III. HOW TO PRESENT EVIDENCE OF FRAUD AND CORRUPTION

A. The elements of proof of FRAUD

DEFINITION

A typical definition of “fraud” is:

“Any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.”

THE ELEMENTS OF PROOF
  • Any act or omission,
  • including a misrepresentation,
  • that knowingly or recklessly misleads, or attempts to mislead
  • a party
  • to obtain a financial or other benefit
  • or to avoid an obligation

Any act or omission

A fraudulent “act” could include, for example, forging a document or signature or altering (backdating, etc.) a document.

An “omission” refers to knowingly and willfully failing to disclose a material fact, for example, that a contractor has been debarred, to obtain an improper benefit or avoid an obligation.

Including a misrepresentation

A misrepresentation refers to a false statement of fact (e.g., “our company employs 2000 people” when in fact it employs ten) and generally not to an opinion (“Our company is one of the leading contractors in the area.”) An exception might be an opinion as to the correctness of a financial statement, issued by an accounting firm, which it knows to be false or which it issued recklessly.

That knowingly or recklessly misleads, or attempts to mislead

“Knowingly” means that the subject acted with actual knowledge that a statement was false and would tend to mislead the recipient.

“Recklessly” means that the subject:
  • Acted without knowing whether the submitted facts were true or false, or did not make an adequate inquiry to determine the truth, or
  • Acted with willful blindness as to the truth or falsity of the statement, i.e., deliberately failed to determine the correctness of the facts, or to put in place procedures that would enable it to do so.

“Reckless” usually requires proof that the subject acted with something “more than mere negligence.”

A party

Includes a public or private person or organization.

To obtain a financial or other benefit

For example, to be pre-qualified to bid, to receive a contract award, or to inflate a payment request.

Or to avoid an obligation

For example, to avoid performing work to contract specifications, or to avoid refunding overpayments received under the contract.

HOW TO PRESENT EVIDENCE OF FRAUD

The following are the standard steps to prove a fraud involving a “misrepresentation.”

1. First, prove that the subject made a “representation” (do not be concerned with proving truth or falsity at this stage)

Obtain the original or an accurate copy of the “representation,” e.g., a bid or proposal, a CV, an invoice or supporting document, bid security, etc., that is alleged or suspected to contain the false statement or misrepresentation. Carefully examine the document for all potential misrepresentations and internal inconsistencies that could assist in the proof of fraud.

Authenticate the document, as described above, by showing it to the author, the recipient or another person with direct personal knowledge of its preparation, submission, or receipt.

Carefully preserve the chain of custody of the document; make a copy with a notation in a corner recording from whom the document was received, the date and place and your initials.

In the unlikely event that you will rely on verbal misrepresentations, closely question the witness who heard the representations to obtain all pertinent details, and promptly prepare a memoranda of interview or statement for the witness to sign. Make sure you have identified and recorded all the relevant representations by the subject – it is much harder for the subject to explain away several false statements than just one or two.

2. Next, prove that the representation was false

Locate witnesses with direct personal knowledge of the truth or falsity of the alleged or suspected false representation. Examine the witnesses in detail, addressing each alleged misrepresentation separately, as set out in the example below.

Find out the basis of the witness knowledge – if the witness says a representation is false, find out how he or she knows this, and make sure it is not based on opinion, speculation or hearsay.