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DOJ Names Dozens of IT Vendors in Kickback Scheme
grantus writes "Today, the U.S. Department of Justice joined three whistleblower lawsuits against Hewlett-Packard, Sun Microsystems and Accenture alleging a massive kickback scheme on government contracts. Among the IT vendors listed in the lawsuit as Accenture partners are Microsoft, Cisco, IBM, Dell and Oracle."
As someone else pointed out the corruption is not in the US government but with the companies supplying IT services to them. Practically every large company in IT seems to be involved, from Microsoft to HP, IBM and Sun. Which is annoying for those of us who love a good Microsoft bash, it seems they are not the worst offenders in this case.
As I read it the /. economic model for these scams goes something like this:
There seem to be other variations on the theme, such as giving share options instead of discounts. Either way the US government have been overcharged it seems. Hope I'm right about this as it's a complex issue and the article is a little vague on the details, that's why I thought this summary would be useful. :)
I'm going to transform myself into a mighty hawk. Either that or I'll just go and work at Dixons, haven't decided yet.
I work for a fairly large company. We recently had an upgrade of our frontline order entry software, we contracted out to an off shore firm (Israeli). The parts we made work very well with a few bugs. The parts we sourced out to hardly works. We had to launch it for financial reasons recently and it basically drops 3/4 of the orders into a stuck state. It has 109 known cases that need work around, we expect call center grunts to be aware of all 109... It has one reoccurring error that is so far unfixable and only affects our high value customers. The contractor is condescending, resentful of our questions and $900/h for any personnel they send. As well the whole system is down at least once a day for an hour.
Word from former employees of two other companies that contracted the same contractor, is that we are lucky that it runs at all. Their experience with them is that it had less running at the same point when they had contracted them.
Given that we had people in our company that had bad experiences with this off shore contractor why did we choose them? All we know is that mid way through the project one of the senior decision makers pushing for this particular contractor was fired. Perhaps this firm does the whole kick back thing. It would explain why our final products feels like an alpha build. Perhaps event the ambivalence and contempt from the contractor. If the contract we sign was stupid enough they can show open contempt without fear of being fired. I attended one meeting with one of their reps and the only word I understood was the work the resentful "okay" the lady kept adding to each of her supposedly English sentences.
I think we could have done in house in the same time (2 year overdue) with less money (I have no idea, but the number is large enough that the senior VPS feel nervous). Or even hired an shore and at least be able to yell at them at our leisure and have them reply in something resembling English.
"There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy."
It's popular to suggest government bureaucrats (employees) are getting cash kickbacks, but that rarely pans out as true. Sometimes is does workout to a favorable job after the bureaucrats time in government is over, but before that, cash rarely changes hands. It's almost an "urban legend".
If you want news from today, you have to come back tomorrow.
This is actually one of the oldest tricks in the book. During the early 1900's, the victorian-era "robber barons" were routinely caught at this sort of industrial collusion, informal agreements at "social clubs" and parties, etc.
C|N>K
No, but the intention of the discount is. It is, technically, a bribe. A bribe given to your competitor to not undercut you for the mutual benefit of both of you.
Government cannot and does not dictate what a company may charge. What they can and do dictate is, the price fixing doesn't happen.
What allegedly happened here is this: Company A is a contractor for the government. Company B gives company A money so they are their "prefered partner". There may be companies that offer the same service offered by company B cheaper, but company A still sticks with company B because of the money they gave them. So the product itself gets more expensive than it has to be, since company A has to forward those increased costs to the government.
In a nutshell, the benefit lies with the companies, at the expense of the government.
Imagine this: Company A is one of the few, maybe the only one, who can offer a certain product. I.e. the government HAS to buy with them. Company B (the one paying to be prefered partner) paid company A to be in the deal as well. They might have competitors, but they paid to be in. Technically, they bought themselves a monopoly position.
Whether it's illegal or not should be determined by a court. I'm no lawyer, I earn my money honestly. At the very least it is dishonest and looks very bad, as a taxpayer I would like to see my tax money spent on quality products not bribes.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
I'm not encouraging this or claiming it should go unpunished, but I know if I'd been in a management position along the line I don't know how/why I could/should be stopping such things (defensibly).
The fact that a fish swims in water does not make it an expert in fluid dynamics. GogglesPisano (199483)
To make things clear (sorry to sound like a lecture, but some people appearantly got things wrong, judging from the comments), a bit about how this works:
Some company has a contract with the US feds. That company didn't do anything wrong (yet), they got the contract fairly. Let's assume that for a moment, because TFA doesn't mention anything different.
Some other company now paid the company above a sizable sum to be their "prefered partner". I.e. to get them to buy the things they need to fulfill the contract from them. This, by itself, is not yet illegal, but at the very least a bit smelly.
The first company (and here comes the allegedly illegal practice) now did not forward this "discount" to the government but decided to keep it for themselves. Furthermore, if there wasn't that "prefered partner" deal, they might have gotten the items bought from the second company cheaper with another company.
Why is this illegal.
Governments usually have a very narrow selection of companies to choose from when they hand out contracts. Said companies usually have to adhere to very specific standards, are closely monitored, they do have to have specific features (varies from type of contract to another, but usually includes things like transparency clauses, being in the country the government is and so on). In other words, there aren't many.
If now another company "buys their way" into being the supplyer of such a company, they can expect to be part of government contracts without going through the same ordeals and strict standards. Furthermore, they have the liberty to choose their price freely (in other words, make their products more expensive than they "should" be), because there is no competitor. In other words, they "buy" a monopoly position.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
It's not obvious to me that there is any corruption here. If, as is likely, these companies contracted with the government in a public bid process, their legal and ethical obligation is to deliver the stated project for the stated fee. These aren't defense contractors here, where the contracts are cost plus. These contracts are typically granted after lengthy bidding and contracting processes. If the companies violated the contracts, the remedy is in civil court, and should be straighthforward.
If the various partners contract between themselves, there is no obvious reason why that is unethical or dishonest. Accenture has had well publicized relationships with these companies for at least 15 years, and is a VAR for most of them (disclosure, I worked for Accenture for 10 years, back when it was Andersen Consulting). Accenture and Microsoft have a joint venture, Avenade. Accenture resells HP, Cisco, and IBM gear. It isn't clear that cash payments going back and forth in the context of projects indicates anything other than a business partner relationship, which no-one is denying. There may still be a law against what happened, but the putative illegal behavior might not actually be anything wrong.
This really smells like either some prosecutors trying to make a name for themselves, or, if you want to be paranoid, Gonzales trying to whip up another story for the papers to distract us from his butt reaming in Congress today.
I was taught to respect my elders. The trouble is, it's getting harder and harder to find some.
Sure a lot of the politicians fall victim to the same greed and malice regardless of political party. But both parties aren't the same and the reason is who is their constituents.
When half of the Republican Congress gets hauled off to jail, evidenced by regular indictments and scandals, Conservative voters are happy to shout, "hey, the other side does it too."
When a Democratic member of Congress is found to engage in criminal behavior, their base is shouting with the rest to have them put in prison.
So yes, corruption happens. The question is whether or not you then hold that politician accountable, or say everyone does it, thereby excusing it.