A senior Woolworths executive and an alleged co-conspirator both face criminal charges following a protracted investigation into a corruption kickback scheme operating inside Australia’s major supermarket chain.
In January 2011, Bill Harvey, formerly Woolworth’s national buyer for coffee, tea and sugar, was charged by Police with receiving or soliciting secret commissions and with conspiracy to cheat or defraud. Harvey was responsible for selecting the brands and lines of coffees and teas from a number of suppliers across Australia. Therefore, Harvey would have been required to frequently meet with current and prospective suppliers as well negotiate terms of contract for supply.
The allegations centre on the claim that Mr Harvey accepted a percentage of a ”promotional fee” from the coffee and tea supplier for the purpose of ensuring that the coffee and tea products were given space on Woolworth’s shelves.
One of Woolworths suppliers was Melbourne based LZ Enterprises, which is the Australian distributor of Arrosto Bello coffee and Cha Yuen tea brands. Robert Lever, now the former marketing and export manager at LZ Enterprises, dealt with Harvey as part of his task for promoting the brand.
Upon receiving this allegations, Woolworths undertook its’ own investigations and made a report to the Police. Harvey was subsequently arrested at the Woolworth’s offices. Internal auditors are checking to see if other products are involved in the alleged scheme and whether more offences may be detected.
The charges come almost a year after both were arrested during operations by police in New South Wales and Victoria. The matter came to light after a tipoff from a disgruntled supplier suggesting that corrupt activity was occurring.
Corrupt kick back schemes are nothing new for the major grocery retailers in Australia, Woolworths and Coles. In October 2009, Woolworths removed three buyers from the fresh produce purchasing department after investigations showed that the grocer was paying up to $20 per carton too much for vegetables from one of its supplier. In 2006, Coles fired an executive after a secret business deal came to light that the executive and the owner of Tasman Group Holdings, then one of Coles’ primary suppliers of red meat products.
When employees interface with suppliers and vendors on a daily basis there is always a likelihood that over time they may form an illicit alliance and seek to act corruptly. As demonstrated in the case above, it is possible to detect errant employees and have them arrested / prosecuted for this activity which can be so damaging to the company and the reputation overall.
In order to reduce the likelihood of corrupt activities between employees and suppliers, plus increase the chances of detecting such activity, it is advised to at least follow some of these suggestions:
- Ensure that all meetings between employees and suppliers take place at designated locations only, usually company offices
- Have all meetings documented and meeting notes made to detail what was discussed and agreed
- Have managers randomly attend meetings to ascertain the demeanor and progress of discussions on pricing, quality, deliverables
- Ensure that all proposals, agreements and communications are scrutinised by auditors and or legal departments
- Issue a Code of Conduct outlining what constitutes corrupt or dishonest conduct and the severe penalties involved for this activity
- Have all employees and suppliers / contractors read the Code and Conduct and sign that they will abide by this
- Install a working `whistle blower’ program so that any party can make a formal complaint as to suspect activity
- Have regular training and education on the perils of corrupt activities
- Rotate employees between positions so as no to over familiarize them with individual suppliers
Do you need to know more about our services and how Regents can assist you with preventing internal theft and corrupt activities?
Simply go to our Internal Theft or Corruption Investigation pages for our phone numbers or else send an email to contactus@regentsriskadvisory.com with your contact details and we will respond at once.