Cases

Forensic Auditors – Worth Their Weight in Gold

By Steven A. Pasichow, MPA, CIG
Assistant Inspector General
Assistant Director of Investigations

In 2000, a Forensic Auditor working for the Office of Inspector General (OIG) for The Port Authority of NY & NJ (Port Authority) was conducting a pro-active random review of internal audits that had been performed on cost plus work invoices submitted by a contractor working on asbestos abatement work under several time-and-material contracts over several years at various Port Authority facilities, including the John F. Kennedy International Airport (JFKIA).

The Forensic Auditor made a comparison of the vendor invoices that had been submitted to support the unit prices billed for materials, to the amounts billed by other contractors performing similar work. This comparison disclosed that the amounts billed far exceeded prices charged for the same items. Further review uncovered that the material―suppliers were not legitimate vendors and that the checks issued by the contractor to the suppliers, were all slightly under $10,000 and had been cashed at several check cashing establishments. The material charges had been reviewed and approved for payment after routine cost plus audits were performed because the costs had been supported by suppliers invoices and had been documented by canceled checks from the contractor to the vendor.

During the course of the asbestos investigation, evidence of unrelated wrongdoing was uncovered against additional Port Authority employees, including the Chief Engineer for JFKIA, who were charged separately from the enterprise corruption indictment. These employees pleaded guilty to accepting renovations and other improvements to their residences from contractors whose work they were overseeing for the Port Authority.

The first trial from this five-year old indictment, involved the remaining two defendants, Port Authority engineers, who chose trial over pleading guilty. On December 5, 2009, they were convicted after a six-week jury trial on enterprise corruption and other related charges. They were convicted of taking bribes to let a company overcharge for work on projects including the World Trade Center cleanup. This company, that was responsible for cleaning up crushed police cars, pieces of steel and other objects recovered from the destroyed twin towers, inflated equipment expenses and pumped up its payroll with no-show workers.

A Senior Engineer of Construction at JFKIA was responsible for managing certain construction projects on behalf of the Port Authority. He accepted tickets to professional sporting events and accepted several $2,000 loans from contractors he had oversight for at JFKIA. The contractors did not require the Senior Engineer to repay the loans.

The Senior Engineer also used for personal benefit the Pennsylvania home of a Port Authority contractor on approximately ten occasions. Additionally, he had a Port Authority contractor perform various construction work at this home, including: concrete work, which included the use of a dumpster at no cost to him and electrical work. He also directed a Port Authority contractor to put two of his sons on their payroll under his wife’s maiden name for one.

The former Manager of Environmental Field Operations of the PA’s Engineering Department was no stranger to criminal conduct in that he was pre-viously arrested in March 2003 by the OIG in con-nection with another joint investigation conducted with the U.S. General Services Administration Of-fice of Inspector General and the Official Corrup-tion Unit of the FBI. He was charged and convicted with bribe receiving and sentenced to one year in prison. With respect to the recent asbestos investigation, he accepted high priced tickets to rock concerts.

This case demonstrates the importance of the forensic auditing function within an inspector general’s office. By analyzing records that had been previously reviewed both engineering and internal audit staff, the forensic auditor was able to discover a pattern of inconsistencies, that when verified, disclosed that a massive fraud existed among contractors and their workers and agency engineers charged with the responsibility for the administration of government contracts.

The Forensic Auditor’s view of the world is different from other auditors and is an integral component of any investigative team.