Construction Fraud

Beware the 'Outside Facilitator'

 


Crafty manipulators will use weak employees at construction job sites to defraud companies for many months – long before the home office smells any problems.

Jake was such a talented mimic that he could have been a hit on open-mike night at the local comedy club. But he geared his impersonations to garner cash and not laughs.

Through his many contacts in the construction business, Jake heard that Sam, the owner of Bacme Specialty Contracting, had recently retired and closed his business. Jake enlisted the help of a crooked employee at a job site of Ace Construction and soon was preparing fake Bacme letterhead and then opened a bank account in Bacme’s name. Finally, he sent bogus invoices to Ace Construction. By the time Ace’s home office smelled any trouble, Jake, the outside facilitator, was on to his next gig.

A typical internal control analysis and investigation usually begins with a focus on the entity’s internal systems and procedures and its employees who are in critical positions of exposure to fraud. From my years of investigating construction contracting, I’ve found that the most significant exposure in this field stems from unscrupulous individuals outside the company who “facilitate” the fraud or embezzlement. These improprieties usually take place at the job site (away from the contractor’s home office) where internal controls are dependent on the honesty and integrity of the key job-site employees.

Indeed, a traditional investigation eventually will uncover an inflated expense report, a ghost employee, a payroll clerk who pads timecard hours for a co-worker, excessive entertainment, or the theft of tools and equipment. But the sizeable thefts in the construction field undoubtedly will include an outside facilitator.

A facilitator is a master at maintaining a low profile and waiting for opportunities to approach key employees and tempt them with promises of lucrative financial rewards by simply following a proven scheme.


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