Uploaded byCase IQ
Under the Table: Combatting Bribery and Corruption Through Analysis and Prevention
The document discusses the prevalence of bribery and corruption, highlighting key statistics and examples of high-profile cases, including the Varsity Blues college admissions scandal and the UAW corruption scandal. It analyzes essential elements of bribery, corruption types, and the various actors involved, such as politically exposed persons. It concludes with considerations for preventing and addressing these issues in organizations and governance.
More Related Content
Similar to Under the Table: Combatting Bribery and Corruption Through Analysis and Prevention
Under the Table: Combatting Bribery and Corruption Through Analysis and Prevention
- 1. Under the Table: CombattingBribery and Corruption Through Analysis and Prevention Michael S Schidlow
- 2.
- 3. Polling Question Is itbribery? A US-based energy company is making a promotional sales pitch to a foreign government official. The company pays to fly the government official in business class to view a product demonstration. A. No, not if the flight cost was a reasonable, bona fide business expense B. Yes, travel is always considered a bribe, unless for intra-company business C. No, business promotion/sales expenses can never be considered bribery D. Yes, business class travel is an unjustifiable expense
- 4. Bribery and Corruption Distinctions •IMF: There are USD $2 trillion in bribes per year. • One in three people report paying bribes, depending on region. • People pay bribes for medical services, identity documents, permits, electricity, and water.
- 5. Bribery and Corruption Sprunga Leak • In the past three years: – Numerous data leaks – Panama Papers, Paradise Papers, Luanda Leaks – Two major scandals (Operation Carwash, 1MDB) – Three global laundromat scandals (Russian, Azeri, Troika) • $230–430 billion in linked activity
- 6. Bribery and Corruption Keepit Simple • Simple bribery/corruption is the misuse of a position for personal gain. – Personal gain is “anything of value.”
- 7. Bribery and Corruption GrandScale • Grand corruption: – “Those at the political, decision- making levels of government use their office to enrich themselves, their families, and their associates.” (FATF)
- 8. Bribery and Corruption Whocommits grand corruption? Politically exposed persons (PEP) “Prominent” Political function Officeholder Close family Close associates Related businesses
- 9. Bribery and Corruption Risks •Institutional bribery—a French bank: •Over five years, the bank paid bribes through a Libyan “broker.” The Broker •The broker had a Panamanian- based front company and sent funds to a family member. Front Company •Bank employees had knowledge of how the broker was obtaining business and concealed the bribes through payments to the Libyan intermediary. Corrupt Intent •$90 million in bribes, portions of which the Libyan broker paid to high-level Libyan officials to secure the investments from various Libyan state institutions for the bank. Millions
- 10. Bribery and Corruption Globally: Skewedeconomics Valuesand economy distorted Capitalflight Lack of infrastructure EndemicRisk Self- perpetuated Systemicallyenabled Multiple layers of complicity
- 11. Under the Table EssentialElements
- 12. Essential Elements Bribery • Actingwith “corrupt” intent (“trying to influence a person to act contrary to a standard of conduct, such as a legal obligation”), the person: – Offered or solicited – Anything of value – In exchange for misfeasance, malfeasance, nonfeasance
- 13. Essential Elements Anything ofValue • Bribery: “anything of value”: – Cash – Tangible/Intangible Assets – No-show or low-show job – Loans, lines of credit, or waived fees – Travel or entertainment expenses – Goods (luxury or otherwise)
- 14. Polling Question Is itbribery? The governor’s spouse is on the board of a charitable organization – a dog rescue – and a bank makes a donation to that charity. The donation is under USD $500. A. Probably not, because a charitable donation shouldn’t be considered “something of value” B. Possibly, if the organization did not properly review and approve the donation. C. Probably not, because board members face tremendous scrutiny D. Possibly, if the donation was made by the bank with corrupt intent
- 15. Essential Elements Low ShowJob • Wife of NY State Deputy Secretary • “Employed” by a Maryland- energy company seeking contracts in NY – USD $90,000/year salary – Taught a +/- 90-minute course, every other month – Posted on social media – Passively join occasional conference calls
- 16. Essential Elements Extortion • Ingeneral, the person – Threatens to deprive another person/company – Of access to otherwise available opportunities and/or resources – In exchange for something of value
- 17. Essential Elements Kickback • Misappropriationof Funds • Used to enrich a decision maker • In order to influence an outcome
- 18. Essential Elements Larceny • Unlawfultaking • Or exceeding use of • Property of Another • Without Permission
- 19. Essential Elements Embezzlement • Larcenywhere • The person taking the property was entrusted • Is legally obligated • To maintain safe custody of the assets
- 20. Essential Elements Embezzlement • TeodorinObiang Jr. • The son was given a role in the cabinet. • He swindled millions from the country. • He purchased homes in London, LA, and Paris. • $16 million in cash and watches were seized. • VC Malte Tourbillon = $775,000
- 21. Essential Elements Fair/Honest Services Ascheme to deprive another of the intangible right to honest/fair services
- 22. Essential Elements Fraud • Misrepresentation •Or omission • Of a Material Fact • Causing Reliance by the Victim • Harm
- 23. Essential Elements Fraud • Materiality– significant enough to cause reliance • Reliance – action/inaction resulting the harm • Harm – usually, financial loss
- 24. Essential Elements Self Dealing-Conflictof Interest • Usually falls under the umbrella of bribery, or extortion • Misutilizing an official position • To steer business/opportunities • To self or other
- 25. Essential Elements Self Dealing-Conflictof Interest •Former mayor of Detroit Accepted numerous forms and types of bribes Used influence of office to steer projects to his best friend’s business Contracts were often padded/excessive BFF paid kickbacks to the mayor
- 26. Polling Question Is itbribery, corruption, and extortion? The town little league wants to expand its primary baseball field from a one field to a three-field capacity. The acreage would support three fields, but due to environmental zoning restrictions, would have to modify the outfield. The parking cannot capacitate more than two games’ worth of attendees at once and there is no street parking. There are only two bids for the project. A. Possibly, if there is no bona fide explanation for the discrepancies B. Probably not, because the approvals needed senior-level oversight C. Possibly, if the two bids were connected or otherwise inappropriate D. Probably not, because baseball is America’s pastime and professional sports in general are corruption-free
- 27. Under the Table CaseStudies
- 28. Varsity Blues College Admissions •Payments funneled from high-net worth individuals to college admissions staff • Coaches/Athletics Directors bribed to list students at prospects • Parents set up staged athletics promotions Source: Mercury News
- 29. Varsity Blues William “Rick”Singer • Key Worldwide Foundation • Three officers, two of whom had no hours • USD $8 million, < USD 1,000 in overhead • Transfers of ”scholarships” to same address as the business itself • Passthrough payments
- 30. Rolex Rob The CountyExecutive • Witness testified that he issued a check in the amount of $5,790 to cover the majority of the price of a Rolex Submariner, with the remainder paid by a county executive • The transaction was arranged by the witness at a jeweler of his choice • The witness and another individual also donated USD $15,000 to the county executive’s campaign • They were both chaplain positions with the county police, including a “free parking” permit; neither person was in the clergy
- 31. Rolex Rob The CountyExecutive • The county executive's watch was forfeited to the FBI • The county executive then tried to contest the forfeiture before ultimately giving up • He tried to claim that USD $1900 was the “full price” for a preowned Rolex Submariner • No charges were filed against the executive and he has been seeking election to the state assembly
- 32. United Auto WorkersUnion Top Down • The former president was among 15 people charged in a broad embezzlement and corruption scandal. • The former president was accused, along with others, of using Union member dues to pay for a four-month luxury villa rental (USD $12,200/month), lavish meals, cigars, and golf outings. • The travel/expenses had nothing to do with Union business.
- 33. United Auto WorkersUnion Top Down • Another former president has already pleaded guilty to bribery and racketeering charges. • The charges expand to executives from car companies. • Both the car companies and the Union were spending money on a lakefront home, given to the UAW president, to be used as a “training center.” • Prosecutors accuse the training center admin of “conspiring with other union leaders to receive millions of dollars in bribes and kickbacks from vendors that made hats, shirts and other merchandise for the union, internally known as ‘trinkets and trash.’” (Source: CNBC) For Sale – $1.299 million 3 Bed, 3.5 bath 1,907 sq ft 1,000 acres 750 feet of visible shoreline Source: The Detroit News
- 34. 1MDB Najib Razak andJho Low • Multibillion-dollar international fund for development in Malaysia • Big political battles on the horizon • Fund started missing payments • Local reporters picked up the story Razak Transfers arranged by Jho Low PM’s personal accounts Shell Companies Riza Aziz
- 35. 1MDB Source: ”Malaysians ScrutinizingWatchesWornby Mahathir, Najib, Rosmah, and Fellow Politicians,” Mothership (May 2018). “His and hers” Hublot BB Black Magic $68,000 Special edition Hublot Big Bang $45,000 Breuget XX Pilot $11,000 Panerai Radiomir 152 $71,000 Jaeger LeCoulture Master Grande Tradition Tourbillon $88,000 Harry Winston Project Z2 $27,000 Richard Mille RM07-01 “Diamond Cruncher” $158,000 Royal Oak Offshore $45,000
- 36.
- 37. Under the Table Considerationsand Takeaways
- 38. Considerations and Takeaways Shells- Internally • Targeting Shell Companies • Luxury Purchases • Passthrough Transactions • Comingling Cabestan Luna Nera USD $225,000
- 39. Considerations and Takeaways Shells- Externally •Single owner/common owner Only registering agent on file Set up in a secrecy haven Not publicly listed No clear biz purpose No employees No products
- 40. Considerations and Takeaways Training •Targeted Role-Based Likelihoodof Exposure Roles and Responsibilities Attestation tied to CoE
- 41. Negative Media Ongoing • StrongParameters – “fake news” • Four Eyes Review • Sampling/QA over decision Alexei Navalny, opposition party advocate, called out Dmitry Peskov for his wristwear. Richard Mille RM52-01 = USD $515,000
- 42. Bribery Risk BOLO • Third-PartyRisk • Padded/Excessive/Tailored/Single- Bid Contracts • Referral Source • Broker/Agent/Intermediary • Unusual payment terms
- 43.
- 44.
- 45. Thank-you for participating MichaelS Schidlow michael@scientergroup.com @ProfSchidlow https://www.linkedin.com/in/mschidlow Contact i-Sight j.gerard@i-sight.com Find more free webinars: http://www.i-sight.com/resources/webinars @isightsoftware