Cracked Foundation

Corruption in Public Construction

By Edward T. Dominelli, CFE, MPA

This project manager for a public construction agency had earned its trust but had stolen its dollars – thousands of them. Learn how he did it and how the agency reformed. 

Everyone at the public construction agency knew project manager “Scott Johnson” was from the “old school.” Johnson, a seasoned, 10-year employee, was rough around the edges, a tough negotiator with contractors, terrible with paperwork, and not much for following procedures. But he got the job done. His multimillion-dollar capital construction projects were on time and within budget, or so it seemed.

Johnson, approaching 70 years of age, enjoyed the support of the agency’s management because he delivered for one of its largest and most prominent public clients. He thrived in the limelight and reveled in the power and prestige his position carried within the agency and, more importantly, with the client. New capital projects in the hundreds of millions of dollars were on the horizon and Johnson would be at the helm. However, his future dimmed when the agency’s Certified Fraud Examiner, “Dale,” received allegations from a confidential source that Johnson was steering work to favored subcontractors at two large capital projects under his direction.

Dale, who was the director of the agency’s internal investigations office, quietly began a review of contractor payment requisitions approved by Johnson to identify any anomalies. Dale proceeded quietly and cautiously because it would be risky to make public unsubstantiated allegations against one of the agency’s superstars until some concrete facts could be confirmed. Fortunately, Dale quickly identified a number of unusual payments to subcontractors working at the two projects. Payments to R&R Construction Inc. caught Dale’s attention and he conducted a background check.

A public database search identified Richard Clark as R&R’s president. Dale knew that the agency employed a Richard Clark whom Johnson personally hired as his project assistant. Was this simply a coincidence or indicative of a potential problem? Dale’s review of Clark’s personnel file disclosed that Clark was previously self-employed under “Richard Clark Contracting” but not R&R Construction. However, an emergency contact listing in the file identified his son also as Richard Clark with a business telephone number matching the number appearing on invoices from R&R found in the payment requisitions. At a minimum, it now appeared that the son of an agency employee might be doing business with the agency on a project his father supervised, and possibly, with Scott Johnson’s knowledge.

Additional information also surfaced that another subcontractor had performed exterior work on Johnson’s residence. Dale quickly confirmed this via an investigator’s drive-by of Johnson’s home and an interview with a second confidential source. After consulting with senior agency management, Dale reported these facts to state criminal investigators who, upon reviewing his findings, concluded that further review of Johnson’s and Clark’s activities was warranted. As per normal procedure, the state investigators contacted the local prosecutor’s office to receive some guidance, but the prosecutor unexpectedly requested that all further investigation cease until a joint meeting could be held to discuss the case.

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