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What are kickbacks and why are they illegal?

On Behalf of | Aug 2, 2021 | White-collar Crime

When many people hear the term “kickback,” they think of a builder handing envelopes full of cash to a corrupt politician in exchange for awarding them a lucrative contract. Indeed, kickbacks are illegal payments in exchange for some type of preferential treatment or improper service. They’re considered a form of bribery, and both the payer and the receiver can be criminally charged.

However, kickbacks can take many forms. It’s possible that someone may see kickbacks going on around them or even be engaged in the practice themselves without fully realizing that what they’re doing is illegal. In some industries, certain types of kickbacks may be “business as usual.”

Kickbacks look different in various industries

It’s essential to understand what a kickback scheme might look like. Let’s look at some examples:

  • A bookkeeper approves an invoice they know is inflated in exchange for getting a kickback of part of that inflated price.
  • A government employee chooses a contractor for a building project over better-qualified and/or less expensive ones in exchange for a kickback of money or other favor.
  • An advertising or media agency gets a rebate from a media company for buying advertising from them for their client rather than making a more effective ad buy from someone else.

The last example is a common practice in Europe and other media markets around the world. However, in the U.S., it’s considered a corrupt practice. That hasn’t stopped some agencies. In fact, in 2016, the Association of National Advertisers (ANA) published an extensive report stating that, contrary to denials by media agencies that they engage in these practices, rebates are common throughout the industry. 

Kickbacks are illegal because they affect the ability of employees of both private companies and government entities to make unbiased decisions in the best interests of their clients and the marketplace as a whole. If you are facing an investigation or a criminal charge of participating in kickbacks, it’s crucial to take the matter seriously, ensure that your legal rights are protected and be prepared to respond effectively to the allegations.