Examination of Witnesses (Questions 517
- 519)
THURSDAY 11 JUNE 2009
MR JEREMY
CARVER, MR
MARK PYMAN,
MS SARAH
SEXTON AND
MR NICHOLAS
HILDYARD
Q517 Chairman: May I welcome our
four new witnesses. I hope you have a list of the questions that
we would like to ask you. The first one, your overall reaction
to the draft Bill, is something that I think we would like you
to deal with fairly briefly because there are a lot of other detailed
questions to come.
Mr Carver: Thank you, my Lord
Chairman. May I take a small amount of licence on that because
I think the answer I would like to give to that question will,
in fact, inform the answers that I would give on behalf of Transparency
International to all of the other questions. First of all, I would
like to pay more than lip service but my appreciation on behalf
of Transparency International UK for being invited to provide
evidence to this Committee. To us, this is a most important function,
a very important role that you play here. As an organisation we
have been combating corruption internationally since we were founded
in 1993. Initially we addressed primarily the demand side, the
receipt of bribes, and it was not for a couple of years before
we realised that you could not address one side of that equation,
you have to deal with both. You have to deal with the supply side
as well as the demand side. You must tackle the payment of bribes
as well as the receipt of bribes. If you do not, you have an imbalance,
an imperfect situation, an oddity, and it does not work. There
has been a lot of evidence that you have received over the last
four weeks and I have enormous sympathy for the Committee, some
of whose members are very experienced in these matters and some
less so. With a very short timetable you have been inundated by
a huge amount of material to absorb and a huge amount of submissions.
These submissions all start with one basic statement, which is
"We welcome the Bill". At that point, beneath the welcoming
of the Bill, there is a major division and it is that division
that I want to explore just for a second if I may, my Lord.
Q518 Chairman: Please do.
Mr Carver: Effectively, the division
comes between those who say, "We really do need proper United
Kingdom legislation to eliminate bribery from our business practices.
We must have it. We are committed to have it by a whole series
of international commitments that we have made over the last dozen
years and it is no good pussyfooting about with it, we must have
it. We must have it strong and clear and we must resume a leadership
role in relation to business because this is where our national
interests lie". Then there is another camp that effectively
says, "Well, yes, we do want legislation but it has got to
be the right legislation. It has got to be very carefully moderated
and modulated so that it is legislation that effectively allows
us to do business as usual". It is that worry about business
as usual that underpins and underlies a great deal of the complexity
that you have been hearing about over the last three to four weeks.
If I can take the Committee back to 1976-77, as you very well
know in that year the Lockheed scandal with Japan broke and it
had a cathartic effect in the United States. There was moral outrage,
much more in Japan than there was in the United States, and there
were lots of complaints from Lockheed's competitors that they
were trading on an unfair basis, but that was a charge that would
have been dealt with by the United States' anti-trust rules. There
would never have been a Foreign Corrupt Practices Act if there
had not been one extra thing, which has not been mentioned at
all to you today, and that was the Securities and Exchange Commission
came down in force from New York to Washington and impressed upon
Congress the absolute necessity for a tough law outlawing US companies
paying bribes abroad. This was legislation that went through on
the basis of the strength of the case that the SEC made. This
was a case based not on morality, not on competition; it was based
upon danger, upon business risk. If major companies are going
to sign contracts on the basis of having paid a bribe that is
a contract that is very, very unsafe and markets are going to
build their expectations, their price in the marketplace, on that
basis and their staff, their employees, are going to base their
future, their careers, on the basis of a very uncertain future.
Payment of bribes not only produces business that is bad business,
it is also very unprofitable business. It is business that simply
does not produce effective results. A company that is used to
getting business by paying bribes is embarking upon a quite different
process. It is not selling goods and services, it is selling vehicles
for bribery. It is selling means whereby bribes are paid and received
in a way that achieves nominally business. In fact, the recipient
of the bribe, the senior government official at the other end,
is not really interested in that because he is interested in getting
the money, so all over the world there are white elephant projects,
many of them funded by international national development banks,
aid agencies, national aid agencies, DFID and others, that are
simply useless, that do nothing, that are sitting there because
their only excuse was as a vehicle for paying a bribe. Nobody
was interested in the outcome. You have Pakistan where the ordinary
citizen in Pakistan cannot afford electricity because the way
in which the electricity power stations were built meant they
were built for a quite different purpose than the provision of
electricity. All over the world these phenomena exist which are
having a devastatingly bad effect and they are not generating
sound business in this country. What it means is you do not invest
in your own business, you invest in paying bribes. Siemens has
been absolutely prominent throughout the last two to three years
and has so far paid in excess of $1 billion in fines for its conduct.
This was quite simple. They had a product line in their telecommunications
division that had simply taken the wrong turn in technological
innovation, but the business decided they had to sell this stuff.
They could not sell it on the basis of a valid product, they could
only sell it by systematically bribing people to take it. That
is the scale of the business. GE realised that when they were
found out under the Foreign Corrupt Practices Act in the 1980s
for paying an Israeli general to take some of their less satisfactory
military hardware products. This type of business is still done
on an everyday basis of selling sub-standard stuff, not on the
basis of it being useful, not on the basis of competitive price,
not on the basis of having been properly invested in and providing
reliable jobs in this country, but on the basis of "How much
will this minister want in order to place the contract with us".
This is a fundamental difference and this difference has to be
recognised as having changed the situation. There are still too
many, particularly in this country, who hanker after a time when
it was possible to pay these inflated commissions, who want to
be able to continue to do that because that is the way they have
done it in the past. To Transparency International, to the OECD
and to many people, civil society in this country and elsewhere,
that is simply an unacceptable way of going forward. Coming to
the Bill, this—
Q519 Chairman: Just before you do
that, the result of the SEC's intervention presumably was the
1977 Act in America. Do you approve of that Act?
Mr Carver: Correct.
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