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What are Kickbacks?

Tricia Christensen
Updated May 16, 2024
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Kickbacks are payment or offering of services with the intent to influence or gain something from a company or a person. Kickbacks may be less fancifully termed as bribes. They are often associated with white-collar type crimes, and can occur in numerous work sectors or in politics.

In politics, kickbacks might be used to secure influence over voting by offering services or even campaign contributions. This type of funding is illegal, and yet, many still employ it in one form or another. As well, in government, kickbacks may be offered to obtain government approval for projects.

Perhaps the most famous of these are kickbacks for government officials who issue permits in exchange for profits or upfront payments. In these cases, permits issued are usually done so without legal right existing for such a permit. For example, a housing inspector might issue an illegal building permit in exchange for a bribe.

Though these bribes still exist, laws regarding government officials accepting kickbacks in the US are now in place. Government officials accepting kickbacks may serve up to five years in prison. It should be noted, that there are many government officials who would never accept a kickback.

In the medical communities, kickbacks might exist to give doctors access to free samples of medicine in exchange for prescribing certain medications. In fact, these forms of kickbacks are quite blatant. One cannot go into most doctors’ offices, without noting the increased marketing of certain pharmaceuticals. One may use a clipboard that has a pharmaceutical advertisement on it, a pen with another, or reach for a box of tissue with yet another pharmaceutical ad.

Presently, there are no legal penalties for a doctor accepting free office supplies or free drug samples. In fact many doctors use these samples to cut down on fees and to provide medications to people with economic difficulties. These practices are considered illegal kickbacks only if the doctor agrees to prescribe certain medications in exchange for these products. Many argue that such overt product placement is often tantamount to endorsement of products. However, this remains legal, as long as these kickbacks do not influence a doctor’s treatment decisions.

In other businesses, kickbacks might be offered to companies who agree to recommend a certain business. For example, a bank recommending a particular mortgage broker, and receiving an under the table fee for such is a kickback. A travel agent who gets rewarded for booking at a particular hotel is also a form of kickback.

These actions may or may not be illegal, and depend upon whether the recommendation involves fraudulent representation of other organizations. For example, if a banker refers everyone to the same broker and claims he is the least expensive, when this is not true, then the kickbacks, particularly if unclaimed as income, are illegal.

There is much to be said for establishing reciprocal relationships with other businesses. However when these reciprocal relationships migrate into fraud, they are illegal kickbacks. Normally if a person is affiliated with a group outside of his or her own business, he or she must claim this affiliation so no misrepresentation occurs.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Tricia Christensen
By Tricia Christensen , Writer
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia Christensen is based in Northern California and brings a wealth of knowledge and passion to her writing. Her wide-ranging interests include reading, writing, medicine, art, film, history, politics, ethics, and religion, all of which she incorporates into her informative articles. Tricia is currently working on her first novel.

Discussion Comments

By ettreeseedco — On Feb 02, 2014

Kickbacks are the most blatant form of embezzlement this planet has ever suffered. Kickbacks for defense contracts to one family, so for every bullet that rips a human to death, they profit.

By anon57527 — On Dec 23, 2009

Some businesses offer referral fees. If I have friends that work as office managers make a lot of purchases on behalf of their company. And I tell them that if they consider using UPS that if they decide to use them I will share my referral fee with them, is that illegal?

Does it matter if I am a real estate agent (VA) I tell them to recommend me to represent their company or allow me to refer them to another agent for a commission -- and if it works out I will share my commission with them?

What if I buy them something, instead of sending them a check? Does that make a difference?

How do you distinguish if kickbacks are illegal or just smart business? --Lorin

By anon51431 — On Nov 05, 2009

Dear Bobby - It isn't termed kickback. It/He "G-d Dr." is termed low life scum sucking leaeh. Here at the WiseGEEK website I had to use more subtle words. I personally would not depend on anyone to correct/alter his maggot like behavior. I would give him the finger and clearly tell him that he has no right to your income. Then with a delightful smile on your face, make copies of documented payments and submit them to the insurance companies, his patients, the hospital. This takes a bit of work but it is well worth it when you stop cowering to the scum bags of the world and give them a form of communication they understand.

If You don't want the maggots turning into flies...Stop Feeding Them.

By bobbynguyen — On Jan 19, 2008

I'm a registered nurse first assistant. My job is to assist surgeons with complicated surgeries and in return I billed independently for my service through the patient's insurance and earned my living that way. I have worked with this surgeon for one year, he only allows me to work with him if I agree to give him 30% of my reimbursement and also work in his office for free. With financial difficulty at the time, I agreed to do that. Now he's is wanting 40% of my money or he will get someone else for cheaper. I'm making good money, but feels threatened by this. I need to know if what he is doing is legal, or is this considered kickback or extortion. I wanted to add that there is no form of contracts and i am independent and not his employee, he does not pay me a thing for my services.

Tricia Christensen

Tricia Christensen


With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia...
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