Chapter 10: Corruption

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Chapter 10 Corruption
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O C C U P A T I O N A L F R A U D a n d A B U
S E
C L A S S I F I C A T I O N S Y S T E M
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Common Corruption Schemes

• Bribery
• Economic Extortion
• Illegal Gratuities
• Conflicts of Interest

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Legal Elements of Bribery

• Offering, giving, receiving or soliciting
• Any thing of value
• To influence
• An official act (no fed law against commercial
  bribery)

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Legal Elements of Commercial Bribery

• Giving or receiving
• A thing of value
• To influence
• A business decision
• Without consent of the principal
• (About ½ of states have criminal statutes that
  prohibit commercial bribery)

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Economic Extortion

• Perp demands payment
• Threatens adverse economic consequences
• Common example
• Purchasing agent requires vendors to kick back
  portion of contract price
• NOT a defense to bribery.

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Legal Elements of Illegal Gratuities

• giving or receiving
• a thing of value
• for or because of
• an official act

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Defining Illegal Gratuities

• Lesser included offense of bribery
• Employee receives something of value
• Because of official act or business decision
• Intent to influence not required

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Legal Elements of Conflict of Interest

• For a Civil Claim
• An agent taking an interest in a transaction
• That is actually or potentially adverse to the
  principal
• Without full and timely disclosure to and
  approved by the principal
• Criminal Claims apply to public officials

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Frequency of Corruption Schemes

• 223 corruption cases were reported in the
  Associations survey.
• Corruption cases accounted for approximately 15
  of all occupational fraud schemes.

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Median Loss for Corruption Schemes

• Although corruption schemes occur less frequently
  than asset misappropriations, their median cost
  of 440,000, is almost seven times as high as the
  median loss in an asset misappropriation scheme.

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Corruption Schemes Breakdown of Cases

• 180 of the 223 corruption cases in our study were
  classified as bribery schemes.
• Overall, bribery schemes made up 11.8 of all
  occupational frauds.

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Corruption Schemes Median Losses

• Median losses were 500,000 for both bribery and
  conflicts of interest schemes, making them among
  the most costly occupational frauds.