These men are paid to know your business better than you know it yourself. They are private investigators hired by construction firms hit by employee crime, whether on site or in the boardroom. Their job is to expose the enemy within.
David Gill had to pick the right team for the job. He wanted skilled tradesmen and general labourers who would take on tough and dirty work – but above all he was looking for men who could handle danger. This was the £350m Heathrow Express project, most of which was taking place hundreds of metres below the surface in underground tunnels. But Gill’s recruits weren’t going to build the tunnels – their job was to spy on the men who were.
This was a 12-man undercover unit, hired by Gill’s investigation firm, Linx International, to pose as construction workers on site in west London. Initially, they were brought in to investigate allegations of theft. Balfour Beatty, the main contractor, had noticed that large quantities of steel used on the tracks were going missing. Linx set up a night surveillance operation to catch the culprits, but the team soon realised it was dealing with more than small-time thieves: it had stumbled on a criminal gang that were dealing drugs and a separate trade in forged CSCS cards.
After three months, the Linx team had uncovered the evidence it needed and identified the ringleaders. It was time to strike.
This operation went on to be one of the biggest drug busts in the UK construction industry. As a result, 20 operatives were forced to leave the site, the drug dealers were handed over to the Metropolitan police drugs squad and the training provider identified as the source of the fake CSCS cards was stripped of its CITB accreditation.
That was more than nine years ago.
Since then, Heathrow Express has become a textbook case in how to successfully infiltrate and expose criminal gangs on sites and Linx has been in demand from construction firms as well as practically every other sector.
In the wake of the WorldCom and Enron scandals, companies everywhere are worried about the damage corruption and malpractice can do on business. More than 40% of engineering and construction companies are victims of fraud, according to a Pricewaterhouse Coopers global economic crime survey published earlier this month, and more than half is committed by employees.
Today frauds are much more sophisticated so the detection methods have to be a lot more subtle
Chris Hill, Norton Rose
Scams come in all shapes and sizes – from simple theft and money laundering, to bribery, blackmail, intimidation and violence. In construction, the most common scam is theft or substitution of equipment, being named by 57% of the victims featured in PWC’s survey. But perhaps just as damaging, although less quantifiable, is the impact scandals and mishaps have on a company’s reputation. Reputation is what specialist “risk consultants” such as Linx are paid to protect. They are hired to identify the threats to a business – whether they come from competitors or employees – and to mitigate them. But according to Gill, many business managers simply don’t know that consultancies such as his exist.
In fact, Linx is just one of many consultants offering a range of services, from security reviews and vetting of potential employees and trading partners to crisis management strategies and investigations into internal fraud and theft. The most famous of these sleuths is the American giant Kroll, credited for uncovering Saddam Hussein’s assets hidden in Swiss bank accounts after the first Gulf war. Linx may not have such high-profile cases to its name, but in the UK it has a solid reputation and an impressive client list.
The consultancy, comprising Gill and seven full-time employees, is based in an anonymous street in Walton-on-Thames, a sleepy west London suburb. Gill set it up in 1987 after an 11-year career in the police. In that time, he had been one of the youngest officers to join the CID – an exciting posting for a 21 year old who says he only became a police officer to get the free driving lessons. “It was the 1970s, right at the end of the Sweeney era.” He had his fair share of excitement in the force – he had a shotgun pulled on him and was attacked by a man with an axe – but eventually the novelty wore off. Once he had decided to set up on his own, he has never looked back: “You get to choose your clients and there’s no overtime restrictions.”
Gill hates the term “private investigator”.
It brings to mind the stereotypical dirty mac keeping tabs on adulterous husbands and wives. “There are guys who do that sort of work, but not us. We deal with businesses and we work at board level.” That’s why Gill prefers to describe himself as a “security and risk consultant” – it has a much more professional ring to it. Gill is edgy about giving the names of his clients, which include multinationals in food, retail, banking, IT, utilities and manufacturing as well as insurers and government agencies.
A growing area of work for Gill and his team has come from contractors and housebuilders. It’s hardly a revelation that the construction industry is vulnerable to fraud and corruption – with large amounts of business conducted through cash-in-hand deals and a relatively unregulated and mobile workforce, it is a difficult area to police. According to Transparency International, the global anti-corruption organisation, construction is perceived as the most corrupt of all the business sectors with the highest propensity to pay or offer bribes to secure work.
Procurement scams and mucky deals
You’re isolated, your only friends are crows, seagulls and rats, and the stench is just unbelievable
Low levels of surveillance on construction sites have made matters worse – criminals have come to regard them as safe and easy places in which to operate. Drugs rackets are one obvious result, but Gill says construction is also vulnerable to procurement scams.
He uncovered one such scam recently after being brought in to investigate a procurement manager who was suspected of having an affair with a consultant. Through surveillance, Linx was able to establish that there was a relationship – not a crime in itself, but definitely a conflict of interest.
It turned out the consultant was billing the company more than £4500 a month for doing very little, and the manager was signing off her invoices.
Linx also established that the procurement manager and three others were taking kickbacks from a big supplier, including a weekend jolly to Amsterdam. But worse was to come – the managers had conspired with the supplier to sign the company up to a 20-year lease for offices in the UK, costing £130,000 a year. When interviewed, the managers immediately confessed and resigned. The client chose not to pursue the matter with the police but is currently renegotiating the onerous terms of the lease with the supplier.
Another common scam in construction is on “muck away” contracts, where thousands of tonnes of earth and waste have to be removed from sites. The increased rates of landfill tax, which came into force this April, mean that waste disposal companies are charged £21 per tonne of active, or contaminated, waste. Inactive waste, such as sand, gravel, stone, topsoil and bricks, is charged at a much lower rate of £2 per tonne.
To avoid paying the top rate of tax, some companies disguise the contaminated waste by simply covering it up with a layer of inactive waste. They then bribe the clerk at the landfill site who weighs the trucks at the gate. Gill’s men exposed one of these scams on a recent surveillance job at a landfill site in the Midlands. It involved two of Gill’s men lying in rubbish for two days. They got the evidence they needed against the owner of the waste disposal company, but the work was not pleasant: “You’re isolated, your only friends are crows, seagulls and rats, and the stench is just unbelievable,” says Gill. In fact, one of his agents was nearly scooped up and thrown into the landfill.
The attraction of Linx for clients is clear – it promises to resolve their problems without interrupting business and, in most cases, without involving the police as this could lead to unwanted attention from media and shareholders.
Tim Randles, a senior executive at law firm Laytons who has referred his own clients to Linx, agrees. “If a business has been the victim of a corporate crime it may not be something it wants to advertise.” On the other hand, he says, by hiring a specialist investigator companies will ensure that they have a well-prepared case if they decide to bring in the police at a later stage or dismiss an employee for gross misconduct.
It can all backfire if an employee finds out he is being watched before you’ve got the dirt
Edward Goodwyn, Lawyer
Who else will gather the evidence?
If a company like Linx is not hired, invariably the task of evidence-gathering falls to a line manager, the human resources department or the in-house security guard who doubles as facilities manager. These people have neither the skills in observation, interviewing and computer forensics, nor the legal knowledge of a professional investigator. According to Randles, this often means that cases collapse because of a procedural irregularity on the part of the employer: “As a lawyer taking these cases to court, you are entirely dependent on the quality of the evidence.”
Chris Hill, a partner at law firm Norton Rose, also thinks investigators are useful and says they have been used by contractors for many years. “Back in the 1970s, when corruption was endemic in construction, we used to use what were called enquiry agents. Today the issues have changed. Frauds are much more sophisticated so the detection methods have to be more sophisticated and a lot more subtle.”
Edward Goodwyn, an employment lawyer at Pinsent Masons, agrees but says clients should think carefully about when it is appropriate to hire investigators. “You may suspect an employee of bunking off work, but end up spending a fortune having him followed and not get any helpful information. It can also backfire spectacularly if an employee finds out he is being watched before you’ve got the dirt.”
Investigators are most effective, according to Goodwyn, in cases where an employee has defrauded a company. “Clients want to know where the money has gone so they can get a seizure order from the courts. Investigators are good at tracing money and finding out about people’s finances. I don’t know how they do it, but it’s terribly helpful.”
Unsurprisingly, Gill won’t divulge the exact rates Linx charges; he says it depends on the service the client requires. He does groan that security is only ever seen as an expense rather than a saving. Typically, Linx works on a project basis with the client, who pays 50% of the fee in advance and gets a first consultation free. Many clearly see that as good value for money – about a dozen clients have gone on to employ Linx on a retainer. One of the savings available is reduced insurance premiums. Insurers often regard employing a security specialist as a serious attempt to protect the interests of the company.
There are a lot of these outfits in the market, but not all are of the same standard. The Security Industry Authority and the Home Office are looking at options for licensing private investigators, but a report that was supposed to be published this summer has been indefinitely delayed. At present, word of mouth is the only way of knowing which firms are top notch.
Laytons’ Randles says: “Always get a personal recommendation before using a consultant. And you should back that up with references and I insist on interviewing them personally before recommending to a client. We all put our reputations on the line when we make a recommendation.”
Construction, like every other industry, is susceptible to crime. “No area of business is void of criminality. It is a fact of life and it’s not going away. The companies that are not prepared will be the ones that suffer,” says Gill. It would be reassuring to know that someone like Gill was on your side against this criminal underworld, but he has one warning for anybody wishing to hire a private investigator: “Of course we check our clients out too – make sure we’re working for the good guys …”