Discuss about the Corporate Bribery and Corruption.
Corruption can be defined as the act of misusing the position of a person to commit any crime. The crimes committed by these people vary from theft to the solicitation of bribes. Bribery is not restricted to only the public sector officials now-a-days, in fact it is committed by many of the trusted employees in any organization to take advantage of a supplier or customer in a dishonest manner. The corporate bribery is an act of paying illegal inducements to a person or a firm in exchange for an illegitimate advantage. The case studies explained later indicate a few such cases of corporate bribery and corruption where the company owners or other powerful employees of the company have taken advantage of their positions and networking to benefit their organizations in a dishonest manner.[1]
Corporate bribery is one of the most prominent crimes in the corporate sector along with money laundering and anticompetitive behavior. These crimes bring the financial losses to the country and are damage to the reputation of both the company and the country. They also bring distraction and disruption to the company. These crimes arise when the businesses fail to adhere to the code of conduct established by the countries internationally. They bring a damage nit to the company but also to the country and affect the trade relations of a country as well.[2]
With the increased reporting of the cases of corporate bribery and corruption internationally, the need for the development of an International Convention to look into such matters and punish the guilty has increased. The OECD Convention on the Bribery of Foreign Public Officials has been established for the prevention of payment of bribes to the public officials. This Convention operates internationally for the corporate welfare.[3]
There have been many allegations on the companies of UK that are operating internationally, for receiving or making bribes. The government of UK has imposed many laws in order to prevent the cases of bribery in the corporate sector and in the companies that are operating in the international market such as the Bribery Act 2010 (discussed later in detail). Introduction of corporate failure for the prevention of economic crime is a provision under section 7 of Bribery Act Model. The country has also formulated a legal framework to align with the OECD Convention which is specifically acknowledged by OECD’s Working Group on Bribery. The UK Government has also adopted the measures to align with the UN Convention against Corruption with its Serious Organised Crime and Police Act 2005.[4]
Keppel Offshore and Marine is a company linked to the Singaporean government. This company has been reported to undertake many corrupt measures to make its business achieve heights. They are believed to pay money to a number of people and firms to accept their business over it competitors. They did not prefer to undertake the tender process and took the corrupt means to achieve high position in the market. Between 2001 and 2014, the company gave a massive amount of S$ 73 million as bribe to the people and firms. They bribed the influential people in Brazilian politics and oil sector to win the contracts for their business. Not only this, they spent an amount of more than S$ 563 million in paying the fines to the U.S., Brazil and Singaporean Governments to avoid going to the courts. The profits earned by Keppel were in excess of S$467.6 million.[5]
The given picture gives an account of the transfer of the funds as bribes by the Keppel O&M. As reported by the U.S. Department of Justice, the five authoritative executives of Keppel paid extensively large commissions to the intermediaries such as the consultants. Under the semblance of the consulting agreements that were legitimate. These intermediaries transferred the money to whosoever was concerned. The given screenshot gives an account of these illegitimate payments.[6]
They also passed the funds to the shell companies using global financial system such as the US banking system.
The company got caught up for its corrupt deeds when the Br4azilain Police noticed that a lot of money was transferred by a small petrol station in Brasilia. The police arrested a number of suspected money launderers and bankers in the case. Through this, they came to know about the illegitimate involvement of the then-ruling Worker’s party of Brazil in the case. The party received millions of dollars from Keppel O&M as bribes and used this money in their political campaigns too. The entire operation was named as operation Carwash where the Petrobras fuel company was exposed for its corrupt deeds. After Keppel was accused of these allegations, it started internal investigations on the officers involved in these acts, however, this investigation has no outcomes.[7]
The company was penalized with a massive amount of S$619 million including the legal, forensic and accounting costs. The sufferings came not only in the form of penalty, the company also suffered with the massive loss of S$495.8 million after the bribery deeds of the country got proved.[8]
The Rolls Royce is the engineering and the automobile giant who has established its worldwide recognition on the name of its products and class. The company makes the customized and on demand vehicles for the customers. Just a few years back, the firm faced the allegations for bribing the intermediaries in the six countries of the world for securing its orders. The countries were namely Russia, China, Indonesia, Thailand, India and Nigeria. The company admitted the allegations put on it. The following are some of the cases reported for bribery in the following countries-
The investigations were carried out on the company for bribery for 5 years after the multinational company was reported to have paid £13bn to different intermediaries to secure its contracts rather than winning them through fair means. The investigation initially began in US, UK and Brazil. According to the investigations of BBC Panorama and the Guardian, the company hired 12 countries as the commercial agents to secure its high end contracts. The British government never took this case seriously, as reported by the anti- corruption campaigners.[10]
After the bribery acts of the company were proved, the company signed a deferred prosecution agreement (DPA) with the Britain’s Serious Fraud Office where it agreed to pay an amount of £497m along with the interest and other costs to settle the above claims that were proved after the investigations being done since 2012. The company paid almost an amount of £700 million to settle its corruption and bribery allegations.[11]
The Royal Dutch Shell Plc and Eni SpA are the two companies that have been accused in the bribery and corruption act worth corruption act worth $1.1 billion which involved a field in Nigeria. The case began in 1998, when the military dictator in Nigeria allotted the Oil Prospecting License 245 to Malabu Oil and Gas Limited for retrieving the oil from the deep waters off the coast of Nigeria. The license, under the reign of the successive governments, was cancelled and offered to Shell at once and then awarded back to Malabu. In 2011, the reports came out that Shell bribed the government of Nigeria with $1.3 billion to nail the contract down forever. The Nigerian government did not keep the money, but passed it further into an escrow account.[12]
After the reports came out, the investigation began for sorting out the entire matter. The companies were p[robed by three nations and the Italian prosecutors have named Malcom Brinded (former head of production and exploration in Shell) and Claudio Descalzi (Chief Executive Officer of Eni) as the chief people involved in the scandal. Apart from them, 4 other executives of Eni and 3 other employees of Shell were also targeted in the enquiry. The anti-graft agency of Nigeria also filed the cases against the two companies.[13]
The trial for the case is still going on and the case has not reached its climax yet. The legal [proceedings are still going on. The trial has been postponed till July 2018. The Dutch Financial Intelligence and investigation services are also investigating the case along with the Public Prosecutor.[14]
Patrick Hi is a renowned political figure in China. He was allegedly charged for offering bribes to the political figures of Africa for securing the oil rights for the Conglomerate of China. The Chinese Minister was accused for offering a bribe of $2 million to the President of Chad and for securing these oil rights. Not only this but Ho was also accused of bribing the then President of the General Assembly of UN with a massive amount of $500,000 for rendering then business advantages using the banking system of New York. Ho was engaged in eight cases of bribing including these. He was condemned worldwide after his bribery deeds were exposed.[15]
The Minister was accused of these bribery cases and was arrested in November 2017, along with Cheikh Gadio (the failed presidential candidate of Senegal). They were arrested in New York on the charges of money laundering and multiple bribery. The trial date for Ho is set for 5th November, 2018. The accused pleaded not as guilty in a federal court on 9th January and has challenged six out of eight allegations that are imposed on him. The case is still runni8ng in the US courts and Ho has been constantly denying the allegations put on him and has been spending time behind the bars despite of his ailing health.[16]
There have been efforts made by the local as well as the international bodies for reducing the acts of bribery on an international scale. One such convention is OECD Convention for fighting Bribery of Foreign Public Officials (1997). The OECD =has issued the guidelines to the member countries to treat the cases of corporate bribery as the criminal offences and carry out the legal proceedings to punish the government employees involved in these cases. This convention has brought consistency and uniformity in the international definition of bribery but the implementation of the guidelines laid by this Convention still varies in different jurisdictions. Many of the countries, such as UK, have passed the legislations to classify the acts of corporate bribery as the criminal offence. But many nations are still struggling to introduce these guidelines as legislations.[17]
The Keppel case violated the guidelines of OECD as the government employees were involved in carrying out the illegal transactions or bribery. Since, the legislations have not been passed in Singapore marking bribery as the criminal offence as per OECD, the Convention was not involved in its investigation.
The Foreign Corrupt Practices Act (FCPA) also established the civil as well as the criminal; penalties for extending the bribes to the foreign officials for keeping the business, either the use of agents or directly to secure contracts or any other improper advantages in order to retain or obtain business. This act implies to the companies which are registered under the US exchange. The US Federal authorities issue large penalties for the companies which are found to have violated the FCPA.[18]
The Bribery Act 2010 was brought into action tom update the UK law on corporate bribery. The Act also contains certain provisions for foreign bribery to fulfill the requirements of OECD Convention against bribery. It is one of the strictest legislations against bribery. To fulfill the requirements under this Act, the companies need to prove the legitimacy of their procedures in order to prevent bribery. The Act provides the criminal procedures for both the active and passive involvement of the individuals in the cases of bribery. This act came into force in 2011.[19]
It included the criminal offences of-
The Act holds great significance for the companies who are carrying out their businesses in UK. To protect themselves from the liabilities for bribery, the companies need to implement strict, updated and efficient anti-bribery systems and policies. This was understood by the Rolls Royce Company and the strict legislations of the company and its alignment with OECD made the company admit its bribery stories. This was the strict legislation of UK which made the investigation of bribery deeds on the company go smoothly and result into the acceptance of the bribery cases by the company. This has also been possible due to the extra territorial reach of the Act for the companies of UK operating within UK or outside its boundaries.
This act included the provisions for the organizations to be found guilty of the corporate manslaughter due to management failures which further results into the breaching of the duty of care. The act came into force in 2008.It gives an account of the criminal liability of the companies where the serious failures in the management of the safety and health of the organizations may result into fatality.[21]
This is an act brought into force in 2000 by the Parliament of UK. The part one of the act, also known as the regulator is managed by the Financial Conduct Authority. This act has many provisions including the maintenance of financial stability, protection of consumers and such others. It also includes the provision for controlling the bribery as a means of reducing the financial crime.[22]
This ace came onto action in 2013. This act was introduced in order to bring several changes into the judiciary of UK. Some main provisions of this Act were-
This Act was important to bring modifications in the acts, such as the bribery acts, on time and make the decisions of the cases rapid as many of the cases take a lot of time to be resolved as seen in above case studies.
The UK government has taken the guidelines offered by OECD seriously and has taken strict measures to control the bri8bery related activities. However, it has certain loopholes. There are certain proposals mentioned in the Ministry of Justice 2017, Criminal Liability in Regulatory Context, The Law Commission paper no.195. According to them, if the liability of one person in an organization depends upon the commission of a crime by some other person, the individual liability of first person must not arise until and unless the awareness of the offence engaged in by the second person is proven. Therefore, when the company is held liable themselves for committing any criminal or bribery offence appropriately, it is not appropriate to provide that the individual director of the company is liable for a separate offence of failing to prevent that offence due to negligence.[24]
The other recommendations that can be put forth to improve the currently existing bribery frameworks all across the world are-
References
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Law Society. (2018). Crime and Courts Act 2013. Retrieved from www.lawsociety.org.uk: https://www.lawsociety.org.uk/communities/solicitor-judges-division/articles/crime-and-courts-act-2013/
Albanese, C., Pasquale, S. D., & Katakey, R. (2017). How Shell, Eni Got Enmeshed in $1 Billion Scandal: QuickTake Q&A. Retrieved from www.bloomberg.com: https://www.bloomberg.com/news/articles/2017-05-09/how-shell-eni-got-enmeshed-in-1-billion-scandal-quicktake-q-a
Callus, A. (2013). Shell under the skin, 10 years after crisis. Retrieved from www.reuters.com: https://www.reuters.com/article/us-shell-decade/shell-under-the-skin-10-years-after-crisis-idUSBRE94S1GL20130529
Cheng, K. (2017). Explainer: Patrick Ho’s bribery allegations – from top Hong Kong official to US police custody. Retrieved from www.hongkongfp.com: https://www.hongkongfp.com/2017/11/21/explainer-patrick-hos-bribery-allegations-top-hong-kong-official-us-police-custody/
Edmonds, T. (2017). Corporate Economic Crime: bribery & Corruption. parliament.uk.
Evans, R., Pegg, D., & Watt, H. (2017). Rolls-Royce to pay £671m over bribery claims. Retrieved from www.theguardian.com: https://www.theguardian.com/business/2017/jan/16/rolls-royce-to-pay-671m-over-bribery-claims
Gov.uk. (2000). Financial Services and Markets Act 2000. Retrieved from assets.publishing.service.gov.uk: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/81410/consolidated_fsma050911.pdf
HSE. (2018). About corporate manslaughter. Retrieved from www.hse.gov.uk: https://www.hse.gov.uk/corpmanslaughter/about.htm
ICAEW . (2018). Bribery and Corruption. Retrieved 2018, from https://www.icaew.com/technical/legal-and-regulatory/business-crime-and-misconduct/bribery-and-corruption
ICAEW. (2018). International and foreign law on bribery and corruption. Retrieved from www.icaew.com: https://www.icaew.com/technical/legal-and-regulatory/business-crime-and-misconduct/bribery-and-corruption/international-and-foreign-law-on-bribery-and-corruption
Institute of Business Ethics. (2012). Anti?Bribery & Corruption (ABC). www.ibe.org.uk.
Market Poundations Initiative. (2010). Business and economic crime in an international context. ICAEW.
Marsh, J. (2018). How a Hong Kong millionaire’s bribery case exposes China’s corruption problem in Africa. Retrieved from edition.cnn.com: https://edition.cnn.com/2018/02/09/world/patrick-ho-corruption-china-africa/index.html
OECD. (2017). Implementing the OECD Anti-Bribery Convention. OECD.
PwC. (2014). Economic Crime:A Threat to Business Globally. PwC.
Serious Fraud Office. (2016). Annual Report and Accounts 2015-2016. House of Commons.
Tan, J., & Zheng, Z. (2018). Keppel O&M corruption scandal, explained. Retrieved 2018, from https://mothership.sg/2018/01/what-is-the-keppel-corruption-scandal-all-about/
the Law Commission, UK. (2015). Criminal Liability In Regulatory Contexts; Consultation Paper No 195 . lawcom.gov.uk.
Tovey, A. (2017). Rolls-Royce to pay £671m to settle bribery and corruption claims. Retrieved from www.telegraph.co.uk: https://www.telegraph.co.uk/business/2017/01/16/rolls-royce-pay-almost-700m-settle-bribery-corruption-claims/
Transparency International UK. (2018). The Bribery Act. Retrieved from www.transparency.org.uk: https://www.transparency.org.uk/our-work/business-integrity/bribery-act/#.Wt8AqNRubox
Ward, A. (2018). Eni and Shell’s Nigerian bribery trial delayed. Retrieved from www.ft.com: https://www.ft.com/content/c805bdb4-206a-11e8-a895-1ba1f72c2c11
Watt, H., Pegg, D., & Evans, R. (2017). Rolls-Royce apologises in court after settling bribery case. Retrieved from www.theguardian.com: https://www.theguardian.com/business/2017/jan/17/rolls-royce-apologises-bribery-671m-uk-us-brazil
Woo, J. (2018). Penalty for Brazil corruption charges drags Keppel Corp into the red with Q4 loss of S$495.8m. Retrieved from www.businesstimes.com.sg: https://www.businesstimes.com.sg/companies-markets/penalty-for-brazil-corruption-charges-drags-keppel-corp-into-the-red-with-q4-loss
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