Corruption

Petty corruption occurs at a smaller scale and takes place at the implementation end of public services when public officials meet the public. For example, in many small places such as registration offices, police stations, state licensing boards,[12][13] and many other private and government sectors.

Grand corruption is defined as corruption occurring at the highest levels of government in a way that requires significant subversion of the political, legal and economic systems. Such corruption is commonly found in countries with authoritarian or dictatorial governments but also in those without adequate policing of corruption.[14]

The government system in many countries is divided into the legislative, executive and judicial branches in an attempt to provide independent services that are less subject to grand corruption due to their independence from one another.[15]

Systemic corruption (or endemic corruption)[16] is corruption which is primarily due to the weaknesses of an organization or process. It can be contrasted with individual officials or agents who act corruptly within the system.

Factors which encourage systemic corruption include conflicting incentives, discretionary powers; monopolistic powers; lack of transparency; low pay; and a culture of impunity.[17] Specific acts of corruption include "bribery, extortion, and embezzlement" in a system where "corruption becomes the rule rather than the exception."[18] Scholars distinguish between centralized and decentralized systemic corruption, depending on which level of state or government corruption takes place; in countries such as the Post-Soviet states both types occur.[19] Some scholars argue that there is a negative duty of western governments to protect against systematic corruption of underdeveloped governments.[20][21]

Corruption has been a major issue in China, where society depends heavily on personal relationships. By the late 20th century that combined with the new lust for wealth, produced escalating corruption. Historian Keith Schoppa says that bribery was only one of the tools of Chinese corruption, which also included, "embezzlement, nepotism, smuggling, extortion, cronyism, kickbacks, deception, fraud, squandering public monies, illegal business transactions, stock manipulation and real estate fraud." Given the repeated anti-corruption campaigns it was a prudent precaution to move as much of the fraudulent money as possible overseas.[22]

Public corruption includes corruption of the political process and of government agencies such as the police as well as corruption in processes of allocating public funds for contracts, grants, and hiring. Recent research by the World Bank suggests that who makes policy decisions (elected officials or bureaucrats) can be critical in determining the level of corruption because of the incentives different policy-makers face.[28]

A political cartoon from Harper's Weekly, 26 January 1878, depicting U.S. Secretary of the Interior Carl Schurz investigating the Indian Bureau at the U.S. Department of the Interior. The original caption for the cartoon is: "THE SECRETARY OF THE INTERIOR INVESTIGATING THE INDIAN BUREAU. GIVE HIM HIS DUE, AND GIVE THEM THEIR DUES."

Political corruption is the abuse of public power, office, or resources by elected government officials for personal gain, by extortion, soliciting or offering bribes. It can also take the form of office holders maintaining themselves in office by purchasing votes by enacting laws which use taxpayers' money.[29] Evidence suggests that corruption can have political consequences- with citizens being asked for bribes becoming less likely to identify with their country or region.[30]

The political act of graft (American English), is a well known and now global form of political corruption, being the unscrupulous and illegal use of a politician's authority for personal gain, when funds intended for public projects are intentionally misdirected in order to maximize the benefits to illegally private interests of the corrupted individual(s) and their cronies. In some cases government institutions are "repurposed" or shifted away from their official mandate to serve other, often corrupt purposes.[31] See too State Capture.

The Kaunas "Golden Toilet".

The Kaunas golden toilet case was a major Lithuanian scandal. In 2009, the municipality of Kaunas (led by mayor Andrius Kupčinskas) ordered that a shipping container was to be converted into an outdoor toilet at a cost of 500,000 litai (around 150,000 euros). It was to also require 5,000 litai (1,500 euros) in monthly maintenance costs.[32] At the same time when Kaunas's "Golden Toilet" was built, Kėdainiai tennis club acquired a very similar, but more advanced solution for 4,500 euros.[32] Because of the inflated cost of the outdoor toilet, it was nicknamed the "Golden Toilet". Despite the investment, the "Golden Toilet" remained closed for years due to the dysfunctionality and was a subject of a lengthy anti-corruption investigation into those who had created it and[32] the local municipality even considered demolishing the building at one point.[33] The group of public servants involved in the toilet's procurement received various prison sentences for recklessness, malfeasance, misuse of power and document falsifications in a 2012 court case, but were cleared of their corruption charges and received compensation, which pushed the total construction cost and subsequent related financial losses to 352,000 euros.

Various sources acclaim the Spanish People's Party – Partido Popular -, to be Europe's most corrupt party, with about yearly 45 billion euro worth of corruption.[34]

On 7 July 2020, Carnegie Endowment for International Peace, a global think tank, released a report claiming the Emirati city, Dubai, of being an enabler of global corruption, crime and illicit financial flows. It stated that the global corrupt and criminal actors either operated through or from Dubai. The city was also called a haven for trade-based money laundering, as it gives space to free trade zones, with minimal regulatory laws and customs enforcement.[35]

Police corruption is a specific form of police misconduct designed to obtain financial benefits, personal gain, career advancement for a police officer or officers in exchange for not pursuing or selectively pursuing an investigation or arrest or aspects of the "thin blue line" itself where force members collude in lies to protect other members from accountability. One common form of police corruption is soliciting or accepting bribes in exchange for not reporting organized drug or prostitution rings or other illegal activities. In America another common form of police corruption, is when white supremacist groups, such as Neo-Nazi Skinheads or the Ku Klux Klan, recruit members of law enforcement into their ranks or encourage their members to join local police departments to repress minorities and covertly promote white supremacy.[36]

Another example is police officers flouting the police code of conduct in order to secure convictions of suspects—for example, through the use of surveillance abuse, forced confessions and/or falsified evidence. More rarely, police officers may deliberately and systematically participate in organized crime themselves. In most major cities, there are internal affairs sections to investigate suspected police corruption or misconduct. Similar entities include the British Independent Police Complaints Commission.

In the Renaissance fresco The Good and the Bad Judge (Monsaraz, Portugal), the Bad Judge, depicted as having two faces, is shown taking bribes: the nobleman to the right offers him gold coins from a purse, and the villein to the left gives him a pair of partridges.

Judicial corruption refers to corruption-related misconduct of judges, through receiving or giving bribes, improper sentencing of convicted criminals, bias in the hearing and judgement of arguments and other such misconduct. Judicial corruption can also be conducted by prosecutors and defense attorneys. An example of prosecutorial misconduct, would be a politician or a crime boss bribing a prosecutor to open investigations and file charges against an opposing politician or a rival crime boss, in order to hurt the competition.[37] An example of attorney misconduct, would be a defense attorney refusing to represent a client for political or professional motives.[38]

Governmental corruption of judiciary is broadly known in many transitional and developing countries because the budget is almost completely controlled by the executive. The latter undermines the separation of powers, as it creates a critical financial dependence of the judiciary. The proper national wealth distribution including the government spending on the judiciary is subject to the constitutional economics.

It is important to distinguish between the two methods of corruption of the judiciary: the government (through budget planning and various privileges), and the private.[39] Judicial corruption can be difficult to completely eradicate, even in developed countries.[40] Corruption in judiciary also involves the government in power using the judicial arm of government to oppress the opposition parties in the detriments of the state.

Military corruption refers to the abuse of power by members in the armed forces, in order for career advancement or for personal gain by a soldier or soldiers. One form of military corruption in the United States Armed Forces, is a military soldier being promoted in rank or being given better treatment than their colleagues by their officers, due to their race, sexual orientation, ethnicity, gender, religious beliefs, social class or personal relationships with higher-ranking officers in spite of their merit.[41] In addition to that, the US military has also had many instances of officers sexually assaulting fellow officers and in many cases, there were allegations that many of the attacks were covered up and victims were coerced to remain silent by officers of the same rank or of higher rank.[42]

Another example of military corruption, is a military officer or officers using the power of their positions to commit activities that are illegal, such as skimming logistical supplies such as food, medicine, fuel, body armor or weapons to sell on the local black market.[43][44] There have also been instances of military officials, providing equipment and combat support to criminal syndicates, private military companies and terrorist groups, without approval from their superiors.[45] As a result, many countries have a military police force to ensure that the military officers follow the laws and conduct of their respective countries but sometimes the military police have levels of corruption themselves.[46]

Corruption, the abuse of entrusted power for private gain, as defined by Transparency International[47] is systemic in the health sector. The characteristics of health systems with their concentrated supply of a service, high discretionary power of its members controlling the supply, and low accountability to others are the exact constellation of the variables described by Klitgaard, on which corruption depends.[24]^:26

Corruption in health care is more dangerous than in any other sector, because it affects health outcomes and is literally deadly.[48] It is widespread and yet, little has been published in medical journals about this topic and as of 2019 there is no evidence on what might reduce corruption in the health sector.[49] Corruption occurs within the private and public health sectors and may appear as theft, embezzlement, nepotism, bribery up til extortion, or as undue influence.[50] and occurs anywhere within the sector, be it in service provision, purchasing, construction and hiring. In 2019, Transparency International has described the 6 most common ways of service corruption as follows: absenteeism, informal payments from patients, embezzlement, inflating services and the costs of services, favouritism and manipulation of data (billing for goods and services that were never sent or done).[51]

Petrobras headquarters in downtown Rio de Janeiro.

In criminology, corporate crime refers to crimes committed either by a corporation (i.e., a business entity having a separate legal personality from the natural persons that manage its activities), or by individuals acting on behalf of a corporation or other business entity (see vicarious liability and corporate liability). Some negative behaviours by corporations may not be criminal; laws vary between jurisdictions. For example, some jurisdictions allow insider trading.

Petróleo Brasileiro S.A. — Petrobras, more commonly known as simply Petrobras (Portuguese pronunciation: [ˌpɛtɾoˈbɾas]), is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. The company's name translates to Brazilian Petroleum Corporation – Petrobras. The company was ranked No. 58 in the 2016 Fortune Global 500 list.[52] It is being investigated over corporate and political collusion and corruption.[53]

Odebrecht is a privately held Brazilian conglomerate consisting of businesses in the fields of engineering, real estate, construction, chemicals and petrochemicals. The company was founded in 1944 in Salvador da Bahia by Norberto Odebrecht, and the firm is now present in South America, Central America, North America, the Caribbean, Africa, Europe and the Middle East. Its leading company is Norberto Odebrecht Construtora.[54] Odebrecht is one of the 25 largest international construction companies and led by Odebrecht family.

In 2016, the firm's executives were examined during Operation Car Wash part of an investigation over Odebrecht Organization bribes to executives of Petrobras, in exchange for contracts and influence.[55][56][53] Operation Car Wash is an ongoing criminal money laundering and bribes related corporate crime investigation being carried out by the Federal Police of Brazil, Curitiba Branch, and judicially commanded by Judge Sérgio Moro since 17 March 2014.[57][58][59][53]

Corruption in education is a worldwide phenomenon. Corruption in admissions to universities is traditionally considered as one of the most corrupt areas of the education sector.[60] Recent attempts in some countries, such as Russia and Ukraine, to curb corruption in admissions through the abolition of university entrance examinations and introduction of standardized computer-graded tests have met backlash from part of society,[61] while other appreciate changes. Vouchers for university entrants have never materialized.[62] The cost of corruption is in that it impedes sustainable economic growth.[62]

Endemic corruption in educational institutions leads to the formation of sustainable corrupt hierarchies.[63][64][65] While higher education in Russia is distinct with widespread bribery, corruption in the US and the UK features a significant amount of fraud.[66][67] The US is distinct with grey areas and institutional corruption in the higher education sector.[68][69] Authoritarian regimes, including those in the former Soviet republics, encourage educational corruption and control universities, especially during the election campaigns.[70] This is typical for Russia,[71] Ukraine,[72] and Central Asian regimes,[73] among others. The general public is well aware of the high level of corruption in colleges and universities, including thanks to the media.[74][75] Doctoral education is no exception, with dissertations and doctoral degrees available for sale, including for politicians.[76] Russian Parliament is notorious for "highly educated" MPs[77] High levels of corruption are a result of universities not being able to break away from their Stalinist past, over bureaucratization,[78] and a clear lack of university autonomy.[79] Both quantitative and qualitative methodologies are employed to study education corruption,[80] but the topic remains largely unattended by the scholars. In many societies and international organizations, education corruption remains a taboo. In some countries, such as certain eastern European countries, some Balkan countries and certain Asian countries, corruption occurs frequently in universities.[81] This can include bribes to bypass bureaucratic procedures and bribing faculty for a grade.[81][82] The willingness to engage in corruption such as accepting bribe money in exchange for grades decreases if individuals perceive such behavior as very objectionable, i.e. a violation of social norms and if they fear sanctions regarding the severity and probability of sanctions.[82]

The Teamsters (International Brotherhood of Teamsters) is an example of how the civil RICO process can be used. For decades, the Teamsters had been substantially controlled by La Cosa Nostra. Since 1957, four of eight Teamster presidents were indicted, yet the union continued to be controlled by organized crime elements. The federal government has been successful at removing the criminal influence from this 1.4 million-member union by using the civil process.[83]

Wikiquote has quotations related to: Corruption in religion

The history of religion includes numerous examples of religious leaders calling attention to corruption in the religious practices and institutions of their time. Jewish prophets Isaiah and Amos berate the rabbinical establishment of Ancient Judea for failing to live up to the ideals of the Torah.[84] In the New Testament, Jesus accuses the rabbinical establishment of his time of hypocritically following only the ceremonial parts of the Torah and neglecting the more important elements of justice, mercy and faithfulness.[85] Corruption was one of the important issues during the Investiture Controversy. In 1517, Martin Luther accuses the Catholic Church of widespread corruption, including selling of indulgences.[86]

In 2015, Princeton University professor Kevin M. Kruse advances the thesis that business leaders in the 1930s and 1940s collaborated with clergymen, including James W. Fifield Jr., to develop and promote a new hermeneutical approach to Scripture that would de-emphasize the social Gospel and emphasize themes, such as individual salvation, more congenial to free enterprise.[87]

Business leaders, of course, had long been working to "merchandise" themselves through the appropriation of religion. In organizations such as Spiritual Mobilization, the prayer breakfast groups, and the Freedoms Foundation, they had linked capitalism and Christianity and, at the same time, likened the welfare state to godless paganism.[88]

19th-century German philosopher Arthur Schopenhauer acknowledged that academics, including philosophers, are subject to the same sources of corruption as the society they inhabit. He distinguished the corrupt "university" philosophers, whose "real concern is to earn with credit an honest livelihood for themselves and ... to enjoy a certain prestige in the eyes of the public"[89] from the genuine philosopher, whose sole motive is to discover and bear witness to the truth.

To be a philosopher, that is to say, a lover of wisdom (for wisdom is nothing but truth), it is not enough for a man to love truth, in so far as it is compatible with his own interest, with the will of his superiors, with the dogmas of the church, or with the prejudices and tastes of his contemporaries; so long as he rests content with this position, he is only a φίλαυτος [lover of self], not a φιλόσοφος [lover of wisdom]. For this title of honor is well and wisely conceived precisely by its stating that one should love the truth earnestly and with one’s whole heart, and thus unconditionally and unreservedly, above all else, and, if need be, in defiance of all else. Now the reason for this is the one previously stated that the intellect has become free, and in this state, it does not even know or understand any other interest than that of truth.[90]

"Arms for cash" can be done by either a state-sanctioned arms dealer, firm or state itself to another party it just regards as only a good business partner and not political kindred or allies, thus making them no better than regular gun runners. Arms smugglers, who are already into arms trafficking may work for them on the ground or with shipment. The money is often laundered and records are often destroyed. [91] It often breaks UN, national or international law.[91] Payment can also be in strange or indirect ways like arms paid for in post-war oil contracts, post-war hotel ownership, conflict diamonds, corporate shares or the long term post-war promises of superfus future contracts between the parties involved in it, etc...

In 2006 Transparency International ranked Angola a lowly 142 out of 163 countries in the Corruption Perception Index just after Venezuela and before the Republic of the Congo with a 2.2 rating.[92][93] Angola was at 168th place (out of 178 countries) on Transparency International's Corruption Perceptions Index (CPI), receiving a 1.9 on a scale from 0 to 10.[94] On the World Bank's 2009 Worldwide Governance Index, Angola had done very poorly on all six aspects of governance assessed. While its score for political stability improved to 35.8 in 2009 (on a 100-point scale) from 19.2 in 2004, Angola earned especially low scores for accountability, regulatory standards, and rule of law. The score for corruption declined from an extremely low 6.3 in 2004 to 5.2 in 2009.[95][96]

The country is regarded poorly and that corruption is wounding the economy badly despite the emerging oil industries wealth.[95]

The Mitterrand–Pasqua affair, also known informally as Angolagate, was an international political scandal over the secret and illegal sale and shipment of arms from the nations of Central Europe to the government of Angola by the Government of France in the 1990s. It led to arrests and judiciary actions in the 2000s, involved an illegal arms sale to Angola despite a UN embargo, with business interests in France and elsewhere improperly obtaining a share of Angolan oil revenues. The scandal has subsequently been tied to several prominent figures in French politics.[95]

42 individuals, including: 42 people, including Jean-Christophe Mitterrand, Jacques Attali, Charles Pasqua and Jean-Charles Marchiani, Pierre Falcone. Arcadi Gaydamak, Paul-Loup Sulitzer, Union for a Popular Movement deputy Georges Fenech, Philippe Courroye the son of François Mitterrand and a former French Minister of the Interior, were charged, accused, indicted or convicted with illegal arms trading, tax fraud, embezzlement, money laundering and other crimes.[95][97] "[98]

An election leaflet with money stapled to it.

Bribery involves the improper use of gifts and favours in exchange for personal gain. This is also known as kickbacks or, in the Middle East, as baksheesh. It is a common form of corruption. The types of favors given are diverse and may include money, gifts, real estate, promotions, sexual favors, employee benefits, company shares, privileges, entertainment, employment and political benefits. The personal gain that is given can be anything from actively giving preferential treatment to having an indiscretion or crime overlooked.[100]

Bribery can sometimes form a part of the systemic use of corruption for other ends, for example to perpetrate further corruption. Bribery can make officials more susceptible to blackmail or to extortion.

Embezzlement and theft involve someone with access to funds or assets illegally taking control of them. Fraud involves using deception to convince the owner of funds or assets to give them up to an unauthorized party.

Examples include the misdirection of company funds into "shadow companies" (and then into the pockets of corrupt employees), the skimming of foreign aid money, scams, electoral fraud and other corrupt activity.

The political act of graft is when funds intended for public projects are intentionally misdirected to maximize the benefits to private interests of the corrupt individuals.

While bribery is the use of positive inducements for corrupt aims, extortion and blackmail centre around the use of threats. This can be the threat of physical violence or false imprisonment as well as exposure of an individual's secrets or prior crimes.

This includes such behavior as an influential person threatening to go to the media if they do not receive speedy medical treatment (at the expense of other patients), threatening a public official with exposure of their secrets if they do not vote in a particular manner, or demanding money in exchange for continued secrecy. Another example can be a police officer being threatened with the loss of their job by their superiors, if they continued with investigating a high-ranking official.

Influence peddling is the illegal practice of using one's influence in government or connections with persons in authority to obtain favors or preferential treatment, usually in return for payment.

Networking (both Business and Personal) can be an effective way for job-seekers to gain a competitive edge over others in the job-market. The idea is to cultivate personal relationships with prospective employers, selection panelists, and others, in the hope that these personal affections will influence future hiring decisions. This form of networking has been described as an attempt to corrupt formal hiring processes, where all candidates are given an equal opportunity to demonstrate their merits to selectors. The networker is accused of seeking non-meritocratic advantage over other candidates; advantage that is based on personal fondness rather than on any objective appraisal of which candidate is most qualified for the position.[101][102]

Euro bank notes hidden in sleeve.

Abuse of discretion refers to the misuse of one's powers and decision-making facilities. Examples include a judge improperly dismissing a criminal case or a customs official using their discretion to allow a banned substance through a port.

Favouritism, nepotism and clientelism involve the favouring of not the perpetrator of corruption but someone related to them, such as a friend, family member or member of an association. Examples would include hiring or promoting a family member or staff member to a role they are not qualified for, who belongs to the same political party as you, regardless of merit.[103]

Creating bottom-up mechanisms, promoting citizens participation and encouraging the values of integrity, accountability, and transparency are crucial components of fighting corruption. As of 2012, the implementation of the "Advocacy and Legal Advice Centres (ALACs)” in Europe had led to a significant increase in the number of citizen complaints against acts of corruption received and documented[107] and also to the development of strategies for good governance by involving citizens willing to fight against corruption.[108]

In 1994, the German Parliamentary Financial Commission in Bonn presented a comparative study on "legal corruption" in industrialized OECD countries[123] They reported that in most industrial countries foreign corruption was legal, and that their foreign corrupt practices ranged from simple, through governmental subsidization (tax deduction), up to extreme cases as in Germany, where foreign corruption was fostered, whereas domestic was legally prosecuted. The German Parliamentary Financial Commission rejected a Parliamentary Proposal by the opposition, which had been aiming to limit German foreign corruption on the basis of the US Foreign Corrupt Practices Act (FCPA from 1977), thus fostering national export corporations.[124] In 1997 a corresponding OECD Anti-Bribery Convention was signed by its members.[125][126] It took until 1999, after the OECD Anti-Bribery Convention came into force, that Germany withdrew the legalization of foreign corruption.[127]

The Foreign corrupt practices of industrialized OECD countries 1994 (Parliamentary Financial Commission study, Bonn).[123]

Belgium: bribe payments are generally tax deductible as business expenses if the name and address of the beneficiary is disclosed. Under the following conditions kickbacks in connection with exports abroad are permitted for deduction even without proof of the receiver:

• Payments must be necessary in order to be able to survive against foreign competition
• They must be common in the industry
• A corresponding application must be made to the Treasury each year
• Payments must be appropriate
• The payer has to pay a lump-sum to the tax office to be fixed by the Finance Minister (at least 20% of the amount paid).

In the absence of the required conditions, for corporate taxable companies paying bribes without proof of the receiver, a special tax of 200% is charged. This special tax may, however, be abated along with the bribe amount as an operating expense.

Denmark: bribe payments are deductible when a clear operational context exists and its adequacy is maintained.

France: basically all operating expenses can be deducted. However, staff costs must correspond to an actual work done and must not be excessive compared to the operational significance. This also applies to payments to foreign parties. Here, the receiver shall specify the name and address, unless the total amount in payments per beneficiary does not exceed 500 FF. If the receiver is not disclosed the payments are considered "rémunérations occult" and are associated with the following disadvantages:

• The business expense deduction (of the bribe money) is eliminated.
• For corporations and other legal entities, a tax penalty of 100% of the "rémunérations occult" and 75% for voluntary post declaration is to be paid.
• There may be a general fine of up 200 FF fixed per case.

Japan: in Japan, bribes are deductible as business expenses that are justified by the operation (of the company) if the name and address of the recipient is specified. This also applies to payments to foreigners. If the indication of the name is refused, the expenses claimed are not recognized as operating expenses.

Canada: there is no general rule on the deductibility or non-deductibility of kickbacks and bribes. Hence the rule is that necessary expenses for obtaining the income (contract) are deductible. Payments to members of the public service and domestic administration of justice, to officers and employees and those charged with the collection of fees, entrance fees etc. for the purpose to entice the recipient to the violation of his official duties, can not be abated as business expenses as well as illegal payments according to the Criminal Code.

Luxembourg: bribes, justified by the operation (of a company) are deductible as business expenses. However, the tax authorities may require that the payer is to designate the receiver by name. If not, the expenses are not recognized as operating expenses.

Netherlands: all expenses that are directly or closely related to the business are deductible. This also applies to expenditure outside the actual business operations if they are considered beneficial as to the operation for good reasons by the management. What counts is the good merchant custom. Neither the law nor the administration is authorized to determine which expenses are not operationally justified and therefore not deductible. For the business expense deduction it is not a requirement that the recipient is specified. It is sufficient to elucidate to the satisfaction of the tax authorities that the payments are in the interest of the operation.

Austria: bribes justified by the operation (of a company) are deductible as business expenses. However, the tax authority may require that the payer names the recipient of the deducted payments exactly. If the indication of the name is denied e.g. because of business comity, the expenses claimed are not recognized as operating expenses. This principle also applies to payments to foreigners.

Switzerland: bribe payments are tax deductible if it is clearly operation initiated and the consignee is indicated.

US: (rough résumé: "generally operational expenses are deductible if they are not illegal according to the FCPA")

UK: kickbacks and bribes are deductible if they have been paid for operating purposes. The tax authority may request the name and address of the recipient."

Referring to the recommendation of the above-mentioned Parliamentary Financial Commission's study,[123] the then Kohl administration (1991–1994) decided to maintain the legality of corruption against officials exclusively in foreign transactions[128] and confirmed the full deductibility of bribe money, co-financing thus a specific nationalistic corruption practice (§4 Abs. 5 Nr. 10 EStG, valid until 19 March 1999) in contradiction to the 1994 OECD recommendation.[129] The respective law was not changed before the OECD Convention also in Germany came into force (1999).[130] According to the Parliamentary Financial Commission's study, however, in 1994 most countries' corruption practices were not nationalistic and much more limited by the respective laws compared to Germany.[131]

Development of the shadow economy in (West-) Germany 1975–2015. Original shadow economy data from Friedrich Schneider, University Linz.

Particularly, the non-disclosure of the bribe money recipients' name in tax declarations had been a powerful instrument for Legal Corruption during the 1990s for German corporations, enabling them to block foreign legal jurisdictions which intended to fight corruption in their countries. Hence, they uncontrolled established a strong network of clientelism around Europe (e.g. SIEMENS)[132] along with the formation of the European Single Market in the upcoming European Union and the Eurozone. Moreover, in order to further strengthen active corruption the prosecution of tax evasion during that decade had been severely limited. German tax authorities were instructed to refuse any disclosure of bribe recipients' names from tax declarations to the German criminal prosecution.[133] As a result, German corporations have been systematically increasing their informal economy from 1980 until today up to 350 bn € per annum (see diagram on the right), thus continuously feeding their black money reserves.[134]

In 2007, Siemens was convicted in the District Court of Darmstadt of criminal corruption against the Italian corporation Enel Power SpA. Siemens had paid almost €3.5 million in bribes to be selected for a €200 million project from the Italian corporation, partially owned by the government. The deal was handled through black money accounts in Switzerland and Liechtenstein that were established specifically for such purposes.[135] Because the crime was committed in 1999, after the OECD convention had come into force, this foreign corrupt practice could be prosecuted. It was the first time a German court of law convicted foreign corrupt practices like a national practice, although the corresponding law did not yet protect foreign competitors in business.[136]

During the judicial proceedings it was disclosed that numerous such black accounts had been established in the past decades.[132]