There is no honour among thieves! The old adage is proved correct in a fascinating story told by former Aveng CEO, Roger Jardine, in his latest blow by blow account of how construction firms raided the public purse via collusion.
In an address delivered at Wits Business School this week, Jardine tells a story of an executive who pulled wool over the eyes of co-conspirators while they were engaged in a practice called “cover pricing”.
In beginning to throw in the fascinating detail Jardine said “I will give you a snapshot of how I understand this all to have worked between the companies from my experience through the process.
The main practice appears to have been what is called ‘cover-pricing’”.
A strong management system was clearly in place, including succession planning because when one person was promoted or left the company he would bring his successor to a meeting (according to evidence submitted, these meetings usually occurred at 5 star hotels), introduce the new person and do a formal hand-over”.
Some of the younger people knew that if they wanted to get ahead in their companies this was ‘the way it is done’”.
The tenders were then allocated as follows: the firm not wanting the business gives a “cover price” to a competitor who then wins the award on submitting a lower price than the ‘cover price’. In some cases, the firm submitting the ‘cover price’ will be compensated through a ‘losers’ fee’”.
These ‘losers’ fees’ were apparently disguised through fake accounts in line items called plant and machinery, scaffolding hire or labour. Money came in and out of these accounts, they kept a score sheet to keep track of who owed monies, invoices were raised, and if another project came up offsets were applied”.
In the steel cartel, which was a selling environment (not tenders), they circulated price lists and agreed on a price ceiling in certain markets”.
And then came the ‘robber of robbers’ tale.
Jardine said “I am sure we have all heard that there is no honour amongst thieves,” said Jardine in throwing in the ‘robber of robbers’.
“In private tenders the tender results are not necessarily made public. In one cartel an MD attended every meeting and dutifully signed off on the price fixing agreement”.
He kept winning all the tenders because he lied to his partners about his tender pricing and they were not wiser because the tender results were not disclosed by the client. He told them it must be due to his strong customer relationships”.
We can only wonder about the identity this ‘sly boss’.