Bangladesh fights rampant corporate corruption

It charged the son of a former leader with laundering kickbacks and is investigating other prominent figures.

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. Two weeks ago, as Bangladesh brought charges against Arafat Rahman, Royal Dutch Shell Corporation reported that it was under investigation by US authorities over allegations that it bribed officials in Nigeria. [Editor's note: The original version misstated the time frame.]

The victims of such bribery are not only the companies that lose out. There is growing awareness that bribery can have a direct, destabilizing impact on developing countries. The case of Bangladesh and Siemens suggests how that could work: In court documents, Siemens admitted to paying bribes not only to Arafat Rahman, but to Bangladesh's former telecommunications minister. That minister was Aminul Haque, who served between 2001 and 2006. Mr. Haque in turn was sentenced in 2007 to 31 years in prison for patronizing the Islamic terrorist group, Jama'tul Mujahideen Bangladesh (JMB).

According to cases filed by the government against Haque, the court ruled that he used JMB as a political tool to eliminate members of political opposition groups beginning in 2004. But by 2005, JMB took on a life of its own and launched a national campaign of violence that left dozens dead. Today Haque is a fugitive, but the group he patronized continues to operate underground and is suspected of involvement in the bloody mutiny that rocked Bangladesh last month.

While there is no direct evidence showing that Siemens' bribe money went to JMB, observers in Bangladesh contend that the possibility of a link underscores the dangers of foreign corporate bribery.

"Many of the [multinational companies] don't care who they're giving money to. They don't try to find out what effect it will have on the life of ordinary people," contends Sultana Kamal, the director of Ain O Salish Kendra, a leading human rights group based in Dhaka. "They should be very careful about it."

Amid growing public awareness and public outrage, Bangladesh's government has in recent years acted with force. In the past two years, the ACC has launched hundreds of investigations into some of the most prominent ministers and businessmen in the country – including the sons of Khaleda Zia. Both brothers were arrested in 2007. They are currently on bail as more charges are framed against them.

"To have Khaleda Zia's two sons and powerful higher ministers accused ... was really the first major cleansing process that started," says Mahfuz Anam, the editor of The Daily Star, Bangladesh's most influential English-language newspaper. "Now, we are far from the end of it, but it's gotten started."

• This article is a joint project with PBS FRONTLINE's "Black Money," which airs Tuesday, April 7, at 9:00 p.m. EST on PBS (check local listings).