Conspiracies as Structure and Perception

Recent scandals such as VW’s manipulation of emission rates, the bribery schemes in the upper echelons at FIFA, or Bernard Madoff’s Ponzi-scheme reveal how ubiquitous criminal conspiracies are in economic life. Though there are various case studies scattered across different literatures and there is a growing area of sustained research into ‘dark’ networks, a general theoretical framework for thinking about such conspiracies has yet to be formulated. Moreover, even though the literature has produced some insights into the basic principles behind the organization of such networks, there has not been much work about how they are discovered. That is a question about how and why audiences arrive at particular evaluative judgments about sets of incriminating material? How do they come to change an established interpretation of economic activities, such that they suddenly seem illegal and morally reprehensible?

Most structuralist studies of conspiracies have neglected this line of inquiry, because they reconstruct the networks from individual investigations that make it impossible to account for variations in external scrutiny. However, as Georg Simmel has already pointed out, secrecy is a relational phenomenon: we cannot look at the actions of the perpetrators alone to understand an instance of deception, but must also examine the particular way the audience engages with it. While structuralist approaches thus neglect the interactional, evaluative dimension of conspiracies, micro-sociological work that focuses on these processes usually assumes a generic situation of ‘everyday life.’ While it thus draws attention to the fact that discovery and deception have something to do with controlling processes of evaluation, it fails to consider the structural factors that determine who gets to see what kind of evidence, and in what kind of situation, in cases of organized deceptions. Since the particular interplay between perpetrators and audiences has not yet been studied for larger conspiracies, few attempts have been made to articulate a general conceptual framework or study the reasons for the discovery of conspiracies.

This paper reconstructs different investigations of a historical conspiracy to make some headway towards addressing both issues. In 1932, one of the largest utility empires of the United States collapsed. Even though extensive, earlier investigations had not been able to discern any crimes, the investigators now revealed widespread financial fraud at the heart of the Chicago based ‘Insull Group’ as they sifted through the complex network of holding and operating companies. Several different state and federal investigations were conducted, but even now the officials failed to discover a key fact: that prominent bankers in Chicago’s main loop banks had been active participants of Samuel Insull’s criminal conspiracy. The paper asks how the conspiracy managed to retain secrecy in the beginning and why, when it was finally discovered, the bankers managed to get away nonetheless.

To address the first question, the paper reconstructs the network of the conspirators as well as the network of company transactions comprising the fraud. It then examines the relation between network structure and the search behavior of the investigators, and shows that the conspiracy was adjusted to one particular form of scrutiny but not others. The crucial information for an incriminating interpretation was disassembled into different books that would not be examined together in the course of a regular investigation. So, even though there were clear indicators of criminal activities, their mandate guided the investigators in such a way through the network of financial transactions that they never came across the decisive information. When prominent Insull companies went into receivership, the auditors changed their search strategy to explain the surprising event and discovered the conspiracy.

The second part of the paper investigates why only some but not all of the perpetrators where caught after the mechanism of deception had been uncovered. At this point, the paper looks more carefully at the logic of discovery itself and shows the process by which investigators came to agree on a particular interpretation of the conspiracy that resonated with early findings. Faced with the enormous complexity of the transactions between the various Insull entities (over 200 firms) and severe time constraints, the investigators settled on the first interpretation of the data that formed a harmonious ‘Gestalt’ and neglected details that should have been read as signs for the involvement of the bankers. The Gestalt provided a selection mechanism that allowed the investigators to reduce the complexity they confronted, because it identified a clear set of transaction types as illegal, allowing the investigators to neglect others. Since the initial discoveries establishing this selection mechanism suggested that the bankers were victims of the conspiracy, conflicting evidence was not registered as conspicuous.

Drawing these two parts together, the paper then develops a more general framework for thinking about conspiracies: it considers them as systems of interaction between sets of perpetrators and sets of audiences that are mediated by a material infrastructure – the books, records, publications, testimonies, etc. that are connected to the conspiracy. This material infrastructure is the site where perpetrators and audiences engage with one another, because it consists simultaneously of the material that the perpetrators generate to implement their deception and the sources of information the audiences confront. The material either implements the audience’s deception or turns into evidence in their discovery of the conspiracy. In other words, the material infrastructure is inherently ambiguous and the success or failure of a conspiracy depends on how well its meaning can be controlled by the conspirators. The paper then discusses various potential mechanisms in this interactive negotiation of meaning represented by the financial transactions.  

In conclusion, the paper shows how the evaluation of the financial transactions documented in the material infrastructure of the conspiracy was shaped by the interplay between different logics of perception and the referential structure of the evidence. Its central claim is that we should think about the interactional dynamics behind conspiracies in terms of processes of evaluation that seek to settle on the meaning of an inherently ambiguous network of information, one that is manifested in the material infrastructure of the conspiracy.