Advice Line | Bob Lewis | InfoWorld | Another ethical dilemma | October 11, 2006 05:08 AM

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Another ethical dilemma

October 11, 2006 | Comments: (0)

Another ethical dilemma

Dear Bob ...

Another ethics question... what was the best ethical way to let a client know the contract company I worked for was allegedly defrauding the client of billing fees?

I worked as an IT contractor for a large company through a small local IT services group. The local IT services group had been found by the client company to have repeated labor billing overcharges that could not be substantiated by payroll records in the past year. The client had issued a warning to the contractor/reseller company a year prior to my joining the company.

The IT services group was difficult to work for because of behind the scenes company politics. While working for them I became aware of suspected billing irregularities caused by a supervisor on another project to maximize his department earnings and pad his yearly bonus. Other contractor employees were aware of the billing fraud and said nothing about it to the contract company management or the client.

What should I have done? I kept quiet for several months about the billing overcharges as I stewed with concern about what I knew and unwilling to act upon it. I did not know if I would get fired by the contract company for reporting alleged billing fraud. One of my parents advised me to ignore the alleged fraud because it was hear-say and I could not adequately substantiate my suspicions.

The IT services company made my decision for me through its twisted company politics. I received a formal commendation from the client (unknown to me at that time) for service actions above the call of duty on an unrelated project. My employer did not even let me know about the commendation that I earned and had been awarded by the client. Instead, they fired me a week later with no warning, notice, or severance claiming a 3rd party contractor had complained about my work. I felt this was a bogus complaint because I was not allowed to address or refute the it in this strange meeting. However, the unethical firing I experienced released my silence about alleged unethical billing practices by the former company.

I decided at that time to keep the contractor over billing quiet as I searched for a new job and soon found one working through another IT services company doing the same job for the client.

Several months later I was assigned to work with another senior exec at the client on a new project. He and I worked well together on the project and I later confided what I knew about the billing fraud.

It hit the fan when the senior exec investigated my allegations and found all of them to be true and valid.

What do you recommend I should have done about my former employers fraud? I was eventually proved correct, but when should I have revealed what I knew, given I was fearful of losing my job?

- Torn

Dear Rip ...

I think your parent gave you good advice. There are lots of allegations, and in the absence of evidence they're nothing more than gossip.

I'd also say that to the extent you thought the allegations were credible, you should have immediately found other employment. Never mind the ethical considerations - there's your reputation to consider, and hanging on with snakes like that doesn't do it any good.

I'm sorry - that wasn't fair to snakes, which in general are useful and productive members of the ecosystem.

One last thought on the subject: The client company had an obligation here as well - to maintain proper controls so that it couldn't be victimized in this way, especially since it had previously caught your former employer in billing irregularities. Failing to have them is, to my way of thinking at least, unprofessional. They certainly shouldn't be relying on either universal honesty or getting word from a whistleblower.

- Bob

Posted by Bob Lewis on October 11, 2006 05:08 AM

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COMMENTS

There comes a point (quicker) than we'd guess when remaining silent crosses into the accessory to fraud territory.

Posted by: Ken Harvey at October 11, 2006 11:19 AM

Bob

This is an ethical issue that the contract employee should not have been worried about. Generally the contract firm employee does not see what gets invoiced to the client firm. The saying "Let the buyer beware" has significant meaning here. I fully agree with your advice - the client company should have been validating the invoices before paying any of them. None of the over billing should have been paid. This is especailly true if the vendor was already under suspision of overbilling. Hopefully the client firm began excuting a validation process or put in the necessary controls to validate the invoice amounts.

Posted by: Mike at October 11, 2006 01:20 PM

I would think that a key question in this would be "Are you being asked to sign anything fraudulant?"

Generally as long as I don't have to participate in this type of thing then I ignore it. Over billing is pretty much an industry standard so you may have a lot of trouble avoiding a place where it is going on.

Posted by: Ray Stevens at October 12, 2006 04:35 AM

Did the contractor get his cut?

If the client is billed for 50 hours of my time, when I only worked 40, shouldn't I get my cut? It only seems fair that if someone's going to commit fraud in my name that I should at least share in the ill-gotten gains.

Posted by: Drew at October 12, 2006 05:52 AM

First a question of facts:

1 - were you certain of your facts -- i.e., there really was fraud

2 - was this fraud intentional

3 - was the fraud known to the party that you worked for / reported to, etc.

4 - is your awareness of this situation an ordinary outcome of your job (i.e., you weren't snooping or illegally accessing documents, etc.)

-----------

If the facts are clear -- my opinion is that you need to do two conflicting things: (1) REPORT THE FRAUD internally at first and (2) cover your tail to make sure the mud doesn't splatter on your shoes.

From a practical standpoint DOCUMENT everything (and not on your company computer.) Stick to facts, not opinions.

AND yes, plan to find another job ASAP.

Waffling on honesty is a slippery slope. For example, when the customer DOES their proper review and discovers the irregularities do you want to find yourself in a position of having known but not acted.

You may have whistleblower status -- check with an attorney.

Posted by: Carl A. Singer at October 12, 2006 09:53 AM

As a followup, I only brought forth these facts that occured since 7 years have passed. I did the best I could under difficult work conditions created by the contract company and my concern for the company my parent worked at as a senior manager who worked for the Board of Directors ...

I originally became aware of this overbilling situation when a contractor employee working in the help desk area for the client mentioned the overbilling over lunch. He also mentioned that he would be soon leaving for another job. I did not dig to find this information, it was casually mentioned to me by an aquaintance who worked with me briefly. Neither he nor I profited in any way fom the contract company overbilling.

Another reason I delayed notifying the client for several months was to allow the acquaintance time to work into his job with another company. The client company eventually corroborated my allegations agaist the contract company by talking directly with the acquaintance & performing a detailed audit on contractor billing records.

I did not report the overbilling problems to the contractor company for 3 primary reasons: 1.) I no longer worked for the contract company since they let me go, 2.) I did not trust any of the managers in the contract company, and 3.) I did not want the contract company to alter & falsify additional records before the investigation started to hide their dirty past.

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