Posts Tagged ‘DoJ’


Organizational Corruption is Rarely Isolated; It’s Systemic.

April 14, 2010

In one of the largest criminal fraud cases to be brought by the US Government in recent years a Kuwaiti owned logistics firm, Agility, was indicted last February for multiple instances of fraud and other crimes totaling (what has been reported to be) as much as two billion dollars.  Yes, that’s billion—with a “B”—dollars.

The criminal indictment issued by the US District Court in Atlanta is public domain and is available on many web sites.  It includes two conspiracy counts alleging (in simple terms) fraudulent large-scale over-billing, fraudulent large-scale concealment of distribution fees into item pricing, fraudulent retention of rebates from vendors, and fraudulent  large-scale repackaging of items. The indictment counts detail a time-line of fraudulent behavior from June of 2003 to December of 2008 and lists dozens of instances, meetings, communiques, and transactions covering contracts totaling about 8.5 billion dollars (whew, now it’s easy to see how the fraud could be a much as two billion). It’s a pretty damning document.

This week the indictment was amended to include the major US subsidiary, Agility Defense and Government Services (DGS) headquartered in Alexandria, Virginia, that seems to have been the contracted and operational entity. Lawyers for Agility DGS have pleaded ‘not guilty’ even though recent news reports suggest there are negotiations underway between the US District Attorney’s office and Agility that would have Agility pay 750 million to avoid a trial (now—in my understanding of the world—no organization pays three-quarters of a billion dollars if its’ innocent).  Also see Article in Atlanta Journal-Constitution.

Agility is a competitor in my industry so I have been closely watching the events unfold from a couple of viewpoints. First, as one of the largest competitors in my industry their demise would certainly be a boon to not only my company but other logistics companies as well; so I can’t say I’d be sad to see them crippled by their own folly.

Secondly, I’m keenly interested from an international corruption standpoint how the USG resolves the matter—I certainly hope it’s with greater impact than the 2008 Siemens corruption scandal.

In the Siemens matter no one went to jail and—incredibly—Siemens was not barred from doing business with the US Government.  ((I wrote a Letter to the Editor about the Siemens incident that was published in the Wall Street Journal on December 24, 2008:  If You Do the Crime, You Should Do the Time.)

Roughly half of Agility’s revenues come from business with the US Government and if any non-trial resolution of the indictment allows Agility to continue to do billions of dollars of business with the USG–well, there are very important reasons why that would be an incredibly bad outcome. To begin with (like the Siemens case), it would present no deterrent. If Agility is only “fined” 750 million dollars then, and from any knowledgeable cost assessment, they are way ahead—no question they probably profited much more than that penalty amount. Most importantly, if one looks back over large corruption scandals like Siemens as well as the great UN Oil for Food incident—the most notorious in recent memory—the similarity that cannot be ignored is the corruption was not isolated within those organizations; like a metastasized cancer it was systemic.