Construction fraud may be either civil or criminal fraud perpetrated in connection with the activities of construction contractors or in connection with the construction industry. Construction fraud may involve fraud in a contractor’s bidding on projects, substituting parts or materials or billing. A legal consultation in Florida with a Florida lawyer would help a person understand construction fraud.
Fraud in construction may involve collusion between contractors, subcontractors, suppliers, or other parties involved in the construction process. Fraud can result in delays in project completion, poor quality work and the creation of risks for workers and owners who have contracted for projects.
What Is Fraud?
Fraud is both an intentional civil wrong, or “tort” in legal terminology, and a criminal offense. In Florida civil law, fraud is defined as one party engaging in deceptive practices in order to acquire some kind of gain, usually monetary. A person files a lawsuit in the case of a civil fraud in order to recover monetary compensation for the damages caused by the fraudulent actor. Civil fraud cases are governed by Florida statutes.
Fraud consists of a person engaging in deliberate deception or misrepresentation to gain a financial or personal advantage. Fraud can be committed by lying, concealing the truth, forging documents, or misusing someone else’s identity.
As a technical matter, in Florida, there are four elements to civil fraudulent misrepresentation as follows:
- A party to a transaction makes a false statement concerning a material fact. A material fact is a fact that would be important to a reasonable person in deciding whether or not to participate in a particular transaction.
- The person who makes the representation knows that the representation is false.
- The person who makes the representation does so with the intention of inducing another person to act on it.
- The person who acts on the false representation suffers harm because they acted in reliance on it. The reliance does not have to be justifiable or reasonable.
If a false statement is made by an individual who knows it is false, then the wrong is intentional misrepresentation. If the false statement is made by an individual who makes it recklessly and without knowing whether it is true or false, it is negligent misrepresentation. A person might also be liable for negligent misrepresentation if they make the statement in a situation in which they should have known that it was false, even if they did not know it.
Both intentional and negligent misrepresentation can be perpetrated by omitting to state a material fact, i.e., not stating a material fact that should have been communicated. So, withholding information intentionally for the purpose of inducing action on the part of another person is also fraud.
Is Criminal Fraud the Same as Contract Fraud?
Criminal fraud can be any deceptive act intended to secure some gain or advantage illegally. So it is in some sense the same as civil, or contract, fraud. Of course, a person who commits criminal fraud is subject to criminal punishment, i.e., the payment of fines and/or imprisonment. A person is only liable civilly for contract fraud, so they would probably pay money damages to their victim if found responsible in a civil trial.
A person who is the victim of criminal fraud could sue the perpetrator of the crime in a civil lawsuit to recover money damages, but usually a victim does not sue a perpetrator in civil court because the perpetrator does not have the assets from which they could pay a judgement.
Again, criminal fraud involves some kind of deception or presenting information as true when it is not. Most acts of criminal fraud fall within the definition of criminal fraud in Florida.
- Identity theft: Identity theft is perpetrated when one person makes the unauthorized use of another person’s personal information to commit theft. It involves presenting oneself as another person, e.g., using another person’s credit card to buy things or taking out a loan while posing as another person.
- Credit card fraud: Again, when an individual uses another person’s credit card information to buy goods and services for themselves, they commit fraud.
- Insurance fraud: This type of fraud involves employing deceptive actions to get undeserved benefits, usually money payouts, from insurance companies. People may exaggerate the damages they have suffered, make entirely false claims or stage car accidents in order to make a claim and get money from their own or another person’s insurance.
- Mortgage fraud: Mortgage fraud can involve making false statements in a mortgage application in order to get a mortgage for which a person would not qualify if they were truthful.
- Tax fraud: Tax fraud involves intentionally reporting false information on tax returns to evade paying taxes. A person can be charged with tax fraud, for example, because they under-reported income or inflated deductions.
- Check fraud: Check fraud involves the unlawful use of checks to deceive others for financial gain. It can include writing bad checks or forging signatures to obtain goods without paying.
- Embezzlement: An employee of a contractor might commit embezzlement. The employee who may have access to the contractor’s accounts, credit cards and checks might simply steal the contractor’s assets.
These criminal offenses are all varieties of criminal fraud.
How Do I File a Criminal Charge Against a Contractor in Florida?
A private party cannot file a criminal charge against a contractor or anyone else in most states. A private individual must report a crime to law enforcement and then law enforcement, in consultation with a prosecuting attorney, would decide whether to file a criminal charge.
What Are Some Types of Claims for Contractor Fraud Cases?
Some common contractor practices that are fraudulent are more often seen in government contracting. For example, one practice is for contractors who plan to bid on a project coordinating before the bidding begins. Bid-rigging practices are as follows:
- Bid Suppression: One or two contractors may threaten, bribe or otherwise persuade others not to submit a bid for a particular project. The contractor who suppresses the bidding of other contractors obviously wants to ensure that they win the contract.
- Complementary Bidding: In complementary bidding, competitors get together and decide beforehand who is going to win the bid. Some agree not to bid or to submit high bids, so that another is sure to win the contract. The winning bidder may pay off the others who agreed to bid to lose.
Some examples of the kind of contractor fraud that happens in private residential construction are as follows:
- Large, Upfront Advances: A contractor may demand a large upfront advance, presumably to fund the purchase of materials or equipment rental. The contractor may then disappear completely, delay the project to order materials and equipment and then either disappear with the money, delay the project for lengthy periods, or provide subpar work that is not worth the thousands of dollars that the homeowner already paid.
- Low-ball Bids: A contract may intentionally offer the project at a cost that is well below what it should cost and then later adds on additional prices that may result in the final cost being much greater than the initial estimate.
- Unforeseen Problems: In the course of completing a project, a contractor may run into unforeseen, major problems, e.g., unseen water damage or termite infestation, after starting the job. The contractor then adds a large sum to the bill to pay for fixing the problem. The homeowner has no real choice but to pay to keep the project moving along.
- Construction Defects: An individual may learn after a project has been finished that the work contains construction defects. An owner may have to sue a contractor for construction defects.
Other types of fraud are possible. If a person is told something unexpected, they may want to talk to a Florida construction lawyer.
Who Can Commit Construction Fraud?
Any party involved in the construction process, from bidding for jobs, to verifying that construction has been finished and meets specifications can commit construction fraud. The owners of land or property on which a construction project is done can commit construction fraud. Government officials in government agencies who are responsible for government contracting for construction projects might commit construction fraud.
What Should I Do To Prevent Construction Fraud?
A person who is planning a construction project wants to do their research about the contractors whom they may hire. They want to ensure that any contractor they may hire for home repairs or renovations is legitimate. They should do a search of contractors online and read reviews that have been posted on legitimate websites. Of course, they want to get bids from at least 3 contractors.
They want to know if complaints have been made against the contractor with such organizations as the Better Business Bureau and their state attorney general’s office. The local city or county government may also have a consumer complaint bureau, and a person should identify any such agency and contact it to see if it offers information about contractors.
A person should ask a contractor for references and talk to the contractor about the planned project. They want to know exactly what the project plan is, which subcontractors would be involved, what materials are going to be used and when the project should be finished. Of course, a person wants to make sure that their contractor is licensed (not just “registered” but licensed), bonded and insured.
A person also wants to make sure that their own insurance is up-to-date, and their policy limits are adequate to cover any potential losses.
If an individual runs into an unexpected issue with a contractor during a project, they may want to consult a lawyer for guidance.
Can Settlements and Agreements Be Reached in Florida Contractor Fraud Cases?
Settlements and agreements to resolve disputes between contractors and their customers based on allegations of fraud are always possible in Florida.
Should I Contact a Florida Lawyer About Construction Fraud?
If you have an issue with a contractor and suspect unlawful activity, you want to consult a Florida construction lawyer. Your lawyer will be able to review all the facts and help you determine whether some kind of fraud has been perpetrated.
Your attorney will be able to help you determine how best to respond, whether negotiations can resolve the problem or whether a lawsuit for damages would be necessary.
