[LONDON] About five years ago, General Electric, the largest Western player in Russia's market for medical equipment, uncovered pervasive corruption in its Russian business. Ferdinando Beccalli-Falco, then chief executive of GE Germany and Developed Markets, told an investor conference in 2012 that senior management became aware of the problems around 2009. "We had to eliminate more than half of our healthcare organisation because we discovered that they were happily scamming our customers, scamming against us and scamming against the government," Mr Beccalli-Falco told the conference.
A GE spokesman said Mr Beccalli-Falco did not wish to comment, and the company declined to comment on its Russian business.
Former GE employees told Reuters that GE staff in Moscow had colluded with government officials and criminal networks to overcharge hospitals for equipment, using offshore intermediaries to do so.
As a result, GE decided to stop selling equipment through offshore intermediaries, according to current and former employees of the company. Customs data show that since 2011 GE has made almost all its exports to Russia through a wholly-owned GE subsidiary in Moscow, which then supplies the local market. "Of course, we lost a lot of customers. Of course, we had to rebuild the customer base," Beccalli-Falco told the investor conference in 2012. GE's sales in Russia have since recovered strongly.
The Japanese company Toshiba Corp has taken the same course. Since 2011, it has stopped using obscure middlemen, customs data show. Toshiba declined to comment on its Russian business.