DAMCO’s Bangladesh Operations: Systematic bribery detected

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Systematic bribing by Damco has been detected in its business operations in Bangladesh.

Damco, among the world’s biggest freight forwarding companies, handles almost 20 per cent of freight of Bangladesh.

Internal investigation revealed that Damco took to widespread bribing for rapid expansion of its business operations in Bangladesh in gross violation of the laws of the land. The company’s internal audit report of June 7, 2013 obtained by New Age reveals that Damco Bangladesh regularly spent thousands of dollars for bribing and facilitation payments for rapid expansion of its already vast business operations in Bangladesh.

The practice is ‘embedded in the organisation and its procedures,’ reveals the report of the investigators from the company’s head office in The Hague. The company failed to report the irregularities to the authorities in Bangladesh, though bribery is a serious penal offence in Bangladesh.

In fiscal 2011-12, the freight forwarding company paid $79,000 in kickbacks and in the first 10 months of fiscal 2012-2013 it paid $31,000 in kickbacks, according to the audit report. The report cited several instances of bribing by Damco, including payment of $3,000 in February 2012 to obtain quality control licence for the globally famous apparel brand H&M.

Many other world famous apparel brands like JCP, Collins, Wal-Mart, Levi’s and Tesco, as well as importers and exporters of food, jute and electronic products take Damco’s service in Bangladesh. The 20-page audit report concludes that altogether these practices involved ‘gross or intentional negligence exposing the business to a high level of risk.’

In a statement sent to New Age, the country head of Damco’s legal and compliance department Rashed Bin Ehshan admitted that one of its ‘internal reviews revealed some violations of our internal controls program carried out by certain employees.’

He also stated that the company had taken necessary disciplinary steps against the ‘employees in question,’ and to ‘ensure that the policies are followed in the future.’

The audit report shows how Damco, a subsidiary of Copenhagen-based Maersk Group, bribed officials or agents of its potential customers in Bangladesh to obtain contracts of forwarding freights, supply chain management and customs clearing and forwarding. The audit report also reveals that the moneys Damco Bangladesh received from its customers were spent to bribe customs, port and licencing authorities to obtain favours for its customers. The report reveals that Damco’s chief commercial officer paid the kickbacks even to the employees and agents of customers keeping them in the dark.

The kickbacks are arranged through the Damco CCO organization, says the report. Since February 2012, the kickbacks were paid through cheques of RS Corporation, an enlisted service provider of Damco. RS Corporation deducted five per cent service fee mark-up in order to receive official invoice. The report said that the chief commercial officer of Damco Bangladesh admitted the anomalies and corrupt practices to the audit team.

The audit team, during its four-day investigation from May 20 to 23, 2013, also identified intercompany billings in short ICBs which could create scope to evade taxes.

New Age learnt that following the internal investigation, several Damco officials in Bangladesh, including the country manager, chief commercial officer, chief human resource officer and chief financial officer, left the company under ‘restructuring process’ began by Damco head office.

Some of the officials involved with the malpractices are still serving Damco and some of them left the company after taking full benefits, said insiders.

In the statement the company sent to New Age, Damco Bangladesh avoided replying to the queries about whether it had informed its customers that it bribes their employees and agents or reported its intercompany billing practice to the government authorities.

Source: New Age