Construction Company Federal Charges.

If your company or a company employee is being investigated for allegations of construction fraud, you need to get a sense of the facts and the potential implications of the federal government’s investigation. You should also get clear, straightforward answers to any questions you have. You need to speak with a defense lawyer who knows how to work with the U.S. Attorney’s Office and other federal authorities. You need a lawyer who can represent you effectively and negotiate to protect you (or your company) and your interests.

Do You Qualify as a “Participant” under the U.S. Department of Justice’s Criminal Division?

Federal prosecutors may investigate construction companies, executives, employees, subcontractors, and other individuals or entities that participated in a business venture that is the subject of an investigation. Federal prosecutors and agents do not limit themselves to investigating those who personally made contracting and billing decisions.

Does Your Construction Project Qualify for Federal Jurisdiction?

Local construction projects can implicate federal law. The federal government is a major consumer of construction services and supplies. A project does not need to span state lines to attract federal attention or fall under the federal government’s jurisdiction. Many local construction projects use federal funding, and if the project involves a federal program, then federal jurisdiction may apply.

Does Your Company Face Exposure to Federal “Construction Fraud” Charges?

“Construction fraud” is not a standalone federal offense. However, federal prosecutors use a wide array of statutes to punish construction fraud schemes, and the government is not limited to charging these offenses against construction companies. The more a company relies on federal funding, the greater its exposure to construction fraud charges. 18 U.S.C. § 1031 covers major fraud and criminal attempts to commit major fraud involving the government’s contractual and subcontracting programs. This statute carries up to a 10-year sentence for a conviction and fines up to $1 million.

When Do Inflated Invoices Become Wire Fraud, False Claims, or Mere Billing Errors?

Common allegations of fraud in construction include:

• Labor Hours Billed That Were Never Worked
• Invoices for Material Amounts Never Received or Used
• Expenses Billed That Were Not Actually Incurred
• Substandard Materials Used While Billing for Higher-Quality or More Expensive Products
• Billing for Debris Removal That Was Never Performed
• Billing for Additional Work Not Specifically Requested or Authorized by the Client

When Does It Count as Wire Fraud?

The federal statute that covers wire fraud is 18 U.S.C. § 1343. Under the statute, wire fraud occurs when anyone (1) develops a scheme to defraud, (2) uses an interstate wire in furtherance of that scheme, and (3) does so with the intent to defraud.

As a result, prosecutors can use the wire fraud statute to punish various forms of suspected construction fraud. Using interstate wires is easy to satisfy for all types of digital and email-based communication that are now ubiquitous in business relationships. However, the prosecution must establish the defendant’s intent to defraud and the existence of a fraudulent scheme.

If your construction company is facing allegations of wire fraud, your defense attorneys will scrutinize the government’s evidence of “intent.” If the fraud was a mere mistake, it is not wire fraud.

However, a mistake on an invoice or within a billing process can become the evidence that federal prosecutors need to satisfy the statute’s requirements.

Federal prosecutors and agents typically rely on statements made by whistleblowers. Often, one of these statements is a denial of the company owner’s or executives’ knowledge of the alleged fraud.

However, the statement of the individual who is coming forward with information can be influential in the prosecution’s effort to build a case.

When Does it Count as a Violation of the False Claims Act?

The False Claims Act, 31 U.S.C. § 3729, allows for liability against a person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;” The False Claims Act is a statute that imposes civil liability rather than criminal liability.

However, as we discuss in a separate section of this page, the civil case can trigger separate and additional criminal investigations.

When is a Construction Billing Error a Mistake Rather Than a Fraudulent Scheme?

A construction billing mistake does not by itself establish a fraudulent scheme. It does not meet the statutory requirements for charges like wire fraud or a violation of the False Claims Act. Even in cases where federal prosecutors or agents are trying to substantiate charges under statutes with a federal crime classification, you should not assume that a billing mistake constitutes fraud.

Most first calls to Spodek Law Group are not from the person under investigation. They come from a mother, a husband, a sister, holding a phone and frightened.

How Can One Project Produce Criminal Charges, False Claims Act Damages, and Procurement Exclusion?

The False Claims Act is a statute providing for civil remedies. Under the Act, a civil court can impose treble damages plus a civil penalty for each false claim; a successful whistleblower may receive a share of the recovery. Civil suits under the False Claims Act can proceed in tandem with criminal investigations and prosecutions.

So, a single federal investigation can create criminal, civil, administrative, financial, and reputational exposure. It can also create the prospect of exclusion from future government contracting opportunities, affecting the company’s long-term viability.

If your company is being investigated, your defense counsel should look beyond criminal punishment. You should understand your company’s contractual, bidding, and procurement-related consequences in addition to any other potential outcomes of the investigation.

Can a Construction Company and Its Executives Face Charges for the Same Conduct?

If the U.S. Attorney’s Office or other federal authority pursues charges of construction fraud against a company’s owners or executives, the company itself can face charges for the same conduct.

If prosecutors decide to seek criminal and civil penalties, they can pursue charges based on the company’s statutory violations, civil liability, and possible statutory penalties.

Each of these will raise unique issues. While they may rely on a single investigation or set of documents, the scope of the company’s potential liability under the False Claims Act will vary by case. The same will be true for the company’s potential criminal punishment.

Each scenario calls for a custom approach. To work this approach out, construction companies will need a defense lawyer who can advise on construction-related civil, criminal, administrative, and procurement matters.

What Does This Mean for Company Executives and Employees ?

Company executives and employees can face criminal, civil, and other types of consequences for their role in business dealings with the federal government, and with private clients as well. The same types of exposure and potential consequences described above can also apply to owners, executives, and employees of construction companies.

What Should a Construction Company Preserve and Challenge After a Subpoena, Target Letter, or Search?

Federal criminal investigations may not lead to formal charges for several months or years. During this period, government agents and investigators may continue to seek information, which may present additional challenges for construction companies. If you are the subject of a government-contract investigation, it is critical to contact a federal criminal defense lawyer who knows how to protect your rights and preserve your interests.

In many cases, the Department of Justice (DOJ), FBI, the Federal Bureau of Investigation, agency inspectors general, federal agents, the U.S. Attorney’s Office, and procurement officials are all involved in the investigations. Government agents may request interviews, financial records, email, testimony, and electronic devices, or conduct unauthorized computer or device searches.

Federal agents may execute search warrants, seize documents and computers, or request access to third-party records. To maintain compliance, construction company executives and employees must avoid any actions or omissions that could be perceived as an attempt to delete, destroy, alter, hide, or otherwise obstruct the federal authorities’ investigation of their alleged crimes.

In some circumstances, preserving and challenging evidence could be vital. It could lead to a potential for a defense that lowers or eliminates criminal liability. If you need to defend your business or yourself against a government-contract fraud allegation, your lawyer should make this high priority.

Interviews with former employees, review of financial records and emails, review of computer and device logs, interviewing third parties, and other techniques can protect the owners and the company itself. Your lawyer will seek to avoid criminal charges at all costs, while keeping civil and administrative risks in mind as well.

Construction companies involved in federal government contract fraud cases will often seek to avoid criminal charges. This is because any admission of criminal wrongdoing will increase the risk of being excluded from future federal contracting opportunities as well. Companies must be prepared to fight these investigations aggressively.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 888 348 8028 to speak with our team.