Shock, Horror, Bribery in Kazakhstan!

Money from the employees\’ fund at the Eurasian Natural Resources Corporation (ENRC) is alleged to have been used to send the son of a police chief in Kazakhstan, where the company mines for iron ore, to college 6,000 miles away in the United States.

It is claimed money was removed from ENRC\’s subsidiary SSGPO to finance the education of the son of Kazakh regional police commander, Bulat Baizhasarov, at Michigan State University.

This is both very naughty indeed and very normal: in fact, in one way, it\’s surprisingly honest.

The question is, by whose moral and business standards should we be measuring this?

Leave aside for the moment that this is an allegation, entirely unproved and no doubt only a malicious invention by a disgruntled employee.

Start from our view: this is a London listed company, part of the FTSE 100 and thus rightly considered to be playhing by London rules. This is an outrage, disgusting fleecing of the corporate coffers and people should be jailed.

Look at it by the standards of many parts of the world and it\’s just how things are done. The local power brokers get a cut of any economic activity that happens in their area. While we don\’t call it this it\’s really no different from our own feudal times. You own an area, you get a cut. These days it might not be a geographical area of which you are Duke but it might well be a port of which you are customs chief (and we\’ve had similar positions in our own feudal times) or indeed an area of which you are police chief (and there have been Margraves and Marches Barons which were not far off exactly that).

By the standards of Kazakhstan this is actually very weak beer. Almost sweet in its innocence in fact. Sticking the kid on a corporate scholarship? What happened to demanding vast bribes, in cash, in advance of not doing anything?

I know someone (listed company too) who once paid $50,000 to an aide just to get an interview with the PM of the country. To try to find out why they were nationalising, with no compensation, the company he\’d just paid the government hundreds of millions for.

$100,000 a year as a scholarship to keep the local major general of police onside? Cheap at the price in that environment.

Which returns us to our basic question: whose morals, whose business practices, should we be using when we deal with Johnny Foreigner? We\’re qadvised to speak the local languages, adopt the local customs of greetings, use local law in contracts: how far should we be willing to go?

It\’s not for nothing that until recently you could declare bribes to foreigners as a tax allowable expense in your company tax return: bribes to anyone at home meant jail.

4 thoughts on “Shock, Horror, Bribery in Kazakhstan!”

  1. Many years ago I was told an anecdote about the secretary (and mistress) of a former President of Venezuela; because she controlled all access to him and had his ear she took a little slice of every government contract from paperclips to fighter jets. When he was finally ousted she waltzed off with $8bn she had sitting in a Swiss bank account.

  2. “The local power brokers get a cut of any economic activity that happens in their area. While we don’t call it this it’s really no different from our own feudal times. You own an area, you get a cut. ”

    Now a days it’s called taxes. 😉

  3. Morally speaking there are two types of bribery

    1) Paying to protect you rights
    2) Paying for special priviledges

    1 is an unfortunate necessity, 2 is plain wrong.

    The same categories exist in lobbying.

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