Former construction exec sentenced to 38-month prison term on fraud charges

Dive Brief:

Brian Paluch, former CFO of St. Louis-based PARIC Construction, has been sentenced to 38 months in prison, fined $15,000 and ordered to pay $393,659 in restitution after his August conviction on federal mail fraud charges, KMOV reported.
According to prosecutors, from 2010 to 2014, Paluch charged personal expenses on a company-issued American Express card, then altered and forged an executive’s authorization signature on financial summaries as part of his efforts to hide the charges.
Paluch reportedly used the card to pay for personal travel, dining, spa visits, electronics and gifts. Paluch was found guilty in August of stealing nearly $150,000 from PARIC over the course of four years.

Dive Insight:

PARIC performs taxpayer-funded work, but the company said in an earlier statement, "It is important to note that no customer or project accounts were impacted in any way by these issues. We took the results of our internal audit to the appropriate law enforcement authorities. They initiated an investigation, and PARIC provided them with access to information throughout that process. That investigation has led to the indictment of Mr. Paluch."

According to the 2015 Kroll Global Fraud Report, 75% of construction, engineering and infrastructure companies have experienced a fraud incident in the past year, and, overall the construction industry has the second highest fraud rate across all industries.

Recent news stories coincide with Kroll’s findings, as there has been a wide variety of fraudulent activity in the past several months, from simple scams to elaborate schemes. Authorities in Georgia recently arrested a roofing contractor for allegedly damaging a roof himself so that he could repair the work and bill the homeowner’s insurance company. On the other end of the spectrum, three Pennsylvania steel company executives pleaded guilty to DBE (disadvantaged business enterprise) fraud after bilking state and local governments out of $19 million in infrastructure contracts over a period of almost 20 years.

Although penalties for contractors who commit fraud have been getting tougher, New York City has taken it to a new level and created a construction fraud task force to root out fraudulent behavior among New York’s construction industry.