Help Stop Bribery in its Tracks

Posted on Monday, July 30, 2018

Today's companies face a tremendous amount of pressure to win the best deals and contracts. In some cases, employees feel compelled to offer or accept bribes to clinch a business agreement. And in some countries, bribery is widely considered part of the cost of doing business.

 Watch for Other Forms of Corruption

  Bribery may be the most common type of corporate corruption, but there are other forms to watch for, such as:

Conflicts of Interest - This results when an employee has an undisclosed interest in a transaction. The conflict prevents the individual from making decisions based solely on the business impact on the employer. For example,  an employee involved in purchasing a new accounting system receives a set of golf clubs from one of the potential vendors. The employee becomes conflicted by thinking that he or she now "owes" that particular vendor for the gift.
Illegal Gratuities - This occurs when a supplier gives an employee an unsolicited item of value after benefiting from a decision or event. An illegal gratuity can evolve into bribery if the employee requests or signals that future decisions will be contingent upon gifts or money.
Economic extortion - In this case, the recipient of the bribe initiates the request for payment. The individual is exerting influence on a vendor to pay up or lose the business.

But such behavior is unethical, and in some cases, can be illegal. It can result in significant economic losses to your company as well as damage to its reputation. Even worse, it can also breach your fiduciary duty to shareholders, which creates legal risks.

For all of these reasons, your organization should set a policy of zero tolerance when it comes to bribery and other forms of commercial corruption. Otherwise, corporate wrongdoing can start to feed on itself as employees who witness one form of corruption may decide they, too, want a piece of the action. 

It is crucial to have a written policy that outlines the signs of bribery, explains how employees should report their suspicions, and details the consequences of violating the policy. If allegations of bribery do surface, take immediate and aggressive action to investigate the charges. Involve your accountant, your lawyer and, if necessary, law enforcement officials.

Bribery is the most common form of corporate corruption. Typically, it involves giving someone something of value, such as money, goods or even services, to influence a decision.

Here is a list of some of red flags that can signal the possibility that bribery is involved in the purchasing or bidding processes at your business:

A long term supplier is suddenly replaced by another company for no logical reason.

A vendor is replaced by a new supplier who charges higher prices and imposes more restrictive credit terms.

The quality of the goods or services provided by a new supplier declines and there is no effort to make improvements -- even when asked to do so.

Clauses regarding quality are omitted from a contract.

Longstanding bidding rules appear to have been revised, ignored, or circumvented to benefit a new supplier.

Excess goods or services are ordered from a new vendor, which boosts inventory levels above normal  while sales remain static.

An employee appears overly friendly with a new vendor. Be even more suspicious if the employee exhibits lifestyle changes, such as buying an expensive new car.

Information that can help win a contract is shared with a select list of vendors.

Former long-term vendors say they don't understand why they lost your business or complain about inappropriate behavior by company employees or executives.

Your attorney can assess your company's ability to detect and prevent corruption. It is better to adopt an offensive stance rather than waiting for corruption to occur and then have to cope with the fallout. If signs of bribery start to show, consult with your attorney and accountant. Bribery investigations are complex, so proceed cautiously so the probe doesn't result in civil or criminal charges against your organization.

Posted in Fraud & Forensics Group, Tax And Accounting Topics For Business

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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