Corporate Fraud on the Rise, Study Says
By Sandra I. Erwin and Grace Jean
Incidents of procurement fraud in Afghanistan, Iraq and the reconstruction following Hurricane Katrina suggest that the threat of misconduct by government contractors is growing, according to a recent PricewaterhouseCoopers report, titled “Predicting the Unpredictable: Protecting Aerospace and Defense Companies Against Fraud, Reputation and Misconduct risk.”
The 2005 PricewaterhouseCoopers Global Economic Crime Survey revealed that 30 percent of companies in the aerospace and defense sector have been involved in some type of fraud.
“The aerospace and defense industry faces unique risks because of the nature of procurement regulations and the long-term and large-scale contracts inherent in the industry,” said Scott Thompson, of PricewaterhouseCoopers.
The report identifies several categories of fraud commonly found in the aerospace and defense sector: Unauthorized expenditures, financial statement manipulation and intentional manipulation of cost estimates, misappropriation of assets, industrial espionage activities such as violation of export regulations, use of domestic products and payments to influence federal transactions, and helping a prime contractor overbill a customer through multi-tiered profit arrangements or inflated lease transactions.