Most companies with effective audit controls and policies have some degree of prohibition against the awarding of jobs and contracts to close friends, relatives, and business partners of employees. This helps the company avoid the perception of favoritism and prevents undue advantages based upon relationships with insiders – advantages that frequently evolve into fraudulent activities. Regrettably, there are those individuals who attempt to circumvent policies by concealing the existence of such an organizational conflict of interest.
Over the years, the investigative professionals of ResultQuest have repeatedly uncovered instances in which lucrative contracts have been given to those who had close ties to company insiders and should have been disqualified in accordance with corporate policy. In almost every case, overt attempts were made to improperly shield the relationships. Usually, our inquiry was triggered when the contractor failed to measure up to performance standards or upon discovery of irregularities that arose during the course of the contract.
Attempts to hide contractor conflicts of interest that we have uncovered include:
- Use of variant or fictitious names
- Recruitment of straw business registrants
- Creation of phantom companies
- Setting up layered ownership structures
- Failure to disclose the identity of conflicted shareholders
- Utilization of brokers or subcontractors
The majority of the deceptive efforts to conceal were discovered by ResultQuest early in the course of the investigation and, in most instances, would have been revealed if a background probe had been conducted during the contractor selection stage. In one recent matter, we determined that a company serving a major contract was owned by the mother-in-law of the person responsible for awarding the contract.
Failing to do the homework needed to completely identify the parties to which contracts are tendered can result in severe damage to a company’s reputation if a serious conflict of interest is later revealed.
The specialists at ResultQuest have vast experience in digging beneath the surface to identify signs of misrepresentation. Call us at 713-781-9040 to find out how we can assist.