It’s Friday, it’s procurement fraud time!

Now I know this is two posts in a row where we’ve referred back to comments on a previous post, but again, we recommend you take a look at the comments we got on our "interesting" bribery in Singapore post from last Friday.  Funny, insightful and  interesting ... including one man (well, I assume it was a man) who was actually offered entertainment of an... "interesting" nature by a fork-lift truck supplier!

And we’ve had a couple of real life examples in recent days that show this sort of case isn't restricted to distant lands – maybe it’s not female temptresses, but two UK cases have shown procurement related fraud does unfortunately happen everywhere.

Last week, Ronald Marks, an ex MOD Procurement Officer, pleaded guilty in a Northern Ireland court case to accepting bribes of £66,500 from a supplier of CCTV services who won £16 million worth of contracts. An MOD quantity surveyor was also involved and found guilty, as was the supplier.  The actual incidents date back 10 years or more, and the Serious Fraud Office, who got involved in 2004, gathered over  7.5 tonnes  of evidence according to the Wall Street Journal!

I could tell you a lot more about this case... but then I’d have to kill you. If you see what I mean.

Wine and Chocolates - a recipe for corruption?

Then we spotted this report on MicroScope.com.  A procurement manager accepted bribes from two IT companies, in return for using their firms and paying inflated invoices. No beautiful woman involved this time (unlike the previous Singapore case), just goodies including “wine and chocolates”. No imagination, these British procurement fraudsters.

Rogue employees of resellers Bytes Software and Nettitude have been collared for collusion in a £123,000 conspiracy to defraud Lincolnshire-based grocery co-operative Nisa Today. The conspiracy was orchestrated by Nisa's IT procurement manager Trevor Guerin, who bagged sweeteners of laptops, netbooks, wine and chocolates on top of £50,000 in cash.

One thing I thought was rather strange though. The buyer got two years in prison – seems quite a tough sentence, but fair enough, it is a serious abuse of trust and all that. But the sales people got away with much lesser sentences.

Guerin has now been sent down for two years, while Hesk received a 12 month suspended sentence and a community service order, and Dudani a 12 month community order.

Why?  I assume the court felt that the procurement man was the instigator of the fraud. But... it takes two to tango, as they say. And how on earth did the sales guys get the money from their firms to pay these bribes without apparently anyone else knowing about this?

It also raises all sorts of questions about appropriate purchase to pay processes and so on, but let’s leave it at that, and just remember that while we may not like to think about it too often, fraud in our procurement world is more common than most would imagine.

Voices (5)

  1. SpunkyRaptor:

    On inspection, one of the sellers, Barry Hesk, of Nettitude, was a Director that resigned prior to the case! He only resigned as a director, however, and I believe continues to work for Netitude. This may go some way to explaining how he managed to pay the cash.

    It made me wonder how the other guy, of Bytes, did though. He was apparently ‘influenced’ and they paid £16,000 to Guerin – pray tell how a member of Bytes sales staff have the authority to make such payments!

    From the various reports it suggests that, in one case, Guerin ordered a £700 software licence that was invoiced for £18,700 – he authorised it and Nisa paid it. He then invoiced the supplier from his own limited company for consultancy – how much is unknown, but as part of such a scam I would find it hard to believe that it was for the £18,000 balance. So did the companies AND the selling employees also benefit in some way? And I find myself questioning if the employees had the authority to enter into a procurement contract with Guerin’s own firm…..

  2. bitter and twisted:

    Do CIPS do a module on not getting caught ?

  3. Billy:

    Good point Dr Gordy – I suspect that these people are not CIPS members – but I wonder – what processes / procedures does CIPS has in place to identify any breaches by members?

    There is currently a huge investigation going on in Edinburgh Council which is very interesting. We have been keeping a keen eye on the case and are using it in awareness sessions for devolved procurers / budget holders / etc.

    (http://www.scotsman.com/news/statutory-repair-firms-overcharge-by-13-5m-1-2044963).

    To quote “Council workers* have been accused of cosying up to contractors, accepting bribes and favouring certain building companies for lucrative jobs, while contractors face accusations of hiking up final bills by as much as 20 times the original estimate, charging for fictional or sub-standard work and completing work that did not need to be done”

    * I believe that no CIPS members work in the department.

  4. David Atkinson:

    A couple of test cases, where the CEO of the selling company is in the dock at the High Court, would put the brakes on such inducements for a little while.

    And no sympathy for the procurement guy at all. As my old PM said, in my Black & Decker days, “if you’re going to take a bribe, best make it so big you never have to work in the profession again.”

  5. Dr Gordy:

    One reason why the procurement guy may have suffered more could be that, if he accepted this bribe there could be an assumption that he’d accepted many more that were not exposed. Whereas, if you think of the seller, while he may have the intention to bribe he always has to find someone willing to accept. It will be interesting to see whether any of those cited above are CIPS members and whether CIPS names, shames and strikes off as in breach of the CIPS code of ethics.
    That aside it would be useful if CIPS collected the evidence as to what actually happened in the various cases and then produced some guidance on how to close those loopholes.

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