by Peter McCann of McCann Corporate Consulting Associates (“MCCA”)
MCCA has seen a small, emerging phenomenon of cases that resemble customer shakedowns. MCCA has seen millions of dollars at risk. The following description is heavily disguised but the essential points are clear. This article is not specific advice for specific situations. Consult your professional advisers.
Major Company’s head office is in a gleaming 12-storey building shimmering on an oasis of manicured suburban lawns. Recently, Major’s Internal Audit Group reviewed the Purchasing Department’s documentation on office supplies, and concluded that the 10-year old agreement between Major and Purple-Blue Office Supplies provided for a 10% volume discount and that the discount had not been given for at least 8 years. Therefore, Internal Audit reported that there had been overcharging of 10% on $300,000 average annual purchases for at least 8 years - $400,000 (including interest).