Corporate Management Usually Aware of Foreign Bribery, OECD Report Finds

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By Yin Wilczek

Dec. 2 — In a groundbreaking report on transnational bribery, the Organisation for Economic Cooperation and Development found that most international bribes are paid by large corporations, usually with the knowledge of senior-level executives.

The OECD's Foreign Bribery Report, released Dec. 2, studied 427 transnational bribery cases that occurred between February 1999 and June 2014. In 41 percent of the cases, management-level employees paid or authorized the bribes, while chief executive officers were involved in 12 percent of the cases, according to the report.

The report also found that three-quarters of the cases involved intermediaries. In 41 percent of the cases, the intermediaries were agents, distributors or brokers. In another 35 percent of the cases, the intermediaries were corporate vehicles, such as subsidiaries or companies established under the beneficial ownership of the foreign official being bribed.

The findings have important implications not just for law enforcement authorities across the globe, but also for corporate compliance programs, according to the report.

‘Face to Face' With Enemy

The findings bring “us, for the first time, face to face with our foe,” OECD Secretary-General Angel Gurría said in the report's preface. The report says, “Corporate leadership is involved, or at least aware, of the practice of foreign bribery in most cases, rebutting perceptions of bribery as the act of rogue employees.”

In a same-day speech at an event in Paris to launch the report, Leslie Caldwell, assistant attorney general for the Justice Department's Criminal Division, also spoke about the importance of coordinated responses by different jurisdictions to combat foreign bribery. All countries, not just OECD members, “must contribute to this international effort if we are going to meaningfully deter and root out global corruption,” she said.

As an example of international cooperation, Caldwell cited the actions by U.S., U.K., Swiss and Indonesian authorities against Japan's Marubeni Corp. and executives from France's Alstom related to a bribery scheme to secure a $118 million power services contract in Indonesia (12 CARE 551, 5/23/14). “There are many other examples, and many more are in the pipeline,” she said.

Other Findings

Among other highlights, the report found that:

• four sectors accounted for almost two-thirds of the cases: extractive (19 percent), construction (15 percent), transportation and storage (15 percent), and information and communications (10 percent);

• the most prevalent bribes were those paid to obtain public procurement contracts (57 percent), followed by customs clearance (12 percent); and

• almost half the cases took between five and 10 years to resolve, and some cases continued for up to 15 years after the last corrupt act.

Meanwhile, the high level of involvement by senior executives indicates the continuing need for companies to set the right tone at the top, according to the report. In addition, even though small- and medium-size enterprises accounted for only 4 percent of the companies sanctioned, corporations of all sizes with global businesses should implement measures to detect and prevent the risk of foreign bribery, the report states.

The “overwhelming” role of intermediaries in foreign bribery cases also shows the need for “enhanced and effective due diligence, oversight and application” of corporate compliance programs to third parties (whether individuals or entities) in international business dealings, the report states. “Compliance programs should focus specifically on due diligence with respect to agents and on verifying the rationale and beneficial ownership of other companies involved in the transaction.”

This is the 20th anniversary of the OECD Working Group on Bribery, and the OECD's Anti-Bribery Convention has been in force for 15 years.

To contact the reporter on this story: Yin Wilczek in Washington at ywilcek@bna.com

To contact the editor responsible for this story: Mike Moore at mmoore@bna.com

The OECD's Foreign Bribery Report is available at http://www.oecd.org/corruption/oecd-foreign-bribery-report-9789264226616-en.htm.

A related release is available at http://www.oecd.org/daf/anti-bribery/scale-of-international-bribery-laid-bare-by-new-oecd-report.htm.

The text of Caldwell's speech is available at http://www.justice.gov/opa/speech/assistant-attorney-general-leslie-r-caldwell-speaks-launch-oraganization-economic-co.