U. S. Department of Transportation Office of Inspector General

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U. S. Department of
Transportation Office of Inspector
General FRAUD AWARENESS BRIEFING
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PURPOSE OF BRIEFING

• Discuss the OIG Mission and Role in combating
  Fraud, Waste and Abuse
• DOT OIG Stimulus Oversight
• OIG Investigative Responsibilities
• Overview of Common Fraud Offenses and Indicators
• Identify Ways You Can Report Suspected Fraud

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US DOT-OIG OVERVIEW

• Created by the Inspector General Act of 1978
• Independently Conduct Audits, Investigations and
  Reviews
• Improve Department Programs and Operations
• Promote Economy, Efficiency and Effectiveness
• Review and Make Recommendations Regarding
  Existing and Proposed Transportation Legislation
  and Regulations
• Only DOT Agency Authorized to Conduct Fraud
  Investigations

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ROLE OF DOT-OIG SPECIAL AGENT

• Conduct independent investigations based on
  allegations received through various means
• Hotline telephone, e-mail and written
  correspondence
• Letters to Congress
• Meeting with DOT employeesYOU!
• Must have some federal connection, i.e., funding
  or regulatory authority
• Gather evidence of criminal or civil fraud
• Work with DOT Modes, FBI, State DOT
  Investigators, Prosecutors

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DOT OIG STIMULUS OVERSIGHT

• Phase I Outreach
• Communicate, Educate and Share Information with
  federal, state and local counterparts.
• Phase II Proactive Investigative Initiatives
• Monitor distribution of funds.
• Recruit and develop Confidential Sources.
• Work with LE counterparts for the creation of
  regional stimulus task forces.
• Phase III Investigative Work
• Conduct stimulus related investigations developed
  from Phases I and II.

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US DOT/OIG Investigation Offices

• Regional Field Offices NYC, Cambridge, DC,
  Atlanta, Ft. Worth, Chicago, San Francisco
• Sub-Offices Trenton, King of Prussia, Baltimore,
  Miami, Norfolk, Charlotte, Tampa, Denver, Los
  Angeles, San Diego, Seattle

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OIG Criminal Investigative Regions
Alaska
Maine
Vermont
North Dakota
Minnesota
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Montana
Washington
NH
Mass
2
South Dakota
Wisconsin
5
Rhode Island
Idaho
Oregon
New York
Connecticut
9
Wyoming
Michigan
Nebraska
Iowa
Pennsylvania
New Jersey
Ohio
Indiana
Illinois
Nevada
Utah
Kansas
Maryland
Delaware
Colorado
Missouri
3
West Virginia
Kentucky
Virginia
California
Oklahoma
Arkansas
Arizona
New Mexico
Tennessee
North Carolina
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4
Washington, DC
South Carolina
Hawaii
Mississippi
Texas
Alabama
Georgia
Louisiana
OIG Regional Office
Florida
(Includes Puerto Rico, Virgin Islands)
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GO MOUNTAINEERS!!
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BOOMER SOONER
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Contract/Grant Fraud

• Contract Fraud Initiative Is Our Number One
  Priority
• Statistics Since FY-2007 FY-2008
• - 271 Indictments
• - 259 Convictions
• - 713 Million in Fines Restitution, etc.
• - 756 Years in Jail, Probation, etc.

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The Process Referral-Investigation- Prosecution
OIG - Investigations
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Characteristics of an Administrative/Civil Action

• Non-compliance with DOT Regulations
• Inadvertent/Not deliberate
• Proved by a Preponderance of Evidence
• Sanctions can include Orders to Take Corrective
  Action, Repay funds, Withhold funds, Return funds

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Characteristics of a Criminal Action

• Violation of a Penal Law (Title 18 USC), CFR
• Actions are Intentional/Deliberate
• Requires Proof Beyond a Reasonable Doubt
• Punishable by a Term of Imprisonment, Payment of
  Fines, and Restitution

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FRAUD
A Generic Term That Embraces All the Ways One
Person Can Falsely Represent Something to Another
in Order to Induce That Person to Surrender
Something of Value.
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MINNESOTA BRIDGE COLLAPSE
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FALSE STATEMENTS

• Any Statement within the Jurisdiction of the
  Government which Contains Any False, Fictitious,
  or Fraudulent Representation

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FALSE CLAIMS

• Make Any False, Fictitious, or Fraudulent Claim
  Against the United States
• Typically in the Form of Invoices or Requests for
  Reimbursement

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COMMON FRAUD SCHEMES

• Bid Rigging and Collusion
• Materials Overcharging
• Time Overcharging
• Product Substitution
• Minority-Owned Business Fraud
• Quality-Control Testing Fraud
• Kickbacks
• Bribery

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BID RIGGING AND COLLUSION

• Collusive Bidding and Price Fixing by Companies
• Agreements between Competitors which Limit
  Competition
• Same Winners, Losers, and Bidders on Almost Every
  Project
• Bid Suppression Companies Agree that Other
  Companies Will Not Bid
• Bid Rotation Companies Agree that They Will Each
  Take Turns Getting Contracts Adjusting Their
  Bids Accordingly

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INDICATORS OF BID RIGGING AND COLLUSION

• Contractors bids are very close in dollar value
• Different contractors make identical errors in
  contract bids
• Unsuccessful bidders submit bid protests advising
  of collusive practices
• Contractors bids are close to or slightly higher
  than government estimate

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MATERIALS OVERCHARGING

• Definition Contractor misrepresents how much
  construction material was used on the job and
  then charges for more material than was used to
  increase job profit
• Example Erosion-control contractor submitted
  grass seed tickets plus fertilizer and mulch
  weight slips in excess of materials applied on
  the job to cause the State DOT to make excessive
  payments for work performed.

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INDICATORS OF MATERIALS OVERCHARGING

• Contractor regularly creates opportunities to
  load job materials into equipment away from job
  inspectors
• Truck drivers state that handling characteristics
  indicate their trucks are under weight
• Use of photocopies, rather than originals, when
  providing quantity documentation
• Irregularities in color or content of weight
  slips or other contractor documents used to
  calculate pay quantities

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TIME OVERCHARGING

• Definition Consultant misrepresents how many
  hours employees work on jobs in order to charge
  for more work hours or charges a higher overhead
  rate to increase job profit
• Example An engineering consultant regularly
  altered his employees time cards to add hours to
  cost-plus jobs and add administrative hours to
  increase the companys overhead rate charged on
  job invoices.

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INDICATORS OF TIME OVERCHARGING

• Unauthorized alterations to time cards and other
  source documents
• Time cards filled out by supervisors, not
  employees
• Photocopies of time cards used, rather than
  originals
• Inconsistencies between consultants labor
  distribution records and employee time cards

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PRODUCT SUBSTITUTION

• Definition Contractor misrepresents what product
  was used in order to reduce costs of construction
  materials
• Example Contractor caused false statementsfalse
  stenciling on exterior of coated steel pipe and
  false certificates of compliance for this
  unapproved pipeto conceal the use of a cheaper,
  substitute pipe installed in highway drainage
  culverts.

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PRODUCT SUBSTITUTION

• Goods and Services Must Conform to the Quality
  and Quantity Required by the Contract

But.. You receive this
Contract calls for this.
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INDICATORS OF PRODUCT SUBSTITUTION

• Contractor restricts or avoids inspection of
  goods or services upon delivery
• Contractor refuses to provide supporting
  documentation regarding production or manufacture
• Use of photocopies, rather than originals, when
  providing necessary certifications
• Irregularities in signatures, dates, or
  quantities on delivery documents

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MINORITY-OWNED BUSINESS FRAUD

• Definition Contractor misrepresents who
  performed contract work to limit costs while
  appearing to be in compliance with contract
  requirement to use minority/women-owned
  businesses
• Example Prime contractor and minority-owned
  subcontractor submitted false payroll records and
  prepared false job-cost records to indicate that
  a minority-owned business performed specialty
  painting of highway structures, when in fact a
  majority-owned subcontractor controlled and
  supervised the painting work.

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INDICATORS OFMINORITY-OWNED BUSINESS FRAUD

• Minority owner lacks background, expertise, or
  equipment to perform subcontract work
• Employees move back and forth between prime
  contractor and minority-owned business payrolls
• Business names on equipment and vehicles are
  painted over or covered with magnetic signs
• Orders and payment for necessary supplies are
  made by individuals not employed by
  minority-owned business

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QUALITY-CONTROL TESTING FRAUD

• Definition Contractor misrepresents QC test
  results to falsely earn contract incentives or
  avoid contract disincentives or to avoid
  production shutdown or required removal of
  deficient material in order to limit costs or
  increase profits
• Example After distracting the State inspector,
  an asphalt-paving crew foreman discarded road
  cores from random QC locations designated by the
  inspector and replaced them with test cores
  known to qualify for density-incentive payments
  under the contract

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INDICATORS OFQUALITY-CONTROL TESTING FRAUD

• Contractor employees regularly contrive to take
  or label QC samples away from inspectors
  oversight
• Contractor insists on transporting QC samples
  from the construction site to the lab
• Contractor does not maintain QC samples for later
  Quality-Assurance (QA) testing
• Contractor challenges results or attempts to
  intimidate QA inspectors obtaining conflicting
  results

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BRIBERY

• When a government employee agrees to be
  influenced in the performance of their official
  duties in exchange for something of value
• When someone offers a public official something
  of value in exchange to influence an official act
  

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INDICATORS OFBRIBERY

• Other government inspectors at the job site
  notice a pattern of preferential contractor
  treatment
• Government official has a lifestyle inconsistent
  with his or her salary
• Contract change orders lack sufficient
  justification
• Inspectors socialize or have business
  relationships with contractors or their families

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CONFLICT OF INTEREST

• Occurs When Employees Take Actions With
  Businesses in Which They Have Some Interest

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WHAT TO DO IF YOU SUSPECT FRAUD?

• Gather as much information as possible
• Who is involved?
• What activity has occurred?
• Secure and make copies of all relevant documents
• Do not alert persons to your suspicions
• Contact the OIG

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REPORT FRAUD, WASTE AND ABUSE!!!

• Call the OIG Hotline
  1-800-424-9071
• E-mail Hotline_at_oig.dot.gov
• You Can Remain Confidential!
• www.oig.dot.gov

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QUESTIONS AND COMMENTS
Presented By Bruce A. Quintero, Senior Special
Agent U.S. Department of Transportation, Office
of Inspector General Investigation Washington
DC Regional Field Office 409 3rd St. SW, Suite
301, Washington, DC 20024 Telephone (202)
260-8564