Employee bribes, kickbacks, and payoffs within the business world are the most pervasive. In conservative terms, the cost to corporations from this type of white-collar crime exceeds $20 billion annually.

The core characteristic of a commercial bribe, in which the company becomes the victim involves improper influencing of a corporate decision or expenditure by an employee for personal or career gain.

Commercial bribery- a form of corrupt and unfair trade practices in which an employee accepts a gratuity to act against the best interests of his or her employer. (People v. Davis, 33Cr. R. 460,160 N.Y.S. 769).

No Federal statute exists prohibiting commercial bribery. However, the offense may be prosecuted at the Federal level as mail fraud, or as part of other offenses concerning contractors or vendors for the Federal Government. Approximately 25 states have statutes making commercial bribery a criminal (state) offense.

Illegal Gratuity- is a lesser-included offense of bribery. It is an extra "thank you" or "reward" payment to an official for the performance of normal duties. An illegal gratuity does not require proof if intent to influence.

Collusion- "An agreement between two or more persons to defraud a person of his rights. It is a conspiracy or concert of action between two or more persons for fraudulent or deceitful purposes." - Black’s Law Dictionary

Kickbacks - in the commercial sense, are the giving or receiving anything of value to influence a business decision, without the employer’s knowledge and consent.

Gifts and Gratuities- An illegal gift or gratuity is the giving or receiving anything of value for or because of an official act. Unlike kickbacks, the gift or gratuity does not have to be given influence, but merely as a "thank you" for something that has been done.

The gift givers may believe that they (or their company) have earned a favored status when an influential employee accepts a gift from them. Others may assume that employees accepting gifts have agreed to a beholden position and are no longer free to act for their company without prejudice.

The Internal Revenue Service allows only one $25 business gift per year as a tax exemption. Gifts to employees exceeding that allowance become taxable as income.

Conflicts of Interest- this occurs when a company official has an undisclosed financial interest in a transaction that causes economic harm to the company. Employee involvement in business conflicts of interest often surpasses an ethics problem. Conflicts of interest may involve white-collar crimes that include bribes, kickbacks, or misuse of information and may extend into other crimes such as forgery, fraud, and theft.

Recruiting Versus Bribery- The crime of bribery can develop from a company offering or promising a job or position to an employee of your corporation when you can show that doing so influenced the employee to act in a way that created injury to the company.

 Gifts, Travel, and Entertainment Most bribery (corruption) schemes begin with gifts and favors, such as:

1. Wine and liquor
2. Clothes and jewelry for the subject or their spouse
3. Sexual favors
4. Lavish entertainment
5. Paid vacations
6. Free transportation on corporate jets
7. Free use of resort facilities
8. Gifts of the briber’s inventory or services

1. A prior outright payment may be falsely described as an innocent loan.
2. Payments on a legitimate loan guaranteed or actually made by someone else.
3. An actual loan made on favorable terms, such as an interest free loan.

Most corruption schemes are detected through tips from honest and disgruntled co-workers or vendors. The following is a listing of "red flags" to watch for:

1. The Big Spender - is the most common way to detect corrupted employees. However, some recipients spend their money less conspicuously by paying off debts or paying down mortgages.
2. The Gift Taker- A company or government official who regularly accepts gifts that are not appropriate, may often be susceptible to larger payments.
3. The "Odd" Couple - Corrupted employees and their payers may often appear to have very friendly social relationships. Parties who do not have much in common, but frequently meet outside of the office, may be a sign of deep and troublesome ties between the two.
4. The Rule Breaker- Probably of all characteristics listed here, this is the most significant. An individual receiving a payoff will often take action on his own, or direct a subordinate to bend, break, or ignore standard operating procedures or rules to benefit the payer. You should pay particular attention to those who insert themselves into areas in which they are not normally involved or attempt to assert authority or make decisions for which they are not responsible.
5. Genuine Need-Legitimate pressures, such as illness of a family member or drug addiction can induce participation in illegal schemes. Usually, however greed seems to be the motivation in most cases.

1. The Gift Bearer- The businessperson, who routinely offers inappropriate gifts, provides lavish business entertainment or otherwise ingratiates himself is the one offering more valuable inducements.
2. The Sleaze Factor- The corrupt payer is frequently a person known or suspected in the industry to be involved in payoffs or other fraudulent activity.
3. The Too-Successful Bidder- If one supplier is consistently awarded work, without any appearance of a competitive advantage, they may be providing under-the-table incentives.
4. Poor Quality, High Prices - Product quality and service may deteriorate with a corresponding price increase, particularly after a corrupt relationship has been formed.
5. The One-Person Operation- In certain industries, small, closely held businesses may resort to payoffs as a marketing edge. These businesses lack the internal controls and financial reporting obligations of their publicly-traded counter parts. Some favored conduits for funneling and concealing illegal payments include independent sales representatives, consultants or other middlemen.

The first countermeasure to end this often complex white collar crime issue must include revising existing or creating a new series of company policies that deal specifically with the problem of employee bribery and associated offenses.

Many companies have no definitive policy about employees receiving gifts. Others create opportunity through loopholes and do little to prevent bribery in any of its forms. Make sure that each employees despite his or her position in the company, reads and signs a statement of understanding acknowledging that he or she has read and fully understands applicable company policies.

Planning pointers include the following:

1. Explain the IRS rules on business gifts. Gifts may qualify as reportable income.
2. Determine whether inexpensive, impersonal items may be acceptable gifts in your business circles.
3. Tell employees why accepting gifts from people who have a special interest in the company is generally unacceptable.

A serious conflict of interest occurs when an employee competes with his or employing company during employment and for a specified period after leaving the employ of the company. In addition to a comprehensive company policy dealing with conflicts of interest, you should ensure that each employee signs an agreement of understanding about the policy as a prevention counter- measure. Tips for creating this policy include:

1. Arrange for your corporate legal counsel to develop or review the company policy and written agreement of understanding
2. Identify employees who should sign non-competition agreements
3. Establish a method for securing and maintaining contracts.
4. Review and update the policy as needed by law or circumstances.

Protection of sensitive company information is essential to safeguard against indiscriminate public policy. You need a company policy that clearly informs employees (to put an end to excuses of not knowing) and creates a basis for legal action, should that become necessary. Tips for creating your policy include:

1. Determine what company information would supply advantage to a competitor.
2. Clearly establish the confidential nature of certain sensitive information.
3. Determine rules and procedures limiting access.

One of the best white-collar crime deterrents includes a variety of obvious and not-so-obvious stumbling block layers. Employees or non-employees contemplating a white-collar crime will recognize your countermeasures and will suspect that you have other measures that are not so obvious. Here are some tips:

1. Number your manuals
2. Number your documents
3. Use cover sheets for documents
4. Have employees sign for manuals and documents

Corporate contracts supply a lucrative target for bribery (especially contracts involving large sums of money). Often, naive employees will find themselves unwittingly compromised in a scheme that delivers subtle bribes, kickbacks or payoffs. Once compromised, the employee will often continue this white-collar crime, either accepting more bribes for influencing your company to do business with a supplier.

A preventative strategy for contract bribes, kickbacks, and payoffs must begin with a comprehensive corporate policy that creates awareness and sets up effective counter-measures. Three contract policy planning tips are:

1. Let employees know that a contract by another name (e.g., a sales agreement) is still a contract.
2. Ensure that customer’s signatures are obtained, when appropriate.
3. Provide an avenue for employees to gain immediate legal consultation when needed.

Purchasing activities within your company might also create opportunities for employee bribery, especially kickbacks.

Companies involved in building stores or other types of outlets and facilities often buy real estate and contract with builders and suppliers. Each aspect of this process supplies the opportunity for employee bribery, kickbacks, and payoffs. Contractors may feel a need to bribe due to misrepresentation of their capabilities, substandard construction, faulty equipment, problems with the land, or a spectrum of flaws involved with this type of operation.

The best rule of thumb when deciding when to conduct investigative audits in the contract bribery category is to "follow the money." Whenever you know there are significant amounts of money involved in a company deal (either purchasing or arranging some other situation such as building, real estate, etc.) Or a deal involves commodities with a value equivalent to a large sum of money, take note and create layered countermeasures to prevent and detect bribery.

How to Structure and Conduct an Investigative Audit for Contracts and Purchasing

Detecting a white-collar crime of bribery in its diverse forms will prove a significant challenge for you. It’s a crime that normally remains deeply hidden, carefully merged with daily business, and regularly is discovered accidentally.

Assuming the contracts meet your company’s legal specifications, and are cleared by corporate counsel, and others in the company, you need to look at them in a different way. Your investigative audit must determine the requirement for the items purchased.

You should examine this area carefully to determine if the employee(s) used a valid method of determining your company’s need for the item and why he or she chose the supplier.

1. Adequate financial resources, or the ability to obtain such resources as needed during the contract.
2. Ability to follow the required or proposed delivery or performance schedule, considering all existing business commitments.
3. A satisfactory record of performance (contractors who are sufficiently deficient in current contract performance, when considering contracts and deficiencies of each, shall without proof to the contrary be presumed to be unable to meet this requirement).
4. A satisfactory record of integrity.
5. Be other wise qualified and eligible to receive a contract from your company under applicable laws and regulations.

1. Have the necessary organization, experience, operational controls and technical skill, or the ability to obtain them.
2. Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them.

Employees of the ABC Corporation may not accept personal gifts or gratuities from any business entity that does business with or seeks to do business with ABC Corporation or any of its subsidiaries or interests. Employees must discourage receiving gifts and gratuities as noted above to the extent possible and immediately (within twenty-four hours or the next business day) report any gifts or gratuities received on ABC Form 2200 to the Personnel Director, who will maintain complete records of these transactions. The Personnel Director will take charge of the gift and seek a ruling from the Executive Board regarding its disposition.

As ordered by the ABC Corporation Executive Board, the Personnel Director will be responsible for donating all gifts and gratuities received by employees of ABC Corporation to one of the local charities. When a gift received from a supplier, contractor, or other person or company appears to be an attempt to gain favor, send a letter to the person or company presenting the gift to the ABC Corporation or employee thanking them for their goodwill and explaining the company policy requires all gifts of that type be donated to a local charity. The letter continues with the name of the recipient charity, adding that the donation was carried out in both company names. The Personnel Director will submit a full report to the Corporate Counsel on the fifth business day following the close of each quarter in reference to the gifts and gratuities received by company employees during that time. An annual report provided to the Board of Directors will show all gifts and gratuities received by ABC Corporation and its employees in the previous year, including disposition.

Invoices from suppliers for goods ordered by ABC Corporation must show discounts given to the Corporation. When receiving added goods (as opposed to cash discounts) from suppliers, their invoice should show that type of rebate. Whenever their invoice does not show added goods as discounts in a delivery, the receiving department manager will immediately report the added inventory on ABC Form 2200, forwarding it to the Corporate Comptroller and sending a copy to the Personnel Director.

All gifts received by ABC Corporation employees from other companies that clearly have a primary purpose of advertising and public relations value - such as calendars, pens and pencils, and other items bearing the other company’s name - will be exempt from reporting.

Regarding all gifts received by ABC Corporation employees from other companies who do or want to do business with ABC Corporation: if the gift has value no greater than $25, the employee may retain it for personal use of consumption on a one-time basis annually. However, the employee receiving the gift must report it to the Personnel Director on Form 2200 within twenty-four hours or on the next business day. All later gifts within the same calendar year from the same or any other person or company will not be exempt.

The manager concerned must file a report for gifts to ABC Corporation or one of its divisions as a whole. However, in certain cases the gift may be shared jointly by ABC Corporation employees when it is to their benefit and morale and will not, in the judgement of the department or division manager, create an obligation or conflict of interest. Examples include candy, flowers, fruit, or other perishable or consumable items.

This policy exists to supply protection of ABC Corporation assets. It is necessary for employees to agree to certain conditions that address non-competition with the company during employment and for a post-employment period dependent on the type of job and level of access to company information experienced during employment.

These conditions will be detailed in a written agreement prepared by the Corporate Legal Counsel, signed by the employee, and maintained in each employee’s personnel files.

The Corporate Legal Counsel will review the company’s noncompetitive agreements at least twice a year, or as necessary, and inform the Executive Board of the agreements at least twice a year, or as necessary, and inform the Executive Board of the agreements’ status. No one is permitted to hold a position in ABC Corporation unless he or she has a signed agreement on file.

All employees of ABC Corporation should be aware that certain manuals, materials, contracts, designs, and even oral statements are intended for use within the Company and should not be made available to nonemployees. Further, documents marked as restricted information are not authorized for disclosure outside the company or even within the company, unless there is a need for the employee to know that information. Employees should check with department supervisors and managers before conveying any restricted or confidential material to employees outside their departments, unless doing so complies with established and approved workflow needs.

Proprietary information must have labels whenever possible, and access to it will remain limited. This entails using a document vault or safe to store some restricted company materials and information when they are not in use. Also, access codes will be necessary to obtain sensitive computerized information.

Officers and management personnel should view request for company materials by nonemployees as nonproductive to the company. Officers and management personnel should consult with the company’s public relations director and corporate legal counsel and err on the side of caution regarding disclosure.

ABC Corporation’s view is that employees who sign contracts on behalf of the company need training and information showing them the significance of their actions. Also, company sales people and other employees who interact with customers and suppliers must know when to introduce written agreements and obtain appropriate signatures. Because contracts are legal documents that obligate or entitle the company, they must have proper scrutiny before they are signed by a company representative. Employees must consult with department supervisors, managers, and the company’s legal counsel before signing any agreement on behalf of the company. A department manager may waive this stipulation for some employees and some agreements (e.g., purchase orders) outlined in a separate company policy.

The corporate legal counsel will review and approve all contracts (e.g., sales agreements) issued by the company. Preprinted contracts commonly sold by office supply vendors are no exception. The legal counsel will initial each applicable contract in the lower right-hand margin of the last page of the contract.

The director of personnel will schedule orientation programs and periodic updated sessions regarding making, negotiating, and signing contracts for employees who have a need to know. He or she will seek company legal counsel advice and assistance in formulating this training.