Wednesday, December 6, 2017

Example of a "Major Fraud"

The "Major Fraud Act of 1988" (MFA) was passed during the Reagan administration to strengthen previous fraud legislation. Among the changes, the MFA increased the maximum penalties for fraud and added protection for employees who assist in prosecuting fraud. The Act made it illegal to defraud the U.S. Government or to obtain money or property by means of a false pretense or representation. The Law authorizes fines up to $10 million in cases involving multiple violations and a maximum of $5 million for individual counts.

The Justice Department just announced the conviction of a Government contractor charged with fraud under the Major Fraud Act of 1988. According to the press release, Mr Collins executed a scheme to defraud the United states on a $1.5 million contract to replace the roof and air conditioning system at the Federal Courthouse in Jackson, TN.

As part of the scheme, Mr. Collins caused the roofing subcontractor, a small Memphis-area business, to perform work for which he was never fully paid. Mr. Collins however filed false and fraudulent certifications with the U.S. Government indicating that he, in fact, had the paid the subcontractor. The value of the funds obtained from this scheme was more than $580 thousand, a third of the contract price.

Although the Justice Department didn't indicate how the major fraud was uncovered, it seems very likely that the unpaid subcontractor complained to someone that he hadn't gotten paid for his services. There are several avenues available for subcontractors to make such complaints. And, its a very easy crime for Federal investigators to prove. Its fact specific - either the prime paid or it didn't.

One interesting aspect to this case is that it went to trial but after two days, Mr. Collins entered a guilty plea. The evidence presented must have been overwhelming.

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