Former Foxconn Employees Charged with Accepting Bribes from Supply Chain Partners

[TsunamiTheClown]

Kickbacks for Tips. Solid Apple tips are still worth their weight in gold.

Investors want to know the future.

 

[xraydoc]

Wow. You have to do something really bad to be charged with labor violations in China. If convicted, these guys will probably be executed.

 

[Plutonius]

Can we blame it on Samsung ?

 

[OrangeSVTguy]

Hope that $25 in US currency was enough to lose your job over. But then again, that's like what 3 months of labor + overtime there?

 

[MacLC]

After reading the article, I still have no idea what the workers were bribed to do.

Management, not workers. "Accepting kickbacks from partner companies in the supply chain". Couldn't be clearer than that. Foxconn needs a million dollar worth of parts. Some person at Foxconn gets the task of finding the best supplier and get the parts. But the contract doesn't go to the best supplier, but to the supplier who pays the largest amount of cash to that person. Which means Foxconn doesn't get the best supplier, and pays more (because the kickback will obviously be added to the price of the order). That's stealing from your employer, which gets you fired and prosecuted when you get found out.

It may have been that. It may have been any number of a hundred other violations such as free "defective" product, jobs for relatives, or a myriad of other benefits. The article said "supply chain partners" but those could be Apple's supply chain partners thus customers of Foxconn, such as an Apple subsidiary. They could have been offering grease money at the demand of their bosses then left to dry on the rack when the practice was discovered.

 

[Solomani]

Corruption…. in China?!! So it ain't so!

 

[friedmud]

You guys aren't viewing this properly...

In the US this is NOT illegal. A person working in a private company in the US can accept any kickbacks they like under the law. There are two caveats:

1. Most companies frown on this behavior these days so company policy could ban this... meaning that you might get fired.

2. If you are working for the government in any way THEN it is illegal.

These people are only arrested like this in China because it's communist... so the government owns everything to a certain extent.

A lot of business in the US is still done this way... with supply chain people receiving "gifts" from suppliers in order to sway favor... it's the way business has been done in the US since the beginning...

 

[ApfelKuchen]

Just to play devil's advocate, this is a question I always had regarding frequent flier miles, dining points, etc. Is it stealing to buy even a slightly more expensive flight in order to get the miles? Same with hotel points, etc. Aren't these also forms of kickbacks?

It depends who benefits.

When we pay for the flight/hotel, part of the price covers our future loyalty "benefits." Many businesses find that offering a prize for loyalty works better than charging slightly less for the product and offering no prize (collect 10 cereal boxtops and get a toy).

Now, using loyalty programs to encourage someone traveling at the employer's expense to select a particular airline/hotel... that's closer to a true kickback. That's why some companies take travel decisions out of the employees' hands - corporate travel makes the booking. Other companies have tried to assert that they own the loyalty points (I don't know how successful that is in practice).

A classic kickback, though, is when an employee or official receives a payment in order to steer company/government business to a particular supplier. Arguably, whatever they put in their pocket belongs in the employer's pocket, or is taken out of the pocket of another supplier that chose to play by the rules (same price for the same goods, only difference is, one is paying the decision-maker a "marketing expense.") In an environment where all suppliers pay kickbacks as an accepted "cost of doing business," the net effect is higher prices to the consumer/taxpayer.

In any case, there's the question of loyalty. Is the employee/official acting in the company's/citizens' best interest, or his/her own? Is the employee/official a commissioned sales rep working for the supplier, or a salaried employee of the buyer?

 

[tbrinkma]

Why would a company accept this? Yes, from the point of view of the briber it makes sense: The company (Foxconn) needing supplies wont't buy yours because they are rubbish, so you hand over $10,000 in cash to a Foxconn employee who promptly signs the contract, and it's illegal, but you're happy. The Foxconn employee is also happy; he's a thief but $10,000 richer. But the company (Foxconn) loses out. The are effectively paying an employee a tax free extra $10,000 salary and for that they get rubbish supplies at an exaggerated price. That has nothing to do with culture; it's just someone stealing from you. I can imagine it's a cultural thing whether you are willing to steal, but there's no culture where you would accept someone stealing from you (unless they have the power, which the employee doesn't).

(There might be the case that the CEO's nephew is employed somewhere and does that kind of thing and it might be a cultural thing not to complain about it).

There's two 'styles' of this sort of arrangement. The first is a finder's fee, which is relatively common, and utterly acceptable. The second is a kickback, which is *also* relatively common, and utterly unacceptable.

A finder's fee is set up between the person tasked with finding the supplier and the person/group asking them to do so. The finder is given an incentive to find the best possible deal (eg: a fixed fee, or a percentage of savings or amount under budget). This is done above board, and is legal.

A kickback is set up between the person tasked with finding the supplier and the supplier. The finder is given an incentive to use the supplier even though they *aren't* the best possible deal. For this to make sense to the supplier, they *must* be getting more out of the deal than they are paying in kickbacks. (Otherwise, they simply wouldn't bother, because it would be a net loss.) This is done under the table, and is illegal.

In the first case, everyone is happy, and everyone is getting the deal they expect.
In the second case, everyone is happy until the truth slips, at which point, someone discovers they've been defrauded.

 

[ApfelKuchen]

There's two 'styles' of this sort of arrangement. The first is a finder's fee, which is relatively common, and utterly acceptable. The second is a kickback, which is *also* relatively common, and utterly unacceptable.

A finder's fee is set up between the person tasked with finding the supplier and the person/group asking them to do so. The finder is given an incentive to find the best possible deal (eg: a fixed fee, or a percentage of savings or amount under budget). This is done above board, and is legal. :::snip:::

Finder's fees go to third parties - brokers. A third party who brings buyer and seller together to the the benefit of all parties. Yes, that's generally legal. However, I don't know of a business that allows its employees to accept finders fees, and generally, they prohibit the employee's family members from collecting them as well. If an employee is to be rewarded for finding a particularly good deal, the bonus or promotion comes from the employer, not the vendor.

 

[GoCubsGo]

i just hope this doesn't delay the iPhone 6.

Nice perspective. Don't worry, I'm sure the iPhone 6 is safely on its way. Unlike Tarantino, I assume Cook will allow the iPhone 6 to still be made in spite of any possible leaks.

 

[djtech42]

Might explain why there have been so many leaks the past two years.

 

[anthony11]

THIS IS THE REALITY IN CHINA and is well documented.

.. as is that fact that their next jobs will be as involuntary organ donors.

 

[japanime]

The use of the photograph of a random Foxconn employee to illustrate this story is potentially libelous.

Unless, that is, MacRumors is suggesting that the person in the picture is one of those who has been charged with accepting bribes.

 

[DisMyMac]

Apple isn't involved like Columbus helped Native Americans.

 

[OrangeSVTguy]

Might explain why there have been so many leaks the past two years.

Well the new Mac Pro is assembled in the USA and there were no leaks all the way up until it was announced? Don't know how many parts were manufactured in China or other countries so I doubt that would make much difference then?

 

[Tech198]

I agree here..

While its bad for Foxconn, its business......

Shady things gets faked all the time from China all the time... Phones that look like iPhone and Android's top products, but sell for at far less.... It happens, move on.

So, its only natural that Foxconn just happened to be in there.

If it was the U.S, then that would be different.

 

[tbrinkma]

Finder's fees go to third parties - brokers. A third party who brings buyer and seller together to the the benefit of all parties. Yes, that's generally legal. However, I don't know of a business that allows its employees to accept finders fees, and generally, they prohibit the employee's family members from collecting them as well. If an employee is to be rewarded for finding a particularly good deal, the bonus or promotion comes from the employer, not the vendor.

Good further clarification, and generally true. There are circumstances where employees get finders fees, generally in procurement positions, as something like a reverse-commission.