Apple alleged procurement fraud – keep your eyes peeled…

I'd been planning to write about the Bribery Act for a few days now, and also link to Jason's very good piece here about procurement fraud.  He in turn links to a good piece in the CPO Agenda magazine on the same topic.

And then the pretty stunning news today that an Apple procurement executive has been arrested  and accused of accepting more than $1m in bribes and kickbacks from several Asian suppliers of iPhone and iPod accessories, according to the San Jose Mercury News.  Paul Shin Devine, global operations manager for Apple's iPod music player and Andrew Ang, who works for one of Apple's suppliers in Singapore, were named in a 23-count federal grand jury indictment for wire fraud and wire fraud conspiracy, while Devine was also charged with money laundering and receiving kickbacks.

Devine is accused of supplying information such as specifications, forward plans and pricing from other suppliers to his unnamed co-conspirators.

Why do I call this news 'stunning'?  Well, for a start, Apple was named recently by AMR Research as the world's best supply chain organisation for the thrid year running!   Which means either a. we shouldn't believe all these rankings or b. fraud can happen to even the best.  In fact, I would probably agree with both statements.

So if this can even happen to Apple, what can other mere mortal organisations do to mitigate such risks?   Jason lays out some steps that can be taken, starting with competitive, open and transparent sourcing processes (auctions, e-sourcing)  good spend analysis and of course looking out for signs of spend out of line with someone's apparent earnings.  I would add another couple.   Devine had been at Apple since 2005; I don't know if he has been in the same job for all that time.  But as a CPO I favoured moving procurement staff around - 3 years was about ideal -  for a number of reasons, including the danger of getting too close to suppliers.  Even if it doesn't tip over into fraud, I do believe  it is harder to be truly objective - and tough - once you know supplier staff too well.   Using a team approach to critical spend areas is another recommendation; at least there might have been  someone else looking over Devine's shoulder.

But the fact is that collusion between seller and buyer is very difficult to pick up.  It is one of the reasons also that the public sector goes to such lengths through EU and  similar regulations to guard against this sort of thing.  Imagine the press - in pretty much any country - if this had been a Government Department or a local police force rather than Apple!

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