Bribing for business: Russia and China score lowest in fighting corruption

According to a survey released on November 3, 2011, by Transparency International, a non-profit, corruption watchdog, Russia and China got the lowest scores in its 2011 Bribe Payers Index, which ranked the top 28 largest economies according to the probability of companies headquartered in these countries practicing bribery. The scores were calculated from responses of 3,016 executives in 30 countries who had business dealings in those economies.

Companies based in China and Russia scored below 7 on a scale of 10, at 6.5 and 6.1, respectively. Mexico, with a 7.0 score, was third from the bottom. Companies in the Netherlands and Switzerland tied for first place with scores of 8.8, with Belgium, Germany, and Japan rounding out the top five.
The survey also ranked the business sectors in which bribery was perceived to be prevalent. Public works and construction were reported as the most pullulated along with oil and gas. Agriculture and light manufacturing were ranked as the cleanest.

The report noted that “there is no country among the 28 major economics whose companies are perceived to be wholly clean and do not engage in bribery.” And the scores, on average, have not improved significantly from the 2008 Bribe Payers Index. The average score of 22 countries increased only 0.1 points to 7.9 in the latest edition.

The survey also found that “international business leaders reported the widespread practice of companies paying bribes to public officials in order to, for example, win public tenders, avoid regulation, speed up government processes or influence policy.” However, companies are almost as likely to pay bribes to other businesses, according to the survey, which looked at business-to-business bribery for the first time. This suggests that corruption is not only a concern for the public sector, but for many businesses, and carries major reputational and financial risks.

November 3rd, 2011|Criminal Activity|

China’s bribery law amendment resembles a version of the FCPA

In February 2011, the People’s Republic of China (PRC) legislature, among 49 amendments, passed Amendment No. 8 to Article 164, which criminalizes the payment of bribes to non-PRC government officials and to international public organizations. Legal experts say that that the passing of this amendment is the PRC’s effort to comply with the United Nations Convention Against Corruption to which the PRC is a signatory. Although no interpretive guidance has been issued, the amendment resembles an early version of the Foreign Corrupt Practices Act (FCPA).

Before the amendment was passed, the PRC prohibited bribery of PRC officials and provided for civil and criminal liability for making commercial bribes to private parties for the purpose of obtaining illegitimate benefits, but had no specific law that criminalized the payment of bribes to non-PRC officials. Effective May 1, 2011, the amendment adds the following clause to Article 164 of the PRC Criminal Law:

“Whoever, for the purpose of seeking illegitimate commercial benefit, gives property to any foreign public official or official of an international public organization, shall be punished in accordance with the provisions of (Article 164.)”

Article 164 states that “if the payer is an individual, depending on the value of the bribes, he/she is subject to imprisonment for up to 10 years. If the payer is an entity, criminal penalties will be imposed against the violating entity and the supervisor chiefly responsible; other directly responsible personnel also may face imprisonment of up to 10 years. Penalties may be reduced or waived if the violating individual or entity discloses the crime before being charged.”

According to legal experts, the PRC Criminal Law applies to all PRC citizens (wherever located); all natural persons in the PRC regardless of nationality; and all companies, enterprises, and institutions organized under PRC law. Thus, in addition to PRC domestic companies, any joint venture or other business entity formed under PRC law, including ones involving non-PRC companies, may be criminally liable under the amendment. Non-PRC companies with representative offices in the PRC may also be subject to the provisions of the amendment.


Fraudulent credentials rampant in China

Media sources report that scholars in China say that fraud in education and scientific research, and faking credentials to get work or advance in careers is staggering. With frequent news of falsified resumes by prominent officials and company heads, employers in the country have adopted stricter background checks of job candidates.

According to news reports, Fang Zhouzi, known for exposing plagiarism and academic fraud in China, said that Tang Jun, who was president of Microsoft’s China operations from 2002 to 2004, had falsely claimed in his autobiography that he earned a doctorate degree from the California Institute of Technology, when in fact, the degree was bought from California-based Pacific Western University, known as a “diploma mill.” The scandal was later dubbed the “fake credentials gate” by Chinese media.

Several media publications also brought up the case of Zhang Wuben, who through television shows, DVDs and a best-selling book, convinced millions of people that raw eggplant and immense quantities of mung beans could cure lupus, diabetes, depression and cancer. Zhung’s patient consultations, for which he charged $450 for ten minutes, were booked solid through 2012. But when Chinese journalists dug deeper into Zhung’s background, they learned that contrary to his claims, Zhung was not from a long line of doctors (his father was a weaver) nor did he earn a degree from Beijing Medical University. His only formal education was a correspondence course that he took after losing his job at a textile mill.

The exposure of Zhang’s fake credentials gained media focus and started a new round of scrutiny into the dishonest practices that plague Chinese society, and the Chinese government has vowed to address the problem. To facilitate employers’ checks of their job candidates, the China’s Ministry of Education released a list of approved Chinese-foreign jointly-run schools and a list of overseas colleges. And employers now have a greater awareness of the value of background investigations. Zhu Shibo, manager of recruitment at the China International Intellectech Corporation, one of the country’s leading human resources service providers, told media sources that the company has received unprecedented commissions to investigate job applicants. A typical background investigation includes highest education verification, employment experience confirmation and criminal record searches.

February 8th, 2011|Asia, Employment Decisions, Fraud|
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