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The federal indictment of Disaster Restoration Inc.'s CEO and many of its employees has captured the attention - and imaginations - of the entire disaster remediation industry. We wanted to take a deeper look at the allegations and traveled to Denver, Colorado where we were able to obtain a copy of the indictment from the courthouse. As a matter of public record, this indictment is available to anyone who cares to ask the court's clerk for a copy.

The 31-page indictment makes interesting reading with its long list of alleged fraudulent acts. It's important to remember that all parties are presumed innocent until proven guilty by a court of law. With this in mind, we won't mention each defendant by name, but rather we will provide you with an overview of the charges.

As we've discussed in earlier articles, the indictment involves 60 counts alleged against many current and former DRI employees including: conspiracy, mail fraud, and interference with commerce by threats or violence. In addition, if convicted, forfeiture of property and a monetary judgment as well as possible jail time are possible.

So, what exactly is DRI and the defendants alleged to have conspired to do? According to the indictment (section B, paragraph 18), the defendants and others knowingly agreed and conspired to commit an offense against the United States of America: mail fraud.

The Conspiracy Count (Count 1) The indictment alleges that during weekly meetings, the defendants discussed how to convince their subcontractors to inflate the original bids by 20% to 30% followed by a later decrease on their final invoices of the same amount. From there, DRI allegedly paid the subcontractor the lower rate while submitting the inflated proposal to the insurance company. Where does mail fraud come into play? The indictment alleges that the inflated bids and insurance checks were allegedly sent using the U.S. postal service, hence the mail fraud counts.

Numerous overt acts are detailed in the indictment including allegations that a co-conspirator was instructed to tell subcontractors during new subcontractor orientation meetings that in order to perform work for DRI, they needed to give DRI a 20% discount while including an extra 20% in their bids which would cover the discount.

Another overt act alleges that a subcontractor was told that more work would be given if the contractor would add 20%-30% to his bids and submit two invoices (one with the inflated price, the other with the discount) with the understanding that the lower invoice would be paid.

Midway through a job, a subcontractor was allegedly told to create a second inflated bid of 20% while invoicing DRI the original bid price. When the subcontract expressed discomfort with this arrangement, he was told that all subcontractors for DRI were required to do so and that if he wanted to continue working for DRI, he would need to comply.

The indictment continues listing about 25 similar overt acts, with the final one alleging that one of the defendants told a subcontractor, "Tell me which of the invoices the investigators are looking for and I'll make them disappear."

The indictment lists additional overt acts by project, detailing the invoice amounts. For example, in Section D, Overt Acts, paragraph 48, the indictment alleges that a DRI structural estimate submitted to Traveler's Insurance for $312,619.42 contained at least one inflated line item.

Another example is paragraph 88 which alleges that two invoices (#1103 - $3484.32 and #1104 - $4293.44) were faxed to DRI along with a cover sheet that read, ". . . here are costs for . . . sunroom shades. Your price is on invoice #1103, insurance is on #1104."

In all, 46 additional overt acts by project are listed in the indictment with inflated invoices submitted to insurance companies in excess of $4.5 million.

The Mail Fraud Counts (Counts 2-57) The DRI indictment contains 56 individual mail fraud counts. This section of the indictment alleges that for the purpose of executing the schemes detailed in the conspiracy count, the defendants knowingly caused another to place material (insurance checks which are detailed in the indictment) and authorized the sending and receiving through the U.S. Postal Service as well as private and commercial intrastate carriers. The indictment lists the specific insurance checks and dollar amounts, the date they were sent, the project name, to whom the check was mailed, and the defendants involved.

The Extortion Counts (Counts 58 and 59) Counts 58 and 59 are the counts that allege interference with commerce by threats or violence. Count 58 involves an incident that was alleged to have occurred on or around February 11, 2005 involving an electrical subcontractor and a single DRI employee. The allegation states that the defendant demanded a $5000 credit memo off of the $109,283.20 bill that DRI owed the subcontractor if the subcontractor wanted to be paid. The defendant allegedly obtained this $5000 through the wrongful use of threatened force and fear - including the fear of economic harm.

Count 59 details a similar situation allegedly involving this same defendant and a subcontractor who was owed $57,859 by DRI. The defendant allegedly demanded a $4240 reduction in price if the contractor wanted to be paid. The defendant allegedly obtained this $4240 price reduction through the wrongful use of threatened force and fear - including the fear of economic harm.

The Final Count (Count 60) The final count alleged against the defendants re-alleges all counts preceding it and states that if convicted of the alleged violations, the defendants shall forfeit any and all rights, title, and interest in all property derived from and constituting any proceeds obtained as a result of the offense. This includes and is not limited to: DRI's property located at 4275 Forest Street Denver, Colorado and monetary judgments. In addition, the forfeiture count also targets assets such as bank accounts and real property including (but not limited to) the named defendant's personal home.

These allegations provide a warning to the entire industry that serious charges can be levied against employers and employees alike - with serious consequences. The best business practices are ethical business practices. If your company is "bending the rules" or engaged in practices that don't quite feel right, it's time to take an honest look at how you are conducting your business. In addition, it's important to know exactly what your employees are up to because a single rotten employee can take the entire company down.

Mr. Mark Decherd Dryout Inc. Water Damage

Article Source: ArticlesBase.com - Allegations of Fraud: the Disaster Restoration Inc. Indictment