INDICTED Than You Think . . .
In recent years, Fortune 500 companies have commanded most
of the media coverage on corporate frauds. However, the
U.S. Department of Justice also prosecutes individuals
in smaller, privately-held companies. This is one story
of overbilling, kickbacks, and criminal charges
at the highest levels.
BY: AN ANONYMOUS AUTHOR
Imagine this: You wake up one morning to screaming headlines in your local papers – you have been accused of fraud
in connection with construction work performed by your
company. As the CFM, you have been indicted by a federal
grand jury on numerous charges, including conspiracy and
mail fraud. If convicted, you could face more than 30 years in
prison, a fine in excess of $1 million, or both.
The real life story that follows concluded not long ago in federal court. For the sake of anonymity, individual and company
names have been replaced with general descriptions.
Why have I chosen to share such a deeply personal experience? So that my story can serve as a “heads up” for my fellow CFMs to help them recognize their very real exposure to
CFMs are vulnerable because of their level of responsibility,
their understanding of company operations, and the knowledge they are expected to have about the actions of other
management personnel. And, here’s some extraordinary news:
You do not even need to be actively involved
in a fraud to be indicted.
All federal prosecutors need to obtain a grand jury indictment
is one witness who states that you knew of a fraudulent activity and, in some small way, allowed that activity to continue.
Armed with this knowledge of vulnerability, I sincerely hope
my colleagues can take the necessary steps to avoid the
criminal prosecution that befell this unsuspecting author.
This story begins over 10 years ago on a construction jobsite
where our company was performing large-scale renovation
work for a commercial customer. The extensive renovations
were on a T&M basis and the job’s scope continued to expand
over several years.
In addition, the customer’s budgetary controls were not very
tight, it was understaffed to handle the large volume of work,
and the job was schedule-driven.