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The companies that export corruption

Five foreign bribery cases that should change the way we do business

Illustration: Andrea Settimo © Transparency International

Airbus, Ericsson, Odebrecht, Rolls Royce, Halliburton...the list of multi-nationals that have been caught red-handed in systematic and widespread bribery schemes is long.

Since 2000, big corruption scandals such as those involving corporate bribery at Siemens, one of Germany’s biggest companies, or BAE Systems, Europe’s largest military contractor, sent shockwaves worldwide prompting public outrage and calls for increased enforcement against foreign bribery.

Previously, foreign bribery was considered just another cost of doing business. It was barely investigated, to the detriment of the citizens of the affected countries.

Sadly, ordinary people still suffer the biggest consequences.

Money lost to foreign bribery wastes millions of dollars that would otherwise go towards essential, and often lifesaving services, like health care and education.

Equally troubling, foreign bribery damages people’s trust in their government, which once lost, is hard to rebuild.

In the long run, corruption in international business transactions is also bad news for national and global economies.

It impedes cross-border investment, deters fair competition in international trade and discriminates against small and medium size companies.

Yet, companies from major exporting countries continue to use bribery to win business in foreign markets while many governments choose to turn a blind eye.

Today, we look back at some of the most recent cases of foreign bribery cited in the 2020 Exporting Corruption report that expose the extent of corporate corruption, and highlight specific issues as well as the long way many governments still have to go to address bribery in foreign markets.

Airbus

The breakthrough: In 2020, the world saw the largest foreign bribery resolution to date, as Airbus, a global provider of civilians and military aircraft based in France, agreed to pay nearly US$4 billion in combined penalties to the U.S., France, and United Kingdom to resolve foreign bribery charges. France played a huge role in holding the company to account, thanks to a recent law that helped reform their anti-corruption legal framework.


Issues highlighted in the report: Settlements with companies should include admissions of guilt and should not preclude prosecutions of responsible individuals. Also, the settlement e any victims’ compensation and showed an unwelcome shift away from self-reporting as a condition for a deferred prosecution agreement.

What’s at stake: In the words of Daniel Bruce, Chief Executive of Transparency International UK: “Large penalties are a quick and effective way to sanction companies for wrongdoing, but they should be one of a number of consequences for egregious corruption cases such as this. Individual prosecutions in this case are vital to ensure that justice is seen to be done. Failing to go after those involved will give the impression that big companies play by a different set of rules and can simply buy their way out of trouble.”

In addition, governments should ensure that the victims of corruption are compensated, and that the perpetrators face the consequences they deserve. They should also ensure that settlements are only used in cases of strong public interest, with utmost transparency and to help encourage self-reporting by others in the future. Settlements should also meet high standards of transparency, accountability and due process.

Odebrecht

The breakthrough: In Brazil, Operation Lava Jato revealed criminal schemes of a rare magnitude, and, in doing so, challenged powerful politicians and businesspeople in more than a dozen countries and on at least three continents. The investigations into Odebrecht, the construction company at the heart of the scandal, initiated in Brazil have effectively unravelled corrupt networks, recovering unprecedented amounts of public resources and prosecuting powerful individuals, many of whom have confessed to their crimes. It revealed both domestic and foreign bribery.

The operation was also crucial for bolstering a positive anti-corruption dynamic in Latin America thanks to the cooperation between Brazilian enforcement authorities and their foreign counterparts.

Issues highlighted in the report: The leniency agreements resulting from the Operation Lava Jato investigations, including those relating to foreign bribery, are only partially accessible to the public in heavily redacted, anonymised versions providing little information.

The annexes where the foreign bribery conduct is detailed remain under seal. This hinders public understanding of the offences committed and impedes independent evaluation of the proportionality and dissuasive effect of sanctions imposed.

What’s at stake: Enforcement authorities and members of the public in the affected countries are deprived of key information that would help them to follow-up on domestic bribery cases.

Some of the leniency agreements, such as the one with Odebrecht, include confidential provisions requiring implicated companies to seek out officials in other countries where they bribed to settle pending matters.

Such arrangements foster opaque deal-making and deprive the public of the information needed to pressure any reluctant law enforcement officials into fully investigating domestic aspects of the corruption scheme.

The Odebrecht case exposed a wide range of high-level corruption as well as challenges to enforcement and international cooperation across the continent.

Inter-American Water and Utility Society (INASSA)

The breakthrough: In 2018, the water conglomerate Inassa was fined 5 billion Colombian pesos (US$1.8 million) over charges of foreign bribery, as the Superintendency of Corporations stated that the firm allegedly either paid or offered bribes to public officials in Ecuador in 2016.

Issues highlighted in the report: As part of the decision, the regulator required the company to publish an extract of its ruling “in a medium of wide circulation and in a visible part of its website”. This was a welcome and innovative form of transparency about an enforcement outcome.

What’s at stake: This was s the first company to be fined for foreign bribery by the Superintendency of Corporations, the local enforcement body established by Colombia’s Transnational Corruption Act of 2016, designed to meet the requirements of the OECD Anti-Bribery Convention. There is a serious lack of transparency about enforcement information in most OECD Convention countries and the Colombian regulator showed a different approach.

Semlex

The breakthrough: In Belgium, in May 2020, Congolese citizens applied to be partie civile in a long-running corruption and money-laundering investigation by Belgian prosecutors of Semlex, a passport printing company operating in several countries in Africa, and the subject of two reports by Reuters. The deal made with Semlex increased the price of passports in the Democratic Republic of Congo (DRC) from US$100 to US$185, US$60 of which seems to go to an obscure Gulf company owned by a close relative of DRC’s President Joseph Kabila, according to Reuter’s reporting.

Semlex’ activities vary widely on the African continent and the company is alleged to be involved in several other foreign bribery cases implicating top African government officials, not all of which are under investigation. Reuters determined that on top of engaging in foreign bribery, Semlex might have sold passport to citizens who are suspected to be security threats.

Issues highlighted in the report: This case highlights how slow the Belgian enforcement authorities have been and their lack of resources, as well as a greater need for international cooperation. Victims also have an important role to play and their compensation should be built into case outcomes.

What’s at stake: In September 2020, leaked electronic correspondence revealed that the Belgian passport company paid the former Secretary of State for Public Security of Madagascar €120,000 (US$ 140,000), possibly more, in explained fees. This same top official, Lucien Victor Razakanirina, contracted Semlex Group to provide the nation’s biometric passport at a sky-high price, equivalent to a month’s salary on minimum wage. The leaks also revealed that Razakanirina received a share of the passport sale, at about 2 euro apiece. TI’s Malagasy chapter asked the competent authorities to investigate these allegations.

What’s at stake is the possibility of intervention in cases of victims and their representatives and that this may help lead to results in the long-running case.

Skoda JS A.S.

The breakthrough: Two intermediaries are on trial in relation to a tender awarded by Ukrainian state enterprise NNEGC Energoatom to Czech company Skoda JS A.S. for the supply of equipment for nuclear power stations, that according to some reports, seem to suggest a relation to the tender and payments from Skoda JS A.S. transferred to former MP Mykola Martynenko.

The Czech company is a subsidiary of Netherlands-registered OMZ B.V. which is part of the Russian OMZ Group (Uralmash-Izhora Group) which is in turn owned or controlled by Russia’s state-owned Gazprombank. This case surfaces in a tense geopolitical context and illustrates Russia’s efforts to keeps its energetic dominance over Ukraine.

Issues highlighted in the report: Without parent company responsibility to ensure adequate anti-corruption preventive measures in their subsidiaries, there is insufficient deterrence. . Increased liability of parent companies for subsidiaries could help deter cases of foreign bribery and related money laundering.

What’s at stake: Parent company liability for subsidiaries in foreign bribery cases would mean additional deterrence in the form of potential enforcement by the authorities in several countries.

With parent company responsibility to ensure adequate anti-corruption preventive measures in its subsidiaries, the Dutch and Russian parent companies might be held liable if the Czech company were found liable for foreign bribery.

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