Cost of fraud revealed

4 October 2009
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05 October 2009 | Jake Kanter

Procurement corruption is "stifling" global financial recovery, Transparency International (TI) said.

The fraud watchdog's Global Corruption Report 2009 said corruption, including bribery and price-fixing cartels, undermined fair competition and was costing the economy billions of pounds.

The findings come as British engineering firm Mabey & Johnson (M&J) was fined £3.5 million last month after pleading guilty to using bribery to win contracts overseas.

In addition to the penalty, a judge at Southwark Crown Court in London ordered the firm to pay a further £3.1 million in compensation costs, confiscation of profits and prosecution fees, as well as the cost of establishing an auditor to monitor its future conduct.

The TI review said many international executives find fraud raises project costs by at least 10 per cent. It said in developing countries alone, suppliers have paid bribes of up to $40 billion (£24 billion) a year to politicians and government buyers.

"Revolving doors between public office and the private sector provide a smooth path to deceitful public procurement deals where non-competitive bidding and opaque processes lead to immense waste and unreliable services or goods," TI said.

The report found that 90 per cent of the top 200 global companies have adopted anti-corruption codes, but fewer than half monitor compliance. Firms with strong ethical guidelines suffer 50 per cent fewer incidences of fraud and are less likely to miss out on business opportunities, it added.

Meanwhile, as SM went to press, the Serious Fraud Office announced its intention to prosecute UK defence contractor BAE Systems for alleged corruption overseas, following an investigation lasting nearly five years.


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