The former president of Interface Corporation pled guilty in federal court on Thursday to charges of wire fraud. The charges alleged that the former president had steered business to a specific vendor in return for kickbacks. These benefits would accrue to the former president personally rather than the company, thereby depriving Interchange of the of the vendor’s honest services.
The line between advantageous business relationships and criminal charges can sometimes be a difficult path to tread. It is not uncommon for a salesperson to take a client out to dinner or treat them to a round of golf in order to further a business relationship. It is possible that in a situation like this one, the former president did not start out with the intent to commit wire fraud, but rather through incremental steps, found himself in a situation in which he was at risk of criminal charges.
Interface Corporation is a manufacturer of modular carpets. The former executive was responsible for overseeing sales and subcontracting for the installation of their product. The prosecutor in the case alleged that the former executive entered into an agreement with a subcontractor in which the executive would steer Interface’s business to the subcontractor in exchange for a portion of the subcontractor’s profits for the installation.
The prosecutor further alleged that at some point the former executive and the subcontractor agreed that the former executive’s spouse would receive a salary from the subcontractor despite the fact that she had allegedly not performed any actual work for the subcontractor. Finally, the prosecutor said that the subcontractor also agreed to pay for the spouse’s credit card bills and make retirement account contributions in the spouse’s name.
When engaging in business negotiations, it is important to have a clear understanding of the line between the furtherance of business relationships and potentially criminal activity. It may be useful to consult with outside counsel to ensure compliance with all applicable laws before the deal is struck.
Source: Atlanta Business Chronicle “Ex-Interface exec guilty of wire fraud,” Oct. 6, 2011