Why Isn’t Fraud Found Earlier? – An Indictment!

Thursday, June 9th, 2016


We have, in the past, heard our clients say ‘It couldn’t happen here.’ This is a genuinely held belief when it comes to fraudulent practice. Our professional work requires continuing research into ‘goings on’ that impact on our work and our client’s corporate reputation. Events at the City of Chicago have come to our notice. They indicted a senior member of the Department of Transportation. The Indictment is very informative. The contract was in regard to the installation, maintenance and operation of a Digital Automated Red Light Enforcement Programme. It automatically recorded and ticketed drivers who ran red lights. Between 2004 and 2008 a company named Redflex received approximately $25 million of income from the programme. Then, later, another contract was awarded to Redflex. It was single sourced and no competitive process was followed. There was an RFP ‘process’ and the defendant BILLS served as a voting member on the RFP evaluation committee. BILLS and others devised a scheme to defraud the City of Chicago. BILLS received personal financial benefits, including meals, hotel stays, rental cars, and golf outings, and, in addition, arranged for Martin O’Malley to be hired as an independent contractor for Redflex and to receive lucrative compensation, much of which O’Malley passed onto BILLS. O’Malley was paid over $2 million by Redflex between 2003 to 2011.

Unsurprisingly, the City Procurement Department entered into negotiations with Redflex (unaware of BILLS involvement) and BILLS assisted in the contract containing a provision for liquidated damages, against the advice of the City’s Law Department.

Between 2004 and 2012 O’Malley paid BILLS approximately $570,000 in cash.

The Indictment contains a lot more that will interest procurement specialists and internal auditors. It includes arranging the seating on tender evaluation meetings to influence decisions, single sourcing and other devices. It is incredulous that none of this was known within the City.

In January 2016 BILLS was convicted on all 20 counts against him.

It raises a general question about the influence of non-procurement people on procurement decisions. We have encountered undue pressure, on occasions, to place contracts with suppliers who do not warrant contract award. The case also raises serious questions about the ability of some internal auditors to understand all the nuances of procurement and opportunities for malpractice.