What ethical and legal action can you take when you are forced to bribe?

JANUARY/ FEBRUARY 2018 Vol. 32 | No. 1 THE JOURNAL OF PRACTICAL BUSINESS ETHICS A PUBLICATION FROM THE SOCIETY OF CORPORATE COMPLIANCE AND ETHICS

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What ethical and legal action can you take when you are forced to bribe?

BY ROBIN SINGH

H

ave you ever been forced to pay a bribe in return for certain services? Well, if you have, you could have very well committed a crime. If you haven’t and are being forced to, don’t do it. You will be prosecuted for aiding and abetting a crime.

Bribery is a menace that leads to corruption and several other consequences. In this article, we’ll be exploring bribery, the legal aspects of it, and how to respond when asked for a bribe.

However, the perspective differs from continent to continent and culture and culture. What would be viewed as cronyism in the West is seen as sharing the gain resulting from the help of others in other parts of the world. Some see this conduct as unethical, but when viewed from a cultural perspective of some other continents, it is regarded as not only ethical, but also morally required. Gifts in the Middle East are considered as a gesture of goodwill for the other person. Most probably, giving a gift is viewed as a bribe in the West. Giving gifts is an integral part of conducting business in Confucian cultures, where relationships are everything and, trust me, for some cultures, relationships are everything.

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The legal definition of a bribe A bribe is legally defined as the corrupt practice of accepting, soliciting, and transferring a thing of value in return for an action. The action here can refer to anything that is official or legal. For example, if you have to pay someone at the Department of Motor Vehicles to provide you with a license, you’re paying a bribe.

n THE PROBLEM WITH BRIBERY IS THAT IT RESULTS IN OBJECTIVE DUTIES BEING CARRIED OUT IN FAVOR OF AN INDIVIDUAL’S SUBJECTIVE INTERESTS. Bribery aims to influence the actions of a person who carries out duties in the legal or public sector. The problem with bribery is that it results in objective duties being carried out in favor of an individual’s subjective interests.

It is, therefore, a crime and both the recipient of the bribe and the one offering it are punishable by law.

However, like all legal matters, an offering of value must be first proven to be a bribe.

For this to happen, a “quid pro quo” relationship must first be established (i.e., it must be proven that the recipient has purposely carried out a duty with the intention of providing the offeror with specific benefits). This is exactly why campaign donations do not fall under the category of bribes. A quid pro quo relationship cannot be established in these exchanges.

Proving a bribe also requires that there must be intent to influence the recipient’s

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official actions. In some cases, both the recipient and the offeror are required to have shown an agreement to the exchange. For instance, if the recipient or offeror has not agreed to the arrangement, the exchange is not necessarily seen as a bribe.

The attempt to bribe falls under common law and is assessed according to the Model Penal Code.1 The punishment for bribery, whether attempted or completed, is the same.

In fact, solicitation is also a crime as far as US laws are concerned. Whether or not the solicitation results in the bribe being completed has no effect, and the solicitation is still seen as a crime.

Apart from the fact that crimes interfere with the regular functioning of public or legal systems, they also have an impact on the economy. Economists state that it leads to what is known as “rent-seeking behavior.”2 This refers to the practice of increasing one’s wealth without contributing to the creation of wealth.

A good example of this would be the illegal attempts made by corporations to influence the open market in order to expand their own wealth disproportionately. When this happens, it leads to the improper allocation of resources, eventually causing an economic crash or depression. Those who are charged with attempting to bribe or bribing are prosecuted under the federal statute 18 U.S.C. 201 – Bribery.3 Just say “No” Is it possible to stop someone in the act of giving gifts/bribes or should one stop it indirectly? If you are ever caught in such a situation, people will always say and the court of

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law will always question, “Why didn’t you stop or say no on the face of it”? But humans and cultures differ in a multicultural environment, and it is not easy to say no on the face of it.

However, it may be an operations person or a compliance officer who knows that “ignorance of the law is not an excuse” and will be held against that standard and prosecuted with that objective in mind. The bottom line is that ethics does not always jive with the law. No matter the training that compliance people might conduct, when you are caught up in a practical situation, more often than not, the pressures will not allow you to make an immediate correct decision. Certain thoughts would always come to mind, such as the pressure that, “Mr. X is an important vendor to my company. Mr. X is in good terms with my boss. What will my superiors think if I reject this ‘gift’?”

These are the exact aspects of the Fraud Triangle (i.e., pressure, opportunity, and

rationalization). Together, these three components lead to fraudulent workplace behavior.

However, I see it as the same question as “Can someone be killed without intent?” The answer is yes. Imagine a pedestrian crossing a street.

A hot coffee spills on a driver, and the distracted driver does not notice the traffic signal and hits the poor pedestrian. I know it would be considered a host of things, including negligence, but not intent.

So what are the ethical steps one can take, and are only operations people responsible for facing the brunt of it? Well, I believe no. The second line of defense is risk management and compliance is the third line of defense, and both are equally responsible. This brings us to an aspect of how can people be trained, role play, etc. to help employees safeguard themselves from such situations?

It’s easier to say no to a parallel person or a junior employee; however, it’s not easy to say no to an ambassador, or a person very

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high in stature and, at the end of the day, that person will have nothing to do with you either. But a framework can be put in place by the Compliance function to safeguard in situations of ethical dilemmas.

Now, bear in mind that this is different from being forced or asking someone to do something in response to a gift (or bribe)—an innocent mind. On the other hand, if someone is trying to force you, there is something that can help more than law and that is courage to report. Most of the compliance trainings fail to build courage/open lines of commutation to report, and thus people—the first line of defense—get caught up under a paramount pressure of the unknown. Not everyone has the courage to be a whistleblower and take on corporations by filing a case with government authorities. Again that courage is an aspect which requires a cumulative training from HR and Compliance to report, to help people build an understanding that they can report, and that tone at the top is just not another word in the standard of conduct, as it was in Enron’s case.

However, the other part of this article concentrates on the visible aspect of bribery, that is, if someone is faced with an intentional bribe, what can a courageous employee do?

Anti-bribing laws in the U.S. In general, statutes such as federal prosecutions of public corruption under the Hobbs Act (enacted 1934), the mail and wire fraud statutes (enacted 1872), the honest services fraud provision, the Travel Act (enacted 1961), and the Racketeer Influenced and Corrupt Organizations Act (RICO) (enacted 1970), all

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codified under Title 18 of the United States Code, were never set out to prosecute official corruption; each has been interpreted to provide a means to do so.

Over due course of time, the federal official bribery and gratuity statute, 18 U.S.C. § 201 (enacted 1962), the Foreign Corrupt Practices Act (FCPA) (enacted 1977), and the federal program bribery statute, 18 U.S.C. § 666 (enacted 1984) directly address public corruption.

All of the aforementioned statutes differ in:

§§ their jurisdictional elements, §§ the mens rea (intent) that they require (e.g., a quid pro quo or a nexus),

§§ the species of official actions that are cognizable, and

§§ whether or not non-public official defendants can be prosecuted.

Specifically, the federal official bribery and gratuity statute defines that whoever indirectly or directly offers an item of value (usually money) to a public official with the intent of influencing their actions will be required to pay a fine. The fine as an amount is three times more than the value of the item offered as a bribe. Or, the offender (recipient and offeror) will receive up to a 15-year prison sentence. Depending on the case, the punishment could include both the fine and the prison sentence. The recipient of the bribe, who is usually a public official, will also be dismissed from his/her role as a public official and will

This article appears with permission from the Society of Corporate Compliance & Ethics. Call +1 952 933 4977 or 888 277 4977 with reprint requests.

not be eligible to hold any official U.S. government post from there on.

Commercial bribery, which is defined as bribing an official working for a private agency, is also punished under statute.

How are whistleblowers protected by law?

Whistleblowers, in bribery-related scenarios, are those who are aware (i.e., personally witnessed) the act and would like to inform the authorities.

The U.S. has established several legal precedents to protect whistleblowers. There are multiple legislative acts that offer protection to whistleblowers. A couple of examples would be the No-FEAR Act4 and the Sarbanes-Oxley Act.5 These acts outlaw any form of retaliation against whistleblowers.

However, these are some of the newer acts that have actually been founded upon older laws. Even the Lloyd-La Follette Act of 19126 and the Whistleblower Protection Act of 19897 have contributed greatly to protecting whistleblowers from retaliation.

For example, securities whistleblowers are protected via wide-ranging legislation and they are even encouraged through several incentives. The Dodd-Frank Wall Street Reform and the Consumer Protection Act of 20108 has had the greatest impact in this case, especially with regard to Section 922.

In 2013, the Dodd-Frank Act allowed the Securities & Exchange Commission (SEC) to pay a bounty of $14 million to a whistleblower whose testimony allowed the recovery of defrauded funds worth $147 million.9 Under the Act, the SEC is allowed to offer whistleblowers up to 30% of the recovered amount as an incentive. This kind of an incentive-based whistleblower program has led to more people coming forward with information.

Apart from financial incentives, Section 922 of the Act also provides protection to whistleblowers. A whistleblower will receive protections against the retaliation that is likely to arise from the actions brought on by the SEC in such cases. In fact, the SEC is

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dedicated to enforcing the provisions that protect whistleblowers. In some cases, the SEC has even taken action against companies that have forced employees to sign non-disclosure agreements that bar them from whistleblowing in the future. These agreements are actually violations of the Dodd-Frank Act, which clearly prohibits action that would impede the freedom of an employee to function as a whistleblower when needed.

those messages. If you can see the number 6, a person on the opposite side of the table will see it as number 9.

However, these serious matters need to be addressed promptly and action must be taken.

Filing bribery cases on time is of critical importance. Also, be prepared for the negative consequences of whistleblowing. It is a serious matter that can have an impact on your life and also the lives of your loved ones. This matter should be managed internally first, and then the Compliance department should always live by their words on retaliation policy.

Some countries, such as the U.S., have strong laws that help people and provide adequate support and enough protection to whistleblowers. n Robin Singh (robinsingh002@yahoo.com), Ms.(Law), MBA, CFE, CFAP, is a Compliance & Ethics Lead Officer at Abu Dhabi Health Services Company in Abu Dhabi, UAE.

How to take action against bribery If you are forced to pay or receive a bribe, the best approach would be to report it to the Compliance/Fraud Control department first.

If they take no action, you have the option of reporting it to the appropriate authorities. Never delay the issues. The delay will incriminate a person. This is as simple as a joke about Mr. Y that is sent in a WhatsApp message to a person who “liked” it and wrote LOL. Now, if these texts and devices are later seized by the authorities and investigated, the same text/WhatsApp message will be seen as making a mockery of Mr. Y. You never know what conclusion may be drawn from

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ENDNOTES 1 Paul H. Robinson and Markus Dirk Dubber: An Introduction to the Modern Penal Code. https://www.law.upenn.edu/fac/phrobins/ intromodpencode.pdf 2 Investopedia: Rent-seeking. http://www.investopedia.com/terms/r/ rentseeking.asp 3 18 U.S.C. § 201 Title 18 (Bribery of public officials and witnesses) 4 Public Law 107-174 (Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002, known as the No FEAR Act). https://www.gao. gov/about/workforce/nofear.html 5 Sarbanes-Oxley Act Anti-Retaliation Provisions. Information at https://www.gao.gov/about/workforce/nofear.html 6 Lloyd-La Follette Act of 1912. http://www.encyclopedia.com/history/ encyclopedias-almanacs-transcripts-and-maps/lloyd-la-follette-act 7 Public Law 101-12: The Whistleblower Protection Act of 1989. https://www.gpo.gov/fdsys/pkg/STATUTE-103/pdf/STATUTE-103-Pg16.pdf 8 Public Law 111-203: Dodd-Frank Wall Street Reform and Consumer Protection Act. https://www.congress.gov/bill/111th-congress/housebill/4173/text 9 SEC press release: “SEC Awards More Than $14 Million to Whistleblower” October 1, 2013. https://www.sec.gov/news/press-release/2013-209

This article appears with permission from the Society of Corporate Compliance & Ethics. Call +1 952 933 4977 or 888 277 4977 with reprint requests.