Lack of awareness hampers fight against private enterprise corruption

Switzerland has tightened laws and regulations against corruption in recent years, in accordance with international conventions, but corruption in the private sector is a little known phenomenon and no case has ever been taken to court.

Christof Müller, a lawyer and expert on economic crime, knows that defining the problem is difficult. “We know about and have tackled insider trading, money laundering and corruption between private entities and civil servants,” he says. “But almost nothing is known of private-to-private corruption.”

The term describes illicit payments made by individuals or company officials to representatives of another enterprise in order to gain access to information, to obtain a contract, or to have the edge over a competitor.

In theory, such practices are punishable in accordance with Switzerland’s law against unfair competition. But the code is part of civil law. A court can therefore apply it only when a private party brings charges.

It never happens. “In the 50 years that the law has been on the statute books there has not been a single conviction,” says Müller.

There have also been no attempts to assess the magnitude of the problem. “It’s the last taboo in white-collar crime,” Müller concludes.

The anti-corruption organisation Transparency International (TI) pledged last week to campaign against the practice. “The phenomenon is widely present in Switzerland as well as in other countries,” said Philippe Lévy, President of TI’s Swiss branch.

TI wants to begin by conducting an awareness campaign. In the long term, the organisation proposes that competition law is incorporated into the penal law system.

According to Lévy and Müller, private-to-private corruption has increased due to current economic and social trends such as global competition, mergers, pressure from shareholders, and privatisation.

“Your typical fund manager hopes that the volume of stockholders under his management grows by 30 per cent annually,” says Müller by way of an example. “The temptation is very real to approach the manager of a pension fund, for instance, and get him to invest in your portfolio.”

But Thomas Pletscher of the Swiss Association of Trade and Commerce doubts that private-to-private corruption is on the increase. “In any case, such developments would be counter-balanced by other, more favourable trends.”

Pletscher says most companies have strengthened their internal account and control mechanisms in recent years, partly in their own interest, partly to fall in line with tougher regulations against ‘normal’ corruption and money laundering.

As companies implement compliance systems to obey new penal laws against economic crime, “the awareness and perception of private-to-private corruption rise at the same time,” he says.

The Swiss Association of Trade and Commerce is opposed to an awareness campaign. It also disputes the assumption that corrupt employees go unpunished “just because they don’t appear before a court”, in the words of Pletscher.

“Most companies have strict rules against receiving gifts and favours, and if these are contravened employees are sanctioned or even sacked,” he says.

But Müller contends that internal disciplinary action only deals with ‘passive’ corruption: “The outsider who does the bribing is let off the hook.”

One reason why companies do not wish to charge each other for corrupt practices, or why even duped competitors prefer not to go public with what they know, could be the relatively small size of Switzerland’s business community.

“We have a very tight network that cuts across the business, politics and military establishments. The effect is that everybody shies away from denouncing everybody else,” Müller thinks.

International organisations, such as the non-governmental TI and the Council of Europe in Strasbourg, are expected to put private-to-private corruption on the political agenda in the near future. But this is a relatively new development.

In 1997, 32 industrialised nations in the Organisation of Economic Cooperation and Development (OECD) agreed that all member countries should outlaw bribing foreign civil servants. But the ensuing OECD anti-corruption convention made no mention of private-to-private corruption.

In the run-up to Switzerland’s ratification of the treaty in 1998 and 1999, experts wanted to include a ‘private-to-private’ clause in the new national anti-corruption law. But the proposal was thrown out during the pre-parliamentary consultation procedure.

by Markus Haefliger