Anti- bribery laws get more bite
Changing the culture of corruption has become a priority for many nations
High- profile cases of alleged bribery in China and India are showing that even countries that have been synonymous with corruption have to confront their problems as their dependence on international trade grows.
Increasingly tough antibribery laws, especially in the United States, but also in Europe and most industrialized countries, are making it tougher for emerging economies with cultures of corrupt gift- giving and kickbacks to engage in global business.
The legal nets in the industrialized countries are often wide enough to enmesh foreign partners of domestic companies. And fear of running foul of prosecutors at home is deterring some corporations from seeking local partners in suspect economies.
In both India and China, bribery and corruption are also important domestic issues because they cause public outrage.
In India, the government has been forced to add anti- bribery legislation to its penal code and set up specialized anti- corruption organizations after several years of public protests.
The most famous was the 2011 hunger strike by activist Anna Hazare, which forced the resignation of the agriculture minister on corruption allegations. The government of Prime Minister Manmohan Singh also ratified the United Nations Convention against Corruption.
Since then, Indian courts have seen a sharp rise in bribery and corruption cases.
The most high profile case at the moment is an investigation into allegations that the Italian company Finmeccanica paid bribes to secure a $ 750- million order for 12 helicopters made by its U. K.- based subsidiary AgustaWestland.
The luxury helicopters are to be used to transport Indian government ministers, senior officials and visiting dignitaries.
Italian police have arrested the head of Finmeccanica. But while sifting through the company’s records, the Italians found evidence suggesting the company had also paid $ 5 million to a senior Indian army officer to secure a contract to supply the army with 197 light reconnaissance helicopters. That deal has now been put on hold while the Indian authorities investigate. In China, meanwhile the former railways minister, Liu Zhijun, who during the past decade captained the country’s massive program to build the world’s largest network of high- speed bullet trains, has been charged with taking bribes and abuse of power.
Liu was charged on Wednesday last week after being fired from his ministry post in February 2011, for “discipline violations.”
In the run- up to his sacking, there was widespread criticism that the bullet train network was too expensive to build and that tickets would be far too expensive for the poor people who are the majority of train passengers.
There were also allegations about shoddy workmanship in constructing the system, which gathered added credence in the July after Liu’s firing when one of the trains crashed killing 40 people.
The Liu case is an important one for China’s new president and head of the ruling Communist party, Xi Jinping.
Before he assumed the leadership last November, Xi warned that unless the Communist party addressed its massive problem of internal corruption it might lose the right to rule China.
Indeed, China faces about 180,000 mass demonstrations a year — nearly 500 a day on average — by people outraged by the criminal actions of party officials and their allies in business. Almost all these cases involve bribery and corruption among officials.
China, like India and Russia, another hotbed of graft, has recently enacted anti- bribery legislation.
But it remains to be seen how vigorously it will be enforced and how effective it can be in a country where the government is not subject to the rule of law or serious accountability.
The progress in addressing bribery and corruption has its roots in the 1998 Anti- Bribery Convention adopted by the 34- member club of industrialized countries, the Organization for Economic Co- operation and Development. The convention has been followed by significant toughening of domestic legislation in several countries.
In the U. S. the administration has extended the reach of the 1977 Foreign Corrupt Practices Act ( FCPA). Legal action can now be brought against all companies that issue securities on an American stock exchange as well as individuals, whether they are American citizens or not, who commit corrupt acts on U. S. soil.
American prosecutors have shown a firm willingness to go after foreign companies. Almost half the companies prosecuted for bribery and corruption in 2010 and 2011 were foreign.
Britain introduced its Bribery Act in April 2011, which in some respects is even stricter than the American FCPA.
These laws have become the world standard and in several countries local investigators and prosecutors use evidence and court judgments from the U. S. and Britain as the base for their own legal actions. The Indian use of evidence turned up by Italian investigators in the helicopter deal is one example of this piggybacking, but there are many others.
India has started anti- corruption proceedings against a local subsidiary of Dow Chemical as a result of a FCPA case in the U. S. China has used evidence from anti- bribery cases in the U. S. and Britain in actions against Rio Tinto, Siemens and Lucent.