Press Statement: A Corporate Liability Provision: A Needed Boost to Curb Bribery and Corruption in the Private Sector

C4 PRESS RELEASE 

22 MAY 2020

A CORPORATE LIABILITY PROVISION, A NEEDED BOOST TO CURB BRIBERY AND CORRUPTION IN THE PRIVATE SECTOR

Overview 

The Center to Combat Corruption & Cronyism (C4 Center) is pleased with the announcement that the Corporate Liability Provision under the new Section 17A of the MACC Act will commence without delay on 1 June 2020.

Sec 17A of the MACC Act is needed to effectuate the principle of corporate liability among corporate organisations and enhance the culture of good corporate governance with strict liability. 

It requires mandatory precautionary measures in place in order. The Act prohibits any organisations for corruption-related actions by associated persons done for the benefit of the organisation. In which Section 17A (1) stipulates that a commercial organisation commits an offence if a person associated with it corruptly gives, offers or promises any gratification to any person with an intent to obtain or retain business or a business advantage for the said commercial organisation. 

 

Corporate Corruption

Corporate corruption is a rising threat to governments everywhere. As corporations big and small are the central pillars of economic growth, the behaviour and competence levels in doing business has become a much-needed focus area and in many instances have clouded the scene for good integrity and compliance practices, leading to bribery and oftentimes corruption. 

In Germany for example, Siemens’ company headquarters and subsidiaries were raided by the police in 2006. For years, the company had postured itself as a company that adhered to the highest ethical and legal standards. Since the 1990s, Siemens had organised an international system of corruption to gain market share and increase its price. It got away through loopholes of legal systems in different countries including Germany. Siemens paid bribes to government officials about US$1.4 billion, while profiteering from the people for the countries affected paid the overpriced costs of necessities. 

The famous Panama Papers leak of confidential documents revealed the properties of Panama-based law firm Mossack Fonseca, in which over 214,000 tax havens or shell companies, companies that do not conduct any businesses were created. Shell companies can either be used for privacy purposes or fraud and tax and international sanctions evasion. Governments cannot tax these companies because the money could not be found. Among those who were involved are former world leaders, 128 other public officials, and politicians and hundreds of famous and rich individuals. It meant that taxes were not paid by these individuals but the other hard-working citizens are. 

In our own country, the 1Malaysia Development Berhad (1MDB) was set up in 2009 meant to boost our economy through strategic investments. Instead, it has done otherwise by increasing the gains for a few individuals instead of the country. Not only the scandal has affected the capital markets’ perception of Malaysia, but the people have lost more than RM 30 billion and more in corporate and government corruption.

 

Procurement

Corruption may exist at three different stages, the decision stage, tender stage and contract execution stage. Politicians seeking re-election may pressure the need for new projects which are often not used but will secure electoral votes. We know these as white elephants. 

At the tender stage, output requirements on advertisements can be modified to exclude competitions and the time to submit documents for tender selection might be shortened. The other method could be direct negotiation instead of using the open tender mechanism. The award criterion would then be skewed. 

During the contract stage, officials may secure better decisions for the selected firm through renegotiation of the contract by adding the duration of tender, items needed, services charges and more. Invoices can be feigned as well. If these processes do not come with strong, solid anti-corruption policies and measures are not implemented or monitored, corruption is bound to happen. 

While we have an ongoing investigation on procurement related contracts on COVID19 testing kits, just days ago, interim President Jeanine Anez ordered an investigation, Bolivia’s health minister Marcelo Navajas along with two health ministry officials have been arrested on corruption-related overpriced purchase of Covid-19 ventilators. It costs the Bolivian government (funded by the Inter-American Development Bank), $5million, $27,683 each for 179 ventilators from a GPA Innova, Spain. The ventilators did not meet the requirements for use in intensive care. 

The Bolivians had to pay more for the ventilators while risking higher death rates of Covid-19 cases as the ventilators are not up to par while a few individuals are siphoning the money from the other end. 

 

Public-Private Partnerships

Under procurement, we can zoom in on a particular type of concession contract, the Public-Private Partnership (PPP). These are long-term procurement contracts, where the chosen supplier gets the contract to build certain infrastructure or provide services while managing and maintaining the services and goods. 

In Spain, the Gürtel scandal which turned out to be the biggest corruption in Spain’s history, the complex scheme channelled illicit donations and bribes to the then-ruling party for government contracts. Francisco Correa, the businessman who was involved in the scandal was eventually sentenced to 51-year in jail while his ally, the former treasurer of former president Mariano Rajoy was fined nearly US$50million. 

While some are enjoying the benefits from the government contracts, the rest of the people have to pay for higher prices of necessities and tax. With so many cases of corporate corruption enhanced in a free market economy, and by directly cutting corners and seducing public private partnerships in win-win situations, we understand the enormity of this challenge, especially for the SME industries. 

With due expertise and knowledge on anti-corruption policies and good governance, we offer our hand to the MACC in extending training to corporate organisations and government linked companies which may need additional support and resources and offer solutions as to how to put anti-corruption measures as precautions against corrupt practices. 

We urge the MACC to engage us and other stakeholders to make this bold and effective provision an impactful success.

 

 

Released by:

C4 Center

 For further information please contact:

+60 12-379 2189

+60 16-535 5389