Buying materials for my job through my own company?
March 10, 2014 2:28 PM   Subscribe

I work for a medium size 40 employee company in a management capacity. I'm responsible for purchasing equipment and software. What sort of legal issues could arise from purchasing the equipment myself and reselling it to the company?

The company I work for has, until recently, not had an IT department on staff for many years. They have always overpaid hugely for their IT services, equipment and software. Since I came to work for them, they have consistently been shocked at how low the prices I find are, as well as the many things that I can just do that they used to pay for. Oftentimes I will find something for X dollars, which will please them and are happy to authorize, only to find it for even less money a short time later.

Now, this made me think. I could start my own supply company that would purchase items for the main company after marking them up a certain amount. The prices would still be incredibly lower than they used to pay and they would still be very happy. It's really just a surcharge for the years of experience I have in evaluating sources and acquiring equipment at great prices.

I don't need to know about the ethical implications, because the owner of the company does this exact thing (and worse) every day and I don't feel that there is anything wrong with putting a price on the effort I've put into being good at what I do. I understand that yes, I would most likely be fired for the egregious crime of capitalism if I was found. I'm not very happy with the job so that's a minor risk at worst. I would, of course, start the supply business in earnest, filing with the state and doing all that is legally required. My question is what, if any, are the legal reasons not to do this? As an uncontracted W2 employee, is there anything more than termination that they could pursue?
posted by dozo to Law & Government (10 answers total) 1 user marked this as a favorite
You should seek legal advice, obviously, and you may want to ask your lawyer about whether your jurisdiction imposes a "duty of loyalty" on employees and if so, whether your scheme (of making a side profit at the company's expense) would be a breach of that duty. Here are some googled examples: 1, 2, 3

I am a lawyer, not your lawyer and TINLA.
posted by girlpublisher at 2:45 PM on March 10, 2014

Any chance you can point out what they've been saving due to your skills in this area and ask for some part of that figure as a raise? Might not work, but it sure seems like less of a hassle if you're not planning on providing the same services to other companies.
posted by asperity at 2:49 PM on March 10, 2014 [2 favorites]

I am not a lawyer at all, but this sounds like embezzlement to me. Most jurisdictions do have laws against this.
posted by soelo at 2:49 PM on March 10, 2014 [2 favorites]

It's a pretty small step away from actual embezzlement. Setting up a phony vendor and writing checks to said vendor is pretty much textbook embezzlement. Not sure what it means when the phony vendor isn't phony, but even if it's legally in the clear it seems like you're at least setting yourself up for an embezzlement investigation.
posted by BabeTheBlueOX at 2:57 PM on March 10, 2014 [3 favorites]

Your job, which you presumably get paid for, involves evaluating sources and acquiring equipment at great prices. Attempting to defraud your employer by getting paid twice for the same service (once with your salary and again with your markup) is not likely to end well.

What could they do? Fight any unemployment claim, leaving you without severance and unemployment if terminated. Ask the police/DA to pursue fraud and embezzlement charges against you (at a minimum, a massive inconvenience and a stack of legal bills at the same time you've lost your job). Sue you. Tarnish your reputation, preventing you from getting another job. Tip off the IRS to your scheme, triggering an audit to go over your "supply company" with a fine toothed comb.

If your company happens to be covered by Sarbanes-Oxley, that brings further federal laws into play that may apply both to the company and potentially to you as a member of management.
posted by zachlipton at 3:06 PM on March 10, 2014 [6 favorites]

Probably not a great idea, as outlined above.

Other options may be available though...(I can't speak strictly to their legality, but I've seen them happen often enough in the real world that most people won't bat an eye...)

1. order from vendors that have referral/rewards programs and use your own referral/rewards code to collect points. As long as your company is paying the same price with or without your rewards info on the order, it's not fraud. Also make sure you are still getting competitive pricing - don't buy from a really expensive site just to get your reward. People do this with airline miles all the time, it's really not different.

2. see if your employer is OK with you purchasing items directly and getting reimbursed. Use a rewards credit card and make sure you submit the invoice quickly enough that you can pay it off before interest hits. Again, your employer pays the same amount in the end, so no fraud occurs, but you can get rewards too.
posted by trivia genius at 3:29 PM on March 10, 2014 [1 favorite]

Terrible idea and is embezzelment. Your company couldn't pass an audit with this kind of thing going on.

You can ask for a raise based upon what you can save the company in third-party charges, and you could make a good case for it.
posted by Ruthless Bunny at 6:11 PM on March 10, 2014

This exact thing happened at my company several years ago- one of the shipping dept managers had set up a trucking company of his own, and was routing shipments through it. Yes, it was a bit of a savings... no, it wasn't legal. He's serving time.
posted by drhydro at 8:57 PM on March 10, 2014 [1 favorite]

Best answer: As everyone said, you can't do this.

However, you could quit and become a supplier and your current company can be your first (and possibly only) customer.
Consider if your current job (pay and stability) is better than if you were getting a reasonable percent on the IT services.
I (at my company) partner with IT service resellers, some of whom only have 1 or 2 customers. So it is a real thing, and can be a viable business if you would rather just do that.

But you can't double dip, it has to be either/or.
posted by rmless at 4:16 PM on March 11, 2014 [1 favorite]

Response by poster: Hmm, I guess that's off the table then. Wouldn't be worth any risk. rmless, I've also considered that very thing but yeah - the volatility is frightening.

There's no way the boss will go for sharing any of the money I've saved - that's some Obama shit right there if you ask him. He's already "had to" restructure the business to avoid FMLA and ACA requirements so any more "bullshit" about people trying to get "free stuff" isn't going to be pleasant.

I looked at duty of loyalty in Florida and it appears to be more about taking clients and starting a competing business or sharing trade secrets. I couldn't find anywhere - though IANAL and I only spent a few minutes looking into it - that referred to the specific thing I was wondering.

posted by dozo at 8:12 PM on March 11, 2014

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