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Ask HN: How have you dealt with corruption?
91 points by puppetaccount on Oct 30, 2009 | hide | past | favorite | 69 comments
A technical person at a potential large government customer of ours invited me to discuss our technology with him outside the office. This could be a red flag in itself but we had met twice before and I had learned that he graduated from the same school as I and around the same time I did and we knew some people in common. Additionally, he had given me a paper of his to read which was pretty decent and said he would like feedback. In general, he seemed like an enlightened techie who was enthusiastic about our technology and technology in general. There seemed to be no red flags.

The first time I met him, we discussed his paper and our project in general and he was generally encouraging, saying his organization could be very bureaucratic but he really believed what we were doing was the future and he would pull for us. He also indicated he was stifled in his job and would be interested in working for us in the future. This was a bit of a red flag but considering our connections outside of this project, it seemed like it could be an innocent thing. I told him that if he decided to leave his employer he should let me know and that we were at least a few months away from thinking seriously about hiring someone with his skills.

When I met him the second time, he out and out suggested that we pay him to push our project through and, when I told him his employer would most likely find that objectionable, he suggested various ways of hiding it. I was too shocked to say anything, afraid he would sabotage us if I said no to his face and insulted him and the only thing I could say to him was that my cofounder is very by the book and I really have to run it past him and that he should double check to find if it is actually allowed.

I have no intention of paying him or dealing with him again, but I feel dirty for not telling him off on his face. I am just posting this here to vent and see if anyone else has faced similar issues. How did you deal with them? Any advice for me?

How could I have handled this better? I am asking this seriously. Although I did not do anything wrong (or so my partner tells me), I feel that not doing anything more assertive than what I did was wrong. :(




You nailed it.

If you had not stood your ground, you would have sacrificed all your hard work for nothing.

If you had pushed any more than you did, you would have created an unnecessary drama that would have diverted your focus.

You feel badly right now because you're normal. This shall pass.

Even the fact that you registered a puppet account to discuss this clearly demonstrates that you know how to handle a delicate business matter. If the quality of your product matches the integrity of your character, you have great success awaiting you.

Respect.


Thank you for your kind words.


I've dealt with this when I had to mop up after a predecessor made a habit of taking bungs at a government department.

My advice to you is that you should have absolutely nothing to do with this. You should forget the sale now (it's a possibility that it was only entertained in the first place because your associate thought the payoff would be likely).

If you can anonymously tip off this person's superior one way or another, you'll be doing a good thing for everyone (citizens, colleagues, bung-seeker) in the long run.

This advice only applies for government - in private enterprise this kind of thing is pretty much par for the course on very big sales, but in modern times it normally takes the form of valuable free stuff rather than cash.


The dilemma is clearly between the larger good and my selfish interest in not seeing my company hurt. The industry we operate in is very narrow and while losing thus customer alone would hurt us a lot, having someone there say negative things about us could destroy us. I have already written off this customer, because if nothing else, the stress of having to manage a corrupt person while not indulging in corruption is not worth whatever money we make off them. But we would prefer to not get vilified in the industry because of someone else's character flaws.

I will find out about how to anonymously report this. I am thinking I could do it at least after a few months so at the very least it's not obvious who did it.


I understand, managing this for you has got to be really, really delicate.

There's potential downsides in doing nothing as well.

I'd still say it is worth having a word with someone more senior if you are able to. He'll likely lose his job, which is a horrible thing to have on your conscience - but if your sale goes through anyway, and he championed it - you could still end up on the hook. You'll either get tarred with his brush, or outright investigated for colluding with him, which may or may not be a crime where you are.

On the basis that you've written off the sale mentally, talking becomes an upside. It gives you another chance at making the sale on fair terms, and establishes your trustworthiness.

I don't envy you though, horrible situation.


Now you have me worried. If I did not offer him anything, how could I be held responsible for colluding with him?

I understand the risk of being painted with the same brush. This is all the more infuriating because there are other people, more senior than him at this organization who seemed enthusiastic about the project.


Don't screw around. You've described yourself as the sole witness the commission of a serious crime. Passivity and/or trying to resolve this "politely" in back channels can bite you by making you an accomplice. If it really was as bad as you describe - your next call should be to the FBI and you should prepare for that by writing down every detail you remember, as carefully and accurately as you can.


I am going to write it down. I will have to think a lot and come to an agreement with my partner before I can decide to talk non-anonymously to the authorities.

I do appreciate your advice on this.


You can talk anonymously to the authorities. They may not be able to do much but at least they can keep an eye on the guy. There is an organization called the Office of Special Investigations. They handle this kind of stuff. Letting them know the activity exists might be enough to get them to open an investigation and watch the guy.


Isn't he better off just walking away from this (and yes OP: forget the sale)?

Per his own account here, he (a) discussed potential issues with "hiding" the kickback, and (b) tentatively agreed to discuss the possibility with his "by the book" partner.

I am not questioning your righteous outrage here, but this is a can of worms if there ever was one. And I'm just guessing that the sleaze ball in DC acted that way because its likely a norm in the seat of our government. (Would that really surprise you?)


Just to clarify, I did not "discuss" potential issues with hiding a kickback. When I mentioned that his employer may not allow his "consulting" with us, he rattled off a bunch of ways he could hide it and I responded by asking him to check the legality of it. To any sane person the message that I did not want to do this would have been obvious. The fact that he ignored it tells me that he thought he could bulldoze me into paying him (because he does not seem dumb).

What I precisely told him, and I was careful about this, was that he should investigate the legality of doing this and I would discuss the same with my by the book partner. I wasn't clear about his in the original text, but my survival instincts did kick in and I remember telling him this precisely.

Further thinking has left me wondering how he would have responded to a simple "Sorry buddy, don't take it personally but we can't do that. How's the steak?". It may have been the better thing to do. But if he had continued bulldozing it would have ended up in a similar place.

As an aside, I have never paid even for a coffee for a government employee who is a potential customer. It is not that I do not know the rules. I just wish I had been more familiar with the playground and had thought about what I would do in a situation like this beforehand. Hopefully this will serve as an opportunity to do that for other entrepreneurs who read this.


It sounds like you did the best you could after being hit with a pretty big curve ball.

Had this happened to me, I think I would have approached it by saying something to the effect of "Look buddy, we're a small outfit, we couldn't really do things this way even if we wanted to. How you usually manage your affairs is none of my business, but I think it would be best for us both if we just forget this conversation ever happened." End of story. So still a firm "no" but also indicating that I'm not interested in making trouble and just wish to be left alone. In this kind of situation, sure there's the question of the greater good not being addressed (i.e. he can go on being corrupt), but sorry, the good of me and mine comes first. There will be corrupt people around for as long as there are people around.

But if I were to find myself in the position you're in now where it seems the guy still may harbour some ambitions that he may still have an in with you, on the one hand I wouldn't really want to keep interacting with this guy because the more I would it kind of feels like it could be construed later on as some form of collusion. But at the same time I would be very careful about exposing him before getting legal advice, because who knows if this guy might go all vindictive and try to take you down with him. From what you've said, it seems like it would be yours and your partner's word against his, two witnesses on your side is better than one I guess, but these "his word against yours" kind of things seem to have a way of sometimes getting very messy if they ever hit a court room. I'd be looking to avoid that possibility.

Get some senior legal advice ASAP! Fuck the greater good, do what's best for you and your partner! Good luck with it!

P.S. I do also think though that there's a difference between supplying a bribe and buying a client a coffee or something. The latter and things like it can be part of building a relationship and there's nothing wrong with that. You just need to make sure that this kind of thing stays at a certain reasonable level.


You have my sincere sympathies (and I have no clue what I would have done in your shoes; its one of those moments where clarity arrives in hindsight and self-kicking ensues and we've all been there) but you entered the spider's web as soon as you met with him outside of his office. He knew exactly what he was doing; you didn't.

Live and learn.

But lets be honest here: "Please check the legality of your proposed hiding of your proposal for our paying you to be our secret consultant and meanwhile I'll run this by my by the book partner"? (And I'm just a (sympathetic) fellow geek on HN; I'm trying to make a point regarding careless escalation of this matter beyond anonymous posts on HN ...)

It is imperative that you consult a lawyer regarding this matter even if you and your partner's intent is to simply drop the sale cold, walk away, and cut your loses; call the FBI; go on Oprah; whatever.

Get legal advice and mum's the word until you do.


Will do. I will say that I am not proud of my rather meek response and that guilt is a large part of why I posted here.

Thanks for your advice.


No, I don't think he's better off "walking away".

First, you can't be too paranoid: perhaps his firm was being investigated and the bribe proposal was false.

Second, if the bribe offer was serious and that guy has any power, now his firm has a nervous enemy in the wrong place.

Third, if the bribe offer is taken up by someone else, he makes it less likely that he can get future contracts anywhere near that arm of government without making bribes.

Fourth, the corruption is independently reported by some third party, then it may come back to haunt his firm (as in questions about what they knew about it, when).

-t


IANAL but it might not be a bad idea to take a few minutes and write down who said what and when, while it's still fresh in your mind. Maybe even in some official company record ("captain's log").

Ya never know . . .


I agree. If the situation escalates to the point where you can't avoid legal action (e.g., your contact accuses you of doing something corrupt), it would be useful to have a paper trail for your side of the story.


Yes writing it down couldn't hurt (I think).


Do not tip off the supervisor. Go to the FBI.


The FBI does not care if some low level bureaucrat at (say) the New York City Department of Education offered a pay-for-play deal. Better advice is to take five minutes to Google up the department which handles internal ethics issues in whichever organization it is and contact them. Granted, you don't go to the guy's supervisor.... but you also don't leap immediately to the feds.


The FBI does care, and will care with EXTREME PREJUDICE if your bureaucrat comes anywhere near a national security brief, which is a surprisingly large field of human endeavor. (It may not be obvious to many people here that there are thousands of jobs in the Department of Agriculture which are categorized as national security related, but there are.)


It makes me sad to realize I read the OP and thought "Isn't this normal?"

Then I read all your comments and realized just how different the US is from India and how far we still have to go.

Sigh


Watch out! Go to a lawyer first. Always lawyer. And a good one.

FBI might squeeze you to do things you don't want to do. Also the accused will retaliate in some way to discredit you and your company. Never deal with law enforcement without going to a lawyer first, unless it's an emergency (911 first, lawyer 2nd.)

Lawyer first, always. Not even your co-founder as he could mess things up (Unless he is a lawyer.)


My cofounder is a solid guy. I would trust him with my life. So I have already shared this with him.

The advice to get a lawyer is sound though. Unfortunately we don't have a lot of money and what money we do, we would prefer to pay our handful of employees with. We are not profitable.

But I do have some friends who went to law school. So I'll ask a friend pro bono.

As you can imagine, any legal step would be a huge distraction, and as a startup that really hurts us.


Cool.

> My cofounder is a solid guy. I would trust him with my life.

Good guys can mess things up unintentionally. Consequences on things this big can affect your life forever.

> Unfortunately we don't have a lot of money and what money we do, we would prefer to pay our handful of employees with. We are not profitable.

If you are in US there have to be several organizations to give you free advice on similar matters. I bet they even have 1-800 numbers.

> But I do have some friends who went to law school. So I'll ask a friend pro bono.

Good start.

> As you can imagine, any legal step would be a huge distraction, and as a startup that really hurts us.

Take this as training. Surfing the legal ecosystem is part of entrepreneurship. Ignoring this costs (in both time an money) can cost you more than your investment. Be smart.

I dealt with exactly the same situation but not in US. People doing that in the open tend to have a network of support. Do not underestimate the consequences of your (or your cofounder's) actions. Watch out.


The point about organizations is a good one. I will look them up. The advice to be very careful is also on the money. I appreciate it and will do so. Certainly, one of the things worrying me is that he might not be alone.

Hope your situation turned out o.k.


Thanks. Yeah, it turned out well. It was a good eye opening experience for me, personally. It's the way to learn many things. And what doesn't kill you...


You need to withdraw your product/service from consideration by this customer. In other words, refuse to sell to them. Come up with any reason. This guy sounds like your typical corrupt politician or organized criminal.

They typically do you a "favour" that you didn't even ask for, one that is executed in such a way as to break some rules/laws however petty. Having preemptively performed a favour for you, they have you on their books for when they want to call on you for a return favour. Even though you don't think you owe them one, the shady nature of that first favour is always a dark cloud hanging over your head. They're master manipulators and blackmailers with a balance sheet of favours. It's simply warped.

You shouldn't be afraid that he'll sabotage your bid. You should be afraid that he'll give you the bid anyway, then call you up later saying, "look I did this favour for you, now I need you to do X for me." From there it's a slippery slope. The only way I've found to deal with these folks is not to deal with them at all and deny any favours from them. I wouldn't accept a glass of water from them if I were dying of thirst.


I don't know who to hate for the repeated advice to talk to lawyers for anything half-legal.

Hey, when people ask legal questions, they have already considered seeing a lawyer.


My only non-professional advice is do not in any way do business with the firm he works with until after the situation is dealt with. Even if you get the contract through normal channels, it could blow up in your face later if this guy was found out. Report it, and get a record of you reporting it. That way, if anything happens, you can pull out your record and say 'we already reported this'.

Also, assuming this is a US department, this site may be the way to go: http://www.gao.gov/fraudnet/fraudnet.htm

I'm not sure if it's how you report bribe solicitors, but if it isn't I'm sure there are similar government sites set up for that. Good luck. I don't envy your situation.


http://www.washingtonpost.com/wp-dyn/content/article/2009/03...


You did perfectly fine - seriously.

Alternatively, you could have gone the comedic route by making the whole thing into a big joke, but it's not like things would have been better.


Having thought about this a bit, I feel like if I had turned a cold shoulder to his proposal to work for us in the future, he would have been discouraged about it. I could also have communicated in some other way that we work by the book.

At least then, we would have had the chance of working with other (possibly non corrupt) people in the organization to get our project through. I mean there are other people there who are enthusiastic about it.

Anyway, that's just me ranting. Thank you for your words.


If I may ask - which country?


Without prematurely compromising your identity or giving more details than you're comfortable sharing, can you say

(1) which country;

(2) which level of government (fed, state, city, etc.);

(3) anything else about the geographic region or field-of-work?


Running an IT service business for 7 years, I've run into a number of dubious situations. Heres a couple.

A client introduced me to a salesperson who works for a competitor company. We sat down for coffee, and his opening line was that he has a million dollars of deals in the pipeline (which would have been a very welcome addition to the bottom line), and he was interested in bringing all these customers to my business. Immediately after this, he asked for a very large base salary, which was a bit surprising given the time passed in the interview, but I suppose within general norms.

In any case, I was interested in bringing him on board, but since we're a smaller company, I'm very careful with my hiring decisions. As you all know, a wrong hiring decision can cause all sorts of problems and headaches for a small focused team.

So I started by asking him some more questions about his background, and some typical interview questions. Then he says :

"Actually, I know a good way we can start our relationship. There's a guy at work I really hate - a total prick. What if I were to give you all of his leads before he closes them? I can't give you an introduction or anything of course, but I can give you the client information, and the decision makers names, and you would have to sell them yourself! What do you think?"

I was taken back, and I responded : "Well, I'd need to examine the ethics and legality of that arrangement."

He responded : "Hey - we're all ethical here. This is just a way for us to start collaborating."

I ended the interview, already decided that I wouldn't hire him. If he was offering me this deal after knowing me for 20 minutes, how could I trust him as my salesperson once I hired him?

After this interview, I called a mentor to get his take. His immediate response was "Here's what you do. You call the CEO of the company he works for. Say 'I know we're competitors, but some information directly relevant to your company has come my way.' Meet up with him, and tell him exactly what happened. He'll be fired on the spot."

I didn't end up doing that. The salesperson was not the most moral of people, but he had a family to support, and it's very difficult to find a job in this down-market.

Another unrelated story - a customer manager who was a friend came to me and asked me for a kickback from the project he awarded me. Thinking back, he might not have realised how difficult a situation he put me in. Providing him with any kind of monetary payment would have been a touchy situation for many reasons, so I sat down with him and said something along the lines of :

"Actually, we're already running right against our profit margins for this project. Since you're a friend, I gave you a much bigger discount than I normally would give. I'd end up losing money here if I gave you a finders fee for this particular project. The fee I'd be able to pay probably wouldn't be worth your risk in accepting that kind of fee, or my risk in paying it. But, if you come across any other opportunities in different companies, I regularly provide finders fees for those situations so I'm happy to organise that for you."

By framing any kind of payment as risky, and by telling him we're not making much from this project because of our friendship, he dropped the issue, and everything turned out alright.

In summary - I tend to deal with corruption by avoiding it or deflecting it wherever possible. I don't tend to take the aggressive route of reporting it, or going after people.


> The salesperson was not the most moral of people, but he had a family to support, and it's very difficult to find a job in this down-market.

It seems to me that the salesperson already had a job, before he decided to act blatantly disloyally to his employer.


Thank you for sharing your experiences. They gave me some very useful perspective.


Glad to hear that.

Sometimes these situations are ambiguous, and confusing. In some cultures, this would be a normal part of doing business and it's commonly accepted. In some places, you can even claim these 'bribes' against tax...!

Generally it comes down to being comfortable with your choices, and ensuring that everything you do is completely legal.

If you need to invest $1,000-$2,000 for a lawyer to write a legal opinion, and this will make it likely to safely get a deal worth $15,000, it may be the right decision.

Good luck!


I've lived in 'some culture' for years and I can say that 1) yes, there are situations where you can account for bribes in your taxes but 2) it's still never normal or accepted.

I've never been in the situation where there was the illusion that what was talking place was ok. It's dirty, cloak and dagger (making gifts or payments is always an exercise in creativity) and heads generally roll if it's exposed.


Money spent for corruption was tax deductable in Germany until a few years ago. Though only when you used it on a non-German or outside Germany or so. The reason ran along the lines of `Everyone else is doing it, so we just level the playing field for German companies.' I am glad this hypocrisy ended.


The U.S. was one of the first nations to make it illegal for its own citizens to pay bribes overseas with the 1977 Foreign Corrupt Practices Act. The bill passed even though the US knew we'd lose business overseas. It was also very steady U.S. pressure that helped move Europe to do the same a couple decades later-- this was on the top of the U.S. trade agenda with Europe for a long time.


Thanks.


Your mentor was spot-on in his recommendation in the first situation, IMO.


Second example was handled perfectly. Well done.


Do not put yourself into a position in where you are susceptible to blackmail. This is a big risk when dealing with dubious stuff. (edit: s/the biggest/a big/)


So, really and truly this government guy hit you up for a bribe?

Tonight, write down every detail, sign and date (ideally with witnesses). Tomorrow morning, call the FBI. After speaking with the FBI, unless they advise otherwise, brief your CEO.

Only do these things if you are really, really sure the guy actually hit you up for a bribe but if you are - I think you should do these things.

-t


Already briefed my partner. Calling him again in a few minutes.

Calling the FBI is tricky. I don't have any proof and as a small company, I would prefer not to have a scandal (even with us on the right side of it) be our first introductiion to the rest of the small community. In essence, what I am saying is doing the perfectly right thing would hurt us.

I am thinking seriously about anonymously reporting this though. I don't know if that even works but at least I can say I tried.


You don't need proof. Proof is their job, not yours.

Yes, it will hurt your firm, short term, odds are. Tough it out. Adhere to the rule of law. Protect your longer term interests.


Do the country a service and stand up for what is right. You may lose this sale, but you will have your honor and integrity.


At this point I do not care about the sale. As I mentioned elsewhere, having to 'manage' this person without paying him a dime is going to be a task. It's not like I can bar him from meetings. I will be dead before he sees a rusty penny from us though.

There are other concerns, outlined in my other comments. Doing anything has implications on people other than myself. And an anonymous tip, while not the most surefire way of getting this guy caught, is also an approach to doing the right thing.


Let's outlaw corporate lobbying before we worry about some small-fry with a few-thousand dollar software contract.


Lobbying is very different than corruption. Lobbyists, in theory, are supposed to present the case and frame issues so that politicians can make informed decisions.


This guy is possibly a future lobbyist. Best to put his type down and out before he gets some place where he could do more damage.


Really good advice - write a detailed account of what happened as soon as possible. Be VERY detailed.


I've been trying to compose a response to this, describing a similar situation I was involved with. I just can't do it without saying more than is prudent. I was slow to catch on to what was going on but I did the right thing when I did and the guilty weren't punished. I don't mind talking more about it privately. The lesson I learned was that there are a lot of good, honest, and competent people around but there a few who aren't and I wish I hadn't wasted time and frustration with people who were willing to put up with that corrupt few. You've got a tough problem but it sounds like you have good judgment. I hope it works out well for you.


I understand not wanting to share specifics. Thanks for sharing your experience, your good wishes and your offer of advice.

At this point I think I am done thinking about this for the day. If I come back to this I will definitely reply to your latest comment to ask for advice. (Wish HN had private messaging).


I worked for a small company in Europe selling software into much larger companies. I am pleased to say that over four years, there were only a couple of times when I think we lost a sale because of corrupt tactics by a competitor and even then, I can't be sure. Certainly, we sold a fair amount of software and didn't have to bribe anyone. These were small deal sizes though, less than ~$50k and I think corruption probably gets more prevalent with larger deals. Certainly I have seen much more questionable behavior in other businesses such as consulting and outsourcing which is why I wouldn't want to spend my days selling those kinds of services.


Welcome to the real world, Neo.

Kickbacks is what drives business deals in many countries, including the US, Canada and you name it. That's an integral part of business culture. In some places to a lesser degree, in some - to greater. Government contracts are especially lucrative type of deals, and I would very surprised if you somehow waltzed in from the street without any prior connections and got a contract. You have to "know" people, you have to have "contacts" and you have to work to keep these "contacts" alive. Take a guess what it usually translates to.

Just say, no, can't do and walk away.


"Just say, no, can't do and walk away."

Yes, but talk to a lawyer first before talking to ANYONE else.


I don't see any benefit to taking a strong stand face-to-face. It's not like he would see the light or something. It would only ensure that he has a heads up, putting you in a seriously dangerous position.


Wow. Just wow. I don't know what agency/department you're dealing with and I'm making an assumption that you're in the US.

Try searching for "fraud, waste, and abuse" and your agency's name in Google. If you're dealing with the DoD, try these folks:

http://www.dodig.mil/HOTLINE/fwacompl.htm

Not sure if this falls under FWA but if you talk to someone at the IG (Inspector General) office, they'll point you in the right direction.

The other option is to go to your boss and see how your company wants to handle this.


No boss. This is my company. Have a cofounder who knows.

Appreciate the links.


An effective way to deal with corruption is to make it clear that you don't participate in it.

It only takes for you to fail once and then everybody will know that you are ready to de "business" with them.

Whereas if you make a name for yourself as a clean contractor, you will also attract other kind of customers. Even inside government itself, but from other branches. Government is such a big beast, that there is plenty of honest people inside of it too.


Not being honest is not, and has never been, an option I would consider.


A contrasting approach - when Mo Ibrahim set up a mobile network in African counties he knew a no-bribe approach wouldn't fly, so bribes were limited $30,000.

http://www.guardian.co.uk/lifeandstyle/2009/feb/01/mo-ibrahi...


I didn't read it that way, I read it that because he set things up in the way he did, "Effectively, no one could now pay a bribe."


You did the right thing. You are the victim in this situation. Nobody, especially not yourself, should expect that you damage your own cause beyond not participating in the crime. If everybody acted like you did, corruption would not exist.


http://www.youtube.com/watch?v=fRcamEx7EmA

Just kidding.




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