Examples of Large-Scale Corruption in International Business

Bribery is one of the 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 deflected by bribery often possess a legitimate public purpose, so the corporation may be toppling local social interests and harming local competitors. Third, the giving of bribes may evoke 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, bribery is illegal not only in a 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 backlash from society or community.

To begin with, some recent cases of corruption in international business have captured considerable media attention. Paying a traffic officer to ignore a minor traffic violation is unremarkable or something cliché. However, paying a senior government official a secret bribe of millions of dollars to get a large contract signed is a different story or seemingly sensational. While all multinational companies have adopted anticorruption policies virtually, 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. Even in the most responsible organizations, for instance, such policies are still works in progress. However, there is some evidence that the implementation is not always as effective as might be hoped.

Furthermore, the number and magnitude of recent corruption cases prosecuted by government authorities is somewhat baffling. What’s more, such widely-publicized cases may represent only the tip of the iceberg whereas the Regulatory bodies focus principally on the bribery of public officials so that other forms of business corruption can be hidden elsewhere. To date, the ten largest cases successfully tried pursuant to the FCPA are listed below:

1. Siemens (Germany): $800 million in 2008

2. KBR/Halliburton (USA): $579 million in 2009

3. BAE (UK): $400 million in 2010

4. Total SA (France): $398 million in 2013

5. Snamprogetti Netherlands BV/ENI SpA (Holland/Italy): $365 million in 2010

6. Technip SA (France): $338 million in 2010

7. JGC Corporation (Japan) $218.8 million in 2011

8. Daimler AG (Germany): $185 million in 2010

9. Alcatel-Lucent (France): $137 million in 2010

10. Magyar Telekom/Deutsche Telekom (Hungary/Germany): $95 million in 2011

Additionally, there are other examples of large-scale corruption took place in the scope of 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 resumed, having implicated Walmart management at the most senior levels.


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 form of bribes to obtain 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 is paid to the citizens of Costa Rica.


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 ban corruption. Thus, in a widely publicized 2011 statement by China’s Premier, Wen Jiabao, anticorruption actions were emphasized as a “primary task in 2011”. This was interpreted as an indication that increased enforcement of anticorruption laws will be a top government priority, as the prohibitions must be taken seriously by foreign corporations operating in China.

Perhaps, a number of recent high-profile cases have illustrated the extent of the Chinese seriousness at cracking down corruption. One notorious case was 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 which 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 too and then convicted to life-sentence.


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