Corruption and Bribery

April 2010

Definitions
Bribery is a white collar crime in which money, a favor or something else of value is promised to, given to, or taken from an individual or corporation in an attempt to sway his or its views, opinions, or decisions. Corruption is the use of publics delegated power in personal or close standing people interest in order to get personal benefit.

Types of Bribery
Bribery of a Public Official. Any public official (anyone acting in interests of a country, for example president, vice president, juror etc.) who demands, receives, or accepts a bribe in exchange for making an illegal change in his duties will be fined up to three times the value of the incentive and/or imprisoned for no more than 15 years. The public official may also be prohibited from holding any political or government office in the United States. Bribery of a Witness. Conversely, anyone who offers a bribe to a witness will be fined and/or imprisoned for up to two years. Any witness who demands, receives, or accepts a bribe in exchange for altered testimony faces a fine of three times the value of the bribe and/or up to 15 years in prison, while anyone who bribes a witness faces a fine and/or up to two years in prison. Bribery of a Foreign Official. In 1977, The U.S. Congress accepted The Foreign Corrupt Practices Act, which made it illegal for an American corporation to bribe a foreign government official with money or gifts in hopes of landing or maintaining important business contacts. According to the act, all publicly traded companies must keep records of all business transactionseven if the companies do not trade internationallyto ensure that this act is not being violated. However, in the act, there are loopholes of which many U.S. corporations take advantage. For example, the act permits grease payments, which are incentives paidwithout penaltyto foreign officials to help expedite the completion of paperwork and to ensure the receipt of licenses or permits. Bank Bribery. According to the Bank Bribery Amendments Act of 1985, 1) the solicitation of an employee, director, etc. in any

capacity in exchange for business and 2) the acceptance of anything (including meals, entertainment, and accommodations during travel) but a legitimate salary, wages and fees from anyone in connection with the banks business are prohibited. If any representative of a bank accepts a bribe, he will be fined three times the value of the incentive, or he will be imprisoned for up to thirty years. However, if the value of the bribe is less than $1,000, the representative will be fined but sentenced to not more than one year in jail. If a bank official is offered a bribe, he must disclose all information to the bank so that the situation may be addressed appropriately. Bribery in Sporting Contests. A sporting official who accepts a bribe in exchange for a promise to fix a sporting event is guilty of bribery and may be punished according to laws of a particular country. For example, if a referee is convicted of throwing a major sporting event, he will be fined, imprisoned for up to five years, or both.

Negative effects of bribery

1. Bribery corrupts the capitalist economic system. The capitalist system is based on competition in an open and free market, where people tend to buy the best product at the best price. Bribery corrupts the free-market mechanism by getting people to make purchases that do not reward the most efficient producer. 2. Bribery is a sell-out to the rich. In any situation ruled only by money, the deeper pocket will prevail. If bribery were universally practiced, expert testimony, justice in the courts, and everything else would be up for sale to the highest bidder. 3. Bribery produces cynicism and a general distrust of institutions. It destroys people's trust in the integrity of professional services, of government and the courts, of law enforcement, religion, and anything it touches. There is good evidence that societies which allow bribery tend to have social unrest and perhaps revolutions. 4. Bribery treats people as commodities whose honour can be bought and sold. It thus tends to degrade the respect we owe to other human beings.

Corruption Perceptions Index

Since 1995,Transparency International has published an annual Corruption Perceptions Index (CPI) ordering the countries of the world according to "the degree to which corruption is perceived to exist among public officials and politicians". The organization defines corruption as "the abuse of entrusted power for private gain". The 2003 poll covered 133 countries; the 2007 survey, 180. A higher score means less (perceived) corruption. The results show seven out of every ten countries (and nine out of every ten developing countries) with an index of less than 5 points out of 10.

Methods and interpretation Transparency International commissioned Johann Graf Lambsdorff of the University of Passau to produce the Corruption Perceptions Index (CPI). The CPI 2005 draws on "16 different polls and surveys from 10 independent institutionsThe institutions who provided data for the CPI 2005 are: Columbia University, Economist Intelligence Unit, Freedom House, Information International, International Institute for Management Development, Merchant International Group, Political and Economic Risk Consultancy, United Nations Economic Commission for Africa, World Economic Forum and World Markets Research Centre. Early CPIs used public opinion surveys, but now only "experts" are used. TI requires at least three sources to be available in order to rank a country in the CPI. "TI writes in their FAQ on the CPI that "residents' viewpoints correlate well with those of experts abroad. In the past, the experts surveyed in the CPI sources were often business people from industrialised countries; the viewpoint of less developed countries was underrepresented. This has changed over time, giving increasingly voice to respondents from emerging market economies." As this index is based on polls, the results are subjective and corrupt in itself, and less reliable for countries with fewer sources. Also,

what is legally defined (or perceived) to be corruption, differs between jurisdictions: a political donation legal in some jurisdiction may be illegal in another; a matter viewed as acceptable tipping in one country may be viewed as bribery in another. In former Soviet states, the term "corruption" itself has become a proxy for the broader frustration with all changes since the breakup of the USSR. In the Arab world, terms for corruption had to be invented by advocates as recently as the 1990s.

Statistics like this are, by nature, imprecise; statistics from different years aren't necessarily comparable. The ICCR itself explains, " year-to-year changes in a country's score result not only from a changing perception of a country's performance but also from a changing sample and methodology. Each year, some sources are not updated and must be dropped from the CPI, while new, reliable sources are added. With differing respondents and slightly differing methodologies, a change in a country's score may also relate to the fact that different viewpoints have been collected and different questions been asked despite anti-corruption reform or recent exposure of corruption scandals it is often difficult to improve a CPI score over a short time period, such as one or two years. The CPI is based on data from the past three years (for more on this, see the question on the sources of data, below). This means that a change in perceptions of corruption would only emerge in the index over longer periods of time".

Criticism
The Corruption Perceptions Index has drawn increasing criticism in the decade since its launch, leading to calls for the index to be abandoned. This criticism has been directed at the quality of the Index itself, and the lack of actionable insights created from a simple country ranking. Because corruption is will fully hidden, it is impossible to measure directly; instead proxies for corruption are used. The CPI uses an eclectic mix of third-party surveys to sample public perceptions of corruption through a variety of questions, ranging from "Do you trust the government?" to "Is corruption a big problem in your country?" The use of third-party survey data is a source of criticism. The data can vary widely in methodology and completeness from country to country. The methodology of the Index itself changes from year to year, thus making even basic better-or-worse comparisons difficult. Media outlets, meanwhile, frequently use the raw numbers as a yardstick for government performance, without clarifying what the numbers mean.

The lack of standardization and precision in these surveys is cause for concern. The authors of the CPI argue that averaging enough survey data will solve this; others argue that aggregating imprecise data only masks these flaws without addressing them. In one case, a local Transparency International chapter disowned the index results after a change in methodology caused a country's scores to increasemedia reported it as an "improvement". Other critics point out that definitional problems with the term "corruption" makes the tool problematic for social science.

Aside from precision issues, a more fundamental critique is aimed at the uses of the Index. Critics are quick to concede that the CPI has been instrumental in creating awareness and stimulating debate about corruption. However, as a source of quantitative data in a field hungry for international datasets, the CPI can take on a life of its own, appearing in cross-country and year-to-year comparisons that the CPI authors themselves admit are not justified by their methodology. The authors state in 2008: "Year-to-year changes in a country's score can either result from a changed perception of a country's performance or from a change in the CPIs sample and methodology. The only reliable way to compare a countrys score over time is to go back to individual survey sources, each of which can reflect a change in assessment." The CPI produces a single score per country, which as noted above, cannot be compared year-to-year. As such, the Index is nearly useless as a tool for evaluating the impact of new policies. In the late 2000s, the field has moved towards unpackable, action-oriented indices (such as those by the International Budget Partnership or Global Integrity), which typically measure public policies that relate to corruption, rather than try to assess "corruption" as a whole via proxy measures like perceptions. These alternative measures use original (often locally collected) data and are limited in scope to specific policy practices (such as public access to parliamentary budget documents).

Recent Bribery Scandals

Siemens Case, year 2008. German engineering conglomerate Siemens, rocked by the worst bribery scandal in the countrys history, won a court asking the company for a $56 million fine. Previously, a lower court ordered the company to pay back millions of dollars in profits after two former managers pleaded guilty to paying bribes to win orders from the Italian Enel Group. Now the highest tribunal in Germany, the Federal Court of Justice, instructed

a lower court to rehear the case against the former executives, who forwarded $8.9 million to staff of the Italian electricity company in 2000. The court threw out the judgment against Siemens and lifted the bribery convictions. The court didnt challenge that the payments were made. However, before 2002, bribery was only a crime if it harmed competition between German companies, the judges said. As no other German company bid for the order and Enel was not a government agency, the payments didnt constitute corruption at the time, the judges said. Siemens faces investigations in the United States and at least a dozen other nations over claims its employees used bribes to win contracts. The company has found $1.9 billion of unclear payments made from 2000 to 2006. Daimler Case. Daimler, the holding company of Mercedes-Benz cars and commercial vehicles, has agreed to pay a $185m fine in an attempt to avoid disclosure of alleged bribes the company paid in 22 countries. Amongst the countries implicated are Croatia, Latvia, Russia, Hungary, Serbia, Montenegro and Turkey where beneficial government contracts were awarded to Daimler subsidiaries between 1998 and 2008. In one example, it was claimed Daimler gave an armoured Mercedes as a birthday gift to an official at a time it was in talks to sell nearly 200 vehicles to the Turkmenistan Government. Perhaps the most damning statement is that Daimler made payments to officials in Iraq under the Oil for Food program. Hewlett Packard Case. At issue is the sale of some $47.8 million worth of computer systems to the office of Russia's prosecutor general, who also happens to be the one that investigates corruption cases in his country. Talk about a twist of irony if, as reports suggest, HP is found guilty of paying almost $11 million in bribe money to land the contract. "This is an investigation of alleged conduct that occurred almost seven years ago, largely by employees no longer with HP. We are cooperating fully with the German and Russian authorities and will continue to conduct our own internal investigation," the HP spokeswoman said via e-mail on Wednesday.

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