Step Six: Begin the External Investigation

This section sets out the standard investigative steps during the external stage of a complex corruption and fraud investigation.  Although, as always, the specific steps will  vary according to the facts of the case, the primary objective in most cases is the same: to identify witnesses and documents that can provide the following types of evidence.

In Corruption Cases:

Look for evidence of the payment of a thing of value to improperly influence the actions of another.

Potential witnesses include:

1. Losing and excluded bidders, who may have knowledge, among other things, of:

  • Bribe demands from project or government officials, or
  • Instructions from such officials to use certain agents, subcontractors and suppliers (in which the officials might have a hidden interest) or
  • “Low ball” price offers by the bidders that were rejected (indicating corruption in the selection process)
  • Other circumstantial evidence of corruption, such as unduly short notices of opportunities to bid, the inability to buy bid packages, anomalies in Bid Evaluation Reports, threats from project or government officials to discourage bidding or unfair disqualification of certain bidders
  • Information in the industry regarding corrupt parties, and information on officials that live beyond their means

2. Former employees of the project or of winning contractors, who may have knowledge of improper payments and the related bid rigging schemes, the life style of the officials etc.

Potentially relevant documents include:

  • Project procurement and implementation files, including bid notices, retained bids, scoring sheets and Bid Evaluation Reports
  • Copies of losing bidders (to compare to retained copies by the bidders to identify possible changes to the submitted bids) and complaints from losing bidders in the procurement files
  • Local public records concerning the ownership of the winning bidders, subcontractors and suppliers, property ownership by project officials, etc.
  • Documentation from the winning bidders, including evidence of bribe payments, fraudulent invoices used to generate such funds, etc. Try to determine, for example, if a contractor failed to incur the necessary expenses to support work or items billed for, such as failing to lease the necessary equipment to perform work on road project.

This information can be obtained by exercising contract audit rights, serving a subpoena or requesting them from a compliant contractor.

In Fraud Cases:

Look for evidence of fraudulent acts, such as forged documents as well as knowing false statements or omissions of material facts.

Potential witnesses include:

  • Persons who have direct personal knowledge of the truth or falsity of questionable information in proposals, CVs, claims for payment, etc.
  • The purported issuers of bid securities, manufacturer’s certificates, etc.; to confirm or deny the legitimacy of questioned documents
  • Inspectors and testing personnel, regarding the accuracy of submitted test and inspection results and work completion certificates

Potentially relevant documents include:

  • Documents that demonstrate the truth or falsity of claims, e.g., public records regarding the incorporation or ownership of a bidder; original CVs (to compare to the submitted copies)
  • Legitimate securities or certificates (to compare to the submitted documents)
  • Previously submitted reports and written work product (to identify copied or plagiarized reports)

Other possible steps:

  • Re- inspect and re-test goods and works with independent inspectors to determine if they meet contract specifications and the claims by the contractor
  • Exercise contract audit rights, serve a subpoena or request documents from a contractor to compare internal records to invoices and claims, etc.

General Order of External Interviews

The usual order of interviews is to begin with the outer circle of informed but disinterested witnesses, then move inward to the “facilitators,” followed by the co-conspirators, and finally the principal subject, as illustrated by the example below.

Example of Order of External Interviews

A contractor is alleged to have bribed a contracting employee to win a bid and to have thereafter fraudulently installed cheaper non-compliant materials at unjustified high prices. The contractor allegedly acquired the product from the manufacturer, who was not involved in or aware of the scheme, and allegedly paid the bribe through an agent.

A logical order of interviews might be:

  1. Independent industry sources regarding price and quality issues
  2. Losing or excluded bidders regarding the same topics and possible requests for bribes
  3. The supplier to the winning bidder (to determine what goods were provided to the broker at what prices)
  4. Former (disgruntled) employees of the winning bidder
  5. The agent, to attempt to gain his cooperation, based on the previously obtained evidence
  6. The winning bidder (to insist on the production of financial records and to attempt obtain its cooperation)
  7. The alleged recipient of the bribe to demand relevant records and to attempt to obtain a confession