Companies Committing Fraud During the Aftermath of Hurricane Ian!
As a resident of Englewood, Florida, Ground Zero of Hurricane Ian, I am well aware of the brutal attempts at overcharging and fraudulent activities that many companies partook in, because I was one of them. But, as a Forensic Accountant, I have also had the pleasure of busting these crooks.
About 3 weeks ago, I was contacted by a resort business located on Boca Grande Island (SE corner of the eyewall in the radar image below), which is about 4 miles from our house as the crow flies.
Boca Grande Island was hit by Hurricane Ian with top wind speeds of 224 mph! It was an absolute disaster area and still is all these months later.
The problem that pops up in a natural disaster is that crooks come out of the wood work. There is way too much work for the local population of businesses to take care of, so a flood of people come from all over the United States to get in on the feeding frenzy.
Many of these businesses are out to help and, make a profit, which is how it should be. But as for others, their goal is to make as much money as possible by gouging customers or just plain committing fraud.
With all that said, I wanted to illustrate how these swindlers actually commit the gouging and/or fraudulent charges through a fraud investigation I just completed!
Because this may become a criminal charge, I am going to leave out the names of the parties involved, but what I found was sickening in terms of how much in overages they charged.
My first step was to take 4 separate PDF invoices that totaled over 200 pages together, and extract all the data into Excel to be able to analyze it. Over 10,000 line items in all.
We'll just start with this...when you provide a customer with 200 pages of invoicing, it already seems like something is off. Not to mention the way they set the PDF invoices up was out of alignment. This means that they set up the invoices in Excel and created many columns when the information only needed a few columns to present. They also offset headers to confuse the invoice further. Therefore, when they loaded it from Excel to the PDF, then when I tried to bring it back to Excel, the data was all over the place.
Step one of fraud is to make it difficult to extract the full population of data. Too bad they were dealing with an Excel expert and I was able to get all the data uniformed to analyze.
My next step was to total all of the data I extracted, to the totals that were given on the PDF invoices to assure myself that I didn't have too much, or too little data. Checked that box.
From here, I split out the extracted data by the types of line items that they had on the PDF invoices; labor, materials & equipment, 3rd party charges, and offsite charges.
On my "labor" tab, I sorted the data in several different ways in order to see if;
-Laborers were used at different projects on the same day.
-Breakout of overtime charged versus actual overtime worked.
-Amount of laborers and supervisors used, per unit, to see if there was an attempt to charge for more than was actually needed.
On my "materials & equipment" tab I was looking for;
-Usage of equipment and materials versus amount of laborers on the same dates.
-Dates charged for equipment and materials.
-Extended pricing on units and rates.
To expand on the overall analysis, I used many different ways to slice the data up in order to find any correlations that would indicate a problem. And boy there was a problem.
In terms of fraud findings or overcharges, this company;
-Overcharged or doubled up labor charges for supervisors totaling $10k.
-Charged a Per Diem rate that exceeded the actual county rate by $5 per employee, per day. This totaled around $20k.
-Charged for idle machinery while laborers were not on the job at a cost of $380k.
The total fraud or "overcharges" this company tried to push down the throats of Hurricane Ian victims was over $400,000! This does not include the 3rd Party and Offsite charges that had zero backup to the numbers. I am certain they will be able to negotiate that down also, but this is a great example of how gusty these bandits can be to just throw a number up on an invoice, mark it up, and expect the customer to just pay it, which a lot of them do.
Unfortunately, because of the trauma induced by a natural disaster, most companies are just trying to get back into operations as quickly as possible and don't have the resources or time to truly look at these invoices that they are being charged for. To make it worse, insurance companies are so overwhelmed that many have to pay out of pocket in order to get their businesses restored. This concoction leads to ultimately setting customers up to be raked over the coals.
My client's lawyer still needs to review the full contract to make sure there are no loop holes, but this seems to be a slam dunk in terms of being able to reduce the invoice from $3M down to $2.6M, if not more as my client now has leverage.
The moral of the story is this; if you have been affected by Hurricane Ian and have a gut feeling that this may be a similar situation to the above story, please look into what your vendors are charging for with a fine tooth comb.
If you need any help, just hit me up on my contact page and we can see if there is any funny business going on. I would love to take down another one of these thieves!
Blue Collar CFO