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Kickback: Exposing the Global Corporate Bribery Network
An investigation into corporate bribery around the world and how it undermines democracy and the free market system
The World Bank estimates that rich multinational corporations pay hundreds of billions of dollars in bribes every year to officials overseas. The perpetrators are not a handful of rogue companies, but many members of the Fortune 500. Kickback is a sweeping, global investigation into corporate bribery around the world and how backdoor financial transactions undermine democracy and the free market system by lining the pockets of some of the world's worst dictators and criminals. Ultimately, this system affects billions of people by creating conditions that lead to poverty, violence, environmental disaster, and political instability in countries like Nigeria, Bahrain, Costa Rica, and Iraq.
Kickback traces the origins of corporate bribery from the reign of the British East India Company to the methods by which it is carried out today. Traveling across four continents and interviewing police and intelligence officials, convicted criminals, business executives, and corruption experts, David Montero takes an inside look at bribery's pernicious effects. He examines its ramifications at both the individual and national levels--from the murder of a young activist in Bangladesh to a Texas billionaire's dealings with Saddam Hussein, from pharmaceutical firms' payoffs in China to how the entrenched culture of bribery helped destroy the Greek economy. Montero also examines the countermeasures that have been introduced to combat these practices, such as the Justice Department's efforts to halt them and attempts to identify and provide restitution to victims.
Given the new era of profound uncertainty we are entering--the strength of the European Union founders, the power of China rises, the global economy continues on a path of perilous flux, and allegations mount that President Donald Trump and his associates are possibly tainted by bribery themselves--the stakes for eradicating corporate bribery have never been higher.
The World Bank estimates that rich multinational corporations pay hundreds of billions of dollars in bribes every year to officials overseas. The perpetrators are not a handful of rogue companies, but many members of the Fortune 500. Kickback is a sweeping, global investigation into corporate bribery around the world and how backdoor financial transactions undermine democracy and the free market system by lining the pockets of some of the world's worst dictators and criminals. Ultimately, this system affects billions of people by creating conditions that lead to poverty, violence, environmental disaster, and political instability in countries like Nigeria, Bahrain, Costa Rica, and Iraq.
Kickback traces the origins of corporate bribery from the reign of the British East India Company to the methods by which it is carried out today. Traveling across four continents and interviewing police and intelligence officials, convicted criminals, business executives, and corruption experts, David Montero takes an inside look at bribery's pernicious effects. He examines its ramifications at both the individual and national levels--from the murder of a young activist in Bangladesh to a Texas billionaire's dealings with Saddam Hussein, from pharmaceutical firms' payoffs in China to how the entrenched culture of bribery helped destroy the Greek economy. Montero also examines the countermeasures that have been introduced to combat these practices, such as the Justice Department's efforts to halt them and attempts to identify and provide restitution to victims.
Given the new era of profound uncertainty we are entering--the strength of the European Union founders, the power of China rises, the global economy continues on a path of perilous flux, and allegations mount that President Donald Trump and his associates are possibly tainted by bribery themselves--the stakes for eradicating corporate bribery have never been higher.
304 pages, Hardcover
First published November 13, 2018
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April 21, 2020
“The means we use to achieve our objectives in this world define the type of world we are going to live in.” - Senator Charles Percy, speaking in the aftermath of Watergate about the dangers of kickbacks
WHAT IS THE FCPA?
- Foreign Corrupt Practices Act (FCPA)—groundbreaking legislation that, by prohibiting commercial bribery for the first time in history, sought to change how capitalism and political affairs were conducted around the world.
FCPA’S ORIGINAL INTENT
- “At its inception, Congress understood the FCPA as an instrument for promoting democratic values in developing countries,”
BUT COMMUNISM FELL, SO WHAT’S THE POINT...
- Ironically, by the time the industrialized world committed itself to outlawing bribery, communism had collapsed, and with it the FCPA’s major motivation to protect democracy and citizens overseas.
- “With the collapse of the Soviet Union . . . the foreign policy implications of antibribery law gradually grew obscure.”
FOCUS SHIFTED FROM OVERSEAS CITIZENS TO HELPING US BUSINESSES
- The perceived victim was no longer poor citizens overseas, or democracy, but American business itself. Throughout the 1990s, under a pro-export Clinton administration, corporate bribery had effectively become a trade and commerce issue, not a foreign policy matter, and the FCPA, an instrument for protecting American corporate power.
SCOPE OF THE FCPA IS OUTSIDE THE USA
- how unprecedented an effort the FCPA was: It was not just that the statute criminalized the bribing of an official—many existing laws did that—but it forbade bribing a foreign official in another country, and as such represented an assertion of jurisdiction never before attempted in the fight against bribery.
WHY SHOULD ANYONE CARE ABOUT BRIBERY?
- Bribes eventually harm Americans, American society, American values, and American interests, both domestically and around the world, in ways that are difficult to gauge.
- The firms also effectively steal the public’s money because the majority of bribery cases involve capital-intensive development and infrastructure projects—such as roads, dams, defense systems, oil extraction, or mining—that are publicly funded. To recoup the bribes involved in winning such contracts, companies conspire with foreign officials to inflate the costs, sometimes by tens or even hundreds of millions of dollars. While the companies and the officials win out, taxpayers are left shouldering the burden.
HOW MUCH MONEY ARE WE TALKING ABOUT?
- Corporate bribes involve a remarkable amount of money: The World Bank has estimated $1 trillion a year, though this may represent the high end; others have placed the amount at 10 percent of the $4 trillion spent annually on global public procurement.
THE EAST INDIA COMPANY
- But what originally agitated [Thomas] Paine was the corruption and plunder of the East India Company.
- The company faced a mounting debt of £1.5 million, as its stock price began to plunge. By 1772 it was in full-blown crisis. In a foreshadowing of our own times, the world’s most powerful corporation needed a government bailout and asked the Bank of England for a loan of £1 million.
- In 1773, with bankruptcy looming, the East India Company raised the price of tea in America—prompting a chain of events that began with the Boston Tea Party and eventually led to the American Revolution.
- England would not specifically criminalize corporate overseas bribery until 2010.
MODERN-DAY BRIBERY
- The template for modern-day bribery had been established by multinational corporations sometime after the end of the Second World War.
UNITED FRUIT
- Eli M. Black, the founder and CEO of United Brands
- Black had built United, and its Chiquita brand was responsible for nearly one third of all bananas brought into the United States. The SEC had discovered that United Brands had offered $2.5 million in bribes to foreign officials, including the president of Honduras, Oswaldo López Arellano. Using his briefcase, Black smashed out the windows facing Park Avenue and, still holding the case, leaped out the window, plunging to his death.
CORRUPTION NEARLY TOPPLED JAPANESE, ITALIAN GOV’TS IN THE 1970S
- As investigations by the SEC and the Senate revealed in minute detail, Lockheed had not just bribed officials in Japan, but paid tens of millions of dollars to democratic political parties in Italy...When these payments were exposed, the two governments involved were shaken and nearly toppled.
CORRUPTION CHANGES A STATE’S BUYING PRIORITIES
- “Because we are frequently competing not necessarily with another airplane just like ours but we are competing for the sales dollars that would be spent on something else”—effectively acknowledging that the company had bribed foreign officials to buy military equipment that Indonesia might not even need and could have spent on something else, like schools.
SADDAM HUSSEIN EXPLOITS OIL-FOR-FOOD PROGRAM
- Every foreign company that wanted to buy Iraqi oil would now have to pay a “surcharge” of between ten and fifty cents on each barrel of oil.
- The surcharges had to be paid not to the UN escrow account in New York, but to a separate bank account controlled by Iraq and housed in either Lebanon or Jordan.
- The largest humanitarian effort in world history ultimately failed due to a simple yet glaring design flaw: Saddam Hussein was given control over all contractors—both those to whom Iraq sold oil, and those from whom it purchased humanitarian supplies.
SADDAM USED OIL-FOR-FOOD KICKBACKS TO FUND INSURGENCY
- At 4:00 A.M. on March 18, 2003, just hours before the American bombing campaign began, Saddam’s thirty-seven-year-old son, Qusay, arrived at the Central Bank of Iraq in Baghdad,
- brought with him fifty helpers, three flatbed trucks, and a handwritten letter from his father instructing the head of the Central Bank, Isam Rashid al-Huwaysh, to hand over to Qusay $920 million and €90 million from the bank’s vault. The money, which included $100 bills organized into two hundred fifty metal boxes, was then loaded onto the trucks,
- Qusay then disappeared with the cash in what the New York Times called “perhaps the greatest bank robbery in history.”
- What became of Qusay’s haul became known only when two sergeants broke through the front door of the cottage on the grounds of one of the Iraqi leader’s former palaces and seized $760 million. It is unclear what happened to the remaining $160 million and €90 million that Qusay stole, though American officials believed he used the money to begin funding insurgent activity.
CHINESE PHARMACEUTICAL INDUSTRY BRIBES
- For more than a decade, the world’s leading pharmaceutical companies...all resorted to the crudest means imaginable to generate billions in China: paying off thousands of Chinese doctors to prescribe their products instead of the competition’s.
- The low base salary is an additional incentive to take corporate bribes. Official state salaries for most doctors are meager: $150 a month for entry-level physicians, and $400 a month for doctors with a few years of experience; even upper-level hospital officials earn only about $1,500 a month. Doctors can double this amount by taking kickbacks. The Chinese government is well aware of this practice but turns a blind eye to it. As long as the bribes keep flowing, the state can avoid raising doctors’ salaries, saving billions a year.
CHINESE BRIBERY -> OVER-PRESCRIBE ANTIBIOTICS -> SUPER BUGS
- China has, in fact, one of the highest rates of drug overprescription in the world, particularly of antibiotics...the average individual in China uses ten times as many antibiotics as the average American.
- “This pattern is likely to exacerbate the problem of growing antibiotic resistance.”
- China’s pronounced overuse of antibiotics is responsible for the appearance of antibiotic-resistant strains of various diseases, such as tuberculosis and syphilis, as well as various superbugs such as MRSA, mcr-1, and CRE.
LOCKHEED BRIBED JAPAN
- Lockheed would never make a sale in Japan if it did not pay bribes, which were effectively the “admission to a ball game.”
- All Nippon reneged on its deal with Boeing and McDonnell Douglas and purchased Lockheed’s aircraft instead.
- Carl Kotchian’s admission before Congress of having paid bribes to the Japanese became Japan’s greatest scandal since the end of the Second World War—their version of Watergate.
ROLE OF SHELL COMPANIES
- To fully enjoy the proceeds of bribery, foreign officials need shell companies through which they can mask their true ownership; bank accounts held in the name of those shell companies at respectable banks like Barclays; real estate titled in the name of the shell companies in first-tier cities like New York or Washington; and a team of lawyers and financial consultants to incorporate and manage the shell companies and execute the necessary transactions.
SHELL COMPANIES AND REAL ESTATE
- According to a study by the Washington Post, anonymous companies acquired $61.2 billion in U.S. real estate in the last quarter of 2015—which amounted to 58 percent of all transactions of $3 million or more.
BRIBERY AND ARMS SALES
- International defense and arms companies had been bribing the Greek armed forces for a decade, resulting in billions of dollars in waste that had helped push Greece to the brink of collapse.
- “They bought 60 F-16s without radar defense,” he recalled. “They bought 150 tanks, the first [of their kind] in the world,” he said, referring to German Leopard 2 tanks Greece purchased in 2009. “But they bought them without ammunition. They bought the ammunition after ten years.”
BRIBERY AND RISING HEALTH CARE COSTS
- To recoup the costs of the bribes, plus the cost of taxes and Karagiannis’s cut, DePuy inflated the price of its products by 35 percent.24 This meant the state overpaid by that amount every time a surgeon performed a knee surgery. By the mid-2000s, the price of a knee replacement in Greece had risen to more than eight thousand dollars—double the cost in the rest of Europe.
FUNDING TERRORISM
- “some of the money definitely went to terrorism. Terrorists raise money in different ways. But the bribery money is one source, categorically.
REX TILLERSON PERSONAL STORY ABOUT BRIBERY
- Trump, the article describes, began “fulminating” about the FCPA and how it unfairly penalizes American companies. Tillerson interjected to disagree, and then related a personal story to the president. Tillerson described how, when he was the CEO of ExxonMobil, he met with government officials in Yemen to discuss a business deal. During the talks, Yemen’s oil minister handed Tillerson a business card, on the back of which was written a Swiss bank account. “Five million dollars,” the oil minister told Tillerson, implying that if Exxon wanted to close the deal, it would have to pay a bribe. Tillerson refused, and explained to Trump, “I don’t do that. Exxon doesn’t do that.” If the Yemenis wanted to do business with Exxon, Tillerson told him, they’d have to do it cleanly. The Yemenis eventually agreed. “Tillerson told Trump that America didn’t need to pay bribes—that we could bring the world up to our own standards.”
*** *** *** *** ***
FACTOIDS
- Until the early 2000s, corporate bribes in Germany were actually tax deductible.
- “politically exposed person” (PEP)—a designation used in financial regulation for a foreign government official, or for a person in a prominent political office.
- Bangladesh had become the most corrupt country in the world, according to Transparency International.
BONUS
- The Battle of Plassey (1757); won India through bribery: https://youtu.be/f1T36J92bf0
- Iraq illegally made billions from Oil-For-Food program: https://youtu.be/oVeZpP2QLSw
- GSK bribery case in China: https://youtu.be/OqonXRdtUKk
- China overprescribes antibiotics: https://youtu.be/ahIZarIObbk
- Alcoa bribery: https://youtu.be/1Cb1rCw6sKw
- Rolls-Royce bribery: https://www.itv.com/news/2017-01-16/r...
- What is a politically exposed person (PEP)?: https://youtu.be/qdt5RPqbiWg
- Bribery in Greek health care: https://youtu.be/yLN0c5vML8M
- Richard Bistrong: https://youtu.be/aYRj-CUx3fo
WHAT IS THE FCPA?
- Foreign Corrupt Practices Act (FCPA)—groundbreaking legislation that, by prohibiting commercial bribery for the first time in history, sought to change how capitalism and political affairs were conducted around the world.
FCPA’S ORIGINAL INTENT
- “At its inception, Congress understood the FCPA as an instrument for promoting democratic values in developing countries,”
BUT COMMUNISM FELL, SO WHAT’S THE POINT...
- Ironically, by the time the industrialized world committed itself to outlawing bribery, communism had collapsed, and with it the FCPA’s major motivation to protect democracy and citizens overseas.
- “With the collapse of the Soviet Union . . . the foreign policy implications of antibribery law gradually grew obscure.”
FOCUS SHIFTED FROM OVERSEAS CITIZENS TO HELPING US BUSINESSES
- The perceived victim was no longer poor citizens overseas, or democracy, but American business itself. Throughout the 1990s, under a pro-export Clinton administration, corporate bribery had effectively become a trade and commerce issue, not a foreign policy matter, and the FCPA, an instrument for protecting American corporate power.
SCOPE OF THE FCPA IS OUTSIDE THE USA
- how unprecedented an effort the FCPA was: It was not just that the statute criminalized the bribing of an official—many existing laws did that—but it forbade bribing a foreign official in another country, and as such represented an assertion of jurisdiction never before attempted in the fight against bribery.
WHY SHOULD ANYONE CARE ABOUT BRIBERY?
- Bribes eventually harm Americans, American society, American values, and American interests, both domestically and around the world, in ways that are difficult to gauge.
- The firms also effectively steal the public’s money because the majority of bribery cases involve capital-intensive development and infrastructure projects—such as roads, dams, defense systems, oil extraction, or mining—that are publicly funded. To recoup the bribes involved in winning such contracts, companies conspire with foreign officials to inflate the costs, sometimes by tens or even hundreds of millions of dollars. While the companies and the officials win out, taxpayers are left shouldering the burden.
HOW MUCH MONEY ARE WE TALKING ABOUT?
- Corporate bribes involve a remarkable amount of money: The World Bank has estimated $1 trillion a year, though this may represent the high end; others have placed the amount at 10 percent of the $4 trillion spent annually on global public procurement.
THE EAST INDIA COMPANY
- But what originally agitated [Thomas] Paine was the corruption and plunder of the East India Company.
- The company faced a mounting debt of £1.5 million, as its stock price began to plunge. By 1772 it was in full-blown crisis. In a foreshadowing of our own times, the world’s most powerful corporation needed a government bailout and asked the Bank of England for a loan of £1 million.
- In 1773, with bankruptcy looming, the East India Company raised the price of tea in America—prompting a chain of events that began with the Boston Tea Party and eventually led to the American Revolution.
- England would not specifically criminalize corporate overseas bribery until 2010.
MODERN-DAY BRIBERY
- The template for modern-day bribery had been established by multinational corporations sometime after the end of the Second World War.
UNITED FRUIT
- Eli M. Black, the founder and CEO of United Brands
- Black had built United, and its Chiquita brand was responsible for nearly one third of all bananas brought into the United States. The SEC had discovered that United Brands had offered $2.5 million in bribes to foreign officials, including the president of Honduras, Oswaldo López Arellano. Using his briefcase, Black smashed out the windows facing Park Avenue and, still holding the case, leaped out the window, plunging to his death.
CORRUPTION NEARLY TOPPLED JAPANESE, ITALIAN GOV’TS IN THE 1970S
- As investigations by the SEC and the Senate revealed in minute detail, Lockheed had not just bribed officials in Japan, but paid tens of millions of dollars to democratic political parties in Italy...When these payments were exposed, the two governments involved were shaken and nearly toppled.
CORRUPTION CHANGES A STATE’S BUYING PRIORITIES
- “Because we are frequently competing not necessarily with another airplane just like ours but we are competing for the sales dollars that would be spent on something else”—effectively acknowledging that the company had bribed foreign officials to buy military equipment that Indonesia might not even need and could have spent on something else, like schools.
SADDAM HUSSEIN EXPLOITS OIL-FOR-FOOD PROGRAM
- Every foreign company that wanted to buy Iraqi oil would now have to pay a “surcharge” of between ten and fifty cents on each barrel of oil.
- The surcharges had to be paid not to the UN escrow account in New York, but to a separate bank account controlled by Iraq and housed in either Lebanon or Jordan.
- The largest humanitarian effort in world history ultimately failed due to a simple yet glaring design flaw: Saddam Hussein was given control over all contractors—both those to whom Iraq sold oil, and those from whom it purchased humanitarian supplies.
SADDAM USED OIL-FOR-FOOD KICKBACKS TO FUND INSURGENCY
- At 4:00 A.M. on March 18, 2003, just hours before the American bombing campaign began, Saddam’s thirty-seven-year-old son, Qusay, arrived at the Central Bank of Iraq in Baghdad,
- brought with him fifty helpers, three flatbed trucks, and a handwritten letter from his father instructing the head of the Central Bank, Isam Rashid al-Huwaysh, to hand over to Qusay $920 million and €90 million from the bank’s vault. The money, which included $100 bills organized into two hundred fifty metal boxes, was then loaded onto the trucks,
- Qusay then disappeared with the cash in what the New York Times called “perhaps the greatest bank robbery in history.”
- What became of Qusay’s haul became known only when two sergeants broke through the front door of the cottage on the grounds of one of the Iraqi leader’s former palaces and seized $760 million. It is unclear what happened to the remaining $160 million and €90 million that Qusay stole, though American officials believed he used the money to begin funding insurgent activity.
CHINESE PHARMACEUTICAL INDUSTRY BRIBES
- For more than a decade, the world’s leading pharmaceutical companies...all resorted to the crudest means imaginable to generate billions in China: paying off thousands of Chinese doctors to prescribe their products instead of the competition’s.
- The low base salary is an additional incentive to take corporate bribes. Official state salaries for most doctors are meager: $150 a month for entry-level physicians, and $400 a month for doctors with a few years of experience; even upper-level hospital officials earn only about $1,500 a month. Doctors can double this amount by taking kickbacks. The Chinese government is well aware of this practice but turns a blind eye to it. As long as the bribes keep flowing, the state can avoid raising doctors’ salaries, saving billions a year.
CHINESE BRIBERY -> OVER-PRESCRIBE ANTIBIOTICS -> SUPER BUGS
- China has, in fact, one of the highest rates of drug overprescription in the world, particularly of antibiotics...the average individual in China uses ten times as many antibiotics as the average American.
- “This pattern is likely to exacerbate the problem of growing antibiotic resistance.”
- China’s pronounced overuse of antibiotics is responsible for the appearance of antibiotic-resistant strains of various diseases, such as tuberculosis and syphilis, as well as various superbugs such as MRSA, mcr-1, and CRE.
LOCKHEED BRIBED JAPAN
- Lockheed would never make a sale in Japan if it did not pay bribes, which were effectively the “admission to a ball game.”
- All Nippon reneged on its deal with Boeing and McDonnell Douglas and purchased Lockheed’s aircraft instead.
- Carl Kotchian’s admission before Congress of having paid bribes to the Japanese became Japan’s greatest scandal since the end of the Second World War—their version of Watergate.
ROLE OF SHELL COMPANIES
- To fully enjoy the proceeds of bribery, foreign officials need shell companies through which they can mask their true ownership; bank accounts held in the name of those shell companies at respectable banks like Barclays; real estate titled in the name of the shell companies in first-tier cities like New York or Washington; and a team of lawyers and financial consultants to incorporate and manage the shell companies and execute the necessary transactions.
SHELL COMPANIES AND REAL ESTATE
- According to a study by the Washington Post, anonymous companies acquired $61.2 billion in U.S. real estate in the last quarter of 2015—which amounted to 58 percent of all transactions of $3 million or more.
BRIBERY AND ARMS SALES
- International defense and arms companies had been bribing the Greek armed forces for a decade, resulting in billions of dollars in waste that had helped push Greece to the brink of collapse.
- “They bought 60 F-16s without radar defense,” he recalled. “They bought 150 tanks, the first [of their kind] in the world,” he said, referring to German Leopard 2 tanks Greece purchased in 2009. “But they bought them without ammunition. They bought the ammunition after ten years.”
BRIBERY AND RISING HEALTH CARE COSTS
- To recoup the costs of the bribes, plus the cost of taxes and Karagiannis’s cut, DePuy inflated the price of its products by 35 percent.24 This meant the state overpaid by that amount every time a surgeon performed a knee surgery. By the mid-2000s, the price of a knee replacement in Greece had risen to more than eight thousand dollars—double the cost in the rest of Europe.
FUNDING TERRORISM
- “some of the money definitely went to terrorism. Terrorists raise money in different ways. But the bribery money is one source, categorically.
REX TILLERSON PERSONAL STORY ABOUT BRIBERY
- Trump, the article describes, began “fulminating” about the FCPA and how it unfairly penalizes American companies. Tillerson interjected to disagree, and then related a personal story to the president. Tillerson described how, when he was the CEO of ExxonMobil, he met with government officials in Yemen to discuss a business deal. During the talks, Yemen’s oil minister handed Tillerson a business card, on the back of which was written a Swiss bank account. “Five million dollars,” the oil minister told Tillerson, implying that if Exxon wanted to close the deal, it would have to pay a bribe. Tillerson refused, and explained to Trump, “I don’t do that. Exxon doesn’t do that.” If the Yemenis wanted to do business with Exxon, Tillerson told him, they’d have to do it cleanly. The Yemenis eventually agreed. “Tillerson told Trump that America didn’t need to pay bribes—that we could bring the world up to our own standards.”
*** *** *** *** ***
FACTOIDS
- Until the early 2000s, corporate bribes in Germany were actually tax deductible.
- “politically exposed person” (PEP)—a designation used in financial regulation for a foreign government official, or for a person in a prominent political office.
- Bangladesh had become the most corrupt country in the world, according to Transparency International.
BONUS
- The Battle of Plassey (1757); won India through bribery: https://youtu.be/f1T36J92bf0
- Iraq illegally made billions from Oil-For-Food program: https://youtu.be/oVeZpP2QLSw
- GSK bribery case in China: https://youtu.be/OqonXRdtUKk
- China overprescribes antibiotics: https://youtu.be/ahIZarIObbk
- Alcoa bribery: https://youtu.be/1Cb1rCw6sKw
- Rolls-Royce bribery: https://www.itv.com/news/2017-01-16/r...
- What is a politically exposed person (PEP)?: https://youtu.be/qdt5RPqbiWg
- Bribery in Greek health care: https://youtu.be/yLN0c5vML8M
- Richard Bistrong: https://youtu.be/aYRj-CUx3fo
March 29, 2019
Corporations have been bribing government officials since the dawn of civilisation, and they are still doing so now. Alcoa bribes Bahrain officials. UN officials bribing Saddam Hussein during the ‘Oil for Food’ program, allowing him to receive cash in his Jordan account to build his military. Pharmaceutical companies bribing doctors in China to over prescribe their medication. Bribes paid to Bangladeshi middle man funded extremist group that eventually killed locals and tourists. Greek politicians took bribes to buy tanks without ammo, and order submarines from a German company that were never finished, and buying expensive medical equipment that it cannot afford. Eventually health care funding was cut during austerity and everyone suffered.
The FCPA (Foreign Corrupt Practices Act) was set up to prosecute companies that engage in paying bribes. However the companies generally just pay a fine without admitting liability, and no restitution is made to victims in corrupt countries. It is extremely difficult to prosecute individual decision makers.
Montero proposed to greatly increase the fines for companies, and to give some of that to victims in the affected countries. Studies have shown that bribes increase a company’s revenue in the short term but a non-corrupt company’s earnings are higher. Also morale becomes lower when a company pay bribes.
I think all of us need to fight the urge to go with the flow, and just stand firm against bribery.
The FCPA (Foreign Corrupt Practices Act) was set up to prosecute companies that engage in paying bribes. However the companies generally just pay a fine without admitting liability, and no restitution is made to victims in corrupt countries. It is extremely difficult to prosecute individual decision makers.
Montero proposed to greatly increase the fines for companies, and to give some of that to victims in the affected countries. Studies have shown that bribes increase a company’s revenue in the short term but a non-corrupt company’s earnings are higher. Also morale becomes lower when a company pay bribes.
I think all of us need to fight the urge to go with the flow, and just stand firm against bribery.
June 8, 2025
Really liked this. Informative and insightful, with just the right amount of detail- not too technical or financial. Great for a bit of context around my own job.
January 15, 2019
A thought-provoking work on global corporate bribery and international law enforcement against corruption. Would highly recommend it to anyone interested in understanding corporate greed and its deleterious effects on human lives.
March 1, 2020
In 1757 Robert Clive bribed the head of the defending military force of West Bengal to stand down, and allow the East India Company to take control of the area. Montero chronicles many other examples since where corporate power gets its way through payoffs.
Efforts by governments to reign in these practices are fraught with hypocrisy and contradiction, starting with Clive himself who was able to buy his way into the British Parliament, and every top national honor in the books. The USA was formed in part as a protest against corruption, as manifested in the rising price of tea due to East Asia Company exploitation and destruction of India. However, even in the USA, there wasn't much beyond just rhetoric until after Watergate, when a small team at the SEC started looking at corruption in US corporations. This led to the FCPA, which both required corporations to keep accurate accounts of transactions, including bribes, and also a provision that giving a bribe was unlawful. While an important initiative, hypocrisy was still rife. For example, one keen supporter, Joe Biden, was a young senator from Delaware, the state that is ground zero for registering shell companies with little documentation that then become conduits for corrupt practices. The goal initially was the noble one of protecting the interests of citizens of other countries: government purchases say of military airplanes facilitated by bribes could divert scarce resources away from schools and health clinics. Yet after the end of the cold war, there was much less concern for welfare of other countries, and the emphasis shifted under the pro-trade Clinton administration to protecting the interests of US corporates (giving them reasons not to pay bribes).
Baron Sir Robert Clive set the example of corrupt oligarchs airbrushing their reputations with political connections and charity. More recently, Victor Dahdeleh came up first as a middleman for aluminum transactions with Bahrain, and now controls all bauxite in Guinea. He has made large donations to LSE, McGill University, and the Clinton Foundation.
One example of the challenge in combating corruption involves the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business transactions, a voluntary agreement among member countries to outlaw commercial bribery, and to share evidence on corruption investigations. An analysis of evidence on the Iraq Oil for Food scandal found intricate patterns of kickbacks from companies in 66 nations of $1.7 billion between 1996 – 2003. While the UN required that all funds from oil sales go into a UN managed account, the government had the power to choose oil traders, and suppliers of goods and services procured using the UN funds; the government received the kickbacks from these traders and suppliers. The UN official appointed to oversee the program received kickbacks himself. Government proceeds were in turn reportedly used first to build up Iraq’s military, and then to fund the insurgency and ISIS after the government of Saddam Hussein was toppled. Looking at a sample of companies that did business in Iraq, 58 percent of those based in countries that signed the OECD convention paid bribes for contracts, compared to 71 percent of those based in countries that did not sign the agreement. While fewer firms pay bribes in the convention signing countries, the difference is smaller than would have been hoped for. Part of the reason for this was the scant enforcement of the OECD convention and related national laws. For example, in the home of the FCPA that provided the template for the OECD convention, there was for the initial 25 years only a single attorney in the Justice Department's FCPA unit. While he and one or two prosecutors brought a number of key cases, there were limits to what a small team could do.
Kickbacks have unanticipated consequences. For example, Montero documents how China's medical system has intricate networks of corporate middlemen for rewarding doctors for helping to sell drugs and other medical supplies. International drug companies faced with strict regulatory requirements in Europe and the US that are holding down profits, seek to make profits in less regulated China. The government is complicit in allowing this, in part to permit low salaries for doctors that keeps down budgets. What Montero doesn't mention is that these illicit deals also give the government greater control, for example allowing them to fire a doctor for corruption whenever needed. The result is a system where Chinese pay more than they should for medical care, due to overprescribing of expensive, newer and more powerful drugs. There is also the risk of overuse of antibiotics leading to antibiotic resistance. The high expense of medical care dissuades sick people from seeking treatment, and the corruption undermines trust in the medical system. These and other dysfunctional aspects of Chinese medical care stemming from illicit practices may contribute to the outbreak of and challenges in controlling pandemics like SARS and Coronavirus 19.
Another unintended consequence came from the Siemens bribes to Bangladesh telecommunications minister Aminul Haque. Siemens had the simple objective of winning a contract, which it did. However, Haque was at the same time patronizing Jamat'ul Mujahadeen Bangladesh, an Islamic militant group in Bangladesh. Haque was a leading member in the Bangladesh Nationalist Party (BNP), one of the country's two political parties. Its main rival is the Awami League. According to victims, Haque allegedly used JMB militants to kill Awami League members to ensure his party's supremacy in the area. In return, Haque provided the group with political cover to continue its Islamist agenda, and presumably funding from the bribe money. In 2007, Haque was sentenced in absentia to 31 years and six months' imprisonment for aiding and abetting the militants. In 2009, Haque surrendered and was sent to jail where he died in 2019. Another case, as in Iraq, where bribes funded insurgency.
What to do? Billions in fines and recovered funds have gone to US, UK, and other governments instituting legal action. Very little gets back to the countries that lost the funds in the first place, in part due to reluctance to give money back to corrupt governments. One successful case of World Bank setting up foundation in Kazakhstan and funding with recovered funds under FCPA. Some corporations setting up KYC and other compliance regimes. One challenge: companies make net return on corruption, even if have to pay fine. Suggests that NPV of fine * probability of being caught should be greater than NPV of benefits from corruption; at present, the latter is much greater, so naturally, firms continue corrupt behavior.
Efforts by governments to reign in these practices are fraught with hypocrisy and contradiction, starting with Clive himself who was able to buy his way into the British Parliament, and every top national honor in the books. The USA was formed in part as a protest against corruption, as manifested in the rising price of tea due to East Asia Company exploitation and destruction of India. However, even in the USA, there wasn't much beyond just rhetoric until after Watergate, when a small team at the SEC started looking at corruption in US corporations. This led to the FCPA, which both required corporations to keep accurate accounts of transactions, including bribes, and also a provision that giving a bribe was unlawful. While an important initiative, hypocrisy was still rife. For example, one keen supporter, Joe Biden, was a young senator from Delaware, the state that is ground zero for registering shell companies with little documentation that then become conduits for corrupt practices. The goal initially was the noble one of protecting the interests of citizens of other countries: government purchases say of military airplanes facilitated by bribes could divert scarce resources away from schools and health clinics. Yet after the end of the cold war, there was much less concern for welfare of other countries, and the emphasis shifted under the pro-trade Clinton administration to protecting the interests of US corporates (giving them reasons not to pay bribes).
Baron Sir Robert Clive set the example of corrupt oligarchs airbrushing their reputations with political connections and charity. More recently, Victor Dahdeleh came up first as a middleman for aluminum transactions with Bahrain, and now controls all bauxite in Guinea. He has made large donations to LSE, McGill University, and the Clinton Foundation.
One example of the challenge in combating corruption involves the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business transactions, a voluntary agreement among member countries to outlaw commercial bribery, and to share evidence on corruption investigations. An analysis of evidence on the Iraq Oil for Food scandal found intricate patterns of kickbacks from companies in 66 nations of $1.7 billion between 1996 – 2003. While the UN required that all funds from oil sales go into a UN managed account, the government had the power to choose oil traders, and suppliers of goods and services procured using the UN funds; the government received the kickbacks from these traders and suppliers. The UN official appointed to oversee the program received kickbacks himself. Government proceeds were in turn reportedly used first to build up Iraq’s military, and then to fund the insurgency and ISIS after the government of Saddam Hussein was toppled. Looking at a sample of companies that did business in Iraq, 58 percent of those based in countries that signed the OECD convention paid bribes for contracts, compared to 71 percent of those based in countries that did not sign the agreement. While fewer firms pay bribes in the convention signing countries, the difference is smaller than would have been hoped for. Part of the reason for this was the scant enforcement of the OECD convention and related national laws. For example, in the home of the FCPA that provided the template for the OECD convention, there was for the initial 25 years only a single attorney in the Justice Department's FCPA unit. While he and one or two prosecutors brought a number of key cases, there were limits to what a small team could do.
Kickbacks have unanticipated consequences. For example, Montero documents how China's medical system has intricate networks of corporate middlemen for rewarding doctors for helping to sell drugs and other medical supplies. International drug companies faced with strict regulatory requirements in Europe and the US that are holding down profits, seek to make profits in less regulated China. The government is complicit in allowing this, in part to permit low salaries for doctors that keeps down budgets. What Montero doesn't mention is that these illicit deals also give the government greater control, for example allowing them to fire a doctor for corruption whenever needed. The result is a system where Chinese pay more than they should for medical care, due to overprescribing of expensive, newer and more powerful drugs. There is also the risk of overuse of antibiotics leading to antibiotic resistance. The high expense of medical care dissuades sick people from seeking treatment, and the corruption undermines trust in the medical system. These and other dysfunctional aspects of Chinese medical care stemming from illicit practices may contribute to the outbreak of and challenges in controlling pandemics like SARS and Coronavirus 19.
Another unintended consequence came from the Siemens bribes to Bangladesh telecommunications minister Aminul Haque. Siemens had the simple objective of winning a contract, which it did. However, Haque was at the same time patronizing Jamat'ul Mujahadeen Bangladesh, an Islamic militant group in Bangladesh. Haque was a leading member in the Bangladesh Nationalist Party (BNP), one of the country's two political parties. Its main rival is the Awami League. According to victims, Haque allegedly used JMB militants to kill Awami League members to ensure his party's supremacy in the area. In return, Haque provided the group with political cover to continue its Islamist agenda, and presumably funding from the bribe money. In 2007, Haque was sentenced in absentia to 31 years and six months' imprisonment for aiding and abetting the militants. In 2009, Haque surrendered and was sent to jail where he died in 2019. Another case, as in Iraq, where bribes funded insurgency.
What to do? Billions in fines and recovered funds have gone to US, UK, and other governments instituting legal action. Very little gets back to the countries that lost the funds in the first place, in part due to reluctance to give money back to corrupt governments. One successful case of World Bank setting up foundation in Kazakhstan and funding with recovered funds under FCPA. Some corporations setting up KYC and other compliance regimes. One challenge: companies make net return on corruption, even if have to pay fine. Suggests that NPV of fine * probability of being caught should be greater than NPV of benefits from corruption; at present, the latter is much greater, so naturally, firms continue corrupt behavior.
December 8, 2018
Imperialist schlock.
December 31, 2018
In “Kickback”, investigative reporter David Montero has produced a monumental work detailing a massive world-wide crime that has largely been ignored by criminal justice systems for centuries. As Montero details example after example of multi-billion-dollar-per-year corporate bribery, the overriding question that ponders the reader as he or she turns page after page is “Can this EVER be stopped?” and sadly at the same time, the answer of “No, never” becomes more and more evident.
There are two themes that run through the pages of “Kickback” - the historical and in most instances still current lack of oversight and investigation, and prosecution, for these crimes, and the social cost to the people of such countries as Greece, China, Nigeria, Bangladesh, and dozens, or more likely hundreds, of other countries where corporate bribery has been the standard operating corporate procedure for generations.
Companies prosecuted and paying massive (a relative term) fines include Johnson & Johnson, Siemens, General Electric, Merck, Pfizer, GlaxoSmithKline, and thousands more, but they and others will continue to a large extent unabated, as US Justice Dept statistics show that for every $1.00 a corporation spends on bribes, they receive a return of $10.00 in profits.
There are two themes that run through the pages of “Kickback” - the historical and in most instances still current lack of oversight and investigation, and prosecution, for these crimes, and the social cost to the people of such countries as Greece, China, Nigeria, Bangladesh, and dozens, or more likely hundreds, of other countries where corporate bribery has been the standard operating corporate procedure for generations.
Companies prosecuted and paying massive (a relative term) fines include Johnson & Johnson, Siemens, General Electric, Merck, Pfizer, GlaxoSmithKline, and thousands more, but they and others will continue to a large extent unabated, as US Justice Dept statistics show that for every $1.00 a corporation spends on bribes, they receive a return of $10.00 in profits.
March 22, 2019
As a previous reviewer has said, this is good if you're interested in the topic. Montero is a successful journalist, and his style is straightforward and effective in the manner of good informative/investigative journalism.
He presents a convincing picture of the practice of corporate bribery and its impact on countries and communities around the world, especially in the developing world. He also presents a damning if ultimately hopeful account of attempts to deal with the problem to date.
If you're not interested in the topic itself, this will probably feel pretty dry or even boring. Not because Montero is a bad writer, but because he's a good one, never going beyond what is provable or engaging in schlock hyperbole to ramp up emotion in his readers. In this case the facts, boring as they may seem to some, are sufficiently damning without any such inflating and Montero resists the temptation to move toward tabloid writing and sticks with presenting effective reporting. It probably won't win raves, but it's really good at what it does--which is all expressed in its title.
He presents a convincing picture of the practice of corporate bribery and its impact on countries and communities around the world, especially in the developing world. He also presents a damning if ultimately hopeful account of attempts to deal with the problem to date.
If you're not interested in the topic itself, this will probably feel pretty dry or even boring. Not because Montero is a bad writer, but because he's a good one, never going beyond what is provable or engaging in schlock hyperbole to ramp up emotion in his readers. In this case the facts, boring as they may seem to some, are sufficiently damning without any such inflating and Montero resists the temptation to move toward tabloid writing and sticks with presenting effective reporting. It probably won't win raves, but it's really good at what it does--which is all expressed in its title.
July 21, 2020
A good overview of worldwide corruption
This book handles a very difficult topic, and that makes it hard to read. It’s not because corruption is hard to understand, but because it’s dry and not exciting.
Who will be interested on how kickbacks and bribes work around the world? Probably not many. Who should read this book?
All taxpayers in the first world, who have the power to change and demand transparency from their governments.
The book has a good compendium of cases where mostly western companies corrupted poorer governments and prevented their populations from enjoying the benefits of their own resources.
The author proposes some solutions, which are mostly impractical and naive. This isn’t detrimental because it starts a needed discussion.
The book needed some proofreading by editors. Some mistakes regarding the location of headquarters of European companies (i.e. Siemens is German not Italian) just shouldn’t be there.
This book handles a very difficult topic, and that makes it hard to read. It’s not because corruption is hard to understand, but because it’s dry and not exciting.
Who will be interested on how kickbacks and bribes work around the world? Probably not many. Who should read this book?
All taxpayers in the first world, who have the power to change and demand transparency from their governments.
The book has a good compendium of cases where mostly western companies corrupted poorer governments and prevented their populations from enjoying the benefits of their own resources.
The author proposes some solutions, which are mostly impractical and naive. This isn’t detrimental because it starts a needed discussion.
The book needed some proofreading by editors. Some mistakes regarding the location of headquarters of European companies (i.e. Siemens is German not Italian) just shouldn’t be there.
February 28, 2019
What a phenomenal book. David Montero takes an obscure topic of Bribery and gave example after example in demonstrating how widespread and rampant this financial abuse is. Prior to reading this book, I never fully understood the ramifications of what kickbacks do to harm an entire national and international economy. Montero effectively articulated why governments and people around the world should tackle corporate bribes and kickbacks head on. His idea of ‘restorative justice’ encompasses a realistic and proactive way of empowering the very communities and nations that kickbacks damage and hurt the most. A great read for a topic that often goes insufficiently discussed in society, even in 2019.
July 30, 2020
You'd think a book about white-collar crime wouldn't be thrilling or enraging, but that's the thrust of David Montero's book. Bribery is not a "victimless" crime where money changes hands and only the free market suffers. Bribery is where the money to murder political activists, support terrorists, suppress democratic movements, bolster religious extremism, and more comes from. It rips off taxpayers, reduces the quality of goods and services, and makes the world worse, and Montero concisely sums up these points, why it happens, and how to stop it in a brisk must-read that will make you reconsider the "harmless" nature of white collar crime.
October 26, 2020
Excellent Book!!!
Makes you look at some international incidents from a different point of view. Gives you pause of those incidents and ponder how did it get to that. These are companies that we all know about, pay money to for services and buy stock in. We get more insight into their thoughts that go behind their actions. Even doing small deals with some international companies (all size companies) such as these throughout my life, I have seen that the graft hand is always out.
Looking forward to more books from David.
Makes you look at some international incidents from a different point of view. Gives you pause of those incidents and ponder how did it get to that. These are companies that we all know about, pay money to for services and buy stock in. We get more insight into their thoughts that go behind their actions. Even doing small deals with some international companies (all size companies) such as these throughout my life, I have seen that the graft hand is always out.
Looking forward to more books from David.
January 30, 2019
Good if you are interested in the topic. The book is structured with some history from the signing of the FCPA in the 70's, plus deep dives into several recent bribery scandals and their impacts. Learning more about the oil for food scandal in Iraq was especially insightful for me. There is also a nice historical example given of bribery and the East India Company. The book ends with a somewhat fluffy and overly optimistic 'we've got this' message, but overall the ending is ok.
January 15, 2020
Tells how big corporations profit by paying out kickbacks to government officials to get big project contracts. The author shows examples of how this way of doing business ruins nations, increases poverty and sets all of us up for disaster. Even well meaning leaders will look the other way once kickback money gets into their pockets. Meanwhile, thousands of people go homeless and starve. The money that should have pulled a nation up, leads to endless poverty.
December 21, 2019
老子說：上善若水，看完這本書的感想一言以蔽之：至惡若錢。
這本書的『黑錢』指的是大企業為了做成生意，給他國高官或相關人的賄賂、回扣，『黑錢』除了在道德上有著極大的虧欠外，還為「被行賄國」帶來了物價飛漲（羊毛總是出在羊身上，賄賂是導致價格膨脹的原因之一）、貧富差距擴大、削弱國家減少貧困的能力，從而加劇貧窮等風險。
書裡講到黑錢流竄的案例還蠻讓人目瞪口呆的，更讓人深深感到無奈的是「在數百萬美元的賄賂案中，負有直接責任的人很少入獄」，原因是複雜的金流關係透過層層的空殼公司洗錢，創建了一個「國際迷宮」，讓司法人員很難找到確切的正據，想想我們小老姓就為了防止這些有錢人的洗錢行為，轉帳或提個五十萬就要被追查半天（一塊錢都跑不掉），真是正義何在？
這本書的『黑錢』指的是大企業為了做成生意，給他國高官或相關人的賄賂、回扣，『黑錢』除了在道德上有著極大的虧欠外，還為「被行賄國」帶來了物價飛漲（羊毛總是出在羊身上，賄賂是導致價格膨脹的原因之一）、貧富差距擴大、削弱國家減少貧困的能力，從而加劇貧窮等風險。
書裡講到黑錢流竄的案例還蠻讓人目瞪口呆的，更讓人深深感到無奈的是「在數百萬美元的賄賂案中，負有直接責任的人很少入獄」，原因是複雜的金流關係透過層層的空殼公司洗錢，創建了一個「國際迷宮」，讓司法人員很難找到確切的正據，想想我們小老姓就為了防止這些有錢人的洗錢行為，轉帳或提個五十萬就要被追查半天（一塊錢都跑不掉），真是正義何在？
December 9, 2018
Incredibly interesting and thought-provoking. It made me wonder how corporations can possibly be as above the law as they are. This was a shockingly honest read and I want all my friends to read it so they can see how blatantly these corporations deal in bribes.
August 5, 2019
Exactly as it says in the title with a bit of linguistic flair. It's like the ketchup on dry meat ;p would've been nice if it covered cyber crimes as much as Alcoa or J&J scandals, but well researched where he does go in depth.
January 17, 2022
Concrete examples show the hurtful impact of bribery, not just on investors and "the economy", but on citizens of the nations where it takes place, where officials taking bribes prioritize military spending over e.g. schools.
March 2, 2019
The book is well written. Not dry for someone who’s curious about grand and corporate corruption. I would have appreciated the book more if the author had explored the scheme that these actors used.
March 23, 2019
Clearly written and gives you an idea of how everything is impacted by corruption. I had no idea how so many things are impacted by such small dealings.
June 6, 2019
Was expecting something a bit more cynical. Not bad, anyway.
September 30, 2024
amazing, amazing, amazing
don't let the pessimistic view of india sway your investment theses, the book gives candid examples of horrible behavior throughout the global economic domain
don't let the pessimistic view of india sway your investment theses, the book gives candid examples of horrible behavior throughout the global economic domain
August 15, 2019
Very well written and makes a good case how bribery in the third world is crucial to the economy of the developed world.
Read
May 1, 2019«Откат! Как много в этом звуке...», дальше перефразировать классика не станем, но сразу скажем, что в свежей книге о мировой коррупции нашлось место и нашему Алмаз-Антею. Впрочем, единократное упоминание в ней оборонщиков бледнеет в сравнении с успехами целого ряда уважаемых международных корпораций. Siemens содержал 2700 «консультантов», занимавшихся взятками по всеми миру, а своим взрывным ростом Rolls-Royce обязан восьми «посредникам», работавшими с Нигерией, Китаем, Россией, Казахстаном и Анголой. Установлена причина живучести коррупции – низкая вероятность наказания (6,5% согласно последнему исследованию международных корпораций). Взятки – это выигрыш контрактов, что по душе фондовым рынкам. Поэтому крупные компании прилагают все усилия, чтобы всучить Индонезии ненужные истребители, а Греции танки (снаряды к которым поставляют через 10 лет), учатся «работать» с китайскими докторами и вычисляют правильных посредников для подхода к японским чиновникам.
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