Procurement Fraud in the IT Sector 153
TopShelf writes "IT staff usually enjoy unrivaled access to the deepest details of an organization's structure, and all too often, some submit to the urge to use that knowledge for nefarious purposes. Baseline Magazine explores how how Tech Insiders Cheat Their Employers, with examples of executives creating their own vendors to which fat contracts are awarded. Perhaps the most galling case involves a director in the New York City Chief Medical Examiner's office who is accused of scamming FEMA in the wake of the September 11, 2001 terrorist attacks."
I did this with post-it notes. (Score:4, Funny)
I'm trying to figure out how to do it with the company cars, but that one's a little tough.
Machine that goes DING!! (Score:2)
For non-expendable items that require a capital investment, I suggest setting up a leasing company. That's what I did with our company's Machine That Goes DING!!(tm).
Re:I did this with post-it notes. (Score:2)
I worked onsite for a DC-government agency.... it was amazing. They had huge plasma screen TV's for "homeland security". Unfortunately, I only seemed to walk by during their "breaks" from 10am - 3pm when they were watching soap operas, game shows, etc.
That's why this whole "oh, they cut security funding to DC and NYC" doesn't mean much without some actual analysis.
Oh Crap! (Score:1, Funny)
Re:Oh Crap! (Score:4, Interesting)
That reminds me of the recent case where a guy was caught trying to pass a counterfeit billion dollar bill. Most criminals avoid detection by trying to fly under the radar with a scam so low level it is undetected. This guy was caught because the attack was so ridiculously visible - which reminds me I blogged on this and forgot to actually publish the post, must do that.
These frauds are all pretty standard ones that any good auditor should be able to spot. Placing orders with a cutout company is an old ruse. What is suprising is the way that an exec of a public company would put it all on the line for what was actually chickenfeed compared to his salary and $900K stock options. I did that rant on my blog already though [blogspot.com]
The only part of this that is Internet specific is the attempt to shut down the whistle blowers with court orders in the fourth case. Again it happend in Enrons home base of Texas.
The blogosphere recently uncovered a series of frauds committed by Duke Cunningham and a number of other congressmen. The mainstream media has yet to tell the public anything close to the whole tale which is still being investigated but has already cased the dismissal of Porter-Goss as head of the CIA, the uncovering of a prostitutes and poker game held by lobbyists at the Watergate hotel and a peculiar series of limosine contracts. The bloggers are also currently getting their teeth into what appears to be a bipartisan scam where a legislator buys land up cheap, gets an earmark appropriation passed to build on or close to it that massively increases the value of the land and then sells dear.
In the UK the magazine Private Eye has traditionally been the whistle blower. The US has never had a true equivalent. Private Eye has dramatically reduced the amount of graft in UK public life by bringing to light many schemes that would otherwise have continued for decades.
Perhaps the Internet can be the Private Eye for the US.
Unreported cases (Score:4, Insightful)
Re:Unreported cases (Score:2, Funny)
Bad Guy: "Officer, these men beat me severely with IBM model M keyboards!"
Officer: "What possessed you to to this?"
Good Guys: "Sir, he defrauded our company of 3 million dollars."
Officer: "Oh, in that case, try this nightstick."
Re:Unreported cases (Score:1)
Re:Unreported cases (Score:2)
Re:Unreported cases (Score:2)
-nB
Re:Unreported cases in the real world (Score:2)
Judge: "What possessed you to to this?"
Laid off workers: "Sir, he defrauded our company of 3 million dollars."
Judge: "Oh, in that case... The workers loose their life savings to compensate the victim! And to victim... How does 5 years in Club Fed sound with only 6 months served? Oh and the wife says hey... See at golf next Sunday!"
Maybe I have a lack of knowledge... (Score:2)
Re:Maybe I have a lack of knowledge... (Score:3, Informative)
Personal experience (Score:2)
They were the outsourced IT managment and staff for CompanyA. CrapIT had CompanyA buy all the hardware and software from themselves. Since CrapIT made all the IT decisions, with little or no oversight (more on that later), they could charge whatever they wanted for hardware and software. They also charged for hourly overtime when their staff "stayed late" or "work
Like ST:TNG? (Score:3, Interesting)
Re:Like ST:TNG? (Score:3, Funny)
Re:Like ST:TNG? (Score:3, Insightful)
I applaud you.
Re:Like ST:TNG? (Score:2)
Re:Like ST:TNG? (Score:1)
Old hat (Score:1, Funny)
Re:Old hat (Score:2)
... as opposed to ... (Score:4, Insightful)
As opposed to creating whole outsourcing companies to manage contractors during an outsourcing push. Or an executive personally subcontracting a building project at a bid below the rest of the local builders. Or the usual everyday case of standardizing on vendors that appear heavily in the executive's personal stock portfolio.
Encourage loyalty (Score:5, Insightful)
But for most employees, instilling loyalty and pride in the company is the best disincentive to theft. It's also the best way to increase productivity.
How does a company do that? Pay employees what they're worth, don't overwork people, be ethical in your business operations. Basically, it's the golden rule. Treat your employees the way you want them to treat your company. Your employees will take care of the rest, and the money will roll in.
It's too bad that most companies are only in business to line the pockets of the top execs this quarter, and damn the next financial period; we'll figure that out later.
Re:Encourage loyalty (Score:5, Interesting)
It goes a bit deeper than that I'm afraid.
The modern model for business structure requires hiring and treating people as interchangable parts in a machine. This has nothing to do with short term greed, but is rather aimed at the sustainability of the business itself.
This is one of the reasons that new, small businesses can out perform older, larger businesses. They tend to be more reliant on high performing and essentially irreplacable personel. Say; the founder.
One of the reasons that new, small businesses tend to fail is because. .
So both short term greed and long term surviability can lead to an air of people not mattering. The opposite of love is not hate; it is indifference. In the average company they aren't actually out to get you, they simply don't give a fuck about you.
KFG
Re:Encourage loyalty (Score:2)
And there's more: if I have become your irreplaceable personel and I am highly skilled etc etc, why on Earth would I want to stay with you when many other companies are willing to pay me the big bucks that your small biz does not have? Mercenary, I know. The best way to be in a highly competitive environment, I think.
Re:Encourage loyalty (Score:2, Insightful)
An oxymoron.
KFG
Re:Encourage loyalty (Score:2)
Re:Encourage loyalty (Score:1)
Re:Encourage loyalty (Score:1, Funny)
Re:Encourage loyalty (Score:3, Insightful)
Too true. The best part of is that these clowns get to walk away with insane severance packages after running companies into the ground that no mere mortal outside of this priviledged class will ever see. I'd love to be able to completely and utterly fuck up at my job and be "severed" with several years salary and other lovely parting gifts.
You have to trust your people (Score:4, Insightful)
Singling out IT managers as potential sources of fraud is disingenuous. ALL managers have the potential for fraud, because they have the access and the authority to commit the crime.
Re:You have to trust your people (controls help) (Score:3, Insightful)
"invoices were often hand-delivered to Motschenbacher who, in turn, would hand-deliver the Buca payment to EDP"
If your business processes are so pathetically broken that the same person processes invoices and writes the checks, your problem has nothing to do with IT having too much access to the company's nervous system.
TFA lies (Score:2)
Re:You have to trust your people (Score:2, Informative)
> Singling out IT managers as potential sources of fraud is disingenuous. ALL managers have the potential for fraud, because they have the access and the authority to commit the crime.
You're missing one of the main points, stated clearly on the first page of TA:
"An information-technology manager with a larcenous bent is uniquely qualified to carry out clandestine procurement activities. Not only do some corporate I.T. budgets top $1 billion, but the head of inform
Re:You have to trust your people (Score:2)
People with a strong sense of ethics are not allowed into senior management posts in large companies, because they would report the company for accounting fraud (at least).
Agreed. You have trust -- then you have to audit. (Score:2)
What's wrong? (Score:1)
No it's still theft (Score:2)
No. You still stole something and you can get arrested. Unautorhized taking of property is theft.
Re:What's wrong? (Score:2)
Happens all the time (Score:2)
Re:Happens all the time (Score:1)
Re:Happens all the time (Score:2)
Re:Happens all the time (Score:2)
Re:Happens all the time (Score:2)
The UK and the US both have laws that say that unsolicited goods are gifts and that there is no obligation to pay for them.
Th UK law is called "Unsolicited Goods and Services Act 1971". In the US, the law was passed in 1970 and it is in Title 39
Re:Happens all the time (Score:2)
This is true in Canada as well: Office of Consumer Affairs [ic.gc.ca].
not "Tech insiders" these are called "managers" (Score:3, Informative)
Just my 2c
Re:not "Tech insiders" these are called "managers" (Score:1)
Then it would be my 2c.
Poor Control Measures? (Score:3, Insightful)
At least 4 people see a cheque before it is signed and sent out, two signatures are needed on the cheque and one from someone like a manager on the form requesting it. If I want a printer cartridge, I have to fill out a form, get my line manager to authorise it, and then give that to the secetary - who also checks everything, then when she places her order it has to be signed off by her boss. Etc etc.
Control measures are fundamental to reducing exposure to fraud or theft IMHO. Trust me, I'm an accountant.
Re:Poor Control Measures? (Score:2)
If the people making the money decisions don't get a direct benefit from the companies success, you can anticipate some of them will make decisions more for their own benefit than the companies.
Re:Poor Control Measures? (Score:2)
TO do this you need a mid level or CIO to accomplish this and take cuts on the transactions.
Re:Poor Control Measures? (Score:2)
The irony is that many people who have committed massive fraud have said the exact same thing.
Re:Poor Control Measures? (Score:2)
This is exactly correct. I've been in a variety of positions in the public and private sector, and they all operate the exact same way -- peeny wise and pound foolish. It was always easier to spend $5,000 than it was to spend $50, which obviously led to overspending on critical things because we could
In smaller orgs, lack of widespread tech knowledge (Score:3, Interesting)
He got caught as soon as he did only because he was a complete dumbass about it -- students knew there was a "forbidden room" and were suspicious of its contents, and he listed some Cisco kit and some printers on eBay with an address that obviously traced back to the school. When someone brought in a printout of the eBay auctions it was all over.
Re:In smaller orgs, lack of widespread tech knowle (Score:4, Funny)
this technique is so old, that reporters know it (Score:2)
and the funny thing is, they were voltage-limited supplies, they would all have to be rewired into current-limiting units on receipt by the father.
at tha
That's too hard (Score:2)
I am familiar with a business that gets all its IT services through a one-man contracting operation. It's in the contract that this guy will provide them with all their hardware, at a 5% markup over his cost. So instead of just telling them what to buy and letting them call up Insight or whomever, he buys it for them, tacks on 5%, and gives them the bill.
The value-add is pretty near nil, but the cost add really lines the guy's pocket.
Re:Huh? That sounds like legit capitalism. (Score:2)
If someone said in a project I was to buy them hardware, I'd charge a fee too. Otherwise, they can go spend their own time buying the hardware.
Or if I call
Re:Huh? That sounds like legit capitalism. (Score:2)
All this guy is doing is adding an unnecessary layer to the transaction and driving up the end-user's cost. I have other reasons to think that he's milking this particular cash cow that I won't go into here. Suffice it to say that he has found several ways to profit by his customer's continued ignorance, and he acts to keep them in the dark rather than educate them. (The customer probably shoul
Too legit to quit (Score:2)
Re:Huh? That sounds like legit capitalism. (Score:2)
Re:That's too hard (Score:2)
Re:That's too hard (Score:2)
Indeed. For example, automobile repair shops routinely mark-up the hardware they install by 50-100%
Major Cojones (Score:2)
Talk about hubris!
Aren't we all a little fraudulent? (Score:1)
Re:Aren't we all a little fraudulent? (Score:1)
Of course, if you described it as a "Real-time, mission-critical IT security news service", or something like that, you might be able to get someone else to sign for it.
Re:Aren't we all a little fraudulent? (Score:2)
Re:Aren't we all a little fraudulent? (Score:2)
Re:Aren't we all a little fraudulent? (Score:2)
It seems teh lower your job the harder you work and the most that is expected of you. When I was an intern lan admin I went on slashdot all the time. Not excessively but every few hours I would check if I wasn't too busy with anything or waiting for a meeting or something.
If your a director then you can be on slashdot all day long
Re:Aren't we all a little fraudulent? (Score:2)
Now that I'm salary, I don't care. After all, I'm salary, and my employer has a vested intrest in keeping me up-to-date.
After all this time wasted reading /. (Score:2, Funny)
Power leads to corruption (Score:2)
"...Abuse of Power Comes as No Surprise is one of Holzer's Truisms first published in l977. [...] Holzer's Truisms, first published in l977 include such politically charged statements as ABUSE OF POWER COMES AS NO SURPRISE, EVERYONE'S WORK IS EQUALLY IMPORTANT and MOST PEOPLE ARE NOT FIT TO RULE THEMSELVES."
All ideals that are apt today
Cant we just execute people (Score:2)
Re:Cant we just execute people (Score:2)
The people that claimed that Iraq was involved in 9/11, the people that wiretap tens of thousands of phones in America, the people that use secretive government agencies to collect information on Americans
Ah, you get the idea.
Re:Cant we just execute people (Score:2)
Sunlight is the best disinfectant (Score:2)
'should anyone such as the HP account rep question Champag[n]e too closely about his dealings, he would tell them "that the work was confidential and in the interest of national security," '
Secrecy corrupts. If someone says "national security" too often they are covering up something foul.
The converse is the New York case:
"an unnamed employee in the medical examiner's office alerted the Department of Investigation's Zander"
Keep an open channel for whistleblowers. You'll never get this
glad you brought it up (Score:2)
a never ending cycle... (Score:2, Insightful)
Re:a never ending cycle... (Score:2)
My old company got pwned big time by the CIO... (Score:3, Interesting)
I left there about 5 years ago, but one of my close friends who remained there worked in finance and a year after I left she uncovered a scam run by the CIO, one of his underlings, and a vendor on the outside. It was pretty simple and had apparently been going on for some time even before I left. Basically, it was just a matter of phony invoices coming in from the vendor, for equipment that was not needed nor delivered. The CIO and his underling signed off on the invoices and they were paid, and presumably some of the money that went to the vendor found its way back to the CIO and his underling. My friend quietly followed the paper trail and was able to determine that the scheme netted somewhere in the mid six figures, over just how long a period I don't remember.
I would like to mention that the CIO's underling was an empire-building, micromanaging bitch that was hated by everyone who was under her, which unfortunately included me. She would cover her own ass and happily throw anyone else under the bus she could to solidify her own position. I ended up having to report to her for a period when my boss left the company, until a replacement was found. Having to deal directly with her was a major reason why I left the company.
The above paragraph is just to give you a feel for the fervor with which I pleaded with my friend to assemble all the evidence of wrongdoing and present it to the CFO. She surrepetitiously made copies of everything and kept the folder around, but never did blow the whistle. I suppose she figured it might come in handy as a bargaining chip someday if they ever tried to pin anything on her. It's a real shame, because nothing would have pleased me more than for my friend to have taken that bitch down. Oh, well.
~Philly
Seems like a good place to tell this story... (Score:1, Interesting)
So of COURSE as we are on the elevator going down, the CEO gets on with us, and asks where w
Hard to do with open source software (Score:2)
Re:Hard to do with open source software (Score:2)
My cohort & I were just discussing that if the national average is 6% of revenu, we have a lot of catching up to do.
Re:Hard to do with open source software (Score:2)
Snack Bandits count, too! (Score:1)
Big Brother vs. the Whistleblowers (Score:2)
Vendors do it too. (Score:2)
Hey, fair is fair (Score:3, Interesting)
On the other hand... (Score:2)
Re:On the other hand... (Score:2)
Nothing to worry about... (Score:2)
Okay back to
Who is scamming whom? (Score:2, Insightful)
I didn't find this in the article, but let's see. New Orleans was built below sea level, and the problem was just a matter of time. The US government has decided to take my money to pay for the problems in New Orleans? That sounds like a scam in and of itself.
Check out this opinion [nytimes.com]
The basic point is that the US government is buying votes with your money, including subsidiz
Re:Who is scamming whom? (Score:2)
No, New Orleans was not built below sea level. It was built above sea level, and sunk. But, those with an agenda to push don't ever bother to try for accuracy. The inflamatory lies are much better for getting people riled up to be blind to the hidden agenda. The government is incompetent enough (though often less incompetent than the private sector), you don't need to spread lies to make them look worse.
Re:Who is scamming whom? (Score:2)
Re:Who is scamming whom? (Score:2)
No. I think $ are being used to appear to be responsive.
Meanwhile, I find references to large parts of NO being built under sea level around 1900, in contradiction to your initial remarks.
You are correct. I did not make my comments explicit. There was construction on fresh ground that was below sea level. New Orleans was founded about 200 years before the point in time you are referencing. Within the first 100 years, there was no area at all under se
Re:Who is scamming whom? (Score:2)
No, by my own criteria, I have limited time and did not write the extra words necessary to clarify a non-point. New Orleans was founded because it was high-area in a swamp. Period. New Orleans was founded in a location that was above sea level and not know to be sinking (since it wasn't sinking when founded). Period. That, long after it was founded and established, there was some small amount of new construction in areas that had sunk below sea level does no
I confess (Score:2)
I'm turning myself up for using company resources for personal benefict.
Maybe they'll be lenient - the paper was already printed on one side.
Well, somebody has to have access (Score:2)
I just changed a few fields in the database I was installing and now my domain name is registered until 2099.
Re:What a bunch of BS (Score:2)
Re:What a bunch of BS (Score:2)
http://www.crimelibrary.com/criminal_mind/scams/l
Re:This is why Rebates are so popular! (Score:2)
The Fianace department didn't want to bother with the rebate checks.
About the only thing I ever got them to go for was a free Jornada for buying an HP 4650 and returning an old LJ III for recycling.