UTStarcom, Bribery, and China

In the long Goldman post, I wrote that the case for American companies to do business in Communist China is at least in part that American values — capitalism, rule of law — are imparted to the Chinese. But I warned that there was a risk — not a certainty, but at least a risk — that some of the values flow back in the other direction and that instead of American companies exporting capitalism and the rule of law to China, China ends up exporting Communist-style state ownership, arbitrary government decision-making, and cronyism back to America. Now comes the announcement of a settlement with the Securities and Exchange Commission in which a California-based American telecommunications company, UTStarcom, agreed to pay $3 million in fines as a penalty for what the SEC characterizes as "millions of dollars on illegal bribes to win and keep customers in Asia." Says the SEC, "UTStarcom's wholly-owned subsidiary in China paid nearly $7 million between 2002 and 2007 for hundreds of overseas trips by employees of Chinese government-controlled telecommunications companies that were customers of UTStarcom, purportedly to provide customer training. In reality, the trips were entirely or primarily for sightseeing." Yikes. If it amounts to bribery to pay for an overseas sightseeing trip, what does it say about our Congress, whose members regularly accept such trips? Sometimes, sad to say, it's hard to tell if the Chinese are corrupting us or if we are corrupting the Chinese.