Some Detroit Public School (DPS) leaders may learn about detention first-hand for allegedly taking kickbacks from a businessman selling school supplies to Detroit schools.

 

According to the U.S. Department of Justice (DOJ), the owner of Allstate Sales (a business which sold school supplies to the Detroit schools) submitted fake invoices to some Detroit public school principals and one superintendent.

 

Although the school officials paid for the school supplies, the supplies were never delivered to the school.

Instead, the Allstate Sales owner would allegedly “kickback” a portion of the payment to the Detroit school officials for their own personal benefit. The DOJ claims that this had been happening since 2002 and it has  cost DPS hundreds of thousands of dollars.  

 

When this was exposed, the DPS emergency manager immediately set out to take corrective actions.

In addition to placing some employees on unpaid leave and suspending the business that was involved in the activities, he also instituted a new policy of centralized purchasing which prohibited individual schools from making their own purchases. The emergency manager also called upon the foes of fraud – auditors – to audit the school district’s procurement processes to see if they complied with local, state and federal laws and regulations. (Detroit Free Press; DOJ Press Release)

 

I find this story fascinating for a couple of reasons.

 

For one, U.S. businesses spend a lot time worrying about the corruption risks of doing business with governments in Russia, Nigeria and China. However, these arrests show that businesses should also worry about corruption when selling to governments in Detroit, Cleveland, New York City and within the federal government.

We have home grown corruption, and your anti-corruption program should include controls for avoiding domestic corruption.

 

Second, the DOJ claims that the DPS principals and superintendent were not working together and thus unaware that each other was involved in the scheme. If true, this means that Allstate was able to strike up an arrangement not with one or two DPS employees, but with 13 of them individually. This demonstrates that the lure of easy money from corruption is powerful and can ensnare a lot of people.

 

Given that 13 different Detroit school officials were involved and not working together, it suggests that perhaps getting a request from a government official for a bribe may be a common occurrence.

So, if it appears that the government official is asking you for a bribe in exchange for your business when you’re developing business or making a sale to a government, your instinct is probably right. You should realize that you are being asked to commit a crime and have a plan to end this type of conversation immediately.

 

Third, it took these arrests for the Detroit schools to audit and review its procurement policies to see if its procurement practices were legal. This shows that government agencies don’t always follow the law when it comes to purchasing goods or services.

 

The next time your business is responding to a government request for proposal and you think to yourself, “This procurement process just doesn’t seem right, but I must be wrong since I am just a businessperson,” Banish the thought. Check into what you think may be wrong with the process. You don’t want to be awarded a contract just to have your competitor challenge the award or have the government conclude that they did not follow the procurement laws. This could lead to it getting re-issued and you not only losing the opportunity, but also losing time and money submitting multiple bids.

 

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