A Santa Clarita, Cali., former assistant city engineer has been charged with diverting to himself more than $533,000 in “refunds of cash payments in lieu of bonds from contractors, engineers and others who performed services for the city,” reports Engineering News Record in a Sept. 7, 2016 story headlined “Indictment Details Embezzlement Charges Against City Engineer".
If he’s found guilty, the charges could bring David Rubira nearly 14 years in a state prison. The diversion allegedly occurred as contractors, engineers, and others doing work on city building projects made cash payments in place of performance bonds. When work was completed on the projects according to contract specifications, refunds were due to the contractors and others who'd made cash deposits.
Instead, Rubira allegedly opened bank accounts of fictitious companies and routed the phony companies' funds that should have gone back to the contractors and others who performed the work, according to a news release from the Los Angeles County District Attorney’s office. It’s curious why Rubira, the alleged perpetrator of the scheme, thought that construction companies and other vendors would forget, ignore, or bypass the cash refunds due them, as all it would seem to require was a single contractor being able to prove to authorities the refund had been unjustifiably withheld, reduced, or diverted.
Nevertheless, the alleged criminal acts occurred between Nov. 2012 and April 2015. This perhaps indicates a criminal process of as-yet not fully described sophistication, an inexplicable laxity on the part of contractors and other vendors to demand back their money, or that was just simply the length of time it took to uncover the fraud.
Santa Clarita had a different accounting approach for projects the city owned as opposed to its own projects. According to Engineering News Record,
“For projects owned by the city, it requires a faithful performance bond and a labor and material bond, each for the complete contract amount. Contractors submitting bids to the city are also expected to submit a bid bond for 10% of the contract amount, which can take the form of a certified or cashier’s check returned when the city council awards the contract. Santa Clarita does not accept cash in lieu of these requirements for its own projects…”
As word of this case makes its way nationally in the construction industry and among governmental agencies, two things will undoubtedly occur:
- Contractors and others will go back to examine every aspect of every cash bond refund, or lack thereof, about which they have any questions.
- Local governments will examine in-depth their accounting and fraud prevention procedures to find out if they, too, have been victimized.
Unfortunately, such situations tend not to be one-time and one-place events. There may be similar scams underway in other locations, or some variation of them. Whether there is or not, to paraphrase a rockabilly classic, there’s going to be “a whole lotta searchin’ going on.”