The 'Great Potato Fraud of 2012'

I wrote a few weeks ago of the pride and complacency of the middle management fraudster and the 'smartest guys in the room'

On a recent ski trip I had met a guy on a chairlift
who proceeded to tell me his approach to 'supplementing his income' including "finding suppliers you need on a consistent basis who you can overpay, and get cash back later, minus a ‘consideration’"

Some readers of my blog expressed disbelief at these comments.

This week the humble potato made headlines for a similar fraud. In 2008 a senior buyer for Sainsbury's was arrested on suspicion of fraud together with a senior manager from their key potato supplier, Greenvale, on suspicion of bribery and corruption. Financial control specialists, fraud experts and those following the UK Bribery Act and its US cousin, FCPA, will find this fascinating.

The story goes back to 2005 when the Sainsbury buyer 'consolidated and streamlined' potato supplies to one vendor commenting "By streamlining our potato supply base we are in a much better position to improve efficiencies for everyone involved in the supply chain, which ultimately means we will be able to serve our customers better." Sounds great, right?

Arrested in 2008, the trial has just started in the last week and is expected to last three weeks.

The Sainsbury buyer is accused of receiving 5 million pounds in corrupt payments. A self funding scam where the supplier made money, the fraudster made money and ultimately the company may not have lost out since the costs were probably recovered in consumer pricing. This case is especially interesting in that there was no obvious loophole which explains why it went undiscovered for so long.

The full story is well worth a read here . . .

This sorry story obviously raises questions. Segregation of duties? Mandatory rotation of supplier (and customer) management responsibilities? Monitoring unusual price changes? Is supplier single sourcing such a great idea? Multi-source supply has inherent risk management benefits . . .

The lesson in all this? Financial control isn't just about protecting the cash, you gotta protect your spuds too!

Thanks for reading . . . .