TRACE International, the leading global anti-bribery standard setting organization, recently published the third in its biennial How to Pay a Bribe: Thinking Like a Criminal to Thwart Bribery Schemes series. The collection offers an insider’s view on how bribery and corruption impact international business, making it an excellent instructional tool for compliance practitioners.
In a four-part series published exclusively on Corporate Compliance Insights, TRACE offers a preview into the 2016 edition of How to Pay a Bribe. The complete collection is available for purchase on Amazon.
This story is based on actual events, although some details – such as dates and names of entities and individuals – have been changed. It is a story concerning fraud and corruption in public procurement and a tale of a culture that not only permits, but expects payments to government individuals – as a condition of public contracting. Such practices are all the more troubling when involving important medical products and other goods needed for public health. A general tolerance for graft creates a culture of impunity for bribe payers and the recipients of bribes and a lack of accountability – even in the face of hard evidence.
Over the course of the next several months, my team and I reviewed hundreds of emails and financial documents that gave further insight into the extent of the relationship between Lee and Che. The overtness of the discussion and the language was breathtaking. In some emails, they didn’t even try to hide what was happening, although a few ended with the admonition that the reader should “delete the email once read.” They forgot to. One email Che had sent to Lee gave instructions on where Lee should send his “commission” payment, equal to 15 percent of the contract value. Che instructed Lee to send it to his sister’s account in Thailand. Lee also sent emails to Che to inform him that he had lined up a flight for Che and his daughter and had made the appointment with the specialist for Che in Singapore. Another informed Che that he had already taken care of his hotel and airplane ticket when he arrived the following week. Lee had also financed Che’s trip to the United States shortly after the tender had been announced, and in a separate mail just minutes after offering to send Che and his family to the U.S., Lee reminded Che that SGC was interested in the LLIN contract and was looking forward to submitting a bid for the contract. In looking at the financial documents, I saw that Lee invoiced his company for these expenses, typically describing them as “consultant fees” and business expenses in connection with marketing for the bednet contracts.
In the hope of not being questioned by administrative financial personnel, Lee had engaged a consultant — a Singapore company named “Meenah” — to funnel such expenses and disguise the nature of the payments on the company’s books. The expenses were described very generally, as “administrative costs” or “fees” associated with the tenders. As the investigation progressed, I became increasingly interested in understanding the work Meenah had done on behalf of SGC to win the LLIN contract. I noticed that Meenah had no website and only communicated with Lee via a Gmail account. The email signatures did not specify a business address and appeared to be signed using a pseudonym – “Mr. Fen.”
It also became evident that Lee was using Meenah to cover more than just travel and hospitality expenses. Under the terms of the engagement letter, Lee had hired Meenah to gain an understanding of the business climate and the lay of the land within the Ministry of Health. The agreement entitled Meenah to a 3 percent success fee commission for generating any business on behalf of the company. Payments to Meenah were made in U.S. dollars, a decision that not only made it easier to eventually trace the funds, but meant that the funds passed through correspondent banks in New York. After talking to the banks, I learned that the funds were being filtered back out of Meenah and into two other bank accounts within Cambodia and Laos. With the help of friends in law enforcement, I was able to identify that the money was going directly to Che.
A few weeks later, I was back on a plane, this time headed to Phnom Penh. My team had dug up more information about Che, who I learned had been appointed Minister of Health six years prior. Although he had never run for office, he’d been a lifelong politician, holding several prominent appointments before his most recent promotion. Che also had a deputy, Mea Soche, who’d been among the Ministry’s financial staff responsible for examining the various bids. In one long, deleted email to Lee my team was able to recover, Che explained that Soche’s “compensation” for the contract should be about half of his. He then advised Lee to delete the mail once he’d read it.
My first meeting in Phnom Penh was with Soche in the lobby of the Raffles Hotel near the U.S. embassy. I told her that she’d been linked to an account in the name of a third party in Laos and that one of the New York banks I’d spoken to regarding Meenah said that more than US$500,000 had been delivered in U.S. dollars to that account. Surprised and more than a little annoyed, Soche contended that the account was her “aunt’s,” who was sick, and that the payments were loans to subsidize her aunt’s health care. When later asked to substantiate these claims, Soche chose to contest the request and not cooperate with the investigation.
The following day, I met with Che at the offices of the Ministry of Health. With me, I’d brought a litany of damning evidence. Lee and Che communicated often, and Che had made explicit in several emails the “commission” he required for the awarding of the contract. Che, in very blatant language in his email communications, directed Lee to make the payment to an account in U.S. dollars, and his deputy Soche gave similar instructions to pay her “aunt” into the account in yet a different location.
Although Che found it hard to deny the overwhelming evidence against him, he equally refused to substantiate any claims that he’d done anything wrong. For over an hour and a half he sat opposite me and expertly dodged my questions. He repeatedly tried to change the subject and divert the discussion. I figured that he was being watched by several other government ministers, which turned out to be correct, along with several others I did not know about. In one email I showed him, dated four weeks after the awarding of the tender, he’d written to Lee that he was increasing his commission from 7 percent to 15.5 percent. When I questioned Che as to how he arrived at the figure, he didn’t have an explanation. However, a later document uncovered during the follow-on investigation revealed that Che was sharing his spoils with more senior members of the government, and a “table” set out the various percentages each official was entitled to. The more senior the official, the greater the percentage. It was obvious that this process had been in place for some time and was well established.
After my visit to Cambodia, I flew back to Singapore to sit down one last time with Lee and present him with all the evidence I’d accumulated over the past several months. This time around, he had no choice but to concede his participation in the scheme. Over several cups of coffee, he offered a chilling account of the reality of public contracting in the country over the last 20 years. Essentially, it was evident that a contract could not be secured without paying a bribe or a gratuity payment and the procurement processes were simply a disguise and a facade to promote the appearance of legitimacy. For the Cambodian bednetting contract, the bribe payments came directly from corporate accounts, based on distribution requests sent through the company’s administrative process and system. The payments were first made to Meenah, who then passed them on to Che and his deputy through wire transfers. Lee sent the authorization through, received the funds and wired them as directed. In all, we identified more than US$2.25 million in bribe payments that had been made over more than six years to Che and Soche.
Read on in Part 4, published on May 11.
TRACE International and TRACE Incorporated are two distinct entities with a common mission to advance commercial transparency worldwide by supporting the compliance efforts of multinational companies and their third-party intermediaries. TRACE International is a nonprofit business association that pools resources to provide members with anti-bribery compliance support while TRACE Incorporated offers both members and non-members customizable risk-based due diligence, anti-bribery training and advisory services. Working alongside one another, TRACE International and TRACE Incorporated offer an end-to-end, cost-effective and innovative solution for anti-bribery and third-party compliance. For more information, visit www.TRACEinternational.org.
TRACE Member companies should write to firstname.lastname@example.org to request their free copy of How to Pay a Bribe: Thinking Like a Criminal to Thwart Bribery Schemes. Others can purchase the book by clicking here.
To learn more about the How to Pay a Bribe series and other publications from TRACE International, visit www.TRACEinternational.org.
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