Procurement Fraud in the IT Sector

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."

Like ST:TNG?

[Skadet]

"The I.T. chief controls the information architecture of the firm and can conceal a fraudulent transaction by circumventing controls and safeguards," says Joseph Anastasi

Maybe I'm a nerd, but the very first thing I thought of was the ST:TNG episode "Brothers" [startrek.com] where Data circumvents the Enterprise's safeguards and takes over the ship.

In smaller orgs, lack of widespread tech knowledge

[linefeed0]

I am aware of a fairly large suburban school district that was taken to the cleaners by their IT manager without them knowing it at the time. Few people outside IT in such a place really understand the cost of the IT equipment they're buying. So the manager decided to order a whole bunch of "spares" to fill a closet. Somehow this closet was bottomless as stuff kept officially going in it but it never filled up.

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:Encourage loyalty

[kfg]

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.

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. . .they tend to be more reliant on high performing and essentially irreplacable personel.

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

My old company got pwned big time by the CIO...

[phillymjs]

...and to my knowledge they still don't know it ever happened.

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...

[Anonymous Coward]

...a friend and I worked at a .com way back when. We knew that we had a couple of high end graphics cards sitting in the basement that were never going to get used by the company, but would add some new life to our boxes. Since no one but myself went down to the basement much, my friend and I decided that we would go down there on Friday afternoon, grab them, and then leave for the day... no one would ever know.

So of COURSE as we are on the elevator going down, the CEO gets on with us, and asks where we are going... we say checking on something in the basement, and he decides that he's going to come down, too. In my head, I think we can just scrap the plan and hold off until next week. My friend decided we were going to go through with this.

So we get to the basement, and the CEO starts looking through some boxes. While he's doing that, my friend grabbed the cards, threw them in my bag, and we walked out... the CEO never had a clue. It was awesome.

Re:Oh Crap!

[Zeinfeld]

Maybe I shouldn't have named my fake vendor company Enron...

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.

Hey, fair is fair

[Opportunist]

If it's fair for management to rip their company off, why shouldn't the IT grunts?