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Procurement Fraud in the IT Sector

timothy posted more than 8 years ago | from the but-we-neeeeeed-those dept.

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."

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Yea, Definitely ... Like, Totally i got my cut (-1)

unity100 (970058) | more than 8 years ago | (#15541194)

There was a datacenter deal 6 months ago. I frauded with ibm and received my cut of $500 m crisp.

lapdances, strippers, and porn oh my! (0, Funny)

Anonymous Coward | more than 8 years ago | (#15541205)

Did he buy lapdances like the Katrina victims?

I did this with post-it notes. (4, Funny)

Trigun (685027) | more than 8 years ago | (#15541210)

For six years I would take a pad of post-it notes from the supply cabinet. After I had enough stock, I opened a wholesale company and sold them all back at a discount rate. Then I did the same with toner cartridges, pens, erasers, etc. Eventually I worked up to filing cabinets.

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!! (1)

Ohreally_factor (593551) | more than 8 years ago | (#15542178)

I applaud your entrepreneurial spirit, but what you should have done was set up your own office supply company to sell the supplies back to your own company. Hell, you wouldn't even need to sneak into the supply closet, just send them a monthly invoice.

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).

Oh Crap! (1, Funny)

archaic0 (412379) | more than 8 years ago | (#15541213)

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

Re:Oh Crap! (3, Interesting)

Zeinfeld (263942) | more than 8 years ago | (#15541967)

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.

Re:Oh Crap! (1, Insightful)

Opie812 (582663) | more than 8 years ago | (#15542177)

...which reminds me I blogged on this and forgot to actually publish the post, must do that.

Can you hurry and publish your blog. I'm really eager to hear what you have to say on the topic. I bet it's insightful and spot on the money. Wow, I'm getting hot just waiting.*

*The above sentence is a fictional depiction and in no way represents my actual feelings about what you may have to say about this topic.

Unreported cases (3, Insightful)

Rob T Firefly (844560) | more than 8 years ago | (#15541221)

What's more, the organizations victimized by this kind of fraud often don't report it and choose to settle privately with the alleged culprits involved.
Don't they say this about every kind of fraud that affects a company? Whether it's procurement fraud, credit fraud, social engineering, expense account fraud, or Ted from Accounting stealing pencils, it seems pretty universal that no company ever wants to look like it falls victim to anything, or falls for anything.

Re:Unreported cases (2, Funny)

JerBear0 (456762) | more than 8 years ago | (#15541316)

For us, "settle privately" would be a nice way of saying "take into the back parking lot and kick the crap out of." I mean what are they going to do, call the cops? I'd love to hear THAT conversation.

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 (1)

Trigun (685027) | more than 8 years ago | (#15541358)

You know, you can fit two people in the back of a police cruiser, don't you?

Re:Unreported cases (1)

pete6677 (681676) | more than 8 years ago | (#15541818)

Sure you can. One faces misdemeanor assault charges, the other grand larceny. Hence, the cops will not be called.

Re:Unreported cases (1)

Trigun (685027) | more than 8 years ago | (#15541994)

So you're going to beat the hell out of someone, and pay three million to do it?

Re:Unreported cases in the real world (1)

vertinox (846076) | more than 8 years ago | (#15542685)

CEO: "Judge, these men beat me severely with IBM model M keyboards!"
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... (1)

Chagatai (524580) | more than 8 years ago | (#15541493)

How does this qualify as fraud? If I have a day job with Company A and form my own LLC as Company B that sells product to A, isn't that perfectly fine? I could see it qualifying as a "conflict of interest" by A's standards, but otherwise I see it as a regular business transaction. I mean, I have seen tons of companies set up so that the same person manages one business that owns some piece of land on which his other business, an accounting firm, pays rent back to the first, and those transactions seem legal.

In the example given, there was some interaction with working for and selling to the government, which I could see as illegal, but in all other cases with private organizations, I would say that things are fine. Does anyone have any details on the legality of this action?

Re:Maybe I have a lack of knowledge... (2, Informative)

HTTP Error 403 403.9 (628865) | more than 8 years ago | (#15541688)

How does this qualify as fraud? If I have a day job with Company A and form my own LLC as Company B that sells product to A, isn't that perfectly fine? I could see it qualifying as a "conflict of interest" by A's standards, but otherwise I see it as a regular business transaction. I mean, I have seen tons of companies set up so that the same person manages one business that owns some piece of land on which his other business, an accounting firm, pays rent back to the first, and those transactions seem legal. In the example given, there was some interaction with working for and selling to the government, which I could see as illegal, but in all other cases with private organizations, I would say that things are fine. Does anyone have any details on the legality of this action?
From the article,"Typically, procurement fraud involves an employee working with an outside vendor to defraud his employer through bogus or inflated invoices, services and products that are not delivered, work that is never done or contract manipulation."

Like ST:TNG? (2, Interesting)

Skadet (528657) | more than 8 years ago | (#15541222)

"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.

Re:Like ST:TNG? (3, Funny)

general scruff (938598) | more than 8 years ago | (#15541819)

The only problem is that Data would never do something like sell Dilithium Crystals on ebay2400.com or anything else to profit from having control of the Enterprise. This would be more like the guy from the past who stole a time machine from a scientist from the future and then started making patents on stuff he stole off the Enterprise. Get your analogies striaght. :p

Re:Like ST:TNG? (1)

Corbets (169101) | more than 8 years ago | (#15541859)

Yes, you're a nerd, but so am I for recognizing that episode. ;-)

Re:Like ST:TNG? (0)

BigCheese (47608) | more than 8 years ago | (#15541870)

No, you've got ie right. You're a nerd.

Old hat (1, Funny)

Anonymous Coward | more than 8 years ago | (#15541239)

Simon Travaglia's BOFH's [theregister.co.uk] been using those tricks for years.

... as opposed to ... (3, Insightful)

Speare (84249) | more than 8 years ago | (#15541240)

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 (4, Insightful)

MrNougat (927651) | more than 8 years ago | (#15541242)

Right off the top - there are always some people who are going to screw you, no matter how you treat them.

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 (5, Interesting)

kfg (145172) | more than 8 years ago | (#15541422)

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

Re:Encourage loyalty (1)

Kamineko (851857) | more than 8 years ago | (#15541433)

So... what you're saying is, some of them want to use you... some of them want to be used by you... some of them want to abuse you... some of them want to be abused?

Re:Encourage loyalty (1, Funny)

Anonymous Coward | more than 8 years ago | (#15541545)

I assume you are "singing" the Annie Linux version.

Re:Encourage loyalty (2, Insightful)

dr_dank (472072) | more than 8 years ago | (#15541707)

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

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 (3, Insightful)

eln (21727) | more than 8 years ago | (#15541243)

Any employee with purchasing power can defraud the company. The more purchasing authority that person has, the greater the damage he can inflict. The only way to get around this is to make sure you're hiring the type of people who won't do this sort of thing because of a strong sense of ethics. Obviously, this isn't 100% foolproof, but there is always risk in business. The idea is to mitigate that risk as much as possible.

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) (2, Insightful)

Beryllium Sphere(tm) (193358) | more than 8 years ago | (#15541457)

From the first fraud mentioned in the article:
"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.

Re:You have to trust your people (2, Informative)

nuckfuts (690967) | more than 8 years ago | (#15542203)


> 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 information technology oftentimes has the most complete access to the company's inner workings and understands better than anyone else what alarms not to trip when absconding with funds from the corporate coffers."

Of course your oversite hasn't prevented you from being modded up as "Insighful".

Re:You have to trust your people (1)

asuffield (111848) | more than 8 years ago | (#15542557)

The only way to get around this is to make sure you're hiring the type of people who won't do this sort of thing because of a strong sense of ethics.

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).

Re:You have to trust your people (0)

Anonymous Coward | more than 8 years ago | (#15542875)

ALL managers have the potential for fraud, because they have the access and the authority to commit the crime.


True... but the IT side of the operations tends to be more lucrative because, as Willie Horton once observed when asked why he robbed banks, "that's where the money is."

I once worked for a medium-sized non-profit organization as their network admin. While I was network admin, I had three supervisors, and two of them were, shall we say, caught with the meat in their mouth. One of them pulled the classic bogus-invoices stunt, and the other was caught when our finance people saw a number of invoices from a company we never did business with for server equipment that was never delivered to us.

Neither of them were prosecuted, despite large piles of evidence and glaring audit trails. In my opinion, this was because both of those people were touted very highly by our executive director, who evidently thought it more prudent to let those mutts resign for "personal reasons" rather than airing out the organization's dirty laundry.

At the time, IT had the largest expense budgets in the organization, and accounted for over 75% of the firm's capital expenditures. IT was where the money was, and I don't doubt that it's even more the case now than it was a few years ago when I was the alpha geek there.

Agreed. You have trust -- then you have to audit. (1)

CFD339 (795926) | more than 8 years ago | (#15542984)

Audit can only be done after the fact, but is a necessary evil. The idea of "Walk softly, but carry a big stick" isn't a bad one to apply here.

What's wrong? (1)

archaic0 (412379) | more than 8 years ago | (#15541246)

Suppose one buys equipment on the company dime and then sells it on eBay and pockets the profit... no problem there, right?

No it's still theft (1)

technoextreme (885694) | more than 8 years ago | (#15541326)

Suppose one buys equipment on the company dime and then sells it on eBay and pockets the profit... no problem there, right?

No. You still stole something and you can get arrested. Unautorhized taking of property is theft.

Re:No it's still theft (0)

Anonymous Coward | more than 8 years ago | (#15541812)

No. You still stole something and you can get arrested. Unautorhized taking of property is theft

O RLY?

Re:What's wrong? (1)

Beryllium Sphere(tm) (193358) | more than 8 years ago | (#15541546)

"He who sells what isn't his'n, buys it back or goes to prison"

Re:What's wrong? (1)

archaic0 (412379) | more than 8 years ago | (#15542591)

I should have included a smiley face or something... the sarcasm didn't come through like it should have...

Happens all the time (1)

kalirion (728907) | more than 8 years ago | (#15541251)

I know of a midsized company that wanted to be bought by another company, so it shipped products to its customers which the customers never ordered. Invoiced them too. That way it could report more revenue, nevermind that the customers were very rightfully pissed off.

Re:Happens all the time (1)

awhelan (781773) | more than 8 years ago | (#15541471)

I've been on the other end of this, I did web design for a while and a company called "Specialty Technical Publications" found my address on my site, sent me a CD, then a month later sent me an invoice for a monthly $500+ charge for as many months as I wanted to keep the CD, including a month that had passed... this reminds me, I have to go file a BBB complaint.

Re:Happens all the time (1)

rcw-work (30090) | more than 8 years ago | (#15541911)

If you live in the US, consider writing your state Attorneys General instead of the BBB. What they are doing is against the law [cornell.edu] . You can treat the CD as a gift with no strings attached.

Re:Happens all the time (1)

pete6677 (681676) | more than 8 years ago | (#15541933)

The BBB can't and won't do anything. What happened here was criminal. If the U.S. mail was used in this process, it's mail fraud and you should inform the Postmaster General. Otherwise, file a complaint with your state Attorney General. Scams like this are common, and so are prosecutions. At the very least, you won't have to pay anything once you've reported the fraud. You might even be able to sue for damages.

Re:Happens all the time (0)

Anonymous Coward | more than 8 years ago | (#15541985)

I think I got the same "invoice" . . . if you look closely, it says that "this is not an invoice" in tiny print on it, and claims just to be a signup for a subscription.

Re:Happens all the time (1)

Secrity (742221) | more than 8 years ago | (#15541758)

The customers needn't have been pissed off, they should have been grateful that the company was sending them gifts. This sort of fraud used to not be that uncommon until laws were passed in the early 1970's that make it illegal to send a bill for unsolicited goods.

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, United States Code, Section 3009. This specific section of the US Code deals with mail sent via the US Post Office, but I understand that it applies to other delivery methods as well.

http://www.dti.gov.uk/consumers/buying-selling/uns olicited/index.html [dti.gov.uk]
http://www.usps.com/postalinspectors/fraud/merch.h tm [usps.com]
http://www.ftc.gov/bcp/conline/pubs/products/unord erd.htm [ftc.gov]

Re:Happens all the time (0)

Anonymous Coward | more than 8 years ago | (#15542878)

The customers needn't have been pissed off, they should have been grateful that the company was sending them gifts. This sort of fraud used to not be that uncommon until laws were passed in the early 1970's that make it illegal to send a bill for unsolicited goods.

A recent personal experience tells me that Amazon.com might have found a way to circumvent this law, using "One Click".

They just sent me some stuff, and when I objected, they gave me the canned message about how easy it is to accidently order things with "One Click". So how can I prove I didn't place the order accidently? Not easily, I think.

not "Tech insiders" these are called "managers" (2, Informative)

OeLeWaPpErKe (412765) | more than 8 years ago | (#15541258)

Obviously it's the "strategic decision makers" that pull this kind of crap.

Just my 2c

Re:not "Tech insiders" these are called "managers" (1)

Kamineko (851857) | more than 8 years ago | (#15541394)

Not if I worked for you.

Then it would be my 2c.

Poor Control Measures? (3, Insightful)

celardore (844933) | more than 8 years ago | (#15541276)

It sounds like the companies that are being so defrauded must have terrible control measures. For instance, in my company (a logistics/shipping co) we need to have several pieces of documentation before any job is done, or any invoice raised. The measures are stricter when it involves money going out of the company in any way. There are varying levels of control depending on the value concerned.

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? (1)

rtaylor (70602) | more than 8 years ago | (#15541429)

And what does "her boss" have to do to get approval for a toner cartridge purchase or for that matter the CFO or CEO at the company? I'm guessing nothing more than take out the corporate charge card. How about a company sponsored family vacation? Company car?

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? (1)

Net_fiend (811742) | more than 8 years ago | (#15542468)

Wow. You've got to get a signature just to buy more legit toner/ink? That seems a bit ridiculous to me. I mean I can understand making sure that the paper work is done so it comes out of the company chauffers and is 'in the system' as it were. But to get multiple signatures on simple things is a little over the top. If you had to put that policy in place due to theft, then you've got bigger problems that should be dealt with accordingly.

I mean if workers steal something along the lines of laptops, etc. then by all means prosecute their asses. No wonder businesses have gotten grubby with the consumers. They hire (some) theives and then the company turns a blind eye and just fires them for the worker to become someone elses problem (hopefully a competitor?). I think common sense in this country is going out the door.

At my job I constantly get calls asking what the person owes when they've got the bill right in front of them.

(for the spelling nazis' if I spelled anything incorrectly my thanks now for correcting me...including a spell check at some point would be nice. If just to save time from having to either 1. look the word up in a dictonary or 2. google the word)

Re:Poor Control Measures? (1)

Chabil Ha' (875116) | more than 8 years ago | (#15541998)

That's the trick though, isn't it? There has to be a fine line of controls and being able to get work done. As long the controls allow for the process to continue without a material delay in time that's ok. It's when the controls interfere with business's ability to do business, (ie. add politics, the proverbial 'red tape' etc.) that it goes over the line. I think this is a really important opportunity for technology to help speed those things along.

Re:Poor Control Measures? (1)

Billly Gates (198444) | more than 8 years ago | (#15542099)

The problem is alot of CIO's are involved and they can circumvent any security standard or fraud policy he or she wants too. So in the end it doesn't matter if the CEO and CFO get smoked blowed up their ass so they dont know whats going on.

TO do this you need a mid level or CIO to accomplish this and take cuts on the transactions.

Re:Poor Control Measures? (1)

corbettw (214229) | more than 8 years ago | (#15542766)

Trust me, I'm an accountant.

The irony is that many people who have committed massive fraud have said the exact same thing.

In smaller orgs, lack of widespread tech knowledge (2, Interesting)

linefeed0 (550967) | more than 8 years ago | (#15541296)

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:In smaller orgs, lack of widespread tech knowle (4, Funny)

Kamineko (851857) | more than 8 years ago | (#15541467)

I would've gotten away with it too if it weren't for those meddling kids!

Re:In smaller orgs, lack of widespread tech knowle (0)

Anonymous Coward | more than 8 years ago | (#15542632)

And may the gods help him if the equipment was procured via the Federal ERATE program.
Waste, Fraud, Abuse = time in PMITA prison

this technique is so old, that reporters know it (1)

swschrad (312009) | more than 8 years ago | (#15541332)

among others, this was the big "gotcha" that got the U of U folks wondering about their so-called cold fusion scientists. turns out they would only work with the cold fusion institute mandated by salivating legislators if the institute bought a particular model of power supply... which was only marketed in the US by the son of one of the chief researchers.

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 that point, everybody's eyes were opened in all corners.

it's a classic scam, buy it from yourself at market-high prices. it's so old, even green kids from journalism school know to look for that trick.

That's too hard (1)

peacefinder (469349) | more than 8 years ago | (#15541363)

Oh, heck. It's easier than that.

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. (1)

vertinox (846076) | more than 8 years ago | (#15542903)

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.

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 called Tiger direct and asked them to buy hard ware from AMD and then got all mad when they raised the price they paid AMD, wouldn't you think that would be silly?

Major Cojones (1)

catdevnull (531283) | more than 8 years ago | (#15541382)

Wow. How audacious is it to hold your first "shadow company" meeting in the board room of the company you're ripping off.

Talk about hubris!

Aren't we all a little fraudulent? (1)

boyfaceddog (788041) | more than 8 years ago | (#15541408)

How many of you are posting from work?? Come on, we all know who we are.

Re:Aren't we all a little fraudulent? (1)

Anonymous Coward | more than 8 years ago | (#15541574)

But it wouldn't be comparable to these examples of procurement fraud unless we said reading /. was essential to do our job, we needed to pay a subscription to read /., that the money had to be sent to "slashdot, Inc.", we were the ones who approved the purchase order, and we happened to own the company to which the money was sent.

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? (1)

morcego (260031) | more than 8 years ago | (#15541988)

All consultant on my company (me included) are required by policy to read slashdot daily. It is considered an important part of the "staying up-to-date" methodology.

Re:Aren't we all a little fraudulent? (1)

techno-vampire (666512) | more than 8 years ago | (#15542016)

I can't speak for anybody else, but I won't even read Slashdot at work. Not even at lunch. If I did, I'd get tempted to do it on company time, and for me, at least, that Just Isn't Right. I'm not saying that those of you who do are wrong, just that I wouldn't feel right about it. (I work in tech support, and not only have to take calls, I have to reseearch them and make call-backs. Reading Slashdot takes time that should be going to help customers. I suppose if I were a programmer, reading it during long compiles would be reasonable.)

Re:Aren't we all a little fraudulent? (1)

Billly Gates (198444) | more than 8 years ago | (#15542304)

I did tech support. I never use the internet at all unless its work related. I felt too paranoid all the time about my perception and handle time statistics when I am on the phone.

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 as long as your work is done and meets expectations.

Those at McDonalds obviously have to work continiously non stop.

Seems odd that those with the higher salaries and responsibilities should work the harder because they are getting paid more?

After all this time wasted reading /. (2, Funny)

Anonymous Coward | more than 8 years ago | (#15541515)

There's finally an article that can improve my bottom line.

Not Just I.T. (0)

Anonymous Coward | more than 8 years ago | (#15541517)

"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.

At least we can count on the police to put a stop to this.

http://catless.ncl.ac.uk/Risks/21.58.html#subj5 [ncl.ac.uk]

[According to the third Detroit Free Press story, a cop who stalked a woman
using his access to police databases was "suspended for a day without pay."
That'll teach 'em! --Declan] [FROM POLITECH]

> Date: Sat, 04 Aug 2001 02:08:36
> From: "Ed Walker"
> Subject: Michigan cops abusing database

> www.governing.com/news had a link to a freep article that may be of
> interest to politechnicals. The first two links are the story, and the
> third is an account of a truly creepy cop stalking someone he met while on
> duty.

> Michigan Newspaper: Police Abuse Database Police throughout Michigan,
> entrusted with the personal and confidential information in a state law
> enforcement database, have used it to stalk women, threaten motorists and
> settle scores. Over the past five years, more than 90 Michigan police
> officers, dispatchers, federal agents and security guards have abused the
> Law Enforcement Information Network, according to a Detroit Free Press
> examination of LEIN records and police reports. More: Detroit Free Press
> http://www.freep.com/news/mich/lein31_20010731.htm [freep.com]
> http://www.freep.com/news/mich/lein1_20010801.htm [freep.com]
> http://www.freep.com/news/mich/amber31_20010731.ht m [freep.com]

Power leads to corruption (1)

fak3r (917687) | more than 8 years ago | (#15541524)

While this is a new 'high techy' way of scamming money, it's just another example of the old adage: "Abuse of power comes as no surprise [snacc.mb.ca] " - Jenny Holzer (American, born 1950)

"...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 as back in the 70s.

Cant we just execute people (1)

Tweekster (949766) | more than 8 years ago | (#15541571)

that scam others in wake of a national tragedy. Those people that claimed they died in 9/11, the people that scammed 1.5 billion from the hurricane. Hell, the politicians that claimed they needed hurricane money in Utah.

Re:Cant we just execute people (1)

Tony (765) | more than 8 years ago | (#15541929)

Cant we just execute people that scam others in wake of a national tragedy. Those people that claimed they died in 9/11, the people that scammed 1.5 billion from the hurricane.

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 (1)

Tweekster (949766) | more than 8 years ago | (#15541955)

Pushing an agenda still requires some form of approval, and in each of those cases, consent by the nation was given, unfortunately.

This is why Rebates are so popular! (0)

Anonymous Coward | more than 8 years ago | (#15541648)

This is why Rebates are so popular in electronics stores.


In the previous place I worked, the IT guys loved getting extra parts from Best Buy and Frys who gives an extra "rebate receipt" and charged the company the full amount and pocketed the rebate.


When I confronted them (I managed them), they mentioned the sales guys did the same with Frequent Flier miles from the airlines and after a brief effort with the CFO to stop both practices (I agree they have parallels) we decided to just let them.

Re:This is why Rebates are so popular! (0)

Anonymous Coward | more than 8 years ago | (#15541844)

That employees keep the frequent flyer miles they build up as they travel on the company dime is a well established practice. The IRS has even looked into whether or not those miles should be reported as income, and decided not for now because many of them are never redeemed, and there is not a good way of valuing them. Some businesses even know that employees are booking flights that cost more in order to build up their miles; if the business knows it, it's OK in my opinion, but if they don't, you have to book the cheapest flight and let your miles suffer.

The mail-in rebate thing is different. It's a fully monetary refund, so it should be easy to account for it. When I buy things for my clients, either I give them the rebate reciept and they mail off for it, or I discount the rebate when I bill them for the part.

Sunlight is the best disinfectant (1)

Beryllium Sphere(tm) (193358) | more than 8 years ago | (#15541750)

From the Canadian case:
'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 kind of tip if employees know you'll wreck the career of anyone who points out a problem. If that's your policy, employees will figure it out *real* fast.

Did anyone else, by the way, find the article summary misleading? Nothing in the article involved a sophisticated rewiring of the IT infrastructure: they were just classic self-dealing and kickback schemes.

Re:Sunlight is the best disinfectant (1)

joekampf (715059) | more than 8 years ago | (#15542800)

I found this statement with no back up or example just a bit over the top: "Anastasi says that in highly sophisticated cases of fraud, information-technology officers create a parallel and completely hidden I.T. infrastructure that they use to tunnel into the company vault electronically." No where in the article is this claim backed up. I find it hard to believe than a whole shaddow infrastructure could be concealed with out the cooperation of an entire support organization. Sys Admins, Network people, etc.

glad you brought it up (1)

johnny cashed (590023) | more than 8 years ago | (#15542876)

Like the 19 CIA agents who went to Italy to kidnap a radical Islamic cleric. They stayed in luxury hotels and ran up huge tabs (ok, maybe small tabs, but $100,000 is huge to me). As if they were all motherfucking James Bond or something. I think it is the tip of the iceberg when it comes to "black" operations and "classified" stuff done in the name of "national security". I'm not going to link an article, do a search for CIA +luxury hotels +Italy and come to your own conclusions. Why do CIA agents need to spend time in luxury hotels to case the kidnapping of an Islamic cleric? I could maybe see it if they were kidnapping a rich businessman/industrialist or even a movie/rock/rap star, but a cleric? The dude wasn't spending time in luxury hotels. CIA, bling bling, get the hookers and Courvoisier (yes, I know it is French) got the money and the guns and the cars, gonna kidnap the bad muthafuckers and get medieval on their asses! C. muthafuckin' I.A. In the house!

Or maybe they were doing the right thing. Yeah, that's the ticket.

a never ending cycle... (2, Insightful)

abstract1 (982691) | more than 8 years ago | (#15541766)

I work for a metadata management company providing search capabilities for various information assets. You would be amazed at how long it takes for a simple implementation of our systems within larger corporations. We are talking of timeframes ranging anywhere from 3 months to 3 years. Many of these deals end up in the hundreds of thousands of dollars, and it is obvious to us that the reason it takes so long is because companies need to keep a very close eye on these types of things to avoid issues such as the ones seen in this article. Corporate corruption is a huge hindrance to business today. However, from a business standpoint, has anyone considered how much money is lost by the company in just coming to a decision when it comes to choosing a vendor (or a product)? Sure, John over in the R&D department could be skimming a few thousand off of a large deal - which I agree is quite a disgusting business practice in general - but how many thousands are lost in time spent coming to an overall decision? How many meetings must we sit through to be involved in the never ending/looping discussion over semantics? How many proposals are shot down after months (or years) of researching, traveling, and testing out different solutions?

Re:a never ending cycle... (1)

jaseuk (217780) | more than 8 years ago | (#15542611)

42

My old company got pwned big time by the CIO... (2, Interesting)

phillymjs (234426) | more than 8 years ago | (#15541797)

...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... (1, Interesting)

Anonymous Coward | more than 8 years ago | (#15541817)

...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.

Hard to do with open source software (1)

ewg (158266) | more than 8 years ago | (#15541840)

I'll start defrauding my employer as soon as I figure out how to charge them for open source software...

Re:Hard to do with open source software (1)

tinkerghost (944862) | more than 8 years ago | (#15542346)

Ahh, you create a dummy corp that does the compiling in a "Clean" environment. Then sell the value added of the compiling to the company. Ohh, and don't forget to charge for "Installation support".
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 (1)

corbettw (214229) | more than 8 years ago | (#15542857)

Simple, set up a shell corporation to provide "support", then have them pay thousands of dollars for a support contract.

Snack Bandits count, too! (1)

botlrokit (244504) | more than 8 years ago | (#15541878)

That sounds like the same scam as the office worker who places an order with Quill, then refuses to share the cookies that come in with the order...

So where's the how-to guide? (0)

Anonymous Coward | more than 8 years ago | (#15541971)

Us newbies need some help with our first fraud!

Big Brother vs. the Whistleblowers (1)

RobertB-DC (622190) | more than 8 years ago | (#15542007)

This bit from TFA about the ERCOT scandal here in Texas shows why the Supreme Court's recent weakening of whistleblower protections, plus Yahoo & Co's willingness to turn over customer records, combines to be a really Bad Thing.
Still, Shoquist and the others might never have been apprehended had it not been for several whistle-blowers within ERCOT.

Beginning in late 2004, these employees e-mailed members of the Texas Public Utilities Commission (PUC) and Randy Chapman, executive director of the Texas Legal Services Center, with numerous allegations concerning Shoquist and the others, Chapman says. The first reaction was shock, says one of the recipients, Paul Hudson, chairman of the Texas PUC: "The second was concern about the systems' vulnerability based on the materials that we had received." There was ample reason for concern. Most of the so-called security work that had supposedly gone into protecting ERCOT over the previous year was as shadowy as the companies that provided it.

Resolution: When the whistle-blowers initially surfaced with their anonymous e-mails, ERCOT's reaction was to attack the messengers and ignore the message. In November 2004, it sued two Internet service providers, Yahoo and Time Warner, in the Travis County District Courthouse to force them to reveal the identities of the employees who had leaked information about the fraud. The suits were filed based on ERCOT's claim that the e-mails were defamatory and "solicited ERCOT employees to turn over confidential information to outside entities."

"The lawsuits had a chilling effect at a time when we required absolute openness and accuracy," says Texas PUC chairman Hudson. Within a few days, the Public Utilities Commission and various state politicians convinced ERCOT to drop the lawsuits. At the same time, the PUC held an emergency open meeting to review ERCOT's audit procedures and controls. "It was a sad state of affairs," says Chapman, who met with the ERCOT board. "There were no checks and balances in place. At the time, ERCOT wouldn't even allow a state auditor to come in because they claimed that an outsider would be too intrusive."

Note that it wasn't the protection of the law, but political pressure that forced ERCOT to drop the lawsuits. If it hadn't happened in the wake of the California energy "crisis", there's every indication that nobody outside the situation would have cared. It's cases like this that make me cringe when politicians tell us that they need ISPs to hold login information indefinitely. When I "think of the children", I worry about the mess that current "if you're not with us, you're with the [terrorists|pedophiles]" mentality will leave for them to clean up.

What a bunch of BS (1)

Ollabelle (980205) | more than 8 years ago | (#15542032)

The whole article seems geared toward justifying spending money to root out "fraud." 6% of revenue is lost through fraud? Come on, that fails the smell test. My favorite part of TFA: 900,000 is the average amount stolen by the owners of the business. Hello? The owners stole from themselves?

Re:What a bunch of BS (1)

mfrank (649656) | more than 8 years ago | (#15542500)

If they declare it properly, they have to pay income tax on the money they get from the business. Dip into the till, and it's tax free income, baby. Even lowers the amount of tax the company has to pay.

Re:What a bunch of BS (1)

Ollabelle (980205) | more than 8 years ago | (#15542641)

Yeah, but in failing to disclose the withdrawals as income, he sets himself up for IRS fraud, a'la Al Capone. There are better ways. My favorite story in this regard is about an owner/employee of a company, let's say a pizza joint. He put his arm in the dough machine, where it got broken. So he, as the employee, hired a lawyer to sue the company (owned by him, of course), who promptly sends a threatening letter. Then he, the owner, then hired another lawyer to defend the company. The two lawyers sat down and 'negotiated' a settlement for the employee's injuries. The money is compensation for a bodily injury, so it's tax-free, and it's a deduction for the company.

Vendors do it too. (1)

BigCheese (47608) | more than 8 years ago | (#15542041)

A long time ago in a job far away I had a IT Manager who would buy all sorts of stuff from Computer Associates every time they took him out to a fancy dinner and a ball game.

Hey, fair is fair (2, Interesting)

Opportunist (166417) | more than 8 years ago | (#15542103)

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

thIs is goatsex (-1, Offtopic)

Anonymous Coward | more than 8 years ago | (#15542134)

BSD culminated in with tHOUSANDS of Us3net is roughly

On the other hand... (1)

saihung (19097) | more than 8 years ago | (#15542373)

I had purchasing power at a tech job, and tens of thousands of dollars worth of equipment passed through my office on a monthly basis. I ended up getting *fired* on the suspicion of stealing a $90 ZIP drive, because I made the mistake of auditing our stock and realizing that it had been stolen. Had I said nothing I would've been fine. Lesson? Honesty is for suckers. To think...I could've had a cluster of SGI workstations (it was 1999, give me a break).

Keeping the wolves at bay (1)

sysadmintech (704387) | more than 8 years ago | (#15542392)

This is one of the most important jobs in IT. Wolves (salesmen) will constantly attack an IT budget with $30,000 servers that only cost $3000. If IT rests even a month they will find that management will have wasted their budgets losing a hole to wolves on the golf course. I've personally seen over 25 times companies I've worked for throw over a million dollars down the hole in less than a month. Once I was out of a job when the wolve told management that their new PCs did not need admin while I was on vacation. That lie lasted about 2 weeks (during install), and then the wolves refused to answer the companies calls. The company spent over a million the next year trying to get their IT department up and running again. A decade later they are still struggling to try to get back where they were 10 years ago.

Nothing to worry about... (1)

Dareth (47614) | more than 8 years ago | (#15542501)

... I didn't see one reference anywhere to Counterstrike servers...

Okay back to .. uh .. work. *grin*

Big scam at Canadian Government level (0)

Anonymous Coward | more than 8 years ago | (#15542518)

Recently employees at HP and the Department of Defence bilked millions in taxpayer money by somehow buying millions in HP computers, but the computers were never actually ordered or delivered from HP. Its pretty bad when both the vendor (HP) and people working at some high level department like a National Defense office can be in a scam like this.

Is it a problem, yes. Will is change, no! As long as there are ways to rip people off, there will be people around to rip people off.

Its just easier when government offices go through computers like underwear, changing entire systems on an almost yearly basis because they need something as simple as more RAM, a software upgrade, or they flip flop between wanting to support Linux or Windows. Rather then making existing systems work (i.e. paying someone to upgrade the RAM or install software or an OS, or better yet, actually getting their IT staff to do work), governments just think it is easier to buy a whole bunch of new computers with whatever hardware/software comes pre-installed on them. Who cares, its taxpayer money, governments don't have to be accountable for spending it. When you think about it, any IT worker at a government office is a fraud. They are high school drop outs getting paid $80K/year in a unionized job to tell their boss they need to upgrade all their departments 1000 computers because some new application requires 512mb of RAM opposed to the the 256mb installed.

How can you tell I hate Civil Servants. Who is the servant? The taxpayers are!

It's worse in some parts of the public sector (1)

Mr. Lwanga (872401) | more than 8 years ago | (#15542548)

Fraud is seen as a political liability, reflecting badly on the purchaser's superiors, so criminal investigations are not encouraged and are sometimes blocked. If there isn't any adverse publicity from the fraud, the individual(s) get a slap on the wrist, a temporary demotion at worst. A few public servants at the bottom of the hierarchy may be sacrificed to the criminal justice system, but the ones doing real damage are rarlely touched.

Who is scamming whom? (2, Insightful)

edbarbar (234498) | more than 8 years ago | (#15542612)

Perhaps the most galling case involves a director in the New York City Chief Medical Examiner's office who is accused of scamming FEMA


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 subsidizing insurance in flood planes with your money. Gee, that encourages it, but the worst part is that people aren't bothering to buy flood insurance, as they know the FEMA will bail them out!

So a scammer scammed a scammer? Big deal.

Re:Who is scamming whom? (1)

AK Marc (707885) | more than 8 years ago | (#15542921)

New Orleans was built below sea level,

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.
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