Compliance Glossary

Graft

When government employees or elected officials allocate public funds, they are expected to act in the best interests of the public by awarding contracts to the most competitive bidders in a fair and honest procurement process.

When an official abuses their authority by undermining the procurement process and misdirecting public funds to benefit specific private interests, their actions may be characterized as political graft.

What is Graft?

Graft is a form of political corruption that involves the misdirection of public funds by a government official for the benefit of private interests.

These interests are often private companies where the corrupt official owns a financial stake or has friends who will pay kickbacks or bribes in exchange for preferential treatment.

Political grafting takes place in decision-making situations where public officials are directed to choose a supplier for goods and services or select the winning bid for a government contract. A corrupt official would award the lucrative contract to a “friendly” company, often at a cost that substantially exceeds the fair market rate.

This “friendly” company might then compensate the corrupt official with a financial kickback or pay bribes to other government officials to continue circumventing proper oversight.

What is an Example of Graft?

Political graft takes place anytime a public official misdirects public funds to benefit private interests. We can point to several examples of political graft that have come to light throughout history:

  1. In 1972, political leaders in Baltimore, Maryland were investigated by the Maryland District Attorney’s Office for a grafting scheme that involved engineering firms, architects, and construction contractors. The investigation discovered that public officials were preferentially awarding contracts to select firms in exchange for financial kickbacks. This led to charges against government officials for corruption and tax fraud.
  2. In 1984, Pennsylvania’s State Treasurer awarded a no-bid $4.6 million contract to a California-based accounting firm. It later came to light that the contract was overpriced by millions of dollars and had been inappropriately awarded due to the promise of a $300,000 kickback. 
  3. In 2013, staff members and appointees of New Jersey governor Chris Christie were accused of political grafting after they appropriated public funds to reduce the number of lanes on the George Washington Bridge. This was done for the sole purpose of creating traffic jams to punish the constituents of Fort Lee after Fort Lee’s Mayor Mark Sokolich declined to support Christie’s bid for re-election. 

Is Grafting Illegal?

While there is no law that explicitly condemns political grafting, the act of grafting almost always includes a violation of anti-corruption laws.

In the United States, a government official who intentionally misdirects public funds for personal gain may be found guilty of defrauding the United States. Additionally, the crime of bribery is committed if a public official seeks, receives, or accepts anything of value in exchange for misusing their influence or the authority of their office. This makes it a crime for a public official to accept kickbacks from private companies in exchange for contracts. 

Finally, a corrupt public official who purchases a financial stake in a company in order to subsequently award the company a lucrative contract and benefit from an anticipated increase in the company’s stock price may be found guilty of insider trading.

Blog CTA - Demo 3 (See the GAN Platform in action)