Theft Entrepreneurs

Translation of a story published by Daniel Bilbao, CEO of Truora

I’ve always known there’s corruption in my country. I see it on the streets on a daily basis.

Perhaps my view is biased because we literally work to reduce fraud in my company. However, What I see never ceases to amaze me.

In this line of work, you stumble upon many creative ways and amusing stories about people who“find the angles and shortcuts” to get their slice of the pie.

This causes outrage sometimes, sometimes laughter, or even worse: indifference. One thing is clear: these people are persevering, creative, resourceful (and corrupt, of course). They go afteer what they want and they work hard to get it.

Theft entrepreneurs, we call them.

A couple of weeks ago, I was taught an excellent lesson from one of these theft entrepreneurs in the government sector. What started as an innocent conversation, turned out to be a lecture. I want to share the conversation (verbatim) with you, since I found it amusing. If you know more stories like this, by all means, share them with me.

Context:

After leaving the Airport, I got on an Uber home. Julian (not real name) was to be my driver. After greeting him, and chatting briefly about my company, I wanted to learn more about him and what he did for a living when he wasn’t working with Uber.

D: What do you do for a living? What’s your trade?

J: I work with tendering processes. That’s my trade. But, in the meantime, I’m working with Uber.

D: How so? Tendering?

J: I help assigning tenders.

D: I don’t follow. With the State? Or a private Company?

J: Yes, with the State, in X province, A small one.

D: Excuse me if I butt in, but I still don’t understand. What do you do exactly? Evaluate proposals?

J: Yes, I make sure the contractor that was previously chosen ends up being awarded the contract.

D: Hold on. Did I get that right? Do you tamper with the process so the tendering goes to a specific person?

J: Yes, sir. Exactly. The mayor might say: “Julian, this contract must be awarded to contractor X” and I take care of it.

D: How many processes did you do?

J: All of them.

D: Seriously? All processes go through you?

J: Yes, sir. Of course, that’s my job.

D: And the contract was always awarded to the contractor they said?

J: Always.

D: Hold on a second. I want to understand this: You’re telling me the mayor says: “This company must win” and you say: “Sure” and that’s what happens?

J: Yes, exactly. He says: “Julian, this one must be awarded to Dr. Schmith” and I take care of it.

D: I can’t believe it, that’s baffling! And what happens if they don’t win?

J: Well, I’d be fired, of course. A friend of mine was let go because of that.

D: From all processes in the province, what percentage went through you?

J: All of them, construction work, buildings, anything and everything.

D: And how much is the province budget?

J: About 23 billion pesos, plus production. About 30 billion pesos (10 million USD) a year.

D: And 100% of them go through you and 100% of them are awarded to the person they say?

J: Yes, of course. I’m very good at my job.

D: Is it hard to assign the winner?

J: Oh, yes. Sometimes it’s very hard. In some large processes, thankfully, no more than three or two companies participate, so weeding them out is easy. But in some others, I have to really work hard to pull it off.

D: And how did you manage to go unnoticed? Isn’t that in Law 80? [Law for resource allocation in search of competitiveness in processes]

J: Yes, it’s in the law. But there are ways to go around.

D: For instance?

J: A call for tenders is assigned by a score system. We can post a visit to premises as part of the requirements. We can post that requirementon a Sunday at 6 am on the billboard, but since no one sees it, no one shows up for the visit and that takes away some points from competitors.

D: But isn’t the financial matter more complex?

J: No, it’s not. It’s the same. We ask the selected contractor for their financial information and we search for ways to make them match the requirements. Like having experience greater than 10 years or having worked with the State before. That one is the best, since we can do three small contracts with them the first year, so that gives them an edge over the others.

D: But, Isn’t it suspicious that requirements are tailored for the contractor you assigned?

J: Of course, but that’s why we do it by steps and so it looks crystal-clear.

D: How so?

J: Let’s say I want some company to win. First, I ask them for they financial information, and if their net worth is 1.4M and they have 8 years of experience, then I make the first requirement version to be 1.5M net worth and 10-year experience. That’s step one

D: How do you manage them to win?

J: In all processes, the requirement sheet is open to commentary, so the one we chose posts something like “Hey, that net worth is too high, and the experience requirement is too strict” so we listen to them and make adjustments. That way we make it look like it’s a process where everyone is included.

D: Aren’t you afraid of going to jail?

J: No, because, if the procurement processes are done properly, everything is documented. Besides, in my province the construction projects are finished. As long as construction projects are finished, there is no problem at all.

D: No wonder so much money goes into construction. In other words, you could build a 100M bridge for 500M?

J: Oh, no. I wish. I can’t because there is an accountant, so the project utility is about 30%.

D: Accountant?

J: A person who decides how much a project could cost. He checks into materials, building works and all that.

D: What’s the project utility? What does that mean?

J: Let’s say undertaking a construction project costs 70 million, and so the budget is set to 100, thus there’s 30 million in utility. The building work takes 70 million, the 30 million remaining are split: 10 are for the mayor, 10 are for the contractor, and 10 are to repay the debt.

D: Wait, does the mayor always get a slice?

J: Yes, almost every time. Sometimes he prefers not to when the deal seems too shady. But he usually does.

D: And do you get a cut? How much do they pay you?

J: I make some decent cash, two million pesos (700 USD) and they also give me some more for each process.

D: And do you get a good amount per process?

J: It’s a good one since it helps me make ends meet. 50, 200 thousand pesos. They once gave me three million pesos, but that only happens once a year.

D: What does the debt mean? From the 30 million in utility, 10 million goes to repay whose debt?

J: Well, a business man lends the money to the mayor so he gets elected, right? So the mayor has to repay him

D: How so? The businessman gave him money for what? The campaign? How much money?

J: Yes, money to be elected. This is a small province, so about half a billion pesos. And so, with the building works, the mayor repays him.

D: Winning the election costs only half a billion?

J: Yes, because it’s a small one. Bigger provinces are way more expensive: 2, 4 billion, a lot more.

D: So, the businessman gives the candidate the half million and he repays him during his term?

J: Yes, exactly, and that way he repays for his investment.

D: So, tell me. Do you know if this works in the same way everywhere? Across the country?

J: In several small provinces, yes, no doubt. I have some acquaintances and it’s the same thing. Though every province puts together their own system.

D: And what about the bigger provinces and cities?

J: For the bigger ones, I’m not sure. I guess they’ll be a lot more finicky. But I’m sure they find the way to tamper with requirement sheets.

D: How many people work with you “tampering with requirement sheets”?

J: There’s about 4 people working with that, but I’m the one who does most of the heavy lifting.

D: So, if you were to freely award contracts, would the chosen one always win or are there better tenders?

J: Oh, no. Many, many times others would be awarded contracts. Most of that money would go to other people.

D: But, why do they keep tendering if they never get awarded any contracts?

J: Because they think they could get awarded some contract. But I see to it that they don’t. You have to do a good job.

D: How much money do you think the province would save if you could award contracts freely?

J: Probably the project utility. Yes, most of the project utility, the 30% they split.

D: So, what you’re telling me is you could do the same the province does with 10 million, but using only 7 million?

J: Yes, exactly. There are about 3 million dollars a year that go to the mayor, the businessman and the debt, of course. And the little bit they end up giving me for doing a good job.

D: That’s unbelievable. It’s a much better business for you than Uber.

J: Yes, of course. That’s why I’m back in politics: to go back to my town and get back to work on that again.

D: What do you mean by politics? Are you buying votes?

J: No, no. I introduced the candidate to the businessman. So he gives the candidate the half a billion pesos for him to win the election. That’s how I know exactly how much it costs.

D: Are you doing that now? Right now?

J: Yes, sir. I already introduced them to each other. They met and got along very well. God willing, they’ll make a deal this month. And if he wins the election, they’ll hire me as an accountant, since I’ve done pretty well before. And I introduced them to work together.

D: So this Uber thing is temporary?

J: Yes, of course. God willing, next year I’ll be working as an accountant again. This time I’ll do an even better job, since the province is a little larger. Hopefully, I’ll be back in my job in a couple of months.

D: Thank you so much for your time, Julian. And the conversation. I learned a lot today.

J: Thank you for listening, I always wanted to be a teacher, and so I love teaching.

D: Well, I must confess, you gave me a lot to think about. Those tendering processes are a really complex matter. Anyhow, the more you know… This is my stop, thanks a lot.

J: Thanks to you, Daniel. Good luck with your company. I agree with what you said: corruption is some serious crap, you better not deal with the State, or at least not with my province. Because I’ll be there and you won’t win. Or, if you want, I can introduce you to the big boss.

D: Thank you, Julian, for the lesson and the offering. But I’ll have to decline. We’d rather continue the way we’ve been working this far. I wish you the best of luck, though I hope the other candidate wins the election.

J: No, please, don’t say that. Not even jokingly. I know we’re going to win. Take care, I’m at your service, if you need anything.

About Truora

Truora is a Latin American startup that provides fast and reliable background checks as well as Digital Identity solutions to prevent Fraud throughout Latin America. It works with large banks, fintechs and 90% of the largest marketplaces in the region. To learn more, go to www.truora.com

About Daniel Bilbao

Daniel is a co-founder and CEO of Truora. Along with Maite, Cesar and David, he built Truora with a mission of both solving a huge problem in LatAm and helping founders grow their businesses. He’s a serial founder, having co-founder Paladin Cyber, and is also a board member at Frubana, one of the fastest growing startups in Latin America.

Truora

In Truora, we are fighting fraud in Latin America, one background check at a time

Pablo Luis Gómez Hernández
Truora
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