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U.S. probes Uber for possible bribery law violations

210 points by zeep 9y ago

altotrees 9y ago
So, potentially stupid question but here goes...with a new CEO coming in, what impact will this have on the company in the short-term? Did they foresee this probe coming or is this something that they will have to scramble to react to? I mean it sounds like they may have expected this investigation with the handling of obtaining medical records, but wow.
- TheAdamAndChe 9y ago
  > Did they foresee this probe coming or is this something that they will have to scramble to react to? It depends entirely on whether or not this was a top-down decision. The most efficiently run companies consider the likely returns on illegal activity and the potential ramifications of getting caught. If the math works out in favor of the illegal behavior, they'll go ahead and do that. Depending on the nature of the illegal behavior, they may save for a fund that would pay for costs of being caught. The math isn't just about money in vs money out, either. The best consider the effect on the brand, cost of a PR campaign, potential legal changes, lobbying fees(to make currently illegal behavior legal), the likelihood of getting caught in the first place, and a lot of other stuff that I'm probably not thinking about. It's not right, but when shareholders demand exponential growth, the owners and managers will do what is necessary to make that happen.
  - exelius 9y ago
    Come on -- the case in question is in India. Bribes are a way of life there. You literally cannot do business there without paying bribes. Nobody had to tell anyone to pay the bribe; if they're anything like every other company I've worked with over there, they have an official slush fund for this stuff. You just do it. Now, it's pretty abhorrent that they doxed a rape victim; and that behavior is reason enough to investigate IMO. But the bribery part? Literally everyone does it because you have to if you want anything to get done there as a foreigner / foreign company.
    - TheAdamAndChe 9y ago
      That's correct - and it definitely affects the math involved. It would be way more expensive in many ways to be involved in bribery in a larger country like Canada, to the point that the illegal activity likely wouldn't be worth the potential cost. But in India, the cost of such illegal activity is very different, thus is more likely to be worth it.
    - ajdlinux 9y ago
      I don't know about the US, but in Australia, our foreign bribery laws explicitly exempt "facilitation payments", i.e. bribes that are customarily paid to grease the wheels of bureaucracy and get routine government actions done. However, that certainly wouldn't cover anything like this alleged rape doxxing, and it also wouldn't cover bribes intended to secure new business, which are presumably extremely common in countries like India.
      - dbuxton 9y ago
        The FCPA similarly differentiates. However the practical problem is that running a defense based on whether a certain activity was a facilitation payment (to secure the performance of a "routine government action") means you essentially have to admit that the potentially unlawful activity actually took place, and you move onto generally very treacherous ground. For that reason most companies don't go that route. In any case as others have noted it's not relevant here because getting someone's medical records isn't a service that you're entitled to.
      - tryingagainbro 9y ago
        However, that certainly wouldn't cover anything like this alleged rape doxxing The article didn't say anything about the rape case. Getting her info could have cost less than $100, but staying in business in certain countries could run in tens of millions.
        saghm 9y ago
        > The article didn't say anything about the rape case. From TFA: "Reuters in June reported that Uber had hired a law firm to investigate how it obtained the medical records of an Indian woman who was raped by an Uber driver in 2014." > Getting her info could have cost less than $100, but staying in business in certain countries could run in tens of millions. I'm honestly not sure what point you're trying to make here. Regardless of the calculus, it was morally bankrupt and probably illegal.
  - ThrustVectoring 9y ago
    The best run companies transform top-down decisions into bottom-up ones, helpfully protecting executives from consequences. How it works is through setting high expectations in a "get it done" culture, and then carefully cultivating strategic ignorance about illegal activity that's positive value.
dreamcompiler 9y ago
Oh wow. FCPA violations. One of the key rules of American business is that you do not dance around with the FCPA [0]. (I suspect many new startup managers are not familiar with the FCPA but you can bet their investors are.) Violations of the FCPA do not just result in fines, they result in actual jail time for whomever did the bribing, whether they be individual low-level employees, contractors, or CEOs. That said, the FCPA explicitly allows small "greasing" bribes that encourage low-level bureaucrats to expedite some action they would have taken anyway -- when such greasing payments are legal in the country in question. Obtaining the medical records of a rape victim certainly does not fall within this exception. [0] https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act
- rayiner 9y ago
  Note that the facilitation payment exception to the FCPA is (i) extremely narrow; (ii) still requires the company to accurately report the payment as a facilitation payment, which Uber probably didn't do: https://globalanticorruptionblog.com/2014/06/17/the-fcpas-facilitating-payments-exception-mostly-harmless https://globalanticorruptionblog.com/2014/06/17/the-fcpas-fa... > On top of that, even if a grease payment is exempt from the FCPA’s anti-bribery provisions, if that payment were not accurately recorded as a facilitation payment in the company’s books, then the company would be in violation of the FCPA’s accounting provisions–and if the mischaracterization in the books was “willful and knowing,” this would also be a criminal violation. On the other hand, if the company were to accurately record facilitation payments in its books, it would be officially confessing violations of the host country’s anti-bribery laws, as well as the laws of other countries that might have jurisdiction over the transaction (such as the UK) that lack any exception for facilitation payments in their foreign bribery laws. It is perhaps for this reason that I’m not aware of any company that today formally records facilitation bribes accurately in its books.
  - dreamcompiler 9y ago
    Very interesting! Thanks. The FCPA is a minefield that I'm still trying to wrap my head around many years after I was first trained on it.
tryingagainbro 9y ago
Gut feeling: they did it, early and often. In many countries that's the only way to operate it, especially if you're breaking the laws (taxi rules and regs.) A wire transfer or a suitcase full of cash will automatically make you complaint and a law abiding company...doesn't matter who complains about you. They will throw the person under the bus and pay a huge fine, but it will definitely hurt them in a lot of countries.
- matt4077 9y ago
  That is true in some foreign countries, but probably not as many as one may think. Uber ran into a lot of trouble in countries such as France and Germany, where attempts of bribery are probably doomed–if only because whoever you're trying to bribe is quite likely not to even understand what you're trying to do. That doesn't mean you couldn't find corrupt people in those countries. But the sort of regulatory trouble Uber was having would require bribing group of local officials all over those countries. And only a single one of them would have to go public to not only ruin your chances in that country, but also get you into trouble in the US.
  - malka 9y ago
    There is actually some corruption in France (domestically). If you work in the building business and want some juicy contract with the City, building gratis a new pool for the mayor's house will definitely help.
iblaine 9y ago
Every large, 100+ person sharing economy company has done this. I'm a former employee at one of them. I'd bet my 401k on it.
- horsecaptin 9y ago
  Under what circumstances would different such medium-to-large sharing companies have to do this?
- matt4077 9y ago
  Well, most 100+ employee companies are probably older than the law. Other than that, your attitude is of the rather useless variety: it's easy to disprove, as just a single counter-example is sufficient. I'm actually not even sure if the majority of US companies does /any/ business in foreign countries. Even among those 100+ sized, an awful lot of them are hospitals, regional cleaning companies etc that couldn't bribe any foreigners even if they wanted. (edit: just noticed that I had missed the "sharing economy" qualification. You may be right in that context.) Then, to take an example closer to this audience, there are all those that sell into foreign markets but have basically no contact with those markets other than what's mediated by their payment processor. Think of some medium-sized ISV: under which circumstances would they even get into a situation where bribery was an option? Is corruption something that actually occurs in the US–to such a degree that a significant portion of white-collar employees know how it works? Because I've never seen it, and wouldn't know were to start. The FCPA is actually among the rather great achievements of US diplomacy. Until its enactment, my wonderfully law-abiding home country of Germany still allowed foreign bribes to be tax-deducted. It wasn't that bribery itself was tolerated domestically–far from it. But they considered it a matter of pragmatism to adjust to lower moral standards in other countries. Of course such rules only perpetuated those "lower moral standards", and German businesses never were the powerless victims they claimed to be. When the US started to enforce rules against foreign corruption against domestic companies, these had a strong incentive to lobby for similar standards abroad, and for the US to use their unparalleled power to directly enforce such rules against foreign companies as well. The result was the almost complete elimination of corruption among a segment of the economy, namely large internationals, and specifically their b2g business.
dbuder 9y ago
Their abrogation of laws worldwide is only possible via their organised conspiracy.
crmd 9y ago
If I pay a consultant $1M for his expertise in navigating local bureaucracy, and it turns out that he used half of that money to bribe local officials without my knowledge, have I committed a crime under FCPA?
- seanlinehan 9y ago
  If there were any red flags that you could have known about, yes. Not knowing does not grant you immunity under FCPA.
- dpiers 9y ago
  Possibly. Most FCPA enforcement actions involve third parties. The FCPA expressly prohibits corrupt payments made through third parties or intermediaries. The fact that a bribe is paid by a third party does not eliminate the potential for criminal or civil FCPA liability. The FCPA expressly states that a company or individual may be held directly liable for bribes paid by a third party if the principal has knowledge of the third party's misconduct. It is unlawful to make a payment to a third party, while “knowing” that all or a portion of the payment will go directly or indirectly to a foreign official. The term “knowing” includes “conscious disregard” and “deliberate ignorance”. Intermediaries may include joint venture partners or agents. Third parties and intermediaries themselves are also liable for FCPA violations.* *: https://www.transparency.org.uk/wp-content/plugins/download-attachments/includes/download.php?id=5739 https://www.transparency.org.uk/wp-content/plugins/download-...
Thinpad 9y ago
SEC: Qualcomm Hired Relatives of Chinese Officials to Obtain Business https://www.sec.gov/news/pressrelease/2016-36.html https://www.sec.gov/news/pressrelease/2016-36.html Not one head rolled or Jailed.. They settled despite brazenly violating the FCPA rules which most of them are trained for every year.
- fish_fan 9y ago
  Is that considered bribery in china? Is it illegal?
deleted 9y ago
[deleted]
Matt3o12_ 9y ago
This is a bit off topic but I have never understood why the US cares about corruption in foreign governments. I understand why corruption is bad and should not happen but what I don’t understand why the US cares. If a US company can make more money this way (without violating any domestic bribery laws) why does the US care? It is not like that they are known to have high moral standards when it comes to other countries unless it somehow aligns with their own interests.
- throwaway2048 9y ago
  They care because it becomes a political disaster for America when an American corporation is enabling some kind of bribery scandal. This could easily lead to american investment abroad being blocked, and generally tarnishing the image of America on the international stage. A lot of the American world order is based upon the perception that America are "good guys", allowing corruption to run rampant is very counter to that.
- pimmen 9y ago
  They care because if I expand to the foreign market rather than in the US market because I can bribe my way to advantages, that's competing on very unfair terms with competitors that stay in the US. That and the fact that OECD has a convention against bribery, so if you want to trade in the largest trading block in the world on good terms, you better help enforce the rules.
- deleted 9y ago
  [deleted]
TRUMPISYOURPREZ 9y ago
Can we give it a rest with the constant amplification of the fake news power struggle for the control of Uber?

210 points by zeep 9y ago

So, potentially stupid question but here goes...with a new CEO coming in, what impact will this have on the company in the short-term? Did they foresee this probe coming or is this something that they will have to scramble to react to? I mean it sounds like they may have expected this investigation with the handling of obtaining medical records, but wow.

TheAdamAndChe 9y ago
> Did they foresee this probe coming or is this something that they will have to scramble to react to? It depends entirely on whether or not this was a top-down decision. The most efficiently run companies consider the likely returns on illegal activity and the potential ramifications of getting caught. If the math works out in favor of the illegal behavior, they'll go ahead and do that. Depending on the nature of the illegal behavior, they may save for a fund that would pay for costs of being caught. The math isn't just about money in vs money out, either. The best consider the effect on the brand, cost of a PR campaign, potential legal changes, lobbying fees(to make currently illegal behavior legal), the likelihood of getting caught in the first place, and a lot of other stuff that I'm probably not thinking about. It's not right, but when shareholders demand exponential growth, the owners and managers will do what is necessary to make that happen.
- exelius 9y ago
  Come on -- the case in question is in India. Bribes are a way of life there. You literally cannot do business there without paying bribes. Nobody had to tell anyone to pay the bribe; if they're anything like every other company I've worked with over there, they have an official slush fund for this stuff. You just do it. Now, it's pretty abhorrent that they doxed a rape victim; and that behavior is reason enough to investigate IMO. But the bribery part? Literally everyone does it because you have to if you want anything to get done there as a foreigner / foreign company.
  - TheAdamAndChe 9y ago
    That's correct - and it definitely affects the math involved. It would be way more expensive in many ways to be involved in bribery in a larger country like Canada, to the point that the illegal activity likely wouldn't be worth the potential cost. But in India, the cost of such illegal activity is very different, thus is more likely to be worth it.
  - ajdlinux 9y ago
    I don't know about the US, but in Australia, our foreign bribery laws explicitly exempt "facilitation payments", i.e. bribes that are customarily paid to grease the wheels of bureaucracy and get routine government actions done. However, that certainly wouldn't cover anything like this alleged rape doxxing, and it also wouldn't cover bribes intended to secure new business, which are presumably extremely common in countries like India.
    - dbuxton 9y ago
      The FCPA similarly differentiates. However the practical problem is that running a defense based on whether a certain activity was a facilitation payment (to secure the performance of a "routine government action") means you essentially have to admit that the potentially unlawful activity actually took place, and you move onto generally very treacherous ground. For that reason most companies don't go that route. In any case as others have noted it's not relevant here because getting someone's medical records isn't a service that you're entitled to.
    - tryingagainbro 9y ago
      However, that certainly wouldn't cover anything like this alleged rape doxxing The article didn't say anything about the rape case. Getting her info could have cost less than $100, but staying in business in certain countries could run in tens of millions.
      - saghm 9y ago
        > The article didn't say anything about the rape case. From TFA: "Reuters in June reported that Uber had hired a law firm to investigate how it obtained the medical records of an Indian woman who was raped by an Uber driver in 2014." > Getting her info could have cost less than $100, but staying in business in certain countries could run in tens of millions. I'm honestly not sure what point you're trying to make here. Regardless of the calculus, it was morally bankrupt and probably illegal.
- ThrustVectoring 9y ago
  The best run companies transform top-down decisions into bottom-up ones, helpfully protecting executives from consequences. How it works is through setting high expectations in a "get it done" culture, and then carefully cultivating strategic ignorance about illegal activity that's positive value.

dreamcompiler 9y ago

Oh wow. FCPA violations. One of the key rules of American business is that you do not dance around with the FCPA [0]. (I suspect many new startup managers are not familiar with the FCPA but you can bet their investors are.) Violations of the FCPA do not just result in fines, they result in actual jail time for whomever did the bribing, whether they be individual low-level employees, contractors, or CEOs. That said, the FCPA explicitly allows small "greasing" bribes that encourage low-level bureaucrats to expedite some action they would have taken anyway -- when such greasing payments are legal in the country in question. Obtaining the medical records of a rape victim certainly does not fall within this exception. [0] https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act

rayiner 9y ago
Note that the facilitation payment exception to the FCPA is (i) extremely narrow; (ii) still requires the company to accurately report the payment as a facilitation payment, which Uber probably didn't do: https://globalanticorruptionblog.com/2014/06/17/the-fcpas-facilitating-payments-exception-mostly-harmless https://globalanticorruptionblog.com/2014/06/17/the-fcpas-fa... > On top of that, even if a grease payment is exempt from the FCPA’s anti-bribery provisions, if that payment were not accurately recorded as a facilitation payment in the company’s books, then the company would be in violation of the FCPA’s accounting provisions–and if the mischaracterization in the books was “willful and knowing,” this would also be a criminal violation. On the other hand, if the company were to accurately record facilitation payments in its books, it would be officially confessing violations of the host country’s anti-bribery laws, as well as the laws of other countries that might have jurisdiction over the transaction (such as the UK) that lack any exception for facilitation payments in their foreign bribery laws. It is perhaps for this reason that I’m not aware of any company that today formally records facilitation bribes accurately in its books.
- dreamcompiler 9y ago
  Very interesting! Thanks. The FCPA is a minefield that I'm still trying to wrap my head around many years after I was first trained on it.

tryingagainbro 9y ago

Gut feeling: they did it, early and often. In many countries that's the only way to operate it, especially if you're breaking the laws (taxi rules and regs.) A wire transfer or a suitcase full of cash will automatically make you complaint and a law abiding company...doesn't matter who complains about you. They will throw the person under the bus and pay a huge fine, but it will definitely hurt them in a lot of countries.

matt4077 9y ago
That is true in some foreign countries, but probably not as many as one may think. Uber ran into a lot of trouble in countries such as France and Germany, where attempts of bribery are probably doomed–if only because whoever you're trying to bribe is quite likely not to even understand what you're trying to do. That doesn't mean you couldn't find corrupt people in those countries. But the sort of regulatory trouble Uber was having would require bribing group of local officials all over those countries. And only a single one of them would have to go public to not only ruin your chances in that country, but also get you into trouble in the US.
- malka 9y ago
  There is actually some corruption in France (domestically). If you work in the building business and want some juicy contract with the City, building gratis a new pool for the mayor's house will definitely help.

iblaine 9y ago

Every large, 100+ person sharing economy company has done this. I'm a former employee at one of them. I'd bet my 401k on it.

horsecaptin 9y ago
Under what circumstances would different such medium-to-large sharing companies have to do this?
matt4077 9y ago
Well, most 100+ employee companies are probably older than the law. Other than that, your attitude is of the rather useless variety: it's easy to disprove, as just a single counter-example is sufficient. I'm actually not even sure if the majority of US companies does /any/ business in foreign countries. Even among those 100+ sized, an awful lot of them are hospitals, regional cleaning companies etc that couldn't bribe any foreigners even if they wanted. (edit: just noticed that I had missed the "sharing economy" qualification. You may be right in that context.) Then, to take an example closer to this audience, there are all those that sell into foreign markets but have basically no contact with those markets other than what's mediated by their payment processor. Think of some medium-sized ISV: under which circumstances would they even get into a situation where bribery was an option? Is corruption something that actually occurs in the US–to such a degree that a significant portion of white-collar employees know how it works? Because I've never seen it, and wouldn't know were to start. The FCPA is actually among the rather great achievements of US diplomacy. Until its enactment, my wonderfully law-abiding home country of Germany still allowed foreign bribes to be tax-deducted. It wasn't that bribery itself was tolerated domestically–far from it. But they considered it a matter of pragmatism to adjust to lower moral standards in other countries. Of course such rules only perpetuated those "lower moral standards", and German businesses never were the powerless victims they claimed to be. When the US started to enforce rules against foreign corruption against domestic companies, these had a strong incentive to lobby for similar standards abroad, and for the US to use their unparalleled power to directly enforce such rules against foreign companies as well. The result was the almost complete elimination of corruption among a segment of the economy, namely large internationals, and specifically their b2g business.

dbuder 9y ago

Their abrogation of laws worldwide is only possible via their organised conspiracy.

crmd 9y ago

If I pay a consultant $1M for his expertise in navigating local bureaucracy, and it turns out that he used half of that money to bribe local officials without my knowledge, have I committed a crime under FCPA?

seanlinehan 9y ago
If there were any red flags that you could have known about, yes. Not knowing does not grant you immunity under FCPA.
dpiers 9y ago
Possibly. Most FCPA enforcement actions involve third parties. The FCPA expressly prohibits corrupt payments made through third parties or intermediaries. The fact that a bribe is paid by a third party does not eliminate the potential for criminal or civil FCPA liability. The FCPA expressly states that a company or individual may be held directly liable for bribes paid by a third party if the principal has knowledge of the third party's misconduct. It is unlawful to make a payment to a third party, while “knowing” that all or a portion of the payment will go directly or indirectly to a foreign official. The term “knowing” includes “conscious disregard” and “deliberate ignorance”. Intermediaries may include joint venture partners or agents. Third parties and intermediaries themselves are also liable for FCPA violations.* *: https://www.transparency.org.uk/wp-content/plugins/download-attachments/includes/download.php?id=5739 https://www.transparency.org.uk/wp-content/plugins/download-...

Thinpad 9y ago

SEC: Qualcomm Hired Relatives of Chinese Officials to Obtain Business https://www.sec.gov/news/pressrelease/2016-36.html https://www.sec.gov/news/pressrelease/2016-36.html Not one head rolled or Jailed.. They settled despite brazenly violating the FCPA rules which most of them are trained for every year.

fish_fan 9y ago
Is that considered bribery in china? Is it illegal?

deleted 9y ago

[deleted]

Matt3o12_ 9y ago

This is a bit off topic but I have never understood why the US cares about corruption in foreign governments. I understand why corruption is bad and should not happen but what I don’t understand why the US cares. If a US company can make more money this way (without violating any domestic bribery laws) why does the US care? It is not like that they are known to have high moral standards when it comes to other countries unless it somehow aligns with their own interests.

throwaway2048 9y ago
They care because it becomes a political disaster for America when an American corporation is enabling some kind of bribery scandal. This could easily lead to american investment abroad being blocked, and generally tarnishing the image of America on the international stage. A lot of the American world order is based upon the perception that America are "good guys", allowing corruption to run rampant is very counter to that.
pimmen 9y ago
They care because if I expand to the foreign market rather than in the US market because I can bribe my way to advantages, that's competing on very unfair terms with competitors that stay in the US. That and the fact that OECD has a convention against bribery, so if you want to trade in the largest trading block in the world on good terms, you better help enforce the rules.
deleted 9y ago
[deleted]

TRUMPISYOURPREZ 9y ago

Can we give it a rest with the constant amplification of the fake news power struggle for the control of Uber?