New Corruption Scandal Involving Top Manager of Large International Company
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Photo: EPA-EFE

New Corruption Scandal Involving Top Manager of Large International Company


TOKYO, JAPAN – November 21, 2018

Over the past five years, the level of corporate corruption in the world has increased, according to 56% of top managers of multinational companies in 14 major countries. Corruption in fast-growing economies is considered by half of the top managers to be insincere and natural.

In 2017, 49-year-old billionaire and head of the Samsung Group Lee Jae-Young was accused of transferring a bribe of $38 million and other corruption incidents related to the former President of South Korea Park Geun-Hye.

In 2014, Brazil revealed a large-scale corruption scheme in the state-controlled oil refining company Petrobras. The Prosecutor's office suspected the company's top managers of stealing more than $ 3.8 billion; among those arrested was the former Director of Supply of Petrobras Paulo Robert Costa, who, by his own admission, received bribes from the largest construction companies in the country in exchange for concluding contracts at inflated prices.

In 2012-2015, criminal proceedings were instituted against the TeliaSonera and VimpelCom telecommunications companies in several European countries and in the United States for possible large-scale bribes to Uzbekistan officials.

US officials said that the beneficiaries of offshore companies, which transferred money to the operators, were the daughter of the former President of Uzbekistan, Gulnara Karimova, and Islam Karimov himself.

In 2008, Siemens was accused of bribing government officials and state-owned companies in several countries. The court decision named the top managers who allegedly received bribes and gifts from Siemens.

In total, the bribes of Siemens worldwide were estimated at $1.4 billion. The company had to pay fines of about $800 million in the US and $800 million in Germany, and the investigation itself cost Siemens about $1 billion.

In 2010, the German automobile concern Daimler pleaded guilty to bribery of officials in 22 countries and entered into a settlement agreement with US justice authorities who accused him of corruption, and paid a fine of $185 million within five years after the company conducted an internal investigation, which cost it another $500 million.

In 2007, the "daughter" of the third largest oil service company in the world, Baker Hughes Inc, Baker Hughes Services International acknowledged bribery of Kazakh officials under the contract for the maintenance of a consortium developing the Karachaganak field. The contract price was $219 million, and the fine for violation of anti-corruption legislation was $44.1 million.

In 2006, the British press reported that the defense and aerospace company British Aerospace has for more than 10 years on a quarterly basis paid about £30 million to the Ambassador of Saudi Arabia to the United States Bandar Ibn Sultan al Saud. The Ambassador allegedly facilitated the conclusion of a major deal on the supply of military aircraft and weapons to Saudi Arabia. The total amount of bribes was estimated at £2 billion according to the media. The British government, that is, the Prime Ministers Margaret Thatcher, John Major and Tony Blair knew about it.

In 2010, US authorities accused the Swiss transport company Panalpina World Transport of bribing foreign governments—in particular, representatives of Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia, and Turkmenistan. In total, according to the US Department of justice, Panalpina World Transport paid bribes in the amount of $49 million.

In 2007, the head of the South Korean automobile company Hyundai Motor Co. was sentenced to three years in prison for embezzling $130 million from the company's funds and using funds to bribe politicians and officials. In addition, Chung Mon GU was also accused of making unfavorable deals for Hyundai, which were beneficial to his son — the President of the Kia Motors Corp. Jung Yung.

In 2015, China executed the founder of one of the leading iron ore mining companies, the billionaire and one of the richest people in China, Liu Han. He was found guilty under 13 articles of the criminal code, in particular in the creation of a criminal group. At the same time, his company Hanlong Group was fined 3.1 billion yuan for providing incorrect information to obtain Bank loans.

And here is a fresh example of corruption. On Monday, the head of the Renault-Nissan Alliance Carlos Ghosn was arrested in Japan. The details of the alleged misdeeds for which he is being prosecuted by Japanese authorities are beginning to trickle out. Initially, reports that Ghosn underreported his income in filings submitted to the Tokyo Stock Exchange sounded suspiciously staid when weighed against the potential 10-year sentence that Ghosn is facing. But in a shocking new report published Tuesday, the Nikkei Asian Review said that Ghosn's misuse of company resources included an audacious fraud to create what amounted to a private slush fund that purchased homes and other luxuries explicitly for use by the CEO.

With the help of representative director Greg Kelly (who was charged by Tokyo authorities alongside Ghosn), the executive set up a fund that was purportedly seeded with 6 billion yen to invest in “startups.” But investigators haven't found any evidence to suggest that any of the money was used in this way.

Instead, the money was used to purchase luxury properties in Rio De Janeiro and Beirut (Ghosn was born in Brazil and spent his high school years in Lebanon) between 2010 and 2015. The homes were used by Ghosn and his family. All told, the fund spent some 2 billion yen ($18 million) on the homes. Ghosn was then able to use them explicitly for personal purposes. All told, Ghosn is accused of underreporting his pay by the equivalent of about $44 million.

The transactions were done through a Dutch subsidiary, created around 2010, with 6 billion yen ($53.4 million at current rates) in capital, ostensibly set up for investment purposes. The sources said it was funded entirely by the Japanese automaker. The official line within Nissan was that the unit would invest in startups, though there is little evidence to support this claim.

The revelations come the day after Nissan accused Ghosn of "numerous... significant acts of misconduct." The statement was made following an internal investigation over several months, sparked by a tipoff from a whistleblower. He is accused of understating his compensation and misusing company assets and funds. He could not be contacted for comment. He is due to be dismissed as Nissan chairman on Thursday.


According to the sources, funds from the Dutch company were apparently used to purchase a condominium in Rio de Janeiro and a luxury home in Beirut, both of which were provided to Ghosn for his personal use. In addition, Nissan is said to have shouldered maintenance and renovation costs. The combined outlays are believed to have exceeded 2 billion yen.

These transactions were overseen by representative director Greg Kelly, according to the sources. Nissan alleged on Monday that "Kelly's deep involvement [had] also been confirmed."

But how did these revelations come to light in the first place? Nissan has said it launched an investigation into the allegations after being tipped off by a whistleblower. According to Nikkei, the whistleblowers took advantage of a new law that allowed them to cooperate with the government's investigation without risking any charges.

People involved with Nissan used a newly established plea bargain scheme in the investigation, according to sources familiar with the matter. The scheme, introduced in June, reduces or exempts criminal disposition in exchange for cooperating with prosecutors. Ghosn's case is the second known use of the scheme.

It's believed that Ghosn resorted to misappropriating company resources because his pay (about 1.1 billion yen, or $10 million in 2016) was roughly half what executives at other major automakers received (though he also received another 7.4 million euros ($8.45 million) for his work at Renault).

Whatever the reason, the motivation is clear: An increasingly unaccountable Ghosn felt he deserved more, and decided to reach out and take it unilaterally.

Author: USA Really