CFOSnafu.com » Are your vendors who they say they are?

Are your vendors who they say they are?

May 8, 2008 by Shane Borer
Posted in: "Seemed like a good idea at the time", Bad investments, Contract disputes, Special report

Whether you deal with ten or 10,000 businesses, it’s hard to know if your vendors are telling the truth about what they really do. The Pentagon found that out the hard way.

Between 1998 and 2007, the U. S. Air Force and Defense Logistics Agency bought more than $1.7 million worth of airplane parts from three companies: Utah Tool and Die, Western Precision and NewEra Manufacturing.

Nothing strange there — according to the NewEra Web site, these companies supplied precision components “for aerospace, military, medical, recreational and other commercial entities.”

But what folks at the Pentagon didn’t realize was they were inadvertently sending money to a polygamist sect — self-proclaimed “Mormon fundamentalists” who are no longer affiliated with the Church of Jesus Christ of Latter-Day Saints — that profited from the government contracts.

The polygamist sect owned all three businesses, which regularly pumped close to $200,000 per month into the group’s coffers. Along with the substantial contribution by the Pentagon, these funds were used to help build compounds across the country, some of which — like the one in Texas recently in the news — have faced allegations of child abuse and forced marriages.

When asked to comment, Pentagon spokesman Geoff Morrell noted the “Department of Defense awards contracts based on who can most effectively meet our requirements for supplies or services at the most reasonable cost to the taxpayer.”

So, as long as the company that practices notorious and illegal activities provides materials on the cheap, the government will let it slide?

Not exactly. “Illegal activity is certainly cause for termination of a contract,” Morrell continued, “but DoD is not aware of any criminal allegations against anyone managing the companies in question.”

Usually, we say something about “taxpayer dollars going down the drain,” but we think the situation speaks volumes on its own.

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One Response to “Are your vendors who they say they are?”

  1. JGW Says:

    Appreciate the notice of “knowing who your vendors are” because it can make a difference on who you want to get your business. I feel it really is unrealistic for most companies, much less government agencies to check out exactly what all their vendors do with the profits. Isn’t that a right to privacy?


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