Construction fraud is real! Not only have homeowners become victims, but established construction companies as well. While we need to be aware of back-office embezzlement which is preventable through proper oversight, here are a few examples of other potential construction fraud and construction scams provided by LegalMatch.
False invoicing: A contractor may submit false invoices for work that was not done or materials that were not delivered by creating fake documents, inflating costs, or billing for work that was not authorized.
Kickbacks: A contractor or subcontractor may receive kickbacks from suppliers or other parties for using their services, resulting in higher costs for the project and lower quality materials or services.
Bid-rigging: Contractors may collude to rig the bidding process by agreeing to submit higher bids or by excluding certain bidders from the process, resulting in inflated prices and fewer choices for the project owner.
Material substitution: Contractors may use substandard or cheaper materials than what was specified in the contract to save costs, which can compromise the quality of the project and create safety hazards.
False claims: Contractors may make false claims about their qualifications or experience to win contracts, resulting in incompetent or unqualified contractors being awarded projects.
Misleading contracts: The contractor may provide an in-person walk-through and discuss what needs to be fixed. They will then present a contract to the client, who signs it assuming it matches their physical description of the necessary repairs, but it is different.
Endless work: A contractor may begin working on the agreed-upon repairs but will keep finding additional issues and claiming that the current project cannot be finished without fixing the unforeseen issue that was found first. Don't accept this as the norm and be watchful of those contractors who constantly submit change orders.
Jerry of Ipsen Due Diligence assists both trade contractors and GCs in the prevention and investigation of suspicious activity relating to financial fraud. In many cases, onsite visits may be enough to deter fraudulent activity such as embezzlement or theft.
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