The Shakedown: The Continuing Conspiracy against the American Taxpayer - Assignment Example

 The Shakedown Question The Ukrainian tax officials have picked and chosen Strategy Solution as their target. The officials claim the company has not put on record each and every tax schedule required. In addition, the country’s tax officials allege that Customers Strategy Solution has tax arrears owed to the Ukrainian government. These claims are contrasting since Zhuk, the head of the company, and his associates have done everything according to the law. The weak institutions and deficient laws of the country encourage extortion. Customer Strategy Solution being a new company in Ukraine makes it more vulnerable than local based companies. It does not have any connection in the country. The fact that the company’s officials bribe Mylofienko in order to get their telephone lines installed faster make them easy targets for other officials who are extortionists. Ukraine also permits payment of facilitation fee which Zhuk is keen to pay in order to get his company’s telephone lines installed. Additionally, the high business goals that Zhuk sets also make the company a target of extortion by the officials. Zhuk establishes the company so that he can change people’s lives. He pays the best salaries to his workers and ensures they have a comfortable life. Moreover, the company shows that it is willing to pay any official any amount of money so as to pursue business interests in the country. Customer Strategy Solution presumes bribing as the only way of succeeding in Ukraine. They want to have an advantage over other business rivals hence the dealings with officials who are corrupt. Question 2 Customer Strategy Solution should not have used that mode of payment in order to get their telephone lines installed. By paying a bribe to Mylofienko, the company showed that it was willing to pay any official any amount of money so as to pursue business interests in the country. Zhuk and Hnatyuk visited Mylofienko, a senior telecommunications manager, to acquire relevant information n costs associated with telephone lines installation. According to Mylofienko, renting a telephone line would cost the company ten hyrvnia monthly, and the rate of use would be 0.5 hyrvnia per single minute. The telecommunication company was willing to charge the company 100 hyrvnia. This amount was fair according to Zhuk and Hnatyuk. They were able to pay the stipulated amount as presented by Mylofienko. Mylofienko informed them that it will take a period of three years before the company’s telephone lines could be installed. He attributed this long wait to a huge number of orders placed by people and companies. The delay in installing the telephone lines would mean that the company’s project be slowed down or fail to be realized altogether. Hnatyuk’s thought of acquiring services from another, though more expensive company made Mylofienko decide to help them with the installation, but at a fee. He was to give exceptional treatment to their application. He was to be given $300 per line; he was also to install ten lines in the company’s office at a cost of $500 in a month’s time, and the installation was to begin the week that followed. The higher the amount demanded by the telecommunication company, the faster Customer Strategy Solution, would start its operations. For $3000, the company would start functioning in a month’s time. $5000 meant it would commence its operation the following week. Making fresh appointments, spending extra time getting wired and meeting new people posed a new challenge. These thought made the company decide to accept the terms of Mylofienko in exchange for the installation services. They demanded to get the telephone lines get installed in the shortest time possible. What followed was Hnatyuk’ giving Mylofienko the envelope containing some money and one copy of the contract between the two companies. The company had bribed Mylofienko. They should not have made their payment the way they did. The company should have followed the due process associated with the installation process. They should have made the application and wait for their time. If this option did not favor the company’s operations, it should have opted to pay more to get quicker services. Moreover, they violated the FCPA by paying the $5000. The act only allows for payments that are small. Other than that, Hnatyuk violated the Anti-Terrorism, Crime, and Security Act of 2001 by bribing Mylofienko. Additionally, making payment would bring problems with the country’s Internal Revenue services. The mode of payment used by the company will also make cause other country organs to request for bribery in order to ensure its smooth operation. Question 3 Customer Strategy Solution should not give in to the extortion demands. They should not pay off and leave the country. The owner of the company is an extortion victim. Laws in most countries do not consider extortion as a crime. Paying Simonenko will mean that the company will continue to part with money so as to conduct its business. Normally, a company which is under extortion demands from officials cannot adequately operate in a foreign country. There may be a situation where a competitor may be bribing bureaucrats in order to get additional advantage over other companies. A decision to engage in the same practice as your competitor so as to continue operating in the country seems inevitable. The problem is that the company will be accruing additional expenses. Companies that pay bribes justify extortion demands and payments. They also demand to be given preferential treatment than their competitors or equal treatment with their rivals. A company will only agree to do favor if it also receives favors in return. Justifying these favors becomes easier to one when he or she claims they are victims of extortion demands by the official or officials. This means that companies that pay bribes are on caught between a rock and a hard place. They justify bribes, and they justify extortion payments, by claiming they are doing the same thing as their competitors. The result is that it all becomes a cycle. The outcome is the decline of moral standard that govern the companies and creation of a dangerous business environment involving politicians who are corrupt. If the company does not pay and leave the country, it will reduce the number of organizations that are corrupt. This will reduce people’s demand for companies’ regulation, increased taxes, and harassment. Furthermore, this will reduce the cycle of increased corruption and policy formulation. Accepting to pay off the tax official and stay means that the company risks negativity before the eyes of the people and reduces the legitimacy of business in Ukraine. Conversely, Zhuk may want to bribe officials because he wants to improve the lives of his employees. The desire to do so may be significantly enhanced due to his wish to create employment and bring aspiration to the country. Accepting the extortion demands will bring more harm than good as intended by Zhuk. Giving bribes to gain advantage or stay in business brings more harm than satisfaction to many people. It also increases corruption. Ukraine has failed to achieve its economic potential for a long period. This failure is hugely attributed to high level corruption in its institutions. As long as corruption exists there will be shakedowns such as that involving Zhuk’s company. The people of Ukraine should device ways of encountering extortionists such as Simonenko. Zuhk has an option of getting into contact with other software firms, but he does not use it. Additionally, he can corporate with other overseas companies doing business in the country to figure out if there are techniques they can utilize to put a stop to extortion. In spite of everything, there are transnational companies that have succeeded in Ukraine. My view is that Zuhk should not pay the extortionists. He should leave Ukraine and set up his company in another place where there are favorable conditions for business. Works Cited Bodrock, P. “Harvard Business School.” The Shakedown. March, 2005: 31-41. Print. Malanga, S. Shakedown: The Continuing Conspiracy against the American Taxpayer. Chicago: Ivan R. Dee, 2010. Print. Wrage, A. A. Bribery and Extortion: Undermining Business, Governments, and Security. California: Praeger, 2007. Print. Read More