Bank cheats government – and taxpayers

It's a myth that only sinister companies cheat on government contracts. The sad truth is it is very common. Even the most respected companies are willing to commit fraud, if it gives them a healthier bottom line.

What about a major bank? Surely, such a respected institution would not lie, cheat or steal just to look good.

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Well, Mellon Bank, a venerable American institution formed in 1902, has answered that question. It not only lied directly to the face of a government contracting officer about its poor contract performance, but it destroyed documents to conceal the truth.

Mellon Bank had a contract with the IRS to process individual tax returns. The contract value was based upon meeting a certain deadline. It contained a "lockbox" provision that would cost the bank a chunk of its profits if it did not finish the work by a certain date, but give them a bonus if they finished on time.

When the due date arrived, the vice president of Mellon Bank called the IRS and notified it that the work had been completed. The truth was it had not been completed. There were still 75,000 income tax filings that had not been processed.

Rather than admit the truth (and risk losing the bonus), the bank did the unthinkable – it ordered its employees to start shredding the unprocessed personal income tax filings of thousands of taxpayers!

Mellon Bank planned to blame the post office for losing the tax returns when angry taxpayers called the IRS wondering what had happened to their tax refunds or why they are receiving penalties for late filings.

How callous can a company be – to throw out tax filings of hard-working Americans, many of whom were watching the mail every day, hoping their tax refunds had arrived!

While Mellon Bank was shredding IRS mail, they also shredded checks paying for taxes due. In all, $1.3 billion in tax returns and checks were shredded – just so Mellon could earn a bonus.

How would you feel if a government contractor shredded your tax return to get a bonus from the IRS? It could happen, because the truth is it's a part of the corporate culture today to cheat on government contracts. Thousands of respected companies participate in tax evasion equaling $300 billion a year. An estimated 10 percent of corporations regularly submit false claims to the government. Their cheating costs tax payers like you $150 billion a year.

To what lengths would your company go to get a bonus? Would it conceal information? Lie about performance? Shred documents that are important to you?

It can be stopped. Once their crime came to light, Mellon Bank was forced to repay the government $34 million, consisting of $18 million in lost interest on checks it destroyed and $16 million for breaching the contract. But thousands of other companies are costing you money by committing similar acts every day. Fortunately, the IRS was able to sort out the mess caused by Mellon Bank, the taxpayers got their refunds and no penalties were assessed for late payments by others.

What can you do to stop it?

If your company lies or shreds documents to conceal fraud, consider being a whistleblower. Be willing to protect not only your own interest, but the interests of others by standing up and reporting it.

You may also be entitled to a nice reward. If you had reported the shredding of documents at Mellon Bank, the IRS would have paid you a reward worth roughly $7 million. Interested?