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UK Bribery Act: An Ethical Analysis

February 13, 2014

A guest blog on whether there is a defense to bribery

 

From time to time I receive a comprehensive response to a blog I have written as part of an ethics assignment. The posting below by Jen is in response to one such blog on “UK Firm Fined for Inadequate Controls and Bribe Risks.” The original blog has been shortened to meet size limitations.

 

The first point I would like to comment on is that “you say that ignorance of the law is no defense.”  In the UK bribery is seen as an unethical act, therefore just because the management of JLT didn’t know about the law, doesn’t mean they have acted ethically in this situation. It is management’s responsibility to ensure, they are well aware of the UK law, and law of other countries, before making any such payments to other overseas businesses. 

 

Due to the management not ensuring to obey the law. This meant they have lacked integrity, where the owners are concerned.  The management have acted on what they wanted or needed, and disregarding the responsibilities of the company to the law.  The managers have put their wants and needs first, and not acted on code of ethics of JLT, and what is best for the owners.  Due to the actions of management, the owners of the company has suffered the consequences, caused by the actions of management.  The owners have been “fined for acting unethically against the law of bribery.”  Management have also broken the code of ethics set by the owners of JLT, by behaving unethically.  As well as, being dishonest against the rules and guidelines set by the owners. “Rules are acts required allowed, or forbidden.

 

The second point is on grease payments, you say ‘the bribery act doesn’t allow grease payments.’  As grease payments are illegal in the UK bribery law.  Management should have made sure that they followed the guidelines on the checks set by the owners.  Management is expected to follow the rules, regarding all overseas payments, to ensure they are legal.  And they weren’t seen as a bribe in the UK bribery Act.  By not making sure that their checks were followed correctly, therefore they have acted unethically against the Bribery Act.  “Facilitation payments - The FCPA creates an exemption for facilitation payments whereas the Bribery Act makes no such exception.”   The UK bribery act does not allow grease payments under any circumstances, small or big, therefore any excuses to try and get away from a fine for acting unethically, is not accepted at all under this act.

 

My view is that management has a responsibility to the owners, and to the law to ensure all checks are done.  To ensure that the owners don’t get fined, against the bribery law, for being dishonest and acting unethically.  When making payments to offshore businesses, all transactions must be checked that they aren’t grease payments.  However, the management have not followed the checks in place, putting the owners of JLT at risk.  Your view Steven is that JLT can’t ignore the law and expect not to be fined for their actions on grease payments.  Hence the reason, why it is the responsibility of management to check all payments.  As the owners have entrusted them with the running of the operations for JLT.  Therefore they should have made sure, they acted accordingly to the code of ethics.  By making sure they aren’t grease payments, as saying they didn’t know it was a grease payment, isn’t good enough.  They have to come up with a better explanation.

 

Obviously management is trying to excuse their actions, by saying they didn’t know about the law.  Who knows, they might be saying that, just so they can get off from being fined.  Good try, but the law is the law, they can say whatever they want, until they are blue in the face.  There is no way they can excuse themselves from the law, the fine still stands.  Unfortunately it’s the owners that have to pay the fine, not the managers that acted unethically.

 

“The new U.K. law sets rules for two general offenses covering the offering, promising or giving of a bribe (active bribery) and the requesting, agreeing to receive or accepting of a bribe (passive bribery). It also expands the scope of regulation to include commercial bribery, not just bribery of government officials. And it also makes companies liable for the actions of subsidiaries and agents with whom they do business.  If a company is convicted of an offense under the U.K. Bribery Act, the only way it can avoid penalties is to prove that it had “adequate procedures in place to prevent the crime. The procedures required of a small or medium-size company are likely to be different from those of a large, multinational corporation.”  For example, JLT’s management may have offered to pay a grease payment to a company they do business with, in return for a service request being performed at a faster pace.  For example if they speed up the processing and delivery of their order.  JLT will pay them twice or three times their standard charge for this service.  JLT also managed to avoid paying the penalties, as they already had checks in place, to avoid these risks from happening.

 

The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since 1998, they also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. The meaning of foreign official is broad. For example, an owner of a bank who is also the minister of finance would count as a foreign official according to the U.S. government. Doctors at government-owned or managed hospitals are also considered to be foreign officials under the FCPA, as is anyone working for a government-owned or managed institution or enterprise. Employees of international organizations such as the United Nations are also considered to be foreign officials under the FCPA. There is no materiality to this act, making it illegal to offer anything of value as a bribe, including cash or non-cash items. The government focuses on the intent of the bribery rather than on the amount.”  The Foreign Corrupt Practices Act indicates that any Company either in the US or outside of the US that have dealings with a US companies, to exchange cash or anything of value, in return to speed up a standard service or delivery etc.  In JLT’s case, they must not offer to pay a US company for a bribe, to speed up a service provided by a US company.

 

My conclusion would be that in order to act accordingly to the expectation set by the owners of JLT.  Management must follow the expected requirements, of the bribery law.  “Companies can be strictly liable for bribes paid by any person associated with their business, even if they didn’t know about it, or authorise, the bribe.  Companies that violate the Act will face unlimited fines.”  To produce a good outcome for the benefit of the owners.  Management needs to abide by the bribery law of each country around the world.  They are not to make any bribe payments to other businesses around the world, in which the country has a law against bribery.

 

Management must obey the bribery law, by checking every payment, to ensure it isn’t a grease payment for a bribe.  By JLT acting unethically, the manager that authorised and made the bribe payment, not only lacked integrity, but also acted against the rules and guidelines of the owners, which could cost the manager their job, as they have broken the rules and guidelines set by the owners of JLT.

 

Posting of piece by Student (thomsenfms22@hotmail.com); posted by Steven Mintz, aka Ethics Sage, on February 13, 2014

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