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Entries in Pacific Consultants International (2)

Sunday
Feb152009

Vietnam In The News

Last month we reported the conviction in a Tokyo court of three Japanes executives and their company on charges of bribing a senior Vietnamese government official. The illegal payments of $820,000 were intended to secure contracts for road projects backed by Japanese aid money. In court, the recipient of the bribes was identified as Huynh Ngoc Sy, an official in Ho Chi Minh City.

Last week, the Vietnam News Agency reported the arrest of the same Mr. Sy, 56, for "abuse of power." He was the former deputy director of Ho Chi Minh City’s Department of Transport, and the former director of the East-West Highway and City Water Environment Improvement projects. After his arrest, investigators from the Ministry of Public Security’s Anti-corruption Department searched his house. Police also arrested Sy’s deputy, Le Qua, and searched his house.

In November last year, Sy was suspended from his job and banned from traveling outside Vietnam. That action came after the country's Prime Minister, Nguyen Tan Dung, directed his government to "co-operate with Japanese agencies investigating allegations that officials of a Japanese firm had bribed Vietnamese officials to get project contracts."

Vietnam's biggest aid provider is Japan. But the bribery scandal caused such a flap in Japan that it suspended aid, including low-interest loans for infrastructure projects. Vietnam's state television reported last week that following Sy's arrest, Vietnam's prime minister asked Japan to resume the loan program.

Japan has a low incidence of domestic public corruption -- it ranked 18th on the 2008 Corruption Perception Index, tied with Belgium and the United States. But until this case, it hadn't prosecuted any overseas bribery cases. In June 2008, the OECD criticized Japan for its "lagging" enforcement. We speculated that this case went to court only because it involved the misuse of Japanese taxpayer funds in the foreign aid program.

Vietnam is ranked 121st on the 2008 Corruption Perception Index, tied with Nepal, Nigeria, Sao Tome and Principe, and Togo. Despite Vietnam's corruption-prone reputation, it wasn't named in any Foreign Corrupt Practices Act enforcement actions until recently. In September 2008, U.S. citizens Nam Nguyen, Joseph Lukas, Kim Nguyen, and An Nguyen, along with their Philadelphia-based company, Nexus Technologies, were charged under the Foreign Corrupt Practices Act with bribing government officials in Vietnam. The alleged bribes were intended to secure contracts to supply high-tech items -- including third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems. Their trial is pending.

In December 2008, Siemens' guilty plea to FCPA books and records violations involved Vietnam. The Securities and Exchange Commission's complaint (download the pdf here) said Siemens' medical division "paid $183,000 in early 2005 and $200,000 in early 2006 in connection with the sale of approximately $6 million of medical devices on two projects involving the Vietnamese Ministry of Health." And in 2002, the complaint said, Siemens' communications division paid about $140,000 in bribes as "part of a much larger bribery scheme concocted by high-level managers at Siemens regional company in Vietnam, SLV, to pay bribes to government officials at Vietel and the Vietnamese Ministry of Defense in order to acquire Phase I of the Vietel GSM tender."
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Sunday
Feb012009

It's A Start

We've never come across any good news to report about Japan's overseas anticorruption enforcement. Until now, that is. Last Thursday, according to an AFP report, a court in Tokyo convicted three former executives and their consulting company for bribery in Vietnam.

The three men -- Haruo Sakashita, 62, Kunio Takasu, 66, and Tsuneo Sakano, 59, all former executives of Tokyo-based Pacific Consultants International, or PCI -- admitted bribing a senior Vietnamese government official to secure contracts for road projects backed by Japanese aid money. The Japanese press said the former PCI executives admitted paying $820,000 in bribes to Huynh Ngoc Sy, who was then the Ho Chi Minh City senior transport official named in the Tokyo trial. Prosecutors said PCI had promised Sy a total of $2.6 million for awarding consulting contracts to the firm in connection with road projects in Vietnam financed by Japan's Official Development Assistance program. The scandal caused by the case resulted in Japan's suspending all aid loans to Vietnam.

"The crime was devious, organized and calculated. PCI systematically supplied cash to foreign government employees with the agreement of the top cadre," said the Tokyo District Court judge. "This has inevitably led to a loss of confidence in our country's Official Development Assistance activities, and the result is serious," he said.

Despite his tough talk, the judge suspended the ¥70 million ($780,000) fine he imposed on the defendants and didn't sentence the men to any prison time. AFP said in its report, "Japanese courts often spare prison time, particularly for white-collar crime, if the accused admit the allegations."

Japan is among the 37 countries that have joined the OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions. But along with the United Kingdom, Japan comes in for regular criticism from the OECD for failing to prosecute overseas bribery. In this case, we suspect the Japanese government was forced to act because tax-payer funded foreign aid was involved.
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