1. 1 FAA DBE Workshop DBE Program Fraud U.S. Department of Transportation Office of Inspector General

2. 2 Overview Mission and Priorities Fraud Discovery, Schemes, and Indicators Detection and Deterrence of DBE Fraud

3. 3 North Dakota Minnesota South Dakota Wyoming Colorado Nebraska Kansas Missouri Iowa Wisconsin Illinois Kentucky Indiana (Includes Puerto Rico, Virgin Islands ) Montana Idaho Washington Oregon California Nevada Arizona Utah New Mexico Texas Oklahoma Arkansas Louisiana Florida Georgia Alabama Mississippi North Carolina South Carolina Virginia West Virginia Maryland Pennsylvania New York Connecticut Mass Vermont Maine Ohio Rhode Island Delaware 1 6 2 3 9 5 NH New Jersey Michigan Tennessee 4 Hawaii Alaska OIG Regional Office OIG Criminal Investigative Regions Washington, DC

4. 4 Why Employees Do Not Report Fraud According to a 2005 Business Ethics Study, employees do not report fraud because they: Believe nothing will happen. Don’t know who to contact. Think the report will not be kept confidential, so supervisors or co-workers might retaliate. Believe the situation has no personal impact on them.

5. 5 Difficulties in Prosecuting DBE Fraud Cases Project completed to owner’s satisfaction Unpopular program → unsympathetic jury Government loss is amount paid to DBE front → below threshold for prosecution Government prosecutor does not understand DBE program

6. 6 “Red Flag” Indicators Owner lacks background, expertise, or equipment to perform subcontract work Employees shuttle back and forth between prime contractor and minority-owned business payrolls Business names on equipment and vehicles are covered with paint or magnetic signs Orders and payment for necessary supplies are made by individuals not employed by minority-owned business

7. 7 Minority-Owned Business “Red Flag” Indicators Prime contractor facilitated purchase of minority-owned business Minority-owned business owner never present at job site Prime contractor always uses the same minority-owned business

8. 8 Settlement for $11.75 M and Compliance Agreements

9. 9 DBE Fraud Schemes False Eligibility The DBE does not belong to one of the recognized socially or economically disadvantaged groups The DBE does not belong to one of the recognized socially or economically disadvantaged groups The DBE provides false information concerning size or financial status The DBE provides false information concerning size or financial status Hidden assets or false statements concerning origination of capital Hidden assets or false statements concerning origination of capital

10. 10 DBE Fraud Schemes Conduit Companies DBE firm does not complete any of the contracted work DBE firm does not complete any of the contracted work The DBE sells his status to another company who completes the work The DBE sells his status to another company who completes the work Usually allows the use of the DBE name on invoices, trucks, equipment Usually allows the use of the DBE name on invoices, trucks, equipment

11. 11 Prototype Fraud Card

12. 12 Simple Recipe for Fraud Detection Identify selected big ticket items on big-dollar DOT projects. Closely examine supporting documentation for irregularities and discrepancies. Interview third parties concerning project details. Ask simple questions to detect fraud. Distribute fraud cards.

13. 13 DOT/OIG Hotline Call: 1-800-424-9071 E-Mail: Hotline@oig.dot.gov Write: U.S. DOT/OIG P.O.Box 23178 Washington, DC 20026-0178

14. 14 Questions? OIG’s web site: www.oig.dot.gov