Global Fraud Focus: Examining cross-border issues



You never know when a fraud story will take on historical significance. Recently, board members of the Capital District ACFE Chapter were discussing a proposed seminar for its members on construction fraud. Perhaps not an exciting topic to some, but board member Jayne Colangelo, CFE, made the subject matter historical.



Jayne told us that in one of the fraud training sessions she took years ago, the speaker asked if they knew where a letter's closing word, "Sincerely," originated. She said that no one in the session knew the answer. The speaker, Jayne said, told them that construction crews in ancient Rome used marble to build or repair structures. When the builders quarried the marble, they found they could make more profit by using the top layers because it was easier to quarry. However, that marble was pitted with holes, which made it substandard and less strong than the deeper stone. They would fill the holes and cracks with a kind of mud putty or wax that would make the marble look solid but not strengthen it.



Eventually, buildings began collapsing, which killed people and cost wealthy people large sums to rebuild or repair, the speaker said. Some of these structures were government buildings. So, the emperor and the government passed a law that stipulated each Roman builder had to list on his invoices the materials he used and his marble sources. At the end of each list, he had to write the Latin phrase "sine cera" (or "without wax"), which meant that the marble materials were premium, and then sign his name. If the buildings fell down and materials were subpar, the builder was executed, according to the speaker. Fraud case settled.



Now that story could be apocryphal. (Many authorities trace sincere to the Latin sincerus, "clean, pure, sound.") In his article, "Harena sine calce ["Sand without lime"]: Building Disasters, Incompetent Architects, and Construction Fraud in Ancient Rome," Dr. John P. Oleson, of the University of Victoria, answers the question of why construction disasters were common in ancient Rome [Acta Instituti Romani Finlandiae 128 (2011) 9-27].



"Aside from fire," Oleson writes on page 14, "one can cite three major factors: incompetent architects or an absence of architects altogether; incompetent contractors, or contractors who fraudulently employed defective materials; and poor maintenance." Regardless, I'm sure construction fraud has been with us at least since the 1st century.



Viewing headlines only cements the fact that construction fraud is alive and well in the 21st century. Witness the Jan. 3 news release, "Prison terms for corruption in oil and gas contracts," from the Serious Fraud Office (SFO), an independent government department and part of the UK criminal justice system that investigates and prosecutes complex fraud cases.



Andrew Rybak, Ronald Saunders, Philip Hammond and Barry Smith were sentenced to various prison terms (12 months to five years) for receiving payments for passing on confidential information to various companies bidding on procurement and component parts or construction of:

A styrene monomer plant in Bandar Assaluyeh, Iran.

A generator package for the development of the QASR gas fields in Egypt.

Equipment to treat fuel gas, oily water treatment and large bore pipes for the exploration and development of oil fields in the Sea of Okhotsk off Sakhalin Island (part of the Russian Federation).

A procurement contract for the Singapore Parallel Train project.

Procurement services for a hydrogen power project in Abu Dhabi.