Exposing Political Corruption - $ 20 Million Dollar Contract

The Story:

A business consultant, who consults for many large companies, including Pharma, Phizer, etc, contacted our firm. He had a client that manufactured the type of emergency cell phones that are installed along freeways. This company was in a bidding contest for a $20 million dollar contract to install these cell phones along all the freeways in a Southern California county. Their competitor was a company that was owned by a man who was a very close personal friend of a county supervisor. The contract was coming up for a vote by the supervisors in about three months, and the client was very concerned about the vote of this supervisor going to the competitor, for reasons other than on the merits of its bid.

Nic Smith began the investigation. Knowing that an elected official's campaign contributions are public record, he secured them and looked for the obvious - a contribution in the name of the competitor's company. Unfortunately, that avenue didn't produce any results. He next scrutinized the competitor's company, applying the principles that we generally use when doing a securities investigation with only limited information.

In those cases, we first develop the organization chart of the target company. To do that, Nic called the company many times and asked questions about who was in charge of what. For example, he would call and say, "Good morning, may I speak to the Human Resources Manager, and, I'm sorry, what is her name?" He did that until he had a complete organization chart.

We then compared the organization chart to the contributions list for the county supervisor. Lo and behold, there were a GREAT number of employees of the competitor who had made significant contributions to the supervisor's recent campaign. What an interesting piece of information.

Nic then did a brief profile on a number of employees, including their addresses, and went to their homes to speak with them. He discovered that the employees had been "reimbursed" by the company for their "donations" to the supervisor campaign. This information was turned over to counsel for the client company, who had a nice little discussion with the supervisor's lawyer.

Needless to say, the county supervisor recused herself from the vote on the contract, on an invented pretense. Our client won the $20M contract on its merits.

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