Beware of clients bearing big gifts

By JULIE MIDDLETON

No one is going to accuse you of corruption in private business if you accept the odd bottle of wine or coffee cup bearing a corporate logo at, say, Christmas or when companies are on the promotional bandwagon.

Everyone likes freebies. But they can turn into suggestions of impropriety and even court cases, as the case of Paihia's Ian Edward Watson proves.

The former manager of Feltex subsidiary New Zealand Wool Spinners is appealing against a sentence last week of 18 months' jail on three counts of corruptly accepting gifts from a dye supplier.

He has also been ordered to pay $17,000 in reparation to the subsidiary.

The gifts? International travel for him and family members as well as a total of $40,000 cash from Dyetex Industries.

Watson's case is at the extreme end of the scale, but experts say that New Zealand is long overdue to take the pitfalls of gift-giving and receiving seriously.

The global village is shrinking and we are developing business with countries where gift-giving is an important part of business etiquette, or where bribery - "facilitating payments" as some term it - is common practice.

With an eye on the future, Parliament has just amended the Crimes Act to make it an offence for a New Zealand businessperson to bribe a public official in a foreign country.

This change implements an Organisation for Economic Cooperation and Development convention.

The World Bank estimates that $80 billion annually is paid in bribes around the world.

Some of New Zealand's big corporates, especially those with American parents big on ethics, have rules on giving and receiving gifts to avoid accusations of bribery.

But many local companies have no idea where to draw the line.

On which side do tickets to a rugby test corporate box sit? A crate of wine? Weekends in Australia masquerading as professional conferences? A set of golf clubs?

The most natural home for these distinctions is in a company code of ethics.

Rodger Spiller , director of the New Zealand Centre for Business Ethics and Sustainable Development, says that although there are no statistics, relatively few New Zealand corporates have codes compared with American companies.

Businesses employing fewer than 50 people - about 99 per cent of all New Zealand companies - are even less likely to have rules.

Says US-born Marie Wilson, a University of Auckland business school lecturer: "When us immigrants get together, we often discuss how New Zealanders don't have much of an innate sense of conflict of interest.

"We speculate that it might be because New Zealand has been such a small society that everyone adjusted to inside deals because there weren't any other options."

No free lunches, says Spiller. "Gifts are generally given for something in return.

"In New Zealand corporate gift-giving sits in a very grey area in many companies."

David Bradshaw, of the Serious Fraud Office, which prosecuted Ian Watson, adds: "The bigger the gift, the greater the moral persuasion to continue with that person, even though it may not be in the best interests of the overall company.

"Gift-giving and receiving can slide into corruption and bribery. But there's no line that says: at this point it's fine; here we're going too far."

Where is too far? Insurance and pharmaceutical industries are notorious for throwing fancy dinners and conferences at exotic places to schmooze those who can choose their products.

Michael Morris, company director and chairman of the New Zealand chapter of anti-corruption body Transparency International, says he can think of a "significant private hospital that drug companies are pretty assiduous in courting. Not the management, but the level below management."

Some travel companies expect journalists on all-expenses-paid overseas junkets to write pages of praise, rather than report what they find.

One Auckland research company staffer lost his job after he was found to be accepting expensive gifts rather than billing clients, claiming that his newly created department was not making money.

Says Morris: "We're not totally squeaky-clean [in New Zealand]. We need to be vigilant."

Bradshaw agrees, saying gifts from private companies to public servants have been a larger problem, "particularly in the last 10 to 15 years when we've been told to think more commercially; that the commercial sector does everything the best."

Corporates, he says, forget that Government and local body employees work in a much stricter environment.

Morris says they are just trying it on.

"There are anecdotal stories of local body concerns who somehow find that they are more able to approve an application under the Resource Management Act given a little bit of help along the way," he says.

Transparency International's executive officer, Murray Petrie, says the advent of MMP has increased fears about the boundary between the public and private sectors, which is where much corruption occurs.

"There is potential for lobbying to involve illegitimate influence. We need to introduce a leadership code for MPs, covering such things as declarations of gifts received."

Bradshaw: "For us [public servants], the perception thing is so important. You don't put yourself in a position which might be seen to place you in an obligation to a third party."

But he admits that it is hard at times. As a rugby fan, he wishes he did not have to turn down tickets to corporate boxes, "but I don't know tomorrow who I am going to be investigating."

Every gift coming into the SFO must be declared.

"Once it's declared, all pressure of any secrets, sinister or dishonest, is blown away."

As in several large New Zealand corporates, SFO gifts might be donated to the social club raffle, or Bradshaw might return it to the recipient.

Auckland University's policy is up with latest overseas examples, stating that the odd bottle of wine or a gift worth no more than $100 can be accepted.

"In the event that the media became aware of the gift in question," says the policy, "is there any possibility that the good name of the university could be compromised?"

Deans or directors must be consulted if the gift is worth between $100 and $500, and if the "gift" - the university's punctuation tells its own story - is above $500 in value, the vice-chancellor is to be consulted.

Compaq says no gift should be accepted unless it has "insubstantial" value, and approval must be sought for anything worth more than $US25 ($60).

Jacqui Millar, of Fletcher Challenge Forests, says modest hospitality is okay, "but not a weekend on someone's yacht."

Most companies seem to take a she'll-be-right approach.

"There's no general rule," says a Carter Holt Harvey spokeswoman, "but there's an unwritten rule that you don't accept gifts."

New Zealand companies need to take the issue seriously, says Juergen Gnoth, a senior lecturer in Otago University's department of marketing.

"New Zealand has a major leap to go to sort that out; a leap in making this a topic of discussion."

WHERE'S THAT GIFT TAKING YOU?

Try these tests for gifts received: Is it likely to influence my decision-making? Does it place me in obligation? Could it be seen as an inducement?

* Context is everything. Says SFO director David Bradshaw: "That's part of the problem of fixing arbitrary limits. Sometimes limits can be useful, but how can you measure value? Retail, wholesale, cost?"

* Companies need a gifts policy, and it should be part of a statements of ethics and values that is put together with the help of staff and widely communicated.

Says Auckland lawyer Andrew Caisley: "It ought to be brought to the attention of staff in a way that enables the company to prove the staff know about it."

* Put a disclosure rule in place - ensure bosses know what gifts have been received by staff.

"It allows the management to control and avoid any secret commission-type action beginning," says Bradshaw.

* Balance the need to be above reproach with the need not to offend, says Bradshaw. "If it's the odd bottle of wine, it would offend people to send it back. A crate of wine - I'd send it back."

* Ensure companies you do business with know your rules. Post them on the web. Fletcher Challenge Forests' Jacqui Millar says that there is a drug and alcohol ban on the company's sites, and that most business partners know that sending alcohol breaches that ruling.