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Rampant “Legalized” Corruptions Unmentioned

While the recent sensationalized story in the media painted a bleak picture of state of corruption, there is a much undiscussed topic of “legalized” corruptions in many forms.

Undoubtedly, because such corruptions have somehow become “legalized” in some nations, the amount of them are rampant and costly.

I like to start a discussion of them here.  I will take a stab at making an initial list.  Commentors are welcome to add their own.

(1) political lobbying.

This is a billion dollar industry, legalized to peddle political influence for various things, good PR, endorsements, campaign funds, etc.  It’s one thing to say, “vote for me, and I’ll ….”  But many politicians and lobbyists are using more than “votes” to exchange for political decisions.

(2) Corporate-Government collusion.

It may sound fishy for corporations to somewhat “bribe” politicians.  It may be also fishy for corporations and politicians to start working together, because that’s when public money and corporate money become mingled, and no one can really tell who’s paying for what and who’s getting the benefits.

Worse yet, corporations by working with the government, often get legal immunity from prosecution, for doing bad things against private citizens in the name of the government and the public.

For example:  Recently, Snowden revealed that large tech companies like Google, Apple, Microsoft, AT&T, Verizon have been helping NSA to spy on pretty much everyone on the net.  These companies undoubtedly got some favorable economic benefits.  Google was lobbying for fat government contracts to provide Gmail servers.  Of course, some of them excused their actions as “compelled” by the Government, but let’s face it, that’s also a “get out of jail free” card that they got from the Government.  You can’t sue them for doing what the government wanted them to do.  (even if they could have just said no).

Other examples are plenty:  Government grants tons of money to companies for “development” projects, every where.  At the very least, they are just corporate welfare.  On the more shady side, it’s also political kickbacks, because many of the companies that do a lot of work with Government also hire EX-government employees!!  For example, Snowden’s ex-employer Booz Allan have a lot of ex-government employees on their board of directors, earning WAY more than what they used to earn in the Government.  You wonder why?  Another example:  Department of Interior, which is in charge of mineral rights to oil companies, have high ranking officials who used to work for oil companies, and oil companies hire some of them upon exiting the government (like a revolving door of kickbacks).

(3) Media-Government Collusion.

Well, media companies are also corporations, which are also people.  They also collude with the government, big time.  They may chase stories and scandals, but they are wise enough to work with the government, especially on “messaging” to the public.

Why?  Well, media companies are also lazy and greedy, just like any other corporation.  They want more money for less work.

So why dig at US government’s well protected dirty secrets, when it’s much easier to just take some rumors from the US government about foreign nations, and make up stories on it?

Wag the Dog, but you have to pet it nicely too.

(4) Privatized Penal System.

This is generally not discussed, but becoming prevalent in the West, where population of the incarcerated have ballooned.  The governments overwhelmed by the cost, increasingly turn to “private prisons” for cheaper solutions.  Invariably, this is a hand-waving of responsibilities.  And invariably, abuse and corruption mounts.

First, instead of decreasing cost to the public, the private prisons bilks the public, while they hire lobbyists to keep lobbying the government for more money.

Second, even worse, abuse of prisoners becomes rampant in such legalized “racket”.  Particularly, in immigration detention prisons and juvenile detention centers, where the young and the illegal immigrants are weak and vulnerable to abuses.


It might be bad enough to have corrupt officials running prisons on public tax money, it’s far worse to have corporations get into the racket and run amuck profiting on abuse.

Government punishing prisoners is a necessity of legal systems, but private companies doing it for profit, that becomes just another form of “slavery”.

(5) Protecting Dirty Secrets of Corporations.

It’s bad when governments want to hide dirty secrets, and every government has some.  Thus, “transparency” is often important, to a degree that some legitimate secrets of national security should be protected.

But it’s really bad when companies’ dirty secrets are protected by laws, passed by corporate lobbying in the name of protecting business interests.

Particularly in US, traditional “trade secret” laws are now stretched far beyond the intended scopes.  In the old days, “trade secret” just means some kind of recipe, secret formula, secret method, for making things.  But now, “trade secret” laws are increasingly applied to protect vague “financial information” of corporations, even old data.

Such data are not particularly useful, EXCEPT when the data may reveal wrong doing of the corporations.

Yes, in a word, today, corporations are using “trade secrets” to hide their misdeeds, and to go after potential “whistleblowers”.

Company emails of stockbrokers discussing how to sell junk funds to clients, labeled “confidential”, are considered “business strategy”, and thus “trade secret”.  Sure they went after a few guys here and there, but those were the few sacrificial lambs, where most of the others got away with it and are still making money with the same dirty scams (too big to prosecute).

Whistleblowers have little protection, and government don’t tell either.  Indeed, Politicians who may get wind of companies’ confidential information are actually free to profit from disclosures to government.  Boom!  You get companies and politicians profiting by cheating the public.  Not many politicians in US got stuck with worthless mortgage backed mutual funds.  Yeah, that’s why.

The real “trade secret” in US these days, is that the public really doesn’t know what’s going on in their government and their corporations, which are in league with each other to cheat the public.

If you try to expose them, you are a “hacker” or even a “traitor” who stole the companies’ secrets, or exposed it to foreign nations.

(6) Medical Cost.

As a basic necessity in modern time, medical cost is out of control, because it’s another racket, controlled by pharma monopolies and special “masters” who just make up ridiculous numbers for fees to justify their own ridiculous salaries, all while the US government is hopelessly ignoring the extent of the problem.

It almost makes the open bribes in 3rd world hospitals look sane and tame by comparison.  You can at least haggle with a 3rd world hospital doctor.  You can’t haggle with some nameless “master” who send you a $5000 medical bill.


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  1. Wahaha
    July 11th, 2013 at 20:15 | #1

    Well, media companies are also corporations, which are also people.

    Media and journalists are not part of people anymore since TV becomes popular, because they control what people know and what people care. Westerners never pay attention to the corruptions in their countries because mainstream media didn’t “define” those as corruptions.

    There are four kinds of corruption, from lowest to highest :

    (1) cash bribery. I don’t have to explain what it is.

    (2) asset bribery. For example, sell an apartment to government officers at price much lower than market value.

    (3) controlling business opportunities. If there are good business opportunities, everyone wants a piece of it. So those who can get the offers or contracts are the ones who make money. If you have family business, being a powerful politician secures the business opportunities for your family business in lot of ways. People will love to give the contracts to your family business compared to other available options. Of course you will return the favors in favor through the political power you have, like giving them state contracts, or paying them higher for the contract.

    (4) mutual trust between politicians and businessmen, that is, politicians work for businessmen when they are in office and believe he will get in return after leaving office. Why do you think Clinton has given so many 5 min speeches, each paid tens of thousands of dollars? While Brooksley Born, the one who tried to contain Wall St, was never given such opportunities?

  2. Wahaha
    July 11th, 2013 at 20:18 | #2

    #1 and #2 kinds of corruptions happen everywhere, more or less, once caught, it is very hard to make a case for yourself. #3 and #4 kinds are legalized corruptions, WHICH INVOLVE LOT LOT LOT MORE MONEY THAN #1 AND #2. MOST IMPORTANTLY, IN A SOCIETY RULED BY LAW, GOVERNMENT CAN HARDLY DO ANYTHING TO PUNISH THE PEOPLE WHO COMMITTED SUCH CORRUPTIONS, because it is almost impossible to collect enough evidence.

    The less developed a country is, the more junior forms of corruptions are, because of limited economic size and lack of business opportunities; the more developed a country is, the more senior form of corruptions are, because politicians HAVE BETTER WAY TO GET MONEY FOR THEMSELVES, they don’t have to commit the junior form of corruptions which will put themselves in danger of criminal investigations.

    You can see in developing countries, like India, Indonesia, Philippines, and China in 80s and 90s, #1 and #2 corruptions are very common.

    Since mid 2000s in China, #3 kind of corruptions have started to spread (no #4 corruption in China because of the system), WHICH “FREE” MEDIA HAS GREAT INTEREST BECAUSE IT HAPPENS IN CHINA, THEREFORE SUCH CORRUPTIONS IN CHINA SERVER THEIR POLITICAL GOALS.


  3. Wahaha
    July 11th, 2013 at 20:46 | #3

    BTW, there are 4 basic forms of powers :

    Power over capital
    Power over natural resource
    Power over individual physically
    Power over information and public opinion (mind control)

    Anyone, who have significantly more of any kind of the powers above over common people, are not part the people. Therefore, government, capitalists who use their money to control government, media and journalists who try to control public opinions, are not people.

    Also, criminals and parasites are not part of people.

  4. July 12th, 2013 at 05:00 | #4

    Here is an example of legalized corruption that’s all too common & goes completely unpunished in the US:


    Meredith Baker – a commissioner at the Federal Communications Commission (FCC), resigned her post at the FCC merely weeks after she got the Comcast NBC M&A approved, to join the new entity as its VP of governmental affairs. Now, I’m sure the possibility of a cushy multi-million dollar executive job had “nothing” to do with how she voted…

    Anyway, the business model here is simple & obvious enough: get a job at a government regulatory agency, play nice with businesses that will offer nice compensation, then use the agency as a stepping stone to a more profitable private sector job.

  5. Charles Liu
    July 15th, 2013 at 19:09 | #5

    Anyone still remember the sweetheart no bid contract given to VP Cheney‘s croonies for work in Iraq?

  6. Panthera Tigris Amoyensis
    July 22nd, 2013 at 05:32 | #6

    The GSK thing is going to snare a few foreign expats. Probably ones that China considers they can do without – probably those who they know elsewhere are dodgy or who have been evading tax. One such is Peter Humphrey, ironically a fraud investigator who was booted out of PwC I understand for some ‘irregular’ activities. He then set up ChinaWhys, a consultancy that advised GSK. He’s just been arrested in Shanghai: http://n.mynews.ly/!MB.qqrL

    It’ll be interesting to see who else in China’s expat community gets busted. You could say, “It takes a thief to catch a thief” and China’s tolerance is wearing thin. That’s a good thang imho.

  7. Black Pheonix
    July 22nd, 2013 at 11:45 | #7

    Peter Humphrey’s “consulting” company deals with “risk management” relating to corruption.

    I.e. he’s not there to find corruptions, he’s there to help companies find ways to get away with corruptions.

    There is absolutely no way a company like GSK would not know about such huge amounts of money being funneled through China travel agencies as bribes.

    I.e. someone in GSK UK knew about it, and probably set it up.

    I.e. someone else (like Peter Humphrey) was consulted ahead of time to determine the “risk” involved in the set up. (If Humphrey was investigating corruption, and he was supposedly a good investigator, he should have found it a long time ago).

  8. Black Pheonix
    July 22nd, 2013 at 12:15 | #8

    I should also mention that earlier in 2013, Caterpillar’s China subsidiary imploded due to financial accounting irregularities, but the “cheaters” in question may have been 2 Americans:


    Also, interestingly, PwC was the auditing firm that missed the Caterpillar fraud numbers. Was Peter Humphrey involved in that deal?


    PwC has been Caterpillar’s independent auditor since 1923, according to Audit Analytics. Audit fees hovered at between $21 and $23 million dollars since 2007, but in 2011 they jumped to almost $32 million.

    PwC watched Caterpillar executives quickly acquire Siwei, a Chinese company, last year. Caterpillar executives now say Siwei is full of fraud. PwC may have assisted with the “integration” of Siwei and with the on boarding of monster $8.8 billion acquisition Bucyrus in 2011. It would be nice to think PwC helped identify the Siwei discrepancies during the integration of the company into Caterpillar’s books. Discrepancies with inventory and revenue recognition forced the write off of $580 million of the $653 million Siwei purchase price.

    But what of all the red flags at Caterpillar before the Siwei acquisition? Back in November, research firm GMI Ratings published its second “Black Swan Risk List”, identifying 40 North American companies with the highest risk of major drops in share prices within the next six months.

    Caterpillar is on it.

    At the time, James A. Kaplan, GMI Ratings chief executive, noted:

    “We released our first Black Swan Risk List last week, a day before one of the companies on the list (Hewlett-Packard) announced an $8.8 billion write-down that reflected material misrepresentations and disclosure failures. Beyond validating the inclusion of HP on our risk list, the announcement provided the latest illustration of the importance of forensic accounting in the analysis of issuer risk.”

    Caterpillar’s board admits to the same mistakes HP did with its acquisition of Autonomy – the board was not paying attention to C-suite hunger for “strategic” acquisitions at any cost. A member of the Caterpillar board told Reuters the board was distracted at the time of the Siwei deal by a larger transaction.

    “It came as a complete surprise to us,” the former board member said of the fraud, speaking on condition of anonymity because of the sensitivity of the situation. “It was presented to us as a pretty straightforward transaction. It’s a shame. It should have been investigated further.”

    PwC doesn’t seem to have met its obligations to assess “tone at the top” – the controls that senior executives, the board and internal audit are supposed to provide that manage Caterpillar’s risk of exposure to fraud and illegal acts.

  9. Panthera Tigris Amoyensis
    July 23rd, 2013 at 08:00 | #9

    @Black Phoenix – My intelligence in Shanghai says Peter Humphrey used to work for PwC when they had a compliance division. Word on the street is there was some shenanigans and he was fired. PwC wound that up shortly afterwards you can’t have independent auditors doing business advisory and compliance it’s too close to the bone. I heard even Mr. CDE got rid of him after a trial with his firm. This means Humphrey seems to have some “previous” and some skeletons in the closet. He’s a clever man but seems got caught. It’s a shrewd observation of yours “risk management is how to tell investors the liklelihood of being caught doing something illegal”.

    Back to the “high” quality of Western reporting mentioned before on this blog. The Financial Times identified him as “Stephen” Humphrey. The guy has like only been in China forever. Duh!

  10. Black Pheonix
    July 23rd, 2013 at 08:43 | #10

    1st US citizen detained in connection with China’s GSK corruption probe.


    NPR this morning discussed this investigation, and portrayed corruption in Chinese medical profession as “routine”, and questioned why China is targeting foreign companies.

    NPR’s expert cites an example that patients in China routinely pay “tips” to the doctors.

    I think there is a rather huge difference between (1) patients paying “tips” to doctors vs. (2) drug companies paying doctors to sell drugs.

    If (1) is corrupt, then corruption is quite routine in US (as “tip” paying is rampant).

    (2) is corrupt, even under US laws. “routine” doesn’t exempt you from prosecution under FCPA.

  11. Black Pheonix
    July 23rd, 2013 at 11:16 | #11

    China widens corruption probe, to pretty much any companies or individuals connected to the “travel agencies” used to funnel bribes.

    Also, exposing massive corruption funnel of the “Continuing Medical Education”/CME.


    ***”Continuing medical education (CME) has long been a major area of investment for drug companies as they seek to encourage doctors to use their products by taking them to meetings where the latest advances in medicine are discussed.

    In the United States and western Europe, such CME funding for doctors is now tightly controlled. But there is little oversight in emerging markets.”

    I would actually dispute the last generalized statement, CME is a rampant corruption funnel in the West as well.

    My wife used to do medical billing for a clinic in US, and she told me how the medical supply companies regularly come “bribe” doctors with various gifts/ gift cards for attending CME sessions.

    CME conferences are known to be large “boondoggle” trips.

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