HPRgument Blog | April 29, 2010 at 12:39 am

Corruption is Hardly a Third-World Phenomenon

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Recent news that BHP Billiton and Hewlett Packard are now under serious investigation for bribery should serve as a reminder that corruption at the highest level is not reserved for developing countries. Although whilte-collar crime in Wall Street has been well-known for a long time and, indeed, bankers and financiers have never had a worse reputation, we tend to reserve the idea of systemic bribery for the 3rd world. Several recent scandals should serve to confirm that the Western companies are far from clean on this front.

As the allegations go, HP have been bribing officials within the Russian government to secure computer contracts. The American firm, best known for making printers, is now under investigation in both Russia and Germany. BHP, the world’s biggest miner, is under scrutiny for making illegal payments to Congolese and Cambodian officials. While neither case has yet been proven, BHP has already ventured that its employees have been involved with bribery. Although the geographical areas where this appears to be taking place are not unfamiliar with corruption, the culpability of major, established American and British firms should be a little more surprising.

Only last month, four executives from Rio Tinto, the Anglo-Australian mining giant, were convicted of bribery offences in China. Although it is hard to gauge the level of endemic corruption in China – many commentators assert that bribes are simply a fact of life in Chinese business –, the readiness of relatively senior members of the corporation to engage in this behavior should lead us to question how much of the developing world’s financial scandals are the fault of the local people.

Both of these cases, however, are still comfortably put in the shade by BAE Systems’ sustained use of kick-backs to win major contracts. The British arms manufacturer, currently the largest defence contractor in the world, was found to have been paying a wide and unusual variety of bribes to government officials from Saudi Arabia in the now infamous Al-Yamamah case. Included among the sweeteners, paid out of a slush fund, was the offer to ship a Saudi prince’s Rolls Royce across the Atlantic for free. Add to this mix one of BAE’s lobbyists, the wonderfully-named Austrian Count Alfons Mensdorf-Pouilly, who was arrested travelling from his Scottish Castle, and you have a story just about out of John Le Carre.

Far more disturbing was the U.K. government’s reluctance to bring the company to justice. Aware that BAE is a huge domestic employer and contributor to the economy, Tony Blair seemed to have done his best to kill the case in domestic courts and stifle international reaction. In February of this year, BAE was at last fined $400 million dollars by the U.S., but even so senior managers expect to consolidate their position as the world’s top arms company. Downing Street (the U.K.’s White House) successfully sent out the message that some corporations are not only too big to fail, but also too big to be held accountable to the laws that the rest of us obey. The Brits would argue, with good reason, that BAE makes up a crucial component of the U.K.’s manufacturing industry. Saudi Arabia would also likely have retaliated for an investigation of members of its own royal family, potentially doing great harm to future arms and even oil contracts. The question remains, however, to what extent a government is willing to overlook the law when it really matters. In this sense, the BAE example is almost more important than anyone’s gripes over bankers’ bonuses.

Hewlett Packard and BHP will probably not get off so lightly – bribery investigations have skyrocketed in the U.S. over the past 2 years – but the punishment will still be minimal. Western governments need to come down a lot harder and send out a clear message that corruption is simply not acceptable.

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