The original titled article was published earlier and continues to receive interest from our constituents, so we felt that a restatement and revision would interest our readers.
Employee bribes, kickbacks, and payoffs within the business world continue to be one of the most pervasive business crime. In conservative terms, the cost to corporations from this type of white-collar crime exceeds $20 billion annually.
According to the Association of Certified Fraud Examiners most recent Report to the Nation1, business corruption cases represent approximately one third of all reported business crimes. "Corruption schemes fell in the middle in terms of both frequency (37% of cases) and median loss ($200,000)"
Some Recent Examples
In June of 2015 The United States Department of Justice indicted several executives of the World Cup for alleged kickbacks and bribery schemes. Calling it "the World Cup of fraud," for pocketing more than $150 million in bribes and kickbacks in a "decades-long" pattern of corruption.
And last year over 1,200 military officers and soldiers have been implicated in a long-running, widespread kickback scheme in the National Guard, according to a Congressional oversight panel.
Clearly since the original article was written, the tide has not turned although legislation and regulations continue to focus on stemming the practice both in the United States and globally.
The essence of a bribe, or kickback
The Foreign Corrupt Practice Act provides a good source for the definition of a bribe.
"A payment, offer, authorization, or promise to pay money or anything of value with a corrupt motive, for the purpose of influencing any act or decision of a person to induce them to do or omit any action in violation of his lawful duty, or to secure an improper advantage, or to induce such person to use his influence to affect an official act or decision" 2 .
The core characteristic of a bribe, is the improper influencing of a corporate decision maker to act in their own best interest or personal gain.
Bribes and kickbacks take many forms and are prohibited by different federal and state statutes beyond the FCPA. New York State defines commercial bribery as a form of corrupt and unfair trade practice in which an employee accepts a gratuity to act against the best interests of his or her employer. (People v. Davis, 33Cr. R. 460,160 N.Y.S. 769).
In addition to specific Federal Statues such as the FCPA and Anti-Kickback Statutes, a bribe or kickback can be prosecuted as a mail or wire fraud 3.
Approximately 25 states have prohibitions, making commercial bribery a criminal (state) offense.
What is the difference between bribery, kickbacks and illegal gratuities?
A kickback is considered to be a "term of art" unless specifically defined in statutory language. The difference practically is that kickbacks are generally solicited by the buyer's employees as opposed to bribes which are generally offered by the seller of goods or services or those seeking to gain an unfair advantage.
An illegal Gratuity can be considered to be a lesser-included offense of bribery. It is an extra "thank you" or "reward" payment to an official for the performance of normal duties.
The practical result of bribery comes in many forms, loss of reputation, loss of income, loss of profitability, and potential prosecution. Gift givers may believe that they (or their company) have earned a favored status when an influential employee accepts a gift from them. Others may assume that employees accepting gifts have agreed to a beholden position and are no longer free to act for their company without prejudice. In either case, short term gains turn into long term losses.
Some More Definitions
The Internal Revenue Service allows only one $25 business gift per year as a tax exemption. Gifts to employees exceeding that allowance become taxable as income.
Conflicts of Interest are sometimes criminal but more often than not prohibited by company policies. A conflict of interest occurs when a company official has an undisclosed financial interest in a transaction that may cause economic harm to the company, or place the employee's interest in conflict with that of his employer. A conflict of interest can evolve into criminal violations as well and involve white-collar crimes that include bribes, kickbacks, or misuse of information or other crimes such as forgery, fraud, and theft.
Recruiting Versus Bribery
Bribery can develop from a company offering or promising a job or position to an employee of your corporation when you can show that doing so influenced the employee to act in a way that created injury to the company. Similar civil offenses such as tortious interference with an economic advantage can also stem from these types of offers.
There is increasing pressure on the legislative and investigative fronts that encourage businesses to conduct business with integrity and transparency. Bribery, Kickbacks and payoffs continue to derail successful business operations, so we can assume that businesses will continue to strive to prevent and detect such conduct to better their bottom lines.
1. https://www.acfe.com/rttn/docs/2014-report-to-nations.pdf ↩
2. The Foreign Corrupt Practices Act of 1977 (15 U.S.C. § § 78dd-1, et seq.)↩
3. 18 U.S.C. Section 1341, 1343 ↩