He used his own company to obtain payments from the construction contractor by submitting invoices and bills on behalf of his company for work purportedly performed. Many of the invoices and bills included charges for work that his construction company only partially did, or for work that was not performed at all, causing losses of $1.4 million.
He also accepted kickbacks totalling $180,345, from four subcontractors who served as subcontractors to the contractor on various construction projects knowing that the subcontractors expected, in return, to obtain favourable treatment from him as the Regional Manager of the main contractor.
The key points in this case are as follows:
Once again, this case highlights the importance of conducting due diligence on the main contractor and their sub-contractors before a business relationship commences. All sub-contractors should be authorised before use to ensure that they are able to complete work and also that there is no conflict of interest. Using a sub-contractor or Ghost company as a front for the work is not an uncommon method of bribe payment to an individual working within the client’s organisation or the main contractor because in many cases the transactions and audit trail is hidden.
Where an insider threat has been identified, to assess the scale of the problem or whether it is just a procedural issue there are a number of key checks that need to be conducted:
Obtaining answers to these questions, will give you an initial assessment of the scale of the risk that your organisation may be facing and whether it is only one person involved or there is a darker web and network of individuals involved. It should also be the starting point to reassess your organisations risk mitigation strategy within your procurement lifecycle and projects.
It is not uncommon for government organisations to outsource the management of a project to the main contractor basing governance of the project on trust. Given the global figures of fraud and bribery and the high risk of procurement fraud within the construction sector this is a naive approach and attempt to save money.