one or more family members join the corrupt agent, whose job provides the means for the illegal use of the employer’s resources or the discretion linked to their position. There are multiple ways the pre-existing family structure could be used for corruption. As we saw in the first case, members can help each other on the corrupt agent side using division of labor. The examples of Harminder Phagura and our second case below show that a family member can also act as a broker or a guarantor facilitating the transaction between two parties. The third example presents more complex and networked family corruption. In that case, all family members had official positions at an airport, allowing them to conspire and create a more sophisticated corruption ring. This suggests that there can be a hierarchical division of labor between family members in corrupt situations, with some members playing a more prominent and central role in organizing corruption. The common feature of these cases is that although family members are involved, the primary motivation is to obtain financial benefits. The family was predominantly used as a trust-based arrangement to reduce the transaction costs related to illegal deals.

Despite being family members, the actors involved in the corruption cases discussed in this chapter were driven primarily by financial motivations. In all these examples, monetary profit was an essential element of the transaction. This suggests that the instrumental aspects of these relationships likely outweigh the sociability components (Ledeneva, 2018, p. 9). It does not mean that these partners were not emotionally connected; instead, those strong social ties, including emotional ones, served as a safe vehicle for the exchanges, reducing the risks and uncertainties inherent in corruption. The idea that rational actors in these schemes actively weigh the costs, risks, and rewards of corruption indicates that the “price” is a crucial coordination mechanism. If they can create a setup where transaction costs are low enough, involving family members, and the potential benefits are high enough, they will engage in corruption.

According to institutional economists, even in legal transactions rational actors tend to be opportunistic and may deceive their business partners whenever an opportunity arises, as it is often the most profitable option. To guard against such self-interest-driven calculations, parties must rely on contractual safeguards and related enforcement mechanisms rather than just promises (Husted, 1994; Lambsdorff et al., 2005). Another solution to combat opportunism—especially when contracts are incomplete or difficult to enforce—is to shift transactions from markets to hierarchies, as firms offer more efficient structures for internal behavior monitoring and control (Williamson, 1973, 1979). The core idea here is that actors are boundedly rational in highly uncertain situations and seek to minimize transaction costs. Thus, in legal enterprises, firms emerge not just to produce goods and provide services but to govern complex relationships more effectively than markets can.

Corruption is even riskier than regular business, and thus, actors are especially interested in reducing such risks. Even in the most ad-hoc and impersonal type of corruption, a driver bribing traffic police, the two strangers who are making a one-time corrupt deal use communication as an effective tool to reduce the uncertainty and risk surrounding the situation (Jancsics, 2024).

Hierarchy can also be used to reduce the transaction costs of corruption, but that solution is not available for everyone. Participants, particularly those at lower organizational levels, often lack access to key elements of the formal hierarchy, which can hinder their ability to manage corruption effectively (Jancsics, 2024). More powerful actors have greater chances to hide the corrupt nature of their actions behind formal structures. In grand corruption schemes, elites can rely on dense contractual schemes, inter-organizational networks and even sets of shell companies to make corruption less detectable (Jancsics & Costa, 2024). As we will see in the ensuing chapter, family members in dynastic state capture also use “legal corruption,” in which law-making is tailored to benefit particularistic groups and conceal the corrupt nature of the contracts. However, less powerful actors at lower and middle levels of bureaucracies must rely on informal arrangements instead of formal structures. Here, trust is the most effective solution to reduce transaction costs, and the social organization of the family serves as a highly reliable, trust-based infrastructure for organizing corruption.

Several unknown aspects of the family for corruption phenomenon may need further investigation. An interesting area to explore would be the gender dimension of this type of corruption. The limited existing empirical research suggests a rather marginal female role, less profit, and less proactive behavior than their male co-conspirators in white-collar crime cases (Steffensmeier et al., 2013). Also, when women are involved, they are more likely to be closely connected to their male counterparts, such as spouses. The two cases in this chapter involving spouses also show the secondary role of wives in corrupt transactions; the husband was the primary agent of the transactions, controlling the profitable organizational resources. However, in the corrupt family network case, Cindy Moran-Sanchez, the wife and sister, was the most dominant actor in the scheme. Such varying patterns of gender roles warrant additional empirical investigation.

Finally, future research on family for corruption should move beyond the prevailing focus on kinship norms, loyalty, and cultural obligations and investigate how rational calculation shapes actors’ choices when using family strategically as a low-risk, low-transaction-cost infrastructure for illicit deals. The rational calculus, which treats the family as an optimal institution for corruption, implies that loyalty is maintained as long as the cost-benefit calculus incentivizes silence. If external pressures alter that calculus—for example, a family member is offered a plea bargain or immunity to testify—self-interest may override kinship norms, leading to betrayal despite deep-rooted loyalties. In two border corruption cases discussed in this chapter, married couples who engaged in corruption together divorced after being caught by the authorities, highlighting the possible fragile nature of such alliances.

Key factors where such rational actions can override familial loyalty include legal incentives (such as leniency for whistleblowers), changes in risk (strict enforcement raising the personal cost of remaining loyal), blaming the other party for exposure, disputes over illicit resource shares, or internal power struggles—all of which can lead a relative to conclude that cooperating with authorities, abandoning a corrupt deal, or cutting family ties offers greater benefits than protecting the family. This gap in the literature matters for both theory and practice. Without integrating such rational-choice insight, we risk viewing family corruption as a monolithic “culture,” overlooking how the calculated, instrumental use of kinship facilitates corruption. Future studies could explore how these logics interact—whether loyalty reinforces rational calculation by stabilizing corrupt exchanges or whether self-interest ultimately overrides family obligations when incentives shift.