More Bribery & Corruption

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As has been noted before, bribery and corruption are not exclusive to China – or to Chinese companies. Further to recent news about “Blue-Chip Bribery” and “Corruption (with Foreign Characteristics)”, the latest round of news includes BNP Paribas and Siemens as well as a conclusion to the trial of the former head of China’s State Food and Drug Administration. The FT reports:

    “An executive in the Shanghai office of BNP Paribas bribed a senior government official in the capital in order to win business underwriting Chinese sovereign bonds, according to the Beijing city prosecutor’s office. Liu Min, then the head of the French bank’s fixed income department, allegedly paid $128,000 to Xu Fangming, a Ministry of Finance official, in the late 1990s to ensure he did not object to BNP’s underwriting mandate.”

It seems Xu, who accepted the bribes via a friend’s bank account in Hong Kong, has already been found guilty of accepting bribes, and was been sentenced to life in prison (though this was cut to 13 years on appeal). The fallout for Liu and for BNP is still to be confirmed, but it is not clear how far BNP’s (somewhat undermined) assurance that they have “a zero tolerance policy towards any unethical practices and would never use bribes to obtain business” will go with the authorities.

In another story, from China Tech News, Siemens hits the headlines with a suggestion that the fallout from the bribery probe in Germany has reached China:

    “KPMG in China, an auditor for Siemens, said in an internal audit report called “SAS 99 Audit Procedures-Summary of Results”, which was released in November last year, that during their auditing, they found about EUD1.7 million worth of dubious consulting fees and they don’t know for what kind of services Siemens for paid the fee. KPMG also said that there were a lot of other services unclearly marked in Siemens’ contracts with its partners. KPMG defined the nature of Siemens’s behaviors in the contract as foreign corrupt practices…KPMG listed more than 20 other dubious receivers of these types of consulting fees, which was worth about EUD100 million, of which nine were related to Chinese companies and individuals.”

The suggestion is that certain individuals were paid large “consulting fees” (which by implication could be used for giving bribes) in order to win contracts.

While big foreign firms are in trouble for giving, the local takers are also paying the price. In some cases the ultimate one, as in the case of Zheng Xiaoyu, the former head of China’s State Food and Drug Administration, who has received the death sentence for corruption. The FT notes:

    “Zheng Xiaoyu was convicted on charges of taking more than Rmb6.5m ($832,000, €632,000, £429,000) in bribes from drugs companies and of “dereliction of duty” by the Beijing municipal no. 1 intermediate people’s court”.

The bribe givers may also face problems like those of Siemens and BNP – as the Chinese government has ordered a review of the licensing for 170,000 drugs, most of which were approved during Zheng’s tenure.

These stories serve as a reminder that bribery and corruption are not only illegal, but are also political hot potatoes. Foreign firms, like the proverbial tall bamboo, will attract a lot of wind under the current environment. At the same time, the government is all too aware that the spectre of official corruption can only undermine the building of a “harmonious society”.

As recommended in an earlier post, foreign companies should therefore “ensure that corporate policies on such issues are clear, and that training is combined with an occasional audit to make sure that the systems are working properly”. After all ignorance is no defense, and the risks to individual life and liberty, not to mention corporate reputation, are high.

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One Response to “More Bribery & Corruption”

  1. Jeremy Gordon Says:

    China Ex-Food and Drug Chief Executed – Alexa Olesen
    Posted by Xiao Qiang :: 2007-07-09, 10:47 PM

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