Can bribes paid by private firms cause “social damage”?

Yes! It is possible that firm pays for the damages caused to a society at large when caught bribing governmental officials! This is the case now in Costa Rica where Alcatel-Lucent, the French-American communications company, agreed to pay US $10 million to the Costa Rican State as a compensation for the “social damage” provoked to the Costa Rican society after a scandal that involved US $2.5 million in bribes to ensure a cell-phones contract under the Costa Rican presidential term 1998-2002.

The concept of “social damage” implies that a financial retribution should be made by those found guilty of a corruption crime to repair the damage caused to a society. It is a quite innovative concept introduced in 1998 in Costa Rica – unique in Latin America - that has been used by the Office of the Public Ethics Prosecutor in their investigations against two former Costa Rican Presidents and European firms, including Rodríguez and Alcatel-Lucent, involved in major corruption cases.

The total amount requested by the Office of the Public Ethics Prosecutor as a result of the damage caused to society by the seven parties accused of corruption has been set in this case at US $52 million. The agreement reached with Alcatel-Lucent – by which the company accepted paying the bribes – is expected to be validated by a Court in the next few days and it won’t stop the Prosecutor’s Office, the General Attorney and other damaged institutions from continue seeking further civil and penal consequences for those involved in the scandal.

A landmark for the anti-corruption struggle?

Definitively yes! The concept of “social damage” is meant clearly for all of those who try to keep governments and companies accountable for their acts, mostly when huge amounts of tax payers money are in question and even more when such major corruption scandals occur in societies in need. Now, the concept can count on legal arguments and a specific reference of success. While the “social damage” concept achieves a wider use in other countries and regions, those advocating for private firms’ responsibility in fighting corruption can look at Costa Rica to continue building their demands.

What if all major multinationals that have paid bribes to ensure contracts going in the millions recognise their faults in local courts and compensate societies for their corrupt practices without further conditions? …we are getting there!

PS: By the way, isn’t this a case of transnational bribery falling under the OECD Anti-Bribery Convention? An Alcatel-Lucent executive was indeed condemned in the US in 2008 for this case, any echo in Europe?

PPS: And most importantly: congratulations to all Costa Ricans and the Office of the Public Ethics Prosecutor!

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About Andrés Hernandez

Andrés Hernández is a Senior Programme Coordinator for Central America at Transparency International.

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6 Responses to Can bribes paid by private firms cause “social damage”?

  1. Delia Ferreira Rubio 26 January 2010 at 5:07 pm #

    Gracias por el informe.
    El caso es muy interesante y puede abrir camino en la construcción de la doctrina del daño social producido por los casos de corrupción.

  2. Miguel Angel Rodríguez 2 February 2010 at 1:42 am #

    I take exception to some untruthful element of your commentary ‘Can Bribes paid by Private Firms Cause “Social Damage”?’. The first paragraph states as a fact that bribes were paid to a former president, and my name is mentioned. Well, there is not such a fact. The truth is that five and a half years after voluntarily resigning as Secretary General of the OAS -and voluntarily returning to Costa Rica to make myself available to the judiciary system-, the case is still pending trial. Furthermore, of the five charges that had been investigated, a judge ordered to eliminate 3 of them, leaving only 2 standing for the trial. Again, a judicial decision is pending and I am totally confident my defense will prove the remaining charges are unsubstantiated. Therefore, I respectfully ask you to clarify the false implication of your statement.

  3. ahernandez 2 February 2010 at 10:45 pm #

    Dear Mr Miguel Angel Rodriguez, thank you for your comment. The language in the post has been revised.

  4. mikkechuksy 12 June 2010 at 7:06 pm #

    How does the society benefit from the compensation paid by the offenders if actually we agree in practice and not just in principle that the society was injured by such offence? It is quite a good thing to deal with such offenders but the injured society should be positively impacted on by the compensation paid so that the transparency can have no question mark. or what do you say?

Trackbacks/Pingbacks

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