The Biggest Bribery Cases In Modern Business History

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 (SEC) and the U.S. Department of Justice (DoJ) 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. That hasn't stopped some companies from continuing the practice. These are among the top five business bribes in modern U.S. history.

Key Takeaways

  • A bribe is an illegal act involving the exchange of consideration, such as money, with the purpose of influencing behavior.
  • In business, it is illegal to bribe public officials or regulators in order to win contracts, expedite processes, or look the other way on any number of other activities.
  • Here, we look at some of the biggest corporate bribery scandals in modern U.S. history.
The Biggest Bribery Cases In Business History

Investopedia / Sabrina Jiang

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 2008, 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 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 were charged 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. In 2010, BAE pleaded guilty 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 to 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, the ring leader, was sentenced to more than 19 years in prison.

Alcatel-Lucent SA

At the end of 2010, 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.

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.

Article Sources
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  1. United States Senate. "Select Committee on Presidential Campaign Activities-The Watergate Committee."

  2. The United States Department of Justice. "Foreign Corrupt Practices Act."

  3. KBR. "About Us-Our History."

  4. The New York Times. "Former KBR Executive Pleads Guilty to Bribery."

  5. The United States Department of Justice-Office of Public Affairs. "Kellogg Brown & Root LLC Pleads Guilty to Foreign Bribery Charges and Agrees to Pay $402 Million Criminal Fine."

  6. The United States Department of Justice-Office of Public Affairs. "Former Chairman and CEO of Kellogg, Brown & Root Inc. Sentenced to 30 Months in Prison for Foreign Bribery and Kickback Schemes."

  7. U.S. Securities and Exchange Commission. "Litigation Release No. 22190/December 13, 2011-Accounting and Auditing Enforcement No. 3342 / December 13, 2011."

  8. The United States Department of Justice-Office of Public Affairs. "Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme."

  9. U.S. Securities and Exchange Commission. "SEC Charges Seven Former Executives with Bribing Leaders in Argentina."

  10. The Fletcher School-Tufts University. "The Al Yamamah Arms Deals."

  11. The United States Department of Justice-Office of Public Affairs. "BAE System PLC Pleads Guilty and Ordered to Pay $400 Million Criminal Fine."

  12. Federal Bureau of Investigation Archives. "Former U.S. Army Corps of Engineers Manager Sentenced to More than 19 Years in Prison in $30 Million Bribery and Kickback Scheme."

  13. The United States Department of Justice-Office of Public Affairs. "Alcatel-Lucent S.A. and Three Subsidiaries Agree to Pay $92 Million to Resolve Foreign Corrupt Practices Act Investigation."