Contractor Pleads Guilty to Forging Payment and Performance Bonds

Peter Scott

A California contractor pleaded guilty in court on September 20, 2011 to submitting forged payment and performance bonds to the City of Sacramento for two projects totaling $3.4 million.

City Discovered Bonds Were Fake After Award:  Advantage Demolition and Engineering (ADE) won two federally funded projects with the City of Sacramento in late 2009 to install 3,300 water meters.  In January, 2010 the City became concerned about ADE's work on the project, discovered the bonds were forgeries, and issued a stop work order and eventually terminated the contracts.   Peter Scott, the president of ADE, admitted to forging the bonds.

Bond Forgery Details:  After more closely examining the payment and performance bonds submitted by ADE, officials noted the following signs that the bonds were forged:

• The bonds were issued on a bond form 2006 that was not used by the surety (Merchants Bonding Company) in 2009.  
• The bond number on the bond was not legitimate.
• There was a stamp, but no signature of a Notary Public.
• The date on the Notary Public's signature line was incorrect.
• The attorney-in-fact who signed the bonds for the surety was a fictitious person.
• The phone number for the attorney-in-fact was a cell phone number that ADE set up and represented as the phone number for the attorney-in-fact.

Prison and Fines:  Scott will be sentenced on December 13, 2011.  According to the U.S. Attorney's Office, Scott "faces a maximum statutory penalty for each violation of five years in prison, a $250,000 [fine], and three years of supervised release."

More Information:  For more information about this story, see the following links:

• Sacramento Bee article from February 17, 2010
• Sacramento Bee article from September 21, 2011
• Roseville Press Tribune article from September 20, 2011

In my blog posting of June 12, 2011, I wrote about a New Jersey contractor who forged payment and performance bonds.  That contractor is currently serving a four year prison term.

Practical Tips:  While bond forgeries are relatively rare, there may be more risk of them with the troubled economy and the difficulty of many contractors in obtaining bonds.  

1. Review the bonds and power of attorney document carefully to ensure there are no irregularities or inconsistencies.
2. Do you know the reputation and financial stability of the contractor?  If not, consider calling the bonding company to verify the legitimacy of the bonds.
3. Call the actual bonding company, not the attorney-in-fact who signed the bond, to verify the bond. 

Mike Purdy's Public Contracting Blog 

© 2011 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com