Presentation on theme: "International Fraud Expert and Man of Action"— Presentation transcript:
1 International Fraud Expert and Man of Action Sample fraud awareness presentation Combating Corruption and Fraud in WBG projectsNigel Savage, JD, CFEInternational Fraud Expert and Man of ActionSavageFraud.com
2 Categories of corruption and fraud schemes Bribes and kickbacksHidden interests in contractors by project officialsBid riggingRigged specificationsUnbalanced biddingLeaking of bid informationChange order abuseFraudFalse statements and claimsFalse and inflated invoicesFailure to meet contract specificationsProduct substitutionCollusive bidding by contractorsAgreements by bidders to inflate bid prices, rotate winning bidders, divide markets, etc.
3 The schemes often are linked… A BRIBE is offered or demanded in exchange for the promise of a contract award or other favor, which leads to…Some form of BID RIGGING to exclude the other, often more qualified and less expensive bidders, and finally…FRAUD in by the bribe payer, to cover the cost of the bribe and exploit the corrupt relationship.The fraud can take the form of:False, inflated or duplicate invoicesFailure to meet contract specificationsSubstitution of cheaper inferior materials or productsFraud is the most costly and disruptive stage.
4 CorruptionBribes & kickbacksConflict of interest
5 Bribes and kickbacks To influence a contract Giving a “thing of value” award or execution:S selectionP priceQ quantityQ qualityD delivery…andF facilitate fraudGiving a “thing of value”“Gifts, travel & entertainmentSexual favors“Study tours”Rental of properties, etc.Cash paymentsPayments thru subs, local partners, consultants, etc.Hidden interestsLessonsGTE etc recordedGTE inspectionsCash INVOICES Siemens LiechtensteinDetect with Audit rights NEED DOWNSTREAM AUDIT RIGHTSNot detect with standard auditsDirect or CESPQQD link by CE or direct CHRONO key
6 Why were bribes paid? To be short listed For a contract award To expedite the payment of invoicesFor contract amendments and extensionsTo influence inspectors to accept sub-par work or goodsTo compromise auditors and NGOsTo avoid cancellation of the contract for poor performance
7 Corruption case example West Africa Road - red flagTo house try to trace directly – contact sellersTo WDC circumstantial proof
8 Where the money ended up in the US… Use Google EarthCircumstantial and direct proofrefer to step 7
9 Conflicts of interest For example, an employee: Secretly owns a supplier or contractor, orSets up a “shell company” through which he or she purchases supplies at an inflated price, orHas an undisclosed interest in property sales or leases, etc.MIDDLEMAN KEYEg Cameroon InterFace $45,000Require that DISCLOSE name fee agreement eg TomenIDENTIFY not listed no websiteELIMINATE
10 Front company addresses Empty LotRice TraderShop HouseAuto Repair Shop
12 Corruption red flags Complaints from losing bidders “SPQQD” factors Unjustified sole source awardsMultiple awards just under procurement thresholdsPressure to select an unknown or unqualified contractorPressure to select a particular subcontractor or agentLong delays in contract negotiations or awardInvolvement of unnecessary broker or questionable agentUndisclosed agent fees and commissionsQuestionable contract amendments and extensionsProcurement staff live beyond their means
13 Bid rigging Unbalanced bidding Rigged specifications Excluding qualified biddersLeaking bid dataManipulation of bids after receiptUnjustified sole source awardsSplit purchasesChange order abuse
14 Bid rigging red flags Repeat [sole source] awards to the same bidders Multiple awards just under thresholds (followed by change orders or contract extensions)Bids just at or close to budget or estimateNarrow specificationsAmbiguous specificationsUnreasonable pre-qualification proceduresShort or inadequate notice to biddersFewer than the average or required number of biddersLow bid awards followed by change orders
15 Collusive bidding People of the same trade seldom meet together, even for merriment and diversion,but the conversation ends ina conspiracy against the public,or in some contrivance to raiseprices.Adam Smith,The Wealth of Nations,17761515
17 Collusive bidding red flags Connections between bidders, e.g., common addresses, fax numbers or personnel; assignment of contract to losing bidder, etc.Persistent unexplained high pricesUnusual bid patterns; e.g. bids an exact % apartRotation of winning biddersSame bidders bid; new bidders excludedLosing bidders become subcontractorsFalse or forged bid securities1717
18 Fraud Delivery of expired, fake or adulterated drugs Reporting of exaggerated cure rates and project resultsFalse CV’s and company historiesFalse and plagiarized feasibility studies and reportsForged performance documentsForged bid securities & manufacturer’s certificatesDelivery of substandard goods or equipmentFalse and inflated invoices
22 Narrow road Road 30% narrower than specifications No road surfacing, contrary to specificationsThe contract waspaid in full
23 ‘’Ten Year” urban road Thirteen months after completion 2323
24 Construction and billing fraud Design of spa for ecotourism centerStatus after >50% disbursed with 30 days left to completion
25 Construction fraudPoor quality concrete in slabs, beams and columns with extensive honeycombing can result in- a reduction of compressive strength- a route for ingress of moisture to reachand corrode the steel reinforcementPoor quality concrete in slabs, beams and columns with extensive honeycombing (air entrapment due to insufficient vibration when poured)Plastered with cement to fill in the air holes at the surface (This merely hides the visible honeycombing and adds nothing to structural strength).Extensive honeycombing at concrete surfaces often extends into the core of a unit and can result ina reduction in compressive strength of the concretea route for ingress of moisture to reach and corrode the steel reinforcement.Plastered with cement to fill in the air holes at the surface.The concrete mix itself appeared weak in cement content, both visually and to the touch.At least two columns were rotated a few degrees out of true in plan view. This could result in additional torsional stresses at the junctions between columns and other structural units.Fixing of steel reinforcement within the formwork was of a poor standard (e.g. dimensions of some reinforcement cages were irregular and, in places, would not have provided sufficient concrete cover between main tension reinforcement and the concrete surface). Removal, re-assembly and re-installation would have been the right course of action in several cases.Plastered with cement to fill in the air holes at the surfaceThe concrete mix itself appeared weak in cement content, both visually and to the touchColumns were rotated a few degrees out of true in plan view which can lead to additional torsional stresses at the junctions between columns and other structural unitsFixing of steel reinforcement within the formwork was of a poor standard
26 Fraud red flags “Outliers,” “mismatches,” etc. Poor quality goods or worksMissing or altered supporting documentsInconsistencies between contractor’s claims and inspectionsCulture of corruption of inspectorsNo costs booked by contractor for work claimedComplaints from users
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