The article below gives a good idea how a large US firm pays bribes to get business in a foreign country, which is illegal and not in compliance with the US regulation known as the Foreign Corrupt Practices Act, which was passed back in the 1970's when Lockheed paid big bribes to sell aircraft to foreign countries.
According to the article: "UTStarcom, which sells networking and broadband equipment, has for
the last decade sold large quantities of goods to three of China’s
biggest government-owned telecommunications companies: China Netcom,
China Telecom and China Mobile."
So, if you work in a US firm that sells products or services to firms or governments in foreign countries, watch out for your employees who may:
- Provide free vacation trips to employees of foreign countries or firms disguised as "training" or "plant inspection" trips.
- Provide expensive "executive education seminar" trips.
- Provide "cash allowances" to customer employees. (This could be "funds for advertising", etc. which were never spent for the specified purpose...)
- Hires relatives of decision makers in the foreign country without them being qualified or actually doing any work. (Note: This is also common in developing countries like Iraq, but the "ghost employees" are on the payroll of the government and don't work).
- Pay education expenses of children of government decision makers.
- Pay direct bribes to get a contract.
- Payment for "lavish gifts" to government bureaucrats. (Note: This is common in Asia. I once worked at a Japanese firm's US HQ, and every Christmas, the vendors would walk the halls giving out expensive gifts to anyone they dealt with. And that was still after the US operations had policies the prohibited such practices, so the gifts were limited to something like $100 value).)
One of the aggravating things about this case is that NONE of the UTStarcom employees were prosecuted. The only penalty was a fine.
It would be interesting to see what happened to the Chinese customer's employees that benefited from the bribes. This case came from an SEC investigation, and doesn't mention any actions taken by the Chinese firms.
Favorite quote:
"Sometimes, the government said, customers were given cash
allowances, and on other occasions, UTStarcom put a Chinese official’s
relative on the payroll, even though that person never worked at the
company. The company “paid and provided benefits to at least three of
these individuals for a period of two years each as if they were real
employees, even though they never worked,” the S.E.C. said in its
complaint."
vj
Telecom Company to Pay $3 Million in China Bribe Case
SHANGHAI — UTStarcom,
an American telecommunications company, has agreed to pay $3 million in
fines after United States law enforcement officials accused it of a
long-running scheme to bribe officials of China and other countries with cash, travel junkets and other gifts.
The Justice Department and the Securities and Exchange Commission,
which both issued statements on Thursday, said that from 2002 to 2007,
UTStarcom paid about $7 million for hundreds of trips by employees of
China’s government-owned telecommunications companies to visit the
United States for “training” sessions that were often sightseeing
vacations to Hawaii, Las Vegas and other tourist locations.
The company also offered jobs to the family members of clients, paid
them to attend universities, secured their travel visas and arranged
for a “consultant” to bribe a Mongolian official to win a contract, the
American officials said.
The actions appeared to violate the Foreign Corrupt Practices Act,
which forbids bribing foreign government officials, the officials said.
Those officials did not say why UTStarcom and its executives were not prosecuted.
Often, American officials choose not to prosecute because it is
difficult to prove a case beyond a reasonable doubt. Instead, they
often opt to pressure companies to reform their operations and pay
large fines.
In a statement released on Thursday, UTStarcom said it took
responsibility for the actions listed in the government complaint. A
company spokesman could not be reached for comment on Thursday.
The settlement is a window into how global companies sometimes do
business in China, where bribery and corruption are widespread.
Every year, tens of thousands of Chinese officials are arrested and
accused of corruption. Many legal experts say that steering clear of
bribery here has become increasingly difficult, largely because
government officials control access to the country’s booming economy.
Two years ago, Lucent Technologies, the American telecommunications
giant, settled a similar case with the S.E.C. after it was accused of
spending $10 million from 2000 to 2003 to pay for about 1,000 employees
of Chinese government-owned telecommunications companies to inspect its
plants and attend training sessions. Instead, the groups traveled to
Las Vegas, Disneyland, the Grand Canyon and other tourist sites.
And just this week, China Mobile, one of China’s biggest telecommunications companies, removed its vice chairman because of “serious economic crimes.”
For UTStarcom, which is based in Alameda, Calif., China is a crucial
market. One of the company’s founders is a Chinese-born American, and
most of the company’s operations and employees are based in China.
UTStarcom, which sells networking and broadband equipment, has for
the last decade sold large quantities of goods to three of China’s
biggest government-owned telecommunications companies: China Netcom,
China Telecom and China Mobile.
S.E.C. officials said employees from many of the company’s big Chinese clients accepted bribes.
Apparently eager to maintain or increase its sales, UTStarcom
engaged in complex frauds to please its customers here, American
officials said.
Company executives arranged for Chinese officials and their
relatives to travel to the United States and falsely recorded some of
those trips as “training sessions,” even though no training took place,
the officials said.
The S.E.C. said there were also “lavish gifts and all-expense-paid
executive training sessions” in the United States for customers.
“This was apparently a standard practice,” said Steven D. Buchholz, a lawyer with the S.E.C.’s San Francisco office.
Sometimes, the government said, customers were given cash
allowances, and on other occasions, UTStarcom put a Chinese official’s
relative on the payroll, even though that person never worked at the
company. The company “paid and provided benefits to at least three of
these individuals for a period of two years each as if they were real
employees, even though they never worked,” the S.E.C. said in its
complaint.
The settlement comes at a difficult time for UTStarcom. The company
is suffering through a sharp downturn in sales. It lost over $185
million in the first three quarters of 2008 and recently sold one of
its plants in China.
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