MIPIM 2011, and the conversations on the Croisette become hushed when the topic is raised. Even in the bright glare of the Cannes sun there are some words too scandalous to be said out loud.
No, it is not the R-word – recession – we have done that.
It is the B-word. And, yes, the C-word: words so toxic and unutterable that even hardened, cynical property professionals have trouble talking about them. And no, not those naughty words: they use those all the time, particularly when a deal goes wrong. We are talking about bribery and corruption.
It used to be so simple. Back in the good old days, if, for instance, the Kyrgyzstan development and investment minister invited you onto his yacht to shoot skeet and sip 1928 Krug, the only ethical dilemma involved was whether you were supposed to be doing some real work instead.
If, as you tottered back onto the jetty, his retainer handed you a traditional hand-stitched carpet or some such bagatelle to “thank you for your trouble”, the concern was how you could get it back to Blighty as hand-luggage. But you got the deal in the bag and put a foot on the next rung of your career ladder.
Okay, it is a fictitious scenario. But with the introduction of the Bribery Act later this year such “hospitality” may become illegal (see p158).
With the government stalling over issuing clear guidance on what it expects, it is up to the property industry to figure out what is permissible, and exactly what affect it will have on your career if you accept something you should not.
“There isn’t a single company in the UK that isn’t taking the implications of the Act very seriously indeed,” says David Pilling, head of global regulatory standards and ethics at the RICS.
One reason for this is that the Act will make it a criminal offence for a company to fail to stop an act of bribery. In other words, if a third-party doing a deal on behalf of Fictitious Real Estate plc in China lavishes hospitality on a government official, or makes a facilitating payment to ensure the planning application is looked at before D-day, the directors of the company could face an unlimited fine and 10 years in jail.
But in an industry that is oiled by fine wines, rich food and the giving of gifts, what constitutes a bribe and what is just hospitality?
What is a bribe?
The government’s draft guidance published last year states that “lavish hospitality” and hospitality not directly connected to the company, such as a “no shop-talk” party or, one might say, a trip on a yacht, could be considered a bribe.
It also acknowledges that: “Reasonable and proportionate hospitality or promotional expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of doing business.”
However, it adds that if the company has no clear guidance on which is which, its directors could face prosecution.
“The consideration is the value of the gift and when it is given,” says Pilling. “Is it just a bottle of wine? Or is it a £1,000 bottle of wine?
“Most companies in our industry already have very strict ethical guidance on bribery and corruption,” he adds.
Some firms have a limit on the value of gifts their staff are permitted to accept. At Jones Lang LaSalle that limit is $100 or equivalent. According to the firm’s ethical guidance, that is also the upper limit that an employee should spend on a business lunch, or have spent on them. However, the guidance does acknowledge that this could be tricky in places where costs are higher, such as London, and leaves it to “good commercial judgement”.
Worrying unnecessarily?
“For some firms, this whole area, especially corporate hospitality, will be a worry,” says Chris Card, Knight Frank’s associate for best practise, who is conducting a risk assessment on the implications of the Bribery Act for the firm’s global business. “But they are probably worrying unnecessarily.”
Because of the new legislation, Card is looking into whether he will have to compile a list of what is acceptable and what is not. “We already have fairly sensible policies and a system of oversight,” he says. “We don’t want to issue a dictat, but it looks as though we might have to.”
In fact, despite the fact that nearly every bad-guy on television is a corrupt realtor or developer, the UK property industry is comparatively free from corruption.
“I cannot recall any examples of bribery coming up,” says Card. Occasionally, he adds, some staff have skated close to the edge, owing not to greed or corruption, but “stupidity”.
“Sometimes, especially overseas, someone might feel obliged to accept something because of undue pressure from a client,” he says. “But that is usually sorted out by oversight procedures.
“In terms of our members, very few of the cases that come to a disciplinary committee are to do with corruption or bribery,” adds Pilling.
Even without the Act, any hint of bribery is treated very seriously by the RICS. “If we came across any instances or suggestion of bribery, we would have to convey that information to the police,” he says. If that resulted in a conviction, the member could then also be fined or expelled from the RICS.
But you can breathe easily during MIPIM at least. The Act will not come into force for a while yet, and despite the wide-ranging rules, the Serious Fraud Office has implied that it will prosecute only if it is in the public interest.
Still, anyone at MIPIM trying to fathom whether they are receiving a bribe or mere hospitality might find the answer in the French language. In French, a tip is referred to as “un pourboire” – something for a drink. A bribe, meanwhile, is “pot-de-vin”, which roughly translates as a bottle of wine.
Oh dear we could be in trouble.
