Fraud involving the manipulation of large building contracts, such as collusive bidding by contractors is not uncommon. Employment fraud is another common type of fraud that’s found within industries where projects require external contractors on a regular basis. Individuals responsible for hiring and managing the work force on such project can single-handedly manipulate the situation and commit fraud by hiring “virtual contractors” – contractors who only exist on paper but are paid nonetheless. The salary, of course, going in to the perpetrators’ own pocket, often through an elaborate identity fraud scheme.
This may be the result of a single rogue employee or a more sophisticated operation perpetrated by an organised group – sometimes the external contract agency supplying workers, if staffing of the project has been outsourced.
In one case, a large building contractor became suspicious about the level of contract staffing on project. They had received several requests by the site manger for increased staffing. Upon visiting the site the client was unable to identify where the resources were actually being used. The client suspected collusion between the site manager and the procurement manager and asked Blackhawk to investigate.
At the heart of any forensics investigation is ‘process’. It’s absolutely critical that the forensic integrity of evidential data is preserved, otherwise it may prove inadmissible in legal proceedings.
We follow a universally recognised process to ensure the integrity of both the investigation and the data recovery procedure. Capture, Preservation, Extraction and Analysis. The final stage is the actual report and forensic evidence to our client.
Also important in a case such as this is undertaking the investigation with utmost discretion. We would not want to alert those potentially involved that an investigation was being undertaken and jeopardise the case.
Investigations and actions taken
At some point in the process of committing fraud, money has to be transferred in one form or another. It might be through fake bank accounts, fake companies or even indirectly through money laundering. Often this is a weak spot that can potentially expose the fraudsters, but without regular audits, it is easy to miss. In this case the non-existent employees had to be paid and that left a trail, although heavily obscured by third parties and emails. In addition, in cases like this, the employees benefiting usually like to take advantage of their ill-gotten gains, which can show up as life style changes.
Blackhawk used a combination of accounting forensics, employee surveillance, background investigations and some computer forensics to identify how the fraud was being committed and unmask those involved.
Our team was able to identify two individuals colluding to create fraudulent contract posts and payroll manipulations across a range of jobs on the project. Subtle lifestyle changes were noticed and also tips were received by a whistle blower – actually one of the reasons the suspected fraud was brought to the clients attention.
Further Actions Taken
The client has since taken Blackhawk’s advice and implemented more rigorous project accountability and auditing processes, as well as more thorough background checks on its employees.
The addition of these checks and balances have also enabled the client to monitor more effectively for over billing on projects by contractors and overtime pays to employees.