Bribery and Corruption: Keeping Your Business Within the Law
If you’re doing business with China, here’s something worth reading. It applies to many other countries as well and highlights why it pays to have on call a professional team of investigators that can warn you when your company is shaving close to the wind. Things like computer forensics, transactional analysis and forensic accounting could save you from the sort of embarrassment you don’t want to think about. Many in the international business world follow the travails of Stern Hu, the Australian citizen representing the iron ore interests in China of giant Anglo-Australian mining house, Rio Tinto, who was arrested in July for stealing “state secrets”. Now China is engaging in introspection on how its own business practices stack up.
What brought this on in China was a recent court case in California in which a US-based firm, Control Components (CCI), pleaded guilty to bribing officials in six huge Chinese state-owned enterprises, including China National Offshore Oil Corporation (CNOOC) and PetroChina. They don’t come much bigger than that. The bribes, which added up to nearly $US50 million, occurred over a ten-year period and also involved a number of other companies outside China. Control Components was fined just over $US18 million earlier in August for having violated the US Foreign Corrupt Practices Act, and six of its executives still face charges of their own.
Not unexpectedly, the Chinese companies claimed that after exhaustive investigations of their own, no such cases of bribery had been uncovered.
The twist in the tale came on August 17 when the state-run China Daily – which has a fairly dour image – editorialised in a most unusual way. “We were not surprised,” the newspaper said, “when US companies … pleaded guilty to paying bribes in China. More often than not, that is the way business is done here. Nor are we surprised to see the list of alleged bribe takers [although] … naming names is not the way things are usually done here. What took many of us aback is that US companies may well be pleading to violations that have never occurred on our soil.”
The newspaper then focused on the implications for China of such overseas prosecutions, pointing out that simple denials from the Chinese side might not be enough. It suggested that if Chinese companies involved were properly investigated by Chinese prosecutors and their innocence firmly established, then the possibility existed of libel action in American courts. This really laid it on the line, especially in light of the fact that the state-run news agency, Xinhua, had earlier reported that senior Communist Party officials in CNOOC had minutely examined all business deals between CCI and the oil giant and found no evidence of bribery.
Now the debate on what China needs to do to protect itself from collateral damage to both its individual and national corporate image is under way. This is hardly the sort of predicament in which you’d want your company to become entangled. That’s where a professional team can help you, providing an audit of danger areas in your overseas operations and nipping the problem in the bud.
Deutsche Bank has learnt this lesson inside its own German domain, where it is still grappling with the fall-out from spying on one of its key investors. In this case, the focus has been on the fine line between business security and personal privacy. Corporations that show they can’t distinguish between the two can suffer serious harm. The Financial Times, covering this issue in its August 17 edition, quoted the head of a European corporate investigation firm saying that practices seen as reasonable elsewhere, such as background screening of employees, are tricky or illegal in Germany. A US investigator there added, “There may well be instances that do not cross criminal or legal lines but are outrageous to the general public.” Even companies fighting internal corruption need to be careful how they go about it.
Moreover, The Financial Times notes, in the German context – only two decades since the fall of the Berlin Wall brought the methods of East Germany’s secret police to light – such practices cause shock. A Deutsche Telecom director said: “Do we want to go back to the days of the Gestapo under Hitler or the Stasi in the DDR? Of course not. That is what makes this whole [Deutsche Bank] incident so distasteful.”
The message is clear: if your company is crossing cultural, let alone legal, boundaries, make sure you have the right professional team on side. And don’t just listen to what they claim their track record is. Make sure they have the experience you need.
