Shop Owner Cites Cautionary Tale: Be Ever Vigilant
April 9, 2009
"I've had better months," says Tom Lee Jr., president of Lee
and Cates. You could hear the sadness in his voice during an exclusive
interview with AGRR/glassBYTEs.com this morning. The third-generation
owner of the powerful multi-location glass chain based in Jacksonville,
Fla., is caught in every glass shop owner's worst nightmare.
"We were notified by State Farm in September of last year that our
company was under investigation for fraud," says Lee. "They
met with us once and told us they had found an anomaly in the billing
practices at two of our locations."
"We launched our own investigation immediately and found that some
employees at two of our shop locations had manipulated our software to
allow customers to be billed for dealer items as opposed to NAGS pricing,"
he said. "Those individuals were fired and we cooperated full in
Lee says the state's department of financial services (which includes
insurance oversight) also began an investigation and provided information
to the local press that surfaced yesterday (Stories appeared on Jacksonville's
Channel 4, the First
Coast News and Jacksonville.com.
The Department of Financial Services Division of Insurance Fraud
also issued a press
release about the investigation.) "Their investigator has been
publicizing this and that's been hard for us. The numbers they are bantering
about in local news reports are outlandish. They are way, way exaggerated
and they are implying that glass is inferior and we all know the
difference is the logo and the price, not the quality," says Lee.
Local news reports cited a bonus plan for employees as a motive for the
fraud. "All glass companies have incentive programs for their employees,
and ours in no different," says Lee. "Our employees were bonused
[based] on the profit of their location. We did not anticipate what dishonest
employees would do to manipulate the program. Once we found out, we ended
the incentive program. It's done. We are regrouping and will announce
a new program in the future."
Lee says his negotiations with State Farm are not over yet either. "If
you read State Farm's O&A you'll see that it allows them a $1,000
penalty fee for each and every fraudulent claim. Not a lot of glass shop
owners know this. And that's what State Farm wants. We are still negotiating
with them now. The penalties are vastly higher than the amount of fraud
that took place."
"We are an 83 -year-old company founded on strong principles. This
has just been a horrible thing to go through and I am really kicking myself
that it happened. You do a lot of second-guessing on what you could do
differently or better to keep it from occurring," he adds, stating
that one of the employees involved is a 30-year veteran of the company.
When asked if he had any suggestions for other glass shop owners, Lee
offered some. "Sadly, you have to look at everything, every little
thing and you can't assume honesty. 'Trust but verify' is the best advice
I have. Multiple location companies bring special challenges for management
and require a lot of controls. Don't ever think it can't happen to you,
because it can."
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