Freeman Cebu Business

What is corruption?

INTEGRITY BEAT - Henry Schumacher - The Freeman

I have to admit that I have been involved in corruption a long time ago. But I am proud to state that I have been in anti-corruption for a good number of years now. I have signed the Integrity Pledge of the Integrity Initiative, Inc. and I am living up to the commitments laid down in the Pledge.

Having said this, I am still amazed that a lot of people – in government and in the private sector - still have difficulties to understand what corrupt practices are. Assuming that we are all interested to stop corruption in government and in the private sector, allow me to highlight a number of the bad practices:

* Agent - An agent is a person (natural or legal) with the authority to act for or represent another person or party. Companies can be held liable for their agents’ acts of corruption, including for channeling bribes, for not reacting to corrupt acts, or other bad deals the agent does for another person or party.

* Bid Rigging - Bid rigging is a form of collusion in which bidders on a contract decide between themselves which bidder should be successful in the tender, and then draft their bids accordingly. Forms of bid rigging include bid rotation, complementary bidding and cover pricing. Bid rigging can constitute a cartel or antitrust offense, which is also regulated by the Philippine Competition Commission (PCC).

* Bribery - Bribery is, according to Transparency International “the offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal, unethical or a breach of trust. Inducements can take the form of gifts, loans, fees, rewards or other advantages (taxes, services, donations, favors etc.).” Bribery occurs during an interaction between two parties. Usually, both the giving and the receiving parties of the bribe commit a crime.

* Cartel - A cartel is an agreement (formal or informal) among competing companies to coordinate prices, marketing or production of a good or service. Cartel members may agree on matters such as prices, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, the division of profits, or a combination of these. The PCC is ‘hunting’ cartels.

* Collusion - Collusion is a non-competitive agreement, usually secretive, between two or more persons or businesses to limit open competition, typically by defrauding or gaining an unfair advantage. It can involve an agreement among companies to divide the market, to set prices, to limit production or to share private information. It may also involve bid rigging. The aim of collusion is to increase individual members’ profits. The PCC is fighting collusion!

* Cronyism - Cronyism is a form of favoritism shown to close friends. A typical situation of cronyism would be the political appointment to office of a friend without regard to the person’s qualifications, or more severely, providing vast privileges to a ‘friend’ like franchises, projects, dominant market positions, etc.

* Fraud - Fraud involves the use of deception, trickery and a breach of trust to gain an unfair or unlawful advantage. Occupational fraud entails the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the company’s resources or assets.

* Graft - Graft is a form of political corruption in which an official acquires financial gain by dishonest or unfair means, especially through the abuse of one’s position. Unlike bribery, graft does not require the official to provide an undue advantage; it is enough that she/he gains something of value apart from her/his official pay when working.

* Kickbacks - Kickbacks are a form of bribery where one party obtains an undue advantage, and a portion of the undue advantage is “kicked back” to the individual who gave or will give the undue advantage. It differs from other forms of bribery in that it implies a form of collusion between the two parties.

* Money Laundering - Money laundering is a process in which the ownership, destination and origin of illegally obtained money is concealed or disguised. The objective of money laundering is to make illegally obtained money appear to originate from a legitimate source.

* Price Fixing - Price fixing is an agreement between competing businesses to buy or sell a product, service, or commodity at an agreed upon price. It can also entail maintaining the market conditions so that the price is kept at a given level by controlling supply and demand. Price fixing seeks to coordinate pricing for the mutual benefit of the traders. The group of “market shapers” involved in price fixing is sometimes referred to as a cartel. Antitrust laws commonly criminalize price fixing and the PCC is watching you closely.

The ‘Corruption Directory’ is much longer but the main areas I have tried to cover. I would appreciate, however, if you could comment and give additional examples of corruption. Please email me at [email protected]

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