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Procurement: Bribes As A Cost Of Doing Business
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April 18, 2009: There's yet another corruption scandal involving Israeli arms sales. A deputy defense minister in the Central Asian nation of Kazakhstan was recently arrested for taking bribes to facilitate the $190 million sale of Israeli artillery and UAV equipment and technology. This follows Indian charges that bribes were involved in a recent purchase of over a billion dollars worth of arms from Israel. There have been several similar, but smaller, scandals in other parts of the world, involving Israelis sales agents.

Arms exports (over $4 billion a year) are an important segment of the Israeli economy. The U.S. is biggest customer for Israeli military gear, accounting for nearly 20 percent of Israeli exports. India is becoming an even larger customer. But an equally large quantity of exports consists of many small deals to parts of the world (Africa, Latin America, Asia) where bribes are considered a traditional way to close the deal.

The Israeli attitude is that the bribes are a cost of doing business or, as the accounts put it, "a sales expense." Israeli prosecutors rarely go after Israelis doing the bribing. But on the other end, the buyer nations tends to regard these bribes as another form of corruption.


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sjdoc    Criminous intent   4/18/2009 10:09:26 AM
The prevalence of "squeeze" (Heinlein's term) in all dealings with the "Malevolent Jobholder" (pace H.L. Mencken) is not restricted to places like India and South America.  In America, we've had "pay to play" for decades, and we're not likely to see the end of it anytime soon.
I hold there to be no criminal intent in the private sector vendor's tender of a bribe.  The government officers in question make it crystal clear that without such financial inducements, their decision-making process will churn adversely (see the "Public Choice" school of economics).  It really is a cost of doing business.
However, the receipt of such a bribe is criminous without doubt. 
Therefore let the bribes be offered and paid ad lib.  Just name and nail the recipients.
Then instead of bribing these government goons, they can be blackmailed.
Can't do away with influence.  But we can make it really nasty for our "public servants" to get grabby.
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Bob Cortez       4/18/2009 8:29:31 PM

There is a view in Judeo-Christian thought that it is OK to pay bribes, as a necessary cost of doing business, but the crime is in requesting them.  Way beyond my pay-grade, bribes are part of the pay scale.  Years ago when I was in Spain, war widows were allowed to collect entry fees and keep them to certain state property.  Sort of like a license as it were.  The problem is that levels, and good and bad graft are not really in the culture.

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dll2000    U.S.   4/19/2009 11:08:30 AM
Also extremely prevelant in Illinois, California, New Jersey, Louisana, New York and probably to some degree in every state in the Union.
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chsw       4/19/2009 10:17:50 PM
France, Japan, Russia, Germany and Arab countries have used bribes in commercial dealings for years.  Perhaps these Israeli deals are being scrutinized because they did not offer enough baksheesh to everybody involved.
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sclayton    Bribery is a Crime   4/20/2009 10:19:59 AM
The  tenor of the  article is that bribery in international business is viewed as
a cost of doing business by companies in seller nations  and  sjdoc states his
position that:  "I hold there to be no criminal intent in the private sector
vendor's tender of a bribe."
That is an unusual and misguided opinion about what constitutes  "criminal intent."
In nearly every country in the world it is a crime under statutory law to bribe a
government official. 
Also under the statutory law of the countries in the OECD countries 
including the UK, France, Germany, Japan and nearly every other
exporting nation, paying a bribe to a a foreigngovernment official  IS a crime.
(Israel has joined both the OECD convention against briberty and theUN
conventiona against corruption) Business executives in every exporting nation are
well aware that bribing public officials in their home countries and in foreign countries
is a crime under their home country law and under the law of the country in which the bribe
is paid.  To demonstrate that they fully know they are engaged in criminal conduct, 
the people who  pay bribes in international business do so in secret and  create elaborate 
fake books and records, and engage in money laundering, to try to cover up the crime. 
In countries with reliable stock exchanges, is it is a separate felony level crime for public
company to intentionally create false books and records.   Business  expenses are tax deductible
and bribes paid to foreign officials are not tax deductible, in the US or anywhere else.
Companies frequently falsify their records to conceal the bribes they pay as legitimate
business expenses.

Both the bribe payer and the bribe taker are clearly breaking the law, and any moderately aware
business executive involved in international business knows paying bribes is against the law.
Depending on the country he chance of being caught and prosecuted for bribery is very low, 
but the chance of a major company being caught for any violation of many laws is rather law. 
Ethical companies do not break the law just because the chance of being prosecuted is low.  
Taking sjdoc's thought forward:
Dumping toxic waste in your local river is a cost of doing
business  - which you only pay if you get caught;
Intentionally misstating and failing to pay taxes owed by your business
is a cost of doing business  - which you only pay if you get caught;
Hiring a hit man to kill the president of a competing company is a cost
of dong business, and you only pay the full price if you get caught.
All of those activities are done without criminal intent as well - bu only if you define
criminal intent to  mean you are engaging in conduct  you know is a violation of  the
law but you  do not intend to get caught.
Plenty of US companies engage in bribery  in their international business
knowing what they are doing is illegal   The Bush administration  increased
staffing  in the Department of Justice and dedicated significant FBI resources to
investigate and prosecute American and other companies  involved in bribery of
foreign government officials. Under Bush prosecutions  of cases involving international
bribery went up about 10X over those of  any previous administration.  Dick Cheney's 
friend, Jack Stanley, former CEO of Halliburton subsidiary KBR,  plead guilty
last year and is now getting ready to start a 7 year federal prison sentence for
authorizing KBR's bribes in Nigeria. 
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