The following article was originally published in Compliance & Ethics Professional on October 25, 2017.
In began my career investigating corruption within the New York City government. One of my first cases involved a vendor bribing a city procurement official to win contracts worth tens of thousands of dollars to perform maintenance in city-owned buildings. Fast forward 30 years. I directed an investigation of a $1-billion-plus procurement fraud on behalf of a publicly traded manufacturing company with operations throughout Asia. It was determined that the vice president (VP) of the company’s Asia division conspired with several employees and numerous vendors to fleece the company for more than eight years. Not surprisingly, the two frauds have many of the same modus operandi (MO) even though they occurred 30 years apart, over 8,000 miles apart, and were on vastly different scales. Although not uncommon with these types of frauds, both investigations were initiated due to anonymous complaints by disgruntled vendors. Similarities in the MO for the two cases are: the procurement official and VP had very close personal ties to the corrupt vendors, bids for contracts were manipulated by using fictitious vendors, significantly inflated cost of supplies that ranged from 40% to 100% above market prices, the procurement official and VP were silent partners of vendors, and cash payment of bribes/kickbacks averaged 15% to 25% of each awarded contract.
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