Kickback

A colloquial term for an illegal payment made to secure favorable treatment in the award of a contract.
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Definition

Kickback: A kickback is an illegal payment typically provided to someone in a position of power or influence, often with the intention of securing favorable treatment or the award of a contract. Kickbacks are a form of corruption and can involve various sectors such as government, corporate environments, and construction.

Examples

  1. Government Contracts: An official in charge of awarding construction contracts receives a percentage of the contract fee from a construction company in exchange for awarding them the bid.

  2. Corporate Purchases: A procurement officer in a corporation receives a kickback from a supplier in return for purchasing goods in substantial quantities, regardless of whether these goods are the best choice for the company.

  3. Healthcare: A doctor receives payments from a pharmaceutical company in exchange for prescribing their drugs, regardless of the patient’s specific needs.

Frequently Asked Questions (FAQs)

Q: Are kickbacks considered bribery? A: Yes, kickbacks are a form of bribery where the person receiving the payment uses their influence to provide favorable treatment unlawfully.

Q: What is the difference between a kickback and a legitimate commission? A: Commissions are legally and transparently agreed payments for services rendered, often standardized and well-documented, while kickbacks are illegal payments made without transparency, often in secret.

Q: How can companies protect themselves from kickback schemes? A: Companies can protect themselves through strict internal controls, whistleblower policies, employee training on ethics, and frequent audits.

Q: What are the legal implications of giving or receiving kickbacks? A: Both giving and receiving kickbacks can lead to severe legal consequences, including fines, imprisonment, and reputational damage.

Q: Can kickbacks happen in nonprofit organizations? A: Yes, kickbacks can occur in any organization where there is the potential for individuals to influence the award of contracts or other forms of favorable treatment.

  1. Bribery: The act of giving or receiving something of value in exchange for some kind of influence or action in return.

  2. Fraud: Wrongful or criminal deception intended to result in financial or personal gain.

  3. Corruption: Dishonest or fraudulent conduct by those in power, typically involving bribery.

  4. Embezzlement: The act of stealing or misappropriating funds placed in one’s trust or belonging to one’s employer.

  5. Money Laundering: The process of concealing the origins of money obtained illegally, typically by means of transfers involving foreign banks or legitimate businesses.

Online References

  1. Investopedia: Kickback
  2. The Balance: What Is a Kickback in Business?
  3. U.S. Securities and Exchange Commission: Bribery in International Business

Suggested Books for Further Studies

  1. “Corruption: A Very Short Introduction” by Leslie Holmes
    This book provides an overview of corruption, its causes, effects, and different forms including kickbacks.

  2. “The Honest Truth About Dishonesty: How We Lie to Everyone - Especially Ourselves” by Dan Ariely
    Offers insights into why people engage in unethical behavior like giving or receiving kickbacks.

  3. “Corruption and Government: Causes, Consequences, and Reform” by Susan Rose-Ackerman & Bonnie J. Palifka
    A comprehensive text on how corruption, including kickbacks, operates within government sectors and its implications.

Accounting Basics: “Kickback” Fundamentals Quiz

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Thank you for exploring the intricate world of kickbacks. Aim to uphold integrity even in competitive environments!

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