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Chapter 10: Corruption

Chapter 10: Corruption. O C C U P A T I O N A L F R A U D a n d A B U S E. C L A S S I F I C A T I O N S Y S T E M. Common Corruption Schemes. Bribery Economic Extortion Illegal Gratuities Conflicts of Interest. Legal Elements of Bribery. Offering, giving, receiving or soliciting

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Chapter 10: Corruption

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  1. Chapter 10: Corruption

  2. O C C U P A T I O N A L F R A U D a n d A B U S E C L A S S I F I C A T I O N S Y S T E M

  3. Common Corruption Schemes • Bribery • Economic Extortion • Illegal Gratuities • Conflicts of Interest

  4. Legal Elements of Bribery • Offering, giving, receiving or soliciting • Any thing of value • To influence • An official act (no fed law against commercial bribery)

  5. Legal Elements of Commercial Bribery: • Giving or receiving • A thing of value • To influence • A business decision • Without consent of the principal • (About ½ of states have criminal statutes that prohibit commercial bribery)

  6. Economic Extortion • Perp demands payment • Threatens adverse economic consequences • Common example: • Purchasing agent requires vendors to kick back portion of contract price • NOT a defense to bribery.

  7. Legal Elements of Illegal Gratuities: • giving or receiving • a thing of value • for or because of • an official act

  8. Defining Illegal Gratuities • Lesser included offense of bribery • Employee receives something of value • Because of official act or business decision • “Intent to influence” not required

  9. Legal Elements of Conflict of Interest: • For a Civil Claim: • An agent taking an interest in a transaction • That is actually or potentially adverse to the principal • Without full and timely disclosure to and approved by the principal • Criminal Claims apply to public officials

  10. Frequency of Corruption Schemes • 223 corruption cases were reported in the Association’s survey. • Corruption cases accounted for approximately 15% of all occupational fraud schemes.

  11. Median Loss for Corruption Schemes • Although corruption schemes occur less frequently than asset misappropriations, their median cost of $440,000, is almost seven times as high as the median loss in an asset misappropriation scheme. *Represents size of misstatement

  12. Corruption Schemes – Breakdown of Cases • 180 of the 223 corruption cases in our study were classified as bribery schemes. • Overall, bribery schemes made up 11.8% of all occupational frauds.

  13. Corruption Schemes – Median Losses • Median losses were $500,000 for both bribery and conflicts of interest schemes, making them among the most costly occupational frauds.

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