How can HP do business in Russia if they're not allowed to bribe anybody?

By Tim Worstall , written on April 10, 2014

From The News Desk

As someone who worked in Russia for a number of years (yes, at the same time as Pando's own Mark Ames although we never met after he declined to hire me during a phone interview. I'm not bitter at all) I'm left rather scratching my head over this recent judgement against HP over bribery in Russia:

Hewlett-Packard has agreed to pay a $108 million fine to resolve allegations that its subsidiaries bribed officials in Poland, Russia and Mexico to win business contracts, the company and federal investigators announced Wednesday.

"Hewlett-Packard subsidiaries created a slush fund for bribe payments, set up an intricate web of shell companies and bank accounts to launder money, employed two sets of books to track bribe recipients, and used anonymous email accounts and prepaid mobile telephones to arrange covert meetings to hand over bags of cash," a U.S. Justice Department statement said. That all sounds what is quite a lot of work for what is a relatively simply procedure, paying off people. Specifically in Russia they were found to have paid off the Federal Prosecution Service to purchase HP equipment. And there's a certain joy to being caught bribing the cops of course. But the thing that rather gets me is that how does anyone expect anyone to do business in Russia without bribery? That's just the way that the system works there. Not to do so is like trying to open a non-union auto factory in Detroit. It's just not the way that that scene works.

Whether it should work that way is an entirely different question of course and I can point you to economists who argue that in certain circumstances bribery actually improves the economy. Where there is strangulating regulation for example and paying doucers is the only way to get anything to happen at all. This is the argument over that WalMart planning permission case in Mexico. Were the payments to get the bureaucrats to do more quickly what would have happened anyway or were they to get permission that might not have been granted? The former is legal under US law, the latter not.

The HP accusations are of course entirely illegal under US law. But they weren't under UK law when I worked over there. The UK system being rather more sensible in these matters, at least it was for UK law now accords with US here. The basic distinction made was between bribing where bribery was uncommon (say, at home in the UK) and where it would not be tolerated and bribery where it was common where it was a tax deductible expense in the company's books. Quite literally "to bribes" on the tax return.

The argument in favour of making behaviour abroad illegal as it is at home is that it exports our standards of morality to these more benighted, uncivilised, places. The argument against making behaviour abroad illegal as it is at home is that it exports our standards of morality to these more benighted, uncivilised, places. You know, cultural imperialism, colonisation even.

But given that the law is the way that it is I'm left with this one question. Given that Russia is as it is how does anyone expect any company to get anything done there at all if they're not able to join in the national sport of bribery?

[image via comicbookplus]