Foreign Companies, Desi Agents and Government Officials: Modus operandi of bribing bureaucrats to procure contracts

BRIBING of Indian government officials by foreign companies has come to the fore once again after the US Justice Department said last week that New Jersey-based construction management company Louis Berger International Inc (LBI) bribed officials in India and a few other countries to secure government contracts that included water projects in Goa and Guwahati. The total bribe paid in August 2010 for securing the Goa project alone amounted to USD 9,76,630 (Rs 6.2 crore according to current exchange rate). But what was the modus operandi deployed in bribing officials? According to the ruling of the United States district court of New Jersey, (USA Vs Louis Berger International Inc Criminal Complaint Mag. No. 15-3624, MF), the company concerned "did create...
ostensibly legitimate but ultimately illicit accounts, or ‘slush funds,’ for the payment of bribes through third parties”. The court documents further said that bribe money was disguised as payments to vendors for services that had never rendered.
This, in fact, sums up how foreign companies bribe Indian officials. The transactions appear legitimate in books as slush funds (a reserve of money used for illicit purposes, especially political bribery) are routed through Indian agents appointed to procure contracts. Foreign companies often engage Indian agents -- a culture prevalent for decades in procuring defence and other high-valued government contracts. Those agents are not on regular payroll of the foreign companies, but the understanding is that they get a cut on every contract which in turn is shown in the books as “legitimate” consultancy fee. And the bribe money is embedded in that consultancy fee only. The consultant shows some fictitious services to claim that amount. So, on paper, it appears clean and perfect transaction.
An analysis of earlier cases probed by the Central Bureau of Investigation (CBI) and the Central Vigilance Commission (CVC) shows that bribe money is often handed over in cash before or upon winning a particular contract. The officials sometime use their close relatives either studying abroad or buying real estates in India to park the bribe, thereby minimizing the risk of keeping huge amount of cash at home.
Back in October 2009, the then Indian ambassador to America Meera Shankar wrote a formal letter to the then principal secretary to PM TKA Nair about bribing of Indian officials, particularly those in the Indian Railway Board. The letter was a follow up of a 2008 disclosure by Department of Justice about an US company acknowledging that its Indian subsidiary made a payment to Indian Railway Board officials to obtain and retain business, schedule pre-shipping product inspections and obtain issuance of product delivery certificates among others.
But no investigating agency actually followed up those charges seriously.