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The Tony Moss Firm, LCC > Blog > Criminal Defense > $100 Million Surety Bond Scheme

$100 Million Surety Bond Scheme

An Orange Park, Florida, man was recently sentenced to almost five years in prison for operating a $100 million surety bond fraud scheme. From August 2012 to July 2013, Eric Campbell created several corporations in order to sell fraudulent surety bonds to various construction projects around the country. The unsuspecting purchasers of these fraudulent bonds then submitted them to various federal and local governments, as required where a surety bond is required for construction contracts. The fraudulent bonds were submitted to the cities of Palo Alto, California, McDonough, Georgia, and Nogales, Arizona; DeKalb County, Georgia; the state of Kentucky; the territory of American Samoa; the U.S. Veterans Administration; the Army Corps of Engineers; and several United States military bases, among other entities.

Campbell accomplished this massive fraud scheme by falsely stating to various contractors and government agencies that he had the authority to issue surety bonds on behalf of two insurance companies that are affiliates of The Chubb Group insurance conglomerate. In reality, Campbell printed fake surety bonds, embossed them using a counterfeit seal, and forged signatures of the insurance company’s officials. A total of $100 million bonds were issued by Campbell and his team, and they received more than $2.2 million in premium payments.

Campbell was ultimately convicted in the U.S. District Court for the Northern District of Georgia after an intensive investigation by the FBI and U.S. Attorney’s office. He was sentenced to four years and nine months in prison, three years of subsequent supervised release, and is required to pay restitution of over $1.9 million. Not only did this scheme defraud numerous individuals, but it caused delays for several major construction projects across the country.

What is Surety Bond Fraud?

Surety bonds are essentially insurance policies between a contractor, the project owner (client), and a third-party company. They are used to ensure that a contract is completed even if a contractor defaults (i.e., goes bankrupt). Basically, the bond allows the owner of the project to ensure the project is finished regardless of the contractor’s financial situation. The contractor goes to a surety (insurance) company to obtain the bond and present it as part of the bidding process with the project owner. If the contractor defaults once the contract is signed, the surety company is required to find another contractor to finish the job, or is required to compensate the owner for their losses.

Major project owners, both public and private, will not accept a bid from a contractor unless it is attached to a surety bond, so this is a very critical part of the contract and construction bidding process. Furthermore, any construction contract with the federal government that is worth over $150,000 (i.e., almost all of them) requires a surety bond either during the bidding process or as a condition of being awarded the contract. Most state and municipal governments have the same rules in place. Surety bonds are especially useful for smaller contractors because they allow such contractors to compete for contracts for which they may otherwise not qualify.

Now that we understand what surety bonds are, it’s easier to understand what surety bond fraud is, and how damaging it can be for contractors and projects. Such fraud can not only put the entire project at risk in the event a contractor does default, but it results in the contractors losing money to fraudulent premium payments. Major infrastructure and other construction projects are substantially delayed or cheated out of using superior contractors because of these fraud schemes.

If You Think You Need a Lawyer, YOU DO. Call Now!

Because of the stakes involved, federal authorities have been focusing added resources on catching surety bond fraudsters. If you find yourself under investigation for surety bond-related fraud, or suspect the use of fraudulent surety bonds, please contact Attorney Tony Moss at the Tony Moss Firm, L.L.C. to discuss these issues, or any other white collar defense matters. He has offices located in Miami and Fort Lauderdale, and is prepared to put his 27 years of experience to work for you.

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