Fraud In The Construction Industry: It Can Take Many Forms

Fraud in the construction industry is a growing concern, with asset missappropriation chief among them. In simple terms, asset misappropriation fraud is when an employee who is responsible and trusted with assets abuses their position. They can either be working alone or with internal or external parties such as fellow employees or customers, suppliers or professional service providers.

This kind of theft / fraud can take many forms; more than you would consider within the construction industry. From simple theft of cash, removing data and other protected IP and information from a company. It may be falsifying accreditations, experience and qualifications to fulfil a role but could equally be an employee in collusion with other colleagues or people external from the business.

I see this fraud committed at all levels, as it can be simply committed by any person(s) in the hierarchal ladder.

A Case Study: Dishonest Construction Company Employees Commit Breach of Contract

Two senior members of a Liverpool construction company, our client, both submitted letters of resignation within a short period of time. Both employees received substantial salaries, one of £85,00 and the other of £65,000.

One employee was responsible for contracts in the building company and the other was responsible for sales. The behaviour of both were suspicious to the client, their employer. During discussions, attempts were made to establish why they were leaving and broker a new contract of employment.

At the same time information was received from a current customer of the employers’ who stated that one of the employees had told them they were starting work self-employed and were available to discuss any contract work.

A Clear Breach Of Contract

This would be in breach of the terms of contract of the employees. Expert Investigations Group were asked to conduct data background enquiries and it was established that a company had been set up in an alias name of the two employees.

Upon them leaving their employment, surveillance was placed on the two individuals to establish their movements and any business activities. It was quickly established that they had rented industrial premises and had begun to run a company from them. This company was in direct competition with their previous employer and in breach of their contracts.

Here’s Where Expert Investigations Stepped In

Surveillance showed the ex-employees visiting current contractors, visiting current clients and visiting current suppliers of their previous employer. In addition to the surveillance the two computers which the former employees used were data mined and information was recovered which also confirmed the breach-of-contract. The data from the computers showed that for two months prior to leaving their employment the employees had begun to divert contracts to their new company. In addition, a business plan was found on the computer and a list of data which had been extracted onto a portable device from the company computers. We supplied this to the client and their Solicitors and the evidence was used in the legal civil process.

What Can Be Done In Your Company?

A company or organisation can end up with a culture of dishonesty, with initial frauds being isolated and minor and escalating in value and frequency. All so that the employee sees what they do as routine, a way of their employment life and a dependency on the financial gain as their life is moulded around the revenue they are stealing.

Here Are Some Top Tips To Put A Stop To Construction Industry Fraud

• Look at prevention it may be far cheaper than having to detect it and try and recover any identified losses. Prevent it…you may never know it was happening to you.
• Create a culture. Give a responsible person the project / subject to own.
• Create a whistleblowing policy or reporting process.
• Conduct a gap analysis. Asses your vulnerability. Very few construction companies will have conducted a fraud audit.
• Put access controls in place on building, systems and software.
• Have relevant policies and procedures.
• Educate staff. Let them know you will be decisive.
• Have a tiered responsibility.
• Have a reaction plan with individuals with clear responsibilities and actions.

What Avenues Are Available When You Identify A Dishonest Employee?

You might have to approach a criminal issue such as a theft or fraud differently to that of an HR issue of long term false absenteeism, bullying or harassment. But regardless of the issue, Expert Investigations can help. Contact us today.