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Bribery
Is Your Business Immune?
It’s probably the second oldest profession. Call it what you like. Baksheesh, mordida, dash, tea money, spiffs, cadeaus, fines, gifts, special fees, access or oil, it’s still a ‘bribe’. At one time bribery was ubiquitous in business and trade the world over until civilization realized that this practice has no place in an orderly commercial system that desires to expand and engage in effective competition. However, these practices are inherent and deeply rooted in certain countries and cultures to the point that it is an accepted (and sometimes expected) way of life and sustenance. Second to terrorism many regard bribery as the single most important scourge of humanity and, in some cases, the two are inseparable.
The Berlin based organization Transparency International (transparency.org) does an annual survey known as the Corruption Perceptions Index (CPI). It ranks countries based on the degree to which corruption is perceived to exist among government officials, public servants, and politicians. According to its 2003 report, bribery and corruption are alive and well in most every country. Finland, Iceland, Denmark, New Zealand and Singapore make the first five. The United States stands 19th. The survey charts levels of corruption in 133 countries. Seven out of ten countries score less than 5 out of a clean score of 10, while five out of ten developing countries score less than 3 out of 10
There is an old Russian saying, “I curse you to live on your salary”. Who can doubt that the Russian people are punch-drunk on the problem? There exists the tacit acceptance that bribery permeates the Russian way of life, that it is better to pay for free healthcare, free education and housing services rather than no public services at all. It’s better not to argue for your rights – just pay for them. Western managers working in Russia know that corruption is not restricted to the criminal classes; it is a system of governance. It plagues the country across its eleven time zones, breeds poverty, suspicion, jealousy, and distrust in a society already lacking confidence in democratic values. At least the lights are on. In the past twenty-five years more attention has been paid to this issue than in the past twenty five hundred, and Russia now realizes that trade with the rest of the world is its only lifeline, that there is no turning back.
Uphill fight
But Russia is not alone. Countries from Sweden to Slovakia and from the UK to the USA are subject to the scourge of bribery and corruption to some degree or other. As in most world standards of trade, however, the United States, because of its economic clout, endeavors to enforce agreements by leaning on the worst malfeasants economically. It is a long and arduous process, often amid shouts of hypocrisy and criticism because of American corporate scandals and the western demonstration of power against the weaker Developing Nations. More importantly it is often seen as an attack by western values against deeply and historically held cultural systems, the Data Based culture group trying to change the beliefs and processes of the Relationship and Group Based culture groups.
Take India. In a country where highwaymen are recognized as a social group and have their own honor system and where stealing crops is as honorable as growing them, it is not difficult to include ‘access payment’ in the same category. It is all a matter of practical creativity to get the job done. In a society that has looked after each other millennia after millennia, it is reasonable to believe that the systems of baksheesh will die-hard. Top politicians crammed the jails following high-level convictions in 2000 including Prime Minister P.V.N. Rao for bribing minor MPs for their votes. In April 2001 India’s chief of the Central Board of Customs and Excise was arrested for ‘possessing assets disproportionate to his known sources of income’. Even the esteemed sport of Cricket is not immune. In December 2000 the Board of Cricket Control imposed a life-ban on former captain of the Indian Cricket team Mohammad Azharuddin for fixing the results of matches in return for bribes in a global cricket-betting racket.
Corruption afflicts South Asia at many levels of state and society. The world looks on in amazement as the aid to developing nations, which should be applied to health, welfare and education, is often applied to massive arms procurement and infrastructure projects that afford political movers and power shakers to line their pockets. The thin line between accountability for corruption and political victimization often appears blurred in this region.
Do not pass ‘Go’
Bribery, as understood in the West is jail time. When practiced in certain parts of the South and East it is considered sensible business.
However, in a world gone global, it has no place in free trade and open competition and those governments who see the future of their countries in the international community are taking far-reaching and dramatic steps to end corruption starting with their own bureaucracies. They are finding that it takes more effort, tenacity, and patience.
Law and its enforcement is not easy to apply throughout a diverse and culturally different world, but the wish to level the global trade playing field has been so great in the last twenty five years that giant steps have been taken to get the dirt moving equipment into action.
Moving the goalposts
As a result of a series of SEC investigations in the mid 1970s, over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government, to so-called facilitating payments that allegedly were made to ensure that government functionaries discharged certain magisterial or clerical duties.
Congress then enacted the Foreign Corrupt Practices Act (FCPA) 1977 in an effort to curtail the bribery of foreign officials and to restore public confidence in the integrity of the American business system. The FCPA had an enormous impact on the way American firms do business. Several firms that paid bribes to foreign officials became the subject of criminal and civil enforcement actions, resulting in large fines and suspension and debarment from federal procurement contracting. Some of their employees and officers have gone to jail. Companies with substantial overseas business found themselves completely cut out of many bidding opportunities. Some just pulled out of international business announcing that they could not compete with foreign competitors who had no such constraints.
Following the passage of the FCPA, Congress became concerned that American companies were operating at a disadvantage compared to foreign companies who routinely paid bribes. Some countries even permitted deductions for the cost of such bribes as business expenses on their taxes. Accordingly, in 1988, Congress directed the Executive Branch to commence negotiations in the Organization of Economic Cooperation and Development (OECD) to obtain the agreement of the United States’ major trading partners to enact legislation similar to the FCPA. In 1997 almost ten years later, the United States and thirty-three other countries signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The United States ratified this Convention and enacted legislation in 1998.
The antibribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business or direct business to any specific person or company. Since 1998 this also applies to any persons representing foreign firms who commit any act in furtherance of such a corrupt payment while in the United States.
To avoid such consequences, many firms have implemented detailed compliance programs intended to prevent and to detect any improper payments by or to employees and agents.
It’s the Law
The FCPA makes it unlawful to bribe foreign officials to obtain or retain business. There must be five elements that have to be met to constitute a violation.
1. Who or what are you? The law potentially applies to any individual, firm, officer, director, employee or agent of a firm, or any stockholder acting on behalf of the firm. It embraces foreign subsidiaries, foreign nationals and US residents.
2. What are your intensions? There has to be a corrupt intention. In other words, the payment must be intended to induce the recipient to misuse his official position to direct business. The Act does not require that a corrupt action succeed in its purpose. The offer or promise is enough to land you in jail.
3. What are you going to give? The FCPA prohibits paying, offering to pay, promising to pay, authorizing payment or even a promising any money or anything of value to anybody.
4. Who are you going to give it to? The prohibition extends only to a foreign official, a foreign political party, party official or any candidate for political office. A foreign official means any officer or employee of a foreign government, a public international organization or any person acting on their behalf. Members of a Royal family may come into this category.
5. What’s the business purpose? Checking to see whether the payment is made in order to assist the firm in obtaining or retaining business is the final criteria. It doesn't have to be a government contract. You may have just have greased the wheels of bureaucracy to find your picture on the post office wall.
Any serious businessperson in a legitimate enterprise knows that the consequences of bribery are substantial and severe. This overview is not a legal opinion, but any manager who wants to understand the FCPA provisions should consult their counsel or utilize the services of the Department of Justice Foreign Corrupt Practices Act Opinion Procedure, US Department of Justice, PO Box 28188, McPherson Square, Washington DC, 20038 Telephone (202) 514-7023.
All business is global, intercultural, interacting, and internetted. Our customers, associates and suppliers are from every nook and cranny of the planet. Setting the highest professional standards sets the rules everyone can understand and makes it clear that there is no room for the second oldest profession.
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