Reposted from the This Week in Nonprofit Fraud Blog – July 14, 2014
July 9, 2014: Former New Orleans mayor Ray Nagin, most well known for leading the city’s recovery after Hurricane Katrina, was sentenced to 10 years in federal prison this past week after a jury found him guilty of conspiracy, bribery, wire fraud, conspiracy to commit money laundering, and filing false tax returns.
Several schemes were at the center of the charges, including:
- Separately directing millions in city contracts to an engineering firm and a construction firm in exchange for $60,000 and $50,000 respectively, in payoffs thinly veiled as investments in a Nagin family granite business;
- Receipt of kickbacks including vacations, campaign contributions and a birthday party from a technology vendor, funneled through Nagin’s tech chief;
- Pressuring Home Depot to give his family’s granite business contracts worth $170,000 in exchange for below-market real estate used for construction of a new store and help avoiding a proposed agreement to hire neighborhood residents at above-market rates; and
- Writing off tax penalties for a movie theater and assisting the owners in collecting Hurricane Katrina insurance money after receiving a trip to New York on a private jet from the theatre’s owners.
Nagin’s attorneys plan to appeal the sentence.
- As an elected official, Nagin failed in his fiduciary duty to the people of New Orleans and instead went into business for himself.
- Kickback schemes can be very difficult to uncover, especially in organizations with high volumes of contracting, such as government entities. In this case, Nagin’s relationship with a granite business- which was operated by his son -were not well hidden and could have easily been uncovered if proper conflict of interest investigations were completed.
- Be aware of lavish vacations and other evidence of individuals living outside their means, which are possible indicators of kickbacks and bribery schemes. Several of the major kickbacks and gifts involved in the corruption scheme were luxury vacations and travel which exceeded the means of a public servant.
Raffa Forensic Practice Tips:
- Always be on the lookout for close relationships with vendors, customers, donors or any other closely related parties. These relationships could prove to be red flags for corruption and/or bribery.
- Does your organization have a system in place to determine potential conflicts of interest and an internal audit process to review awarded contracts for legitimacy.
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For more information on the Raffa Forensic Accounting Services Practice please visit us at www.raffa.com/ProfessionalServices/Forensic/ and the Nonprofit Fraud Prevention Institute at www.raffa.com/Fraud.
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