Corruption

Corporate Influence Peddling

A general category of white-collar corruption is corporate influence peddling. The influence peddler uses his or her influence with political authorities to obtain preferential treatment or favors for the corporation, usually in return for payment. In the United States, intensive lobbying of public officials is considered influence peddling. Such behavior may be viewed as unusual, unethical, or deviant but, for the most part, not criminal. Other forms of influence peddling, such as illegal campaign contributions and domestic commercial bribery, carry distinct criminal penalties. It is also illegal for companies to make payments to officials of foreign governments for the purpose of creating a more favorable business environment in the host country. In the past, companies have made such payments to retain or obtain business as well as to reduce any political risks or harassments they might encounter in the foreign country owing to unfamiliar laws and restrictions that they did not face while doing business inside the United States.

The foreign corporate bribery scandal of the late 1970s and early 1980s provided many examples of these kinds of foreign payments. More than 450 large multinationals based in the United States confessed to regulators that they had made questionable or illegal payments to foreign officials totaling more than $1 billion. The payments were made to corporate “sales agents” or directly to officials in the host country. The list included prominent corporations such as Xerox, American Cyanamid, Exxon, Lockheed, Gulf, Pfizer, and ITT. Thirty-two offending companies admitted to paying bribes totaling more than $1 million. Several individual corporations made bribes totaling $10 million or more. Where the funds were sent depended on the corporate objective in a given situation. A variety of foreign concerns received funds, including major or minor governmental officials; political organizations and candidates; nationalized corporations; and news media.

Innovative payment methods were justified with the argument that such expenditures were simply “confidential commissions” and, because they were a customary practice in the host country, were not harmful. They did not appear to violate any U.S. laws. Furthermore, the payments were believed to be infinitesimally small in comparison to the sales totals—generally involving less than 1% of the sales volume. Moreover, some corporations claimed that the expenditures were necessary to survive the extremely competitive business environment in the host country and that without such payoffs the corporation could not expand its international markets. Failure to expand such markets, in turn, would lead to the collapse of the corporation's business.

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