Corporate Bribery Is Threatening the World, But Blockchain Could Help Fight It (Some Day)
11.16.2018

David Montero is a journalist who has covered corporate graft for a decade. His new book Kickback: Exposing the Global Corporate Bribery Network examines how government officials around the world award contracts to corporations, with often devastating impacts on both local citizens and the rest of us. We talked about what makes nations vulnerable to corruption, and how blockchain could someday help reduce bribery by decentralizing power. This conversation has been edited for clarity and length.

You’re specifically focused on corporate bribery, not bribery on a smaller scale.
There’s corruption in so many forms to write about, but I felt particularly intrigued and dismayed, I guess, by the idea of the bribes that corporations were paying, and the impact that was having.

What’s an example of this kind of bribery having a really direct, serious effect on people?
I have a chapter in the book that describes how big pharmaceutical companies based in the United States and the West used very low level, but voluminous, bribes to get doctors in China to prescribe their medicines instead of the competition’s.

And what happens is, if you’re a doctor in China and half your salary is based on the bribes that you get from a pharmaceutical company, you start over-prescribing things like antibiotics. China now has one of the highest rates of over-prescription of antibiotics in the world. And that’s one of the reasons, according to studies, China has some of the most antibiotic-resistant strains of bacteria the world has ever seen.

That’s not just a problem for China. We live in a global system where anybody could be touched by those bacteria.
Just in 2016, this super-strain of bacteria that we thought only existed in China was discovered by the Department of Defense in somebody in the United States. That’s the whole point—those bribes have come back to haunt us. We think that they’re paid somewhere very far away, and we’re insulated or inoculated, but it’s a globally connected world.

The book is coming out at a particularly relevant moment, given allegations around President Trump. Does having somebody in that position of power who is associated with this sort of corruption begin to change standards of acceptable behaviors?
The Trump administration has weakened our laws around corporate bribery, especially foreign corporate bribery. But to me, the more frightening thing is that Trump himself is an outspoken critic of the laws that criminalize overseas bribery. He’s said he hates this law, and that if you abide by it, you can’t compete, and you can’t win. Almost as if he’s saying, “I didn’t abide by it. And that’s how I won.”

We think that they're paid somewhere very far away, and we're insulated or inoculated, but it's a globally connected world.

What’s been done to soften those regulations?
One of the first amendments  the Senate passed right after Trump took the White House was a rollback of the Cardin-Lugar provision of the Dodd-Frank Act. That was a very, very important effort to inject some transparency into how corporations are possibly bribing foreign officials to get big mining or oil deals. Trump signed into law an amendment rolling that back. And then there have been some more subtle things. The Department of Justice has been settling corporate bribery cases, where it basically cuts a deal and says, ‘as long as you cooperate, you can presume that we won’t prosecute you.’ In the past, they actually would consider prosecuting the company and sometimes did.

You write about countries where corporate bribery has really devastating effects. Do you think maybe in the US we‘ve lived without corruption for so long that we’ve forgotten what the impacts are?
Exactly. I think we tend to think of the bribes that corporations pay as something that happens somewhere very far away, that will never impact us. And we are lucky in the sense that the laws surrounding certain types of corruption are much stronger in the U.S. So yeah, maybe we live in a bubble in that sense.

You write a bit about the Lockheed scandal, a case of corporate bribery in Japan from the 1950s to the 1970s. Japan is not a country that we think of as high in corruption today. What are the factors that change the direction a society goes?
It’s political will, it’s leadership. A country like Japan or Nigeria, they take slow shifts. Even if you look at the history of how the United States decided to outlaw this kind of corruption, it took a long time, and we were the first country in the world to do it, in 1977. The rest of the world did not even begin to think about outlawing commercial bribery for another 20 years.

Wow.
That’s because the United States kept pushing and pushing its trading partners through the Organization for Economic Cooperation and Development [a club of the most industrialized countries], saying, ‘look, we can’t be the only country in the world that outlaws bribery.’ It wasn’t until 1999 that 34 countries agreed.

Do you feel that some cultures or countries are more accepting of this kind of corruption?
No. The World Bank has done studies that show that corruption varies greatly, even within a continent like Africa. The levels of corruption in certain countries in Africa are lower than in certain parts of Europe. So it really isn’t something that has to do with culture. It has to do with the resources that a country is trying to develop, and how close those resources are to corruption, the style of government, and the centralization of authority and decision-making.

Bribery only thrives because decision making is so centralized, and there's no accountability.

What interests me about blockchain is that it’s a ledger that is holding to account a decentralized authority. Bribery only thrives because decision making is so centralized, and there’s no accountability. Those two things are what allows a government minister to say, “I alone am going to decide that you, Company A, are going to get this contract because you’re giving me $5 million in bribes.” And there isn’t a blockchain ledger that shows how that decision was arrived at, and why this contract contains all these provisions about weird payments.

One of the major concerns about cryptocurrency and blockchain is that these technologies make it easier to move and potentially conceal funds. But it seems like the global elite already has ways to be very secretive without any technological help.
Yeah. Look at the Goldman Sachs scandal that’s breaking right now. The former prime minister of Malaysia could avail himself of the services of one of the world’s leading banks and steal hundreds of millions of dollars from the Malaysian people, so he could buy his wife diamonds and $30,000 handbags. The criminals, the foreign officials, the people who pay these bribes—they don’t even need cryptocurrency right now. There’s an incredible system in place, namely the financial banking system and the system of offshore companies and anonymous ownership, that provides them with anonymity. It is already its own kind of encryption technology, that hides how this money is moved, and then ultimately hides how the person receiving it, the foreign official, spends it.

Anonymous cryptocurrency does potentially democratize this sort of activity. What would you envision as a consequence of secret money being easier to use?
My first impulse, having just written this book, is to say that it would definitely enable lower level corrupt officials to engage in this corruption, that they might not otherwise be able to do, because it does require you having access to a bank or a lawyer or something like that. So, on the one hand, it’s kind of a scary prospect—it would be easier for people to engage in corrupt schemes.

You write that a lot of officials say they hate bribery, but go along with it because that’s how the system works. What’s your impression of how someone gets involved in bribery?
When you’re talking about a lower-level official, like a state doctor in China, they hate the system. They don’t want to have to participate in it. But they feel like they are paid such a low salary that they feel they have no choice. I sympathize with them. But when I was talking to business executives, I was really galled by how they just didn’t care to understand how these bribes affect the countries where they pay them. There was a lot of very active denial on the part of business executives.

At the highest level, the government officials that I encountered, just seem to have callous disregard. They’ve gone to jail and been written about all over the news, and they claim this was not money they stole. It was money they legitimately made. They love the system. It’s why they go into politics, it’s how they rise up the ranks, and it’s why they stay in power.

It's easy to fool yourself into thinking, 'well, I deserve a little bit more.'

Would you describe those people as sociopaths?
Clearly, there’s something morally absent in them.

I’ve never been faced with a $250,000 bribe, but it’s really hard to identify with these people who steal millions of dollars from the citizens of a poor country to buy shoes for their wife.
They are often insulated from any understanding of the impact. They feel entitled to privilege and wealth, that they’re working hard for it. If you’re a government minister in Nigeria, you make $18,000 a year. And you can see that these companies are coming into your country and they’re getting multibillion dollar contracts. It’s easy to fool yourself into thinking, ‘well, I deserve a little bit more.’

I’m curious if you think bribery has gotten worse or better over the last 1,000 years?
Bribery has had peaks and troughs, but it’s always existed. If we believe in the concept of Western civilization, we as a society have grappled with this particular type of corporate corruption for 400 years, beginning with the rise of the British East India Company, the world’s first corporation.

And I don’t think that it’s gone down. I think in fact we are more aware of how widespread it is now than we ever have been, because there are more investigators around the world looking at it. And as one FBI agent told me, the more rocks we overturn, the more stuff we find. We can’t even keep up with how much corruption there is out there.

Do you feel like we can actually get our hands around the problem ever?
No. I think corporations are going to find reasons to justify paying bribes, and they’re going to have means—maybe it’s cryptocurrency—for paying it. And there’s going to be a cat and mouse game between law enforcement and corporations to try to stop it. They make too much money from it, and they’re not held to account for it. They don’t pay much in the way of fines, and very few people go to jail. We’ll make it harder, but until the penalties really start going up for corporations, it’s going to continue.

Are you in favor of a corporate death penalty?
I don’t know that I am. I think maybe forcing the company to pay really high penalties and to reform within might be more effective.

What can people who care about these things do to help?
People should be aware of how the companies they invest in are making their money abroad, like the pharmaceutical companies that rampantly bribe in China. Maybe that’s a company they should think twice about investing in, because in the end it’s not an innovative company. It’s not a company that has a sustainable strategy for growth and for profit.