Corporate bribery crackdown put on back burner in recession - report

BRUSSELS Thu Sep 6, 2012 12:40pm IST

People walk past a Wal-Mart store with a banner reading ''Low prices, every day, in everything'' in Mexico City in this April 21, 2012 file photo. REUTERS/Bernardo Montoya/Files

People walk past a Wal-Mart store with a banner reading ''Low prices, every day, in everything'' in Mexico City in this April 21, 2012 file photo.

Credit: Reuters/Bernardo Montoya/Files

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BRUSSELS (Reuters) - Only a handful of wealthy nations are tackling bribery by companies vying for lucrative contracts abroad as a worldwide crackdown launched 15 years ago is weakened by the global economic downturn, a watchdog said on Thursday.

The United States and Germany led efforts last year to catch companies and officials who use bribes to seek deals and influence, with about 450 foreign bribery-related cases between them that ended in litigation or settlements, a 25 percent rise on 2010, Transparency International said in a report.

But while Britain and Italy, under reformist Prime Minister Mario Monti, stepped up the fight against bribery in 2011, the report said Japan had only brought prosecutions in two foreign bribery cases in the past 12 years, a very low number given the size of its economy.

Other major nations including France, Canada and Brazil made little headway, while Mexico, where the local unit of U.S. retailer Wal-Mart Stores Inc. (WMT.N) faces bribery accusations, did not wrap up any cases in 2011 and opened just two inquiries.

"The progress in terms of enforcement is not good," said Jana Mittermaier, who heads the watchdog's EU office in Brussels. "The number of foreign bribery cases and investigations in most countries is low to nothing," she said.

Thirty-nine countries including most of the industrialised world - but not China and India - have signed a 1997 convention to combat bribery in international business transactions.

The convention was drawn up by the Paris-based Organisation for Economic Co-operation and Development (OECD). The OECD and Transparency International monitor progress annually.

Governments' reluctance to crack down seems to be linked to the poor state of the world economy since the 2008/2009 global financial crisis and the fallout from the euro zone debt crisis, although no studies have been done to link the two.

"At a time when most (industrialised) countries are beset by the global recession, it has become more difficult to get political leaders to provide strong support to combating foreign bribery," the watchdog said in its report.

"Government leaders must reject arguments that winning foreign orders during the recession justifies condoning foreign bribery," it added.

DIRTY MONEY

Corporate bribery abroad, which is often not considered illegal by a company's home country, pushes up costs of contracts for governments and taxpayers in an area where public contracts in Europe are worth 1.8 trillion euros a year, the watchdog said.

Tenders can end up going to less able firms that may not carry out work properly or flout environmental rules.

Companies, meanwhile, open themselves up to extortion.

Wal-Mart de Mexico, Mexico's top retailer, is being investigated in the United States and in Mexico, following a New York Times report in April that accused the company of bribing mayors and city councillors to expand its empire more rapidly.

The bribes allowed Walmex (WALMEXV.MX), as the company is known, to obtain planning permission, local support and lower environmental fees to open stores, the New York Times said.

Dirty money is a recognised problem in Mexico, where the government is waging a six-year battle against drug cartels and companies are often known to keep two sets of accounts.

But indebted countries in southern Europe are also counting the cost of bribery, while companies can face huge fines.

In a deal worth 270 million euros, Greece agreed in March to settle a row over accusations German industrial conglomerate Siemens (SIEGn.DE) paid bribes to secure government contracts for the Athens 2004 Olympic Games.

In another case, two former executives of Germany's Ferrostaal, a provider of industrial services in plant construction, were given suspended jail terms by a Munich court in April 2011 following accusations the company bribed officials in Greece and Portugal. Ferrostaal agreed last October to pay a 149 million euros fine linked to the charges.

"Paying bribes has driven up the cost of doing business in some of Europe's most crisis-wracked countries," Mittermaier said. "With times so tough and capital drying up as economies shrink, defeating foreign bribery can only help ease the euro zone crisis," she said. (Reporting by Robin Emmott)

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