Definition of Corruption
In the context of road projects, if one is attempting to address the losses suffered as a result of underhand and deceptive dealings, it is important to consider corruption in the form of bribery, extortion and fraud. Financial loss is suffered, and quality and safety are undermined, by a combination of these three activities, and they may each be responsible for significant loss on a project. Bribery is often seen as the primary cause of loss on a project and consequently much focus is placed on better monitoring of the procurement stage of a project. However, the loss caused by fraud at various stages of a project, such as deliberately defective work, inflation of claims, or non-payment of claims, may often be considerably higher than that attributable to bribery. Similarly, the disruption and loss suffered as a result of persistent extortion can result in ethical contractors and consultants withdrawing from projects or refusing to participate in projects in countries where extortion is common. Bribery, extortion and fraud may work together. Bribery usually involves a degree of fraud. For example, a bribe may be paid in a tender process in order to induce fraud in that process, and subsequently the contract price may be fraudulently inflated to include the cost of the bribe. Fraud does not necessarily involve bribery, but bribery may be required to assist the deception. For example, a party may be bribed to participate in the concealment of a fraud. Extortion will often result in an equivalent fraud to make up the loss caused by the extortion. Consequently, an analysis of corruption in road projects of necessity requires analysis of bribery, extortion and fraud.
The section of this website entitled How does corruption occur on road projects? describes how bribery, extortion and fraud may be committed on road projects.
Bribery, Extortion and Fraud
In most jurisdictions, the terms bribery, extortion and fraud will refer to specific crimes with their own precise definitions. However, in general terms, they may be defined as follows:
Bribery is the demanding, receiving, offering or giving of an undue reward by or to any person in order to influence his behaviour and to persuade him to act contrary to the rules of honesty and integrity. Thus, the perpetrators of bribery will include both those who demand or receive the bribe (namely, demand-side bribery) and those who offer or give it (namely, supply-side bribery). The bribe itself need not necessarily be a cash payment. It may include non-cash benefits including, for example, nomination for senior posts, promotion prospects, promise of future work, paid holidays, or influence peddling. Bribery may be initiated by the offeror or payer of the bribe, or by the person who demands or receives the bribe. In order to constitute a bribe, payment does not need to be made. Once the offer or demand for a bribe has been made, that is normally sufficient to constitute a bribe whether or not any bribe is subsequently paid and whether or not the person to whom the bribe was offered acts as intended.
Facilitation payments are a type of bribery, albeit usually made under pressure. They describe relatively minor payments made to junior officials to expedite services which should be provided without payment of a bribe. In many legal jurisdictions, facilitation payments will be regarded as bribes even though they have been paid under pressure. Thus the payer of the facilitation payment, in addition to the person demanding it, may be guilty of bribery.
Extortion is a form of blackmail, namely, threatening some menace unless demands, usually for payment, are met. Such blackmail may constitute refusal to provide customs clearance for equipment or materials or refusals to make due payments. Sometimes such blackmail may constitute threats of physical or other harm to a party.
The term "fraud" is commonly used to cover a wide range of activities involving dishonesty or deception. It normally involves one or more parties deliberately, knowingly or recklessly deceiving another party. A deliberate or knowing deception is where a party knows a statement or conduct is false and that it will or may be accepted as true. A reckless deception is where a party is aware that a statement or conduct may be false and may be accepted as true, or where a party is aware that a statement or conduct is ambiguous and that it may be understood in the wrong sense. The fraud will normally be used by the perpetrator to obtain some benefit for himself or another.
Catherine Stansbury, Global Infrastructure Anti-Corruption Centre