Electoral Fraud

Every one of us yearns to raise our status in society, but politicians entertain hopes of great magnitude. There are many men and women of principle in the world, but once they enter politics they just forget those principles they strived for, and constantly seek money, property, and power. Except a few politicians many do not care about their deteriorating reputation.

It is now an apothegm that any candidate standing for any elections in any part of the world would use all available ploys to influence voters. Invariably, many potential voters expect the handouts from the contesting candidates.

It’s natural to think of elections when we think of political corruption. People or organisations with their own agendas can skew voting. They may secretly give parties big donations. Or parties and candidates can buy votes instead of winning them.

But political corruption isn’t just about election rigging. It can lead politicians in office to steer away from good government. Their decisions can benefit those who fund them. The public interest comes second. Political corruption can divert scarce resources from poor and disadvantaged people. This is especially common in countries where democratic institutions are weak or absent. Private rather than public interests dictate policy.

This means an ethical line has been crossed. Governments can’t act freely and democracy can’t function. Our trust in politicians is damaged. We can turn away from involvement with how we’re governed. Then political corruption continues unchecked. The solution? 

India is a nation where over 30 percent of the population lives below the poverty line, and illiteracy is around 35 percent.

All political parties in India indulge in competitive politics. Their mission does not to make life better for the average person or banish unemployment. In certain states instead of promising to provide schools and households with basic amenities such as potable water and hygienic toilets, freedom from corruption, mitigate poverty, and improve the purchasing power of the people, the political leaders promise to provide colour TVs, electronic gadgets such as mixer-grinders, fans, and laptops, to voters who scarcely get electricity for more than four hours a day. Once these parties come into power they first inflate government expenditures, impose taxes, and then hand out enticing goodies instead of worthwhile goods; and that too only to the members of their party.

Electoral politics in India has a new dimension – arrest of voters for accepting bribe.

The Election Commission has arrested 20 persons in the ongoing elections in Karnataka for accepting money to vote in favour of particular candidates – a bailable offence. If the government accepts the commission's plea, offering or accepting money for vote would land people in jail (non-bailable offence).

It is unusual because, normally, a case of bribery is registered against candidates or their nominees for giving money to voters to use franchise in their favour. The voters, who receive money, are not touched as most of them were from economically deprived section.

The practice resulted in the accused going scot-free in the absence of evidence of someone having received the bribe for voting. "There had been no conviction for years for bribing voters," a senior election commission official said. The commission found that proving such a case in court of law was almost impossible.

The commission went for a tactical change. It decided to take action against voters also so that they could have a better case in the court of law and it could also deter voters from accepting money.

The decision was the fallout of the commission's finding that both the major political parties in Tamil Nadu - DMK and AIADMK - had given money and gifts to voters in the last assembly elections but was not able to crack the whip as evidence was not available.

The commission at that time had not taken any penal action against the voters thinking it would send a wrong message that it was targeting the poor and the deprived.

Now, the commission has taken a view to initiate action for deterrence and not harassment. "We are not going whole hog on getting cases registered against voters. It is being done just to send a message that accepting money for voter is a crime under the Indian Penal Code," the commission official said, who accepted that most of voters accepting money were poor. The decision is being implemented in Karnataka polls.

Another reason for the commission failing to stop the menace of bribing voters is the weak provisions in the law, which makes offering or taking bribe a bailable offence.

The commission wants the offence to be non-bailable and has made a request to home ministry to amend the Indian Penal Code. "As many as 18 state governments have agreed to the proposal," the official said and added that the ball was now in the court of the ministry.

The commission believes that if the amendment is enacted before next general elections it can become a huge deterrent in checking the electoral malpractice of money for votes.

Black’s Law Dictionary, the most widely used law dictionary in the United States, defines bribery as an act of offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in charge of a public or legal duty.

On December 30, 2013, The Monitor carried news that US Federal authorities arrested a local politiquera Diana Castañeda in McAllen, Texas, United States, for paying voters in cash, beer and cigarettes during the 2012 primary and general elections as well as taking voters to buy drugs after they had cast their ballot. According to court records, Castañeda confessed that she was a politiquera for various candidates and that during the 2012 elections she was paid $125 by one candidate to get food for voters and to pay them $10 to $20 per vote. However, the name of the candidate that gave her the money was not listed in court records.

City agencies have seized over 2,064 litres of liquor in the past few days and recovered more than 63,000 bottles during the last one month – 61,500 were ‘quarter’ bottles, which are mainly meant for distribution.

Around 7,000 bottles seized on Tuesday were all of the quarter bottle size (180 ml).
 
A few MLAs revealed that liquor bottles are generally distributed a day before the polls. The police and excise department have seized over 63,000 bottles of alcohol in Delhi over the past month after seeing a record-breaking amount of illegally supplied liquor.

The illegal supply of liquor has crossed all records in the run-up to the Delhi assembly elections. 

“Quarter bottles are distributed among slum dwellers and in resettlement colonies. Politicians ask their workers to keep a stock of bottles at secret locations,” a sitting MLA said.

Delhi chief electoral officer Vijay Dev said the Election Commission has asked all the agencies to crack down heavily on the illegal supply of liquor in Delhi.

Politicians use subtle methods to distribute alcohol to avoid run-ins with the police.

“The voter is given a chit to be deposited with a selected liquor vendor to get alcohol. Many candidates also finance parties hosted by other people and distribute liquor in such parties,” said an excise official.

On March 28, 2013, as his indefinite fast against “inflated” power bills entered the sixth day, AAP leader Arvind Kejriwal alleged both Congress and BJP were winning elections through bribing voters and using muscle power. He told his supporters:

“This is because BJP and Congress are both worried as a different kind of politics is slowly emerging in India. So far they are used to winning on the basis of bribing voters, money power and muscle power but now the voters have awakened. The elections will not be elections but revolution.” 

In conversations with US diplomats, the son of India’s powerful home minister P. Chidambaram and an aide to a senior leader of one of the main coalition partners allegedly explained how the main parties in Tamil Nadu state routinely bribe voters to clinch close elections.

One allegedly said they had widely distributed envelopes containing 5000 Rupees in cash (£70) hidden inside voters’ morning newspapers.

The disclosures highlight the nature of electoral fraud in the world’s largest democracy, and its widespread acceptance. Indian political parties, in particular in the south, often offer televisions, refrigerators, and computers to voters to win elections.

American diplomat Frederick Kaplan, a principal officer in its Madras consulate, was surprised at how freely senior politicians apparently admitted paying bribes for votes.

In a cable dispatched on May 13, 2009, the last day of India’s general election, he explained the system to his colleagues in Washington: “Bribes from political parties to voters, in the form of cash, goods, or services, are a regular feature of elections in South India. Poor voters expect bribes from political candidates, and candidates find various ways to satisfy voter expectations. From paying to dig a community well to slipping cash into an envelope delivered inside the morning newspaper, politicians and their operatives admitted to violating election rules to influence voters. The money to pay the bribes comes from the proceeds of fund-raising, which often crosses into political corruption. Although the precise impact of bribery on voter behaviour is hard to measure, it no doubt swings at least some elections, especially the close races,” he wrote.
 
 “Weeks before the elections agents of the parties come to the neighbourhood with cash carried in rice sacks. They have copies of the voter lists and they distribute the money based on who is on the list.” The deliveries are made between “two and four in the morning, when the Election Commission is asleep,” he added.

One aide is quoted as revealing details of bribes paid by his boss. “It is no secret at all [he] paid 5,000 rupees per voter in Thirumangalam,” he said.

Prashant Bhushan, a senior lawyer who has led a crusade against corruption, said the cables revealed the “corruption of democracy” in India.

“These facts show the corruption and monetisation of the electoral process in India and therefore the corruption of the democracy in this country, where democracy essentially exists in a formal sense on paper, [but] effectively it is owned by those people who have money,” he said. “The money comes from all kinds of corruption which is rampant in India,” he added.

Businessmen

The current narrative is that all businessmen are cheats who evade taxes, indulge in bribery for gaining monopoly rights and bending rules, exploit labour, act contrary to national interests in a crisis and overall keep their selfish interests at the forefront

“Does anybody have a problem with me making provably false accusations about honourable people, just so my side can win?” -Alan Shore, from the television serial Boston Legal.
 
‘Provably false accusations’ is an aptly coined phrase to categorise heated exchanges in political entanglements; the question is, which side is everyone on? Most likely, taking a short cut and avoiding the hassle of a survey, the response that everyone is on Pakistan’s side will have universal acceptance. That being said, if this condition precedent is kept in the forefront always, debates on most issues become irrelevant. Hence, charged political scenarios are indeed mysterious.
 
Serendipitously, the only time there can be a disagreement on fundamental national issues is when one of the parties is misinformed about the facts; this essentially suggests that as nations mature, a single party system might be more efficient. This conclusion is supported by the observation that there is an apparent continuity of policies within mature democracies that have a two party system. Electoral arguments mostly centre around same sex marriage, abortion and similar key issues, while a consensus is always and quickly achieved on trivial matters like foreign policy. Perhaps someday Pakistan will also achieve this nirvana but for the moment let us focus on the economic side of the equation.
 
The prevailing conventional wisdom, irrespective of certain contrarian views, recognises that the private sector plays a primary role in the growth and maintenance of the national economy. The public sector is deemed inefficient in running businesses mostly due to political interference, hence privatisation of all state owned enterprises is propagated as a wise course of action. But whom do you sell to?
 
While foreign direct investment is useful for technology transfer, even in the west there are concerns about handing over national corporations to foreigners, especially of Chinese origin. Even if this paradigm is ignored, foreigners loathe investing in a country where domestic entrepreneurs are moving their investments abroad, or practice self-exile. Additionally, security concerns and continuing political noise combine to adversely impact investor perception of risk. At high country risk, foreigners inadvertently look for a higher return and a shorter payback period. The net result is that cash starts flowing out of the country faster than it comes in.
 
It is not, therefore, rocket science to conclude that domestic businessmen play an indispensable role in a free market economy. Keeping this in view, close cooperation between those who represent the domestic private sector, the businessmen and the political elite, appears prescient. The current perception created due to ‘provably false accusations’ from each side is however quite the opposite.
 
Since everyone loves to imitate the west, lessons therefrom indicate that cajoling and providing seamless and unflinching support to businessmen is a wise strategy for creating employment and enhancing capital investment. Even when the private sector makes a mess of things, the policy is to provide direct assistance from taxpayers’ money, under the pretext of corporations being too big to be allowed to fail. Politicians even go as far as modifying century-old legislation considered problematic for private business, notwithstanding the eventual consequences to the national economy. While the conspiracy theorist will quickly point out that this is because of the campaign funds doled out by the private sector to every party in power, this view essentially ignores the underlying parameters. If businessmen are responsible for the health of the economy and by default the nation, it is imperative that they have a say in the political edifice.
 
Trust perhaps is the key ingredient for this, perhaps uncomfortable, partnership. In successful free market economies the private sector, relatively or at least in theory, enjoys a free hand, largely shielded from the activism of politicians and the bureaucracy, and for these services or absence of services, takes charge of the social construct of society. Investment in projects, creation of employment, ensuring provision of necessities to the poor at affordable prices, supporting art and literature through corporate social responsibility, active philanthropy, grants for universities and beautification of the communities are all costs in a corporation’s financial statement. The thing is — there is no written contract for this arrangement; it is all about trust.
 
Frankly, the west is currently on uncertain tides; regulatory activism is hardly beneficial for maintaining this trust. Perhaps their private sector defaulted on the trust and should pay the price. However, there is a thin line between over and under regulation and private investment is a fair weather friend. Stricter controls on currency flow, which are coming back into fashion, may keep the currency home, but rather than productive investment it will move towards bubbles.
 
The older generations will recall a similar culture in Pakistan up until the 1970s. Back in those days, most universities were funded and a host of schools were trusts owned by leading business houses, investments in new technologies and projects were a regular feature and so on. What were the causes behind the distrust thereafter is not relevant but what is critical is that the majority of the business houses has, over time, dissipated or has not grown to requisite levels. The west has its Gates, Buffett, Bezos and many more; even the next door neighbours have a bunch of famous business houses. Pakistan comparatively lags behind. If the domestic private sector had flourished uninterrupted, would things be different today? If the answer is yes, then perhaps there is a need to revisit provably false accusations.
 
The current narrative is that all businessmen are cheats who evade taxes, indulge in bribery for gaining monopoly rights and bending rules, exploit labour, act contrary to national interests in a crisis and overall keep their selfish interests at the forefront. 

No wonder most businessmen shy away from investment opportunities with a long term horizon, subject to regulatory oversight. In the light of this narrative, policy decisions dependent upon the magnanimity of the business community are rather confusing. If businessmen are categorised as tax evaders, why is a reduction in corporate tax expected to bring about desired results? The expectation that the business community will play, after decades of marginalisation, a larger role in the much needed economic kick off, may be slightly misconstrued. If entrepreneurs have restricted movement and limited input in policy matters, it would be highly unlikely that they will rise.
 
If the public sector is categorised as inefficient or corrupt and the private sector is deemed selfish and dishonest, then the only option left to operate and manage all businesses is foreigners, which can hardly be in the best interest of the nation! By default, the rational choice is between the domestic private sector and the domestic public sector, and indications are that the current leadership is tilted towards the former.
 
Without deliberating on the appropriateness of the choice, which rightly is the domain of the elected representatives, expectations from the private sector need to be accompanied by credible actions that facilitate businessmen across the board. At the very outset, the narrative has to be revisited in line with the policy direction.

Businessmen are honest, pay all their taxes, facilitate employment and employees and are sincerely committed to investing in Pakistan, which is necessary for its economic growth and stability. Minus this change, the policy initiative will not translate into legislation and regulatory actions and the environment will remain hostile for domestic investment. The dream will remain just a dream.
 
Barring views on strategic assets, one has always believed in the veracity of the trickledown theory, which supports the view that businessmen, risk takers and entrepreneurs are crucial for the health of a nation and need to be given this recognition. For Pakistan to come out of its economic doldrums, everything must be done to facilitate the business community to rise. The only way the ability to play golf can rise is a miracle.

It has been suggested that private businessmen caught indulging in corrupt practices or bribing officials or making use of shoddy materials should be blacklisted and be barred from government projects for, say, 10 years and bigger instance of private businessmen cutting corners in public projects by colluding with corrupt officials should attract exemplary punishment—here it may be pointed out that provision already exists for blacklisting and for punishment.

Many people reading about the recent spate of business scandals in the USA may conclude that capitalism is a pretty dreadful system. We have long moaned and groaned about crooked Indian businessmen who inflate profits, hide liabilities, manipulate markets, and break a hundred laws. But the US scandals show that crooked businessmen exist everywhere.

This week, some of the biggest energy companies in the US such as CMS, Dynegy and Reliant admitted that up to 80 per cent of their electricity trades in California were bogus. They indulged in fictitious sales to one another to create the illusion of a boom in revenue. They also indulged in various dirty tricks (some of which could be criminal and lead to prosecution) to exploit loopholes in power regulations (like artificially creating power congestion and then getting paid to relieve it).

This showed there was nothing unique about the peccadilloes of Enron, the seventh biggest company in the world some months ago, that hid huge debts off its balance sheets and overstated profits to create an illusion of prosperity when in fact it was heading for bankruptcy. Enron was abetted by one of the celebrated Big Five of accounting, Arthur Andersen, which is now in the dock for criminal obstruction of justice. The most celebrated giants like General Electric and Boeing stand accused of fudging their accounts to show ever-rising quarterly profits. Microsoft, the biggest of all, is on trial for monopolistic behaviour. Pfizer, the biggest drug company, stands accused of manipulating drug prices, and last year, a cartel of drug companies were fined for trying to rig vitamin prices. Big oil companies are being investigated for rigging petrol prices.

Crooked behaviour is not uniquely Indian or American. It is inherent in human behaviour, and can reach great heights in a capitalist system. Now, market systems have enabled many countries to achieve stunning improvements in living standards that would have been considered impossible a century ago. Businessmen seek to enrich themselves, not society. But competitive, transparent markets force businessmen to compete on a level playing field, because of which the main gains of all their innovation and enterprise go to consumers. For the 500 biggest companies listed in Fortune magazine, net profit averages only 3.3 per cent of sales.

For that very reason, however, businessmen are constantly tempted to find ways to reduce competition and transparency to increase their profits at the expense of customers. This can take legal forms (lobbying, innovative book-keeping, exploiting loopholes) or illegal forms (bribes, fraud, rule-breaking).

No wonder, then, that so many people are utterly disgusted with capitalism and seek alternatives. No wonder they find the profit motive a morally unacceptable basis for ordering an economic system. When the main actors of such a system are self-serving, manipulative and greedy; when they fudge facts, make false claims and promises, bend the law in various ways and indulge in outright crimes, how the outcome be at all satisfactory? Answer: for the same reason that self-serving, manipulative and greedy politicians produce a satisfactory outcome called democracy.

The argument for a market system is exactly the same as for democracy. Winston Churchill once said that democracy is a very flawed system, but all the others are so much worse. The same is true of capitalism: it is a very flawed system but the others are so much worse. Enron hid its liabilities and exaggerated its assets. But do not all political parties hide their political liabilities and exaggerate their political assets? Many crooked business promoters promise investors the moon in order to raise money. But do not politicians also promise the moon to get votes?

Companies fudge their books and make inflated claims to mislead gullible investors. But do not politicians make inflated claims to mislead gullible voters? Businessmen claim to represent the national interest while feathering their nest (by, for instance, demanding high import barriers in the holy name of swadeshi). But politicians in a democracy also claim to represent the national interest while feathering their own nests. Businessmen indulge in bribery. So do politicians. Businessmen revel in black money. So do politicians. Businessmen hire hoodlums to beat up workers or ruin a rival’s business. Politicians too hire hoodlums to capture polling booths and sabotage rivals’ rallies. Businessmen intimidate and buy up rivals to reduce competition. Politicians too use intimidation and money to buy defectors.

There are many criminals in business. There are many criminals in politics too. The use of money, muscle and influence to sabotage rivals and competition is a feature of democracy no less than of capitalism. Why, despite all this, do we regard democracy as the best political system? Because it is grounded in choice for the ordinary man, and freedom to choose is a paramount virtue that makes other freedoms possible. In democracies, the ruler is chosen by ordinary citizens and voted out by them too.

Politicians do their best to subvert free choice through the use of money, manipulation and muscle. Yet the freedom to choose empowers ordinary citizens so much that, despite a thousand flaws, democracy turns out to be more desirable and beneficial than the most well-meaning autocracy.

Democracy creates a market for political goods. Capitalism creates a market for material goods. In both cases, the freedom to choose gives the ordinary man in the street greater power than the biggest political or economic giant. By shifting his vote, the ordinary citizen can oust the most entrenched politician, and by shifting his custom he can bankrupt the most entrenched company.

Lenin was logically consistent in refusing to allow freedom of choice in either political or material goods. What I find amusing is the notion of many democratic socialists that the people must be free to choose their own rulers, but cannot be allowed to choose what goods to buy; that political licensing is abominable but industrial licensing is moral. There lies the road to serfdom.

Sports

Sports bribery has been in existence since ancient times, when in the original Olympic games athletes would be bribed to produce particular outcomes. In the modern day, sports bribery takes a different form than it likely took back then, but it continues to plague the fairness and ethics of sports. Players can be bribed to throw matches; referees can be bribed to unfairly fix results. Individuals willing to commit bribery can make huge amounts of money by betting on fixed matches, assuming they do not get caught.

But sports organizations are fighting back against the prevalence of bribery in sports and the damage that it can do. They have enacted such internal regulations as banning sports betting and punishing very any individual caught exchanging some form of bribe.

The battle between those who would use bribery to unfairly affect outcomes of sports matches and those who would defend the fairness of sports competitions against insidious bribery has no end in sight.

The primary controversy regarding sports bribery comes from the practice of match-fixing. Match fixing would nullify the validity of any sports competition. After all, every sports game has the objective of discovering which team or participant is better at that sport than the other. Match-fixing undermines this goal and prevents any observer from successfully and truthfully claiming that the winner has proven himself the best at that sport.

Controversy arises when considering how best to deal with match-fixing. A major goal is not to discourage the practice, but to repair the damage it causes. Should the fixed matches be replayed, at great cost to the sports organization, the participating teams and even the audience? Should they simply be annulled, the season ignored and forgotten, a costly and unsatisfactory solution?

There is likely no good answer, not least because some of the teams involved may have participated to the best of their ability, without any match-fixing behavior on their parts, only to find out that their success was due to the illegitimate practices of other participants. Seizing their victories from them by replaying those games seems cruel.

Medicine

Corruption in the health sector can mean the difference between life and death. Poor people are worst affected. Medical staff can charge unofficial fees to attend to patients. They may demand bribes for medication which should be free. Or they may let patients who bribe them queue-jump. Corruption also costs lives when fake or adulterated medications are sold to health services.

Without proper checks from regulators, public health funds can easily disappear. World Bank surveys show that in some countries, up to 80 per cent of non-salary health funds never reach local facilities. Ministers and hospital administrators can siphon millions of dollars from health budgets. Or they can accept bribes. This distorts policy and denies people hospitals, medicines and qualified staff. Stolen funds also hamper efforts to beat major health challenges, such as malaria and HIV/AIDS.

It’s not only developing countries which suffer. Wealthy countries lose millions of dollars each year to insurance fraud and corruption. The solution?

China is expected to become the world’s second-largest pharmaceutical market by 2016, with total sales reaching $165 billion, according to IMS Health, a research firm.

Pharmaceutical expenditure accounts for up to 50% of total health spending in some developing countries. The high market value of products means they are a magnet for theft, corruption and unethical practices. Transparency International estimates that in some countries up to two thirds of all hospital medicines are “lost” through corruption and fraud.

The impact of corruption on the pharmaceutical sector is three-fold:
 
Health impact — waste of public resources reduces government capacity to provide access to good-quality essential medicines, while at the same time the risk of unsafe medical products on the market increases due to bribery of officials and/or to counterfeiting;to national health budgets; 

Economic impact — corrupt pharmaceutical practices are extremely detrimental to national health budgets;  

Government image and trust impact — inefficiency and lack of transparency reduce the credibility of public institutions and erode public/donor confidence in governments.

Corruption within the public sector also undermines donor efforts. For example, the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) has so far approved proposals totalling nearly US$ 19.5 billion and the Bill & Melinda Gates Foundation has awarded grants totalling more than US$ 13 billion under its global health programme. Successful implementation of such funds will depend on good governance at national level.

THE Chinese media frequently portray doctors not as life-saving heroes but as profit-seeking villains. Popular anger against medical staff sometimes spills over. One gruesome period in October last year saw at least six violent attacks by disgruntled patients on medical workers, including one that led to the death of a doctor. In 2012 there had been 11 such attacks and 7 deaths.

One of the main reasons for such hostility is the high price of medicines and the corruption that contributes to it. Visitors to Chinese hospitals are often greeted with a sign that reads “no pharmaceutical representatives allowed”, a ban that has existed for more than a decade. Yet a recent spate of scandals involving public hospitals suggests that few heed the prohibition.

The soaring spending on drugs has been fuelled by an ageing population, the expanded coverage of public health insurance and the increasing demands of a wealthier society. But it is also the result of a system that inflates the cost of medicine. Even the cheapest generic drugs sold in Chinese hospitals are much more expensive than their international benchmark.

Public hospitals in China are not so public in their funding: government subsidies only made up 9% of their revenues in 2011. By contrast, the sale of medicines accounts for 40%. Doctors are underpaid, so much of their income depends on how many drugs they prescribe. Hospitals are allowed to charge a 15% markup on the drugs they sell, so the more expensive the better. Consequently, China’s spending on medicines is 40% of total health expenditure, far higher than the average for OECD countries, of 16%. With few other sources of income, hospitals have to maximise their profits from drugs in order to subsidise medical services, says Zhu Hengpeng of the Chinese Academy of Social Sciences. So the high price of drugs is “institutionally justifiable”.

The government has taken a series of measures to attack this problem, including price cuts on a wide range of medicines, but doctors were quick to adopt countermeasures, such as switching to more expensive alternatives or prescribing more unnecessary drugs. According to the health ministry, the average Chinese person consumes ten times more antibiotics than the average American.

The government wants to keep mark-ups under control, says Mr Zhu, but “you can’t expect the horse to run if you don’t let it feed”. As a result, the regulations have exacerbated the problems of corruption, he argues: “since you don’t let me take kickbacks openly, I’ll do it under the table.”

In July local authorities in the city of Zhangzhou in Fujian province recovered over 20m yuan ($3.3m) that more than 1,000 medical professionals had taken in bribes from pharmaceutical representatives. Drug firms have a strong incentive to get their products into the hands of doctors at hospitals, where 80% of China’s drugs are sold, and as a consequence many have stretched the definition of marketing and distribution. Chen Wenling, an economist in the research office of the State Council, China’s cabinet, estimates that kickbacks usually account for more than 20% of the final retail price of a drug sold.

Some distributors issue or buy inflated invoices to extract large sums of cash, creating slush funds to bribe officials and doctors. In August Chinese authorities found two pharmaceutical distributors in Hebei province had issued fake invoices worth 776m yuan ($127m).

The government announced a graft investigation in July into the Chinese operations of GlaxoSmithKline (GSK), a British conglomerate, in what appears to be part of a broader effort to crack down on bribery in health care. Four senior executives of the company have been detained over allegations of funnelling up to three billion yuan ($490m) to travel agencies to fund bribes to doctors and government officials. In an interview with state media, Liang Hong, a detained GSK executive, estimated that without this sort of spending their prices could be reduced by 20-30%. GSK has reiterated its opposition to the alleged misconduct and suggested it will lower its prices in China.

The introduction of generic brands has driven down drug costs elsewhere in the world, but promoting their use is difficult in China. The incentive system works against the use of cheap drugs. Scandals involving unsafe local food and drugs add another obstacle: many doctors and patients favour foreign brand-name drugs, even if they are more expensive.

Since 2009, in an effort to reduce the cost of medicines, authorities have required hospitals to buy them through bidding managed by health officials in each province. But the tenders do not always require brands to compete against generic drugs, so there is little pressure on prices. Where competition does develop between generic brands, the profit margins of drug companies are squeezed as they strive to offer bigger kickbacks to hospitals. When that happens, Chinese patients still do not benefit from cheaper prices.

Lancet Global Health, a British journal, published a study in October showing that in 2012 the lowest-priced generic drugs were significantly harder to find in Shaanxi province than they had been two years earlier. It attributes the decrease in availability to the provincial bidding system, which squeezed the margins of some drug companies so much that they would rather not make or supply the drugs. According to state-owned media, that has created a shortage of some life-saving drugs across the country.

Pharma is in the middle of a strategic crisis, if a report published at the start of 2013 by Roland Berger Strategy Consultants is to be believed. The study, ‘Pharma’s fight for profitability’, claims that increasing pressures on both costs and prices, allied to patent expiry and regulatory changes, are shrinking profit margins in the pharmaceutical sector.

Nearly 80% of participants in the study believe pharma companies will have to adapt their business models to the changing marketplace. ‘Even though global sales have risen in recent years, profit margins have dropped considerably,’ said Michael Dohrman, a partner at Roland Berger. For example, high-growth emerging markets such as China will comprise nearly 40% of the global market by 2016, and companies will have to increase focus on these areas if they are to thrive.

The purpose of the World Medical Association is to serve humanity by endeavoring to achieve the highest international standards in Medical Education, Medical Science, Medical Art and Medical Ethics, and Health Care for all people in the world.” High standards, exceedingly high. Unfortunately the president-elect of the WMA, Dr Ketan Desai, has just been arrested and charged with accepting a bribe to accredit a medical college in the Punjab.

According to Indian newspapers, Dr Desai, a urologist, was a consummate political operator who had amassed a fortune through corrupt practices. It was through him that private medical colleges were accredited, the number of seats could be increased and annual inspections were held.

This is not even the first time that the resourceful Dr Desai has been charged with corruption. Back in 2001, he was removed from his position as the president of the Medical Council of India. However, he clawed his way back and was once again elected as president of the MCI in 2009. It is not for nothing that his personal website describes him as “"an apostle of genuine imagination, innovation and creativity which has resulted in his enviable ascending to key positions in the world of medicine.”

In his second term as president of the MCI, Dr Desai was a crusader for medical ethics and banned Indian doctors from accepting gifts from pharmaceutical companies.

Politics

There are many causes for corruption, and it can be found in politics, law enforcement and business. The practice of corruption violates human rights, causes prices to rise, and affects human health and welfare around the world.The practice of corruption is ancient, appearing throughout history.

Originally and ideally, political contributions were money given to candidates who shared similar ideals to help ensure that these candidates gain or keep political positions to help guarantee that laws are made and followed according to these similar ideals that both groups of people shared.

However, modern political contributions are used to get politicians to vote and enact laws in favor of the person or corporation giving the political contributions. In essence, political contributions are bribes.

And since most political contributions are given by corporations, most political contributions are corporate bribes to help give these companies special tax breaks, protection from lawsuits, ensure monopolies, etc. to ensure maximum profit of these corporations.

This is the main reason why politics is so corrupt throughout the world, especially in the United States.

The obvious solution is to limit how much money corporations and individuals can donate. The problem with this solution is that it is very easy for large corporations to create a plethora of smaller sub-companies that each could each give the maximum allowed amount of money as political contributions. Therefore, corporations could easily afford and circumvent political contribution limits.

The only other obvious solution is to completely prohibit corporations from giving ANY political contributions. This is basically the separation of corporations and state.

Political conditions that foster corruption include weal civil liberties , particularly the level of press freedom, the ability of individual citizens to form civil society organizations, and the level of structured political competition. They also include lack of transparency and accountability on the part of government officials especially where the ruling elite have captured the state. State capture in turn is more likely where the government has extensive involvement in the economy and regulation of public life.

It is said that corruption normally thrives in societies where religious, traditional, ethical teaching and moral standards are weak and where punishment is lenient, yet we see examples in every nation, and people who were regarded as being of the highest moral standing have been caught in the act. Some of the biggest causes of corruption are greed and the lust for power. Corruption happens at every level of society, from the richest to the poorest, and contributes to a general lack of respect for the law. Since it is so widespread, corruption is very difficult to combat. Even if particular individuals are successfully prosecuted for their crimes, others will move into their offices and take up their duties, and be just as susceptible to receiving under the table payments or turning a blind eye to those who pay.

Tax Treatment of Bribes

Corruption is a complex phenomenon. Its roots lie deep in bureaucratic and political institutions, and its effect on development varies with country conditions. But while costs may vary and systemic corruption may coexist with strong economic performance, experience suggests that corruption is one of the most severe impediments to development and growth in emerging and transition economies.

Corruption is widespread in many developing and transition economies, not because their people are different from people elsewhere, but because conditions are ripe for it. The motivation to earn income through corrupt practices is extremely strong, exacerbated by poverty and by low and declining civil service salaries. Coupled with a strong motivation is the fact that there are ample opportunities available to engage in corruption. Corruption flourishes where distortions in the policy and regulatory regime provide scope for it and where institutions of restraint are weak. The problem of corruption lies at the intersection of the public and the private sectors. 

It is a two-way street. Private interests, domestic and external, wield their influence through illegal means to take advantage of opportunities for corruption and rent seeking, and public institutions succumb to these and other sources of corruption in the absence of credible restraints. Even if detection is possible, punishments are apt to be mild when corruption is systemic—it is hard to punish one person severely when so many others are likely to be equally guilty.

Corruption violates the public trust and corrodes social capital. A small side payment to obtain or speed up a government service may seem a minor offense, but it is not the only cost. Unchecked, the creeping accumulation of seemingly minor infractions can slowly erode political legitimacy to the point where even non-corrupt officials and members of the public see little point in playing by the rules. Credibility, once lost by the state, is very difficult to regain.

Corruption is both a major cause and a result of poverty around the world. It occurs at all levels of society, from local and national governments, civil society, judiciary functions, large and small businesses, military and other services and so on.

Corruption affects the poorest the most, in rich or poor nations, though all elements of society are affected in some way as corruption undermines political development, democracy, economic development, the environment, people’s health and more.

Around the world, the perception of corruption in public places is very high.But it isn’t just in governments that corruption is found; it can permeate through society.

The issue of corruption is very much inter-related with other issues. At a global level, the “international” (Washington Consensus-influenced) economic system that has shaped the current form of globalization in the past decades requires further scrutiny for it has also created conditions whereby corruption can flourish and exacerbate the conditions of people around the world who already have little say about their own destiny. At a national level, people’s effective participation and representation in society can be undermined by corruption, while at local levels, corruption can make day to day lives more painful for all affected.

A difficult thing to measure or compare, however, is the impact of corruption on poverty versus the effects of inequalities that are structured into law, such as unequal trade agreements, structural adjustment policies, so-called “free” trade agreements and so on. It is easier to see corruption. It is harder to see these other more formal, even legal forms of “corruption.” It is easy to assume that these are not even issues because they are part of the laws and institutions that govern national and international communities and many of us will be accustomed to it—it is how it works, so to speak. Those deeper aspects are discussed in other parts of another web site’s section on trade, economy, & related issues.

That is not to belittle the issue of corruption, however, for its impacts are enormous too.

Several governments saw no reason to disagree and offered favourable tax treatment for bribery payments, which could be written off as expenses.

These governments argued that making bribes to foreign public officials non-deductible contradicted the principle that all expenses associated with earning taxable income should be taken into account for tax purposes. A second argument they cited was that non-deductibility would be an ineffective deterrent against bribery of foreign officials anyway, even if it changed the effective cost of a bribe. Both arguments were flawed. On the first argument of taxation principles, there are already exceptions for certain legal costs, such as entertainment expenses and gifts, as well as certain payments that are illegal under domestic law. As for deterrent effects, if companies could get a tax deduction for bribes, what incentive would they have for not offering one?

The OECD has developed a simple argument: disallowing the tax deductibility of bribes serves as a strong and politically visible symbol of the common international commitment to combat bribery. And if combined with the criminalisation of bribery, non-deductibility becomes a potent force. 

Therefore, in April 1996 the OECD adopted a Recommendation on the Tax Deductibility of Bribes to Foreign Officials calling on those member countries which allowed the tax deductibility of bribes to foreign public officials to review their legislation with the intention of denying that deductibility. A Recommendation on Combating Bribery in International Business Transactions adopted on 23 May 1997 reinforced that call.

Not all OECD countries at the time treated bribery favourably for taxation purposes; in fact, about half of them disallowed the deductibility of bribes to foreign officials, though not all for the same reasons. In 1996 only 14 denied the deductibility of bribes to foreign public officials as a general rule. Canada, the United Kingdom and the United States denied it because of the illicit nature of the bribe in their own countries. In fact, if any part of the offence was committed in the United Kingdom, for example, whether the offer, the agreement to pay, the soliciting, the acceptance, or the payment itself, it would be covered by the corruption laws and would then not qualify for tax relief. Under Poland’s law, bribery is illegal and an offence for both the briber and the recipient of the bribe and both are punishable.

Other countries adopted approaches that were perhaps a little less explicit. The Czech Republic, for example, classified all bribes as gifts, which were mostly not deductible. In Japan, bribes were categorised as entertainment expenses, which by definition made them non-deductible anyway. 

In several countries – Finland, Greece, Hungary, Ireland, Italy, Korea, Mexico, Spain and Turkey – bribes of foreign officials simply did not qualify as a deductible expense, and were thus not allowed, even if there were no explicit provisions against them in some of these countries. In Denmark, Iceland, Norway and Sweden, bribes paid to foreign public officials were only deductible if they were documented business expenses and if they were a customary practice in the country of the recipient.

In the remaining countries – Australia, Austria, Belgium, France, Germany, Luxembourg, Netherlands, Portugal, New Zealand and Switzerland – bribes to foreign public officials were still as deductible as any other business expense, at least in principle. In practice, a deduction for a bribe was often disallowed because of insufficient documentation to support the fact that the expense was a necessary part of the transaction in question. Moreover, the deductibility of bribes to foreign officials was generally conditioned upon disclosing the identity of the recipient to the tax authorities, which taxpayers are naturally reluctant to do.

Bribery and the Government

More than one in four people across the globe paid a bribe in the last 12 months when interacting with key public institutions and services, with the police and the judiciary seen as the two most bribery prone, according to a new report.

The largest-ever global survey on corruption by Transparency International, which surveyed more than 114,000 respondents in 107 countries, found that over half the respondents said corruption had worsened over the last two years.

The survey comes at a time of increased public anger against the perceived corruption and self-interest of governments, from Brazil to Egypt and Turkey. It revealed a deep distrust of political leaders. In 51 countries around the world political parties were seen as the most corrupt institution and 55 percent of respondents thought government was run by special interests.

"Around the world, political parties, the driving force of democracies, are perceived to be the most corrupt institution," the report said.

Before the financial crisis began in 2008, 31 percent of people said their government's efforts to fight corruption were effective. This year, only 22 percent thought government responses were adequate. Transparency International chief Huguette Labelle said politicians needed "to take this cry against corruption from their citizenry seriously."

"Strong leadership is needed from the G20 governments in particular. In the 17 countries surveyed in the G20, 59 percent of respondents said their government is not doing a good job at fighting corruption," she said.

Twenty seven percent of respondents said they had paid a bribe when accessing public services and institutions in the last 12 months, revealing no improvement from previous surveys.

Despite the frequency of encounters with corruption, almost 9 out of 10 people surveyed said they would act against corruption and two-thirds of those who were asked to pay a bribe had refused, the survey found.

"Bribe paying levels remain very high worldwide, but people believe they have the power to stop corruption and the number of those willing to combat the abuse of power, secret dealings and bribery is significant," Labelle said.

Problematically, the survey revealed that many people did not trust the institutions meant to fight corruption. In 36 countries, the police was seen as the most corrupt institution and in those countries an average of 53 percent of people had been asked to pay a bribe to the police.

Meanwhile, 20 countries saw the judiciary as the most corrupt institution, and in those countries an average of 30 percent of the people who had come in contact with the judicial systems had been asked to pay a bribe.

Bribery occurs on all levels of the government within the United States as well as in other countries. Unfortunately, a large number of bribes each year go undetected, resulting in no charges or convictions upon the guilty parties.

The different levels and types of bribery are clearly defined under United States law. The first type is the bribery by or of a public official, who is someone who acts on behalf of the United States, such as a juror or a senator. The intention of the bribe is to influence the action of the official in the discharge of their public or legal duties – in other words, a bribe might be given to a senator to encourage them to vote a certain way on a bill, or to a juror in order to solicit a particular outcome in a trial. A public official who is convicted of bribery will be fined three times the amount of the bribe and/or imprisoned for no longer than 15 years. The public official will also not be allowed thereafter to hold any government or political office in the United States.

The next type of a bribe is by/of a witness. A witness will receive a fine of three times the amount of the bribe and/or up to 15 years in prison if they accept a bribe for them to alter a testimony. The briber themselves will face a fine and up to two years in prison.

The Foreign Corrupt Practices Act in 1977 makes it unlawful for a United States citizen, as well as certain foreign issuers of securities, to pay a foreign official in order to obtain business with any person. In 1998 a provision to the Act was added which applies to any foreign firms or foreign-born persons who take any act in furtherance of a corrupt payment while in the United States.

Others may be found guilty of taking bribes as well. If a bank representative accepts a bribe of anything more than $1,000, he or she can be imprisoned for no longer than 30 years, and fined three times the value of the bribe. Sporting officials are also sometimes offered bribes to "fix" a sporting event to ensure an outcome that the briber desires. If a referee or other sporting official is convicted or bribery, the punishment can consist of a fine and imprisonment of no longer than five years.

There are many bribery-related offenses with which an individual may be charged. Some of these include government fraud, extortion, kickbacks, procurement fraud, the health care industry and employee benefits or pension plans, and many others. Each of these offenses will result in punishment or sentencing that reflects the severity of the actual crime that has been committed.

Perhaps one of the most common reasons that bribery takes place is to receive unlawful commissions or pay. This is sometimes referred to as a kickback. Often, kickbacks go undetected. However, financial documents within a company or corporation will sometimes serve as substantial evidence in a criminal case to convict the guilty parties of bribery.

Some famous examples of bribery include a federal case in which two former Pentagon officials were sentenced to 24 years in prison after making $1 million and being provided with prostitutes; and the case of an army major who worked as a contracting officer, and who accepted bribes from military contractors that totalled $9.6 million.

Those facing bribery or other related charges should hire an attorney, regardless of their guilt. The punishments for bribery can be severe and having a professional that can handle the case will be of great assistance. When hiring an attorney for a bribery case, it is imperative that he or she has plenty of experience handling similar cases. It may be wise to ask the attorney questions regarding their experience with related cases. An attorney's fees for handling a bribery case in a criminal case will vary, depending on many factors.

Every state, directly or indirectly, prohibits bribery in obtaining government contracts. But few states restrict campaign contributions from businesses seeking government contracts. We need more laws that stop this "pay-to-play" abuse. Government contracts should go to the companies that do the best work for the lowest prices, not the ones that have cozied up to public officials with campaign cash.

Also, enforcement of existing laws is often lacking. It's often unclear who is even responsiible for enforcing the law — the state ethics agency, the state elections agency, or the state contracting agent. This also means that penalties for violating the law are often unclear because penalties for violating the elections code are often different from penalties for contracting abuses.

Public Citizen supports well-targeted pay-to-play restrictions to foster fair and open competition in the contracting process and to eliminate corruption — and the appearance of corruption.