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Amid Anti-Corruption Push, Pressure To Bribe Continues

Oct. 7, 2012 - 04:22PM   |  
By ANDREW CHUTER   |   Comments
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LONDON — Anti-corruption campaigners who shined the light on defense companies’ efforts to improve the transparency of their counter-bribery practices last week said that while the industry may have sharpened its act, evidence suggests it is under as much pressure as ever to pay bribes.

“It’s only anecdotal evidence, but the most common answer I get from senior executives is that companies are being asked for bribes just as often as they ever were. … If I ask have they lost business from not paying bribes, the answer is yes,” said Mark Pyman, the security program director at Transparency International UK.

The key question, though, is how many bribes are being accepted, he said.

Exactly how much money goes into the pockets of corrupt defense officials every year is unknown. It’s not a figure weapons suppliers or buyers advertise.

TI-UK estimates that defense corruption is annually costing taxpayers and companies around the globe a minimum of $20 billion.

The “Defence Companies Anti-Corruption Index,” published by TI-UK on Oct. 4, showed that two-thirds of the world’s top defense contractors fail to provide sufficient publicly available evidence of their efforts to clamp down on bribery.

TI-UK said defense companies have greatly improved public availability of their practices and processes over the last five years, but many of them scored poorly.

Sixty of the top 129 companies surveyed by TI-UK provided little or no publicly available information on their anti-corruption stance.

Only U.S. project management and construction company Fluor achieved a star A rating for information available in the public domain. Other contractors, including Boeing, KBR, Lockheed Martin, ThyssenKrupp and Serco, were elevated to the top band once their internal processes and practices were taken into account.

TI-UK evaluated the publicly available information on anti-corruption practices of the world’s top defense companies, placing them in six bands, from the gold-standard A to the worst performers in band F, which provided little or no information.

The index focused on public data, but it also provided revised bandings, including companies that had given TI-UK access to internal information about anti-corruption practices.

Nine companies made it into TI-UK’s band B for publicly demonstrating in detail their anti-corruption practices. Accenture, BAE Systems, Hewlett-Packard, Nor-throp Grumman and Thales figured among the companies ranked in the B band before internally available information was added.

At the bottom, in Band F, were 47 companies — including Israel Military Industries, Bumar, General Atomics, Sukhoi and NORINCO —which provided little or no information.

Evidence suggests that companies such as Fluor and Accenture, which are not defense specialists, perform better than defense firms and that publicly owned companies are better than state-owned ones about revealing their anti-corruption efforts, TI-UK said.

The organization cautioned that the listing is a guide to information availability and not a guide to the level of corruption among the companies.

“This index only looks at what companies say they do to prevent corruption, not how corrupt they are,” the report states.

TI-UK said it hopes the data will help raise anti-corruption standards across a sector whose business has historically been hidden from view.

The index was published just days after the International Forum on Business Ethical Conduct (IFBEC) published a report detailing best anti-corruption practices in the industry.

Established in 2009 by the Aerospace Industries Association of America and the Aerospace and Defence Industries Association of Europe, IFBEC is an initiative to help reduce the massive cost of corruption by exchanging information on best practices and global trends in business ethics. IFBEC is restricted to European and U.S. companies, but is considering how to extend membership to other regions.

Brinley Salzmann, director of overseas and exports at ADS, the U.K. aerospace and defense lobby group, said that while authoritative figures on corruption are hard to come by, the situation likely is improving.

“Our perception is that, with the increasing awareness of corruption issues, countries in the developing and nondeveloping world are tightening up their rules and regulations on procurement,” he said “There is also a perception [that] there is a commercial advantage if companies can demonstrate they are whiter than white. On that basis, the situation is moving in the right direction.” Whatever the truth on the extent of the problem, life is getting tougher for companies that pay bribes to secure contracts.

Pyman said the increasingly vigorous position of the U.S. Justice Department in prosecuting corruption cases, a new U.K. Bribery Act and cultural change are helping turn the tide on corruption.

“Fifteen to 20 years ago, it was entirely unexceptional to bribe to secure a defense contract,” Pyman said. “Now, it is becoming increasingly less acceptable, either because of the risk of prosecution or cultural change, which is significantly increasing company transparency.” The German industrial conglomerate Siemens was whacked by a $1.6 billion bribery fine by U.S. and German authorities in 2008 in a landmark case, and other high-profile prosecutions that have seen defense companies dragged down by scandal have been a warning for the industry, he said.

Boeing, BAE, EADS, Finmeccanica and Thales are among the firms that have been embroiled in big corruption investigations across the globe in recent years.

TI-UK is scheduled to publish a report in January on how 83 countries measure up on efforts to end corruption.

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