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Bribery and Corruption for Fun and Profit

A few weeks ago the front page of the London Sunday Times newspaper broke a story about how some investigative reporters posed as lobbyists for the banking industry trying to get banking reform legislation watered down. Three members of the European parliament took the bait, and agreed to be paid a yearly salary of 100,000 Euros (US$143,120) in exchange for their votes. One of those was a former deputy prime minister from Romania, who had the chutzpah to email the reporters “Just to let you know that the amendment desired by you has been tabled in due time.” He then sent them an invoice for €12,000 (US$17,174). Isn’t that tidy?

When I read this, my initial reaction was to shake my head at such blatant corruption in the European parliament and wonder how europeans put up with it. But are we really any better? A quick look turned up a few interesting stories from the US.

Here’s one about Wisconsin governor Scott Walker, who insists that his “state is broke” and so has cut government workers’ salaries, saying that they are overpaid, and stripped them of their collective bargaining rights. But Walker somehow found the money to give a 26% raise to one of his employees who oversees environmental and other regulations in the department of commerce, after just two months on the job. What makes this even more curious is that the employee is hardly qualified for the job. He’s a college dropout, and it looks like this is the first real job he has held. Brian Deschane is only 26, but he already has two drunk-driving convictions.

So how did it get this job? It probably helped that Deschane is the son of the head lobbyist for the Wisconsin Builders Association, and one of the largest contributors to Walker’s campaign. So in one fell swoop, the builder’s association gets someone on the inside to oversee regulations that affect them, and that someone even gets paid a salary and a raise. Not only that, but the anti-union law the governor signed also had provisions to convert more than 37 civil service positions into political appointees so the governor can do even more political patronage with taxpayer money.

Here’s another, about how Wachovia Bank laundered tens of billions of dollars for cocaine smugglers, including the same drug smugglers who are killing people in Mexico.

Or how could we ignore how most of the major banks in the US routinely forged mortgage documents, with full cooperation of the government.

Or how about the Candlie’s Foundation, which is supposedly a non-profit whose mission is to prevent teen pregnancy. You may have heard of them because their spokesperson is Sarah Palin’s daughter Bristol, who receives a salary of $262,500. The “foundation” also spent $165,000 on advertising. So how much have they actually spent on teen pregnancy prevention? $35,000. Candie’s Foundation is run by an executive for a teenage clothing company, so it is not surprising that they spend 10 times more on promotion and PR than they spend on, you know, actually doing what their non-profit claims to do.

Or how Koch Industries paid off President Bush, to avoid paying record penalties and even jail time for blatant pollution violations, and even got one of their own employees hired as the inspector general of the EPA as an added bonus.

And yet we often look the other way at this kind of corruption.

In fact, this will probably get me into trouble with lots of my readers, but I will claim that there is a very common form of corruption that pretty much all of us (with the exception of poor people) are guilty of, and yet we think nothing of it. Are you indignant yet? Ready to claim that you would never do anything corrupt like bribery or kickbacks?

So, how many of you have ever flown on company business and received “frequent flyer miles” from the airline, car rental company, or hotel? Or how many of you use a credit card that gives you “cash back” on your purchases, and have used those credit cards to pay for things (such as travel) that were reimbursed by the company for whom you work?

Programs like this are a form of kickback — a personal gift to you in exchange for your company’s business. Airlines do it because it works — it brings them business. Not only that, but the IRS looks the other way, so these kickbacks (which should be illegal!) are not even treated as income, and you don’t have to pay taxes on them. What a deal!

When I’ve had discussions with people about “frequent flyer” programs, a common argument I hear is that business travelers are entitled to perks like this. Interestingly, when government officials who accept bribes are caught, many of them feel entitled to these bribes as part of their “compensation”. I’m sure that politicians who accept massive campaign contributions in exchange for their votes feel the same way.

And the second most common excuse? “Everybody does it”. I guess that means that if everyone is corrupt, then it is ok.



  1. ThatGuy wrote:

    How dare you ask us to look at our own actions! We’re the ones who read and often times agree with you. We should be getting appointments to the Political Irony Department of Commerce or Environmental Affairs.

    Good looks on this post, though I don’t really believe society can exist without corruption at some level, it’s pretty disgusting that it can continue to exist at this volume in the age of 24 hour news. But I guess they need to spend time reporting on the Royal Wedding and what random people on Twitter are saying.

    Saturday, May 7, 2011 at 11:12 pm | Permalink
  2. Nope, haven’t done that. We live debt free, which means no credit cards, so no way to play games with frequent flyer miles.

    We’ve also not flown anywhere in years. I would love to, of course, but the focus right now is building a nest egg so we can move out of this part of the country soonest.

    But I do see what you mean, and there are such bribes everywhere. We’ve got a “me now” mindset that justifies corruption, at least in parts of our culture. *sigh*

    Sunday, May 8, 2011 at 4:25 am | Permalink
  3. BTN wrote:

    IK, I’ll agree that perhaps we shouldn’t bee keeping the cashback bonuses and FF miles, but these aren’t bribes because they do not influence the choices that we make.

    MAJOR distinction.

    Sunday, May 8, 2011 at 6:57 pm | Permalink
  4. Iron Knee wrote:

    Do you seriously think the airlines would be doing Frequent Flier miles if it did not influence the choices that people make? I know plenty of people who travel a lot for business, and they pretty much only fly the airline they have their frequent flier miles with for that very reason.

    You sound like one of those politicians who say that campaign contributions don’t effect their votes. Sorry, I’m not that stupid.

    Sunday, May 8, 2011 at 7:48 pm | Permalink
  5. BTN wrote:

    Okay, I can see FF, but my company pays direct for flights, so I’m off the hook on that on. Also, many companies (including the federal government) make a claim on FF miles

    Sunday, May 8, 2011 at 9:48 pm | Permalink
  6. Michael wrote:

    There’s a problem in your comparison of the above with FF miles: What is the quid pro quo associated with the transaction? With the exception of Candie’s Foundation, all of the examples you provided involved corruption that interfered with the principle of equal treatment under the law. There was some sort of preferential treatment from a government entity in exchange for payment. There is no such intention with FF miles. (And, no, I don’t travel enough for work to accumulate FF miles.)

    As for Candie’s Foundation, I don’t see that as corruption. I see it as yet another of the Paris Hilton-esque famous-for-being-famous celebrity crap. Just wasteful spending and a poorly run non-profit.

    Monday, May 9, 2011 at 2:43 pm | Permalink
  7. Jason Ray wrote:

    I waited to see some other responses before commenting.

    The fact that we have blatant corruption in politics and business, and that as a society many people turn a blind eye and say it’s just “business as usual” is just that – a fact. I personally believe we should stamp out corruption whenever we identify it and imprison (not just de-elect) people that take advantage of their position to demand illegal rewards.

    That said, IK, I don’t think customer loyalty programs are in the same category as selling your vote. I don’t think asking a co-worker if they would like to get a drink with you after work is in the same category as demanding sexual favors if they want to stay employed. To me, there is a clear difference in degree – corruption in this context s doing something that is defined as illegal, or inexcusable, for your job, as opposed to benefiting from something that your employer (or constituent) explicitly understands and approves as an expected benefit.

    Businesses can chose what they want to control and what they don’t – my current company, for example, won’t reimburse us for a flight on an airline that is more than 5% more expensive than the lowest cost on any of the company’s “preferred” airlines. And the fact that I get personal benefits from my company’s expenditures (free rental car days, room upgrades, etc.) is seen by the COMPANY as part of the provided benefits to employees being asked to travel, not as a theft of company resources. If they are willing to give me the benefit, that’s their choice – and it’s factored in to the compensation overall. The same is true of the government – I expect my Senator to get a nice office with nice furniture, and fly first class or better between Oregon and Washington (I want him to be able to work on the flight). I don’t expect or condone him selling his vote.

    Monday, May 9, 2011 at 11:31 pm | Permalink
  8. Iron Knee wrote:

    The fact that some people don’t see getting personal frequent flyer miles on business travel as a kickback, and seem to ignore the fact that they aren’t taxed on something that is clearly income, is precisely the point.

    Tuesday, May 10, 2011 at 10:53 pm | Permalink
  9. BTN wrote:

    Ideally, I agree that FF should be taxed – but how would this be computed? The value of an airline ticket is not fixed. I suppose that you could value it at what the ticket would have cost at the time of booking, but this is complicated and the price is dependent on the method used for booking.

    Also, their is a distinction between how public officials and private employees are treated, as well there should be. If someone works for a private company, its perfectly legitimate, legal, and ethical for the CEO/compensation board to allow someone to keep airline miles, or even to accept direct gifts. It is the company’s money, as Jason says.

    In terms of the federal government, here is GAO’s 2001 view on the matter:

    Of course one good point that your blog brings up is seldom do people do things without justifying their actions (even if that justification doesn’t hold water).

    Wednesday, May 11, 2011 at 12:44 am | Permalink