Legal Definitions - kickbacks

A kickback is an illegal payment made to someone in a position of power or influence in exchange for a favorable decision or preferential treatment. It occurs when an individual or organization receives a benefit (like a contract, referral, or approval) due to the actions of someone in power, and then secretly pays back a portion of their gain to that person.

Essentially, it's a corrupt exchange where influence is sold for a hidden fee, often leading to unfair competition, higher costs, or compromised quality because decisions are based on personal enrichment rather than merit or the best interest of the organization or public.

• Example 1: Healthcare Referrals

  A physician consistently refers all of their patients needing physical therapy to a specific clinic, even though other equally qualified clinics are available. In return, the physical therapy clinic secretly pays the physician a "referral fee" for each patient sent their way. This is a kickback because the physician uses their professional influence to direct business to the clinic, and the clinic then provides a payment to the physician for that preferential treatment.

• Example 2: Corporate Procurement

  A purchasing manager at a large manufacturing company is responsible for selecting suppliers for raw materials. The manager repeatedly chooses a particular supplier whose prices are higher than competitors, and whose materials are not always the best quality. Unknown to the company, the supplier is regularly depositing a percentage of each order's value into a personal bank account belonging to the purchasing manager. This constitutes a kickback because the manager is using their authority to award contracts to a specific supplier, and in return, receives a hidden payment from that supplier.

• Example 3: Government Contracts

  A city council member has significant sway over which construction company receives contracts for public infrastructure projects. A particular construction firm, eager to secure a lucrative contract for building a new bridge, makes a substantial "donation" to a shell company secretly owned by the council member's family, shortly after the council member advocates strongly for their bid. This is a kickback because the council member uses their political influence to benefit the construction firm, and the firm provides a hidden payment as a reward for that favorable action.