International, Security

Bribery, Felony or Line Item?

RR BriberyAre we all felons bribing our way though international commerce or victims of corruption, forced to pay the price of admission?

Let’s face it. Bribery is a cottage industry in many countries—part of their cultural DNA. The sad truth is that buying and selling influence is often the grease that lubricates the wheels of global commerce.

In Spain, it’s “mordita”– the bite. In French, “dessous-de-table,” loosely under the table. In German, it’s “schmiergeld” or smoothing money and in the Middle East the ancient Persian practice of “baksheesh” or gratuity has been common currency for a thousand years.

Is it illegal? Unethical? Should it be condemned or condoned as simply the cost of doing business? And who’s really to blame? Is it the country that turns a blind eye to the problem or the local bureaucrat supplementing his salary? Or, should we punish companies that pony up to get things done during a period of difficult economic growth?

Russia is a case in point. It became one of the most corrupt major economies on earth thanks to the constraints of communism.

Today, Russia’s curious brand of capitalism is immersed in bribery and corruption. For instance, it may take 18 to 20 departmental approvals for a retailer to get a store open. Your basic apparatchik doesn’t offer a stamp of approval without getting something for services rendered?

For Russian companies doing business overseas, bribery is simply another line item. The government’s response? The Russian Foreign Ministry recently told executives that payoffs can’t be claimed as tax deductions.

Some companies choose not to participate. In 2005, the multinational retailer Carrefour pulled out of Mexico because of the level of corruption it encountered, according to insiders.

Walmart’s alleged payoffs to Mexican officials—now estimated at $24 million—violated 1977’s Foreign Corrupt Practices Act (FCPA), which has ensnared many a Fortune 500 company.

Internal investigations by the Bentonville Behemoth have led to the $30 million reorganization of its compliance department under the auspices of Jay Jorgensen, a high powered Washington attorney who was named global chief compliance officer.

Meanwhile, the company recently expanded the investigation to China, India and Brazil, some of Walmart’s most important markets. If you add Russia to the mix, all the BRIC nations are represented.

It’s interesting to note here that China and India—the world’s factories—have declined to sign the 1997 accord by the Organization for Economic Cooperation and Development (OECD) to combat bribery in international markets. They won’t enforce it, but at least Russia signed it.

Meanwhile, prosecutions—domestic and international—have been largely non-existent since the financial crisis in 2008. To put it somewhat harshly, why crack down on something that may impede economic recovery?

In 2012, only about 15 actions were brought by the SEC against violators of the FCPA. Most companies simply settled without admitting or denying guilt—the nolo contendre defense.

Of course, not everything is on a global scale.

Maybe the corner deli gives the cop on the beat a free lunch for keeping an eye on the place. Perhaps you got a job for the wife of your kid’s Little League coach to get him a few more at-bats; slipped a few bucks to the union electrician at some trade show to get something done quicker; or got Superbowl tickets for members of the town council.

It all sounds innocent enough. But they are responses to the same competitive pressures that any company faces?

In the end, it’s unlikely that the lucrative business of bribes and corruption can be eliminated. But it’s up to industry leaders to establish a reasonable code of conduct and a culture of integrity.

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