Supply Excellence recently posted a good summary of the procurement scandal plaguing Fry's. I agree with John Lark, who penned the post, that this really is an example of "Procurement Gone Wild". However, the mug shot of a middle-aged executive caught up in a scandal offers none of the same visual appeal as twenty-some things engaging in rather scandalous behavior. But I digress. John sums the story up well: "Ausaf Umar Siddiqui [aka Omar], the vice president of merchandising and operations for Fry's in San Jose, was indicted last month for embezzling $65 million, according to the San Francisco Chronicle" The Internal Revenue Service alleges that Siddiqui made "backroom sales contracts to vendors, and in return, vendors gave him a kickback...It was his responsibility to find Fry's the best price [but] he allegedly caused Fry's to overpay millions on merchandise and accumulated about $65 million in a shell company account since 2005."
Fry's not only lack procurement process visibility, they're legally blind. Perhaps we can learn a thing or two about monitoring executive behavior through lifestyle. MercuryNews.com reports: "according to the criminal complaint, he [Siddiqui], starting in 1988, worked his way up from salesman, to department manager, to director of advertising, to VP of merchandizing in 2003, where he was responsible for all of Fry's purchasing and supervised 120 employees. He earned an annual salary of $225,000...[and] was known around the office for driving fast cars (a Ferrari), carrying wads of $100 bills and boisterously rooting during sports events watched on four TV screens in his office. He spent $162 million in three years at the MGM Grand Casino and Las Vegas Sands Casino according to the IRS…..While Siddiqui was friendly with Fry's owners, they were not golfing buddies."
Omar was obviously living well beyond his means and Fry's owners could not have failed to see that after working with him for 20 years even if they weren't golfing buddies. While invasion of privacy can be a fine line, corporations (public and private) need to maintain vigilance over appearances of interest conflict. Especially when one person, who's responsible for over 200 employees as well as all procurement, has that much sway with suppliers. Integrity is difficult to validate -- we've all been fried at one time or another by those who lack it. What we can do is minimize access to potential abuse through vigilant organizational structure and accept that no one is immune to corruption -- including vendors.
Fry's owners were quick to say that these alleged improprieties did not translate to increased consumer cost...are they serious? Memo to Fry's: Spend Management is not about gambling. Unless the cards are stacked in your favor (and the kick-backs are going into the corporate account via a kosher rebate program).