Potential Scheme: False Statements and Claims

Contractors can submit a wide variety of false statements and claims to, for example, enhance the scores on their bids and proposals, inflate their CV’s or to support inflated invoices.

Common false statements and claims in development projects include:

False statements regarding a firm’s:

  • Financial condition (false financial statements, inflated sales amounts or account balances, etc.)
  • Prior experience and qualifications
  • Employee’s educational or professional credentials
  • Proposed consulting staff.  For example, a consulting firm can include a highly qualified consultant in its proposal to win a contract, then replace that person with a less qualified, much less expensive person after the contract award.  The contract price, however, remains the same.  The savings can be used to fund bribes.  The scheme is often is done with the knowledge and approval of corrupt project officials.
  • Progress on a contract

False and forged:

  • Bid and performance securities
  • Manufactures authorizations (to sell the manufacturer’s products)
  • Test or inspection results

Reports and work product:

  • Copied or plagiarized reports
  • Reports copied from the internet
  • Falsified inspection or receiving reports (in exchange for kickbacks)

PROOF OF FALSITY

To be fraudulent, the false statements or claims or false documentation must be made or submitted “knowingly and willfully” with the intent to defraud.  Knowledge typically is defined as:

  • Actual knowledge of falsity
  • Deliberate ignorance of truth or falsity (“willful blindness”)
  • Reckless disregard of truth or falsity

Knowledge and intent can be proven directly, for example, by the admission of the subject, the testimony of a co-conspirator or other witness with direct personal knowledge, or by documentary evidence, such as an incriminating email.

Knowledge and intent also can be proven circumstantially, by, for example, showing that the subject knowingly altered or forged supporting documentation, lied to investigators, attempted to obstruct the investigation (e.g., by intimidating witnesses) or refused to produce pertinent records.

A pattern of prior similar “errors” or misrepresentations, beneficial to the subject,  also can be used to show willfulness and rebut the typical defense of accident or mistake.

GENERAL RED FLAGS OF FALSE STATEMENTS AND CLAIMS

  • Discrepancies between statements and claims and supporting documentation or test and inspection results
  • Absent, inadequate or apparently altered supporting documentation
  • Contractor refuses or fails to provide supporting documentation
  • Unreasonable claims or statements compared to observed performance, prior contracts or industry standards
  • Discrepancies between current and former CVs
  • Close similarities in current and former reports or other sources

Red flags of false or forged bid securities or manufacturers certificates:

  • Bid security or certificate is missing issuer’s signatures or reference number
  • Same security or certificate submitted several times for different bids
  • Identical or similar securities or certificates are submitted purportedly from different banks or companies
  • Securities have different appearance (format, logo, quality of paper, etc) from known authentic document

CASE EXAMPLES OF FALSE STATEMENTS AND CLAIMS

See actual case examples of false statements and claims from investigated cases.

BASIC STEPS TO PROVE FALSE STATEMENTS AND CLAIMS

1. Identify and interview all complainants and confidential sources to obtain further detail.

2. Examine the suspected false documents for the red flags listed above, particularly inconsistencies between the statements and claims and  supporting and other documentation.

3. Do due diligence background checks to (1) verify the contractor’s statement’s and claims  (e.g., its claimed prior experience, staff credentials or financial resources) and (2) to determine if the contractor previously has been investigated or sanctioned for fraud or filing false statements or claims.

4. Independently verify the contractor’s statements and claims; e.g.,

  • Locate and interview witnesses with direct personal knowledge of the truth or falsity of the contractor’s questionable statements and claims
  • Contact the issuers of questioned bid securities or manufacturers certificates to confirm their authenticity
  • Confirm the educational credentials of proposed consulting staff; compare the questioned CV to copies of the CV submitted in other proposals or on file

5. Look for evidence of fraudulent knowledge and intent; e.g., apparently altered or forged documents, securities or certificates.

6. Exercise contract audit rights to look for additional evidence of fraud or knowledge and intent; e.g., discrepancies between the submitted statements and internal records or correspondence.

7. Interview the responsible contractor personnel to obtain admissions or identify defenses; continue the investigation to rebut the defenses.

False statements or claims constitute a fraudulent practice.