Jeffrey Sachs: Remember who's written book on corporate fraud

Poor-country governments probably accept more bribes and commit more offences, but it is rich countries that host the global companies that carry out the largest offences.

Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by chief executives.

An insider-trading ring is on trial in New York, and has implicated some leading financial industry figures. It follows a series of fines paid by America's biggest investment banks to settle charges of securities violations.

There is, however, scant accountability. Two years after the biggest financial crisis in history, which was fuelled by unscrupulous behaviour by the biggest banks on Wall Street, not a single financial leader has faced jail.

Corruption pays in American politics as well. The current governor of Florida, Rick Scott, was CEO of a major healthcare company known as Columbia/HCA. The company was charged with defrauding the US government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7 billion.

The FBI's investigation forced Scott out of his job. But, a decade after the company's guilty pleas, Scott is back, this time as a "free market" Republican politician.

When Barack Obama wanted somebody to help with the bail-out of the US automobile industry, he turned to a Wall Street "fixer," Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.

Former vice-president Dick Cheney went to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in bribery of Nigerian officials to enable the company to win access to that country's oil fields - access worth billions of dollars. When Nigeria's government charged Halliburton with bribery, the company settled the case out of court, paying a fine of $35 million. Of course, there were no consequences whatsoever for Cheney.

Impunity is widespread - indeed, most corporate crimes go unnoticed. The few that are noticed typically end with a slap on the wrist, with the company - meaning its shareholders - picking up a modest fine. The real culprits at the top of these companies rarely need to worry.

Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national.Big companies are so financially powerful that governments are afraid to take them on.

Second, companies are the major funders of political campaigns in places like the US, while politicians themselves are often part owners, or at least the silent beneficiaries of corporate profits. Roughly one-half of US Congressmen are millionaires.

As a result, politicians often look the other way when corporate behaviour crosses the line. Even if governments try to enforce the law, companies have armies of lawyers to run circles around them.

Fortunately, the rapid and pervasive flow of information nowadays could act as a kind of deterrent or disinfectant. Corruption thrives in the dark, yet more information than ever comes to light.

We will also need a new kind of politician leading a new kind of campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses.

Moreover, we will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and Swiss banks.

So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the US nor any other "advanced" country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem.

• Jeffrey Sachs is professor of economics and director of the Earth Institute at Columbia University, New York