BDO Wins Arkansas Supreme Court Appeal to Arbitrate Fraud Allegations
Monadnock Research (Vol V, No 1) - 14 January 2012
BDO Seidman has won an appeal against Straits Steel & Wire, forcing the client's allegations of fraud to be heard by arbitrators and not the courts. The Arkansas Supreme Court decision reverses a ruling of the Sebastian County Circuit Court, which had denied a motion by BDO to compel arbitration against Straits Steel & Wire, Co. and its affiliates. The case involves tax consulting services and allegedly fraudulent tax shelters. BDO successfully argued on appeal that the circuit court erred in denying arbitration because it was the dispute resolution mechanism of choice in agreements signed by the parties. SSW attempted to get around the dispute resolution choice by claiming unconscionability of the alleged fraud. SSW claims breach of fiduciary duty, negligence and professional malpractice, negligent misrepresentation, disgorgement of excessive and illegal fees, fraudulent inducement, fraudulent concealment, fraud, civil conspiracy and breach of contract. Research Note includes Arkansas Supreme Court ruling and MR perspective on the inherent system bias of arbitration clauses in consulting agreements. (1,375 words) . . . More
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Lions Gate Sued for Non-Payment Under Terms of Performance-Based Consulting Agreement; Highlights Challenges Small Firms Face in Client Litigation
Monadnock Research (Vol IV, No 41) - 1 Dec 2011
MR - A small consulting firm based in Los Angeles, GBB Consulting, has sued Lions Gate Films over non-payment in a performance-based fee arrangement associated with Nicole Kidman's film, "Rabbit Hole". The suit, filed on 22 November 2011, alleges breach of contract. Kidman was nominated for an Oscar and won a Screen Actors Guild (SAG) award for her performance in the film. GBB claims it wasn't compensated for its services and role in helping to secure Kidman's award and nomination. While the claimed damages are only around $115,000, the case highlights the challenges many small firms face in working with larger organizations with significant resources in high-stakes engagements. Research Note includes a copy of the complaint and MR perspective on the consequences of playing hard-ball and cost-shifting to small and mid-market firms in the current economic environment. (740 words) . . . More
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P&G Awards Ernst & Young and Infosys for Supplier Excellence
Monadnock Research - 10 November 2011
MR - P&G conferred its highest supplier honor, Business Partner of the Year, upon Ernst & Young, Infosys, and 10 other companies for 2011. E&Y was honored for its non-audit advisory work. P&G has more than 75,000 suppliers globally. This year under 1% of its partners were among those selected for awards. Business partners consistently performing at high levels within P&G's internal performance management system earned an Excellence Award. A total of 86 external partners were recognized this year. Beyond Business Partner of the Year recipients Ernst & Young and Infosys, 12 firms providing consulting services as part of their offering were also 2011 Excellence Award recipients. (450 words) . . . More
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Wellogix Prevails in Trade Secret Theft Case Against Accenture
Monadnock Research (Vol IV, No 38) - 2 Nov 2011
MR - Accenture will likely pay around $49 million in compensatory and punitive damages to a former software and services partner, Wellogix, in a trade secret theft and misappropriation case involving SAP and their client, British Petroleum. The court's latest order lowers a $94.38 million jury verdict against Accenture in May 2011. The Texas jury found that Accenture intentionally misappropriated trade secrets from Wellogix, and then knowingly copied, communicated and/or transmitted them without Wellogix's permission. Wellogix has asserted that the associated acts drove it out of the business of providing complex process procure to pay software and services to energy clients. This Monadnock Research Note includes case details; information on additional patent infringement actions involving energy sector clients; copies of complaints against Accenture, BP, and SAP; the Wellogix v. Accenture jury verdict; and various agreements that served as exhibits at trial. (450 words) . . . More
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Accenture Settles Rille Qui Tam Suit with US DOJ for $63.675 Million
Monadnock Research (Vol IV, No 29) - 18 Sept 2011
MR - Accenture has agreed with the U.S. Department of Justice to settle a whistle-blower suit filed in 2006 for $63.675 million. The Qi Tam lawsuit was originally filed by Rille and Roberts alleging that Accenture submitted false claims for payment under contracts with US federal agencies for IT consulting and services. The Justice Department characterizes the settlement as Accenture agreeing to resolve the claims that it received kickbacks for recommendations of hardware and software to the government, fraudulently inflating prices and rigging bids. Accenture continues to vigorously deny the allegations and says that the firm and the Justice Department have settled only to avoid the additional time, inconvenience and expense that would come with protracted litigation. The Accenture kickback allegations were part of a larger investigation of government technology vendors that has resulted in numerous settlements to date with firms that include IBM, PwC, CSC, Oracle, Hewlett-Packard, EMC, and Cisco. The total of the settlements paid by IBM, PwC, and CSC were around $6.5 million. That aggregated total was just a fraction of that paid by each of the firms that waited to settle. So there was clearly a significant premium charged to Accenture and the other firms that refused to address the risk early. Accenture's settlement, as well as that of Oracle, were in the range predicted by Monadnock Research in a September 2010 publication. This Research Note includes MR analysis and perspective on: the cost to firms of waiting to settle; why clients need to better understand firm partnerships, since acting in the client's best interest is often not in the firm's best interest; related case settlements and supporting documents, including complaints; and recommendations on what clients and firms should do to mitigate associated risk. (2 graphics, 1,950 words) . . . More
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A Future Retrospective: The Silent Tectonic Shift in IT Services
Monadnock Research (Vol IV, No 27) - 15 July 2011
MR - The business models of large consulting and technology product and service providers are in the early stages of a tectonic shift. Changes like this are infrequent in any marketplace, but technology products and services are utilized by clients in all sectors. So the implications are not only significant for consultancies and technology product and service firms, but for the client organizations they serve. The shift is driven primarily by a combination of three factors: (1) ever-spiraling IT system costs; (2) protracted implementation timeframes; and (3) application functional capabilities that don't meet client expectations. What we refer-to as the "Oracle Factor" is fueled by dramatic discontinuities between it and the current offerings of alternatives other than Oracle, and the traction Oracle is getting from clients today offers proof. Ironically, it is fueled by an architectural change that is more reminiscent of environments of the past than any new innovation. This Research Note presents the Monadnock Research perspective on the emerging vendor business models that clients will choose between for technology products and services that will carry them through the next generation of business system expenditures. We preview the emerging models, and review many implications for clients, and for services associated with IT strategy and operations consulting, IT services, and outsourcing of IT infrastructure and enterprise applications. We also make predictions for the shifting technological landscape and offer 5 key recommendations for consulting client organizations. (5,625 words) . . . More
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EC Commissioner Barnier Considers Prohibiting Auditors from Offering Consulting
Monadnock Research (Vol IV, N 21) - 1 July 2011
MR The EC Commissioner for Internal Market and Services, Michel Barnier, addressed a conference of the Federation of European Accountants on 30 June, and advocated for a number of auditor regulatory changes that could include a total ban on audit firms providing consulting services and mandated rotation of auditors. Barnier is the EC official responsible for the Internal Market and Services Directorate General and Office for Harmonization in the Internal Market. Speaking before the federation of European CPA's Barnier intimated that he believes the regulatory environment for auditors in Europe is deeply flawed and in need of reform. He proposes the EC focus on: auditor independence issues; opening of the audit services market; and a more integrated European auditor regulatory and certification environment. The issue of auditors offering consulting and advisory services was addressed in his remarks. He believes that a key factor that fuels excessive familiarity between auditors and their clients lies in providing too many consulting and non-audit advisory services. Barnier asks, "How can we view an auditor as independent when the firm also advises the client in the area of strategy?" Research Note includes translation and interpretation of key points from speech associated with consulting. (865 words) . . . More
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SAIC Subcontractors Indicted in $40+ million Alleged Fraud; SAIC Consultant Pleads Guilty in Scheme
Monadnock Research (Vol IV, N 20) - 1 July 2011
MR - Nine defendants have been indicted in connection with an elaborate scheme to defraud the City of New York on its CityTime project. The people named in the indictment are Mark Mazer, Gerard Denault, Padma Allen, Reddy Allen, Dimitriy Aronshtein, Svetlana Mazer, Larisa Medzon, and Anna Makovetskaya. The SAIC subcontractors allegedly complicit in the scheme, along with 2 SAIC employees and a New York Office of Payroll Administration staffer, are Technodyne LLC, D.A. Solutions, Inc. and Prime View, Inc. The contractors are alleged to have grossly over-billed for consultant time on the engagement, and to have employed a network of shell companies and bank accounts in the US and elsewhere to conceal more than $40 million in fraudulently-billed consulting fees. Mark Mazer was a city employee authorized to approve consultant invoices. SAIC employee, Carl Bell, a Chief Systems Engineer in the firm's New York Office, pled guilty to multiple charges in the fraud, and has admitted to receiving millions in kickbacks. Another SAIC employee, Gerard Denault, was charged and is out on bail. Ironically, CityTime, a project that endeavors to properly report time worked, has itself ballooned to 950% of its original budget due, in part, to fraudulently reported time. "IT contracts that involve hundreds of millions of dollars and multiple layers of consultants are a new frontier for fraud, and DOI has been at the forefront of exposing it," said Rose Gill Hearn, Commissioner, New Your City Department of Investigation. (updated 1-July-2011, Research Note includes allegation details, indictment and complaint - 2,975 words) . . . More
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Capita Acquires Procurement Consultancy
Monadnock Research - 31 May 2011
MR - Capita has acquired Red Procurement and Business Systems Limited. Red provides sourcing and procurement consulting services to the public and private sectors. Its clients include BDR Thermea, Anite Telecoms and a number of other FTSE100 market leading companies including Capita. Red has 19 employees and all will transfer to Capita (300 words) . . . More
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Accenture Opens Barcelona Innovation Center
Monadnock Research - 6 April 2011
MR - Accenture has expanded its global network of analytics innovation centers with the opening of a new center in Barcelona, Spain. The firm says the Barcelona Analytics Innovation Center (AIC) will be a global showcase for Accenture's predictive analytics capabilities to clients visiting from around the world. Its initial focus is on supply chain management. Accenture expects 50 new positions will be created within the AIC in the next three years, over the firm's 10,000+ Accenture employees throughout Spain. The center is located within Accenture's existing Supply Chain Center of Excellence in Sant Cugat del Valles, Barcelona. Other centers in the analytics network are located in Bangalore, Chicago, Milan, Mumbai, New Delhi, and San Jose, Calif. (695 words) . . . More
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Italian Government-Owned Procurement Organization, Consip, Awards eProcurement Contract to Consortium Led by Accenture and PwC; City of London Hires Accenture for Procurement Transformation
Monadnock Research - 2 March 2011
MR - Italy's Consip SpA has awarded a consortium led by Accenture in partnership with PricewaterhouseCoopers a four-year, US$6 million contract to develop, implement, and maintain an eProcurement system. Accenture says it will provide Consip with management consulting and IT services to oversee the development and maintenance of a new procurement system. The system will help Consip leverage the latest eProcurement technologies and processes to reduce expenses and transform Italy's public sector procurement methods, processes, and operations. Consip is a public company based in Rome that was founded in 1997 by its sole shareholder, the Italian Ministry of Economy and Finance (MEF), and provides technology consulting on organizational and procedural projects for Italy's government. The City of London has awarded Accenture a five-year contract to help reduce procurement costs by more than £30 million over five years, creating a world-class procurement shared service center. The London agreement has value-based elements, where Accenture has tied a proportion of its fees to the savings realized. (600 words) . . . More
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KPMG Acquires EquaTerra
Monadnock Research - 23 February 2011
MR - KPMG Holdings Limited (UK) and KPMG International finally reached an agreement to acquire EquaTerra's business and subsidiaries after 6 months of rumors on an imminent transaction. The deal creates a global sourcing and shared services advisory firm serving clients across the Americas, Europe and Asia Pacific. The firms say the transaction is consistent with KPMG's growth strategy to focus on organic and inorganic opportunities in high-demand market sectors. Equaterra, founded in 2003, is a provider of advisory and research services, and governance tools to help clients with process improvement, outsourcing, and shared services across a number of business functions. (760 words) . . . More
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Oracle Reaches $46 million Settlement with U.S. Justice Department in 2004 Sun Systems Integrator Whistleblower Suit
Monadnock Research (Vol. IV, No. 4) – 12 Feb 2011
MR - Oracle has agreed to pay $46 million to the U.S. to settle claims that Sun Microsystems, who completed its merger with Oracle a year ago, independently and in complicity with systems integrators, submitted false claims to the General Services Administration (GSA) and other federal agencies on its behalf. The settlement resolves allegations under the False Claims Act and Anti-Kickback Act that Sun paid systems integrators kickbacks to recommend the purchase of Sun products by federal agencies. It was also in the range predicted by MR in September 2010. According to the allegations in the original qui tam whistleblower suit, Sun executed agreements with consulting firms that provided for the payment of related fees. The suits were filed by Norman Rille and Neal Roberts in September 2004, and were intervened by the U.S. Justice department in April 2007. The settlement also resolves claims that Sun's 1997 and 1999 GSA contracts were improperly priced because Sun misrepresented information to GSA contracting officials during negotiations. It also settles claims that incomplete and inaccurate information submitted by Sun resulted in defective pricing of its contract with the U.S. Postal Service and GSA contracts held by two Sun resellers. The Sun kickback allegations are part of a larger, ongoing investigation of government technology vendors that has resulted in six settlements to date with firms that provide consulting and systems integration services. (Research Note includes copies of second amended qui tam complaint, DoJ intervention complaint, and historical perspective and documents detailing complaints and settlement of related matters. 1,830 words) . . . More
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Consulting Firm Suit Against UPS and Federal Express Draws Attention of U.S. Antitrust Enforcers
Monadnock Research (Vol. IV, No. 1) - 11 Jan 2011
MR - A suit brought by AFMS Logistics Management against United Parcel Service (UPS) and Federal Express (FedEx) now has the attention of U.S. anti-trust authorities. AFMS, of Beaverton, Oregon, is an industry leader in helping clients select, negotiate, and audit third-party shipping and logistics contracts with service providers. The suit alleges that UPS and FedEx have conspired to block AFMS's clients from working with the firm. AFMS claims violations of Sections 1 and 2 of the Sherman Act, and seeks treble damages for each violation, attorney's fees, and court costs. (Research Note includes MR perspective on issues and implications for consulting clients and service providers; and copies of the complaint, UPS and FedEx responses, and AFMS response to co-defendant motions to dismiss. 1,200 words) . . . More
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Accenture Closes Ariba Sourcing and BPO Services Transaction
Monadnock Research - 16 October 2010
MR - Accenture has completed its $51 million acquisition of the sourcing and BPO services assets of Ariba. The acquired assets include Ariba's direct and indirect category expertise, sourcing process expertise, and strategic sourcing execution resources. Accenture says the deal will enhance its position as a leading provider of sourcing and procurement consulting and outsourcing services. It will also provide Accenture clients with deeper category expertise, enhanced scalable global sourcing service delivery operations, proprietary sourcing databases, benchmarks and technologies. (335 words) . . . More
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Former Lobbyist Convicted of Fraud, Conspiracy, and Payment of Gratuities to Improperly Influence Public Officials
Monadnock Research - 15 November 2010
MR - A U.S. federal jury in Washington convicted Kevin A. Ring, a former lobbyist who worked with Jack A. Abramoff, on five counts related to a scheme to corrupt public officials by providing remuneration that consultants and other advisors routinely provide to clients, including meals, drinks, travel, golf, concert, and sporting event tickets. Ring resigned his position of Lobbyist and Of Counsel at Barnes & Thornburg of Indianapolis, In. in April 2007 once the allegations were made public. He faces a maximum sentence of 67 years in federal prison, and fines of up to $1.25 million. This includes five years for conspiracy, two years for payment of a gratuity, and 20 years for each of the three counts of honest services wire fraud. Ring could also be ordered to pay a fine of up to $250,000 on each count of conviction. Sentencing is scheduled for 1 March 2011. (1,040 words) . . . More
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