On February 9, 2005, 21 federal agents raided IRP Solutions Corporation and its 20 employees for alleged wrongdoing. The FBI presented a warrant stating that IRP Solutions and its six executives were being accused of mail and wire fraud.
The company, which was established in 2003 to develop software for law enforcement agencies, previously had become engaged with agencies like the Department of Homeland Security (DHS) and NYPD to make modifications to the software. Although no contracts had been drawn up, IRP began working on software non-contractually to meet the needs of state and federal law enforcement.
In order to meet the increased demand for software development, IRP began to explore the option of using staffing agencies, which act as liaisons between employers (like IRP) and often temporary employees. Staffing agencies initially pay employees or “contractors” for the hours he or she bills and then collect a fee that covers the pay rate to the contractor as well as the profit to the agency. Thus, the agency is usually reimbursed by the hiring client.
In this case, IRP was the hiring client that sought out the help of staffing agencies. While several agencies considered IRP a financial risk and did not team up with the company, several more chose to accept that risk and executed contracts with IRP.
In late 2004, DHS requested pricing quotes that exceeded $100 million and told IRP that they were working on their budget. A DHS official stated in FBI interview documents that the DHS was setting up a pilot project for IRP, which hoped to sell its product and pay back the staffing companies. Still, due to IRP’s competitors, no contracts were signed with law enforcement agencies to officially sell the software, and IRP’s debt continued to grow.
By February 2005, what should have remained a civil case between the staffing companies and IRP had suddenly turned criminal. Staffing agencies and FBI agents accused IRP of running a scam, insisting that the company did not develop software, but bilked staffing agencies of millions of dollars. The company was also accused of making up stories about potential customers like DHS and NYPD.
*Next: Did IRP Solutions run a scam or was it a legitimate business that incurred debt? What the grand jury believed…
