The Department of Justice announced two separate contract fraud cases last week, each involving multiple people.  Beyond the obvious repercussions and legal expenses involved, here are three additional takeaways that every contractor and contractor employee should take away from this experience.

1. Monitor Your Employees: One case involved a former employee defrauding its employer, and the government, out of $7 million.  The employee was a senior level BD person who was likely well-liked and well-respected because he brought business in the door.  It turns out, though, that he took a lot of that right out the back door, too, with the creation of two separate shell companies.  The employer was unaware of this until it was served with a DOJ fraud subpoena months after the employee left.  The company will now have to defend itself and seek to recover its lost proceeds.  It’s easy to look the other way when a successful employee is driving revenue.  This is not the first time, however, that a contractor has paid the price for failing to monitor its people. 

2. Be Careful How You Use Email: Sometimes even innocent email exchanges can be viewed out of context and cost a company time and money.  That wasn’t the situation in at least one of these cases, where the perpetrators left an easy-to-follow email trail specifically spelling out the fraud they planned to commit. While we don’t condone fraud under any circumstances, contractors can learn from this example.  Email messages are not 100% private.  Sometimes it’s better to discuss potential business approaches or planning in person or on the phone.  Let’s face it, most of us could use the exercise it takes to walk from one office to another.

3. More is At Stake Than Your Job: While fraudsters will certainly lose their jobs, there are many more consequences that people apparently don’t think through before they decide to try and cheat. One of the people covered in this week’s announcement will almost definitely lose their TS/SCI clearance, making it more difficult to find another position even if they avoid jail time.  DOJ also pursues the forfeiture of any assets they believe you obtained because of fraudulent actions.  Here, that means a boat and a nice sports car.  It could, however, mean your house, putting your entire family at risk.  Fraudsters can lose their job, their family, their friends, their money, and their freedom.  Viewed from this perspective, it’s tough to see why anyone would try to get away with breaking the law, though we suppose that hindsight is, indeed, 20/20.