Watch out for billing scams … and slimy managers

What can you do when a slightly sleazy deal starts to slide deeper into the fertilizer?

A few years ago, I was hired as a contractor to lead the development of a Web application for “SatChem,” a smallish subsidiary of a large pharmaceutical company in California. SatChem had a top-notch IT/network manager. It also had a project manager; I’ll call him Joe. Joe wasn’t the fastest CPU in the box, but he was easy to work with and stayed out of my way. I completed the project successfully and left for my next assignment.

About a year later, SatChem called me in to discuss another development project. I learned that the terrific IT manager had left and that Joe, the not-so-brilliant project manager, had taken his place. Considering Joe’s lack of expertise in networks and software, I was surprised. But I knew I could work with him if I had to. To fill the project manager position, the company had hired Chuck, an even less experienced guy who turned out to be Joe’s old Navy buddy.

During initial discussions, which were held off-site in a hotel room, Joe asked me about my billing rate, and if I was agreeable to working through a contracting agency. I was a little surprised at this; on my previous assignment I had billed SatChem directly. However, agencies aren’t unusual in the contracting world, where many companies have a small number of approved vendors. I agreed — but with the caveat that the agency must be a large, bonded firm, and not some little mom-and-pop outfit. Joe never mentioned it again, and I continued to bill directly.

The combination of the dim-witted IT manager and his even dumber sidekick turned out to be a two-headed Hydra of Dilbertesque, pointy-haired bossness. They had big egos, plus zero understanding of software development and IT. They hired hot and cold running contractors. They spent lavishly on needless perks. And they also made it clear that I was expected to take them out to lunch at a fancy restaurant every week to “discuss the project.” I did, rationalizing that it was the cost of doing business.

Fade to black and fast-forward three months. One morning, we’re asked to report to the meeting room. SatChem’s vice president announces that Joe and Chuck are on administrative leave, and he wants to talk to any contractors who are billing through a certain agency. Suddenly, all the warning lights go on in my head.

Apparently, these two guys had created a sham contract agency with their wives as owners of record. Because all this occurred in 2002, at the height of the IT meltdown, there were plenty of contractors willing to work for chump change. ScamCo then billed to SatChem at $50/hour, with fake time sheets boosting the hours worked by their employees. The boys got caught only when ScamCo bounced a check to one of the contractors, who figured out what was going on and called the head office.

The authorities were called in, and at last report the crooks were facing criminal charges. Unfortunately, the scandal gave the parent company a good excuse to close SatChem. Within six months, the company was history.

Lessons? For upper management, checks and balances are good, especially with regard to major hires. For contractors, trust your nose. If the deal smells sleazy, it probably is. And, oh yes, never sign with a billing agency called ScamCo.

Copyright © 2006 IDG Communications, Inc.