Bribery by Israeli businesspeople and companies to promote overseas business has recently been the focus of a campaign by Israeli authorities.
Bribing a foreign public servant has been banned by Israeli law since 2008, but only in the past two years have law enforcement agencies in Israel stepped up their enforcement efforts. In late 2017-early 2018, enforcement made major strides, with three investigations being made public, including alleged bribery in Africa by Israel Shipyards, a prominent company in civilian and military shipbuilding, and the investigation of Shikun & Binui Holdings Ltd. (TASE: SKBN).
Bribery of a foreign employee by an Israeli company was once considered an acceptable procedure in some countries. An Israeli businessperson or company doing business in a given country, often a country with an unstable and non-democratic regime, was given a heavy hint that without some "axle grease" to oil the wheels of government, no venture in that country could go through. Some succumbed to temptation; others did not.
The struggle to prevent corruption in foreign countries began with an international convention, continued with legislation on the matter in various countries, including federal legislation in the US, and also gained momentum in Israel. Up until 2008, Israel had no powery to prosecute an offense beyond its borders unless part of the offense was committed in Israel. In 2008, Israel signed the OECD Anti-Bribery Convention for preventing bribery of public servants in foreign countries.
The convention states that a businessperson, exporter, or company that bribes, or attempts to bribe, a public servant outside the OECD member country, even if it is done through intermediaries, is subject to criminal prosecution in the courts of the country that signed the convention.
In pursuance of this convention, Israel passed Section 291A of its penal code, which states that bribery of a foreign public servant, including outside of Israel, constitutes an offense in Israel. No use of this section, however, was made before November 2016.
A change in the law enforcement agencies attitude
In late 2016, Israeli law enforcement agencies decided to investigate, and prosecute if necessary, Israelis who had bribed foreign public officials overseas, thereby implementing the ban in the penal code. A special team was assembled in late 2016 to address investigations under Section 291A. One of the most notorious cases at the time was the suspected bribery of a public servant in Guinea by businessperson Beny Steinmetz, allegedly in order to obtain mining licenses.
Another affair under investigation is alleged bribery of a public servant in Romania by Shapir Engineering & Industry Ltd. (TASE:SPEN) in order to further the company's projects in Eastern Europe.
In another case involving enforcement of Section 291A, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) was accused of bribery in Russia, Ukraine, and Mexico, in a case that ended with a settlement in which the company paid a $75 million fine.
What caused this change of heart by the law enforcement authorities towards Israelis who had used illegitimate means to promote their overseas business? It depends on whom you ask.
Various legal sources assert that the reason is Israel's attempt to prove itself to international organizations engaged in the worldwide struggle against unreported capital. The State Attorney's Office says that this outburst of energy in enforcement of the statute against overseas bribery is almost coincidental and even a matter of luck. Sources in the State Attorney's Office previously told "Globes" that something occurred in all of the above cases that helped establish the evidence against the suspects, after which the investigations were stepped up.
How an investigation begins
The special team set up in 2016 follows reports in the foreign press of investigations begun in various countries, and legal proceedings taking place in Israel in which allegations of offenses are made, and reports by Israeli journalists that could indicate that bribes had been given in other countries. In addition, complaints reaching the police arousing suspicion of overseas bribery are immediately sent to the team in the State Attorney's Office for the team's head to decide about how to open an investigation.
Almost every investigation requires a visit by an Israeli team of investigators to the country in which the offense was allegedly committed, plus investigations in the foreign country involving local parties in cooperation with investigators in that country.
How far into the past is it possible to investigate?
The Israeli law on the matter was enacted in 2008, and bribery of a foreign public servant is regarded as an offense in Israel only if committed after that date. Furthermore, the 10-year prescription period under the Statute of Limitations would by now in any case apply to cases before 2008.
Does the same law apply to government, private, and public companies?
The law does not distinguish between a government company and any other kind of company for purposes of prosecution for bribery of an overseas public servant. To date, however, no cases are known of an investigation of a government company on suspicion of bribery in a foreign country.
Published by Globes [online], Israel business news - www.globes-online.com - on August 13, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018