David Montero - Kickback: Exposing the Global Corporate Bribery Network

During Watergate, the appointment of a special prosecutor to investigate President Nixons alleged tampering with elections was intended to mark the close of a sordid chapter of American history. Instead, that effort, culminating in Nixons resignation, would prove to be only the beginning of a deeper political morass that America would face for decades to come. Congressional investigations would uncover for the first time that multinational corporations, through slush funds and bribes, were not only secretly funding political organizations at home, such as Nixons reelection campaign, but corrupting foreign officials abroad. This new perspective on the corporate abuse of power and its impact overseas would result in the Foreign Corrupt Practices Act (FCPA)groundbreaking legislation that, by prohibiting commercial bribery for the first time in history, sought to change how capitalism and political affairs were conducted around the world.

Now, more than forty years later, we are experiencing a kind of dj vu, as a special counsel investigates whether the president allegedly abused his power, again by obstructing an inquiry into a possible manipulation of the countrys elections. Just as was the case in Watergate, whatever Special Counsel Robert Mueller uncovers will likely mark the beginning, rather than the end, of a reassessment of how power actually operates in this country. And just as in Watergate, there is the possibility that Muellers far-reaching probe may reveal how tightly political corruption and corporate corruption are linked through bribery, just under the surface of American political life.

Nixon was the recipient of secret corporate donations, which were considered illegal because they should have been disclosed. But the payments, while unlawful, did not compromise the presidential election itself. Muellers Russian inquiry is directed at a potentially far more serious crime: whether Donald Trump, the head of a sprawling business empire, colluded with a foreign power to deliberately sway the American electorate, committing the very crime that the FCPA has been trying to eradicate since Watergatethe offer of a foreign bribe, a kickback.

That law specifically states that a corporate bribe need not involve an actual exchange of money; an offer of anything of value, such as a promise, to a foreign government official is sufficient to violate its terms. This is precisely what Mueller is trying to ascertain: whether Trump, his company, his associates, or his familyor some combination of themoffered a promise to Russian government officials, a quid pro quo, that if they helped Trump by manipulating the elections, Trump, if victorious, would ease U.S. sanctions against Russia. Doing so would allow greater U.S. investment in Russia and would benefit Russian officials and oligarchs, the Trump business organization, the corporate interests of Trumps family, and former members of his senior staff, including Paul Manafort, his onetime campaign chairman, and Michael Flynn, his disgraced national security adviser. If the Trump Organization or anyone connected with it did make such a promise, and depending on how that promise was conveyed to Russian officials, the Justice Department (DOJ) would have strong grounds for pursuing an FCPA charge (among others). An FCPA violation is within Muellers mandate to investigate any matters that arose or may arise directly from the investigation. As has been widely observed, Mueller has hired two former federal law enforcement officials with extensive experience in investigating fraud, money laundering, and overseas briberyAndrew Weissmann, who ran the Justice Departments Fraud Section, which enforces the FCPA, and Greg Andres, who helped oversee FCPA policy in the Criminal Division.

The drama playing out in Washington starkly highlights the fact that foreign corporate bribery can be a deeply misleading term. We have come to regard it, when we think of it at all, as something that unscrupulous companies do in distant countries, so that any impact it has must be contained overseas. If a corporation pays kickbacks to a greedy government official abroad, why should we be concerned? But in a highly interconnected world, bound together by a global market, a global financial system, and the constant migration of people, goods, and capital, corruption rarely stays out there. Bribes eventually harm Americans, American society, American values, and American interests, both domestically and around the world, in ways that are difficult to gauge.

Why do firms resort to bribery? The obvious reason is to gain an advantage over their competitors. But illicit payments also buy the illusion of growth in the short term, of increased market share and inflated firm value. It does not take into account the harm that this practice causes to companies themselves: sinking employee morale, diminished profit margins, and the possibility of hundreds of millions of dollars in fines and penaltiesnot to mention a reputation that will be associated with corruption and deceit. The firms also effectively steal the publics money because the majority of bribery cases involve capital-intensive development and infrastructure projectssuch as roads, dams, defense systems, oil extraction, or miningthat are publicly funded. To recoup the bribes involved in winning such contracts, companies conspire with foreign officials to inflate the costs, sometimes by tens or even hundreds of millions of dollars. While the companies and the officials win out, taxpayers are left shouldering the burden.

Corporate bribes involve a remarkable amount of money: The World Bank has estimated $1 trillion a year, though this may represent the high end; others have placed the amount at 10 percent of the $4 trillion spent annually on global public procurement.

Corporate bribery is not a rogue act. IBM, Hewlett-Packard, Alcoa, Halliburton, Chevron, Pfizer, and Johnson & Johnson are only a few of the most prestigious corporations in America that have paid extraordinary fines to avoid prosecution on bribery charges. Many more are under criminal investigation, including, notably, Walmart. The companies that pay kickbacks are not being exploited or extorted; for many businesses in America and Europe, bribery is an active core strategy, a highly organized and sophisticated process, and one that is often approved by the CEO. Since the early 2000s, the World Bank has surveyed corporate managers from 135,000 firms around the world about kickbacks. Rather than asking the managers to report directly about corruption in their own firm (which might have resulted in underreporting), the bank asked whether firms like theirs paid bribes for government contracts. Based on knowledge of their industry, managers reported that nearly 30 percent of firms pay kickbacks for business.