The DA & Fraudulent Contractors

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Orange County DA

Donde McCament is a deputy district attorney for Southern California’s Orange County. Currently, she represents the DA’s specialized Public Works Unit dealing with prevailing wage violations and the unlawful disregard for laws governing public works. Recently, Ms. McCament spoke with Sean Reynolds of Energy Independence Magazine.”

In our three-part series on contractor fraud, we have learned prevailing wage is only the tip of the iceberg regarding contractor fraud and the practices of unethical and illegal contractors.

Deputy District Attorney Donde McCament knows prevailing wage violations on public works projects are usually just the first signs of a troubling issue. Her investigators have uncovered insurance fraud, tax evasion, EDD fraud and even “out and out bribery” for getting contracts. “We’ve seen the schemes run the gambit,” she says. “Although we’ve always seen a component of the contractors cheating workers, not paying them prevailing wage and pocketing the money, that doesn’t seem to be exclusive.” Some of the ways deadbeat contractors defraud workers and cut corners on projects are hard to believe.

Prevailing wage is set by the Department of Industrial Relations and affects most public works projects. McCament says prevailing wage is basically a minimum wage for qualified skills and ensures that public funds are used fairly attracting the “best workers possible.” Contractors trying to cheat regulations are not only hurting the worker, but place the project in jeopardy and leave the community with less than they paid for. McCament says the schemes can get “quite sophisticated”. On one investigation they found a contractor paying workers prevailing wage, keeping payroll records in accordance with the law, but then would require them to deposit a portion of their check back into the contractor’s account and bring the deposit slip back in order to be allowed to work the next day. Another outlandish tactic prevalent in the fraud game is to have workers sign a loan document so, if a kickback is detected, the contractor can claim the worker was just paying back a loan. Unfortunately, this type of fraud is occurring on a regular basis.

Tips on illegal contractors come from many sources including the awarding agency, a worker or employee, another contractor, or even specialized investigative agencies. The Center for Contract Compliance (CCC), an organization EIM interviewed on a previous show, is a non-profit group that pours resources and man hours into aiding the unit with investigations and prosecutions. After deciding to investigate, the district attorney’s unit will begin ordering documents for review, official records such as articles of incorporation, insurance documents, certified payrolls, bid information and inspector logs. The unit has their own investigators, McCament says. “We build the investigation from the ground up.”

Because fraud is prevalent, due diligence is important, and an awarding agency has simple tools at its disposal that should be used. McCament recommends the State Contactors Licensing Board because they have a “wealth of information.” The Department of Industrial Relations web page now has a registry to aid in public works, awarding agencies that certify contractors bidding public works projects. “It’s as simple in some ways,” she adds, “as checking with the insurance company. We’ve had cases where the contractor has given the awarding agency a piece of paper showing they have workers’ compensation insurance and it’s been forged.” She says primary follow-ups; a phone call, at least, will provide some assurance. Because public works projects are vital to the community, the committee responsible for awarding these contracts bears an amount of ethical, if not legal, responsibility. McCament recalls an elementary school project involving an expanse of wall built by unskilled workers under a fraudulent contractor. The wall was soon demolished because it was substandard and the cost far outweighed the initial bid. The amount of the bids these contractors are making simply cannot cover the cost of the work, she says, and the project and community suffer because of it.

As for workers wanting to make sure they are working for a legitimate contractor there are, again, simple actions that will help protect them. “Document, document, document,” McCament stresses. Keep a calendar of where you work, hours worked and work performed. She says use a cell phone to capture questionable deposit slips and the number of employees on the job. Keep pay stubs and jot down daily schedules. If a contractor is found guilty and liable for fraudulent practices, these notes and photos will be valuable.

“We’re the first district attorney’s office to form a public works unit to specifically combat the fraud that seems to be very prevalent in a public works area,” McCament says. Along with public agencies like the Department of Industrial Relations and watchdog organizations like the CCC, the Orange County District Attorney’s office is providing a valuable service to workers, public projects and the community they serve.

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