This paper provides both a general model by which to understand ‘grand corruption’ and its application to the Saleh regime in Yemen. The general model uses the variables of elite cohesion and strength of state institutions to generate four basic types of grand corruption. The model is then applied to the regime of Ali Abdullah Saleh. The paper argues that grand corruption is not just a marginal problem but, indeed, has been the glue that holds together fragmented elites (five types are identified) in the face of weak state institutions. The paper further argues that the political economy of corruption in Yemen is centrally funded by oil revenues, new to Yemen since the late 1980s. At their peak, oil revenues accounted for over 90% of all government revenues in Yemen. The sharp decline in oil revenues in recent years has put in jeopardy the basic political economy that held Yemen together. Regional fragmentation and other sources of political instability that marked 2011 can be attributed to the collapse of the ancien political economy. This paper is based on fieldwork conducted in 2006 and recently updated. The final paper is expected to be published as a Carnegie study later this year.