High-profile corruption cases that shook the corporate world


  • Corporate News
  • Saturday, 08 Feb 2020

IT is no secret that corruption and bribery is rampant in the corporate world. Across the globe, many corporations have offered – and continue to offer – some form of payment in return for contracts or favours from government or other companies.

Large multinational companies (MNCs) are no exception, having been involved in numerous high-profile corruption scandals over the years, tainting their image and brand names.

MNCs, especially when they have a newly set-up in a foreign market, are often faced with the need to secure the necessary licensing, permits and other approvals, and may choose to offer some payment or gifts to government officials to help quicken the process.

Others, which have been operating in the country for some time, may take the unethical path of offering – or agreeing to provide – cash or gifts in order to secure certain jobs or contracts.

In the past, international corporations like Siemens AG, BAE Systems and Alcatel-Lucent, among others, have been embroiled in high-profile corruption scandals that involved the resignations of their top officials, and ultimately hefty fines and penalties for the companies.

Today, the latest case involving Airbus will see the aerospace MNC pay a record £3bil in penalties after admitting it had paid huge bribes to land contracts in 20 countries.

Back home, there is, of course, the multi-billion dollar 1Malaysia Development Bhd (1MDB) corruption scandal, which has made headlines globally, involving top government officials, civil servants and even banks in a few countries.

Here is a quick look at some of the biggest corruption scandals involving MNCs based in Malaysia and elsewhere, in recent history.Siemens AG

Back in 2008, German engineering firm Siemens AG was embroiled in a massive corruption scandal that ended with the company being penalised some US$1.6bil – among the largest fines for bribery in corporate history at the time.

According to reports from the New York Times, the firm was accused of routinely using bribes and slush funds to secure huge public work contracts around the world.

The company also pleaded guilty to charges that it violated a 1977 law banning the use of corrupt practices in foreign business dealings.

According to the charges against the company, Siemens had paid bribes and kickbacks to foreign officials to secure government contracts like a national identity card project in Argentina, mass transit work in Venezuela, a nationwide cellphone network in Bangladesh and a United Nations oil-for-food programme in Iraq.

In Argentina, the company is said to have paid US$16mil to the country’s president, and over US$100mil in total to government officials, to secure a US$1bil contract to produce identity cards.

In December 2008, the corporation reached a settlement to pay US$1.6bil in fines in the US and Germany.Alstom SA

French MNC Alstom SA faced corruption investigations in several countries including Malaysia, Latvia and Tunisia after auditors for the Swiss Federal Banking Commission found documents revealing possible corrupt payments to various parties.

According to reports, Alstom, which develops systems, equipment and services for the transport sector, had attempted to conceal the bribes by retaining consultants who acted as conduits for the payments to government officials.

In Switzerland, the company was ultimately fined 38.9 million Swiss francs (US$43.4mil) in 2011 by the Swiss Attorney General’s office for failing to implement proper controls to prevent bribery in Malaysia, Latvia and Tunisia.

This was in relation to payments made to middlemen to secure government contracts to build power plants.

In November last year, Alstom’s UK arm was fined £15mil for bribery in relation to a tram contract in Tunisia, according to Britain’s Serious Fraud Office.

In the US, Alstom pleaded guilty and agreed to pay a record US$772mil fine, back in November 2015, to charges that it violated the federal Foreign Corrupt Practices Act by falsifying its books and records, and failing to implement adequate internal controls.Alcatel-Lucent

In December 2010, Paris-based telecommunications equipment company Alcatel-Lucent SA, admitted it bribed government officials in “many countries, ” including Taiwan, Malaysia and Costa Rica.

Overall, Alcatel-Lucent reportedly admitted to making US$48.1mil in profits as a result of its bribery.

In Malaysia, it was alleged that Alcatel-Lucent had paid bribes to employees of Telekom Malaysia Bhd (TM) to obtain confidential information relating to a public tender for a contract worth US$85mil that the MNC eventually won.

According to a filing in the United States’ Securities and Exchange Commission (SEC), two Malaysian consultants were paid a total of US$700,000 for “non-public information” related to competitors’ pricing and bids.

In Costa Rica, a subsidiary of Alcatel had wired about US$18mil to two consultants, with more than half of the amount later transferred to Costa Rican government officials, the Department of Justice (DoJ) said.

The bribes then resulted in contracts worth more than US$300mil for Alcatel and a profit of more than US$23mil.

At the end of 2010, Bloomberg reported that Alcatel settled its bribery case with the DoJ in 2010 by agreeing to pay US$137mil, including US$45mil to the SEC.Maxis Communications

In July 2018, billionaire tycoon T. Ananda Krishnan and his right hand man Ralph Marshall were among several people charged in the Aircel-Maxis scandal in India.

The scandal had erupted following allegations of power abuse in March 2006 by the Finance Ministry in India.

Among the allegations was the Foreign Investment Promotion Board (FIPB) clearance given to Maxis Communications, which was used to bring in 3,200 crore rupees, far in excess of the ceiling of 600 crore rupees it was authorised to clear on its own.

According to The Economic Times, the Central Bureau of Investigation (CBI) filed charges on more than a dozen people, including several high profile personalities.

Other than the two personalities in Malaysia, the CBI also charged former Indian finance minister P. Chidambaram, his son Karti Chidambaram and five other government officials, who include the then secretary, joint secretary, under secretary and joint director of economic affairs.

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