The president of a fraud detection and risk management firm, whopreviously gained prominence investigating public constructionfraud, said insurers and their clients are losing vast sums onprivate building project scams.

The losses, said Thomas D. Thacher, president and chiefexecutive officer of New York-based Thacher Associates, could beavoided if insurers and risk managers were more proactive invetting contractors.

By doing advance checking, "In the long run, they [insurers]would save enormous amounts of money," Mr. Thacher said in aninterview yesterday with NU Online.

Mr. Thacher, who formerly served as vice president and inspectorgeneral of the New York City School Construction Authority,discussed, in particular, the fraudulent activities that canvictimize projects where all contractors on the job are insured byowner controlled insurance policies (OCIP) providing wraparoundcoverage.

One of the ways in which project developers can be hurt, hesaid, is that contractors may put in injury claims for workers whoare actually hurt on another job site where they have workersemployed.

Frequently, said Mr. Thacher, it is difficult to track thecomings and goings of everyone on a large construction site andpreventing such scams involves careful monitoring and examinationof sign-in sheets. "It's an intense investigative piece," hesaid.

Mr. Thacher said that often there is no checking of contractors'certificates of insurance and he has been amazed at the number oftimes scam artists have been able to slip by with phony documentsthat could be exposed if someone were to notice the word"Assurance" printed in place of "Insurance."

Turning from workers' compensation to surety issues, he saidthat when it turns out there is a failure of a contractor'sperformance bond, the burden then falls on the project's insurer,he noted.

As evidence that insurers are failing to look closely enough atcontractors, Mr. Thacher said that during his time with the SchoolConstruction Authority, the agency was able to debar 290contractors and of that group "every one had a surety bond."

The debarred contractors were kept off the job for a myriadnumber of factors including organized crime ties, fraudulentactivity, environmental violations and other criminal activity, aswell as prevailing wage law violations.

Mr. Thacher said while carriers' claims departments would favoradvance screening of contractors, but the underwriting side of thebusiness is so cost conscious that "you don't have insurers doingthis kind of integrity vetting."

Another misdeed, involving contractors his firm has noticed isthat they may quietly substitute to a second-tier subcontractorthat is so insubstantial that their address is a vacant lot.

Project owners, he said, need to have good controls and riskmanagement that does checking for fraud and job site monitoring.Such activity, said Mr. Thacher, can "result in huge savings."