Perils in Purchasing

Fraudulent Activities by a Telecoms Manager

By By Fred T. Mann, CFE

(Editor’s note: The author, an internal auditor and fraud examiner, has changed the identities of those involved in this recent case.)  

John Williams was a telecoms (telephone communications) manager for a manufacturing company in Lagos, the largest city in Nigeria. An electronic engineering graduate, he was considered an expert and had been with the company for eight years, beginning as a supervisor and quickly rising to the managerial position within a few years. Company management considered Williams a “flyer” who had all the attributes of one day becoming the telecoms department’s general manager.

As part of his normal activities, Williams ordered and procured telecoms materials for the company, which involved purchasing phones and carrying out repairs on aging equipment, such as private automatic branch exchange (PABX) systems and phone cables. He was responsible not only for the company’s head office in Lagos, but also for two other Nigerian branch offices.

Initially, Williams performed his duties well, ensuring the company’s telecoms system was state-of-the-art, and that communication among the head and branch offices was efficient. After a while, however, the quality of the company’s telecoms system began to deteriorate. When senior management asked Williams for an explanation, he said the company’s system was becoming obsolete, and he needed funding to install upgraded facilities. Consequently, management approved a $500 million budget to improve the company’s telecoms system over a two-year period.

In procuring the upgraded parts and accessories, Williams initially used about seven reputable telecoms vendors. However, as time went on, only one vendor seemed to meet Williams’ requirements: MarJon Enterprises. Soon, all telecoms purchases were made through MarJon.

Naturally, one of the previously preferred vendors was not happy about this situation and decided to petition the company. The vendor further accused Williams of ordering supplies from his family business!

Management assumed this was a politically motivated petition by a disgruntled vendor, but asked the internal audit department to look into the matter. At that time, I was the internal audit supervisor. This was a daunting assignment for me, considering that I was being asked to investigate a manager who was three levels above me in the company!

I wasn’t sure how to approach the matter. If the petition were true, it could lead to Williams’ termination. How would that make other managers in the company feel about me? They might see me as a whistleblower, and my future with the company could be jeopardized. I had known auditors who investigated members of management, only to get axed in the aftermath. However, in line with my fraud examiner training, I decided to approach the matter objectively and find the truth behind the allegation.

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