“Some of the very features that make a former public servant appealing to the private sector could be a source of ethical concern.”
“In many cases, there’s a really good reason for hiring a former government employee,” Miller said. The employee may have important subject matter expertise or knowledge about the way the agency operates. “But some of the very features that make a former public servant appealing to the private sector could be a source of ethical concern,” she said.
The simple appearance of a conflict of interest is “probably one of the grayest areas there could be,” said Grant Thornton Public Sector Advisory Services Senior Manager Taylor Larimore. “It’s not enough that there’s necessarily actual fraud, but if there’s just the perception that bias has influenced the procurement process, then that can have significant implications,” he said. “There needs to be an arm’s-length transaction when working with the government — or really, in any business dealing.”
Corruption and confusion
Corruption is the most common type of fraud, Larimore said. Corruption occurs when an employee uses company influence to obtain direct or indirect benefits. “It’s responsible for roughly half of all fraud schemes,” he said. Some industries that are particularly susceptible to corruption are nonprofits and the healthcare industry, according to the Association of Certified Fraud Examiners (ACFE).
Federal grants and loans can also be vulnerable to many types of fraud, Larimore said. Each year, the federal government has been awarding about $450B in grants just for infrastructure programs and scientific research — but, since the COVID-19 pandemic, that figure has ballooned to more than $600B. Cases of embezzlement, theft, bribery, false claims and wire fraud have been tied to government grants.
Often, there’s a lot of flexibility in implementing the grants, so that can prompt questions about where to draw the line, Larimore said. “We’re working with an agency now to perform a proactive transaction review and help them identify and correct issues of non-compliance created by confusion due to fiscal flexibilities and changing program rules. Ultimately, these types of proactive reviews can help agencies gain valuable insight into areas of confusion and frustration that grantees are experiencing.”
Fraud’s harrowing impact
Fraud can have major consequences on participants, and its impact can result in more than just financial losses.
In one case known as the Fat Leonard scandal, a Malaysian businessman was charged with bribing U.S. Navy officials with more than $500,000 cash, as well as prostitutes and expensive cars and meals, to get classified information about the movements of Navy vessels so that the man’s company would have its goods and services at the forefront when the ships arrived. More than 30 people were charged in the scheme, including more than a dozen Navy officers.
“Senior officials were accepting these bribes, which allowed the more junior officers to say, ‘Well, gosh, I didn’t think this was okay — but look, he’s doing it, so I guess it is okay,’” Miller said.