Counterfeit Surety Bonds Cost Taxpayer's Millions

There are a lot of businesses out there trying to cut corners in order to save money in this tough economy, but unfortunately this often hurts their clients as a result. A construction contractor in California claimed he had bonds to cover multi-million dollar jobs; but it turned out the contractor possessed surety bonds that were completely fraudulent.

President of Advantage Demolition and Engineering, Peter Scott, pleaded guilty on two counts of posting fraudulent contract bonds. Based out of Roseville, CA, the contractor bid on eight water meter retrofit phases in Sacramento and submitted surety bonds for the jobs. The company won two contracts worth $3.5 million, but city officials spotted problems with the project and discovered that the surety bonds were illegal containing counterfeit seals and forged signatures.

The project not going as planned is how Scott’s fraudulent ways were revealed. City officials who were monitoring the job noticed issues with the work so in order to be prepared for an unsuccessful job and potential claims on the bonds; they looked closer at the contract bonds he provided. After all, the bonds that were required for the jobs guaranteed that the work would be completed. In the event of an incomplete project, the surety company who wrote the bonds would step in and fund the rest of the job. Then the surety company would then go to the contractor who originally purchased the bonds for reimbursement. In this case, there were no authentic bonds to protect against an unfinished project which may cost millions of taxpayer dollars. Scott’s court hearing is scheduled for Dec. 13 and faces a maximum of five years in prison for each violation.

This story demonstrates how important surety bonds can be. Now the city of Sacramento risks either having an unfinished project on their hands or the loss of public money, both of which are bad outcomes. Should there have been legitimate surety bonds in place, this job would have been completed the way the city intended.