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Corruption costs in Northern Illinois higher than rest of state, study finds

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Monday, October 7, 2019  |  Article  |  By Cole Lauterbach | The Center Square

Chicago (16) , Ethics, Campaign Reform, Transparency (12a) , Pay to Play, Corruption
Corruption costs businesses, and those who invest in them, money, according to a preliminary study released by a group led by a professor at the University of Illinois’ Gies College of Business.

The study found that publicly-traded companies based in some parts of Illinois have higher "corruption costs" than those in other parts of the state.

Professor Nerissa Brown and the other researchers extracted Illinois’ costs on business from national data at the request of The Center Square. The data showed a sharp contrast in costs for the state's three federal court jurisdictions. 

“For the typical big public company in Chicago, investors are pricing in about a $22 million discount compared to central Illinois,” said Roger White, a co-author of the study and assistant professor at Arizona State University’s W.P. Carey School of Business. “We’d see about a 1.5 percent increase in market value if we could transplant the central Illinois corruption environment into northern Illinois.” 

The state, in general, has built a reputation for corruption, White said. 

“Illinois and Louisiana are rare states where they could direct an entire wing of the state [penitentiary] exclusively for people that worked in and around the governor’s mansion,” he said, noting that perception is translated into real money when investors value a firm lower due to its location in the Land of Lincoln.

White said that the more interaction an industry has with government, the more chances for corruption. He referenced the state’s recent $45 billion infrastructure project and federal raids on the officers of Senate Transportation Committee Chairman Martin Sandoval.

“If there’s a $40 or $45 billion that’s going to be allocated by a committee that one person directs and has a lot of influence in, a lot of people need to be a boy scout for there not to be some kind of offer of a kickback,” he said. 

Federal agents raided Sandoval's home and offices last week in what officials told the Chicago Tribune was a hunt for evidence of kickbacks. Sandoval has not been charged with a crime.