Economic Extortion

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Economic Extortion

• April 7, 2003
• By Lee Murphy

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Extortion

• As Defined by the Hobbs Act
• -The obtaining of property from another with his
  consent, induced by wrongful use of actual or
  threatened force, violence, or fear.

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Pay up or Else?

• An Economic Extortion scheme is based on the pay
  up or else strategy. The employee forces the
  vendor to pay him/her personally or threatens
  loss of the companies business.

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Total Losses
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Average Losses
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Extortion at work

• Company A needs 1000 widgets.
• Company B supplies Widgets in a competitive
  market.
• Employee from Company A requires a 1000 payment
  from Company B in order to place the order for
  the Widgets.

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Example 2

• Plant Manager at a Utility Company starts his own
  business.
• Companies that do business with Utility Company
  are forced to work with his private company or
  they will lose their business with the Utility
  Company.

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Effects On Companies

• Company A
• Employee
• Price
• Quality
• Quantity of Contracts

• Company B
• Profits
• Products
• Prices

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Red Flags

• The Big Spender
• The Odd Couple
• The Rule Breaker
• The Complainer

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Identifying Possible Vendors

• The Too-Successful Bidder
• Poor Quality, High Prices
• One Person Operation

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Case

• Internet Extortion
• Wanted One Million Dollars to not post some
  numeric keys that would allow anyone to use
  software without paying for it.
• System normally sells for 5,000 to One Million
  depending on number of modules licensed.

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Case Cont.

• Agents traced e-mails to Michaels computer
• Faces up to 20 years and a 250,000 fine if
  convicted.

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Prevention

• The best method for prevention is to have a
  strict policy in place for no gifts to be
  received from a vendor. This should but the
  perception of detection in place.

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Who has the first question?