| Winter 2008 |
Construction Advisor
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In Construction Fraud, Greed Meets Creativity
Our new series on fraud in the construction business leads off with a
sampling of recent schemes. Unlike recent high-profile corporate frauds,
in which misleading financial statements deceived investors, most
construction frauds target contractors themselves.
Over-purchasing - The spike in copper prices led a project manager and
a bookkeeper to order more tubing than was needed. They sold half to a scrap
yard for cash, and the bookkeeper made sure the vendor's invoice was paid
without fuss. The two felons later moved into steel, paint and even topsoil.
Kickback schemes - Price hikes can tempt suppliers to offer kickbacks
or other incentives. When a clerk put out request for quotations for cement, one
vendor offered her not only a percentage of every order she sent his way, but
also a better paying job at his own company if she could swing a long-term
contract.
Diversion - Some fraudsters steal by the hour. The excavator didn't
know its D9 bulldozer was moonlighting four nights a week, rented out by a
foreman. When the bulldozer ripped a gas main on the second site, the explosion
destroyed the machine and left the excavator facing a lawsuit.
Credit card scams - When a project manager gave himself a raise by
using the company credit card for his own retail purchases, neither he nor the
company knew two other project managers were doing the same thing.
Rigged bids - In an old-fashioned conspiracy, four big HVAC
contractors were dividing a market among themselves. On each new project, three
would quote high and one low. Of course, the general contractor would hire the
designated "low" bidder, thinking he had leveraged free-market competition.
In our series, we'll look at the types of errors that permit such schemes to
succeed - and show you how contractors can protect their assets.
Our firm can help you fraud-proof your business. Give us a call to learn
more.
The Construction Advisor is produced
quarterly by Bober, Markey, Fedorovich
& Company's Construction
Services Team. If you would like additional information about the services that
we can provide to construction companies and contractors, please call or
email our team leader, Dale A. Ruther, CPA, CIT at (330) 762-9785 or dale@bobermarkey.com.
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