An Arizona plastering contractor is reportedly facing fines of up to $10,000 per week as a penalty for allegedly persistent employee record-keeping violations.
Federal investigations dating back to 2012 have uncovered evidence of Valley Wide Plastering Inc. intentionally altering its employee’s hourly rates to make it appear as if they were receiving overtime pay, when in reality they were not.
The contractor is also accused of paying employees from non-payroll accounts and of failing to maintain proper payment records.
If Valley Wide fails to implement new record-keeping practices, it will continue to incur penalties of as much as $10,000 per week — which could send shockwaves down project payment chains the company is involved in.
In an industry already riddled with financial challenges, these mistakes represent a significant risk to the financial health of both Valley Wide and also any subcontractors it may be working with.
Construction industry fraud can result in serious financial consequences
While it’s possible some of Valley Wide’s record discrepancies can be attributed simply to negligence, court documents indicate that at least some of the violations were intentionally misleading.
Either way, the result is the same: Both fraud and poor organization can result in heavy fines for contractors large and small.
Hensel Phelps, one of the largest US contractors, was recently hit with a massive $2.8M fine for fraudulently manipulating a federal contract designated for a veteran-owned business.
A construction project’s payment chain can be fragile, and fraudulent behavior can easily disrupt projects and delay payments.
“One bad egg could affect the project schedule, the quality of performance, project safety, and it could even determine whether payment disputes will occur,” said Alex Benarroche, construction attorney and legal associate at Levelset.
Levelset’s payment profile for Valley Wide gives the contractor a score of 75/100 and has tracked six projects without any reported issue, although there is one lien warning for $60,000 in the last month.
Even if some of Valley Wide’s reporting discrepancies can be attributed simply to poor organization, it’s clear that any amount of negligence can result in severe consequences for contractors.