Potato Procurement – Sainsbury Buyer cashed in his chips……

As one fraud case reached its conclusion, when Ross Knowles, energy buying chief from public sector collaborative outfit LASER, was sent down for seven years, another hit the courts.

John Maylam, the Sainsbury potato buyer, pleaded guilty to demanding bribes from  Greenvale AP in return for awarding them valuable potato supply contracts. The bribes were then funded by Sainsbury’s paying Greenvale slightly over the odds, for lots and lots of potatoes.

One technique was to add on one pound to the price of a crate, and with the volume we are talking about, it soon adds up. The supplier also supplied smaller packs for the same price and there were “illogical prices” for new packs.

Greenvale secured a £40million contract and opened an account called “The Fund” into which they paid £8.7million of ­Sainsbury’s money, giving £4.9million to Maylam, 44, and his associates and keeping the rest for themselves. Maylam also allegedly ran up a £200,000 bill at Claridge’s hotel in London and enjoyed a £350,000 trip to Monaco with the cash given to him over two years by Baxter, the Greenvale account manager.

Maylam admitted corruption when he appeared before Croydon crown court in South London last week. Baxter pleaded guilty to giving him the payments. They’ll be sentenced after the trial of Greenvale finance director Andrew Behagg who denies corruption.

It’s interesting that, according to the report when the arrests were first made back in 2008, the fraud wasn’t discovered by Sainsbury. It was auditors from the parent company of Greenvale who spotted unusual payments and blew the whistle.

"Following an internal investigation by Produce Investments Ltd, the holding company for Greenvale AP, the matter of payments made to individuals outside the Produce Investments group was brought to the attention of J Sainsbury plc".

Scams like this are one of the most difficult types of procurement-related fraud to uncover. That may be why it has taken four years to put the evidence together. I’m convinced that collusion between buyer and seller is very common; and where suppliers are paying bribes, they are likely to recover that “investment” in some manner by mechanisms such as higher prices.

How can organisations guard against this type of fraud then? Four immediate options come to mind.

1. Don’t keep procurement people in the same job for too long – as well as the almost inevitable complacency, opportunities for fraud grow as people on each side of the negotiating table get to know each other better.

2. Don’t have all the power and knowledge concentred. Why didn’t someone else spot that the prices being paid were above the market? And that Maylam was spending a lot of time at Claridges? An assistant, a peer, a boss, someone who could say, “hang on, why are we buying so much from Greenvale when they’re expensive”?

3. Price benchmarking is a powerful tool both to ensure competitiveness and to guard against fraud.  It’s surprising Sainsbury’s didn’t have some sort of process in place given the competitive nature of the supermarket world.

4. Finally, and perhaps the most powerful option, open, transparent procurement processes with a clear audit trail make this sort of fraud much more difficult. If there has been an e-Sourcing process, or even an e- auction perhaps, where the various bids were recorded, it would have been difficult for Maylam to show favour without an objective reason; or for the supplier to load the prices.

And well done to the Daily Mirror, for the headline of the day “For Mash, Get Cash”! In case you're too young to remember that...

 

Voices (10)

  1. Ivor Beenfired:

    This raises the very interesting topic of ‘trust’ which I’ve been doing some academic work on. Trust is absolutely essential in the commercial world; in fact the whole global monetary system is based on trust – money is promissary in its very nature and has no fundamental value when devoid of trust. Whole supply chains – essential for meeting all of our physical needs – are operated on trust: trust the goods will be of the right quality; trust they will be delivered on time; trust that suppliers will be paid. And yes, trust that individual buyers and sellers are not corrupt. No contractual agreement or commercial process is detailed or rich enough to remove the deep requirement for trust. It’s an interesting fact that the word credit is derived from the Latin word ‘Credere’ which means ‘to believe’.

    Peter’s four options make a lot of practical and commercial sense, but here’s a fifth: trust people and recognise that occasionally trust will be broken. This might sound naive at first but its not – when you stop and think about the implications of trying to operate in a world without trust. As one writer commented, ‘without trust one couldn’t even get up in the morning’. Think of all the systems and people you have to trust in before getting to work each day.

    Interestingly levels of trust are falling in the UK. The Edelman 2012 trust barometer indicates that only 38% of people trust government and not many more trust business – only 16% of people trust banks, despite handing over their salaries to them each month. I am convinced that falling levels of trust represent an important factor in understanding the ongoing recession. This Sainsburys story won’t help, but let’s not generalise: most people display impeccable commercial integrity each day, including supermarket buyers and their suppliers.

    1. Plan Bee:

      Excellent. Can I be a supplier to you. Trust me I’ll do a great jon

      And if we are going to quote Latin, Caveat Emptor

  2. Watcher of the Skies:

    Fry the b*****d.

  3. On the Sidelines:

    I take issue with Plan Bee’s comment giving Maylam the title “procurement professional” – there is no evidence that he was ever in a procurement role in the accepted sense or in any way professionally qualified to occupy such a position. My experience is that people like Maylam are little more than fast track silver tounged lizards who are in the positions they are in precisely because of their attributes as silver tounged lizards – there is absolutely nothing about procurement or professionalism in retail purchasing whatsoever.

    1. bitter and twisted:

      The entire retail sector is wrong ?

      If only Maylam had his CIPS, he wouldnt have got caught.

    2. Plan Bee:

      He was the ‘Potato Buyer’. I assume he was paid for doing the buying. THerefore he is a Procurement Professional.

      One may question John Terry’s ability, sanity and attitude etc, but you cant deny he is a football professional.

  4. Julian Moore:

    Balancing continuity of supply and the benefits of product consistency with ‘best price’ is always a challenge and the suggestions all make perfect sense, to a degree. One way to avoid fraud is to ‘triangulate’ markers that might indicate fraud risk. This approach is common in financial fraud and is simple to establish and maintain.

  5. Plan Bee:

    Good story and I look forward to seeing Potato buying weekly featured on ‘Have I Got News for You’

    What is interesting is both of these scams involved Procurement professionals who one would expect are subject to a higher level of scrutiny than othe functions (or at least should be)

    But what comes to mind is how many more of these scams are hidden perhaps with that FM manager who wont let you get involved in ‘his’ spend or the Marketing Director who wants to protect his creative suppliers, or the engineer who wants to continue developing his strategic relationship with the supplier of nuts and bolts.

    Given how much easier it is for these functions to hide things, I suspect that these convictions are absolutely the tip of the iceberg

  6. Final Furlong:

    I heard that he was arrested by the local ‘peeler’. When arrested he was asked “are you John Maylam?” and apparently he said “yes, I yam”

    He may have had a thick skin but, when the chips were down, he was just a small fry. Clearly, he made the mistake of letting the supplier butter him up….

  7. eSourcingSensei:

    I am quite surprised that Sainsbury’s did not spot this.

    I do not necesarily think that rotating a buyer out of their role every couple of years is the correct approach. Having experts in their portfolio field I think can be of benefit

    However completely agree on keeping away from the “one man band” approach – their needs to be accountability, to a Line Manager or another colleague.

    I also fully agree that an eSourcing approach to negotiations exposes the market position and wold as you siad highlight serious irregularities.

    What surprises me the most I guess is the Sainsbury appears not to have a regular financial review of Purchasing spend. Our company has monthly PPV (Purchasing Proce Variance) reporting. This shows the deviation between contractual price and actual price paid. Buyers are challenged to explain any variance positive or negative.

    Then Buyers are also required to measure their performance against the current market. We carry out a lot of market intelligence work and share that across the Procurement Organisation on a monthly basis. This would have been an early indication that something was not quite right.

    Finally having worked previously in the our company’s procurement team for Potato market I am well aware that there are a number of excellent Potato Market publications that provide huge information on price, crop results and trends. Simply reading one of these would probably have highlighted an issue.

    I would hazard a guess that no matter what happens to the individuals concerned both Sainsbury and Greenvale will need to take a serious look at their internal practices and develop some best practice that can identify this at a much earlier stage

Discuss this:

Your email address will not be published. Required fields are marked *