The vendor that was too good to be true

A vendor provides quality service, posts fast turnaround time, and is easy to work with. What's the catch?

Page 2 of 2

Well, that may have been their preferred way of doing business, but definitely not ours. But we were still very happy with the quality of the work and the fast turnaround time. After about a year of working with this group, the crew raised another round of venture capital and was quite pleased with the state of its business.

It was nice while it lasted

One weekend, though, the other shoe dropped. We were scheduled to have a bunch of system changes implemented that were critical to our being able to meet commitments to our customers, so we were pretty excited to see them go in. However, when we came in on Monday morning, we could see that the changes had not been implemented.

We started contacting the vendor but could get no answers from the technical team -- and the senior management wasn't returning our calls. As it turned out, the system changes did not go in because the FBI was investigating the vendor and had seized its goods, including the system for our company, and was making a copy for forensic analysis purposes. They would not allow any changes until they had a system snapshot.

The reason for the investigation? Some of the senior managers, including the CTO, were mismanaging company funds and funneling into their own personal accounts. We found out that the copy of the audited financial statements that we had been given before we'd hired them had been forged. The company had been lying to the VC firms that had provided the funding, and many of the senior managers had been living "Lifestyles of the Rich and Famous" using the company bank account while the rest of the company had been putting out a pretty good product.

The whole situation was a big mess for a few months. The VCs, who were worried about significant liability issues, filed Chapter 7 in short order. A couple of the execs each pled guilty to wire fraud and were sentenced to lengthy terms in federal prison.

The press ripped into a couple of the VC firms for having been duped. It is standard procedure for the board to hire the auditor and meet privately with the auditor. In this case, the board delegated that to the vendor's management team instead of doing it themselves. I expect that one or more members of the board lost their jobs with the VC firms that they represented.

As for me and my team? We once again scrambled to move and integrate into yet another vendor -- and crossed our fingers that this one would work out.

The constant trial and error while trying to push a company forward gets tiring. You can do more research the next go-round and still get burned. My question: How much due diligence is -- finally -- enough?

Send your own IT tale of managing IT, personal bloopers, supporting users, or dealing with bureaucratic nonsense to If we publish it, you'll receive a $50 American Express gift cheque.

This story, "The vendor that was too good to be true," was originally published at Read more crazy-but-true stories in the anonymous Off the Record blog at For the latest business technology news, follow on Twitter.

| 1 2 Page 2