Leaked Emails Reveal Widespread Corruption in Global Oil Industry (theage.com.au)

Nick McKenzie, Richard Baker, Michael Bachelard, and Daniel Quinlan report on a widespread corruption in the global oil industry for The Huffington Post: In the list of the world's great companies, Unaoil is nowhere to be seen. But for the best part of the past two decades, the family business from Monaco has systematically corrupted the global oil industry, distributing many millions of dollars worth of bribes on behalf of corporate behemoths including Samsung, Rolls-Royce, Halliburton and Australia's own Leighton Holdings. A massive leak of confidential documents has for the first time exposed the true extent of corruption within the oil industry, implicating dozens of leading companies, bureaucrats and politicians in a sophisticated global web of bribery and graft. After a six-month investigation across two continents, Fairfax Media and The Huffington Post can reveal that billions of dollars of government contracts were awarded as the direct result of bribes paid on behalf of firms including British icon Rolls-Royce, US giant Halliburton, Australia's Leighton Holdings and Korean heavyweights Samsung and Hyundai.

Comments

other citations

[Geoffrey.landis]

Some citations (other than Huff Post):
http://www.smh.com.au/interact...
http://www.dailymail.co.uk/new...
http://www.stuff.co.nz/busines...
http://www.stuff.co.nz/busines...
http://www.stuff.co.nz/busines...

Sounds like a "facilitator" company

[dj245]

I'm not surprised at all. To play in most Middle East countries requires a local company and a physical office. This can be hard to set up for foreigners due to local law. Certain countries basically require kickbacks and bribes to get anything done. Legitimate companies often get around both of these issues by partnering with a "facilitator" company.

The Facilitator company will sometimes act as the agent (sales representative) for the legitimate company, collecting a commission on goods and services sold. The commission may be deliberately higher than normal in order to have the cash to pay whoever needs to be paid. This can be discovered by examining the commission amount/percentage and comparing it to other parts of the world for similar services. The foreign company can be held responsible if it knew, or should have known, that something fishy was going on.

Another way to do the same thing is to retain such a company for consulting services. Looking at contract deliverables and the contract amount usually gives an indication if the consulting services are legitimate or a cover for something else. Again, the foreign company can be held responsible if they knew, or should have known that something was up.

Yet another way to do the same thing is to subcontract to one of these facilitating companies. The facilitating company then marks up the price to whatever they need in order to pay their sales staff, pay bribes, or negotiate legal hurdles. The customer's contract is between the customer and the facilitating company, and the foreign company never sees it. Done right, the foreign company has no idea what the final customer price is, or if it was reasonable, etc. This is the best way to protect a foreign company since any improper or illegal actions that the facilitating company takes fall solely on the facilitating company. The facilitating company can also accept contract provisions that a foreign company could not legally accept (Israeli goods boycott, as an example). The foreign company never has the information required to see that something was amiss, so proving that they "knew or should have known" is substantially harder.

One last thing to keep in mind is that certain types of payments are actually legal. Generally, you can pay someone to "hurry up" and complete something that is included in their official duties, and which they would have done for you anyway without the payment. If the payment is just to expedite something that would have happened anyway, it is not considered a bribe, even if it is paid directly to an individual. The prime example of this is paying a customs officer to release cargo which has all the correct paperwork. The officer would have done this anyway, eventually. The payment is just to expedite the legal and inevitable action.

Re:Sounds like a "facilitator" company

[Anonymous Coward]

I hadn't realized facilitator companies existed, but, after it's explained, their presence seems like an obvious necessity of doing business in a country with a large degree of corruption. Now I'm really more intrigued and curious about the economic implications to this news than I am shocked in any way.

I wonder how the size of the bribe is decided. It would pretty much have to be what the market would bear, wouldn't it? So, not enough to raise eyebrows from other sources or cause the briber to take their business elsewhere instead, but as much as you can get away with. And is the incidence of bribery correlatable with how laissez-faire and unregulated an economy is? Directly or inversely? Does it act as an inflationary force, deflationary force, or does it instead react to inflation/deflation?

As someone who has never paid or been paid a bribe, I'm really curious about how they fit into the larger picture of an economy.

I've been part of several, largely penny-ante stuff but a few larger. I hate them, but they are a necessary part of doing business in some parts of the world. In Indonesia in the 90s, the going rate was typically 10% of the contract value for consulting work, but it could be negotiated if, say, out-of-pocket costs were a big chunk of the contract value. That 10% figure was remarkably common. You didn't get preferential treatment for that fee; anyone who won the competitive bidding process would be expected to pay, and foreigners paid the same or less than locals. After Soeharto was forced to step down there was a bit of a free-for-all, as bureaucrats were afraid the "goose who laid the golden egg" was leaving the station, and they wanted to get as much as possible before that happened. She never left, and things pretty came back to normal.

After around 2004, the game shifted somewhat, so that the elites in business, judiciary, executive and legislative circled their wagons and it became progressively harder for foreigners to work there. There is always a trade-off between economic growth and protecting established businesses, and it seemed nobody cared much for growth. There has been a lot of progress in law enforcement, with the Corruption Eradication Commission bringing hundreds of charges against politicians, executive officials and businesspeople, but that's just a drop in the bucket of a horribly corrupt society.

I left last year, and although I miss many friends and have many fond memories, it's just too hard a place to do business with your morals intact.

Re:And the winner is?

[Anonymous Coward]

The earliest date mentioned in the article was 2002. Cheney was VPOTUS by then and not CEO of Halliburton. You are an oxygen thief.