Kickback scandal

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Nick Carr and Wired have some excellent reporting (here and here) on the IT kickback scandal. The whistleblower suits, originally filed in 2004 and joined last week by the US Dept. of Justice, allege that HP and Sun secretly paid millions of dollars to other vendors that sold their products to government agencies.

The suits also allege that Accenture not only accepted $4M in such kickbacks itself, but also abused its position as the “independent” firm the government hired to help it evaluate new technology by making another $26M selling the hardware it was recommending.

The government also lists other vendors it feels made or received illegal payments to influence government purchasing decisions including Cisco, Compaq, Dell, EMC, HP, IBM, J.D. Edwards, Microsoft, NCR, Oracle, PeopleSoft, SAP, Siebel, Sun, Unisys, BEA, Broadvision, SAS, and others.

The alleged fraud dates back to 1998 in some cases. This is obviously bad news for the companies involved.

But I’m interested in knowing what the government was doing while all this has been going on. We feel constant pressure in the US government to outsource everything, including core services and what were previously held as “inherently governmental” decisions, like purchasing recommendations and technology futures. It’s inevitable that we’ll go too far, and start the pendulum swinging the other way again.

But all of these contracts are supposed to include government oversight and insight into what’s going on and how business is being conducted.

It’s hard to imagine that these activities could have gone on for so long, and involved over a dozen of the world’s largest IT companies, without being detected by the government’s oversight mechanisms. Unless someone wasn’t minding the government’s store.

I predict Congressional hearings into what was going on at the agencies involved to find whether they share culpability in this for allowing nearly a decade of fraud to go undetected right under their very noses.


  1. Dave Nahmias says

    I have been in Federal Sales for almost 25 years and what we have today is the true “Reagan Legacy”. In order to justify cutting taxes, he needed to cut government, to cut government he had to paint it with the brush of incompetence and waste. In order to cure the waste, he demanded more and more services be outsourced.
    Today there is almost no government in government. It is contractors monitoring other contractors. Sure prior to Reagan, there were plenty of non-motivated government workers, but there were also used to be plenty of people who joined the government to help others – it used to be called public service.
    Contractors have only one master – the dollar, they have no impetus to do anything but increase profits. As powerful as the marketplace is, it doesn’t solve all problems and is proving to create a very poorly run, expensive government.

  2. Christopher C. Aycock says

    I’m just stunned at the sheer volume of names on that list. Makes me wonder how many of Accenture’s non-government clients were also duped into buying bribed machines.