On Guard
FTI Journal
April 1, 2010
Daniel J. Castleman
Managing Director
When governments pump money into stimulus programs, fraud inevitably follows. Here is how to fight it.
With large amounts of stimulus money sloshing around national, regional and local authorities, fraud attempts are siphoning off a significant percentage of contract value. FTI expert Dan Castleman says that by dedicating a tiny proportion of stimulus funds to fraud prevention, including the use of private-sector expertise, organizations can reduce fraud and ensure that the bulk of spending ends up where it can do the most good.
Fraud prevention can be funded with just 2% of the stimulus money dispensed.
Around the world, governments are spending huge sums on stimulus plans in hopes of creating jobs, shoring up banks and boosting economic growth. Some of these programs are working better than others, but one thing is for certain: where there are government handouts, fraud, waste and abuse are rarely far behind.
As the head of investigations at the Manhattan District Attorney’s office for 15 years, my office brought case after case against companies and individuals seeking kickbacks, rigging bids, issuing false invoices and engaging in outright theft. This took place across a wide scope of industries and all manner of public projects. The theft routinely amounted to a tenth of the value of contracts. In fact, one group of insurance fraudsters went as far as to brand themselves the “Ten Percenters.”
With the equivalent of hundreds of billions of dollars being pumped into economies via a tangle of national, regional and local authorities, only the least ambitious thieves are not actively engaged in gaming stimulus systems.