Kickbacks

THE TERMS bribery and graft are often used when referring to kickbacks. Kickbacks are monetary and non-monetary benefits that are paid to gain influence over and profit from an individual or firm. They are widespread and often accepted as a cost of doing business in many segments of the economy at home and abroad. Indeed, there are some segments of the economy that are more susceptible to the kickbacks, and the practice is more prevalent within some occupations. Those often cited among those most susceptible are elected officials and police officers.

James W. Coleman notes that, in cases of commercial bribery, it is often argued that the amount paid in bribes is relatively small relative to the prof [Page 483]its, and consumers bear little of the actual costs. However, the widespread practice of kickbacks gives an unfair advantage to large companies with the resources to defray the costs relative to smaller competitors. According to Coleman, companies are able to avoid the accounting problems that arise from bribes extended in the form of cash, stocks, bonds or other forms of monetary or non-monetary forms of payment by establishing dummy firms to absorb the cost. Another means of disguising kickbacks as a legitimate business expense occurs when multinational firms, unable to establish local offices, distribute payoffs through local sales agents. Firms find this an especially efficient way of conducting business because local agents are more knowledgeable about which local entities need to receive “gifts” according to cultural and structural norms. Moreover, once the sales agent is paid, multinational firms are able to plead ignorance of how money is subsequently distributed and for what purposes.