Procurement Fraud – A Mars a day……..

Wednesday, October 5th, 2011

We have been researching this topic and have encountered a case that will interest our readers. It is 4Eng Ltd v Harper and others [2009] EWHC 2633 (Ch). This is a highly complex case. It began with the purchase in 2001 by 4Eng of Excel Engineering. Excel was a company which provided engineering services primarily to Mars, the confectioner. Despite due diligence 4Eng failed to discover that a Mr Harper and Mr Simpson had been conducting the business of Excel in a manner which was distinctly contrary to the warranties given. In fact for a period of at least 10 years they had systematically defrauded Mars in a classic procurement fraud. With the collusion of Mars employees they created false works orders which were then signed off as completed and thereafter paid for by Mars. The fraud was discovered soon after the purchase of Excel by 4Eng when the directors were approached by an employee seeking confirmation that his bathroom would still be installed as agreed with the previous owners. At paragraph 19 of the court judgment it states ‘that despite his conviction for conspiracy to defraud, Mr Simpson maintained that he did not think that he had done anything wrong in relation to the conduct of Excel’s business. According to him, he considered that the sort of practices in which he and Mr Harper engaged (providing benefits to Mars employees in return for their commissioning work from Excel) were normal in business and there was nothing untoward about them.

We urge a reading of this case. It is an eye opener.