Dive Brief:
- This Pittsburgh City Council voted last week to establish the Joint Task Force on Construction Industry Fraud, which will work to identify and combat “unfair trade practices, including tax fraud” among the city’s construction businesses.
- The resolution takes particular aim at construction companies that commit wage violations that result in underpayment or nonpayment of taxes, as well as too-low pay rates that prevent some workers from being able to support their families. The task force will not focus on the practice of hiring undocumented workers, however.
- The group will be made up of representatives from the city council; mayor’s office; Pittsburgh Regional Building and Construction Trades Council; Allegheny County District Attorney’s Office; Pennsylvania Department of Labor and Industry; and the city's Department of Permits, Licenses and Inspections.
Dive Insight:
According to the resolution, construction is the fastest-growing industry in Pittsburgh. It states that fraud-related violations of city ordinances not only threaten the health and safety of residents and workers but “threaten the viability” of businesses that operate legitimately. The group will review existing industry practices in Pittsburgh and then make code and policy recommendations to the council and mayor.
In the most recent global survey commissioned by corporate investigation and risk consulting firm Kroll, fraud incidents in the construction, engineering and infrastructure sectors increased the most year over year out of all sectors in the report, with 83% of industry respondents indicating that they had experienced some fraud-related incident. The most common types of fraud reported were information theft, loss or attack (33% of respondents); followed by regulatory or compliance breaches (30%); and vendor, supplier or procurement fraud (30%).
The most common perpetrators of fraud named by respondents were junior employees (47%); vendors and suppliers (38%); and senior or middle management employees (38%). Respondents felt most vulnerable to intellectual property theft, piracy and counterfeiting. In addition, fraud was most commonly revealed by a company insider, or "whistleblower,” the report found.
Manhattan's Construction Fraud Task Force, spearheaded by Manhattan District Attorney Cyrus Vance Jr., casts a wider net than Pittsburgh’s. Formed after the jobsite death of worker Carlos Moncayo, who died in a trench collapse, investigators pursue a wide variety of violations, including those related to safety, wage theft and public and private corruption. According to Vance’s office, wage theft alone accounts for $1 billion of lost earnings in New York State each year.
Most recently, Vance’s office announced the indictments of former Turner Construction Co. and Bloomberg LP executives on charges of conspiracy, bribery and bid-rigging during a renovation of Bloomberg’s New York City offices. The former project executives, as well as some subcontractors and vendors, are accused of trying to steal approximately $15 million from Bloomberg during the construction process via inflated subcontractor bids and fake work and change orders.
