Reports of Fraud and Corruption in the Construction Industry

A prominent construction firm that specializes in interior construction in large commercial spaces has recently pleaded guilty to corruption charges arising from a scheme to submit subcontractors’ inflated purchase orders to its clients. According to a report by the New York Times, the company, Structure Tone, agreed to forfeit $55 million as part of its guilty plea in the State Supreme Court in Manhattan. The report quotes the Manhattan district attorney, Cyrus R. Vance Jr. saying that the construction industry “should be on alert” as they are “rooting out fraud” and “making sure that honest businesses can compete fairly.”

It is well known that the high level of complexity involved in the construction process provides opportunities to unscrupulous construction companies to take advantage of customers and other honest members of the trade. The vast majority of construction companies operate honestly and ethically, but those few who don’t damage the reputation of the entire industry.

Construction companies of all sizes must be mindful that unethical and illegal actions by employees could implicate the entire company. As is evident from the Structure Tone criminal case, authorities are stepping up their enforcement efforts. In order to minimize their risks, general contractors and subcontractors should develop clear codes of conduct, strengthen their compliance and oversight efforts, and be mindful and vigilant about whom they do business with.

For more information on this or any other business law issue, please contact Guy Milhalter and the attorneys of Anderson Jones by (919) 277-2541 or by email.