The United States invests a significant portion of tax dollars in infrastructure. In 2021, the Bipartisan Infrastructure Bill (BIL) directed $1.2 trillion of federal funds toward infrastructure investments and upgrades. Money spent via the BIL and others is distributed through state and federal agencies as well as to independent contractors and employers. It funds construction and improvements to railroads, high-speed internet access, roads and bridges, modernized wastewater systems, sanitation, drinking water, and the electrical grid.
However, this substantial funding also attracts bad actors. Infrastructure fraud is a potential goldmine for those seeking to exploit taxpayer money and put communities in need at risk. It jeopardizes public safety by compromising the quality of vital resources like roads, bridges, and electrical grids. It reduces trust, drains taxpayer funds, and lines the pockets of the unscrupulous. To speak up about fraud in government contracts, contact the expert whistleblower lawyers at Tycko & Zavareei LLP online or by phone at 202-973-0900.
What is Infrastructure Fraud?
Infrastructure fraud occurs when government spending earmarked for infrastructure projects is misappropriated. Infrastructure extends beyond the familiar roads, tunnels, and bridges, and encompasses many kinds of structures and systems that permit the flow of goods, people, and ideas. Examples include airports, railroads, ports and coastline traffic, electrical grid, and broadband access.
Infrastructure spending happens on both state and federal levels. Since several state and local projects are federally funded, the misappropriation of funds can result in federal charges. Examples of infrastructure fraud are:
- Reporting inflated costs
- Using inferior materials to cut corners
- Collusion or bid rigging
- Underbidding, by misrepresenting actual costs for a project
- Failing to meet contract standards
- Mis-certifying completion or adherence to contract standards
- Cross-charging, or improper cost allocation
It is almost inevitable that some percentage of government money is lost to fraud. The Government Accountability Office estimates that between 2018 and 2022, approximately $1.6 trillion may have been defrauded from the federal budget. Losses per year exceed $233 billion on average, meaning that scam artists make away with a significant amount of taxpayer dollars more often than we would like to think.
Infrastructure Investment and Jobs Act
Infrastructure spending is important. Many advocates point out that it creates jobs, promotes greener and more efficient systems, expands accessibility to the internet, and makes living in the United States safer and more comfortable. However, without fraud controls and reporting, infrastructure spending quickly becomes a cash cow for those looking to take advantage of the system. The Infrastructure Investment and Jobs Act of 2021 (H.R. 3684) set aside funding for all of the following areas:
- Roads and bridges
- Passenger and freight rail
- Highway expansion and upgrades
- Pedestrian safety
- Public transit expansion
- Wireless Internet access
- Ports and waterways
- Airports
- Clean water
- Power grid reliability
- Coastal resiliency and ecosystem restoration
- Weatherization
- Clean school buses and ferries
- Electric vehicle charging stations
- Cleaning up contaminated sites
- Reclaiming abandoned mines
- Western Water Infrastructure
While the Act itself doesn’t create a new reporting system for fraud, the False Claims Act (FCA) enables whistleblowers to report false certifications that divert public funds intended for infrastructure projects. Under the FCA, you may receive up to 30% of the total recovery and qualify for protection against retaliation.
Signs of Infrastructure Fraud
An infrastructure fraud whistleblower can blow the whistle on different kinds of fund misappropriation. However, for those who are not industry insiders, these types of fraud can be difficult to spot. This is why many infrastructure fraud whistleblowers are project employees, government contractors, or residents in the project area.
Contract Fraud
Contract fraud typically involves mis-certifications of how and when a job is completed. Most government contractors are bound by strict terms outlining job performance, timeline, labor hours, employee qualifications, cybersecurity standards, and more. Contract fraud can happen when a contractor wrongfully certifies that they upheld all the standards of their contract, when in fact they cut corners, failed to report data leaks, or hired unqualified workers.
Beyond false certifications, contract fraud may involve underbidding or similar attempts to rig bidding process outcomes. Contractors may collude to pre-determine project costs in an effort to stifle competition. They may make false promises about the costs of their labor or materials.
Red flags for contract fraud include:
- Unusually close relationships between contractors, government officials, or project managers
- Poor record keeping or incomplete project documentation
- Insistence on cash payments
- Contractors exhibiting a lifestyle that appears to be beyond their means
Violations of Environmental, Health, and Safety Codes
Infrastructure funds are used to address environmental and health concerns, like cleaning up Superfund sites. It is important to adhere to environmental standards in such contracts, but this is not always the case. Sometimes, construction sites do not dispose of hazardous chemicals and materials, polluting neighborhoods. Or they may fail to adhere to Occupational Safety and Health Administration (OSHA) standards for workers and inevitably expose them to dangerous chemicals.
Federal funds come with a responsibility to adhere to environmental, health, and safety codes. Failing to do so is reportable under the FCA.
Product Substitution and Counterfeit Parts
American residents are the ultimate consumers of infrastructure spending. We all benefit from cleaner water, more resilient power sources, and safer transportation. When counterfeit materials are substituted during construction or maintenance, it’s our families and neighbors who bear the cost.
Briberies and Kickbacks
Briberies and kickbacks distort the playing field, diverting infrastructure jobs to those with connections instead of qualifications. They prop up existing scams and continue patterns of grift, waste, and abuse. It can be difficult to spot bribery when you are not in the know, but some warning signs of bribery are: inflated invoices, suspicious purchase patterns, incomplete expense reports, or conflicts of interest that raise questions about impartiality.
Theft or Abuse of Government Property
Infrastructure projects involving government property or the use of government-owned tools or job sites are particularly vulnerable to scams. Sometimes, contractors with access to government resources are not transparent with their spending. A recent case involving a government contractor revealed that he shipped items from a government-owned property to his private residence for resale. The goods, including computer equipment and construction tools, were valued at close to $50,000.
Types of Infrastructure Contracted by the Government
Our daily lives rely on a complex network of infrastructure. Taxpayer dollars are at play in almost every vital project across the country, from the clean water we use to the roads we travel.
Waterways
The BIL invests over $17 billion in port construction, maintenance, and improvements. A percentage of funds is earmarked for tasks like reducing congestion in waterway traffic, reducing emissions near ports, and improving overall efficiency. Other waterway investments involve pollution cleanup efforts, improving responses to extreme coastal weather events, and streamlining inland waterway transportation options.
Sometimes, projects that seem entirely locally-directed may still involve federal funds, and can therefore be reportable under the FCA. For example, one element of waterway funding is the Water Infrastructure Financing Program (WIFIA). WIFIA enables communities to qualify for low-interest, government-backed loans to improve flood protection measures. If a contractor selected to build a levee in New Orleans performs low-quality work and claims expensive supplies (than initially pitched), he may be held accountable under the FCA if his fees are paid through the WIFIA.
Roads, Bridges, and Tunnels
Roads, bridges, and tunnels are well-known hot spots for federal fraud. The recent collapse of the Francis Scott Key Bridge in Baltimore highlights the need for reliable roadway and bridge infrastructure as well as strong whistleblower protections for reporting fraud.
Cutting corners by using shoddy materials in road, bridge, and tunnel construction is a common tactic used by fraudsters. In a recent case involving the Big Dig in Boston, the former managers of the Northeast’s largest asphalt and concrete supply company were accused of supplying the Massachusetts roadway infrastructure project with “leftover concrete.” This substandard product meant that old concrete that had been thinned with water and used in other projects was used in approximately 57,000 yards of highway and road in a massive Boston infrastructure project.
Transportation Infrastructure
The US Department of Transportation oversees multiple areas of federally funded projects, including the Federal Aviation Administration, Federal Motor Carrier Safety Administration, Federal Railroad Administration, Pipeline and Hazardous Materials Safety Administration, and more. Transportation fraud can impact any of these areas and cause severe delays or shutdowns. It can also hike prices for taxpayers, without a corresponding increase in quality. For example, a 2021 caseinvolved an engineering firm that pled guilty to ongoing efforts to defraud the North Carolina Department of Transportation through bid-rigging and collusion.
Power and Energy
Power and energy investments include modernization of the electric grid, energy storage and supply issues, carbon and hydrogen management, and building modifications. Many of these infrastructure investments are made via grants, instead of loans or direct payments. The Federal Energy Management Program, for instance, selects grantees to invest in net-zero energy projects at federal facilities. When grant applicants misidentify their capabilities on applications, or mis-certify their eligibility for a program, they can be held accountable.
Telecommunications
The Federal Communications Commission oversees telecommunications, cell phone, and internet service providers in the US. Telecom companies have a duty to provide customers with an expected level of privacy and data protection. If they fail to engage in certain minimum cybersecurity protocols or report data breaches, they may be fined for treble damages under the FCA.
How to Report Infrastructure Fraud
If you suspect infrastructure fraud, you may want to report it to hold wrongdoers accountable, recover stolen taxpayer funds, and earn whistleblower rewards. It is advisable to report fraud through a whistleblower law firm for the following advantages:
- Reporting anonymously. The name of the law firm will be listed on the complaint, and your identity can be kept as private as possible.
- Qualifying for a reward. If you are not the first to report fraud, you will not be eligible for a reward. Working with a whistleblower lawyer creates a paper trail showing that you were the first to file your claim.
- Building your case. Not all evidence is admissible in court. Some, like taking illegal recordings, may create more problems than they solve. Working with a whistleblower lawyer will allow you to gather the right evidence.
- Strengthening your legal claim. Many contractors and businesses, when accused of wrongdoing, will fight tooth and nail to keep their ill-gotten gains. Others have powerful reputations, or deep connections that allowed them to profit in the first place. Working with a whistleblower law firm means that you are not alone in building your claim for compensation.
- Protecting your professional reputation. Many whistleblowers hesitate to come forward due to fear of retaliation. There are certain legal safeguards that your attorneys can put in place to ensure that your employer cannot retaliate against you without facing significant consequences in court.
Infrastructure Fraud Whistleblower Rewards
An infrastructure fraud whistleblower lawyer will help ensure that you qualify for the maximum reward possible. Under the FCA, if you are the first to report original, unreported information that leads to a recovery of misappropriated government funds, you may receive anywhere from 15 to 30% of the total settlement. This includes additional fines and fees assessed under the FCA. With treble liability imposed by federal statute, as well as the massive amounts of spending earmarked for infrastructure investments, whistleblowers may walk away from a case with thousands or millions of dollars from the recovery.
Protections for Infrastructure Fraud Whistleblowers
If your employer retaliates against you for reporting fraud, you have the right to sue them in federal court. Potential remedies include: financial compensation, reinstatement to the same position, front pay or double back pay, attorneys fees, and other forms of restitution.
Infrastructure Fraud: FAQs
How does infrastructure fraud happen?
Infrastructure fraud happens when federal funds are kept, stolen, misappropriated, or failed to be returned by a bad actor involved in an infrastructure project. This can occur throughout a project’s life cycle, such as during the bidding phase or the project fulfillment phase.
Will the Infrastructure Investment and Jobs Act increase fraud?
An increased flow of funds to an infrastructure project leads to an increased risk of fraud. This is why large government projects tend to attract scam artists, corruption, and theft. Any potential for fraud can be substantially combated with increased due diligence and effective oversight of projects.
What does infrastructure exclude?
Infrastructure typically excludes military spending, education investments, and healthcare, although all of the previous may also be reportable under the FCA and other federal statutes.
Can infrastructure fraud whistleblowers remain anonymous?
Working with an infrastructure fraud lawyer can help ensure that your reporting remains as anonymous as possible. The firm’s name will be listed on the official complaint, and not your own.
Benefits of Hiring an Infrastructure Fraud Whistleblower Lawyer
Infrastructure investments play a key role in the American economy. If you wish to blow the whistle on infrastructure fraud, it is recommended you work with a whistleblower lawyer who can help protect your reputation while helping you expose fraud.
If you need help structuring your claim, gathering evidence, and speaking up against infrastructure fraud, contact Tycko & Zavareei LLP today for a confidential case evaluation.