Paying foreign officials for expediting legal processes or obtaining contracts was a common business practice around the world well into the 1970s. In 1973, the Watergate scandal, that ultimately caused Richard Nixon's resignation as president, brought corporate bribery into the spotlight. The Securities Exchange Commission and the U.S. Department of Justice began investigating the sources of Nixon's illegal campaign contributions and discovered that hundreds of U.S. companies had bribery slush funds on hand in order to curry favor with legislators and other officials. In 1977, the Foreign Corrupt Practices Act (FCPA) was enacted to bar U.S. corporations and some foreign companies operating in the U.S. from making such payments.

SEE: Eliot Spitzer - Man Of A Thousand Scandals

That hasn't stopped some companies from continuing the practice. These are the top five business bribes in U.S. history.

Kellogg Brown & Root
This company, now known as KBR, Inc., was spun off from a subsidiary of Halliburton. It is one of the largest engineering and construction firms in the world and has been connected to large U.S. military contracts. According to the New York Times, in 2009, the Department of Justice charged the company with offenses under the FCPA, including paying hundreds of millions of dollars to secure a natural gas plant construction contract to Nigerian officials. KBR pleaded guilty, as did its CEO Albert Jack Stanley, and paid $402 million in fines, as well as $177 million to the SEC. Stanley was sentenced to 2.5 in prison, beginning in 2012.

Siemens AG
Foreign companies that do business onshore in the U.S. also fall under the provisions of the FCPA. According to reports from the New York Times and the SEC, Siemens AG, a German engineering firm, ran afoul of the law in 2008 when it was charged for paying $16 million to the president of Argentina to secure a contract for making Argentinean identity cards. The contract was worth $1 billion to Siemens AG. In total, the company was accused of paying more than $100 million in total to government officials. Eight former employees and contractors continue to face charges in the scheme. Siemens settled with the Department of Justice and paid $1.6 billion in fines in the U.S. and Germany.

BAE Systems
The British aerospace company has been under investigation by British authorities since 1989, making it one of the longest fraud investigations in history. The main concern surrounded a deal between Britain and Saudi Arabia to supply fighter jets. The investigation spread to BAE's dealings in South Africa, Tanzania, Chile, Romania, the CzechRepublic and Qatar. The investigation focused on payments made by BAE through a "go-between" company to foreign officials. The British version of the Department of Justice dropped most of the investigations, citing national security concerns, but U.S. authorities picked up the ball in 2007. According to the Telegraph, BAE settled with U.S. courts and paid a $400 million fine.

Kerry Khan and Michael Alexander
Individuals can also find themselves charged for bribery and fraud. According toe Lubbock Online, in October 2011, two U.S. Army Corps of Engineers employees were arrested and charged with fraud for taking kickbacks, estimated at over $20 million. Kerry Khan and Michael Alexander are accused of taking bribes from contractors in exchange for being awarded lucrative government contracts, and of inflating invoices to the government and skimming the difference. Khan and Alexander remain in jail pending trial and face maximum sentences of 25 to 40 years.

Alcatel-Lucent SA
At the end of 2010, Bloomberg reported that Alcatel-Lucent, the largest landline phone network company in the world, settled its bribery case with the Department of Justice in 2010 by agreeing to pay $137 million, including $45 million to the SEC. The case revolves around a complex series of money transfers between shell companies and to consultants, resulting in payments being made to foreign officials. Alcatel-Lucent admitted to making improper payments in many African and South American companies.

SEE: SPACs Raise Corporate Capital

The Bottom Line
As the Department of Justice continues to investigate the business practices of some of the largest companies in the world, it is likely that more evidence of bribery and corruption will be found. The penalties upon conviction, however, should make companies think twice before engaging in bribery and fraud.

Related Articles
  1. Entrepreneurship

    Top 5 Startups That Emerged in Denver

    Learn why Denver is one of the hottest markets in America for startups, and identify five of the top startups that are emerging from the Denver market.
  2. Entrepreneurship

    How Does ClassPass Work and Make Money?

    Find out how ClassPass makes money, how the company aims to help both businesses and consumers, and why it has been so successful.
  3. Entrepreneurship

    Top 5 Startups That Emerged in Detroit

    Learn how startups are changing the face of Detroit, a city long dominated by large corporations, and identify the specific Detroit startups leading the trend.
  4. Entrepreneurship

    Top 5 Startups That Emerged in Boston

    Learn why Boston is a hot market for startups, and familiarize yourself with a few of the top startups that have emerged from the city.
  5. Entrepreneurship

    Top 7 Startups That Emerged in Mexico City

    Learn why Mexico City has the potential to emerge as a major player in the startup scene, and identify several companies leading the way.
  6. Entrepreneurship

    Elon Musk Success Story: Net Worth, Education & Top Quotes

    Read more about Elon Musk, the South African immigrant turned technology and engineering entrepreneur and inventor worth $13.6 billion.
  7. Stock Analysis

    How Rollins Inc. Transformed from Radio to Pest Control

    Discover how Rollins, Inc. grew and expanded, making numerous acquisitions, transitioning from the radio industry to the pest control industry.
  8. Markets

    How TheSkimm Works and Makes Money

    Obtain information on the popular news digest newsletter, theSkimm, and understand how email newsletter publishers generate revenues.
  9. Investing

    Steve Ells Biography

    Steve Ells is a bit of an anomaly in the fast food world. By refusing to bow to the rules of fast food, Ells has created a restaurant that people will go out of their way to visit.
  10. Entrepreneurship

    Mark Cuban Success Story: Net Worth, Education & Top Quotes

    Learn more about America's favorite billionaire: Mark Cuban, outspoken owner of the Dallas Mavericks and star of the hit show "Shark Tank."
RELATED TERMS
  1. Black Money

    Money earned through any illegal activity controlled by country ...
  2. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  3. Freelancer

    A freelancer is an individual who earns money on a per-job or ...
  4. Donation-based Crowd Funding

    Donation-based crowdfunding is a way to source money for a project ...
  5. Financial Action Task Force (FATF)

    An intergovernmental organization that designs and promotes policies ...
  6. Lean Enterprise

    A production and management philosophy that considers any part ...
RELATED FAQS
  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  3. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
  4. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  5. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  6. How does the notion of the American Dream influence the US economy?

    The notion of the American Dream influences the U.S. economy because it creates the driving force behind the free enterprise ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!