I have to admit that I have been involved in corruption a long time ago. But I am proud to state that I have been in anti-corruption for a good number of years now. I have signed the Integrity Pledge of the Integrity Initiative Inc. and I am living up to the commitments laid down in the Pledge.
Having said this, I am still amazed that a lot of people—in government and in the private sector—still have difficulties to understand what corrupt practices are. Assuming that we are all interested to stop corruption in government and in the private sector, allow me to highlight a number of the bad practices:
Abuse of functions
Abuse of functions occurs when an employee, or office holder, uses his or her position to perform an illegal act, or an act that he/she has no legal authority to do, to pursue a private gain. One form of abuse of functions is the use of information for personal gain.
Agent
An agent is a person (natural or legal) with the authority to act for, or represent, another person, or party. Companies can be held liable for their agents’ acts of corruption, including channelling of bribes, for not reacting to corrupt acts, or other bad deals the agent does for another person, or party.
Bid rigging
Bid rigging is a form of collusion in which bidders on a contract decide between themselves which bidder should be successful in the tender and then draft their bids accordingly. Forms of bid rigging include bid rotation, complementary bidding and cover pricing. Bid rigging can constitute a cartel, or antitrust offense, which is also regulated by the Philippine Competition Commission (PCC).
Bribery
Bribery is, according to Transparency International (TI) “the offering, promising, giving, accepting, or soliciting of an advantage as an inducement for an action which is illegal, unethical or a breach of trust. Inducements can take the form of gifts, loans, fees, rewards, or other advantages [taxes, services, donations, favors, etc.].” Bribery occurs during an interaction between two parties. Usually, both the giving and the receiving parties of the bribe commit a crime.
Cartel
A cartel is an agreement (formal or informal) among competing companies to coordinate prices, marketing, or production, of a good or service. Cartel members may agree on matters such as prices, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, the division of profits, or a combination of these. The PCC is always on the “hunt” for cartels.
Collusion
Collusion is a non-competitive agreement, usually secretive, between two or more persons, or businesses, to limit open competition, typically by defrauding or gaining an unfair advantage. It can involve an agreement among companies to divide the market, to set prices, to limit production or to share private information. It may also involve bid rigging. The aim of collusion is to increase individual members’ profits. The PCC is fighting collusion!
Conflict of interest
A conflict of interest exists when an individual has competing professional obligations, or personal, or financial interests, that have the potential to influence the exercise of her/his duties. Private or personal interests include family and other relatives, personal friends, the clubs and societies to which an individual belongs, private business interests, investments and shareholdings, and any person to whom a favor is owed.
Corruption
There is no single globally accepted definition of corruption. TI, the leading international nongovernment organization in curbing corruption, defines it as “the abuse of entrusted power for personal gain.” The main forms of corruption are bribery, embezzlement, fraud and extortion.
Cronyism
Cronyism is a form of favoritism shown to close friends. A typical situation of cronyism would be the political appointment to office of a friend without regard to the person’s qualifications, or more severely, providing vast privileges to a “friend” like franchises, projects, dominant market positions, etc.
Donations
A donation is understood as a monetary or non-monetary gift to a fund, or cause, typically for charitable reasons. If a donation is given with the purpose of giving a company an undue advantage, it will likely be considered bribery. Many companies address the use of political donations in their code of conduct.
Extortion
Extortion is the unlawful use of one’s position, or office, to obtain money through coercion, or threats. One example would be when Customs officials request undue “customs duties” from importers as a condition to clear their goods.
Fraud
Fraud involves the use of deception, trickery and a breach of trust to gain an unfair or unlawful advantage. Occupational fraud entails the use of one’s occupation for personal enrichment through the deliberate misuse, or misapplication of the company’s resources or assets.
Graft
Graft is a form of political corruption in which an official acquires financial gain by dishonest or unfair means, especially through the abuse of one’s position. Unlike bribery, graft does not require the official to provide an undue advantage; it is enough that she/he gains something of value apart from her/his official pay when working.
Kickbacks
Kickbacks are a form of bribery where one party obtains an undue advantage and a portion of the undue advantage is “kicked back” to the individual who gave, or will give the undue advantage. It differs from other forms of bribery in that it implies a form of collusion between the two parties.
Money laundering
Money laundering is a process in which the ownership, destination and origin of illegally obtained money is concealed, or disguised. The objective of money laundering is to make illegally obtained money appear to originate from a legitimate source.
Patronage
Patronage is a system in which a number of organizations, companies and/or individuals bestow support, or financial benefits, upon one another. Political patronage occurs when political supporters are rewarded for their support (e.g., by being appointed to public office or receiving contracts, subsidies or other benefits), regardless of merits (cronyism revisited).
Price fixing
Price fixing is an agreement between competing businesses to buy, or sell, a product, service, or commodity at an agreed upon price. It can also entail maintaining the market conditions so that the price is kept at a given level by controlling supply and demand. Price fixing seeks to coordinate pricing for the mutual benefit of the traders. The group of “market shapers” involved in price fixing is sometimes referred to as a cartel. Antitrust laws commonly criminalize price fixing and the PCC is watching you closely.
The “corruption directory” is much longer but the main areas I have tried to cover. I would appreciate, however, if you could comment and give additional examples of corruption. Please e-mail me at schumacher@eitsc.com