What is the world coming to? The British have discovered that
their heralded Metropolitan Police is vulnerable to bribes and that
members of the press will go to excess in invading the public’s
privacy. Formula One racing is now under intense investigation for
allegedly bribing a German bank. Major multinational corporations
like IBM have been caught in the vice of the Foreign Corrupt
Practices Act. As our good friend Captain Renault said in
Casablanca, “I’m shocked, shocked…”
Just to establish some perspective and view this circumstance
from a bit of a remove, the fact is that corruption in government,
business, sports and virtually all aspects of public life exists,
has existed, and will continue to exist on both sides of the pond
and all around the world. As far as the UK is concerned, the myth
of infallibility of the Metropolitan Police was well exposed during
“Operation Countryman” from 1978-1984. This project began with the
uncovering of Vice Squad bribe-taking and later identified a
working relationship between organized crime and ranking police
officers — none of whom were ever prosecuted.
Well, the current fracas centers around journalists from Rupert
Murdoch’s London newspaper News of the World and
their alleged phone-hacking of significant people. The
implication is that these journalists had paid for police
assistance. As far as bribery goes, however, this London affair
pales in financial comparison with the current scandal of major
auto-racing conglomerate Formula One (F-1).
According to prosecutors in Germany, internationally-renowned
F-1 president Bernard Ecclestone and his family trust paid off a
German banker to the tune of $44 million for undervaluing shares in
F-1 sold by his bank to a third-party financial firm. In turn
Bernie received $41.4 million in “commission” and the trust was
awarded another $25 million. The arithmetic of the deal is in
itself startling. No wonder the auditors of the bank involved,
Bayerische Landesbank, rushed to the authorities when the
odd calculation was finally uncovered. The amazing thing is that it
took from January of this year to the last week in July for the
prosecutors to turn the arrest of the bank official into a charge
against Bernie.
Paying off people, i.e. bribing, in order to gain access and/or
advantage appears to be the new accepted way of commercial life.
Why? Because society lacks an aggressive and punishing bureaucratic
and political ethos that could literally “scare straight” any
businessman or official contemplating the short cuts to
success.
Many years ago the late president of Ghana, Kwame Nkrumah, had
the problem well figured out. Pay-offs for any enterprise in his
country — and throughout West Africa — had always existed. It’s
called “dash,” both a noun and verb relating to every transaction.
So Nkrumah approved and passed down the line what became known in
some circles as “Kwame’s Law.”
In the simplest terms this meant that all business deals must
have a built-in kickback of 15% to the official sponsoring agency.
That government agency then would disburse its “dash” to the other
deserving elements down the appropriate line. A certain amount was
always set aside for the Trade Union Congress to ensure worker
participation. While Nkrumah was in power, and not excessively
paranoiac, the system worked amazingly well. At least no one of any
great importance complained publicly.
There are, of course, a myriad of devices that are used to bribe
and corrupt — from bags full of cash to slush funds passed out to
travel agencies to pay for selected officials’ tourist trips.
According to the SEC, those are two of the ways IBM “took care of”
certain Asian officials. But those are the old-fashioned methods,
and these days bribery is serious business. Official records
indicate that in 2010 seven of the top firms in the U.S. settled
Foreign Corrupt Practices Act infringements for a total of $1.563
billion in fines. One can imagine what their deals were worth.
China for many years has been the site of inventive bribery
schemes. One of the new and very imaginative methods is the
transfer of valuable art objects to an appropriate official. This
worthy gentleman or woman places the objet d’art in a
carefully chosen auction house. The item is then purchased by the
original donor and the money is paid offshore. Henny Sender, the
well-known international financial writer, says this little trick
has many mutations — including donations to cooperative
charities.
So before any clucking begins over Rupert Murdoch’s predicament,
it might be well to look around at the breadth of the world’s
political and business communities.
