SC contractors indicted in $350M DBE fraud case

By Kim Slowey | August 8, 2016

Dive Brief:

  • South Carolina federal prosecutors have indicted a group of seven construction executives and associates for allegedly setting up and operating a network of sham disadvantaged and minority businesses in order to win approximately $350 million in government contracts in and out of the state since 2002, according to The State.
  • In addition to creating their own shell companies, authorities alleged that the group also enlisted existing companies owned by women, minorities, veterans and disabled veterans to assist in perpetrating their fraud.
  • If convicted, the individuals and two companies – financing firm Automatic Cash and construction consultant EEC – face sentences ranging from five to 20 years in prison, as well as fines of $250,000 to $10 million.


Dive Insight:

Most publicly funded projects, particularly high-dollar ones, include some level of minority participation requirements, and because many owners and general contractors maintain there is a shortage of qualified minority contractors, some firms see this as an opportunity to gain entry into a potentially lucrative niche, even if they’re not legally entitled.

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BREAKING: McCrory issues executive order on worker misclassification (NC)

Posted by : Rob Schofield
Friday, December 18, 2015


Gov. McCrory took a step in the right direction this afternoon on the issue of employee misclassification – the persistent problem that plagues thousands of North Carolina businesses wherein workers are improperly treated as contractors when they ought to be employees.  As we have reported on multiple occasions this year (and as Raleigh’s News & Observer documented a while back in its special series “Contract to Cheat,”) this is a huge problem that harms workers and honest businesses and robs the state of tax revenue. Doug Burton, a Triangle area contractor put it this way:

“Treating employees as independent contractors when in fact they are regular employees is a fraudulent business practice that has become an epidemic. Some call this ‘misclassification,’ but it is in fact fraud that lets these cheating businesses – many from out of state – off the hook for basic protections, including minimum wage, overtime pay, workers’ compensation, health and safety protections, unemployment insurance, federal and state tax withholding, social security withholdings and matching and more.

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Report: Construction sector faces 2nd-highest fraud rate across all industries

By Kim Slowey | November 24, 2015



Dive Brief:

  • According to the 2015 Kroll Global Fraud Report, 75% of construction, engineering and infrastructure companies have experienced a fraud incident in the past year. The most common types of fraud experienced by respondents in the construction sector were theft of physical assets or stock (36%) and vendor, supplier or procurement fraud (24%). In 32% of surveyed firms, a senior executive or middle manager was involved in a fraud against the company.
  • The construction fraud rates were second only to the retail sector. Construction also had the highest percentage of regulatory or compliance breach fraud, 18%, of any sector. Exposure to fraud has increased for 92% of construction industry respondents in the last year – the highest increase to exposure for any sector.
  • Despite problems caused by high staff turnover, the consulting firm found that only 30% of construction companies are planning to invest in background screening in the coming year, and only 25% plan to spend on management controls – less than the survey average.


Dive Insight:

“While technology has enabled new ways to perpetrate fraud, our daily work with clients confirms what the report also reveals – that old fashioned theft, bribery and kickbacks are still amazingly effective and pervasive,” Daniel Karson, chairman of Kroll, said in a release. “Human nature being what it is, fraud will always be with us, whether it occurs in a company’s corner office or a world away in its supply chain. However, there are numerous strategies, resources and best practices available to companies that can go a long way toward helping them protect themselves and their investments.”

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Iowa [Legislators] say wage theft bill would curtail fraud

Posted: Wednesday, January 28, 2015 7:57 am

DES MOINES (AP) – A bill introduced in the Senate would curtail wage theft in Iowa by requiring businesses to be more direct with workers about employment terms, Democrats said Tuesday.

Sen. Bill Dotzler, a Democrat from Waterloo, is co-sponsor of a measure that would require employers to share a written record of employment terms with an employee at the start of a job. Such an agreement would help the worker if there’s suspicion of wage theft in the future and the worker needs to file a formal complaint, Dotzler said.

“This legislation is common sense,” Dotzler said.

The bill would also define penalty terms and expand protection for whistleblowers. It’s identical to a bill that was introduced last session, according to Dotzler. That bill didn’t get very far, but he said he is hopeful a new legislature would seriously consider the latest measure.

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Hillsboro businessman convicted of tax evasion

By Brent Weisberg
Published: September 30, 2014, 8:05 am

PORTLAND, Ore. (KOIN 6) – A 53-year-old man was ordered by a federal judge to pay the Internal Revenue Service (IRS) close to $500,000 and spend a year and a half in federal prison after pleading guilty to federal tax evasion.

Stephen Gregory Nagy was the former president of Hillsboro-based S&S Drywall Assemblies. According to the United States Attorney’s Office, Nagy’s company produced drywall services from January 2005 through September 2011.

The IRS assessed the company $481,519 in federal employment taxes, penalties and interest for between June 2009 and September 2010. Nagy met with the IRS and committed to a plan to pay the past due payroll taxes for his company, but investigators said he decided not to comply with the payment play and engaged “in a variety of interrelated fraudulent schemes to evade the payment of the delinquent payroll taxes.”

Investigators learned that he started conducting extensive business transactions in order to hide funds from the IRS. He obtained cash by illegally hiring undocumented workers to work on prevailing wage jobs, paying them a small portion of the prevailing hourly rate and demanding that they kick back the largest part of their wages to him in cash, court documents state. Nagy failed to report the case to the IRS.

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