Posted in Economy

Bribery: The Olympics, Business, And Life - By L. Burke Files

President of Financial Examinations & Evaluations, Inc.

 

The bribe is not new.  

 

• Xerxes Bribes Ephialtes, he bribed him with women and gold to betray the Spartans to the Persians. Or did he just help the Persians for a tip?

 

• Eupholus of Thessaly, in the 388 B.C. Olympics, bribed three boxers to lose intentionally.

 

• Judas bribed authorities with 30 pieces of silver and betrayed Jesus

 

• My favorite bribe though, involved Nero in the Games of 67. Nero first bribed the Olympic officials to postpone the games for two years. When the games were finally held he bribed his way to several Olympic laurels. Nero competed in the 10-horse team chariot races, only to be thrown from his chariot short of the finish line. While he did not finish the race in his chariot, he was still proclaimed the winner on the grounds that he would have won had he been able to stay in the chariot and complete the race!

 

• Most recently, US government officials, the “Friends of Angelo”, were getting discount loans from Country Wide Bank - discounted loans for influential friends.  This one stumps me with those who got the loans – as it was decided that they were not bribes or incentives. Hmmm.

 

So what’s the big deal? People on the inside want to “fix the horse race”, they want to assure themselves that their efforts are rewarded.  Isn’t that what we all want to do - get paid for our efforts?  Okay, so if you are willing to offer a bribe, why or what fix makes it okay?

 

First, what is the economic intention of a bribe? The intention is simple, a bribe is used on those in power to fix, or change the odds.  Look at it like a horse race. Who do you need to bribe to fix a horse race and how much do they want?

 

A bribe is an incentive to do the bidding for the payer of the bribe.  The bribe needs to be enough to incentivize the receiver - but not so much to make the cost of fixing the race uneconomic. When you include the risk factors of getting caught and paid, in a way, that while understood by the receiver as a specific incentive to act - the payment is hard to see as direct emolument for said - err actions. 

 

The term emolument - is so lovely, it sounds good when said and looks wonderful on paper, but best when one has been bestowed with some.

 

So the answer is simple. Bribery often ices out competition that may be more qualified but less well-moneyed, or free with emoluments.  In time, an economic society, greased by emoluments, begins to atrophy and the same old suspects are doing all of the business with no incentive to get it done good or right.

 

So why does bribery persist?  Honestly, I think legislators in many countries think it is a good idea or they wholly do not understand commerce.

 

In some Latin America countries, it takes over a year and 120 plus permits to open a business legally - so what do most do? They open shop and pay the inspector a few pesos or cruzeiros to go away.  Complex legislation and the laws they produce are a recipe for emolument facilitation. The same is true up here in the North America.  To get a government contact you need to have a bazillion requirements and submit the equivalent of a business plan. There are fewer permits, but more requirements to get the permits or bids to access the client. The cost of just preparation and submission of some of these bids can cost tens of thousands of dollars to prepare just for simple work - or millions for larger projects like the KC-767.

 

Thus you can see the encouragements to pay bribes to “fix the race”, where there is a high cost of winning. The bribe insures winning.  If you are preparing bids for work, and the bid preparation is so extensive and expensive - one might want to insure the fruits of the labors.  It is, after all, understandable.

 

For example, if one’s rewards are paid to you in an incentive program that incentivizes you to sell more drugs, and or close more loans, you have both a correct and a perverse incentive to “fix the race”.  You want to make sure that as many customers come to you to get their work done as opposed to anyone else.  You do this by both getting the work done and by buying them gifts, expensive dinners, tickets to sporting events, and this is all covered under the banner of “corporate hospitality”.  Another form I have seen is the awarding of research grants. I am not sure what covers the big companies bestowing of “research grants” to favorite clients, but they are incentives and seem perverse.  There are also many other ways of paying the bribes that are ever so subtle, the point here is not how they are paid, but bribes are paid and paid in some very open fashions.

 

This is just a quick look at what goes on within the US, a society with a firmly based belief in raw merit versus emoluments.  Yet, we still don’t get it right.  Though we view bribery as wrong, to many in Africa, Asia, and the Middle East, their views aren’t as strict.

 

If we are going to tackle bribery in the US we must find those people who possess the power to: fix the races, disqualify the horses, call the races, and award the victory to the winners.  These are the people who can take bribes and hurt the system. These are the people who need to be well monitored and fiscally transparent.  No, mystery scholarships to France for the children, research fellowships, or corporate hospitality - pay them well, very well, and insure their fidelity.  We must also make the systems governing compliance, bidding, and performance more even and less complex.  We need to work to keep those who are in power from being able to accept bribes and help remove many of the incentives to pay bribes.

 

On the other hand if you wish to keep emoluments as your friend, make the rules to participate in the economy complex and expensive to comply with, make the cost of entry prohibitive.  Keep those empowered to make choices away from scrutiny and the public’s eye.   This will keep the incentives to fix the race in place.

 

Now, I’d like to hear from you. What are your thoughts on bribery, corruption and horse race fixing?

 

Mr. Files is a published author of five books, in particular "Due Diligence for the Financial Professional, 2nd edition 2010" and "Money and Budgets" other writing and material can be found at .https://www.feeinc.com/media.php.  Mr. Files is an international speaker on these topics. 

 

FE&E, Inc. is an international investigative firm specializing in, fraud prevention, asset recovery, due diligence, anti money laundering and intellectual property. 

 

As a financial industry insider for over 30 years he is keenly aware of the type, and accuracy of the information required to make decisions. Mr. Files has been the case manager on fraud investigations ranging from tens of thousands of dollars to over 3 billion.   As an international expert on due diligence and Intellectual Property and Critical Information (IPCI) he is regularly sought for those cases that bedevil the desktop practitioners. 

 

This article is courtesy of the Top 1% Club and the Top 1% Club Mentor Gail Kasper. For additional information on Gail Kasper, her television appearances and speaking engagements, please visit gailkasper.com.