Oh My Fraud

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Greg Kyte: They absolutely knew that they were giving bribes and they absolutely benefited from those bribes, but they also structured everything so that they could rationalize to themselves that they were not giving bribes. It's like if you make a New Year's resolution with your wife to eat healthy, but you still eat junk food, and you justify it by saying, no, no, no, babe, I am eating healthy. Listen, there is real fruit in Hostess Fruit pies.

Earmark CPE: If [00:00:30] you'd like to earn CPE credit for listening to this episode, visit earmark Cpcomm. Download the app. Take a short quiz and get your CPE certificate. Continuing education has never been so easy. And now on to the episode.

Greg Kyte: Hello and welcome to Oh My Fraud, a true crime podcast where our criminals probably won't kick you in the back, but they will gladly [00:01:00] accept a kickback. I'm Greg Kite.

Caleb Newquist: And.I'm Caleb Newquist.

Greg Kyte: Caleb. Before we get into it, let's read a listener review real quick.

Caleb Newquist: All right.

Greg Kyte: A listener whose screen name is Cassie. 1231, two, three says, I've been here since the first few episodes, but my friends make fun of me for listening because I literally have no connections to finance. I don't even know what CPE credit is lol. But I do love learning about nonviolent crime and you guys [00:01:30] get the job done while being absolutely hilarious. I've learned so much about accounting to keep it up.

Caleb Newquist: That's a very nice review.

Greg Kyte: So nice! Also, shame on your friends.

Caleb Newquist: Your friends? Yeah, you need new friends.

Greg Kyte: We'll be your friends. Stick around. We'll we'll be your, uh, your earbud friends who talk to you directly into your brain.

Caleb Newquist: If you like, on my fraud. Regardless of your connection to finance and accounting, please take a minute to write us a review. Who knows, we might even read yours on the show. Also, if your firm is looking [00:02:00] for in-house ethics or fraud training, that doesn't suck. We do that. We also do keynote addresses at events and conferences. If you want more info on pricing and availability, send us an email at OMG fraud@tcp.com.

Greg Kyte: Awesome. So, Caleb. Yes, I'm very excited about today's episode. Uh, we did it. We did a webinar, uh, on the same topic uh, years ago, although it does not feel like years ago. It was really ago.

Caleb Newquist: It feels like it feels [00:02:30] like a long time ago to you. It does. It does? Yeah. No, it doesn't seem recent at all.

Greg Kyte: Well, this case is all about an airplane manufacturer who has gotten into a lot of trouble for some major screw ups.

Caleb Newquist: That's right. But this airplane manufacturer isn't the one whose doors are blowing out, whose wheels are falling off. And who's stranded two astronauts in outer space. This story is about the other one. Today's story is about Airbus.

Greg Kyte: Before [00:03:00] we talk about Airbus, we have to talk about the goddamn Watergate scandal again. Uh, if you again. Again? Yeah. If you haven't listened to our episode about money laundering, episode 52, then you might not know how much I dislike the Watergate scandal. It's complicated. It's stupid. It's boring. Sure, it led to Nixon's resignation, and we had to be interested [00:03:30] in it because it was part of the origin story of our modern laws and understanding of money laundering. But I hate it. I'm over it. It happened, like, literally when I was being born. And I wish that it would just go away.

Caleb Newquist: Isn't there some kind of, like, important date in the Watergate scandal that, like, is the same day as your birthday?

Greg Kyte: It was like, I think it was exactly three weeks before my birthday that they broke into the Watergate Hotel.

Caleb Newquist: The day you came into the world.

Greg Kyte: The three weeks before the day I came into the world, he resigned. [00:04:00]

Caleb Newquist: Or they or it was, oh, no, I.

Greg Kyte: Don't think anything happened on my birthday. But it was like it was, but it was all right around there.

Caleb Newquist: So this is this is this is so great because, Greg, I love Watergate. I know is if you've listened to this episode, episode 52, you may know this. And I have to tell you, uh, you would you would probably be disturbed to know how many movies and or TV shows I've watched about Watergate.

Greg Kyte: I like all of them.

Caleb Newquist: Not all of them. [00:04:30] Okay, no, but I but a lot of them. And I've watched Oliver Stone's Nixon probably a dozen times or more. Oh, wow. Yeah. And that's like a three hour movie. Like there's no business. I have no business. No one has any business watching that movie that many times. But and yet I did. So I saw Frost Nixon when it was on Broadway. And then that was wait.

Greg Kyte: There was a Broadway?

Caleb Newquist: Well, it was a it was a play, a musical. No, it was a play. It wasn't a musical. It was just a play. Yeah. Sorry. It would probably make a decent musical, but [00:05:00] anyway. But it was a play first, and then they made it a movie. And I still saw the movie even though I saw the play. Okay. So I'm.

Greg Kyte: Just. I'm envisioning springtime for Nixon.

Caleb Newquist: Yeah. Springtime for Nixon. Yeah. It's pretty much, you know. Yeah. That's actually the perfect. Uh. That would have been the perfect song. Um, but anyway, um, and I have to say, the most recent one that I watched there, so there were actually two new ones in the last couple of years. One was called gaslit, which was with Julia Roberts and Sean Penn. Okay. And that was a pretty good one. And [00:05:30] then the most recent one I watched was called The Plumbers with Woody Harrelson and Justin Theroux. Okay. And it is hilarious. It's so it's it's it's hilarious. Okay. Watergate is hilarious. Greg. You you should like it. Maybe what? I'm trying to. This is what I'm trying to tell you.

Greg Kyte: I might look into the the plumbers one because I remember seeing the, like the trailer for that, and it looked it looked funny. But then I was like, Watergate pass.

Caleb Newquist: So maybe.

Greg Kyte: Maybe this ringing endorsement. [00:06:00] I'll renew a membership to Max and watch the.

Caleb Newquist: Justin Justin Thoreau is in rare form. Okay. As as G. Gordon Liddy. It looked like.

Greg Kyte: The costumes and makeup and wigs was pretty rad.

Caleb Newquist: Outstanding.

Greg Kyte: Cool. Yeah. Well, that can do it for me. Um, well, one way or another, unfortunately, we have to be in. Well, fortunately for you, unfortunately for me, we have to be interested in it again, because the Watergate investigation also uncovered how corporations [00:06:30] in the 1970s were making all kinds of illegal political contributions, not just to politicians in the United States, but also to foreign governments. And we talked about this a little bit, uh, just kind of going back and forth about the script for today's podcast. It's like, how did they uncover that they uncovered everything in these, these Investigation, except.

Caleb Newquist: Where Jimmy Hoffa, where Jimmy Hoffa was. But he was. He hadn't even disappeared yet. [00:07:00] So, so so maybe, if only outside. It had happened afterward. Yeah.

Greg Kyte: Finding where people are buried who aren't dead yet was outside of the scope of the investigation. Really? Yes. When you look at it. But, um, regardless, regardless, that was the whole thing at that point. It feels like in today's American politics, it's so goddamn crazy that, like, it's nothing shocks anybody anymore. But back then, this scandal.

Caleb Newquist: Must have shocked everybody. Everybody.

Greg Kyte: And they're like, [00:07:30] we've got to get to the bottom of everything right now. And and that's the other thing. And fix everything, right? So that's why that the Watergate was, like we said, origin story of money laundering. Also that maybe not the or I mean, bribes obviously were not, um, you know, they weren't legal before then, but they, they ratcheted up, uh, the enforcement of that. So these transactions were often concealed in secret slush funds. So when these companies would pay off foreign officials, instead of posting [00:08:00] the transaction to an account called bribes and labeling it illegal payment of bribes, they would basically post it to miscellaneous and label it none of your goddamn business.

Caleb Newquist: May I just say, if you are not, uh, hip to all the fraud vocab a slush fund? Greg, how would you define slush fund?

Greg Kyte: It's it's kind of. It is the fund where we pay for stuff that we don't really want to talk about.

Caleb Newquist: Yeah. [00:08:30] Essentially, it's. I mean, it's money kind of set aside for things that come up. Right?

Greg Kyte: I think of it as the.

Caleb Newquist: Fix the fixer fund.

Greg Kyte: It's like because petty cash is money that you set aside for, for trivial purchases that you don't want to keep track of. Right. And slush fund is the money you set aside for stuff that it's like. Yeah, like you said, non-trivial. Yeah. Not non-trivial, but also kind of like we'd rather not really talk about it.

Caleb Newquist: Right. So for, for for the ransoms and the. Yeah and the. [00:09:00] Yeah. Yeah. And the and the uh right.

Greg Kyte: You know and and not that slush funds can't be there are legitimate slush funds where you know. Yes. You want to I mean, again my day job I manage medical office buildings. So we we have slush funds for, uh, you know, a massive overhaul of our HVAC system. Yeah, we're, you know, we put we stash away a little bit every year so that when we have to bite the the bullet, we do that. But there's also very illegitimate slush funds as [00:09:30] well. All right. Uh, the extent of the here's the thing, Caleb. The extent of the corporate bribery was, was a little bit shocking, quite shocking. Uh, over 400 US companies were found to have made, uh, at least questionable payments totaling hundreds of millions of dollars. Major corporations, including well-known multinationals like Lockheed and Northrop Grumman and Exxon, were all implicated [00:10:00] in these bribes and slush funds, and bad accounting of bribes and slush funds. In response to these revelations, Congress passed the Foreign Corrupt Practices Act of 1977. The act aimed to curb these unethical practices by making it illegal for U.S. companies and individuals to bribe foreign officials. The law also required that companies maintain accurate slush [00:10:30] fund free records and establish internal controls to make sure that corrupt practices like giving bribes aren't happening within your company. The Foreign Corrupt Practices Act applies to US citizens and US companies. But and this is very important. It also applies to any foreign companies listed on any US stock exchange or foreign companies that have a presence within the United States.

Caleb Newquist: The [00:11:00] Watergate break in happened in 1972, and the Foreign Corrupt Practices Act was passed in 1977, but it was just a few years before both of those events that the airplane manufacturer Airbus came into being.

Greg Kyte: Very interesting, because I would have thought that Airbus had been around since shortly after the Wright brothers. But, uh, the fact the fact that they were established during my lifetime [00:11:30] is that was a that was an interesting fact, uh, that surfaced through this, uh, through this case. Yeah.

Caleb Newquist: I don't know. With name like Airbus. I'm not sure. Early 20th century humor had really kind of they would have been like, well, that's a bit of a that's a bit of a cheeky name, isn't it? Well, I don't think this is a very serious business that we're doing here. We can't. It's not a bus in the sky.

Greg Kyte: I always assumed that it [00:12:00] wasn't a cheeky name, that it was. I mean, they're like, well, what? What is it? Because I mean, airplane air bus is kind of like, we know what a bus is. And this is kind of like that goes in the air and it's just in the air instead. So yeah, I don't know.

Caleb Newquist: It's not cheeky, I think slightly cheeky.

Greg Kyte: I attribute it more to like, British literalism than British humor, but I don't get either. So maybe so. You could very well be correct.

Caleb Newquist: Someone set us straight, [00:12:30] please. Yeah, please. All right. In the 1960s, the United States had established itself as the dominant player in the aerospace industry. France, Germany and the United Kingdom recognize that without some kind of joint program to develop and manufacture airplanes, Europe would be left behind in the wake of the US. And so Airbus was formed as a joint venture in 1970 by French and German aerospace firms, which were later joined by Spanish and British companies to create short range and medium range, high capacity [00:13:00] airplanes to compete with American companies like Boeing, Lockheed and Northrop Grumman. Grumman. Grumman.

Greg Kyte: Graham. Graham. Graham. Yeah. You nailed it with Graham. Also hilarious. I mean, I'm sure it does not go unnoticed that some of those companies were also the exact ones that were implicated in the the the findings that led to the Foreign Corrupt Practices Act. Fantastic, fantastic. Small world.

Caleb Newquist: Yeah. Yeah. And compete they did. It [00:13:30] took over 30 years. But finally, in 2003, Airbus surpassed Boeing to become the world's largest aircraft manufacturer. Boeing took back the title in 2004, and the two have gone back and forth with the title ever since.

Greg Kyte: One day in 2016, out of the blue, the parquet national financier was contacted by Airbus. Now [00:14:00] we're not even going to speculate as to whether or not you know what the Parquet national financier is, because you don't. It's the government organization responsible for investigating serious and complex financial crimes in France. And Airbus's largest factory is in France. And for the sake of brevity, and to not torture our listeners who actually know the correct pronunciation of Parquet National Financier, we're just going to refer to it as [00:14:30] the PNF.

Caleb Newquist: Very considerate.

Greg Kyte: I thought so, yeah. So why did Airbus contact the PNF in 2016? Uh, why? Greg, I'm so glad you asked. They were. They were knocking themselves out. They were turning themselves in Because, listen, they had conducted an internal audit earlier that year, and that internal audit brought to light the fact that Airbus's sales department was doing bribes, all [00:15:00] the bribes, bribing individuals and bribing foreign officials, all in an attempt to secure more sales contracts. Now, you might be thinking to yourself, why would Airbus knock itself out? That is also a great question. Were you thinking that, Caleb?

Caleb Newquist: That's 100% what I was thinking. I thought.

Greg Kyte: So why.

Caleb Newquist: Would Airbus narc itself out to save.

Greg Kyte: Their own ass? That's why Caleb and we're going to get into that in a significant amount of detail later in the show. But for now, just know that [00:15:30] Airbus turned in Airbus for bribes that ultimately benefited Airbus.

Caleb Newquist: So the PNF starts to investigate the bribery situation at Airbus, which I think is fantastic. Airbus was like, hey, P and F, If we think we've been paying a lot of bribes, can you figure out if we really have and to what extent? Socialism at its finest.

Greg Kyte: Right? Absolutely. That's what the to. We can't we'd rather [00:16:00] have the government do this job. So we'll hand it over to the. Now please.

Caleb Newquist: Help us. Turns out they had paid bribes. And to a great extent. Here's how it worked. Airbus hired contractors described as secret agents to sell planes for them. These secret agents would tell Airbus how much of a commission it would require for them to close the sale in question. The [00:16:30] agent would direct Airbus to pay the commission to a sketchy shell company with opaque ownership. And boom, the secret sales agent closes the sale, and Airbus achieves dominance in the aerospace industry. It's kind of like that's basically the story of the underwear. Underwear gnomes in South Park, right?

Greg Kyte: I have not seen that episode of South Park.

Caleb Newquist: Oh, really? Oh, okay. Never mind. We'll have to.

Greg Kyte: Look into it. Yeah. So many, so many shows I need to watch now. Yeah.

Caleb Newquist: I mean, South Park. I don't know if you have to watch it. Okay. Never mind. [00:17:00] All right. Forget I said anything.

Greg Kyte: Yeah, I will.

Caleb Newquist: Oh, man. Yeah, but the commissions paid to these secret agents were inflated because a significant portion of the commission was actually being used to bribe various decision makers who were in the market to purchase some airplanes. Structuring it where the bribe was part of the commission gave plausible deniability to Airbus. We just pay the commissions. We don't know anything about any bribes, but they knew they [00:17:30] could also say that the commissions were very large, because the people they were paying were really good at selling planes. You know, you get what you pay for kind of thing. But it was really a you get what you pay bribes for kind of thing.

Greg Kyte: Did we mention that these secret agents were doing lots of bribes? I believe.

Caleb Newquist: We mentioned it.

Greg Kyte: Because they were doing lots of bribes. The Airbus intermediaries [00:18:00] were bribing people in Ghana, Sri Lanka, Malaysia, Taiwan, Indonesia and China and likely in a lot of other countries as well. The reason we're not giving an exhaustive list of all the countries where Airbus bribed people is because Airbus never went to trial over this. Instead, Airbus entered into what's called a deferred prosecution agreement, which is basically probation for corporations, where they pay a [00:18:30] big fine and they say, yeah, we're going to be good from now on. And the authorities are like, okay, but if you bribe even one more person, we're going to come back and charge you with all these actual crimes. And when you don't go to trial, the world doesn't get to know all the sordid details of who bribed who and where.

Caleb Newquist: That's not really very fun.

Greg Kyte: No, but that said, we do have a few sordid details of who they bribed and where. Or maybe, maybe better said, uh, of who they bribed and how. [00:19:00] Uh, there was one example, one example that was reported on, uh, where a $50 million bribe was paid, but not directly to an airline executive. Instead, Airbus paid $50 million to sponsor a sports team that was owned by the airline executive. And in return for the sponsorship, Airbus received an order for 180 planes. And keep in mind. Caleb, I looked this up. The cheapest Airbus [00:19:30] plane. It's the model A318. They cost just over $70 million, and this bribe was for $50 million. And they sold 180 planes. Probably a lot of them were not the cheapest model. So basically, if you do the math, this bribe was equivalent to some kind of buy 179 planes and get one plane almost free. Yeah.

Caleb Newquist: Almost free.

Greg Kyte: Yeah. Like deeply discounted. [00:20:00] Yeah. That's basically where this works out. So so it kind of makes sense that they'd want to do this. Um, wait.

Caleb Newquist: A minute, wait a minute. Greg, are you saying that the ROI on bribes is very, very good?

Greg Kyte: I think it's pretty damn good. Yeah, it's pretty good. I think it's pretty. Well, there's that old adage where it's like half of your advertising budget is completely wasted. You just don't know which half bribes are. Not like that. 100% of your bribe budget is effective. Yeah. So that's. Yeah. Uh, also, and Caleb, I am 100% [00:20:30] sure this is not the case, but in my brain, the sports team that was being sponsored was like the peewee baseball team that the airline executives kid played on. Yeah. Yeah. So, like everybody else, you know, all the other peewee teams are showing up with team t shirts sponsored by the local VFW. But this guy's kid's team gets dropped off at every game by an Airbus H160 helicopter. Again, that is 100% [00:21:00] not what happened, but I would contest that it is loosely based on actual events. Yeah. Yeah. So, uh, so fun. Bribes are fun. Here's another fun bribe. Caleb. Oh, yeah. There was another. Another Airbus bribe was structured such that, again, instead of handing the airline executive a sack of cash, instead, Airbus hired the airline executives spouse as [00:21:30] a consultant on an aircraft contract. Uh, but despite being paid a handsome amount, the spouse had exactly zero experience in aviation and no experience that could possibly qualify them to be a consultant for an aerospace organization. And I think that this is also just.

Caleb Newquist: So it's basically a it's basically a no show job.

Greg Kyte: Yeah. Yeah, exactly. Yeah, exactly. That's precisely [00:22:00] what it is. I mean, I don't know, maybe for the sake of appearances, they showed up to the meetings and just sat at the table. Right. Just to be like, yeah, I had some coffee, I was there, I was, I was at the I was at the conference table.

Caleb Newquist: So let the record reflect that. Uh.

Greg Kyte: I'm, I'm here as a consultant. The fact that they did not consult with me is not my concern. That's their concern at this point. My. Mind you, I have I have great ideas [00:22:30] on how to structure airline contracts. Just FYI, my expertise was just not called upon in this particular instance. Uh, but, yeah, I think this is so delightful. Uh, I've written a short, uh, a play to dramatize how the airline executives spouse got hired. But in my version, the spouse gets hired to fly the planes, uh, because they were just as unqualified to fly the planes as they were [00:23:00] to work as a consultant about the planes. Uh, so, Caleb, in this play, you're going to play the part of the airline executive, and I'll play the part of Airbus, okay?

Caleb Newquist: All right.

Greg Kyte: And action.

Caleb Newquist: Sorry, Airbus. We don't think we want to buy your planes.

Greg Kyte: Well, what if we hired your spouse for $1 million to fly the planes?

Caleb Newquist: That sounds great, but my spouse doesn't know how to fly a plane.

Greg Kyte: Not a problem, because we actually prefer if this was more of a work from home kind of situation. But [00:23:30] you.

Caleb Newquist: Can't fly a plane from home.

Greg Kyte: So it sounds like we've got a deal. Thank you, thank you, thank you so much. It was marvelous. Oscar worthy performances on on both. Both parts.

Learn to fly.

Caleb Newquist: As we mentioned earlier, Airbus turned themselves in. It has been estimated that if they had not turned themselves in, that is, if they had been caught making these bribes, Airbus would have been fined around €8 billion. [00:24:00]

Greg Kyte: Ooh, wow.

Caleb Newquist: That's a big that's a big. Fine.

Greg Kyte: That's a lot of euros. Yeah.

Caleb Newquist: Their actual fine was just a meager €3.6 billion, which, to be fair, still made it the largest fine for bribery in world history.

Greg Kyte: In world history. Fantastic. Not in European history. In world history.

Caleb Newquist: Super job.

Greg Kyte: Amazing. Super job. The Airbus just clearly showing its dominance in the industry by getting not just [00:24:30] the most planes delivered, but also paying the largest bribe in world history.

Caleb Newquist: Yeah, yeah. You just. Greg, you can't teach that kind of stuff.

Greg Kyte: Either. You either got it or you don't.

Caleb Newquist: That's right. Another factor that motivated Airbus to turn themselves in was simply to stay in business. Certain French laws require automatic revocation of licenses for companies that are found guilty of bribery. That's. Yeah, that's a that's more than a slap on the wrist. [00:25:00] Yeah.

Greg Kyte: That's uh. Yeah. Yeah. That's like because that's the same kind of thing like in the United States, there's like mandatory sentencing. It's I think it's the same kind of thing. Yeah. Got it.

Caleb Newquist: Okay. By turning themselves in, Airbus was able to negotiate that deferred prosecution agreement. And the deferred prosecution agreement allowed them to retain all their licensing so that they could continue to operate as a legitimate business in France. You also might be wondering how the Foreign Corrupt Practices Act figures into all this. Well, since Airbus [00:25:30] does business in the United States, their bribes fall under the Foreign Corrupt Practices Act, which resulted in the Department of Justice joining the NDF in their investigation. The Brits also joined the investigation with their Serious Fraud Office, which is the actual name of a department within the government of the United Kingdom, the Serious Fraud Office. It is not the silly Fraud Office. It has been works. Nope. It's the Serious Fraud Office where Professor Snape works.

Greg Kyte: Absolutely. [00:26:00] Yeah.

Caleb Newquist: The €3.6 billion fine was split between the three organizations, with the NDF getting the largest chunk and the DOJ only getting about half €1 billion.

Greg Kyte: Half €1 billion. Why do they even not even worth their time?

Caleb Newquist: I mean, it's like a it's probably a real shitty dormitory on, you know, the campus at Quantico.

Greg Kyte: Yeah. Although it actually I'm sure it was a good payday for the DOJ. Yeah, I'm sure it's fine.

Caleb Newquist: As a result [00:26:30] of all this, the CEO of Airbus, Tom Enders, resigned, which is unsurprising at first glance. But keep in mind, as CEO, he was aware that bribery had been part of the culture at Airbus, and he was hell bent to eradicate bribery from the company. Apparently, Enders was hands on with the decision to self-report to the authorities, and after the scandal broke, he was not forced to resign. But he voluntarily resigned, taking personal responsibility for what happened on his watch and saying that the company would be able to deal with the problem [00:27:00] more effectively if he left. From everything we have read about it, he seemed legitimately ashamed and contrite and committed to Airbus becoming more ethical, even to the point of torpedoing his own career.

Greg Kyte: It also shouldn't be overlooked that after the deferred prosecution agreement came to light, a class action suit was filed on behalf of Airbus shareholders, claiming that Airbus misled them and misrepresented their operations from 2016 through 2020. And as of this recording, the class [00:27:30] action lawsuit is still pending.

Caleb Newquist: Okay, so, Gregory Milhous Kite, did we learn anything?

Greg Kyte: Yes we did. I think every time we talk about bribes on the show, we we have to talk about how weird bribes are. Yes. Um. And not because I think that everyone has this concept of bribes.

Caleb Newquist: Weird. In, like, a JD Vance kind of way.

Greg Kyte: No, no no, [00:28:00] no. We're weird. As in, it's not. It's not as cut and dried as everybody likes to think in their head. Right. Because, because generally when we think of bribes, we think of it as, as being a very explicit thing where, you know, where someone is.

Caleb Newquist: Like a cartoony bribe. Yeah. Where, where one person walks up to a number with a big sack with a big dollar sign on it.

Greg Kyte: Right? Yeah, exactly. Well, it's funny that you say cartoony because we were contemplating, [00:28:30] uh, playing a clip from The Simpsons on here where Homer and Bart are running the ring toss at a carnival and and a police chief. Wiggum comes up and asks them for a bribe. And it's very that's very much where he's like, hey, I gotta shut you down unless you've got some money for me is basically how it goes. And regardless, the line between bribery and marketing is very, very blurry. Yes. Uh, which even like an example from my own life, the company that I work for, [00:29:00] we bank with a bank called Zions First National Bank. And every year they offer to take me to a BYU basketball game for free. Oh, is that a bribe? Uh, he. I don't think so. Okay. But. But, yeah.

Caleb Newquist: You like basketball, right?

Greg Kyte: Yeah. Well, that's why it's not a bribe. Because I never take him up on it. Because I feel like I don't want to waste my night going to a basketball game, but also.

Caleb Newquist: Yeah, where they won't be serving beer.

Greg Kyte: Yeah. Right. Right. Yeah, exactly. [00:29:30] They might not even be serving caffeinated sodas. Right. Uh, but, uh, but but but and again I kind of want to land on. No, that's not a bribe. But then the question is why is it not. You know, because they're they're giving they're giving me something for free. And the expectation is that I will continue to keep my accounts at their bank. Yeah. Seems like a bribe, but it it falls under marketing. Um, I, I'm switching, uh, my CPA services that my company uses from a national company [00:30:00] to a local firm. Okay. And by making that switch, uh, one just for because there's a, there's a number of LLCs that need tax preparation. But one of the companies, their tax prep fees are going to go from $27,000 to less than $10,000. We're saving. That's a good deal. Yeah. A ridiculous amount of money just by switching from and but it's you know, we we know that's the case.

Caleb Newquist: Wait, so what did they bribe you with?

Greg Kyte: Well, well, that's that's the thing. If I go back to the national [00:30:30] firm and say that we'll stay with them, if they give me and my team a suite at the Delta Center to watch the the jazz game against the bucks. Yeah, that's that's bribery. But the but the Zions the Zions Bank thing is not bribery.

Caleb Newquist: Right, right, right.

Greg Kyte: Which is and again it's like it's it's pretty weird that it's both we're talking you know because they again it's not there's the thing it's not cheap to get those uh those suites uh for NBA games. No. But [00:31:00] it's a lot less than the, than the $27,000 of revenue that these guys are going to lose by me switching companies. Right. So it would make sense for them to at least entertain the idea of giving me said bribe. Um, none of this.

Caleb Newquist: None of this is legal advice, by the way.

Greg Kyte: Well, no. Well, none of it's legal advice. But the the point is where it's so weird because you can't you can't tell me there's no bright line where [00:31:30] marketing stops and bribery starts. Oh, yeah. No, that's where I'm getting at with this because we I mean, the other case that we dealt with were with tons of bribery was the Fat Leonard case. Yeah. And it was the same thing there where there is a bright line in the military where they the. So. So if you didn't hear the fat Leonard, uh, case. Fantastic episode. Uh, look for it on our list of episodes, but, uh, but Fat Leonard was bribing the Navy to come and use his services, [00:32:00] and and he would do things like give them Cuban cigars all the way up to hiring prostitutes and throwing these over-the-top parties for naval officers. Right. But you think about, like, a cigar, like, hey, thanks for coming. Thanks for coming to my port. Here's a cigar. Yeah. The Navy did have a bright line. You could not accept any gift over $20. 20 USD in value. Oh my God. So?

Caleb Newquist: So basically. So basically a Starbucks gift card.

Greg Kyte: Yeah. As long as it was for $15. [00:32:30]

Caleb Newquist: Yeah, as long as it for five, 5 to $15. Fine. Exactly. That's a $50 Starbucks card. You give that fucking thing back.

Greg Kyte: Exactly. You're getting court martialed for that? Yeah. So there is a bright line there. But in just in civilian operations, there's no bright line in terms of where your mark, where it's marketing and where it's a bribe. So, uh, like I said, weird. It is.

Caleb Newquist: Weird. It is weird because whenever you're privy to one of those, uh, exchanges, uh, it [00:33:00] feels good. Whatever is going on.

Greg Kyte: Wait, when it like. When you mean when you're the one who's getting the basketball tickets? Yeah. Of course. Yeah. Heck, yeah. Yeah, absolutely. It does. And and that's the thing is, I don't like when because I have a very a strong, enduring relationship with my banker at Zions Bank. Yeah. And when he calls me and says, hey, we got those BYU tickets again, you want to come? I'm not like, how dare [00:33:30] you, sir?

Caleb Newquist: How? My integrity is not for sale.

Greg Kyte: I can't believe the audacity that you would have to ask me a question like that. I'm switching banks on principle now. Good day sir. Good. I said good day. Uh, yeah. It's it's, uh, self-righteous.

Caleb Newquist: Greg voice right there, folks.

Greg Kyte: Like, that's the very sanctimonious Greg. Okay, here's here's how it gets. Here's another way. It gets weird. Okay. Uh, so [00:34:00] the the the ACF, the Association of Certified Fraud Examiners, their 2024 report to the nations says that the median loss due to corruption, which is bribes, is one, uh, of the many corruption schemes that they look at in their report. But they say the median loss due to corruption is $200,000. Okay. For that, it was $200,000 for the basket of cases that they looked at for the 2024 report. And [00:34:30] what's weird is I'm not sure how the ACF quantifies that $200,000 because like, let's look at the Airbus case. If they gave $50 million to secure a contract for 180 to sell 180 planes. Yep. Uh, but that company was still going to buy 180 planes. They needed 180 planes, right?

Caleb Newquist: They needed the planes.

Greg Kyte: So how much money did they lose by giving the business to Airbus? Probably. Probably. [00:35:00] Maybe. Arguably none. Probably because they. Yeah. Because they might have just had like a Groupon for Boeing planes for $50 million off. If you buy as long as you buy a minimum order of 180 planes. So so again, they how do you how do you black out.

Caleb Newquist: Dates over Christmas?

Greg Kyte: Of course. Exactly. But how so? How do you quantify the loss that's due. Because because again there there is probably going to be a loss due to fraud. Because it would be easy [00:35:30] to quit. Well, yeah, it would be easy to quantify that if I did get my bribe from the CPA firm, if I, if I went and said, hey, give me some, uh, some jazz tickets to keep my 27,000, then you go, okay, you. The business lost $17,000 due to fraud. That would that that's. But but again, it's not always like that. And we actually had to have a board meeting to vote as to whether or not we were going to change companies for our CPA services. Right. So there [00:36:00] was a non-zero chance that we would have just paid that $27,000 instead of the $10,000 regardless. So I'm just saying the big thing for me, bribes are weird.

Caleb Newquist: I can't disagree. Yeah. I will say though, excellent story. And I just, you know, no fault of yours because this case was excellent, but I think the lead got a little buried and so I'll just raise it again for those in the back. And [00:36:30] that is that this was the largest bribery case in the history of the world. Yeah. And I think that cannot go unnoticed. Right. And I think again Airbus. Very impressive. Airbus. Yeah, yeah.

Greg Kyte: So even so, what you're saying is, even if no lessons were learned, this case very much, uh, has a has has a place here on the Oh My Fraud podcast. Even if it was the [00:37:00] for no other reason than just magnitude.

Caleb Newquist: Yes, yes, this this case is in the pantheon of of great frauds.

Greg Kyte: The Hall of Fame. The Hall of Fame.

Caleb Newquist: Hall of Fame?

Greg Kyte: Yeah. There it is.

Caleb Newquist: Yeah. Anyway, uh, I enjoyed this very much. Thank you. Greg.

Greg Kyte: Oh, well, Caleb, you are so welcome. And again, uh, it was fun to revisit this, uh, several years after the first time we and [00:37:30] we dove into it also.

Caleb Newquist: If you're an employee of Boeing and your feelings are hurt by any jokes that we make about your employer, too bad.

Greg Kyte: We'd love to leave us a review. We'll read it on the next episode. Yeah. So, uh, or send.

Caleb Newquist: Us an email and tell us how upset you are, and I'll be happy to delete it instantly.

Greg Kyte: Oh, I'll. I'll cherish it there. Just not those. Those are good ones. The ones where people are upset for no good reason. [00:38:00]

Caleb Newquist: Oh, okay. You don't.

Greg Kyte: Mind those? No, no, the ones.

Caleb Newquist: The ones I would say. Like I try to, I try to, I try to protect Greg's, uh, fragile, uh, self-esteem from the the hate mail that we receive, which we don't receive much, but. Yeah.

Greg Kyte: Yeah. But I do.

Caleb Newquist: Try. I do try to to protect Greg, and it needs protecting.

Greg Kyte: So you do it. You do it a very a very good job. And I am very grateful for that. [00:38:30] But, uh, despite all of this, uh, that is it for this episode. Uh, and remember, the internal audit department at Airbus blew the doors off of this bribery scandal, whereas Boeing's doors just blew off.

Caleb Newquist: And also, remember, if you leave a five star review for all my fraud, Greg will give you $100.

Greg Kyte: Uh, no, I will not. You will.

Caleb Newquist: If you want to drop us a line and get your money from Greg. Send us an email. I will not get your. I will not give you my com. If you'd like to [00:39:00] reach me directly, just go to LinkedIn and, uh, find me slash Caleb Norquist. If you'd like to find Greg on LinkedIn, just look for the guy handing out those $100 bills for five star podcast reviews.

Greg Kyte: It's not there. That is not a representation that will be honored. Nope. Not by me or by the oh, my fraud organization.

Caleb Newquist: Gosh.

Caleb Newquist: All right.

Caleb Newquist: Well, he still wants the review though.

Greg Kyte: I do want that's true.

Caleb Newquist: Uh, [00:39:30] right. Oh My Fraud is written by Greg Kite and myself. Our producer is Zach Franc. Rate review and subscribe to the show wherever you listen to podcasts. If you listen on earmark, you can earn free CPE credits. It's that time of year. Greg. It is.

Greg Kyte: And it's so easy to earn your CPE through your mark. And if you don't have a subscription, get one because you're kind of dumb if you don't.

Caleb Newquist: And if you listen to this show and you like it and you don't know what CPE is, you're actually our favorites.

Greg Kyte: Too [00:40:00] much. You are, you are. We're looking at you, Cassie.

Caleb Newquist: 123123123123123123.

Greg Kyte: Yeah.

Caleb Newquist: Join us next time for more average swindlers and scams from stories that will make you say, oh my God, give me 50 million.

Greg Kyte: Oh oh my frog.