Constructing Fraud


At times, a lot goes into building a fraud scenario. First, you must establish the framework – know the specific fraud you’re committing and where the resources to commit said fraud live. Then, you’ll need to lay the foundation – find support and methods for committing the fraud. Eventually you’ll build your way up to aesthetics and décor – operating the calculated fraud to avoid the law. Today’s Fraud of the Day from the Sun Sentinel reports that some Florida construction companies seeking to defraud the system may have hit a brick wall.

Business models can fluctuate, changing as economies rollercoaster through ”ups and downs.’? And, while some business models find great success, others find themselves buried in failure. Southeastern Florida has experienced a struggle rebounding from the Great Recession, resulting in the development of illegal business models responsible for depressing workers’ wages and benefits; not to mention, this makes competitive contracting near impossible. So, what is it? It’s called ”Cheat to Compete” construction – instances in which construction companies ”set up shell companies to evade workers’ compensation insurance premiums,” allowing them to bid extremely low prices and pay employees next to nothing in cash. (Cheat to Compete is clever – I wish there was a fun rhyme for ”you’re going to jail.”)With ”Cheat to Compete” running rampant, how is the government making strides to shut the fraudulent construction down?

A Broward County special investigation task force has been the brains behind stopping much of the ”Cheat to Compete” construction in southern Florida, tracking down nearly $200 million in off-the-book wages and accusing 21 suspected companies of committing fraud. This ”one-of-a-kind” investigation is expanding through southern Florida, capitalizing on the effort which has been defined as ”unusually successful,” by the bureau chief of the workers’ compensation fraud unit of the Florida Division Insurance Fraud. Adding to a growing repertoire of the task force, 18 shell companies, or companies using cash to pay workers off the books, have been shut down due to fraudulent activity. (You have to start somewhere. Just think of how much fraud like this occurs nationwide!? The task force revealed their biggest supporters to be the businesses waiting to bid fairly on projects. A Broward Sherriff, part of the task force, spoke of the investigations saying? ”It levels the playing field.”

Hopefully, the initiative taken by south Florida officials will spread nationwide. In a nation with an economy rebounding from recession, and in the shadows of another, a ”level playing field” is necessary not just in construction building 101, but in allowing businesses to compete and succeed.

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Task Force Tracks Down ‘Cheat to Compete’ Contractors,” written by Donna Gehrke-White and published by Sun Sentinel on October 13, 2012.

It’s a business model that is lucrative, flagrant and popular — but illegal.

A special Broward County-state task force has been ferreting out “cheat to compete” construction firms that set up shell companies to evade workers’ compensation insurance premiums. It’s so pervasive in South Florida that the task force already has tracked down $200 million in off-the-books wages.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.