Dive Brief:
- Gerard Roy, a Minnesota contractor, is under federal investigation for wire fraud, bankruptcy fraud, tax fraud and money laundering after pleading guilty in state court to two counts of forging construction bonds so that his company, RSI Associates, could win contracts for state and local government projects.
- Officials claim that Roy, who lost his residential contractor’s license in 2012, provided forged bonds on at least five projects, some now left unfinished, with subcontractors and suppliers owed at least $200,000.
- State investigators were initially tipped off to Roy’s scheme when a subcontractor made a claim against one of the bonds for nonpayment. The case has broadened to now involve the Minnesota Department of Commerce, the Internal Revenue Service and U.S. Postal Service.
Dive Insight:
Construction bonds — also known as payment and performance bonds — are an additional insurance that contractors provide to the owner as a condition of being awarded a project, usually public. The ability to provide a construction bond is generally accepted as testament to a contractor’s financial stability and quality of work.
Roy admitted that he could not qualify for the bonds because of his criminal record and said he fabricated the bonds, ranging from approximately $103,000 to nearly $860,000 each, in order to win contracts and provide work for people he met in prison.
Roy provided forged bond documents on a riverfront revitalization project in Hastings, MN, and City Administrator Melanie Mesko Lee said nothing about them aroused suspicion. "They had the raised seal, they had the notary — on its surface, it all looked just what we’d expect a legitimate bond document to look like."
Lee said that as a result of the possible fraud, the city would now verify all bonds. "That will just become part of the checklist going forward," she said. "And I imagine others will learn from our experience and perhaps do that as well."
