While it may seem at times that corruption does not bring with it any real consequences, occasionally the reality can be very different, with a number of companies paying the price for their actions.

South Africa is currently grappling with a number of high profile cases dominating the local headlines, and while little action has taken place at home (to date), globally a number of companies have been left decimated by corrupt practices, with others collapsing entirely. This kind of corruption, and the resultant fall-out, are nothing new.

The first corporate collapse due to corruption was several hundred years ago by the Dutch East India Company, with the huge publicly-listed multi-national falling foul to declining markets in the late 18th century, internal corruption, and excessive distribution of dividends (more than its profits), and finally the Anglo-Dutch wars. Founded in 1602, the company was nationalised by the Batavian Republic in 1796 but closed its doors three years later.

Arguably the first modern-day company to buckle under corruption was American energy company Enron in 2001 when its Directors and Executives fraudulently concealed large losses made by the company. A number of those found guilty went to prison, while a US court also convicted accounting firm Arthur Andersen of obstruction of justice by shredding documents relating to the Enron scandal.

The US steps up its fight against corruption

The US government has been seen to step up its fight against corruption, aggressively stepping up its enforcement of the  Foreign Corrupt Practices Act (FCPA) – a U.S. statute that prohibits firms and individuals from paying bribes to foreign officials to further business deals – with the top ten settlements during the Obama administration totalling over $3.7 billion! Most of these cases involved US firms bribing officials of foreign governments for access to lucrative contracts in the telecommunications, medical, and arms industries.

In January 2020, however, Airbus took corruption fines to new heights when they agreed to pay $3.9-billion in penalties to resolve foreign bribery charges with authorities in the United States, France, and the United Kingdom. $2.9 billion was paid in FCPA charges, nearly doubling 2019’s biggest FCPA case, which saw Ericsson pay out a $1.06-billion settlement.

According to the FCPA Blog, the global top FCPA 40 cases now sits at payments of $17.1 billion. That’s more than the GDPs of Belise, Somalia, the Seychelles, and Kyrgyzstan… combined. Airbus, of course, currently tops the list, with Petrobras (Brazil) claiming the dubious ‘honour’ of second place with $1.78 billion in 2018 and Telefonaktiebolaget LM Ericsson (Sweden) rounding out the top 3 with a settlement of $1.06 billion in 2019.

The US Department of Justice’s stepped-up enforcement of FCPA is part of a worldwide movement against government corruption, which would, it was claimed, help U.S. businesses abroad. “People want to see governments where they can succeed based on their own efforts, not based on corruption,” said LA assistant attorney general, Lanny Breuer. “We want U.S. business to compete on a level playing field.”

South Africa steps up the fight against corruption

Locally, the National Prosecuting Authority is also making moves to combat corruption, although not at the pace many would like. Opposition MPs in July criticised the slow pace of high-profile prosecutions taking place, despite promises made to the contrary. In July this year, the DA, EFF, ACDPA and others were at pains to highlight the lack of progress made prosecuting crimes related to state capture and corruption.

The NPA’s investigation into Transnet last year, for example, may have led seizure of assets of controversial company Regiments Capital, but to date, nobody has appeared in the dock. The company stands accused of involvement in Gupta-linked state capture, which saw The NPA flag R1.1 billion of Regiments’ revenue as the proceeds of crime. The Assets Forfeiture Unit in turn seised assets to this value, with those implicated forced to surrender the assets of all their companies and family trusts.

The key difference here is that while the FCPA has achieved considerable results by getting companies to pay fines, the NPA has moved to freeze company assets, but the accused have yet to appear in the dock.

We have listed the top 10 global cases below. The financial costs to these companies are quite staggering and again showcase the needs to ensure your business does not fall victim to these kinds of practices, either wittingly or unwittingly.

Top 10 global settlements

Airbus SE (Netherlands/France):

  • What they did: used agents across world to bribe officials to land high-value contracts.
  • Settlement costs: $2.09 billion in 2020.

PetróleoBrasileiro S.A. – Petrobras (Brazil):

  • What they did: Employees accepted more than $30 million in bribes to sell oil at lower costs.
  • Settlement costs: $1.78 billion in 2018.

Telefonaktiebolaget LM Ericsson (Sweden):

  • What they did: Improperly record tens of millions of dollars in improper payments around the world.
  • Settlement costs: $1.06 billion in 2019.

Telia Company AB (Sweden):

  • What they did: Paid more than $331 million in bribes to  Uzbek government officials.
  • Settlement costs: $1.01 billion in 2017.

Mobile TeleSystems Public Joint Stock Company (Russia):

  • What they did:paid $420 million in bribes to an Uzbek official related to the former President of Uzbekistan to secure business.
  • Settlement costs: $850 million in 2019.

Siemens AG (Germany):

  • What they did:Bribed Argentine government officials to win a government I.D. contract.
  • Settlement costs: $800 million in 2008.

VimpelCom Ltd. (Netherlands):

  • What they did:Paid more than $114 million in bribery payments to a government official in Uzbekistan between 2006 and 2012 to enable them to enter and continue operating in the Uzbek telecommunications market.
  • Settlement costs: $795 million in 2016.

Alstom S.A. (France):

  • What they did: Bribed officials to secure a transportation contract in Tunisia.
  • Settlementcosts: $772 million in 2014.

Société Générale S.A. (France):

  • What they did: Conducted a multi-year scheme to pay bribes to officials in Libya and manipulated the London InterBank Offered Rate (LIBOR), one of the world’s leading benchmark interest rates.
  • Settlement costs: $585 million in 2018.

Kellogg Brown & Root LLC  / Halliburton Company (United States):

  • What they did: Paid bribes to officials within the Nigerian government in order to obtain construction contracts related to the NLNG project.
  • Settlement costs: $579 million in 2009.

The above numbers reflect the reality that, while corruption is rife globally, the costs if caught far outweigh the gains. If anything, this further highlights the necessity of having a system that ensures it never happens in the first place.

Additional Resources

Corporate Insights has published an E-Book aimed at detailing the damage done by undetected corruption. Detailing global cases, the scourge of State Capture in South Africa, and other high-profile cases, it presents you with all the information at hand to better detect and fight corruption within your business.

* Corporate Insights has developed a one-of-a-kind modular system that combines TransUnion’s big data universe with our own artificial intelligence and smart logic algorithms. It enables you to continually monitor, detect, act on, and prevent critical risks, both internally and externally.

The Corporate Insights system will allow you to protect your business from succumbing to the typical pitfalls that lead to corruption. It also comes with a host of additional benefits to ensure your company continues to operate optimally, free of the threat of corruption.

Click here to book a demonstration or call us today to find out how you can transform your business.