What are Kickbacks?

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.