For years corporate corruption has thrived as an open secret in this poor congested nation, a force as destructive as the cyclones that ravage the coastline and the arsenic that poisons people's drinking wells. Last week, Bangladesh's newly elected government took its first high-profile swipe at the problem.
Arafat "Koko" Rahman, the son of former Prime Minister Khaleda Zia and a prominent businessman, was formally charged with laundering nearly $2 million in kickbacks, including $180,000 from Siemens Corporation, the German electronics giant. Mr. Rahman and his brother Tarique, although allegedly at the center of many corrupt deals in Bangladesh, were considered untouchable between 2001 and 2006, when their mother held office. The charges against Arafat Rahman are the first involving foreign bribery and could result in a jail sentence of seven years if he is found guilty.
The case highlights a determined move by Bangladesh's government to root out corruption at the highest levels, while tracing its sources through financial institutions and multinational companies abroad. In so doing, it also sheds light on the little studied dark side of international business: the practice of foreign bribery, whereby some of the world's richest companies directly contribute to instability in the developing world by paying off corrupt governments.
"This issue of foreign companies using bribery to get contracts has been a kind of public knowledge," says Iftekhar Zaman, the executive director of Transparency International Bangladesh, the Bangladesh chapter of the Berlin based anti-corruption watchdog. "It's a failure of the companies to oblige the rules and regulations, but it's also incumbent on the government to be able to prevent those avenues of corruption."
The case against Siemens portrays a typical pattern for graft here. Between 2004 and 2006, as mobile phone use soared in Bangladesh, Siemens was pushing for a $40 million telecommunications contract with the Bangladeshi government, according to a case filed by US investigators against Siemens. To outbid its competitors, it hired a Bangladeshi consultant with links to the Prime Minister's son, as well as the telecommunicatons minister and at least four others. A payment of $180,000 was arranged and sent to Arafat Rahman's Singapore bank account, according to public statements made by Siemens as well as the case filed by Bangladesh's Anti- Corruption Commission (ACC), which is tasked with investigating graft and preparing charges.
"Over a period of time, as we were investigating some of our cases, we could see that, yes, Siemens ... was paying money to some of our people here. This was all put into a bank account in Singapore, so we had to get the cooperation of that government," says Hasan Mashhud Chowdhury, the chairman of the ACC.
It is not a problem specific to Bangladesh. Corporate foreign bribery is a thriving global business, according to studies by the World Bank, which estimates that foreign companies annually pay $1 trillion in kickbacks to corrupt government officials. …