My former employers did something unethical which hurt our vendors.
My former employer, we will call XYZ Co, had some cash flow problems. We had a customer who I will call Customer Co. (I know, I’m not winning any points for originality) Customer Co was frequently, nay—always, late paying their bills to us. Our annual revenue was in the 50–75 million USD range, to give you an idea of the size of the company.
They had always been late but they had kept up as well. Until one particular year. They just got behind. … And further behind. And further behind. In nine months or so, they were into us for about two million USD, and only about 100,000 of that was not yet past due.
This, by the way, is what happens when you have a sales department that’s under huge pressure to meet sales quotas and those salesmen are not held responsible for when their sales do not turn into cash and those salesmen have the sole power of determining whether a customer gets shut off. Yes, I know—it’s ridiculous. But you do not yet know quite how ridiculous it is.
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You see, at about this time, I was walking through the supply room and I noticed something strange on the fax machine. It was a credit referral. Customer Co was using us as a credit referral for a new vendor of some sort that they were hiring. The form we were to fill out had spots to fill out how much they owed us in each category: Current, 1–30 days past due, 31–60 days past due, 61–90 days past due, and 91+ days past due.
This was not unusual. It was not even unusual to me that the form was already filled out and had been faxed back; I was just looking at the copy left on the fax machine by whoever had done it. What was unusual to me was the fact that we indicated on that form that their entire balance of two million was current.
I was…shall we say, concerned. I immediately went to my boss’s office, closed the door, explained the situation, and decried our ethical standards. He seemed to agree with me, but I highly doubt that he ever took any action or even had any conversations on the subject after I left the room. I still wonder if I should have done more.
We struck a deal with Customer Co. We converted their two million dollar debt into a loan so that it wouldn’t be past due anymore. They would make a payment on the loan every month and keep their account current on new purchases. (might as well have promised to solve cold fusion for all I trusted them)
As you may have anticipated, they did not do very well on their loan. A year later, they had only made five of their twelve scheduled payments on the loan, and they were once again over a million dollars into us on new sales.
Then one day they stopped ordering from us.
And stopped returning our phone calls.
Just…nothing. For several months.
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You may have guessed what happened; they filed for bankruptcy. We had to write off all of it. XYZ Co has since been merged away because they didn’t have enough cash flow to self sustain.
I don’t know what happened to the vendor(s) that we lied to. But in this case the lie hurt them, it hurt XYZ, and it hurt the employees who were left out of a job. I still don’t know whether my role in it was illegal (hence why I’m anonymous), but I can’t imagine that that practice was ethical.