Case Analysis

The foreman, CHAN, offered an advantage to the engineer (i.e. an employee and hence agent of the construction company) as a reward for assisting him to falsify attendance records, contrary to Section 9(2) of the Prevention of Bribery Ordinance (Cap.201) (POBO). Irrespective of whether the engineer accepts or rejects the bribe, the act of offering (by CHAN) already constitutes a criminal offence.  Should the engineer have accepted the bribe, the engineer would have committed a corruption offence and be charged under Section 9(1) of the POBO.    In addition, regardless of whether the engineer accepted the bribe, if he assists CHAN in falsifying the attendance record, this would amount to an offence under Section 9(3) of the POBO.  This provision stipulates that it is an offence for an employee to use any false document, receipt or account to deceive his employer.  Improper ethical behaviour may also lead to the revocation or suspension of a professional registration with a professional body and as a result the engineer would be restricted/prohibited from practice.

Case in Perspective

The lack of supervisory control and reliance on a manual tracking system over localised staff attendance create opportunities for personnel to abuse delegated authority, engage in unauthorised absences, commit payroll fraud, or offer bribes to secure the collusion of checking officers.  To address this problem, the main contractor should establish a system to strengthen attendance tracking and staff administration by implementing the following control measures –

(a) Eliminate susceptible manual systems and implement a digital attendance management system (e.g. fingerprint or facial recognition);

(b) In the interim, supplement manual systems with CCTV to authenticate staff presence, deter impersonation and provide verifiable records of attendance; and

(c) Conduct surprise on-site spot checks and physical headcounts to verify real-time worker presence by supervisors and/or independent units. 

Case Analysis

Under Section 9(1) of the Prevention of Bribery Ordinance (Cap.201) (POBO), it would be an offence if David (i.e. agent), without the approval of his employer (i.e. principal), accepted the advantage (i.e. the financial assistance to the down payment of the new flat) as an inducement to assisting Mr. CHAN to get the tender.  Meanwhile, Mr. CHAN might also be liable for promising to offer bribes to David under Section 9(2) of the POBO.

By leaking the insider information to Mr. CHAN, David might also breach the Rules of Conduct of the Hong Kong Institution of Engineers, which prohibited engineers from disclosing confidential information and required them to act in the best interest of the employers.

Corruption would impair fair competition and put public safety at stake.  The quality of work would be in question as the sub-contractor was not chosen by an objective assessment of its competence and capability.  To uphold professional ethics and avoid breaching the law, David should say no to Mr. CHAN’s request and report the matter to his company and/or the ICAC.

Case in Perspective

Leakage of sensitive or confidential tender information (e.g. bid prices) by compromised personnel to favour a particular bidder will undermine fair competition and integrity of the procurement process.  To prevent such malpractice, the company should establish a robust procurement system to ensure the selection of the most suitable contractor based on merit.  For example, 

(a) Take precautionary measures to prevent leakage of tender information, such as receiving tenders through secure electronic channels with the password split and separately held by different staff members, and tasking an independent team to witness tender opening;

(b) Prohibit the opening of tenders received before the deadline, and ensure tenders remain in the custody of designated officer to minimise the risk of information leakage;

(c) Accept late tenders only with the endorsement of the management (or the tender board, if any) on justifiable grounds; 

(d) Require staff involved in procurement to declare whether they have any conflict of interest in the matter, and manage any declared conflict to mitigate integrity risks; and

(e) Maintain proper documentation of the tendering process, including but not limited to meeting minutes, tender evaluation and negotiation, correspondence, and declaration and management of conflict of interest, to facilitate independent audits and ensure accountability. 

Chui and the construction workers, as employees of the construction company, submitted the false attendance records with the intention to deceive salaries from their employer had violated Section 9(3) of the Prevention of Bribery Ordinance (POBO).

Bobby was facing an ethical dilemma that might put his personal values such as responsibility and honesty to challenge. On one hand, he had the supervisory responsibility to report the misconduct of the workers to the company; on the other hand, it might reflect badly on him if Clint learnt that he failed to discharge his supervisory duties properly. In handling the situation, Bobby should identify the relevant facts and take stock of all stakeholders concerned. The following factors should be taken into consideration when identifying viable alternatives and choosing the best course of action for himself:

1. Does his decision violate any professional, industry specific, or company code of conduct?
2. Is his decision against the law?
3. Does it correspond with his self-values such as honesty and responsibility?
4. Can he disclose the decision to others openly and honestly without misgivings?

The ETHICS PLUS ethical decision making model might be helpful for him in solving the dilemma.

Alan breaks the *Codes of Conduct and Section 9 of the Prevention of Bribery Ordinance (POBO) as he agrees to abuse his official position as a member of the broker selection committee by persuading other members to offer business to Agnes and accepts rebate in return without permission from his employer. Likewise, Agnes also breaches the Codes of Conduct and the PBO for offering an illegal advantage to Alan.   Although Alan hasn’t executed the "under-the-table" deal, both of them still commit a corruption offence.   Under the law, a person will be found guilty even though the purpose of bribery has not been carried out.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

In this case, the senior credit manager, an employee (agent) of the bank (the principal), without the permission from the bank, accepted an advantage (a watch) from factory owner as a reward for turning a blind eye to the out-dated equipment and giving him a favourable site inspection report (an act in relation to the bank’s business). Although the acceptance of gifts took place outside Hong Kong, part of the bribery act occurred in Hong Kong (e.g. submission of a favourable report to the bank). The senior credit manager might breach Section 9(1) of the Prevention of Bribery Ordinance (POBO) for accepting bribes, whereas the factory owner might contravene Section 9(2) of the POBO for offering bribes. The senior credit manager might have also contravened the Banking Ordinance.

Although the senior credit manager was the supervisor of the credit manager, he did not have the authority to permit his subordinates to accept the advantage.

It is very common for banks’ corporate clients to have their business operations such as production plants or other assets in the Mainland or elsewhere outside Hong Kong. When site inspection/ visit by bank staff is required in assessing a loan application, the staff members are exposed to significant risk of temptation, which may comprise bribes, gifts, and excessive entertainment or services.

In fact, assigning staff members of the same unit (in particular one of them is the supervisor of the other one) to conduct high corruption-risk tasks is a formula of disaster. The credit manager did not decline the gift offer at the spot probably because of the pressure from his supervisor, and might eventually be tempted to collude with his supervisor.

Due to the differences in various cultures, some customers from other regions may regard offering gifts/ rewards in return for assistance or favour as a common business practice.  Banks should make it clear to their staff members that it is unnecessary and inappropriate for bank staff members to adopt local cultures which may violate the laws.  Moreover, an independent, reliable and confidential channel of reporting malpractices should be established by banks to encourage whistle-blowing.  Furthermore, it is essential for banks to communicate clearly to all staff members and customers, especially non-local ones, about the bank’s policies on anti-bribery, acceptance of advantages / entertainment and zero tolerance to corruption.

Mr Kwok, as an employee, might commit an offence under Section 9 of the Prevention of Bribery Ordinance (POBO) for, without the approval from his employer, soliciting and accepting an advantage (i.e. the ‘under-the-table’ commission offered by Raymond and Freddy) for recommending the listed company to buy their properties.  Meanwhile, Raymond and Freddy both might also violate Section 9 of POBO for offering bribes.

Individual ethics and corporate culture are among the key factors which shape a company’s corporate governance. Company directors and senior executives serving the company should serve as role models.

Mr Kwok, who held an influential position at the company’s property investment, should have used the power bestowed on him by the listed company to protect its interests.  However, Mr Kwok abused his company’s trust for personal gain and violated the law instead.  

It is important for the company to work on an ethical culture at the corporate level through practicing ethical leadership, giving clear guidance on ethical standard expected of staff, managing integrity training and putting in place a comprehensive internal control system which helps company prevent and detect crime or malpractices as early as possible.