Unwrapping Bribery and Corruption: a home renovation in return?

Last week we published an article in the “How They Do It” series about bribery and corruption through travel and entertainment. The following day, the United States Attorney’s Office published a press release regarding their latest enforcement action. The case shows a different way in which bribes can be paid and received; through gifts. The purpose of this article is twofold. We want to briefly touch upon the act of bribery through gifts, as well as highlight to you what valuable information is included in such press releases on enforcement actions.

On November 2023, the United States Attorney’s Office published a press release on a bribery case involving three individuals. All former representatives of an airline, accepted gifts and in return used their influence to grant contracts to the bribing party. All defendants pleaded guilty and were charged with conspiracy to commit ‘honest services wire fraud’. According the involved U.S. Attorney Philip R. Sellinger “The defendants compromised their positions by accepting bribes in the form of hundreds of thousands of dollars’ worth of home renovations, electronics, and jewelry. Commercial bribery of this kind corrupts the fairness of our economic system. We will hold to account those who unlawfully violate their duties to further their own economic interests.“

The three individuals, a former airline corporate real estate director, a former airline senior manager, and a former airline contractor, accepted bribes from a maintenance and construction company in exchange for using their influence to secure contracts at Newark Liberty International Airport. The bribes averaged around a value of USD 400.000 per person. It included: “…significant renovations at the defendants’ personal residences, including renovating and building bathrooms, renovating a deck, installing floors and sheetrock, and renovating a kitchen. The company gave the defendants valuable items, including electronics and jewelry…”. According to the press release, the individuals all chose gifts over direct cash bribes believing gifts would raise less red flags. In addition, the former airline representatives conspired with another employee to fraudulently inflate orders in an attempt to provide the maintenance and construction company to recoup some of the bribe costs. The guilty pleas carry a maximum sentence of 20 years in prison and fines up to USD 250,000.

Aside from the fact that we find enforcement actions interesting by default, we want to highlight the following. In addition to the press release, the United States Attorney’s Office published an information sheet per defendant. These packages are similar to the details published, for example in case of an FCPA violation such as the recent Tysers Insurance Brokers Limited and H.W. Wood Limited case. Both information packages include valuable information and – quite often – in depth details of the offenses and the bribery scheme. This provides insights on how the bribe scheme was set up and how the bribes were paid (in the form of gifts). Of course, we do not want to share this information to inspire anyone to use a similar approach in their own organisation. To the contrary – we want to point out these hidden gems and encourage you to read and learn. Here at The Green Hyena, we always stress that the best way to prevent fraud is to think like a fraudster.

Think Like a Fraudster and read those information sheets

As we highlighted in our previous blogs, getting involved in bribery and corruption is a risk for every organisation, regardless geography and industry. Bribery and corruption cause massive harm to societies and economies, undermining the trust that sustains them. So, let’s have a look at the information sheets and press release and see which five steps you can take to address such risks.

1. Vigilance in your contract awarding process: ensure strict oversight and transparency in such processes, especially in high-value contracts. This helps both detecting and preventing undue influence and favoritism.
2. Implement diverse and independent selection committees: such committees help address the risk of collusion and support unbiased decision-making. Ensure to periodically change the committees to avoid creating opportunities for (abuse of) close relationships.
3. Implement regular audits and (compliance) reviews: ensure to include analytics to identify outliers and unusual patterns or inflated costs that could indicate bribery or kickbacks. Furthermore, not only implement such audits periodically but also as a result of events such as whistleblower reports or incidents.
4. Do not skimp on employee education and awareness: to address (and as far as we can mitigate) bribery and corruption risks, employees need to be able to recognize them. Especially in certain industries or close relationships, the line between doing business and being too close can be fuzzy. We also often see that controls such as third-party due diligence are often not enforced to protect close relationships with clients where procurement managers not realise the harm of it.
5. Robust reporting mechanisms remain key: establishing clear and confidential reporting mechanisms where stakeholders such as employees and suppliers can report without fear of retaliation are crucial. Not only to detect (large) incidents, but also to signal what culture you want to foster and what values need to be adhered to.

To summarise, bribery can take various forms, with gift-giving posing a significant risk alongside cash payments. In the discussed case, employees chose gifts over cash to seemingly evade detection. Identifying such passive bribery, where employees receive gifts to influence decisions, is challenging. For instance, detecting an expensive watch as a bribe is not straightforward. A robust anti-bribery program is crucial, encompassing thorough staff training on acceptable conduct, implementing controls to oversee decision-making roles, ensuring segregation of duties, and rotating roles to manage risks. Despite these measures, the complexity increases when employees collude, as seen in the mentioned case, presenting additional challenges in managing bribery risks.

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