The construction industry has suffered mightily as a result of the global recession. Private funding has dried up and large commercial projects are way down, so contractors are scrambling to compete for smaller jobs, subcontracts and consulting work. If history is a guide, shady dealings will ensue.
"During the downturn in the real estate market between 1989 and 1993, there was a tremendous increase in construction fraud across the board," says Blake Coppotelli, head of the Real Estate Integrity Services practice at Kroll, a risk consultancy. "There was an increase in corruption cases, there was an increase in kickbacks, in bid rigging, fraud and cost-abuse cases, labor schemes, labor racketeering, organized crime--all as a result of the downturn."
The bidding process is always the nexus of fraud in the construction industry, but with stimulus-related projects it's even worse because the money is preceding the rules.