Beware of fraud when searching to bolster supplies in a crisis

by A.J. Plunkett (aplunkett@decisionhealth.com)

When trying to procure necessary supplies during a disaster or emergency, be aware of potential fraud, document all your contracting activities, and ensure staff are trained and up-to-date on your facility’s contracting policies.

These are just some of the best practices and recommendations offered in a Department of Defense (DOD) Inspector General report released June 2, “Special Report on Best Practices and Lessons Learned for DoD Contracting Officials in the Pandemic Environment.”

While the report is intended to inform DOD contracting officials on how best to manage contracting in a chaotic environment, the report also offers some tips for contracting officials in general.

In particular, the report warns of the potential for criminals to take advantage during a crisis.

“During emergencies, contracting personnel are often required to execute multiple contracts quickly to ensure that supplies arrive to affected areas and that emergency responders are prepared and equipped to complete their duties. Unfortunately, the need for quick action makes the contracting process vulnerable to potential procurement fraud schemes. Contracting personnel should familiarize themselves with common fraud schemes to help avoid potential fraud.”

The IG’s tips to avoid fraudulent activity include:

• Verifying the identity of companies and individuals that offer assistance
• Check past performance of companies, including searching online reviews, social media, and company webpages
• Review companies’ articles of incorporation to determine when a corporation was created and whether the company is in good standing
• Search for company addresses to determine whether an address is residential, “which can be an indicator of it not being a viable business concern”

In an online primer for small businesses, The Houston Chronicle offered these tips for checking a company’s legitimacy in an article by Jason Gillikin:

1. “Verify that the company is registered to do business. In most states, the government maintains a central database of LLCs, partnerships and corporations; required filings are typically open for inspection. Sole proprietorships might be registered with county clerks' offices. Publicly held companies must maintain detailed filings with the U.S. Securities and Exchange Commission. Review those filings online to check for adverse activity.
2. Request a credit report through Dun and Bradstreet at dnb.com. Many larger enterprises maintain a commercial credit score through a DUNS number. Although the lack of a D&B report doesn't prove that the company is illegitimate, the absence of commercial credit profiles should raise red flags for all but the smallest businesses.
3. Solicit references. A legitimate company should provide several iron-clad trade or banking references to establish its credentials.
4. Identify the company's official business address. Check to make sure the address and phone numbers remain valid.
5. Search community groups such as the Better Business Bureau or the local chamber of commerce to check for membership or accreditation. Companies that engage extensively in trade but aren't on the level will often incur several negative BBB reports. If your state's attorney general maintains a database of consumer complaints, check that, too. Not many states keep those records open to public inspection, though.
6. Review court records in the jurisdiction within which the business is registered. Calls to the clerk's office of the U.S. Bankruptcy Court will uncover bankruptcy proceedings, while calls to state and federal district courts should uncover civil actions such as negligence lawsuits, breaches of contract or landlord-tenant disputes. Use tools such as the Public Access to Court Electronic Records database of the federal court system at pacer.gov to streamline searching.”