Vendor Kickbacks Are Bleeding New York Businesses Dry

Every year, businesses across New York lose millions to fraudulent vendor kickbacks. You negotiate in good faith, expecting fair pricing and quality service, only to discover that vendors are lining their pockets with under-the-table deals, inflated invoices, and secret commissions. It’s frustrating, infuriating, and worst of all, it’s draining your bottom line.

The good news? You don’t have to take it. Horn Wright, LLP, has spent years helping businesses just like yours uncover vendor fraud, recover stolen funds, and build rock-solid protections against future scams. We’ll walk you through the red flags, expose the hidden tactics vendors use to exploit your trust, and give you the tools to fight back. If you suspect kickbacks are bleeding your business dry, you’re in the right place.

Are Your Vendors Scamming You? Uncover the Hidden Theft Happening Right Under Your Nose

Secret Deals That Drain Your Profits

Vendor kickback schemes are silent profit killers. They involve backdoor agreements where your vendors bribe your employees to secure inflated contracts, overcharge for goods, or supply subpar products. You end up paying more while vendors and dishonest employees pocket the difference.

Some common kickback tactics include:

• Phony rebates or excessive commissions paid to employees who push a specific vendor’s services. These commissions incentivize employees to approve overpriced contracts, leaving your business overpaying for goods or services. In many cases, the employees involved in these schemes receive personal perks, such as cash payouts, lavish trips, or even gift cards, in exchange for approving fraudulent transactions. This hidden compensation makes it even harder to track the true cost of vendor contracts.
• Inflated invoices with hidden fees that don’t match the agreed-upon pricing. Vendors might add vague “service fees” or unnecessary charges that slip through unnoticed, costing your company thousands over time. These fees often appear as “administrative costs” or “expedited processing fees” that sound legitimate but add no actual value. Without a proper audit system, businesses end up paying significantly more than they should.
• Fake subcontracting deals where work is outsourced to shell companies linked to the vendor. These sham companies exist only on paper, allowing vendors to siphon off money while delivering subpar work or no work at all. In some cases, subcontractors are owned by relatives or close associates of the vendor, creating a closed-loop system of fraud that’s nearly impossible to detect without deeper investigation. These fraudulent deals often go unnoticed until a major discrepancy is uncovered in financial records.

If left unchecked, these schemes can cost your business millions.

The Power of Open-Book Vendor Agreements

An open-book agreement requires vendors to provide full visibility into their pricing, costs, and profit margins. This prevents them from sneaking in kickbacks and hidden markups.

Key benefits of open-book agreements:

• Full cost breakdowns ensure fair pricing. You can compare actual costs with the quoted price to detect overcharges. If a vendor refuses to provide a breakdown, that’s a red flag indicating possible fraud. A transparent cost structure also allows for better financial forecasting and budgeting.
• Clear profit margins make it harder for vendors to inflate expenses. If a vendor’s profit margin is significantly higher than industry norms, it could indicate fraud. Knowing these margins also gives you leverage in price negotiations, ensuring that you get the best value for your money.
• Greater accountability deters dishonest dealings. Vendors who know they must disclose financial details are less likely to engage in shady business practices. Open-book agreements also help build long-term relationships with trustworthy vendors, creating a more stable supply chain.

When vendors know you’re scrutinizing their books, they think twice before engaging in fraud.

How to Conduct Surprise Audits and Vendor Reviews

Routine audits are useful, but surprise audits are where you catch real fraud. Here’s how to conduct them effectively:

Audit both invoices and service delivery. Compare what you paid with what was actually delivered. If there are discrepancies, investigate further. Sometimes, vendors deliver lower-quality materials than specified in the contract, allowing them to pocket the difference. Conducting physical inspections can help identify these issues.

Check for duplicate or altered invoices. Fraudulent vendors may submit multiple invoices for the same service under different descriptions to get paid twice. They might also alter invoice numbers slightly to avoid detection. Regularly cross-checking invoices with original purchase orders can prevent this scam.

Review vendor contract terms. Look for discrepancies between agreed-upon pricing and actual charges. Any unexplained cost increases should be challenged. Vendors sometimes take advantage of vague contract wording to introduce hidden fees, so having clear and precise terms in contracts is essential.

Regular vendor reviews also help. Compare multiple vendors to spot inconsistencies. Fraudulent vendors often charge significantly more than their competitors. By benchmarking costs against industry standards, you can quickly identify vendors that may be engaging in dishonest practices.

Act Now and Protect Your Business!

Vendor kickbacks could be draining your business dry without you even realizing it. The longer you wait, the harder it will be to recover your losses and hold fraudulent vendors accountable. Every day you delay, more of your hard-earned revenue could be slipping away into the wrong hands.

Horn Wright, LLP, has a proven track record of exposing vendor fraud, reclaiming stolen funds, and putting safeguards in place to prevent future scams. Don’t wait until it’s too late. Your business’s financial health is on the line. 

Contact us today and take the first step toward stopping vendor corruption in its tracks.