bribery case study examples

Search Search Please fill out this field.
Kellogg Brown & Root

BAE Systems

Kerry Khan & Michael Alexander

Alcatel-Lucent SA

The bottom line.

Laws & Regulations
Financial Crime & Fraud

The Biggest Bribery Cases In Modern Business History

Paying foreign officials for expediting legal processes or obtaining contracts was a common business practice around the world well into the 1970s. In 1973, the Watergate scandal, that ultimately caused Richard Nixon's resignation as president, brought corporate bribery into the spotlight. The Securities Exchange Commission (SEC) and the U.S. Department of Justice (DoJ) began investigating the sources of Nixon's illegal campaign contributions and discovered that hundreds of U.S. companies had bribery slush funds on hand in order to curry favor with legislators and other officials.

In 1977, the Foreign Corrupt Practices Act (FCPA) was enacted to bar U.S. corporations and some foreign companies operating in the U.S. from making such payments. That hasn't stopped some companies from continuing the practice. These are among the top five business bribes in modern U.S. history.

Key Takeaways

A bribe is an illegal act involving the exchange of consideration, such as money, with the purpose of influencing behavior.
In business, it is illegal to bribe public officials or regulators in order to win contracts, expedite processes, or look the other way on any number of other activities.
Here, we look at some of the biggest corporate bribery scandals in modern U.S. history.

Investopedia / Sabrina Jiang

Kellogg Brown & Root

This company, now known as KBR, Inc., was spun off from a subsidiary of Halliburton. It is one of the largest engineering and construction firms in the world and has been connected to large U.S. military contracts. According to the New York Times , in 2008, the Department of Justice charged the company with offenses under the FCPA, including paying hundreds of millions of dollars to secure a natural gas plant construction contract to Nigerian officials. KBR pleaded guilty, as did its CEO Albert Jack Stanley, and paid $402 million in fines, as well as $177 million to the SEC. Stanley was sentenced to 2.5 in prison, beginning in 2012.

Foreign companies that do business onshore in the U.S. also fall under the provisions of the FCPA. According to the SEC, Siemens AG , a German engineering firm, ran afoul of the law in 2008 when it was charged for paying $16 million to the president of Argentina to secure a contract for making Argentinean identity cards. The contract was worth $1 billion to Siemens AG. In total, the company was accused of paying more than $100 million in total to government officials. Eight former employees and contractors were charged in the scheme. Siemens settled with the Department of Justice and paid $1.6 billion in fines in the U.S. and Germany.

The British aerospace company has been under investigation by British authorities since 1989, making it one of the longest fraud investigations in history. The main concern surrounded a deal between Britain and Saudi Arabia to supply fighter jets. The investigation spread to BAE's dealings in South Africa, Tanzania, Chile, Romania, the CzechRepublic and Qatar. The investigation focused on payments made by BAE through a "go-between" company to foreign officials. The British version of the Department of Justice dropped most of the investigations, citing national security concerns, but U.S. authorities picked up the ball in 2007. In 2010 , BAE pleaded guilty with U.S. courts and paid a $400 million fine.

Kerry Khan and Michael Alexander

Individuals can also find themselves charged for bribery and fraud. According to Lubbock Online, in October 2011, two U.S. Army Corps of Engineers employees were arrested and charged with fraud for taking kickbacks , estimated at over $20 million. Kerry Khan and Michael Alexander are accused of taking bribes from contractors in exchange for being awarded lucrative government contracts, and of inflating invoices to the government and skimming the difference. Khan, the ring leader, was sentenced to more than 19 years in prison.

At the end of 2010, Alcatel-Lucent, the largest landline phone network company in the world, settled its bribery case with the Department of Justice in 2010 by agreeing to pay $137 million, including $45 million to the SEC. The case revolves around a complex series of money transfers between shell companies and to consultants, resulting in payments being made to foreign officials. Alcatel-Lucent admitted to making improper payments in many African and South American companies.

As the Department of Justice continues to investigate the business practices of some of the largest companies in the world, it is likely that more evidence of bribery and corruption will be found. The penalties upon conviction, however, should make companies think twice before engaging in bribery and fraud.

United States Senate. " Select Committee on Presidential Campaign Activities-The Watergate Committee ."

The United States Department of Justice. " Foreign Corrupt Practices Act ."

KBR. " About Us-Our History ."

The New York Times. " Former KBR Executive Pleads Guilty to Bribery ."

The United States Department of Justice-Office of Public Affairs. " Kellogg Brown & Root LLC Pleads Guilty to Foreign Bribery Charges and Agrees to Pay $402 Million Criminal Fine ."

The United States Department of Justice-Office of Public Affairs. " Former Chairman and CEO of Kellogg, Brown & Root Inc. Sentenced to 30 Months in Prison for Foreign Bribery and Kickback Schemes ."

U.S. Securities and Exchange Commission. " Litigation Release No. 22190/December 13, 2011-Accounting and Auditing Enforcement No. 3342 / December 13, 2011 ."

The United States Department of Justice-Office of Public Affairs. " Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme ."

U.S. Securities and Exchange Commission. " SEC Charges Seven Former Executives with Bribing Leaders in Argentina ."

The Fletcher School-Tufts University. " The Al Yamamah Arms Deals ."

The United States Department of Justice-Office of Public Affairs. " BAE System PLC Pleads Guilty and Ordered to Pay $400 Million Criminal Fine ."

Federal Bureau of Investigation Archives. " Former U.S. Army Corps of Engineers Manager Sentenced to More than 19 Years in Prison in $30 Million Bribery and Kickback Scheme ."

The United States Department of Justice-Office of Public Affairs. " Alcatel-Lucent S.A. and Three Subsidiaries Agree to Pay $92 Million to Resolve Foreign Corrupt Practices Act Investigation ."

Terms of Service
Editorial Policy
Privacy Policy

More Blog Popular
Who's Who Legal
Instruct Counsel
My newsfeed
Save & file
View original
Follow Please login to follow content.

add to folder:

My saved (default)

Register now for your free, tailored, daily legal newsfeed service.

Find out more about Lexology or get in touch by visiting our About page.

Top 10 Bribery & Corruption Stories of 2020 (so far)

Even with much of the world under partial lockdown during the COVID-19 pandemic, there’s been no shortage of bribery and corruption cases through the first half of 2020. Each of these stories makes it clear that organisations must have proper controls in place to prevent bribery and corruption. ISO 37001 Anti-Bribery Management Systems standard provides a comprehensive approach to mitigating bribery and corruption risk. Organisations of all sizes and industries should take steps now to ensure that they don’t end up on a future list of top bribery and corruption scandals.

In no particular order, here are 10 of the top bribery and corruption stories we’ve seen so far in 2020.

In February, French-based Airbus agreed to pay a record $4 billion in fines for alleged bribery and corruption spanning at least 15 years. The company reached a plea bargain with prosecutors in Britain, France and the United States. According to prosecution documents, Airbus used a global network of agents or middlemen for corrupt transactions, included payouts disguised as commissions to push airplane sales.

“Fallout from the Airbus bribery scandal reverberated around the world on Monday as the head of one of its top buyers temporarily stood down and investigations were launched in countries aggrieved at being dragged into the increasingly political row.” ( Reuters, 2020 )

While the investigation into suspected corruption at Novartis began seven years ago, it appears that 2020 is the year the company can finally close this damaging chapter in its history. The resolution comes at a steep cost. The Swiss-based pharmaceutical company will pay a staggering $1.3 billion in a settlement for kickbacks, bribery and price-fixing.

“The latest settlements cover two different cases. In the first, federal prosecutors claim Novartis used ‘tens of thousands of’ speaker programs and events — some entailing exorbitant meals — as disguise to provide bribes to doctors. The goal, according to prosecutors, was to encourage doctors to prescribe its drugs, including Lotrel, Valturna, Starlix, Tekturna, Tekamlo, Diovan and Exforge.” ( Fierce Pharma, 2020 )

Ohio House Speaker Larry Householder

While political corruption is nothing new, his constituents were nevertheless shocked when Ohio House Speaker Larry Householder was arrested, along with four alleged co-conspirators, as part of a $60 million racketeering and bribery investigation. The alleged scheme is being described as one of the biggest public corruption cases in Ohio, U.S. history.

“All the charges are tied to what federal prosecutors said was a criminal enterprise dedicated to securing a bailout for two nuclear power plants in northern Ohio owned by FirstEnergy Solutions of Akron. The bailout is expected to cost the state’s utility ratepayers $1 billion.” ( Cincinnati Enquirer , 2020)

Alexion Pharmaceuticals

Charged by the SEC with violating the FCPA by bribing officials in Turkey and Russia, Alexion Pharmaceuticals will pay $21.4 million to resolve an investigation that began in 2015. The Connecticut, U.S.- based company was also accused of failing to keep accurate financial records at subsidiaries in Brazil and Colombia.

“In Turkey and Russia, Alexion paid government officials and doctors at state-connected hospitals to promote use of its blood-disease drug, Soliris. Alexion retained a consultant in Turkey from 2010 to 2015 with ties to health officials. Alexion Turkey paid the consultant over $1.3 million for ‘consulting fees and purported expense reimbursements,’ the SEC said. … In Russia, Alexion paid doctors at government hospitals over $1 million from 2011 to 2015 to increase Soliris prescriptions. … The bribery resulted in Alexion being ‘unjustly enriched’ by about $6.6 million in Turkey and $7.5 million in Russia, the SEC said.” ( FCPA Blog, 2020 )

Taiwan Presidential Office Secretary-General Su Jia-chyuan

In Taiwan, a scandal embroiling some top legislators prompted Presidential Office Secretary-General Su Jia-chyuan to resign from office. Su Jia-chyuan’s nephew, Democratic Progressive Party (DPP) Legislator Su Chen-ching, is reportedly under investigation in a bribery case related to the ownership of a department store. Su Jia-chyuan said he has “nothing to hide” and insisted he is stepping down to avoid letting the controversy continue to affect the president.

“Taipei prosecutors on Saturday filed a motion to detain Su Chen-ching, along with four other former and incumbent lawmakers as part of an investigation into bribery allegations against six current and former legislators and their aides. The court hearing on whether to grant the prosecutors’ request to detain them was ongoing as of press time last night. The DPP’s anti-corruption committee convened a meeting at 8 pm to discuss the penalties for Su Chen-ching and former legislator Mark Chen, who has also been implicated in the case and was released on NT$500,000 bail early on Saturday.” ( Taipei Times, 2020 )

Former Malaysia Prime Minister Najib Razak

As part of the 1MDB corruption scandal, former Malaysian Prime Minister Najib Razak was convicted on seven counts for charges that include money laundering, abuse of power and criminal breach of trust. Investigators said he transferred about $10 million from a 1MDB affiliate to his own bank accounts, and the Malaysian High Court agreed. Razak was forced out of office in 2018 during the scandal.

“In 2015, the Wall Street Journal reported that Najib deposited about $700 million from 1MDB into his personal accounts. He has always denied the allegations. He faces more trials in Malaysia on at least 35 additional corruption charges. The judge Tuesday imposed a 12-year prison sentence on Najib, 67, but suspended it during any appeals.” ( FCPA Blog, 2020 )

A multi-year, multi-million-dollar bribery and money laundering investigation involving Alstom Indonesia resulted in more indictments this year. Reza Moenaf, former president, and Eko Sulianto, former director of sales, for Alstom Indonesia were charged along with a former deputy general manager of Marubeni Corporation’s overseas power project department. They are accused by the U.S. Justice Department of violating the Foreign Corrupt Practices Act (FCPA) and of conspiracy to commit money laundering.

“According to the Justice Department, Kusunoki, Moenaf, and Sulianto engaged in a conspiracy to pay bribes to officials in Indonesia — including a high-ranking member of the Indonesian Parliament and the president of Perusahaan Listrik Negara, the state-owned and state-controlled electricity company in Indonesia — in exchange for assistance in securing a $118 million contract, known as the Tarahan Project, for Alstom Power and its consortium partner, Marubeni, to provide power-related services for Indonesian citizens.” ( Compliance Week, 2020 )

Los Angeles City Councilman Jose Huizar

Corruption in local politics is still a major issue, especially in a major city like Los Angeles, U.S. That’s where City Councilman Jose Huizar is alleged to have engaged in a wide array of bribery and corruption acts to enrich himself and his associates. He now faces a laundry list of charges after a federal grand jury returned a 34-count indictment against Huizar.

“Huizar was charged last month with one count of conspiracy to violate the Racketeer Influenced and Corrupt Organizations (RICO) Act. Thursday’s indictment charges Huizar with the following criminal charges: 12 counts of honest services wire fraud; two counts of honest services mail fraud; four counts of traveling interstate in aid of racketeering; six counts of bribery; five counts of money laundering; one count of structuring cash deposits to conceal bribes; one count of making a false statement to a financial institution; one count of making false statements to federal law enforcement; and one count of tax evasion, according to prosecutors.” ( CBS News, 2020 )

Asante Berko, Former Goldman Sachs Executive

Former Goldman Sachs executive Asante Berko was charged by the SEC as a result of their investigation into his alleged bribery plot. Berko is accused of FCPA violations in his effort to help an energy company based in Turkey secure a contract for a power plant in Ghana. He was charged in a civil complaint in New York, U.S., for “aiding and abetting violations of the FCPA anti-bribery provisions.”

“According to the SEC, Berko helped the Turkish energy company pay at least $2.5 million to a Ghana-based intermediary, ‘all or most of which was used to bribe Ghanaian government officials’ to secure approval of an electrical power plant project. … In 2015, Berko negotiated a contract for the Turkish energy company to pay the intermediary $2.5 million at first, and up to $42 million over five years, the complaint said.” ( FCPA Blog, 2020 )

Cardinal Health

Ohio, U.S.-based Cardinal Health paid the SEC $8.8 million Friday to settle FCPA offenses related to a Chinese subsidiary that provided marketing services. Cardinal Health allegedly violated provisions for maintaining books and records, as well as internal accounting controls. Cardinal Health first began doing business in China after acquiring an existing company and rebranding it. It appears the company made voluntary disclosures and has been taking proactive steps to address the corruption issues in its ranks.

“In 2016, Cardinal China learned that the marketing employees and the dermocosmetic company had disguised some ‘marketing payments’ that were funneled to healthcare professionals who provided marketing services, as well as other employees of state-owned retail entities. The state-owned entities had influence over purchasing decisions related to the dermocosmetic company’s products. Cardinal took steps to stop the suspect payments in 2016 when it learned about the misconduct, the SEC said. In December 2016, Cardinal voluntarily disclosed the results of its internal investigation to the SEC.” ( FCPA Blog, 2020 )

Filed under

White Collar Crime
Money laundering
Coronavirus
Leahy-Smith America Invents Act 2011 (USA)
Foreign Corrupt Practices Act 1977 (USA)

Professional development

AML for Law Firm MLROs - Beyond the Basics - Learn Live

Money Laundering Update 2024 with 33 Chancery Lane

Education Law Update - What’s New? - Learn Live

Related practical resources PRO

Checklist Checklist: FCPA due diligence of third-party intermediaries (USA)
Checklist Checklist: What to include in an FCPA compliance programme (USA)
Checklist Checklist: Charitable and political donations and gifts, travel, entertainment compliance (USA)

Related research hubs

This site uses cookies to store information on your computer. Some are essential to make our site work; others help us improve the user experience. By using the site, you consent to the placement of these cookies. Read our privacy policy to learn more.

A case study in bribery violations

Governance and risk

N o company wants to make international headlines due to corruption charges.

But that's the position the multinational telecom giant Ericsson found itself in late last year, when it agreed to pay the second-largest fine in the history of US Foreign Corrupt Practices Act (FCPA) enforcement actions.

Ericsson's mistakes were extremely costly to the company, both in terms of reputational damage and finances: In total, the company paid more than $1 billion in combined fines to the US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) to resolve the long-standing FCPA investigation.

It also makes an excellent case study for finance professionals of what to guard against.

While the Ericsson CFO was not implicated in the crimes, the top financial officer still has responsibility for corruption that took place under their watch, according to Allison Borgatti, an attorney with the Philadelphia-based law firm of Archer & Greiner, where she is a member of the firm's White Collar Defense and Corporate Compliance Group.

"The bottom line is that by being the CFO at the senior level of management of an organisation, you have the duty and the responsibility to implement the appropriate programmes to ensure that your company is effective in implementing these protocols to prevent these types of bribes and payoffs from taking place," she said.

Under the FCPA, it's illegal for US businesses and individuals to pay bribes to foreign officials in exchange for business.

The Ericsson FCPA violations were global in scope, involving millions of dollars of bribes to public officials via company offices in China, Djibouti, Indonesia, Kuwait, and Vietnam, according to US authorities.

From 2000 to 2016, US prosecutors believe, Ericsson and its subsidiaries engaged in large-scale bribery schemes to secure lucrative telecommunications contracts from state-owned customers, according to a DOJ press release. The company's corruption violations were systemic and implicated high-level executives, the DOJ said.

"Through slush funds, bribes, gifts, and graft, Ericsson conducted telecom business with the guiding principle that 'money talks'," US Attorney Geoffrey Berman of the Southern District of New York said in the press release. The "guilty plea and surrender of over a billion dollars in combined penalties should communicate clearly to all corporate actors that doing business this way will not be tolerated". (See details of the charges against Ericsson in the sidebar, "The Scheme".)

Ericsson declined to comment for this article. But in a 2019 press release announcing the resolution of the FCPA case, Ericsson President and CEO Börje Ekholm said he was "upset by these past failings", and that the settlement showed that "we have not always met our standards in doing business the right way".

"This episode shows the importance of fact-based decision-making and a culture that supports speaking up and confronting issues," Ekholm said in the release. "We have worked tirelessly to implement a robust compliance programme. This work will never stop." However, that effort came too late to save Ericsson money on the penalties. Tom Fox, a lawyer in Houston who focuses on compliance issues, said, "Cooperating with the government and fixing the problems can give companies huge discounts, but Ericsson didn't self-disclose, so that was off the table. They didn't get full credit for cooperation, and they got no credit for remediation."

The DOJ has recently been cracking down on companies that have failed to produce documents related to FCPA investigations in a timely way, according to an analysis of the Ericsson resolution by the law firm Skadden. In fact, Ericsson was the fifth company in 2019 that received only partial credit due in part to a failure to produce materials in a timely matter, according to Skadden.

"Ericsson's business is a high-risk model, and they should have put procedures into place and invested in a compliance programme long ago to prevent, mitigate, and detect this kind of behaviour," said Jessica Tillipman, assistant dean and professorial lecturer in law at The George Washington University Law School. "Instead they had a paper programme that no one bothered to enforce."

Learning from Ericsson's mistakes

While prosecutors allege Ericsson's misdeeds were massive frauds in terms of duration, scope, and geography, the schemes used to perpetuate that fraud were actually "relatively pedestrian" and should have been preventable with better leadership and internal controls, according to Fox.

"There was a real lack of due diligence, which points either to incompetence or to an intentional act," he said. "You have a husband-wife couple that was not disclosed in one office, and payments of $2 million for work that was never done in another. These are things that controls should have picked up on."

Here are some of the key lessons that CFOs and management accountants can learn from the Ericsson enforcement action:

Always have a second set of eyes

While it's impossible for a CFO of a big multinational to keep tabs on 100,000 employees in multiple locations, they can still be legally responsible for ensuring that their employees and subsidiaries behave ethically and comply with anti-corruption legislation.

"As a CFO, you can't put your head in the sand or engage in what we could say is conscious indifference," said Fox. "If you don't ask the right questions when you see the red flag, in the eyes of US prosecutors, that's the same as being involved."

That's why Fox recommends that CFOs and other finance executives who want to avoid Ericsson's mistakes keep an eye on multimillion-dollar transactions by putting controls in place to apply additional due diligence to transactions over a certain amount, and regularly ask regional executives hard questions about how funds are being used.

"The CFO is the big picture person, so while they might not look into it themselves, they should have in mind what the five highest-risk transactions might be and then direct management accountants to investigate further," he said. "That's where you'd get deep into the weeds, to look at the contracts and make sure services were delivered, that due diligence was performed properly, and so on."

The various Ericsson bribery schemes involved the movement of hundreds of millions of dollars. Given the vast sums involved, the CFO or board members should have been asking tough questions to verify transactions were legitimate, according to Philadelphia-based Jonathan Marks, CPA/CFF, CGMA, firm practice leader in global forensic, compliance, and integrity services at global law firm Baker Tilly Virchow Krause.

Fox said, "The most important lesson is having a second set of eyes, meaning that there is someone involved in oversight. You had $45 million paid out in Indonesia — that's a lot of money. Why wasn't someone asking questions?"

Ensure your company has a good whistle-blower programme

According to the DOJ complaint, Ericsson executives were involved in corruption in multiple locations. For example, in Djibouti, one of the key Ericsson violations flagged by the DOJ was due diligence that failed to disclose a spousal relationship between a vendor and a high-level public official. This suggests managerial override, according to Tillipman.

"Falsifying due diligence to that degree suggests a deliberate cover-up involving multiple individuals — and possibly even senior-level management," she said. "That's where a whistle-blower programme comes in."

A good whistle-blower programme should allow employees a direct line to the company's compliance programme, in case upper-level management is tainted, according to Tillipman. For it to be effective, employees should receive training on how the whistle-blower reporting protocol works. It should also guarantee whistle-blowers protection from retaliation. A good whistle-blower programme is often the only means that employees working under tainted management have to report corruption, according to Fox.

"If there is managerial override and there is no internal reporting system, you are really stuck," Fox said. And while, at least in theory, employees could go directly to the SEC — realistically, it's unlikely that a local employee in an office outside of the US would necessarily know how to do that, he added.

Build a top-down culture of compliance

The fact that so many subsidiaries were engaging in violations of the FCPA over many years suggests a failure on the part of Ericsson's C-suite executives to create a corporate culture of compliance within the company (and its subsidiaries), according to Borgatti.

"There are certain countries that most auditors are aware of where payments to government officials may be routine," she said. "And if you are doing business in environments where this type of behaviour is prevalent, you have to be inordinately cautious at the ground level that your employees are following the laws of the United States."

To ensure that all employees understand their duties and obligations, Borgatti suggests putting all employees through in-depth compliance training — during onboarding and then annually.

Another useful tool is regular outside audits to test the compliance and internal controls of subsidiaries located in higher-risk areas, according to Borgatti.

"There's no boilerplate programme to be in compliance with the FCPA," she said. "You need a customised compliance programme based on the countries and sectors you are working in, and you need to verify that your employees understand it."

Consider self-reporting violations and address issues

Upon learning about an incident of internal corruption, the CFO should consider self-reporting to the SEC, DOJ, or other relevant authorities, according to Borgatti. Companies facing US charges that self-disclose upon discovering incidents of internal corruption, fully cooperate with the authorities, and also show that they are taking appropriate disciplinary action not only qualify for a financial discount on penalties but send a strong message that corruption isn't an acceptable internal practice.

Not only did Ericsson fail to self-report, it also failed to produce information in a timely manner and to discipline those involved.

But it's not always a good idea to self-report in every situation, as it can bring public scrutiny and doesn't always guarantee discounts on fines, according to US-based forensic accountants Howard Scheck, CPA, J.D.; Greg Buchanan, CPA; and Katy Creecy, CPA, who wrote " Uncovering Bribes Hidden in Books and Records ", Journal of Accountancy , October 2019. Businesses should make a decision about whether to self-report after talking with legal counsel.

Weeding out misconduct, bad actors

Ericsson got caught in the crosshairs of federal regulators — and paid dearly for its failures. Its mistakes should serve as a warning to other multinational companies to take compliance seriously, to build adequate controls into their operations, and to comply with SEC investigations — which includes dismissing employees responsible for misconduct.

There's a saying about fraud that "a bad apple creates a bad bunch, which leads to a bad crop", according to Marks.

"In the Ericsson case, the only way to change the corporate culture is to eradicate the bad apples. You need to dismiss them, to move them out," he said. "Regulatory bodies are paying much more attention to this."

Here’s a summary of Ericsson’s US Foreign Corrupt Practices Act (FCPA) violations, as outlined by the US Department of Justice (DOJ):

In Djibouti, an Ericsson subsidiary directed nearly $2.1 million in bribes to high-ranking government officials in order to secure a $23 million telecom contract with a state-owned company. To pull off the scheme, the subsidiary entered into a fake contract with a sham consulting company, and then approved fake invoices to conceal the bribes, according to the DOJ. Additionally, a due diligence report written by an Ericsson employee failed to report that the owner of the sham consulting company was married to a high-ranking government official.
In China, between 2000 and 2016, an Ericsson subsidiary diverted tens of millions of dollars to consultants and service providers, some of which was used to pay for gifts, travel, and entertainment for Chinese officials, in order to win business from Chinese state-owned customers. To create the slush fund — which subsidiaries allegedly used to continue payments to third parties, allowing them to circumvent Ericsson’s compliance policies — the Ericsson subsidiary created sham contracts, paying a third party $31.5 million for services that were never performed.
In Vietnam, between 2012 and 2015, an Ericsson subsidiary paid a consulting company more than $4.8 million to create an off-the-books slush fund in order to pay third parties who wouldn’t have passed Ericsson’s due diligence process.
In Indonesia, between 2012 and 2015, an Ericsson subsidiary made approximately $45 million in payments to a consulting company in order to create off-the-books slush funds, and concealed the payments on Ericsson’s books and records.
In Kuwait, between 2011 and 2013, an Ericsson subsidiary concealed a $450,000 payment to a consulting company by creating a sham contract and approved invoices for services never performed.
And finally, an Ericsson subsidiary, Ericsson Egypt LTD, pleaded guilty to a one-count criminal information charge for conspiracy to violate the anti-bribery provisions of the FCPA for paying over $2 million in bribes to public officials in order to win a $20 million contract.

Not only did Ericsson neglect to self-disclose the corruption, it failed to disclose materials to the DOJ related to the corruption allegations in a “timely manner” and also did not take adequate disciplinary measures on employees involved in the misconduct, according to federal prosecutors. Companies that cooperate with FCPA investigations can qualify for “discounts” on fines, according to Tom Fox, a Houston-based lawyer who has more than 34 years of experience advising companies on compliance issues, and the founder of a network of compliance podcasts. Those reductions can be significant: up to 25% of the total fine for remediating; up to 50% for remediation and full cooperation with the investigation; and up to 100% for self-disclosure, remediation, and full cooperation, according to Fox.

However, because it failed to “disclose allegations of corruption with respect to two relevant matters” and did not disclose materials in a timely manner or take adequate disciplinary measures with employees involved, Ericsson did not receive a significant reduction in fines. The company only received a 15% discount under the FCPA Corporate Enforcement Policy for its actions, according to the DOJ.

" Fraud Red Flags for Third-Party Intermediaries ", FM magazine, 6 May 2020
" Developments in Anti-Bribery and Corruption Enforcement ", FVS Eye on Fraud , Spring 2019
CIMA ethics resources, anti-bribery, cimaglobal.com

FVS Section and CFF credential

For AICPA members, membership in the Forensic and Valuation Services (FVS) Section provides access to specialized resources in the forensic and valuation services discipline areas. Visit the FVS Center at aicpa.org/FVS . Members with a specialization in financial forensics may be interested in applying for the Certified in Financial Forensics (CFF) credential. Information is available at aicpa.org/CFF .

Malia Politzer is a freelance writer based in Spain. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at [email protected] .

Related resources.

Lessons from the massive Siemens corruption scandal one decade later

Professor, Audencia

Disclosure statement

Bertrand Venard does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Audencia provides funding as a member of The Conversation FR.

View all partners

Ten years ago a colossal corruption scandal involving Siemens, one of the world’s largest electrical engineering companies, shocked the world. The scale of it marked it out as the biggest corruption case of the time.

A few years later, Linda Thomsen, Director at the Security Exchange Commission described the pattern of bribery in the company as:

… unprecedented in scale and geographic reach. The corruption involved more than $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas.

How did it happen and why is it important to keep this case in mind?

Prior to the corruption scandal, the reputation of Siemens was extremely good. It was renowned for its technological products and reliable services in telecommunications, power, transportation and medical equipment. It was common to see articles featuring its activities in remote areas, developing new high quality products and winning competitive bids.

So the world was taken by surprise when the police raided the company headquarters in Munich as well as other subsidiaries on November 15th 2006 . The company’s first reaction was to claim innocence and to blame events on a small “criminal gang” .

For years the company had pretended to do business according to the highest ethical and legal standards. Since at least 1991, Siemens had developed corporate anti-corruption norms, fancy codes of conduct and strict business guidelines. It was even selected to become a corporate member of Transparency International’s German chapter in 1998 – a non-governmental organisation created to fight corruption.

The reality was completely different.

Since at least the 1990s, Siemens had organised a global system of corruption to gain market share and increase its price . It was able to get away with this because of big loopholes in the legal systems of a host of countries, including Germany.

Anti-corruption existed only on paper

Over many decades bribes became the accepted business norm at Siemens. They were channelled through hidden bank accounts, obscure intermediaries and pseudo “consultants”. When calculating the cost of a project, Siemens employees used “ nützliche aufwendungen ”, a common tax term literally translated as “useful expenditures” or internally understood as “bribes.”

The situation wasn’t helped by the fact that the law in Germany was written in a way that allowed bribes to be accounted for as tax-deductible expenses . This changed in 1999 when the country finally brought its law into line with the 1997 OECD Convention on Combating Bribery . This made it illegal to bribe foreign officials for a German company.

On the day the new law was passed in February that year, discussions began at the highest level at Siemens on how to handle the new regulation.

Time for justice

On July 5th 2000, Siemens issued a new corporate circular requiring operating groups and regional companies to ensure that a new anti-corruption clause would be included in all contracts with agents, consultants, brokers, or other third parties. The following year it issued new guidelines that stipulated:

No employee may directly or indirectly offer or grant unjustified advantages to others in connection with business dealings, neither in monetary form nor as some other advantage.

And on taking up a listing on the New York Stock Exchange in 2001, the company became subject to the 1977 Foreign Corruption Practice Act . In addition, from November 2003 the company was obliged to comply with the Sarbanes-Oxley Act, with a code of ethics that required chief financial officers and business heads to act responsibly and with integrity.

In July 2004 Siemens’ chief financial officer delivered a speech entitled “Tone from the Top ”. The aim was to show that fighting corruption was finally a priority and contrary to the company’s principles of integrity.

In reality, as a German prosecutor was to comment later, the Siemens compliance programme existed only on paper .

Government investigations into corruption had been launched in Israel, Hungary, Azerbaijan, Taiwan and China while issues were also becoming apparent in Nigeria, Italy, Greece and Liechtenstein.

But, as American prosecutors discovered :

Siemens management failed to adequately investigate or follow up on any of these issues.

All over the word – from Bangladesh, Vietnam, Russia, and Mexico to Greece, Norway Iraq and Nigeria – Siemens paid bribes to government officials and civil servants. The magnitude of the bribery system was widespread. As Reinhard Siekaczek, a Siemens employee put it :

We all knew that what we were doing was illegal. Paying a bribe was customary in practically all business units at Siemens AG, except for business units that deals with lamps and such.

Action was finally taken against Siemens in a number of countries including the US, Germany, Italy and Lichtenstein.

Following the US and German prosecutions, Siemens paid more than $1.6 billion in fines, penalties and disgorgement of profits, including $800 million to US authorities. This was the largest monetary sanction ever imposed in a case under America’s Foreign Corruption Practice Act since it was passed in 1977.

Lessons from a corruption scandal

The Siemens case is emblematic of the past and we hope that it’s remembered and used to set up real compliance programmes. Without real counter actions, the risk is that the spread of corruption will continue as a virus, with companies imitating one other. .

Another lesson is that the only real justice system taking on corruption seriously is the US. Only the US Department of Justice has been able to sanction corporations sufficiently. But the US shouldn’t be alone in punishing corporate misconduct. All governments should stop simply saying that corruption is bad. They should also show that it will be punished.

Transparency International
New York Stock Exchange
Global perspectives
Organisation for Economic Co-operation and Development (OECD)

Newsletter and Deputy Social Media Producer

College Director and Principal | Curtin College

Research Clinician – Hybrid Study

Head of School: Engineering, Computer and Mathematical Sciences

Educational Designer

JP Morgan: A bribery case study

Written by Richard Wegrzyn on Tuesday 9 May, 2017

Historically, there hasn’t been a large number of high profile enforcement actions in relation to bribery. The low numbers could be taken as a sign that regulators are not focusing on this risk or conversely that firms have improved systems and controls so much that bribery is a thing of the past.

In reality, bribery and corruption incidents can be difficult to identify and extremely complicated to investigate and so there’s a high chance that a number of significant investigations are underway. As to whether firms’ systems and controls have improved to the extent that no breaches are occurring – ongoing scandals suggest this is unlikely to be the case.

The enforcement actions we do see highlight a number of themes, including the:

Different ways bribery manifests itself
Challenges of developing effective systems and controls
Impact a firm's culture has on staff acting dishonestly

We will use a case study to illustrate these three points in more detail.

In late 2016, JP Morgan reached a settlement with the US Securities and Exchange Commission (SEC) and other regulators to settle charges of violating the Foreign Corrupt Practices Act (FCPA). The bank paid $264 million after facing charges of corruptly influencing government officials in the Asia Pacific region, by giving jobs and internships to their relatives and friends.

The firm’s subsidiary in Asia was found to have engaged in a ‘systematic bribery scheme’ by hiring the children of government officials and other clients (who were typically unqualified for the positions on their own merit), in exchange for lucrative business rewards and new deals. JP Morgan’s internal controls were found to be so weak that not one Referral Hire request was denied.

1. How bribery manifests itself:

The view of bribery being about the passing of envelopes of cash is clearly old fashioned. The case study shows how a client Referral Hire programme for the ‘sons and daughters’ of actual or potential clients was used to influence decisions, ultimately securing lucrative financial returns for the firm. The programme was deliberately designed to operate outside of the usual graduate/intern recruitment programmes and the enforcement noted that ‘the primary goal of client referral hiring was to generate revenue for JPMorgan APAC by extending personal favors to client executives and government officials through hiring their relatives and friends’.

The case study reinforces the need for firms to think broadly and creatively about the risks that they face. Risk assessments need to consider all areas where someone may be induced, or induce another, to act improperly. This might cover the giving/receiving of gifts and hospitality, but also extends into the use of third parties, procurement processes and, as highlighted, recruitment.

2. The challenges of developing effective systems and controls

It was well documented within the bank that recruitment programmes could lead to bribery risks. The group’s Anti-Corruption Policy stated ‘it is improper for a person to offer or give anything to a public official, either directly or through an intermediary, in an effort to secure an advantage that would not have been granted if the offer or gift had not been made,’ noting that ‘”value” can include such things as the offer of internships or training for relatives of a public official.’

These policy requirements were reinforced through training which was rolled out to all staff across the region. This means all employees were aware of the risks associated with recruiting children of clients.

In recognition of the risk, legal and compliance developed a process for screening prospective Referral Hires. Under the process as it was intended to work, each requesting banker was required to fill out the questionnaire for each specific hire, and then submit that questionnaire to the bank’s regional legal and compliance staff for review and approval.

Additionally, the bank imposed restrictions on what confidential information Referral Hires were able to access. This was designed to prevent conflicts of interest and the sharing of sensitive, confidential information regarding JP Morgan’s clients, or the competitors of those clients, with the relatives and friends of senior officials with those same clients. In cases in which the referring person was employed by a government ministry, Referral Hires were supposed to be walled off from transactions involving that ministry.

On the face of things, it may appear that the control design put in place was adequate. They covered a range of governance, people and process approaches to mitigate an identified risk. And yet in spite of the controls in place, there was continued misconduct of both investment banking and legal and compliance staff regarding the Referral Hire programme.

Of particular note:

Investment bankers did not demonstrate understanding of the risks; in many cases they completed the questionnaire honestly, for instance ‘It will strengthen our relationship with [client] and solidifying [sic] our position as an advisor to him and the IPOs of his companies (expected to be >$500mm in offering size’. This brings into question the effectiveness of policy requirements and training activity.
Legal and compliance support staff challenged such submissions, explaining that such recruitment would not be allowed. Responses to probing questions would provide a radically different answer obfuscating any risk and these were then escalated by the support staff with no mention of the original insight and no follow-up challenge from legal and compliance staff. This suggests ineffective process, training and segregation of duties. It also suggests challenges with culture, level of seniority/authority or understanding of their purpose.
It doesn’t appear that sufficient independent investigation was carried out into the accuracy of information contained in the questionnaires. Independent checks may have uncovered the fact that the forms were not being completed accurately, exposing the improper behaviour much earlier on.
The business deliberately defined contract dates and durations in order not to appear on the year-end headcount figures (e.g. 11.5 month contracts from January to mid-December), again hiding the true numbers of people being employed. This brings into question the effectiveness of management information protocols as well as HR oversight and challenge.

3. The impact a firm's culture has on staff acting dishonestly

Fundamentally the failings in this case, as in so many others, appear to come down to cultural issues. Despite the presence of numerous directive controls a sufficient number of staff felt that their own agenda was more important than the firm's stated position.

This is exemplified through:

a focus on the financial benefit seemingly at any cost
lack of challenge from legal and compliance support staff
wilful provision of false information in formal records
continued and extensive use of a prohibited approach to recruitment.

Firms need to ensure that staff are actively encouraged to do the right thing, in line with policy requirements. They need to feel supported when they take actions to prevent risks even when this is to the detriment of influential colleagues. Whilst culture must be driven from the very top of the firm through the way they incentivise, target and challenge senior management, it can be driven from the middle or locally too.

As the case study highlights, the Referral Hire process was effectively ended when:

a compliance officer in a newly-created position was tasked with reviewing and approving client Referral Hire questionnaires. In denying a request to hire a Referral Hire, he stated that hiring Referral Hires at the request of clients and outside of the normal hiring system was impermissible under JPMorgan’s compliance and anti-corruption policies.

This demonstrates how an individual with the courage and conviction to do the right thing, or for that matter the wrong thing, can have far reaching effects across even the largest organisations.

The case study focuses very much on a formal arrangement for improper use of recruitment activity. This formal nature makes it very easy to see where improper behaviour was occurring. However, everyday individuals within firms are making decisions which could well involve actual impropriety (or could well be perceived to be improper by an ordinary person).

By working through the case study it was clear that despite awareness of the risk, a range of controls failures were still able to occur. So what can firms do to protect themselves?

All of the ‘typical’ controls need to be in place, as they were in the case study – risk assessment, policies, procedures, training and reporting are all critical parts of the control framework. Firms need to independently critically assess the effectiveness of these controls to try and understand if the controls are functioning as intended through their design.

Additionally, firms should also consider the following.

Culture: To be fully effective this has to come from the very top, and that means that senior management have to genuinely want to do the right thing. It should be driven locally by senior and middle management by way of leading by example. It should be played out in the way they direct the activities of the institution, the way success is rewarded and the way unacceptable behaviour is dealt with. It can be difficult to influence this type of culture but making senior management aware of the risks and consequences is an important first step.
Escalation procedures: Staff need to be encouraged to raise concerns and be confident they can do so without recrimination. This doesn’t need to be via a formal whistle-blowing process it could just be a suggestion box. Heavily linked to culture, often staff will be aware of problems but may not report it for various reasons: knowledge of how to report, fear of reporting or expectation that little will change as a result of their escalation.
Monitoring and independent checking: Whilst a process to complete a questionnaire was a sensible step in the case study, without independent validation of the information provided, even on a sample basis, the process was always open to being abused. Compliance staff and senior management need to have insight into what is really happening on the frontline – independent review, re-performance of controls or validation of information on a risk sensitive sample basis may make the difference in the level of insight.

Richard Wegrzyn is a Managing Consultant in the Financial Crime Advisory team at Bovill Limited. All views expressed are those of the author and should not be considered as advice.

Find out more about the ICA Certificate in Anti-Corruption today.

Product successfully added to cart

UK +44 203 8744521
UAE +971 800 274552
Pakistan +92 51 111 888 400
CLIENT AREA
CLIENT DEMO

Top 10 Bribery & Corruption Stories of 2020

Even with much of the world under partial lockdown during the COVID-19 pandemic, there’s been no shortage of bribery and corruption cases through the first half of 2020. Each of these stories makes it clear that organizations must have proper controls in place to prevent bribery and corruption. ISO 37001 Anti-Bribery Management Systems standard provides a comprehensive approach to mitigating bribery and corruption risk.

Organizations of all sizes and industries should take steps now to ensure that they don’t end up on a future list of top bribery and corruption scandals. Due to last year’s “Top 10 Bribery and Corruption Cases of 2019” successful article we decided to compile a 2020 list too. In no particular order, ABAC™ Center of Excellence collated the top bribery and corruption stories we’ve seen so far in 2020.

In no particular order, here are 10 of the top bribery and corruption stories we’ve seen so far in 2020.

#10. Airbus

#9. Novartis

#8. Ohio House Speaker Larry Householder

#7. Alexion Pharmaceuticals

#6. Taiwan Presidential Office Secretary-General Su Jia-chyuan

#5. Former Malaysia Prime Minister Najib Razak

#4. Alstom

#3. Los Angeles City Councilman Jose Huizar

#2. Asante Berko, Former Goldman Sachs Executive

#1. Cardinal Health

“In 2016, Cardinal China learned that the marketing employees and the dermo cosmetic company had disguised some ‘marketing payments’ that were funneled to healthcare professionals who provided marketing services, as well as other employees of state-owned retail entities. The state-owned entities had influence over purchasing decisions related to the dermocosmetic company’s products. Cardinal took steps to stop the suspect payments in 2016 when it learned about the misconduct, the SEC said. In December 2016, Cardinal voluntarily disclosed the results of its internal investigation to the SEC.” ( FCPA Blog, 2020 )

Stay tuned for Part 2 or follow us on LinkedIn , Facebook or Twitter for more industry news and insights.

Staying one step ahead of any critical risk to your organization is part of being an effective business leader. Contact us today to get started on implementing a robust program that will serve you well for years to come. Get your FREE QUOTE now!

We Welcome You To Have Free Gap Analysis of Highest Ethical Business Survey: prove that your business is ethical. Complete our FREE Highest Ethical Business Assessment (HEBA) and evaluate your current Corporate Compliance Program.

TAKE THE GAP ANALYSIS NOW!

Find out if your organization’s compliance program is in the line with worldwide Compliance, Business Ethics, Anti-Bribery and Anti-Corruption Frameworks. Let ABAC™ experts prepare a complimentary gap analysis of your compliance program to evaluate if it meets “adequate procedures” requirements under UK Bribery Act, DOJ’s Evaluation of Corporate Compliance Programs Guidance and Malaysian Anti-Corruption Commission.

The HEBA survey is designed to evaluate your compliance with the adequate procedures to prevent bribery and corruption across the organisation. This survey is monitored and evaluated by qualified ABAC™ professionals with Business Ethics, Legal and Compliance background. The questions are open-ended to encourage a qualitative analysis of your Compliance Program and to facilitate the gap analysis process.

The survey takes around 10 minutes to complete. ABAC™ is powered by CRI Group™ – this GAP analysis will be performed by ABAC™.

Let’s Talk!

Don’t leave hiring to chance. Take a proactive stance with the highest level of background screening as a part of your essential corporate strategy. Contact us today to learn more about our full range of services to help your organisation stay protected.

Get a FREE QUOTE

About us…

Based in London, CRI Group™ works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management , Employee Background Screening , Business Intelligence , Due Diligence , Compliance Solutions and other professional Investigative Research solutions provider. We have the largest proprietary network of background screening analysts and investigators across the Middle East and Asia. Our global presence ensures that no matter how international your operations are, we have the network needed to provide you with all you need, wherever you happen to be. CRI Group™ also holds BS102000:2013 and BS7858:2019 Certifications is an HRO certified provider and partner with Oracle.

In 2016, CRI Group™ launched the Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence – an independent certification body established for ISO 37001:2016 Anti-Bribery Management Systems , ISO 37301 Compliance Management Systems and ISO 31000:2018 Risk Management , providing training and certification . ABAC™ operates through its global network of certified ethics and compliance professionals, qualified auditors and other certified professionals. As a result, CRI Group™’s global team of certified fraud examiners work as a discreet white-labelled supplier to some of the world’s largest organizations. Contact ABAC™ for more on ISO Certification and training.

MEET THE CEO

Zafar I. Anjum is Group Chief Executive Officer of CRI Group™ ( www.crigroup.com ), a global supplier of investigative, forensic accounting, business due to diligence and employee background screening services for some of the world’s leading business organizations. Headquartered in London (with a significant presence throughout the region) and licensed by the Dubai International Financial Centre-DIFC, the Qatar Financial Center – QFC, and the Abu Dhabi Global Market-ADGM, CRI Group™ safeguard businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI® Group maintains offices in UAE, Pakistan, Qatar, Singapore, Malaysia, Brazil, China, the USA, and the United Kingdom.

Contact CRI Group™ to learn more about its 3PRM-Certified™ third-party risk management strategy program and discover an effective and proactive approach to mitigating the risks associated with corruption, bribery, financial crimes and other dangerous risks posed by third-party partnerships.

CONTACT INFORMATION

Zafar Anjum, MSc, MS, CFE, CII, MICA, Int. Dip. (Fin. Crime) | CRI™ Group Chief Executive Officer

37th Floor, 1 Canada Square, Canary Wharf, London, E14 5AA United Kingdom

t: +44 207 8681415 | m: +44 7588 454959 | e: [email protected]

Get a Quote

Compliance Hotlines
Privacy Policy
Privacy Notice
Candidate Privacy Notice
Information Security Policy
Website feedback
Legal notice
Terms of Service

Today's news
Reviews and deals
Climate change
2024 election
Fall allergies
Health news
Mental health
Sexual health
Family health
So mini ways
Unapologetically
Buying guides

Entertainment

How to Watch
My Portfolio
Latest News
Stock Market
Biden Economy
Stocks: Most Actives
Stocks: Gainers
Stocks: Losers
Trending Tickers
World Indices
US Treasury Bonds
Top Mutual Funds
Highest Open Interest
Highest Implied Volatility
Stock Comparison
Advanced Charts
Currency Converter
Basic Materials
Communication Services
Consumer Cyclical
Consumer Defensive
Financial Services
Industrials
Real Estate
Mutual Funds
Credit Cards
Balance Transfer Cards
Cash-back Cards
Rewards Cards
Travel Cards
Credit Card Offers
Best Free Checking
Student Loans
Personal Loans
Car Insurance
Mortgage Refinancing
Mortgage Calculator
Morning Brief
Market Domination
Market Domination Overtime
Asking for a Trend
Opening Bid
Stocks in Translation
Lead This Way
Good Buy or Goodbye?
Financial Freestyle
Capitol Gains
Fantasy football
Pro Pick 'Em
College Pick 'Em
Fantasy baseball
Fantasy hockey
Fantasy basketball
Download the app
Daily fantasy
Scores and schedules
GameChannel
World Baseball Classic
Premier League
CONCACAF League
Champions League
Motorsports
Horse racing
Newsletters

New on Yahoo

Privacy Dashboard

Yahoo Finance

15 biggest bribery cases in business history.

In this article we are going to list the 15 biggest bribery cases in business history . Click to skip ahead and jump to the 5 biggest bribery cases in business history .

Bribery is part of human life, and it is a part of civilization. No matter where you live, you will see bribery happening, either on a small scale or on a large scale. For example, if you live in a developing country, you will see breaking laws such as traffic signals or not wearing seatbelts with impunity. They're not afraid of their license being cancelled or being hauled off to jail, as the traffic cops who are stopping them are susceptible to small bribes of only a few dollars each, and the person breaking the law can get off scot-free. This may seem like a small thing but these people then don't see any reason to follow laws and this can result in increased traffic accidents, which in turn can result in death. As you can see, small actions have large consequences. Large actions have even larger consequences.

Throughout history, large companies have always shown a disdain of the laws and regulations. You can find numerous examples about companies breaking laws, and profiting off these activities by billions or even tens of billions of dollars in some cases. After all, when GSK ( NYSE:GSK ) was fined $3 billion for misleading people and unlawfully promoting several drugs. And while you may think that $3 billion is a really major amount, the fact is that many people thought this was a very small fine since the company generated around $25 billion from the sale of these drugs. So basically, the net revenue that the company earned from breaking regulations was around $22 billion.

As I mentioned before, it has always been part and parcel of major corporations to flaunt rules and disregard authority, and bribery falls within this ambit as well. Even up to a few decades ago, laws weren't even close to as stringent as they are today, and companies weren't as closely monitored or regulated. In fact, back then, it was the norm to pay officials, especially foreign officials bribes in money and gifts to get them to expedite the process and reduce the expenses of the company. It was a worthwhile trade, though still completely illegal; the company got to save time and money and the officials pocketed the extra amount.

Over the past decade or so, laws have started to tighten, especially after the financial crisis which ruined lives, careers and the economy of the entire world. That financial institutions were able to manipulate the market to such an extent and mostly escape without major repercussions was a major blow to the trust held in the financial system of the company. Hence, new rules and regulations were quickly drafted and brought into law, to ensure that banks didn't do anything like that ever again. Many financial institutions were fined for billions of dollars, though again, while that may seem like a major achievement, it's a drop in the bucket for these companies with hundreds of billions of dollars in revenue annually.

Of course, bribery and corruption isn't just a United States thing. It is a global phenomena and present everywhere in the world. However, most of the biggest companies in the world are present in the United States, which is why when there is a scandal related to these companies, it hits headlines all across the world. All, major companies in the US are well-known to everyone across the world which is why whenever any incident related to them occurs, it piques the interest of everyone, even if they're not located in the US or have ever engaged in business with these companies.

The biggest bribery cases are extremely interesting reads on their own. And these are just the ones we know about. Some of these are epic sagas that don't care about borders and involve many companies as well as many countries. So sit back, grab some popcorn and learn about the biggest bribery cases in history, which should and often do have movies made about them, starting with number 15:

15. Inter-American Water and Utility Society

The company ended up paying around $1.5 million in fines for bribery cases in Columbia.

Pixabay/Public Domain

13. Troika Laundromat

Troika isn't a single company, or even 10 companies. The collective term Troika Laundromat was given to around 70 shell companies which were formed to launder massive amounts of money. Billions of dollars ended up moving from Russia to the West, with bribes being paid to mix black and white money, and ensure that no one could differentiate anymore.

Gajus/Shutterstock.com

12. Daimler

The producers of one of the most famous brands in the automobile industry, Mercedez-Benz, paid $185 million to the United States against charges of bribery and corruption in 2010. Foreign officials were provided with money and gifts between the time period of 1998 and 2008 to get government contracts, and more than $56 million were paid on around 200 occasions in at least 22 countries.

It is now owned by L3 Technologies ( NYSE:LHX ), but when it was independent, Titan, a defense company, received the biggest fine in history at the time by the FCPA, which totaled more than $28.5 million back in 2004. $13 million of this pertained to foreign bribery including in Benin, where the bribery took place to get a contract and establish business within the country. $2 million in bribes were directly sent to the President of Benin.

10. GlaxoSmithKline

We mentioned earlier that GSK earned a fine of $3 billion for its role in the scandal related to misrepresenting its drugs including Wellbutrin and Paxil. However, that's not all. The company also paid kickbacks to physicians to prefer their drugs over those of the competition and promoting it for situations the drug was not intended for.

9. Lucent Technologies

To win lucrative contracts from China, Lucent Technologies, which doesn't exist anymore, would pay for more than 1,000 Chinese officials to travel to destinations such as Las Vegas. The company paid $2.5 million in fines. Later, when the company had been absorbed by Alcatel, there were even more such cases, which are mentioned in more detail below, in our list of the biggest bribery cases in business history.

EvgeniiAnd/Shutterstock.com

8. Kellogg Brown and Root ( NYSE:KBR )

The American engineering company has been involved in several controversies throughout its existence, one of which was the Justice Department charging the company with paying bribes worth billions of dollars to Nigerian officials to earn foreign contracts. The company ended up paying $402 million in fines while its former CEO was sentenced to 30 months in prison.

7. BAE Systems

One of the biggest defense companies in the world, BAE Systems was engaged in controversy in 2006, where it was accused of using corruption to sell arms to various countries across the world including Chile, Qatar, Tanzania, South Africa, Romania, Saudi Arabia and Czech Republic. Even though it was investigated and later charged by the Serious Fraud Office, BAE refused to concede that it had used bribery, which is why it was not banned from future contracts. However, the company ended up paying $400 million to the US and 30 million pounds to the UK against charges of overseas corruption.

6. Alcatel-Lucent SA

The company was a French American telecommunications company, and among the biggest in the world in this industry. However, in 2010, it was engaged in a massive scandal where it ended up having to pay at least $137 million in fines after bribing officials in several countries including Malaysia, Honduras and Taiwan.

Please continue to see the 5 biggest bribery cases in business history . Suggested articles:

15 Biggest Corporate Fines in History

15 Biggest Companies That Don't Pay Taxes

15 Biggest Companies That Aren't Profitable

Disclosure: No position. 15 biggest bribery cases in business history is originally published at Insider Monkey.

An official website of the United States government

Here's how you know

Official websites use .gov A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS A lock ( Lock A locked padlock ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

The Attorney General
Organizational Chart
Budget & Performance
Privacy Program
Press Releases
Photo Galleries
Guidance Documents
Publications
Information for Victims in Large Cases
Justice Manual
Business and Contracts
Why Justice ?
DOJ Vacancies
Legal Careers at DOJ
Our Offices

Archived Press Releases

Archived News

Para Notícias en Español

Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion

The Goldman Sachs Group Inc. (Goldman Sachs or the Company), a global financial institution headquartered in New York, New York, and Goldman Sachs (Malaysia) Sdn. Bhd. (GS Malaysia), its Malaysian subsidiary, have admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for Goldman Sachs, including its role in underwriting approximately $6.5 billion in three bond deals for 1Malaysia Development Bhd. (1MDB), for which the bank earned hundreds of millions in fees. Goldman Sachs will pay more than $2.9 billion as part of a coordinated resolution with criminal and civil authorities in the United States, the United Kingdom, Singapore, and elsewhere.

Goldman Sachs entered into a deferred prosecution agreement with the department in connection with a criminal information filed today in the Eastern District of New York charging the Company with conspiracy to violate the anti-bribery provisions of the FCPA. GS Malaysia pleaded guilty in the U.S. District Court for the Eastern District of New York to a one-count criminal information charging it with conspiracy to violate the anti-bribery provisions of the FCPA.

Previously, Tim Leissner , the former Southeast Asia Chairman and participating managing director of Goldman Sachs, pleaded guilty to conspiring to launder money and to violate the FCPA. Ng Chong Hwa , also known as “Roger Ng,” former managing director of Goldman and head of investment banking for GS Malaysia, has been charged with conspiring to launder money and to violate the FCPA. Ng was extradited from Malaysia to face these charges and is scheduled to stand trial in March 2021. The cases are assigned to U.S. District Judge Margo K. Brodie of the Eastern District of New York.

In addition to these criminal charges, the department has recovered, or assisted in the recovery of, in excess of $1 billion in assets for Malaysia associated with and traceable to the 1MDB money laundering and bribery scheme.

“Goldman Sachs today accepted responsibility for its role in a conspiracy to bribe high-ranking foreign officials to obtain lucrative underwriting and other business relating to 1MDB,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “Today’s resolution, which requires Goldman Sachs to admit wrongdoing and pay nearly three billion dollars in penalties, fines, and disgorgement, holds the bank accountable for this criminal scheme and demonstrates the department’s continuing commitment to combatting corruption and protecting the U.S. financial system.”

“Over a period of five years, Goldman Sachs participated in a sweeping international corruption scheme, conspiring to avail itself of more than $1.6 billion in bribes to multiple high-level government officials across several countries so that the company could reap hundreds of millions of dollars in fees, all to the detriment of the people of Malaysia and the reputation of American financial institutions operating abroad,” said Acting U.S. Attorney Seth D. DuCharme of the Eastern District of New York. “Today’s resolution, which includes a criminal guilty plea by Goldman Sachs’ subsidiary in Malaysia, demonstrates that the department will hold accountable any institution that violates U.S. law anywhere in the world by unfairly tilting the scales through corrupt practices.”

“When government officials and business executives secretly work together behind the scenes for their own illegal benefit, and not that of their citizens and shareholders, their behavior lends credibility to the narrative that businesses don’t succeed based on the quality of their products, but rather their willingness to play dirty,” said Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Greed eventually exacts an immense cost on society, and unchecked corrupt behavior erodes trust in public institutions and government entities alike. This case represents the largest ever penalty paid to U.S. authorities in an FCPA case. Our investigation into the looting of funds from 1MDB remains ongoing. If anyone has information that could assist the case, call us at 1-800-CALLFBI.”

“1MDB was established to drive strategic initiatives for the long-term economic development of Malaysia. Goldman Sachs admitted today that one billion dollars of the money earmarked to help the people of Malaysia was actually diverted and used to pay bribes to Malaysian and Abu Dhabi officials to obtain their business,” said Special Agent in Charge Ryan L. Korner of IRS Criminal Investigation’s (IRS-CI) Los Angeles Field Office. “Today’s guilty pleas demonstrate that the law applies to everyone, including large investment banks like Goldman Sachs. IRS Criminal Investigation will work tirelessly alongside our law enforcement partners to identify and bring to justice those who engage in fraud and deceit around the globe. When the American financial system is misused for corruption, the IRS will take notice and we will take action.”

According to Goldman’s admissions and court documents, between approximately 2009 and 2014, Goldman conspired with others to violate the FCPA by engaging in a scheme to pay more than $1.6 billion in bribes, directly and indirectly, to foreign officials in Malaysia and Abu Dhabi in order to obtain and retain business for Goldman from 1MDB, a Malaysian state-owned and state-controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people. Specifically, the Company admitted to engaging in the bribery scheme through certain of its employees and agents, including Leissner, Ng, and a former executive who was a participating managing director and held leadership positions in Asia (Employee 1), in exchange for lucrative business and other advantages and opportunities. These included, among other things, securing Goldman’s role as an advisor on energy acquisitions, as underwriter on three lucrative bond deals with a total value of $6.5 billion, and a potential role in a highly anticipated and even more lucrative initial public offering for 1MDB’s energy assets. As Goldman admitted — and as alleged in the indictment pending in the Eastern District of New York against Ng and Low — in furtherance of the scheme, Leissner, Ng, Employee 1, and others conspired to pay bribes to numerous foreign officials, including high-ranking officials in the Malaysian government, 1MDB, Abu Dhabi’s state-owned and state-controlled sovereign wealth fund, International Petroleum Investment Company (IPIC), and Abu Dhabi’s state-owned and state-controlled joint stock company, Aabar Investments PJS (Aabar).

Goldman admitted today that, in order to effectuate the scheme, Leissner, Ng, Employee 1, and others conspired with Low Taek Jho , aka Jho Low, to promise and pay over $1.6 billion in bribes to Malaysian, 1MDB, IPIC, and Aabar officials. The co-conspirators allegedly paid these bribes using more than $2.7 billion in funds that Low, Leissner, and other members of the conspiracy diverted and misappropriated from the bond offerings underwritten by Goldman. Leissner, Ng and Low also retained a portion of the misappropriated funds for themselves and other co-conspirators. Goldman admitted that, through Leissner, Ng, Employee 1 and others, the bank used Low’s connections to advance and further the bribery scheme, ultimately ensuring that 1MDB awarded Goldman a role on three bond transactions between 2012 and 2013, known internally at Goldman as “Project Magnolia,” “Project Maximus,” and “Project Catalyze.”

Goldman also admitted that, although employees serving as part of Goldman’s control functions knew that any transaction involving Low posed a significant risk, and although they were on notice that Low was involved in the transactions, they did not take reasonable steps to ensure that Low was not involved. Goldman further admitted that there were significant red flags raised during the due diligence process and afterward — including but not limited to Low’s involvement — that either were ignored or only nominally addressed so that the transactions would be approved and Goldman could continue to do business with 1MDB. As a result of the scheme, Goldman received approximately $606 million in fees and revenue, and increased its stature and presence in Southeast Asia.

Under the terms of the agreements, Goldman will pay a criminal penalty and disgorgement of over $2.9 billion. Goldman also has reached separate parallel resolutions with foreign authorities in the United Kingdom, Singapore, Malaysia, and elsewhere, along with domestic authorities in the United States. The department will credit over $1.6 billion in payments with respect to those resolutions.

The department reached this resolution with Goldman based on a number of factors, including the Company’s failure to voluntarily disclose the conduct to the department; the nature and seriousness of the offense, which included the involvement of high-level employees within the Company’s investment bank and others who ignored significant red flags; the involvement of various Goldman subsidiaries across the world; the amount of the bribes, which totaled over $1.6 billion; the number and high-level nature of the bribe recipients, which included at least 11 foreign officials, including high-ranking officials of the Malaysian government; and the significant amount of actual loss incurred by 1MDB as a result of the co-conspirators’ conduct. Goldman received partial credit for its cooperation with the department’s investigation, but did not receive full credit for cooperation because it significantly delayed producing relevant evidence, including recorded phone calls in which the Company’s bankers, executives, and control function personnel discussed allegations of bribery and misconduct relating to the conduct in the statement of facts. Accordingly, the total criminal penalty reflects a 10 percent reduction off the bottom of the applicable U.S. sentencing guidelines fine range.

Low has also been indicted for conspiracy to commit money laundering and violate the FCPA, along with Ng, E.D.N.Y. Docket No. 18-CR-538 (MKB). Low remains a fugitive. The charges in the indictment as to Low and Ng are merely allegations, and those defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The investigation was conducted by the FBI’s International Corruption Unit and IRS-CI. The prosecution is being handled by the Criminal Division’s Fraud Section and the Money Laundering and Asset Recovery Section (MLARS), and the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York. Trial Attorneys Katherine Nielsen, Nikhila Raj, Jennifer E. Ambuehl, Woo S. Lee, Mary Ann McCarthy, Leo Tsao, and David Last of the Criminal Division, and Assistant U.S. Attorneys Jacquelyn M. Kasulis, Alixandra Smith and Drew Rolle of the Eastern District of New York are prosecuting the case. Additional Criminal Division Trial Attorneys and Assistant U.S. Attorneys within U.S. Attorney’s Offices for the Eastern District of New York and Central District of California have provided valuable assistance with various aspects of this investigation, including with civil and criminal forfeitures. The Justice Department’s Office of International Affairs of the Criminal Division provided critical assistance in this case.

The department also appreciates the significant assistance provided by the U.S. Securities and Exchange Commission; the Board of Governors of the Federal Reserve System, including the Federal Reserve Bank of New York; the New York State Department of Financial Services, the United Kingdom Financial Conduct Authority; the United Kingdom Prudential Regulation Authority; the Attorney General’s Chambers of Singapore; the Singapore Police Force-Commercial Affairs Division; the Monetary Authority of Singapore; the Office of the Attorney General and the Federal Office of Justice of Switzerland; the judicial investigating authority of the Grand Duchy of Luxembourg and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg; the Attorney General’s Chambers of Malaysia; the Royal Malaysian Police; and the Malaysian Anti-Corruption Commission. The department also expresses its appreciation for the assistance provided by the Ministry of Justice of France; the Attorney General’s Office of the Bailiwick of Guernsey and the Guernsey Economic Crime Division.

The Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act .

MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.

MLARS’s Kleptocracy Asset Recovery Initiative, in partnership with federal law enforcement agencies, and often with U.S. Attorney’s Offices, seeks to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by these acts of corruption and abuse of office.

Relevant court documents will be uploaded throughout the day and available at the following links: The Goldman Sachs Group Inc. and Goldman Sachs Sdn. Bhd.

Case Example

How companies in the UN Global Compact are taking action to advance corporate sustainability around the world.

Coca-Cola’s fight against corruption in Myanmar

What was the challenge.

In Myanmar, Coca-Cola adopts a zero-tolerance policy towards corruption in its operations and also for its value chain – including its bottlers.

How was it addressed?

All drivers driving Coca-Cola trucks carry an anti-corruption card on their person, which highlights Coca-Cola’s commitment towards no bribery or facilitation payments. Available in Burmese and English, the anti-corruption card states that the drivers are prohibited from paying any bribes to the traffic police or local road transport authorities. The card clarifies that the drivers will be required to report to the management as any such bribes or facilitation payments will be a violation of anti-corruption laws.

What were the outcomes?

Initially, the drivers met with some resistance and bribes were demanded of them. However, the drivers promptly produced the anti-corruption cards and refused to entertain any demand of bribes or corruption-related payments. With time, the local traffic police started recognizing the Coca-Cola drivers for their established policy against corruption and there was a marked difference in bribery demands.

From our Library

Human Rights and Business Dilemmas Forum

Responsible Business Advancing Peace: Examples from Companies, Investors & Global Compact Local Networks

Global Compact for the 10th Principle: Corporate Sustainability with Integrity

Un global compact drives sustainable business forward at asia & oceania event, un global compact and african union commission partner up to boost the global africa business initiative (gabi), business professors recognized by prme for innovative pedagogy that champions sustainable development, un secretary-general appoints new members to un global compact board, un global compact launches regional caribbean network in barbados, un global compact launches sustainable supplier and sme programme, un global compact launches cmo think lab to drive sustainable growth, african business leaders pledge to tackle gender inequality at the africa ceo forum, un global compact meets at the eu parliament to advance corporate sustainability, office hours: communication on progress, un general assembly events, private sector forum, the 20th anniversary of the un global compact principle ten, un global compact leaders summit, unstoppable africa, high-level meeting of caring for climate at cop29.

Latest updates News Events

events 08 Aug 24 EVENT: Global Perspectives: Insights from the Foreign Bribery Taskforce
events 28 May 24 WEBINAR: The Role of Internal Auditors in Bribery Prevention
events 28 May 24 EVENT: Australian Public Sector-Anti Corruption Conference (APSACC) 2024

Case studies

Conducting thorough due diligence.

6 minute read

This is a case study for business owners on the importance of conducting thorough due diligence before and after acquiring another business, to prevent the risk of being implicated in historic or post-merger bribery.

SwiftCo is a medium-sized telecommunications business which has experienced success in the Australian market in recent years. In an exciting new opportunity, SwiftCo is planning to merge with ByteCo , a similar sized telecommunications business based in Europe that already conducts business in several countries. The merger will create a new entity, incorporating parts of the businesses of SwiftCo and ByteCo. Executives from both firms will sit on the board of the new entity.

SwiftCo is currently conducting a due diligence review of ByteCo’s business, with a particular focus on its service contracts, communications with clients and financial documents. ByteCo has given SwiftCo access to documents and assured SwiftCo that these documents are all SwiftCo needs to see. While conducting the review, SwiftCo staff notice the following:

International service contracts often refer to ‘administrative operations fees’ in connection with dealings with foreign departments without any specific details of why these fees are incurred; and
Some incomplete financial record-keeping.

SwiftCo’s staff are unsure of how to interpret these issues. At the same time, the business learns that an Australian competitor is looking to acquire ByteCo and it is keen to seal the deal. As a result, issues identified by SwiftCo’s staff are not thoroughly examined. SwiftCo decides to take ByteCo’s word that there is nothing to be concerned about.

After the merger, SwiftCo staff notice the following:

Invoices issued to ByteCo sometimes do not match the service contracts agreed to by overseas customers; and
Correspondence about meetings with customers shows that meetings regularly take place in fancy restaurants with ByteCo executives often treating customers to expensive meals.

SwiftCo’s senior executives do not want to create complications with their new business partners. They assume this conduct is ‘business as usual’ in the overseas markets in which ByteCo operates, and remind themselves that nothing of concern was identified in the due diligence process.

Eighteen months after the merger is complete, the newly created entity is charged with foreign bribery offences for conduct that took place before and after the merger. SwiftCo’s executives learn that prior to the merger, ByteCo’s growth strategy relied heavily on third party consultants to facilitate entry into offshore markets. These consultants received large administrative operations fees from ByteCo that do not appear attributable to services provided.

The newly created entity finds itself facing potential criminal proceedings and is at risk of having to pay a large fine.

What should SwiftCo have done to prevent this risk?

SwiftCo should have ensured thorough due diligence and followed up, and investigated the red flags that were identified prior to, during and after the merger. Its ‘desktop’ review of ByteCo was insufficient and contributed to the failure to identify further red flags post-merger.

To be able to pick up on red flags in the first place, it is crucial that businesses understand anti-bribery and corruption risks. Prevention is the strongest tool to reduce bribery and corruption risks. Due diligence is an important step in that process. It can save a business from serious financial and legal problems if red flags are identified and properly addressed at an early stage.

Due diligence is also required for business relationships – it is not only necessary in mergers and acquisitions. Robust due diligence is vital in preventing and detecting bribery and corruption.

The measures below will help a business avoid a situation similar to the one SwiftCo finds itself in.

Step 1: Help staff understand how to identify risks of bribery and corruption in their industry

The business needs to set a tone of zero-tolerance for bribery and corruption.

Implementing an anti-bribery and corruption policy, keeping it relevant, and ensuring it is understood and followed by the business, is a must.

The business should educate staff and directors on what potential risks look like in practice. This will support people in the business to be alert to risks when carrying out due diligence.

Red flags that should be escalated in due diligence may include:

Large hospitality expenses;
Vague or unexplained invoices or descriptions for amounts paid to third parties, or suspicious patterns of payments such as payments being made in multiple smaller amounts, in cash or to personal or offshore accounts;
The target company winning tenders unexpectedly or frequently;
Agents or business partners charging large commissions, demanding upfront fees or ‘success fees’ payable only if a tender is won;
Political donations;
A target company dealing in industries or countries where bribery and corruption are known to be more prevalent; and
Interactions and involvement between a target company and foreign public officials.

Step 2: Evaluate the target business’s approach to anti-bribery and corruption compliance through due diligence

When undertaking due diligence, it is important to ask questions about how the target company manages anti-bribery and corruption risks. A desktop review is a good start, but should be followed up with interviews and requests for further information, such as a request to see an anti-bribery and corruption or risk management policy, or records of relevant staff training sessions.

In this example, SwiftCo should have questioned ByteCo’s suspicious invoices and asked for an explanation of its incomplete record keeping. It could also have discussed with ByteCo staff how the organisation identified non-compliant or suspicious transactions.

Step 3: Promote anti-bribery and corruption within the merged entity through post-acquisition activities

Considering bribery and corruption risks only prior to a merger or acquisition is not enough. Due diligence is an ongoing process.

In the scenario above, post-acquisition, the newly created entity could have:

Conducted a risk assessment and review of the operations of ByteCo and its customers to identify relevant risks and standard business practices;
prohibiting facilitation payments;
concerning giving and receiving gifts and hospitality;
detailing expenditure categories for the business with monetary limits; and
enhancing record-keeping practices.
Made inquiries about overseas business partners to understand better their role and purpose;
Made an anti-bribery and corruption policy available to all staff and implemented it throughout the merged entity through communications and training programs. See the Implementing an anti-bribery and corruption policy case study;
Required business partners and agents to comply with the merged entity’s anti-bribery and corruption policy as a term of engagement; and
Made a whistleblower policy and hotline accessible and available to all staff and encouraged a ‘speak up’ culture. See the Implementing a whistleblower policy case study.

Step 4: Ensure effective audit processes are in place

An effective audit process is an important tool in the due diligence process. It is often the first time a red flag can be identified internally. Any audit process that detects bribery red flags allows an organisation to:

Take steps to adequately address the matter;
If necessary, seek further advice; and
Potentially mitigate the risk of serious legal and financial implications.

The Bribery Prevention Network acknowledges the pro-bono contribution of Corrs Chambers Westgarth in developing this case study.

All case studies

--> Implementing an anti-bribery and corruption policy
--> Real-life Australian foreign bribery prosecution
--> Implementing a whistleblower policy
--> Conducting thorough due diligence
--> Facilitation payments
--> Investigating an internal complaint
--> Responding to contact by an authority
--> Enforcement

Relevant resources

Good practice guidelines for third party due diligence, by world economic forum.

Conduct third party due diligence using this practical guidance developed to support business practitioners manage bribery and corruption risks. The guidance highlights a risk-based due diligence process with four key points. Additional considerations, lessons learned, good practice tips and sample due diligence tools are provided.

Filed under Due Diligence Prevent

As type PDF

Effective third party due diligence for small and medium enterprises

By international chamber of commerce.

Create cost-effective due diligence procedures that help to minimise corruption risks and adhere to international anti-corruption standards. This guidance is targeted at small and medium enterprises (SMEs) and recognises the unique challenges SMEs face. It gives a detailed overview of how and when to undertake due diligence, including practical advice. Sample due diligence tools and templates are provided.

Practical tools for due diligence

By gan integrity.

Undertake due diligence with these five practical online tools when seeking to prevent and address bribery and corruption in business operations. These include guidance on public procurement due diligence and interactive risk assessment tools. Flowcharts are provided to support businesses in screening partners, agents and contractors. The tools are provided as part of GAN Integrity’s guide to building a compliance program.

As type Web

Template risk assessment process for associates

By austrade.

This suite of tools and guidance covers topics including facilitation payments, bribery red flags, and training materials to help identify and manage bribery risks. It includes a flow chart of practical steps businesses can take before entering any formal relationship with business partners or associates and what due diligence can be conducted. This resource forms part of Austrade’s suite of anti-bribery materials.

Filed under Risk Assessments Australian Government Resources Prevent

Due diligence guidance for responsible business conduct

By organisation for economic co-operation and development.

This resource will support businesses to understand and implement risk-based due diligence as recommended by the OECD Guidelines for Multinational Enterprises – a key international standard on responsible business conduct. The guidance describes the due diligence process using six key steps and suggests practical actions business can take. Helpful tips and detailed explanations are also provided, supported by examples.

As type PDF Scenario

Corruption Perceptions Index 2020

By transparency international.

Ranks 180 countries and territories by their perceived levels of public sector corruption. Helps companies to understand and compare the corruption risks of operating in different countries. Useful for undertaking third party risk analysis and due diligence. Learn about regional trends, and the areas that have the greatest bribery and corruption risks.

Filed under Risk Assessments International Resources

An official website of the United States government, Department of Justice.

Here's how you know

Official websites use .gov A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS A lock ( Lock A locked padlock ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

A Handful of Unlawful Behaviors, Led by Fraud and Bribery, Account for Nearly All Public Corruption Convictions Since 1985

A comprehensive analysis of nearly 57,000 corruption cases in federal courts spanning 30 years revealed that fraud and bribery dominated the types of conduct underlying criminal cases, accounting for 76% of the lead charges in cases resulting in convictions. Those two unlawful behavior types, combined with extortion and conspiracy, broadly informed the lead charges in virtually all examined corruption convictions in federal courts from 1985 to 2015.

That was a key finding of a case records study by a research team led by Jay S. Albanese of Virginia Commonwealth University. The purpose of the study, sponsored by the National Institute of Justice (NIJ), was to fill a literature gap with empirically based knowledge of prosecution practices, corruption-fighting statutes, and types of behavior underlying prosecutions. New insights on corrupt behavior could inform new policies to prevent some corrupt conduct and discover some corrupt acts earlier. [1] The findings may also help the justice system focus crime prevention and enforcement strategies on those behaviors most often associated with criminal prosecution, and distinguish among types of corruption more likely to occur at the federal, state, or local level, the researchers said. [2]

All of the corruption case records examined came from federal courts, accessed in court and prosecutor databases, and the researchers compared cases in three different tiers: federal-level, state-level, and local-level corruption.

Corruption Crime Types Vary Among Government Levels

Fraud was the focus of corruption charges in 40.6% of all analyzed cases, with bribery accounting for the lead charge in 35.6% of cases. [3] But the prevalence of charged conduct categories varied somewhat depending on the level of government activity addressed in the prosecution. In federal-level corruption litigation, the first-charged conduct was fraud in 5,579 of 12,663 cases (44.1%) and bribery in 5,129 cases (41%). Similarly, in state-level cases, lead fraud charges outnumbered lead bribery charges, 1,112 cases (29.3%) to 1,070 (28%), out of a total of 3,792 state-level convictions. But in local-government corruption matters, lead bribery charges exceeded lead fraud charges, 2,421 cases (34%) to 2,051 (29%), out of 7,090 total convictions.

Extortion charges were a distant third among lead charges in federal- and local-level corruption cases in federal court, but extortion led all crime types charged in state-level matters. In those cases, extortion led fraud by 1,156 to 1,112 charge types (30% to 29%), with bribery trailing slightly at 1,070 (28%), out of the total of 3,792 state-level corruption charge types.

Together, the four prevalent categories of corrupt behavior — fraud, bribery, and extortion, along with conspiracy — “form the operational meaning of corruption in practice,” the researchers concluded. [4]

Drilling down, the team identified eight discrete corrupt activities, covering all public corruption, through a closer analysis of about 2,400 cases from 2013 to 2015. Those eight activities are: [5]

Receipt of a bribe
Solicitation of a bribe
Contract fraud
Embezzlement
Official misconduct
Obstruction of justice
Violation of regulatory laws

The researchers noted a nexus between heightened corruption risk and public service at the state and, especially, local levels. They pointed out that public officials serving on government boards and councils, as well as in elected office and law enforcement positions, were often employed part time, undertrained, and undersupervised. The report on corrupt behavior types said that the “lack of professionalism” in the public officials’ roles and expectations “provided the space to exploit opportunities to enrich themselves.” [6]

Remedies for Corruption

The researchers propose several corruption remedies, including: [7]

Transparency in contract award processes and government spending practices.
Dual training of individuals on public duties to avoid having a single person authorizing and reviewing payments.
Introducing mandatory ethics training for government entities.
Better protections for whistleblowers.
A focus on fairness in prosecutions.
Mandatory ethics training for federal programs and state and local entities.

What Motivated Corruption?

A separate aspect of the research by Albanese and his colleagues was an empirical analysis of corruption defendants’ criminal motivation broken down into four categories: [8]

Positive — motivated by external factors, usually social or economic, that push the individual toward crime. An assumption underlying this explanation is that changing the influences on individuals will prevent crime.

Classical — an individual decision to maximize personal benefit through corrupt conduct; it can be deterred by increasing the threat of apprehension and punishment.

Structural — driven by systemic political and economic conditions; it can be deterred by legal and structural changes to election processes, balance of power, enforcement of laws, and due process.

Ethical — guided by individual decisions to act ethically or wrongfully; it can be deterred by education and reinforcement of ethical decisions.

For the corruption motivation analysis, researchers interviewed 72 individuals who have direct experience, in different capacities, with a variety of public corruption matters, [9] The themes that were discussed informed the coding of the interviews, and qualitative analysis software completed the evaluation.

Of the four corruption cause categories, ethical explanations led, at 38% of total explanations gleaned from the interviews and analysis; 28% offered a structural explanation; 19% offered a classical explanation; and 15% offered a positivist explanation.

About This Article

The research described in this article was funded by NIJ grant 2015-IJ-CX-0007, awarded to Virginia Commonwealth University. This article is based on three reports: the grantee Final Summary Overview on the project, “ Developing Empirically-Driven Public Corruption Prevention Strategies ” (2018), Jay S. Albanese, principal investigator; and two published articles, also written by members of the research team:

Jay S. Albanese, Kristine Artello, and Linh Thi Nguyen, “ Distinguishing Corruption in Law and Practice: Empirically Separating Conviction Charges from Underlying Behaviors ,” Public Integrity 21 no. 1 (2019): 22-37.
Jay Albanese and Kristine Artello, “Focusing Anti-Corruption Efforts More Effectively: An Empirical Look at Offender Motivation—Positive, Classical, Structural and Ethical Approaches,” Advances in Applied Sociology 8 no. 6 (2018): 471-485.

[note 1] , [note 2] , [note 3] , [note 6] , [note 7] Jay S. Albanese, Kristine Artello, and Linh Thi Nguyen, “Distinguishing Corruption in Law and Practice: Empirically Separating Conviction Charges from Underlying Behaviors,” Public Integrity 21 no. 1 (2019): 25.

[note 4] , [note 5] Jay Albanese, “Final Summary Overview: Developing Empirically-Driven Public Corruption Prevention Strategies,” Final Report to the National Institute of Justice, grant number 2015-IJ-CX-0007, 2018, 4.

[note 8] , [note 9] Jay Albanese and Kristine Artello, “Focusing Anti-Corruption Efforts More Effectively: An Empirical Look at Offender Motivation—Positive, Classical, Structural and Ethical Approaches,” Advances in Applied Sociology 8 no. 6 (2018): 471-485, at 478.

Cite this Article

Related Awards

The Malaysian Lawyer

Latest updates on malaysian law, the airbus bribery case study: six corporate liability lessons for malaysian companies.

I set out six cautionary lessons for Malaysian companies arising from the Airbus US$4 billion global resolution for bribery involving authorities from the UK, France and the United States.

In the UK, Airbus faced five counts of failure of a commercial organisation to prevent bribery. This was under section 7 of the UK Bribery Act. This section 7 is a similar provision to Malaysia’s section 17A of the Malaysian Anti-Corruption Commission Act, known as the corporate liability provision. I have written about the elements of Malaysia’s corporate liability here .

You can read the UK High Court grounds of judgment in relation to the Airbus settlement through the deferred prosecution agreement. You can also read the detailed agreed Statement of Facts for all the background facts.

From the Airbus case study, I set out below six cautionary lessons for Malaysian companies, especially where we are on the brink of seeing the introduction of corporate liability on 1 June 2020.

#1: Persons Associated with Airbus

In summary, persons associated with Airbus, including Airbus employees and other intermediaries, offered very substantial sums of money by way of bribes to third parties in order to secure the purchase of Airbus aircrafts.

The first category of ‘persons associated’ was what was referred to as Business Partners or BPs (sometimes referred to as intermediaries or agents) of Airbus. BPs were third parties used to increase Airbus’ international footprint and to assist it in winning sales contracts in numerous jurisdictions. When Airbus made a successful sale of aircraft, it would typically pay BPs a commission based on a percentage value of the sale, or a fixed amount per aircraft sold.

The second category of ‘persons associated’ were senior employees of Airbus itself. For example, several senior Airbus employees helped to facilitate a sports sponsorship agreement with certain airline executives.

Under Malaysia’s section 17A, the person associated with a commercial organisation will be as wide as the UK position. The categories of persons such as an employee, or an agent or intermediary carrying out services for a Malaysian company, would be such a person associated. The corrupt activities of the person associated would then expose the commercial organisation to the offence under section 17A.

#2: Airbus Compliance Procedures: Failure to Have Adequate Procedures

In both the UK and Malaysia, a commercial organisation can raise the defence that it had adequate procedures in place to prevent the bribery or corrupt activity.

However, in the Airbus case, the High Court Judge noted the following (see generally [65] of the grounds of judgment).

First, Airbus did have bribery prevention policies and procedures in place. There were written policies which governed payment and contractual relationships with third parties, and Business Ethics Policy and Rules, and with detailed due diligence process to be undertaken. However, those policies and procedures were easily bypassed or breached. There existed a corporate culture which permitted bribery by Airbus business partners and/or employees to be committed throughout the world.

Second, the Judge took note of the wrongdoing of a number of very senior, senior and other employees of Airbus. This included employees with compliance responsibilities. Some of the conduct included creation of false invoices, false payment and other compliance material, and the deliberate circumvention of both Airbus’ internal compliance procedures and external compliance procedures.

Third, the weakness of senior corporate oversight, and the seriousness of the offending overall, must be considered in the context of the increased awareness internationally of the pernicious nature of corrupt business practices. Also, taken into account was the obvious vulnerabilities of businesses operating in and selling in international markets, as Airbus does.

#3: Extraterritorial Effect

The Airbus entity was essentially a Dutch and French domiciled company. But Airbus accepted the extraterritorial effect of the UK Bribery Act.

In Malaysia’s corporate liability, there is also extraterritorial effect especially for Malaysian incorporated companies. The corporate liability will extend to these Malaysian companies, whether carrying on business in Malaysia or elsewhere. Liability would also extend to foreign companies carrying on a business or part of a business in Malaysia.

#4: Cooperation by Airbus for Deferred Prosecution Agreement

Malaysia does not have the option of a commercial organisation entering into a deferred prosecution agreement (DPA). A DPA provides a mechanism for an organisation to avoid prosecution for certain economic offences through an agreement with the prosecuting authority.

There are certain advantages of a DPA as highlighted in the Airbus decision (see [119] of the grounds).

First, the DPA requires a significant financial penalty and this has an important deterrent message to corporate wrongdoers. Second, the DPA recognises and rewards what Airbus did to address the wrong, and there was a discount of 50% in the financial penalty. Third, the DPA gave Airbus the opportunity to demonstrate its corporate rehabilitation and commitment to effective compliance. Fourth, with the DPA, it avoids the significant expenditure in time and money in any prosecution of Airbus. Fifth, the DPA is likely to provide an incentive for the exposure and self-reporting of organisations in similar situations to Airbus.

At [74] of the grounds, the Judge noted the significant cooperation by Airbus in the investigation by the UK Serious Fraud Office. I set out some of the examples:

Identified a comprehensive compilation of red flag cases across divisions.
Reported conduct which had taken place almost exclusively overseas.
Fully cooperated on any investigative interviews and provided first accounts of all relevant individuals.
Collected in excess of 30.5 million documents.
Provided extensive and detailed representations with supporting documentation.
Adopted a co-operative position in respect of legal professional privilege.

Without the mechanism of a DPA in Malaysia, it remains to be seen whether a Malaysian company would cooperate so extensively with the anti-corruption agency and other enforcement agencies. Would a Malaysian company and its management ‘lawyer up’ and try to withhold information to prevent a successful prosecution? Or would a Malaysian company cooperate in order to fully mitigate any sentence or fine imposed?

#5: Transformation of Airbus’ Procedures

Airbus also took significant steps to demonstrate that it had fully transformed itself from past bad practices. These are noteworthy items to demonstrate the level of compliance and steps taken to stamp out future misconduct.

At [78] of the grounds, first, the Judge noted that Airbus now had a change in management team, with a largely different Board of Directors.

Second, Airbus conducted disciplinary investigations against existing and former employees. Since 2015, Airbus parted with 63 of its top and senior management employees.

Third, Airbus had commissioned an Independent Compliance Review Panel for a complete independent review of Airbus’ ethics and compliance procedures.

Fourth, Airbus Ethics and Compliance teams had been restructured to ensure functional independence from the business. There was a merger of legal and compliance functions and the change of the reporting line to the newly appointed General Counsel.

Fifth, the creation of a sub-committee of the Board, entitled the Ethics & Compliance Committee, to provide independent oversight of Airbus’ Ethics & Compliance programme.

Sixth, Airbus appointed a new Ethics & Compliance officer with changed reporting lines directly to the General Counsel and the Ethics & Compliance Committee.

Seventh, and at [80] of the grounds, the Judge also noted other examples of steps taken by Airbus including:

Created numerous new compliance roles and extensively recruited highly experienced senior compliance professionals.
Revised its Anti-Bribery and Corruption (ABC) polices and procedures in response to recommendations by external stakeholders.
Launched a company-wide, systemic and comprehensive ABC Risk Assessment
Redesigned the ‘onboarding’, due diligence and ongoing monitoring for all third parties with a business relationship with the Airbus group

#6: Malaysia’s Personal Liability of Directors and Management

In the UK, the Bribery Act provisions on personal liability of senior officers are different from the Malaysian corporate liability provision.

In the UK, it would have to be shown that the senior officer consented or connived to the committing of the bribery offence. This also applies only to the general bribery offences and bribing a foreign official, and does not apply to the section 7 Bribery Act corporate offence of failing to prevent bribery.

In Malaysia however, the corporate liability provision is graver. Where an offence is committed by the commercial organisation, it is then already deemed that the senior officer (i.e. director, controller, officer, concerned in the management of the company’s affairs) has also committed the offence. The burden then reverses on the senior officer to have to show that the offence was committed without his consent or connivance, and that he exercised due diligence to prevent the commission of the offence.

If it occurred to a Malaysian company, the facts of the Airbus case would have exposed the directors and senior management to a grave risk of personal liability under Malaysia’s corporate liability provision.

How Managers Should Respond When Bribes Are Business as Usual

David Montero

Four strategies for navigating markets where bribery is rife.

Commercial bribery is illegal and counterproductive. Yet officials in many parts of the world still demand them, and executives remain tempted to pay up. How can organizations kick the kickback habit? By preparing their people with a resistance plan, building the cost of avoiding bribery into their estimates, walking away from markets where bribery is too rife to do business with out it, and shifting performance incentives to acknowledge high-risk regions.

Corporate bribery—that is, the practice of companies paying government officials for preferential treatment — is not only illegal in dozens of countries. Studies show that it’s also counterproductive resulting in lower profit margins, return on equity , and employee morale ; costly delays as players haggle over the size of the kickback; and poverty and poor governance in the markets where they’re paid. Yet, according to the World Bank , roughly one-third of firms around the world use kickbacks, paying an estimated total of $400 billion a year . Since 2006, hundreds of companies — including global brands like Novartis , Hewlett-Packard , and Rolls Royce — have reached settlements with U.S. authorities on charges of overseas bribery.

DM David Montero is the author of Kickback: Exposing the Global Corporate Bribery Network (Viking, 2018) and was formerly a correspondent for The Christian Science Monitor and a producer for the PBS series Frontline .

Partner Center

Want to create or adapt books like this? Learn more about how Pressbooks supports open publishing practices.

10. Corruption in International Business

The Problem of Corruption

When a large corporation decides to enter a foreign market, it must usually secure a number of licenses, permits, registrations, or other government approvals. Certain types of business may be even be impossible or illegal unless the corporation is first able to obtain a change or adjustment to the nation’s laws or regulations. Since the power to authorize the foreign corporation’s activities is vested in the hands of local politicians and officials, and since corporations have access to large financial resources, it should not be surprising that some corporate executives resort to financial incentives to influence foreign officials. While certain financial incentives, such as promises to invest in local infrastructure, may be legitimate, any form of direct payment to the foreign official that is intended to influence that official’s public decisions will cross the line into illegal subornation , also commonly referred to as bribery .

Bribery is one of the archetypal examples of a corporation engaged in unethical behavior. A number of problems can be attributed to business bribery. First, it is obviously illegal—all countries have laws that prohibit the bribery of government officials—so the foreign company engaging in bribery exposes its directors, executives, and employees to grave legal risks. Second, the rules and regulations that are circumvented by bribery often have a legitimate public purpose, so the corporation may be subverting local social interests and/or harming local competitors. Third, the giving of bribes may foment a culture of corruption in the foreign country, which can prove difficult to eradicate. Fourth, in light of laws such as the US Foreign Corrupt Practices Act (FCPA) and the Organization of Economic Cooperation and Development (OECD) Convention on Anti-Bribery (discussed in greater detail below), bribery is illegal not only in the target country, but also in the corporation’s home country. Fifth, a corporation that is formally accused or convicted of illicit behavior may suffer a serious public relations backlash.

Despite these considerable disincentives, experts report that worldwide business corruption shows little signs of abating. Transparency International (TI), a leading anticorruption organization based in Berlin, estimates that one in four people worldwide paid a bribe in 2009. It appears that the total number of bribes continues to increase annually. The World Economic Forum calculated the cost of corruption in 2011 at more than five percent of global GDP (US$2.6 trillion) with over $1 trillion paid in bribes each year. 1

Governments and intergovernmental organizations have redoubled their efforts to combat the perceived increase in international business corruption. Globalization, which accelerated in the final decades of the twentieth century, is often cited by specialists as contributing to the spread of corruption. Corporations and businesses in every nation have become increasingly dependent on global networks of suppliers, partners, customers, and governments. The increased interaction between parties in different countries has multiplied the opportunities for parties to seek advantage from illicit incentives and payoffs. Although outright bribery is clearly unethical and illegal, there is great deal of behavior that falls into a gray zone that can be difficult to analyze according to a single global standard. When does a business gift become a bribe? What level of business entertainment is “right” or “wrong”? Over the past two decades, governments and regulators have sought to clearly define the types of behavior that are considered unethical and illegal.

Another factor that has heightened the sense of urgency among regulators is the magnitude of recent cases of corruption (several of which are described in greater detail below). The cost to shareholders as well as stakeholders and society has proven enormous. Governments and international organizations have ramped up their enforcement of anticorruption laws and sought increasingly severe penalties, sometimes imposing fines amounting to hundreds of millions of dollars. Largely as a result of these efforts, most multinational corporations have developed internal policies to ensure compliance with anticorruption legislation. However, as we will see in the case study featured in this chapter, such compliance also raises complex ethical dilemmas for corporations. It remains difficult to regulate ethical behavior when social and cultural norms vary significantly from country to country. Acts that are considered unethical in one country may represent a traditional way of doing business in another. One legal scholar explains the difference as follows:

A common misconception, held in both Western and developing countries, and even among many researchers on corruption, is to confuse what is corrupt with what is legal. Laws are defined by values, as are ethical norms, but the two are not equivalent. 2

In this chapter, we will explore the impact, reasonableness, and the effectiveness of anticorruption laws and corporate compliance rules. Finally, we will discuss a case in which the line between corruption and traditional business practices remains difficult to ascertain.

The Scope of the Problem

Recent cases of corruption in international business have attracted considerable media attention. Paying a traffic officer to ignore a minor traffic violation is unremarkable; paying a senior government official a secret bribe of millions of dollars to get a large contract signed is a different matter.

While virtually all multinational companies have adopted anticorruption policies, it is not clear how often these policies are fully implemented and internalized as part of the corporate culture. The emphasis on anticorruption policies is relatively recent and, even in the most responsible organizations, such policies are still works in progress. However, there is some evidence that the implementation is not always as effective as might be hoped.

For example, a study by Control Risks and the Economist magazine’s Intelligence Unit showed that while most companies acknowledge the need to combat bribery and corruption, many are complacent and unprepared to deal with scandals inside their own organizations. 3 The review of global attitudes on corruption surveyed more than 300 senior lawyers and compliance heads in April 2013. It painted a disturbing picture. The authors concluded that “too many companies still fall short of best practices in their anticorruption compliance programs.” Despite ranking anticorruption high on most corporate agendas, the report noted a “danger of complacency” among companies, and as a result, “the risk of a company finding itself in the middle of a corruption-based investigation remains real.” 4

Transparency International’s Corruption Perceptions Index (CPI) ranks countries and territories according to their perceived levels of public sector corruption. It is an aggregate indicator that combines different sources of information about corruption, making it possible to compare countries. Perceptions are used because corruption is generally a hidden activity that is difficult to measure. The CPI confirms that corruption remains a problem worldwide and takes place even in the wealthiest countries. 5 Research in 2012 by the Austrian economist Friedrich Schneider placed the annual loss to the German economy alone at €250 billion. 6

The Dow Jones State of Anti-Corruption Survey in 2011, which surveyed more than 300 companies worldwide, found that more than 55 percent of companies have found cause to reconsider working with certain global business partners due to concerns about possible violation of anticorruption regulations. Additionally, the biannual survey indicated than more than 40 percent of companies believe they have lost business to competitors who won contracts unethically, an increase from only 10 percent in the 2009 study. “Strict liability provisions in legislation like the UK Bribery Act make businesses responsible for the activities of their agents and partners overseas, and this is having a direct impact on the occurrence of new business partnerships between firms,” said Rupert de Ruig, managing director of Risk and Compliance, Dow Jones. 7

Global social costs from corruption include the reluctance of investors to commit to projects in developing economies, inhibited growth of businesses due to syphoning off of revenues for bribes, and diversion of funds from food, medical, and educational aid programs. In addition, it seems likely that corruption hampers the development of executive talent in developing nations, given that frustrated local executives may seek to emigrate to countries where corruption is less prevalent. Consider for example, the long term impact of the necessity of paying a bribe to get running water in a household in rural India. 8 This type of corruption can effectively exclude the poor from access to vital public services. Economist Daniel Kaufmann of the Harvard Institute of International Development cites public sector corruption as the most severe obstacle to development in developing and post-communist countries. 9

Notable Examples of Corruption

The number and magnitude of recent corruption cases prosecuted by government authorities is disconcerting. Moreover, these widely-publicized cases may represent only the tip of the iceberg: Regulatory bodies focus principally on the bribery of public officials so that other forms of business corruption are under-reported. To date, the ten largest cases successfully tried pursuant to the FCPA are listed below (in order of magnitude of fines):

Siemens (Germany): $800 million in 2008
KBR/Halliburton (USA): $579 million in 2009
BAE (UK): $400 million in 2010
Total SA (France): $398 million in 2013
Snamprogetti Netherlands BV/ENI SpA (Holland/Italy): $365 million in 2010
Technip SA (France): $338 million in 2010
JGC Corporation (Japan) $218.8 million in 2011
Daimler AG (Germany): $185 million in 2010
Alcatel-Lucent (France): $137 million in 2010
Magyar Telekom/Deutsche Telekom (Hungary/Germany): $95 million in 2011

There are other recent examples of large-scale corruption in international business.

Walmart in Mexico

According to a report issued by the Mexican Employers Association in 2011, companies operating in Mexico spend more than 10 percent of their revenue on corrupt acts. One of the most well-known cases was the Walmart scandal that was brought to light in September 2005 and resulted in the company’s stock value dropping by as much as $4.5 billion. Evidence unearthed by internal and external investigations revealed a widespread use of bribes, alleged to total over $24 million. The bribes were paid to facilitate the construction of Walmart stores throughout Mexico. The country is a huge market for Walmart—one in every five Walmart stores is in Mexico. As of October 2014, the investigation continued, having implicated Walmart management at the most senior levels of complicity or awareness.

GlaxoSmithKline in China

In September 2013, China’s Xinhua news agency reported that a police investigation into bribes paid by drug manufacturer GlaxoSmithKline (GSK) indicated that the bribes were organized and paid by GSK China and not by individuals operating on their own prerogative as had been reported by the company initially. Police also alleged that the corporate parent merely went through the motions of an internal audit process, indicating a knowledge and acceptance of the bribery. This very recent case suggests that the Chinese government’s widely publicized arrests and convictions for bribery have not yet served as a sufficient deterrent to corrupt practices by foreign corporations.

Alcatel in Costa Rica

In January 2010 Alcatel agreed to pay Costa Rica US $10 million in reparations for social damage caused by Alcatel’s payment of US$2.5 million in bribes to get a contract to provide mobile phone services in that country. This case is notable for its application of the concept of social damage and the resulting order of compensation to the citizens of Costa Rica.

Anticorruption Laws and Regulations

The first major international anticorruption law was the United States’ Foreign Corrupt Practices Act (FCPA), adopted in 1977. 11 The FCPA criminalized bribery of foreign public officials by American business enterprises. Initially, the FCPA was not well received. Few other countries followed suit and US companies complained that the FCPA shut them out of the competition for billions of dollars’ worth of overseas business contracts. Slowly, however, the push for concerted anticorruption measures gathered momentum, and intergovernmental institutions such as the OECD, the African Union, and the United Nations eventually adopted anticorruption conventions. Further support for a global anticorruption agenda was provided by the lending institutions such as the World Bank, by NGOs such as Transparency International, and by the rapidly evolving CSR movement. Notable among these efforts was the Communist Party of China’s promulgation of a code of ethics to fight the widespread corruption within the Communist Party of China . 12

The FCPA applies only to bribes paid (or offered) to foreign government officials to obtain or retain business or to develop an unfair competitive advantage. The concepts of bribe and foreign government official can be interpreted broadly. While companies and executives charged with FCPA violations have often sought to characterize their payments as business “gifts,” this has not shielded them from liability when there was evidence that the payments were intended as a means of obtaining illicit objectives. However, where payments have been characterized as “facilitation” or “lubrication” payments, meaning that they merely created an incentive for an official to promptly execute legal actions, such as mandatory customs inspections, the payments have been allowed. In numerous countries, the state owns all or part of commercial enterprises so that a great number of business executives could be classified as foreign government officials.

In 1997, the OECD established legally binding standards for defining bribery in international business transactions. Similar to the FCPA, the OECD Anti-Bribery Convention focuses on the bribery of public officials. Like the FCPA, the OECD also potentially creates the opportunity for companies to circumvent the regulations by hiring consultants or agents (this topic will be the focus of this chapter’s case study discussion). Notably excluded from the scope of the OECD Convention is a prohibition against bribing private parties. Despite such loopholes, the OECD Convention was an important step in the right direction. By 2012, forty-three countries had ratified the agreement and begun its implementation.

Corruption and Culture

Prior to the expansion of international trade in the nineteenth and twentieth centuries, most commerce was local and followed traditional norms and ethical standards. With the expansion of international trade, however, businesses began to operate across cultural and linguistic boundaries. Misunderstandings and transgressions, both intended and unintended, became commonplace. To some extent, perceptions of corruption may derive from cultural differences, because behavior that is considered corrupt in one society may represent a normal business practice in another.

One example can be found in the Chinese concept of guanxi , which refers to the reciprocal obligations and benefits expected from a network of personal connections. A person with a powerful level of guanxi is considered a preferred business partner because such a person can utilize connections to obtain business or government approvals. Guanxi can derive from extended family, school friends and alumni, work colleagues, members of common clubs or organizations, and business associates. Chinese businesspeople seek to cultivate an intricate and extensive web of lifelong guanxi relationships. The key expectation in guanxi networks is reciprocity in the granting of favors; the failure to reciprocate is considered a breach of trust. The greater the favor asked or granted, the greater the favor owed. Guanxi thus generates a cycle of favors over time. Among the questionable practices facilitated by guanxi are certain types of corrupt favoritism—such as nepotism (favoring family members) and cronyism (favoring friends). In fact, relatively high levels of nepotism or cronyism are accepted and tolerated in many non-Western cultures, not only in China. As applied to business transactions, guanxi opens doors and creates opportunities for business relationships and dealings. In itself, guanxi is not corrupt. However, strong guanxi connections and obligations can serve as an incentive to corruption.

Many traditional business practices around the world are rooted in concepts analogous to guanxi , as in the practice of using business gifts or personal connections to speed up transactions both large and small. Russians use the term blat to refer to the ability to get things done through personal networks or contacts with people of influence. The Japanese have adapted the English word connections to coin a term of their own, konne . In Pakistan, the use of personal sifarish (“recommendation”) refers to the ability to make contact with the right official on the most favorable terms. The French expression for bribe is pot de vin (“jug of wine”), which implies friendly relations. In Urdu and Hindi, petty bribes are known as chai pani (“tea water”). In West Africa the term is dash . The English colloquial term grease and the German schmiergeld (“grease money”) imply a lubrication or easing of resistance to the transaction. In Mozambique, one term for corruption is cabritismo or “goatism,” which is derived from the saying “a goat eats where it is tethered.”

The universality of such terms suggests that various forms of business bribery and graft are prevalent worldwide. However, specific business activities that are considered acceptable in some societies may be considered taboo in others. Thus, the American practice of lobbying legislators and governmental agencies would be considered an illegal form of buying influence in many other countries. In some societies, gift giving to chiefs, elders, or religious leaders is considered not only acceptable and appropriate, but even a mandatory traditional expression of respect and obligation.

A survey conducted by KPMG in the United Kingdom found that while 80 percent of respondents agreed that the UK Anti-Corruption Act was an admirable attempt to address the problem of corruption, 58 percent believed that the Act was impractical and ignored the reality that bribery is an accepted way of doing business in many countries. Other similar studies have revealed widespread international criticism of US anticorruption law as hypocritical in light of the American business practice of offering gifts to potential customers or clients (e.g., trips to conferences, golf outings, tickets to entertainment and sporting events, use of luxury facilities such as spas, condos, and country clubs, etc.).

Case Study: The Chinese Agent

The fictional case subject for this chapter is based on the difficult issue of determining the ethics of employing a well-connected agent. In our case, an American for-profit educational institution, which we will call Cleveland College, is opening a Shanghai campus to offer United States–style college programs in China. There is a ready market in China for “prestigious” US baccalaureate degrees. However, Cleveland College needs to satisfy a lot of red tape to be accredited in China and obtain the necessary licenses for an educational institution in the Shanghai area.

On an exploratory trip to Shanghai, the President of Cleveland College, Mark Rollins, is approached by a prominent businessman, Wang Li, a former member of the Shanghai city government who is familiar with the educational bureaucracy. Wang offers to assist as a public relations agent, but his fee is so hefty ($200,000 per year) that Rollins fears that Wang is going to use much of it to grease palms. Research with local authorities indicates that Wang is well respected and has a high level of guanxi with local educational officials. Wang promises to get Cleveland College all the necessary certifications in much faster time than it usually takes, and also promises to prevent bothersome audits and bureaucratic problems. Should Cleveland College sign him on? What FCPA danger would this entail?

Corruption in China

Over the past decade, the Chinese government has joined the global community in decrying corruption and initiating regulations and laws, and publically stating a strong intent to clamp down on corruption. Thus, in a widely publicized 2011 statement by China’s Premier, Wen Jiabao, anticorruption actions were emphasized as a “primary task in 2011.” 13 This was interpreted as an indication that increased enforcement of anticorruption laws will be a top government priority and that these prohibitions must be taken seriously by foreign corporations operating in China.

A number of recent high-profile cases have illustrated the extent of the Chinese crackdown on corruption. One notorious case was that of the former anticorruption official Huang Songyou, who was sentenced to death for accepting 7.71 billion yuan in bribes. In another case, Wang Huayuan and eight other senior officials of the provincial governments in Guangdong and Zhejiang provinces were convicted of corrupt actions that took place between 1998 and 2009. The former president of the Supreme Court and the former vice president of the state-owned China Development Bank were charged with taking bribes and then convicted to life in prison. In 2011, China sought the repatriation of Lai Changxing from Canada after twelve years there. As former chairman of Yuanhua International Corporation, Changxing was accused of absconding with $7.7 billion dollars. His defense against the repatriation was that he would face torture and execution.

Some observers have questioned the resolve of the Chinese government and have suggested that the small number of corruption prosecutions concluding with extreme punishments may have less to do with ending corruption than with sending a message to those who engage in corruption beyond an acceptable level. Others have suggested that anticorruption prosecutions may be an alternative means of conducting political purges. A more positive but still skeptical interpretation is to view the anticorruption cases as an expression of support for global anticorruption, an encouragement to foreign investors who fear corruption, and a way of appeasing the Chinese citizenry. According to Yan Sun, Associate Professor of Political Science at the City University of New York, it was corruption, rather than democracy as such, that lay at the root of the social dissatisfaction that led to the Tiananmen protest movement of 1989.

Foreign Educational Institutions in China

Accompanying China’s meteoric economic development over the last three decades has been a corresponding growth in sophisticated higher education. The number of institutions of higher education in China has doubled in the last ten years. By 2020, China intends to have produced 195 million college graduates. The Chinese government has determined that it must not only increase the number of college graduates, but also make China an education destination for non-Chinese students. Accomplishing these goals will necessitate increased cooperation with Western institutions of higher education

In an interview with University World News in 2013, Michael Gaebel, head of the higher education policy unit at the European University Association (EUA) reported that, just a few years ago, “it was very difficult to convince European vice-chancellors that Asia was not just a provider of fee-paying students. Now no one in Europe can ignore that China has become important globally for research and will continue growing in importance.” 14 In 2013, China’s vice minister for education announced that China would take efforts to attract more foreign students. By 2020, China hoped to attract some 500,000 international students, making the country the largest Asian destination for international students. Currently about 35,000 foreign students are studying in China.

With 37 million students studying in over 2,400 universities and colleges, China has the largest system of higher education in the world. The rapid growth of demand for colleges and universities in recent years has resulted in a number of problems, including rushed and poor quality construction, high student–lecturer ratio, shortages of qualified faculty, and questionable academic quality, not to mention allegations of corruption.

Corruption in higher education in China has been widely reported, including allegations of widespread plagiarism, selling of degrees, favoritism in admissions, and bribery for grades. A study by Wuhan University Professor Shen Yan showed that ghostwriting academic theses was a one billion–yuan business in 2009, and that 70 percent of the published theses were plagiarized. John Bray, author of “Facing up to Corruption, a Practical Guide,” 15 reports that parents in China often have to pay for a spot in a university for their child.

Compounding these problems is the growing level of unemployment among recent graduates. The Epoch Times reported a 7.7 percent employment rate among the seven million graduates in 2014. 16 The decline in the perceived value of Chinese higher education has created an opportunity for foreign universities. There is a perception that a degree from a Western university is more credible and that its graduates are more employable than graduates of Chinese institutions. Carl Fey, Dean of Nottingham University Business School China, discusses the growing number of foreign campuses opening in China. At his school, they spend the first year teaching students English, so they learn to work, study, and speak in English before diving into subject matter. “Your diploma looks exactly the same whether you graduated from Nottingham, UK, or Nottingham, China,” Fey said. “That’s because the education’s actually the same.” 17

The number of foreign universities operating in China is changing rapidly as institutions from Europe, the United States, and other Western countries enter the fray. This course is not without operational hurtles, as was noted when Harvard University pulled out of a high profile and widely published and joint venture with its Chinese counterpart, the prestigious Beijing University. Harvard cited several reasons for ending the relationship, including low enrollment, high operating expenses, and issues within the Chinese language program.

One of the problems faced by Western universities operating in China is that the potential for government censorship places severe limitations on academic freedom. While this is the most notable issue, there are many other challenges, mostly related to cultural differences. The red tape involved in getting the appropriate licenses, accreditations, and building permits from the various governmental agencies involved in local, regional, and centralized government is a daunting task for a foreigner. Most foreign institutions find it more expedient to partner with established Chinese universities than to attempt to open a new university, but even then, there are all the usual issues related to operation of a partnership or joint venture, all complicated by the cultural differences.

Topic for Debate: To Hire, or Not to Hire a “Consultant” Who May Be Bribing Officials on Behalf of the University

Should Cleveland College hire the local Chinese agent, or “public relations” consultant, who requests a sizeable enough retainer that we may reasonably suspect he is making cash donations to obtain the goodwill of local educational institutions?

Affirmative Position

Cleveland College should hire the local Chinese agent/consultant.

Possible Arguments

Secret cash payments may act as a morally-acceptable “lubricant” to facilitate commercial exchanges.
Corruption is an inevitable part of the process of opening up new and developing markets.
Companies that elect to comply with the letter of the law in the strictest sense may be at a severe competitive disadvantage.
Payment of “fees” to officials can serve as an incentive to development, cutting through unnecessary bureaucracy.
Corruption as defined in this context is a Western concept and may not be applicable in all countries.
In many societies, the “gift culture” is a form of appropriate behavior based on long-standing traditions of exchanging favors.

Negative Position

Cleveland College should not hire the local Chinese agent/consultant.

Paying an agent a fee, who then bribes a government official does not necessarily relieve the college of the risk of violating anticorruption laws.
Paying an agent to bribe a government official sets a precedent that can lead to ongoing demands for bribes.
If the organization pays a bribe, and they do not get what they paid for, they have no recourse. This is a high-risk form of investment.
If the college goes down the path of bribing officials for any purpose, using the justification that it is a traditional and acceptable way of conducting business, it implicitly condones a lack of ethics to its employees—the next step would be to sell grades, diplomas or admissions.

10.1 “Corruption from a Cross-Cultural Perspective”

Hooker, John. “Corruption from a Cross-Cultural Perspective.” Pittsburgh, PA: Carnegie Mellon University. October 2008. https://web.archive.org/web/20131229003750/http://ba.gsia.cmu.edu/jnh/corruption08s.pdf .

The world is shrinking, but its cultures remain worlds apart, as do its ethical norms. Bribery, kickbacks, cronyism, and nepotism seem to be more prevalent in some parts of the world, and one wants to know why. Is it because some peoples are less ethical than others? Or is it because they have different ethical systems and regard these behaviors as acceptable?

…The phenomenon of corruption provides a good illustration of these realities. Corruption is best understood as behavior that corrupts: it undermines the cultural system in which it occurs. Because cultures can operate in very different ways, very different kinds of behavior can corrupt. Practices that Westerners consider questionable, such as cronyism and nepotism, may be functional in other cultures. Practices that are routine and acceptable in the West, such as bringing a lawsuit for breach of contract, may be corrupting in a wide range of cultures, Western and non-Western, but for very different reasons.

The West tends to be universalist in its outlook: every society works, or should work, essentially the same way. Its business practices, for example, should be based on a market system that is characterized by transparency and regulated by laws that apply to everyone. A country that fails to conform to this model is seen as underdeveloped or dysfunctional. It follows from this view that that corruption is basically the same in Sweden as in Sudan.

The reality, however, is that different cultures use radically different systems to get things done. Whereas Western cultures are primarily rule-based, most of the world’s cultures are relationship-based. Westerners tend to trust the system, while people …cemented by personal honor, filial duty, friendship, or long-term mutual obligation. Loyalty to cronies is suspect behavior in the West but represents high moral character in much of the world.

…What is corrupt in the West may be acceptable elsewhere. The classic example of the purchasing agent illustrates this point. The Western purchasing agent is expected to award contracts based on the quality of bids and transparently available financial information about the bidders. An agent who favors personal friends is viewed as corrupt, because cronyism subverts this transparency-based system. It creates a conflict of interest: A choice that is good for the agent and his or her cronies may not be good for the company.

In much of the world, however, cronyism is a foundation for trust. A purchasing agent does business with friends because friends can be trusted. He or she may not even ask to see the company financials, since this could insult the other’s honor. It is assumed that cronies will follow through on the deal, not because they fear a lawsuit, but because they do not wish to sacrifice a valuable relationship in an economy where relationships are the key to business. In such a system it is in the company’s interest for the agent to do business with friends, and cronyism may therefore present no conflict of interest.

What is acceptable in the West may be corrupt elsewhere …Even so basic a practice as negotiation, which is routine in the West, can disrupt harmony in Confucian cultures. Westerners tend to organize their affairs around agreements, deals, or contracts, relying on a concept of covenant that traces back to the ancient Middle East. These agreements are hammered out in negotiation, as for example when labor and management sit across the table from each other. This practice is functional and constructive, so long as it proceeds according to rules of fair play and good faith.

Confucian cultures …are based primarily on loyalty and obligation to friends, family or superiors rather than on a system of rules.

10.2 “Facing up to Corruption: A Practical Business Guide”

Bray, John. “Facing up to Corruption: A Practical Business Guide.” London: Control Risks. 2007. http://www.giaccentre.org/documents/CONTROLRISKS.CORRUPTIONGUIDE.pdf

Direct and Indirect Bribery

Indirect bribery is one of the most sensitive policy issues facing international companies. A typical example would be a case where a company employs a commercial agent to help it win a government contract. The agent is paid by commission based on a percentage of the contract fee; part of that commission is passed on to a government official. The agent’s employers do not know—and do not wish to know—what happened…

The OECD Anti-Bribery Convention explicitly covers payments made “directly or through intermediaries” to secure a business advantage. US and other international legal practice already includes several cases where companies have been prosecuted for paying bribes via agents. Ignorance—wilful or otherwise—is not a defence.

…A broad understanding of corruption includes certain kinds of influence, although the boundary between acceptable and unacceptable forms of influence is often hard to define. A series of cases in the US and other countries have drawn attention to the ethical issues surrounding political lobbying. In principle, political lobbying is legitimate. One of the main roles of industry associations is to lobby government on their members’ behalf. Individual companies, like ordinary citizens, are entitled to seek assistance from their political and diplomatic representatives. Problems arise when such contacts appear secretive, when there is a suspicion of favouritism or when a company’s influence appears to be both disproportionate and against the wider public interest.

In many societies it is common to speed up both larger and smaller transactions through personal connections… The use of personal contacts is both commonplace and useful. However, as with political lobbying, it becomes problematic when the connections lack transparency and when officials break rules on behalf of their business friends, or seek illicit favours in return.

In cases of doubt, the so-called “newspaper test” provides a useful indicator: would a proposed transaction cause you or your company embarrassment when reported in the press? If it would, do not do it.

10.3 “The Cost of Corruption: A Discussion Paper on Corruption, Development and the Poor”

Evans, Bryan R. “The Cost of Corruption: A Discussion Paper on Corruption, Development and the Poor,” (Middlesex, UK: Tearfund, 1999), accessed December 3, 2014, https://web.archive.org/web/20150124021038/https://www.tearfund.org/webdocs/Website/Campaigning/Policy%20and%20research/The%20cost%20of%20corruption.pdf .

Far from being a “victimless crime,” corruption infringes the fundamental human right to fair treatment. All persons are entitled to be treated equally, and when one person bribes a public official he acquires a privileged status in relation to others. He becomes an ‘insider’ while others are made “outsiders” (and the more “outside” they are—the very poor, the landless, women, ethnic minorities—the more they will be hurt). Clare Short, the UK Secretary of State for International Development, notes a report in the Indian magazine Outlook to the effect that the bribe for a new water connection was R1,000. This effectively excluded the poor from access to running water, with all the health and time-loss implications that this entails. Corruption is thus profoundly inegalitarian in its effects—it has a “Robin Hood-in-reverse” character. Hugh Bayley MP, introducing a bill to create offences of international bribery and corruption, went so far as to say that “bribery is a direct transfer of money from the poor to the rich.”

…The ramifications spread yet further. Productive foreign investment may be lost. Before the Asian crisis of 1997/98 there were some who argued that corruption was not harmful, it merely greased the wheels of commerce. It was pointed out that some countries which ranked high in surveys of the level of corruption, also excelled in economic growth. The World Development Report notes that the question of predictability (the amount to be paid, the certainty of outcome) throws some light on this apparent paradox. “For a given level of corruption, countries with more predictable corruption have higher investment rates…”

However, the Report went on to state that even in these countries corruption had an adverse impact on economic performance, because the higher transaction costs and increased uncertainty put off potential investors. Time magazine quotes research by Professor Shang-Jin Wei of Harvard School of Government to the effect that the high level of corruption in Mexico compared with Singapore was the equivalent of a 24 per cent increase in the marginal rate of taxation.

A conservationist, Lansen Olsen, in a letter to the Transparency International Newsletter notes that “political corruption is a major feature of the political habitat in which wildlife conservation efforts sink or swim.” When corruption breaches regulations designed to protect the environment, everyone suffers in the long term, as the loss of primary forest leads to soil erosion, local climate change, etc., but it is the poor who have the smallest resources with which to weather environmental degradation.

Corruption can also have ugly and unpredictable consequences for the (Western) briber. As soon as he pays he begins to lose control. If he does not get what he paid for he is in no position to complain. Having broken the law he is vulnerable to blackmail. If he tries to break the corrupt relationship he may face a variety of threats, including the threat of violence.

Synthesis Questions

Consider the following hypothetical example: An American college seeks to obtain a good image among Chinese educational regulators and accreditors by inviting a number of them, all expenses paid, to a week-long conference in Hawaii. Is this morally acceptable? Does it constitute a form of bribery? Why or why not?
In the past two decades, a number of very large corporations have paid large fines for corrupt behavior. Presumably, the executives who authorized the payments were highly-educated, experienced, professional people. Why do you think they failed to speak up against the corruption?
This chapter explores the concept of guanxi. Do you think guanxi is morally wrong, or rather, is an acceptable form of traditional practice that must be allowed to continue? What are the prospects for guanxi in the future?

1. “Clean Business is Good Business,” International Chamber of Commerce, Transparency International, the United Nations Global Compact and the World Economic Forum Partnering Against Corruption Initiative (PACI), accessed Nov. 26, 2014, https://d306pr3pise04h.cloudfront.net/docs/issues_doc%2FAnti-Corruption%2Fclean_business_is_good_business.pdf .

2. Sharon Eiher, “Corruption in International Business: The Challenge of Cultural and Legal Diversity,” Wichita, KS: Friends University, accessed October 29, 2013, https://web.archive.org/web/20181212135130/https://www.routledge.com/posts/9236 .

3. “International Business Attitudes to Corruption: Survey 2013.” Control Risks Groups Limited, accessed Nov. 26, 2014. https://www.littler.com/files/International_business_attitudes_to_corruption1.pdf .

4. Theresa Tedesco, “Anti-Corruption High on Corporate Agenda, Low in Practise: UK Study,”n Financial Post , July 15, 2013, http://business.financialpost.com/2013/07/15/anti-corruption-high-on-corporate-agenda-low-in-practise-u-k-study/ .

5. “Corruption Perceptions Index 2013.” Transparency International, accessed Nov. 26, 2014. http://www.transparency.org/cpi2013/results.

6. “Corruption ‘will cost Germany €250 billion.’” The Local, March 16, 2012. http://www.thelocal.de/20120316/41373.

7. Dow Jones Risk and Compliance. “Dow Jones State of Anti-Corruption Compliance Survey,” Dow Jones, March 31 2011, http://www.dowjones.com/pressroom/SMPRs/DJACCSurvey2011.html .

8. Mukti Jain Campion, “Bribery in India: a Website for Whistleblowers,” BBC News, June 11, 2011, accessed on December 3, 2014, http://www.bbc.co.uk/news/world-south-asia-13616123.

9. Kaufmann, Daniel. “Corruption: The Facts.” Foreign Policy, Summer 1997. 114-131. https://www.jstor.org/stable/1149337 .

10. Richard Cassin, “France’s Total SA Cracks Our Top 10 List,” FCPA Blog, May 29, 2013, http://www.fcpablog.com/blog/2013/5/29/frances-total-sa-cracks-our-top-10-list.html# .

11. “A Resource Guide to the U.S. Foreign Corrupt Practices Act.” U.S. Dept. of Justice, accessed Nov. 26, 2014. http://www.justice.gov/criminal/fraud/fcpa/guide.pdf.

12. Sommerville, Quentin. “China Communists Get New Anti-Corruption Ethics Code.” BBC News, Feb. 24, 2010. http://news.bbc.co.uk/2/hi/asia-pacific/8533410.stm.

13. “Chinese Premier Renews Call for Fight Against Corruption.” Xinhua News. March 25, 2011. http://news.xinhuanet.com/english2010/china/2011-03/25/c_13798577.htm.

14. Sharma, Yojana. “Beijing Wants More In-Depth HE Links with Europe.” University World News. May 11, 2013. http://www.universityworldnews.com/article.php?story=20130510160844829.

15. Bray, John. “Facing Up to Corruption: A Practical Business Guide.” Control Risks Group Limited. 2007. .https://web.archive.org/web/20150525063828/https://giaccentre.org/documents/CONTROLRISKS.CORRUPTIONGUIDE.pdf .

16. Chen, Lu. “Employment Rate for China’s College Graduates Lowest Ever.” Epoch Times. August 5, 2014. http://m.theepochtimes.com/n3/843094-employment-rate-for-chinas-college-graduates-lowest-ever/.

17. “Why Foreign Colleges Are Entering China.” CNN.com. July 2, 2013. https://web.archive.org/web/20230202074043/https://schoolsofthought.blogs.cnn.com/2013/07/02/why-foreign-colleges-are-entering-china/ .

Good Corporation, Bad Corporation: Corporate Social Responsibility in the Global Economy Copyright © 2016 by Guillermo C. Jimenez and Elizabeth Pulos is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

Business Ethics and Problem of Bribery Case Study

To find inspiration for your paper and overcome writer’s block
As a source of information (ensure proper referencing)
As a template for you assignment

Introduction

Definition of business ethics, unethical practice.

Ethics is one of the fundamental aspects of a business organization. The same moral codes that govern a person’s deeds also regulate commercial activities. Behaving in an ethical manner includes differentiating between right and incorrect and then choosing the right option. This paper defines business ethics. It also identifies bribery as one of the most serious unethical issues in business and proposes solutions to overcome it.

Business ethics is defined as the moral standards that regulate business activities. The law is an important feature of business ethics. Most countries have laws that regulate business activities. For instance, there are legal procedures that must be followed when registering a company in the US. Furthermore, a company should carry out its activities within the legal framework. Majority of multinational companies have elaborate business principles, which guide their activities.

The business principles of a company are often formulated in close consultation with workers, government institutions, and local communities. Business ethics is significant because it enables a company to create a good relationship with consumers, government, and other organizations. For instance, a company should ensure that its activities do not contravene human rights and business principles.

Unethical business practices are numerous. Some of the common unethical business practices include abuse of labour laws, corruption, discrimination, and environmental degradation. More often than not, developed countries have clear-cut business ethics, which must be followed by all companies. On the other hand, many developing nations lack business ethics. Hence, some companies engage in unethical practices in developing counties.

For example, corruption is rampant in many developing counties because they lack stringent business laws. Thus, some multinational companies often engage in fraudulent activities in developing countries due to lack of stringent laws. Indeed, multinational companies that engage in fraudulent activities are unethical because they take advantage of loopholes in developing nations.

Bribery is the most serious offense because it encourages other immoral activities in business. Bribery is an intricate malpractice that can be carried out in various ways. Some companies bribe government officials to support their business interests. A corrupt company is likely to violate ethical codes in business. For example, a corrupt company that violates legal procedures can easily circumvent punishment by bribing government officials and magistrates. Thus, bribery is the most serious unethical behaviour in business.

Although bribery is an intricate challenge in business, it can be solved through the following mechanisms. First, proper legislations should be enacted to regulate business activities. For example, some companies engage in corruption due to ambiguous business laws. Second, law enforcement should be executed properly to mitigate corruption.

Companies that violate business ethics should be penalized to deter others from going against the law. Third, ethics should be emphasized in social, economic, and political institutions because corruption is widespread. Thus, corruption can be mitigated through a concerted effort of workers, employees, consumers, and government officers.

The essay has demonstrated that business ethics is significant because it regulates commercial activities. Business ethics prevents violation of workers’ rights. In addition, it fosters good relationship between organizations and consumers.

Consequently, unethical business activities such as bribery and abuse of labour laws should be discouraged because they create many challenges in the business environment. Unethical business practices such as corruption and childe labour can be discouraged through enactment and proper implementation of laws.

H&M Company Ethical Culture Analysis
Livestrong and Apple Companies Ethical Dilemmas
Bribery and Gift-Giving Policies at Companies
Bribery vs. Lobbying: Key Differences
Ethics of Bribery Cases in Cuyahoga County
Edelman Company Code of Ethics and Business Conduct
The Church as a Business Organization
Dishonesty and Warranties
Business Ethics: "Liar’s Poker" by Michael Lewis
Twitter Company's Code of Business Ethics
Chicago (A-D)
Chicago (N-B)

IvyPanda. (2020, April 9). Business Ethics and Problem of Bribery. https://ivypanda.com/essays/business-ethics-and-problem-of-bribery/

"Business Ethics and Problem of Bribery." IvyPanda , 9 Apr. 2020, ivypanda.com/essays/business-ethics-and-problem-of-bribery/.

IvyPanda . (2020) 'Business Ethics and Problem of Bribery'. 9 April.

IvyPanda . 2020. "Business Ethics and Problem of Bribery." April 9, 2020. https://ivypanda.com/essays/business-ethics-and-problem-of-bribery/.

1. IvyPanda . "Business Ethics and Problem of Bribery." April 9, 2020. https://ivypanda.com/essays/business-ethics-and-problem-of-bribery/.

Bibliography

IvyPanda . "Business Ethics and Problem of Bribery." April 9, 2020. https://ivypanda.com/essays/business-ethics-and-problem-of-bribery/.

Governance | Risk | Compliance | Anti-Bribery

Governance I Risk I Compliance Management

Major Bribery and Corruption Cases in Malaysia

In 2021, a total of 851 civilians and public officials in Malaysia were arrested for corruption, as per statista.com. This indicates a slight decrease in arrests related to corruption in a country with a slightly above average score in terms of the Corruption Perception Index, though Malaysia can be credited with implementing measures to tackle corruption and bribery.

Combating corruption has gradually been rising to the top of policymakers’ and company agendas. Even though it has long been a prevalent issue, there is a greater awareness today of the negative implications of corruption on both the social and economic development fronts.

How to tackle corruption cases in Malaysia?

Cases such as the Sabah Water Department, 1MDB, Port Klang Free Zone (PKFZ) and Immigration Department Scandal in the last five years illustrate how corruption and bribery are deeply embedded within Malaysia’s political and Government institutions. Statistics suggest that the increasing number of agencies that aim to combat corruption are running into a dead wall. However, adopting newly devised measures such as corporate liability for corruption offences coming into effect in Malaysia could be a turning point for tackling corruption and bribery.

Corruption is regarded as a complex, multifaceted phenomenon. Nevertheless, it is widely defined as the abuse of public power and violation of rules for private gains. Whilst there is a perception that it is carried out primarily by government officials, corruption can occur across various sectors and be executed by those other than government officials.

Corruption cases in Malaysia include bribery, extortion, fraud, embezzlement, blackmail, illegal gambling, laundering and nepotism, all of which encompass the abuse and misuse of public power and authority. This includes public officials taking or offering bribes through money or service, which is dishonest. Subsequently, it is often the abuse of trusted power for personal gain. It is considered a consequence of poor governance and undermines the state’s legitimacy.

The impact of corruption cases in Malaysia

Corruption has social, political and economic impacts, which arises through the distortion of law and weakening of institutional foundation on which economic growth depends. Furthermore, it threatens democracy, contributes to the unjust distribution of income and burdens taxpayers. On a wider national level, it undermines free and fair trade. Although corruption has negative implications wherever it is present, the impact on developing nations is often heightened.

Corruption reduces the economic resources available to address social, economic, and political issues that may hinder development. This issue impacts society the greatest by impeding economic growth, government expenditure, and investment. It is a greater detriment to the poor, worsening income inequality and poverty. From a business perspective, it additionally reduces the efficiency of firms and increases the costs of business.

Combating corruption and promoting integrity has become a key aim within Malaysia due to how corruption has occurred and its evident impact on the social, political and economic landscape. It is estimated that corruption may cost up to RM10 billion a year within Malaysia, equivalent to 2.3 billion $USD. It is estimated that this accounts for up to 2% of Malaysia’s Gross Domestic Product (GDP). The Asian financial crisis has acted as a catalyst for combating corruption, shifting public perception of corrupt practices and, in turn, bringing it to the forefront of public policy.

What the statistics say

Malaysia is the 62 least corrupt nation out of 180 countries, according to the 2021 Corruption Perceptions Index reported by Transparency International.

Data suggests that efforts to combat corruption in Malaysia have been futile. This includes over 66% of the public believing that there has been no improvement to the transparency and integrity levels within the public and private sectors. In addition, in 2007, 47% of corporate managers revealed that they had been involved in bribery within the past 12 months or knew someone who had been involved with bribery within the past 12 months. The highest levels of corruption were found within the police, followed by other enforcement agencies such as customs departments and roads and transport.

In 2020, according to Pricewaterhouse Coopers (PWC), the four most disruptive forms of fraud experienced in Malaysian organisations were asset misappropriation, bribery and corruption, customer fraud and cybercrime (see table below). These account for 70% of all economic crimes in Malaysia.

Figure 1: Malaysia’s Corruption Perception Index (CPI) score from 1995 to 2019.

The four most disruptive forms of fraud in Malaysia in 2020.

In addition, public procurement is considered a key sector in Malaysia in which corruption is high. In such instances, Malaysian companies are favoured over foreign competitors due to political connections.

Addressing corruption

The previously highlighted impacts of corruption have encouraged an extensive list of measures to tackle corruption within Malaysia, as seen in Table 1. The Malaysian Government has acknowledged the harmful nature of corruption to economic growth. It has led to many bodies being given the responsibility to address corruption and have implemented many steps to ensure its minimisation and eventual eradication. Combating corruption promotes integrity within society.

Efforts to combat corruption within Malaysia began with the Anti-Corruption Agency set up in 1967. This included the Malaysian Administrative Modernisation and Management Planning Unit, the anti-corruption Agency, the Auditors General Office, the Public Accounts Committee, and the Public Complains Bureau. Early successes included the prosecution of several political leaders and senior civil servants.

Nevertheless, corruption remained high. Research has, however, found that these institutions are ineffective at combatting corruption through continued cases of unlawful transactions and misconduct. However, since 2003, corruption has been high on the agenda of government strategies, with 2003 marking the admittance of Prime Minister Abdullah Ahman Badawi, who declared that fighting corruption would be a key and prime priority. This led to several new initiatives, including the National Integrity Plan in 2005, which aims to promote a culture of integrity.

This was followed by the Malaysian Institute of Integrity (MII), which supports and coordinates and implements the NIP. More recently, the governmental Transformational Program has been introduced to enhance the effectiveness of combating corruption. This includes the Malaysian Anti-Corruption Commission (MACC), which began operation in 2009, reporting to a Parliamentary Special Committee on Corruption.

The four most disruptive forms of fraud in Malaysia in 2020

Two of the early agencies aimed to table corruption.

Name	Date of establishment	Aim	Powers
Anti Corruption Agency (ACA)	1967	Preventing and eradicating all forms of corruption, misuse of power	Investigate, interrogate, address and prosecute offenders. Access documents and witnesses, freeze assets, seize passports. Minor income and assets
Public Complaints Bureau	1990	Addresses alleged administrative lapses and abuse in dealing with public bureaucracy.	Receives and investigates complaints from public dissatisfaction with government administration

Cases of corruption and bribery

There has been a high level of corruption cases in Malaysia – ongoing for decades despite increasing efforts to combat these issues. A number of these cases will be explored, establishing the levels of corruption they entailed and how they were investigated and came to light.

The case of the 1MDB (2015)

One of the most prominent corruption cases in Malaysia involves the former Prime Minister of Malaysia, Najib Razak, known as the 1 Malaysia Development Fund Bhd (1MDB). This corruption case involved the embezzlement of billions of US dollars facilitated by the false declaration by officials. The 1MDB was set up in 2009, initially launched at the Terengganu Investment Authority (TIA). It developed as a network of joint ventures between Aarbar Investments PJSC and Petro Saudi International. It is estimated that more than US$ 6.5 billion flowed through the 1MDB, financing the spending of corrupt officials and their associates.

In addition to embezzlement and bribery, money laundering was a component of the 1MDB scandal, which involved receiving and retaining money from sources and disguising or failing to investigate its origins. This violated the anti-money laundering laws within Malaysia, with banks acting as intermediaries and beneficiaries, which is in breach of their anti-money laundering compliance requirements. In addition, false declaration and bond mispricing between 2009 and 2014 were forms of corruption within this scandal, including the false declaration of 1MDB funds to banks in Malaysia. Recipients of these false declarations included Bank Negara (Malaysian Central Bank).

Investigations of the 1MDB scandal in 2015 highlighted several reasons why such an extensive corruption and bribery case occurred. It was found that governance systems in place were defective, leading to weak control over spending, lending and investment within 1MDB. This includes decisions made outside the board of directors and the board being fed false and inaccurate information, confirming that the Companies Act of 1965 of the Malaysian Code of Corporate Governance was not in compliance.

Since Najib was both Prime Minister and Chairman of the 1MDB Advisory Board, there was a strong lack of political will as there was no one above him to address the corruption. Political control further crushed attempts to deal with the corruption, which included removing the Attorney General from office and the harassment of the MACC officers. In addition, within Malaysian banks, and evidently internationally, there were weak internal rules against money laundering, which enabled such money flows.

As a result of the scandal, there were two key fallouts:

The Malaysian Government were forced to pay US$1.66 billion to debt servicing payments; and
There was significant erosion of trust within the public, particularly politicians and government officials.

The case of the Sabah Water Department (2010)

Before the previous case, the largest corruption scandal in Malaysia was considered to be the Sabah State Water Corruption scandal. This case involved the siphoning of RM3.3B worth of federal allocations for state rural water projects from 2010 onwards to top department officials. This is the equivalent of over 759 million $USD. The case arose due to complaints that water development project contracts were being distributed unfairly.

The two suspects who were investigated included the Director of the Water Department and the Deputy Director. It is estimated that these two civil servants amassed a sum of almost RM115 million (24 million $USD) due to their illicit activities. Such sums of money amassed due to the water department officials abusing their power to award contracts to 38 companies owned by their families or corrupt business officials.

As a result, an investigation was carried out by the Malaysian Anti-Corruption Commission (MACC), who subsequently confiscated cash, luxury cars, jewellery and watches amounting to RM 114.5M. Before the previous 1MDM corruption case, it was considered the largest amount of money confiscated by the MACC. Investigations revealed that many factors led to ongoing corruption taking place. This included the lack of systematic monitoring procedures which otherwise should have been in place to vet projects and irregular transactions. As a result, it led to the misappropriation of public funds, resulting in a weakened trust by the public of governance.

The case of the Port Klang Free Zone (PKFZ) (2007)

The Port Klang Free Zone (PKFZ) was a free trade zone at Malaysia largest port. Implemented in 2008, the project was designed to act as a hub for businesses to connect from over 120 countries due to its logistical location, which allowed for efficient business transactions.

A corruption case arose regarding Port Klang when it became evident that there were cost overruns of RM 3.5 billion, almost double the initial costs of RM 1.845 billion. There were reports that the Transport Minister at the time, Chan Kong Choy, had issued support for bonds which amounted to RM 3.7 billion without the Government’s approval. Pricewaterhouse Coopers was asked to conduct an audit to investigate the financial irregularities.

However, the audit found that the total cost amounted to RM 12.5 billion (almost 3 billion $USD), far higher than the initially suspected discrepancies. After these findings, an investigation was carried out by the Malaysian Anti-Corruption Commission (MACC) and the police, leading to many people being charged with misconduct, including involvement with administering and financing the PKFZ. Even though the MACC was successful in carrying out an investigation, it has been widely dubbed as the scandal with no culprit, undermining the efforts and effectiveness of the institution in tackling corruption.

The immigration department migrant scandal (2016)

This scandal occurred in 2016, involving the Malaysian Immigration Department, which is considered to have been part of long-standing small-scale corruption such as bribery. An internal probe revealed several forms of corruption, including the tampering of the online system within the immigration department, which allowed for the access of cash and the movement of individuals who were not in line with immigration rules.

This was a form of corruption, but it also aided in terrorist activities, as it is suggested that over 130 Malaysians were thought to have travelled to Syria and Iraq to fight with ISIS as a result of misconduct. It led to many arrests and charges for human trafficking and allowed the illegal movement of migrants in and out of the country.

The fallout of corruption cases in Malaysia

Although it is clear that there has been extensive effort to tackle corruption cases in Malaysia, it remains a significant issue with significant economic and social repercussions. The level of corruption has remained high, questioning the effectiveness of strategies in combating corruption. This includes the effectiveness of MACC, which aims to investigate corruption at higher levels. However, the fact that it is subservient to the Prime Minister’s department limits its capacity as a way in which to prosecute high profile corruption cases.

It is additionally key to highlight why corruption cases in Malaysia are rampant. Many factors have undermined anti-corruption policies, including failing to tackle political corruption and defects in Malaysia’s political systems, culture, and institutions. Further reasoning of the ineffectiveness of government initiatives that aim to tackle corruption includes low public support towards government efforts, the inability to address the root cause of this issue and reluctance and duplications (see table below).

Factors that affect Malaysia’s ability to tackle corruption.

In addition, greater corruption prevention strategies should be implemented. This includes corporate social responsibility practices, wherein a company’s risk of bribery and corruption should be assessed and mitigated within the overall approach to corporate social responsibility. This will ensure that corruption cases in Malaysia are tackled from within the government, rather than focusing on external ways to track and investigate corruption.

However, the MACC Act 2009 has introduced a new amendment, including within section 17A, which aims to enhance how corruption is tackled by adopting new penalties. The introduction of corporate liability for corruption offences has come into effect in June 2020, which essentially means that if there are any forms of corruption within a business, those involved in the management of its affairs, be it officers, partners, or directors, could be personally liable for the same offence. The only way to avoid liability is to exercise due diligence known as ‘Adequate Procedures’, which commercial organisations in Malaysia are expected to implement by 1 June 2020. Non-compliance is severe, resulting in penalties of RM1 million (230,000 $USD) and up to 20 years imprisonment.

The way forward

Because corruption cases in Malaysia are rooted in economic and political conditions, it is complex, making remedial efforts difficult. The significant impacts of corruption highlighted, including impeding economic growth, increasing income inequality and leading to poor trust in Government and political institutions, make it clear that eradication would benefit Malaysia’s economic, social and political landscape. This includes enhancing per capita income growth, leading to a greater flow of foreign investment and enhanced business growth.

Although widespread efforts have already been made through various old and new anti-government agencies and policies, these measures should continue to be enforced and adapted to minimise corruption cases in Malaysia in the future.

Demonstrating “Adequate Procedures” through ISO 37001 Certification

In complying with these guidelines and proving “adequate procedures,” public and private sector organisations should strongly consider the ISO 37001 certification process , which would provide proper assurance that the organisation has succeeded in establishing, implementing, maintaining, reviewing and improving its Anti-Bribery Management System.

ISO 37001 Anti-Bribery Management System is an internationally accepted standard that specifies the procedures an organisation should implement to prevent bribery while detecting and reporting any bribery incident.

The standard requires organisations to implement these procedures on a reasonable and proportionate basis according to the type and size of the organisation and the nature and extent of bribery risks faced. It applies to small, medium and large organisations in the public and private sector and can be implemented in any country. Though it will not guarantee that bribery will completely cease, the standard can help establish that the organisation has reasonable, proportionate and adequate anti-bribery procedures in place.

Zafar I. Anjum, MSc, MS, LLM, CFE, CII, CIS, Int. Dip. (Fin. Crime), MICA, MIPI, MAB Group Chief Executive Officer (Certified Fraud Examiner) (Certified International Investigator) (MSc Counter Fraud and Counter Corruption Studies, University of Portsmouth UK) (Master of Fraud and Financial Crime – CSU Australia) LL.M Legal Practice (Intellectual Property) t: +44 7588 454959 | e: [email protected] | LinkedIn

Building 30 years’ career in anti-corruption, compliance, risk management, fraud prevention, protective integrity, security and compliance, Zafar Anjum is a highly respected professional in his field. As a trusted authority in anti-bribery and anti-corruption, fraud risk assessment and prevention, corporate compliance evaluation, securities among corporate clients, government agencies and industry groups, he is known for creating stable and secure networks across challenging global markets. With an impressive educational background and his industry expertise, Zafar Anjum is often the first certified global investigator when multi-national EMEA corporations seek to close compliance, anti-bribery and anti-corruption or corporate security gaps.

Starting his educational background in 1989 with his Bachelor of Arts Degree; he then went on to earn a Master of Science in Counter Fraud and Counter Corruption University of Portsmouth in the United Kingdom along with specialised knowledge and certification in Fraud Investigations, Fraud and Financial Crimes, Corporate Fraud Control and Anti-Corruption. He was also awarded Distinction in Master of Fraud and Financial Crime and was included in the Executive Dean’s List of 2016 by Charles Sturt University, Australia.

All while continuing to earn his LL.M Legal Practice (Master of Laws) (Intellectual Property) from the University of Law in the United Kingdom, which he completed in February 2019. While enhancing further capabilities and competencies, specifically in the Bribery Risk Assessment framework, he is undertaking ICA International Diploma in Governance Risk, and Compliance, ICA International Diploma in Financial Crime and Prevention, ICA International Diploma in Anti Money Laundering from International Compliance Training Academy in the United Kingdom which is mapped and are also awarded in association with Alliance Manchester Business School, The University of Manchester.

His training and business acumen gives Zafar Anjum in-depth precision when dealing with fraud risk management, security consultations, crime investigations, crisis management, risk governance, event security and strategic threat management for industry leaders seeking proactive long-term risk prevention.

His leadership abilities create strong collaborative relationships among prevention teams, crime investigators, government officials, and business executives seeking dynamic solutions across international marketplaces.

For industries needing large project management, safeguard testing and real-time compliance applications, Zafar Anjum is the assurance expert of choice for industry professionals.

We’re here to serve you, Let’s Talk!

Previous post what are the sustainable development goals (sdgs), next post abac® is a registered member of the dqg, join the discussion one comment.

[…] here to read the full […]

ABAC Center of Excellence Limited GLOBAL HEADQUARTERS

Corporate research and investigations limited.

8th Floor, South Quay Building, 77 Marsh Wall, E14 9SH, London, United Kingdom

Liberty House Building Floor 7 Unit 711-712 - Trade Centre, DIFC Dubai, UAE

Suite 22.01A, Level 22 Menara Citibank 165, Jalan Ampang, 50450 Kuala Lumpur, Malaysia

MY: +603 2181 5058

UK: +44 203 874 4521

UAE: +971 50 903 8184

Toll: +971 800 274552

[email protected]

Our Locations

About ABAC™ Center of Excellence
Our Vision, Mission & Values
Our Clients
Quality Policy
Impartiality Policy
Confidentiality Policy
Terms and Conditions of Certification Policy
Use of UKAS Symbol Policy
Use of IAS logo
Retention of Client Records Policy
Anti-Bribery and Anti-Corruption (ABAC™) Policy
Risk Management Policy
Whistle Blowing (Whistleblower) Policy
Code Of Conduct And Ethics Policy
Employee Handbook Policy
Appeals Policy
Securities Commission Malaysia (SC) Code of Ethics
General Privacy Policy
Privacy notice
Candidate Privacy Notice
Complaints and Disputes Policy
Use of ABAC Certification Mark Policy
USE OF EIAC ACCREDIATION SYMBOL
Use of STANDARD MALAYSIA Accreditation Symbol Policy
Our Certification Process
Client Information Form
Client Risk Profile Form
Customer Feedback Form
Customer Complaint Form
Appeal Form (Certification Decision)
Our Accreditations
Client Risk Profile
ISO Certification
ISO 37000 Governance
ISO 37001 Certification
ISO 37001 Certification Process
ISO 37002 Whistleblowing
ISO 37301 Compliance
ISO 31000 Risk Management
Verify an organisation’s certificate
Integrated Management Systems
All Training
ISO 37001 Courses
ISO 37001 Introduction
ISO 37001 Internal Auditor
ISO 37001 Lead Auditor
All WMS Courses
ISO 37002 Introduction
All CMS Courses
ISO 37301 Introduction
ISO 37301 Foundation
ISO 37301 Lead Implementer
All RMS Courses
ISO 31000 Introduction
ISO 37000 Governance of Organization
Anti-Money Laundering
Verify Training Certificate
Training Feedback Survey
ABAC™ Malaysia & Asia Pacific
ABAC™ UK & Europe
ABAC™ UAE & Middle East
Events Gallery
Get A Quote

Certification Request

Send enquiry, enquire for – online/instructor-led, enquire for – plan b, enquire for – plan a, enquire for – online/self-paced, registration form.

IMAGES

Case study bribery
Business Ethics and Problem of Bribery
13 Brilliant Case Study Examples To Be Inspired By (2024)
PPT
The Causes of Commercial Bribery Crime (400 Words)
Case Study 3 Bribery

VIDEO

Top 10 Case Studies of Successful Online Community Campaigns
ALARM Conference: Insurance Fraud Experts
Legacy of bribery (KIAR assignment)
Two-thirds Indians have to pay bribe, highest in Asia Pacific: Survey
Inside the ‘fraud and bribery’ that sank $1bn company
ALARM Conference: Social Care and Local Authority Experts

COMMENTS

The Biggest Bribery Cases In Business History
Learn about five corporate bribery scandals that involved U.S. and foreign companies, and the penalties they faced. The cases include KBR, Siemens, BAE Systems, and Alcatel-Lucent.
Top 10 Bribery & Corruption Stories of 2020 (so far)
In no particular order, here are 10 of the top bribery and corruption stories we've seen so far in 2020. Airbus. In February, French-based Airbus agreed to pay a record $4 billion in fines for ...
A case study in bribery violations
The scheme. Here's a summary of Ericsson's US Foreign Corrupt Practices Act (FCPA) violations, as outlined by the US Department of Justice (DOJ): In Djibouti, an Ericsson subsidiary directed nearly $2.1 million in bribes to high-ranking government officials in order to secure a $23 million telecom contract with a state-owned company.
Lessons from the massive Siemens corruption scandal one decade later
Published: December 13, 2018 7:26am EST. The headquarters of Siemens, Europe's largest engineering company, in central Munich. Shutterstock. The Siemens scandal needs to be remembered because it ...
Top 10 Bribery and Corruption Cases of 2019
Learn about the most eye-popping bribery and corruption scandals that made headlines in 2019, involving companies such as Juniper Networks, Alstom, Microsoft, KPMG and Samsung. See how they violated the FCPA, paid millions in fines and faced legal consequences.
JP Morgan: A bribery case study
We will use a case study to illustrate these three points in more detail. In late 2016, JP Morgan reached a settlement with the US Securities and Exchange Commission (SEC) and other regulators to settle charges of violating the Foreign Corrupt Practices Act (FCPA). The bank paid $264 million after facing charges of corruptly influencing ...
Top 10 Bribery & Corruption Stories of 2020
In no particular order, here are 10 of the top bribery and corruption stories we've seen so far in 2020. #10. Airbus. In February, French-based Airbus agreed to pay a record $4 billion in fines for alleged bribery and corruption spanning at least 15 years. The company reached a plea bargain with prosecutors in Britain, France and the United ...
15 Biggest Bribery Cases in Business History
In this article: KBR. TTFNF. LHX. GS. 15 biggest bribery cases in business history 5 biggest bribery cases in business history. NYSE:GSK. carlosyudica / 123RF Stock Photo. Story continues.
New anti-bribery case studies
The BPN has launched a series of new case studies to support businesses working through the challenges associated with preventing, detecting and addressing bribery and corruption. Each case spotlights a different anti-bribery issue or procedure, including: Implementing an anti-bribery and corruption policy. Implementing a whistleblower policy.
Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2
The Goldman Sachs Group Inc. (Goldman Sachs or the Company), a global financial institution headquartered in New York, New York, and Goldman Sachs (Malaysia) Sdn. Bhd. (GS Malaysia), its Malaysian subsidiary, have admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain ...
A Fraud Case Study: Airbus's Massive Bribes
Corruption and bribery. The Airbus fraud case is a fascinating case study because it illustrates large-scale corruption. The Association of Certified Fraud Examiners (ACFE) notes that there are four different forms of corruption: conflicts of interest, illegal gratuities, economic extortion, and bribery.
How Companies Can Take a Stand Against Bribery
How Companies Can Take a Stand Against Bribery. Summary. In 2016, the International Monetary Fund estimated that corruption amounted to roughly 2% of global economic output - between $1.5 and $2 ...
Case Example: Coca-Cola's fight against corruption in Myanmar
All drivers driving Coca-Cola trucks carry an anti-corruption card on their person, which highlights Coca-Cola's commitment towards no bribery or facilitation payments. Available in Burmese and English, the anti-corruption card states that the drivers are prohibited from paying any bribes to the traffic police or local road transport authorities.
Conducting thorough due diligence
Step 2: Evaluate the target business's approach to anti-bribery and corruption compliance through due diligence. When undertaking due diligence, it is important to ask questions about how the target company manages anti-bribery and corruption risks. A desktop review is a good start, but should be followed up with interviews and requests for ...
A Handful of Unlawful Behaviors, Led by Fraud and Bribery, Account for
A comprehensive analysis of nearly 57,000 corruption cases in federal courts spanning 30 years revealed that fraud and bribery dominated the types of conduct underlying criminal cases, accounting for 76% of the lead charges in cases resulting in convictions. Those two unlawful behavior types, combined with extortion and conspiracy, broadly informed the lead charges in virtually all examined ...
Case Studies: Bribery, Corruption And Money Laundering
Case Study 2: 1MDB: How Malaysian Politicians Were Bribed And How The Money Was Funneled. The 1 Malaysia Development Fund Bhd scandal is one of the most serious corruption scandals on record.It involved the embezzlement and laundering of billions of US dollars from its accounts together with gains from bribery and bond pricing, facilitated by false declarations by the officials and others ...
The Bribery Scandal at Siemens AG
Background. Siemens AG is a German company with a long history of success and a good reputation in the technology industry (Ma 2012). It is also one of Europe's largest technology firms with a revenue base of over $77 billion according to Fernando, Purkayastha, and Bellamkonda (2010, p.2). In addition, the company has over 430,000 employees.
The Airbus Bribery Case Study: Six Corporate Liability Lessons for
The Airbus Bribery Case Study: Six Corporate Liability Lessons for Malaysian Companies. 5 February, 2020 Lee Shih. I set out six cautionary lessons for Malaysian companies arising from the Airbus US$4 billion global resolution for bribery involving authorities from the UK, France and the United States. In the UK, Airbus faced five counts of ...
How Managers Should Respond When Bribes Are Business as Usual
Corporate bribery—that is, the practice of companies paying government officials for preferential treatment — is not only illegal in dozens of countries. Studies show that it's also ...
10. Corruption in International Business
For example, a study by Control Risks and the Economist magazine's Intelligence Unit showed that while most companies acknowledge the need to combat bribery and corruption, many are complacent and unprepared to deal with scandals inside their own organizations. 3 The review of global attitudes on corruption surveyed more than 300 senior ...
Business Ethics and Problem of Bribery Case Study
Behaving in an ethical manner includes differentiating between right and incorrect and then choosing the right option. This paper defines business ethics. It also identifies bribery as one of the most serious unethical issues in business and proposes solutions to overcome it. Get a custom case study on Business Ethics and Problem of Bribery.
Major Bribery and Corruption Cases in Malaysia ABAC® Group
Corruption cases in Malaysia include bribery, extortion, fraud, embezzlement, blackmail, illegal gambling, laundering and nepotism, all of which encompass the abuse and misuse of public power and authority. This includes public officials taking or offering bribes through money or service, which is dishonest. Subsequently, it is often the abuse ...