|Bromwell was accused of fraud.|
On April 10, 1999, the Maryland Senate adopted a resolution offering its "sincerest congratulations" to W. David Stoffregen, the former CEO of mechanical contractor Poole and Kent Corp., which that year was acquired by specialty contracting giant Emcor Group. The warm feelings between former Maryland state Senator Thomas L. Bromwell and Stoffregen would soon blossom into a wide-ranging scheme through which Bromwell and his wife Mary, received pay and favors for helping Poole and Kent, prosecutors claim.
If the charges are true, Stoffregen has joined a long list of contractors, engineers and architects who have broken the law in schemes with elected officials or state or municipal employees. Federal prosecutors claim Stoffregen was trying to win a bonus from his new parent company. Experts on fraud and white-collar crime say the issue goes much deeper.
Without much fear that they will be caught, powerful and successful people, confronted with temptation, often cant resist, say law enforcement officials. So stringent, highly visible auditing and fraud detection procedures are the only way to head off trouble before it gets started.
Significantly, what prosecutors allege happened in Maryland involved some contracts that were in theory competitively bid.
The charges by the federal prosecutors form the basis for a grand jury indictment issued Oct. 19. Stoffregen could not be reached for comment, but one of Bromwells attorneys says he is "confident" that he "will demonstrate their innocence." Poole and Kent said in a statement it had forced Stoffregen out of his job in March and is cooperating with investigators. A new chief executive has also been appointed, the company says.
Discouraging and Detecting Financial Fraud
Pay attention to red flags, such as data gaps and rumors.
Source: Thacher Associates, Joseph T. Wells; Association of Certified Fraud Examiners
The accusations describe a versatile partnership through which Stoffregen, together with Poole and Kent Executive Vice President Michael Forti, channeled lucrative work to Bromwell and his wife, who also was charged. In return, Bromwell pressed state officials and others to award work or make con-cessions to Baltimore-based Poole and Kent. Forti has already pleaded guilty to some charges, as has David M. Jackman, a project manager.
According to the charges, Forti introduced Bromwell to Stoffregen in 1996. Beginning around the time of the Emcor acquisition, Stoffregen hired Bromwells own construction company to work as a subcontractor on a Poole and Kent project in Russia. That year, the two allegedly convinced a developer and general contractor on a commercial development in Baltimore to hire Poole and Kent, even though another contractor had already submitted a winning bid at a lower price.
As part of their conspiracy, Bromwell used his influence to intervene in a contractual dispute between Poole and Kent and the state Dept. of General Services. In exchange, Poole and Kent allegedly awarded a subcontract on its work on a juvenile justice center to Network Technologies Group Inc., which employed Bromwell. The contractor also allegedly performed work on Bromwells home for free or at a discount, and gave Mary Bromwell a no-show job at a phony minority business enterprise.
At one point, according to the charges, Bromwell agreed to remain in his state Senate office rather than leave to take a lucrative new job in exchange for the benefits provided by Poole and Kent.
In the summer of 2000, Bromwell allegedly helped pressure the University of Maryland Medical System and its general contractor, Turner Construction Co., to take Poole and Kents $13.1-million bid for the mechanical contract, prosecutors claim. Another union contractor, John J. Kirlin, consistently submitted lower bids for the same contract, they add.
The charges link Stoffregens bonus to another shady deal. Stoffregen wanted Bromwell to help speed up Poole and Kents payments for the juvenile justice center work to meet "certain monthly cash-flow goals" triggering the bonus. The goals required Poole and Kent to receive payments from the state comptrollers office "prior to the end of each month," prosecutors say.
Is a bonus ever worth such huge risks? Stoffregens salary and bonuses from 1999 until September 2004 was $1.7 million, prosecutors say. Stoffregens salary and bonuses from 1999 until September 2004 were $1.7 million, prosecutors say.
Crime experts say the answer rests in the nature of valuable public works contracts. Not all awards are transparent, torrents of paperwork make it hard to see whats going on and the power of the state can be exerted in numerous ways.
|Architect Kirsch made plea deal in 2003 related to Alabama corruption.|
That may partly explain allegations of extortion and racketeering against former Alabama Gov. Don E. Siegelman (D). A grand jury re-indicted Siegelman and a key aideSiegelman had been acquitted previously of corruption chargespartly for peddling influence on Alabama Dept. of Transportation projects. Prosecutors claim Siegelman, among other crimes, received $40,000 from toll bridge developer Jimmy Lynn Allen in return for help with a project in Tuscaloosa County. Siegelman, who is running for re-election as governor, claims the case against him is politically motivated. The investigation previously netted guilty pleas from others, including architect William Curtis Kirsch. He was charged with giving a state official $21,000 in payoffs.
Still, the causes of public works fraud may go even deeper. "Some people have argued that we have created a competitive culture" that glorifies any financial gain, says John Kane, manager of research for the National White Collar Crime Center, Fairmont, W.Va. "Others say the same qualities that make executives successfulrisk-taking, living for todaymight make them more likely to cheat."
In the end, theres no substitute for the perception that you could get caught. Highly visible controls at key places in the construction process work best, says Thomas D. Thacher III, a New York City-based security consultant. Thacher designs anticorruption programs that invite whistle-blowers to speak up, so that a corporate code of ethics is more than just words.
Theres one more complication: If the penalty for the crime is only a plea agreement that results in a fine or short stay in prison, that may undercut any deterrence. Writes fraud expert Joseph T. Wells: "Regrettably, under our system of justice, there is nothing certain about being punished."