Construction and Infrastructure – Red-flags and Tools

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September 10, 2025

September 11, 2025

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The construction and infrastructure sectors regularly appear in fraud/ corruption/ misconduct investigations undertaken by the Serious Fraud Office, the NZ Police, professional tribunals and recently the Commerce Commission. Substantial public and private funds flow through infrastructure and construction sectors, presenting opportunities for those who are motivated to benefit from wrongdoing.

There is no evidence that the problems are endemic but they are there. There are also good industry practices such as the Code of Ethics for Licensed Building Practitioners and Te Waihanga’s research on transparency in infrastructure.

Nevertheless at a time when the construction and infrastructure sectors and the public purse are under severe strain, fraud, misconduct and corruption generate direct revenue losses, business failure, project delay, reputation loss as well as impacts on victims, suppliers and employees.

Not just New Zealand

The issues are not isolated to New Zealand. The Association of Certified Fraud Examiners (ACFE) report on Occupational Fraud 2024 (based on 1,921 cases from over 138 countries) highlights the chief occupational fraud schemes in the construction sector being corruption, billing, non cash fraud, payroll, skimming and expense reimbursements.

Context risk factors

TI Australia identifies factors that make construction and infrastructure projects prone to corruption fraud and misconduct:

high financial stakes;
unique projects, making cost comparison more difficult;
high government involvement without sufficient controls;
multiple contractual links and layers; multiple project phases; and project complexity
irregularity of projects, creating pressure to win contracts;
concealment of work without reasonable supervision;
low standards of transparency;
intertwined interests cemented by bribery;
industry fragmentation with different codes of conduct;
a lack of due diligence by those financing projects.

Practice and Mechanisms

A recent webinar run by the United Nations Development Programme (UNDP) focused on corruption and misconduct in the construction and infrastructure sectors. The lead expert was Alexandra Carmen-Lancranjan, a public prosecutor at Romania’s equivalent of the Supreme Court. She specialises in international judicial cooperation. She has led major corruption, financial crime, tax fraud, and money laundering investigations. She also trains magistrates across Europe.

Lancranjan talked about mechanisms, practices, red-flags and mitigations.

Adapting her matrix we have catalogued recent NZ investigations, court action, prosecutions and reports. Not surprisingly, there are similar patterns of practices and mechanisms in these New Zealand cases. The table below is just a snapshot of cases. There are also cases before the courts which we have not included. And there are types of corruption for which we haven’t found specific examples, but which readers could identify.

Corrupt Practice or misconduct	Mechanism	NZ Case
Bribery for Permits	Bribes paid to fast-track or obtain permits	Auckland Council building inspector pleaded guilty to 21 charges of accepting bribes between 2018-20. He signed off on building permits and was paid cash payments as well as substantial home renovations.
Conflict of interest	Decision-makers have ties to companies likely to bid	A Christchurch couple defrauded Oranga Tamariki of more than $2 million, transferring funds into overseas bank accounts. They siphoned funds from OT via invoicing and authorising of payments to a construction company owned by a relative.
Bid Rigging/ Collusion/Phantom Competition	Companies agree in advance who will win (cover bidding, bid rotation) or fake companies created to simulate competition	In 2024 a business owner was found guilty and his business fined $500,000 for engaging in bid rigging for two public construction projects - the Northern Corridor Improvement Project (NZTA) and the Middlemore Bridge Refurbishment (Auckland Transport). Further legal action continues. In another recent case a company has pleaded guilty to cartel behaviour.
Bribery of Procurement officials	Bribes paid to receive confidential info or secure contract	In 2022 a former senior executive at a Council was found guilty of bribery after he arranged for sewage plant and water treatment contracts to be awarded to companies on receipt of bribes. In May 2025 two IT contractors for Spark were jailed for their roles in a bribery and corruption case involving more than $4m in kickbacks.This is New Zealand\’s largest ever private sector case involving a publicly listed company.
Undue Use of Emergency Procedures	Non-competitive tenders justified by false urgency	Several cases of fraud relating to false invoicing or diversion of funds following the Christchurch earthquake
Kickbacks	Contractor inflates invoice, shares proceeds with official	A former contract manager pleaded guilty in a Serious Fraud Office (SFO) fraud and corruption case relating to the awarding of road maintenance contracts. He was the architect of several schemes where he accepted gifts in exchange for awarding work, and submitted false invoices to obtain significant benefits for himself.
Overbilling, fake billing or double billing	Charging for the same task twice or overcharging	A construction company director fraudulently produced invoices of over $600,000 to mitigate cash flow issues between January and March 2020.
Internal Fraud	False invoicing, control of bank accounts	Several high profile fraud incidents in Christchurch, people in financial positions in contracting and manufacturing businesses
Front-loading payments	Bulk of payments made at start, before real progress	April 2025 a builder ran three years behind schedule while building a couple's home. The payment in advance included "labour and materials", but clients had to pay a substantial amount in addition to sub-contractors.
Offshore Transfers or Money Laundering	Use of offshore accounts or shell companies to hide proceeds	An Auckland couple, owners of a construction company, have been sent to prison after personal income tax and GST evasion. They were also accused of income tax and GST evasion and failures to account for PAYE for their construction company.
Tax Evasion	Falsified costs, undeclared labour	Operation Spectrum in 2019 found construction workers were not paying tax, and were paid in cash
Forgery	Forging qualifications to gain profit	A Rotorua man forged the signatures of two Chartered Professional Engineers on nearly 2,000 documents used in Council consenting processes of over 1,000 properties, across 42 Councils.
Mandate Fraud	Fraudsters may pose as suppliers or the organization itself to divert payments to unauthorized accounts	A Waikato building company had its email system compromised by cybercriminals. The attackers quietly monitored email activity, then inserted themselves into a high-value transaction — redirecting more than $150,000 intended for a home build into an offshore account. In 2019 hackers took control of a number of Kiwi builders’ email accounts, sent out fake invoices and stole thousands of dollars from clients.
Use of Ghost companies/subcontractors	Contracts assigned to non-existent or unqualified firms	An employee of a major Auckland infrastructure entity pleaded guilty to over $1m fraud, creating fake invoices and fake companies. He issued invoices from his fictitious companies to four suppliers which then paid the invoices (into his bank account) and on-charged his employer.
Tailored Tender Specifications	Specs designed to exclude all but one bidder	No publicly available examples found in NZ courts, tribunal hearings or reports
Privileged access to maintenance contracts	Long-term operation rights awarded unfairly	No publicly available examples found in NZ courts, tribunal hearings or reports
Bribery for certification or inspections	Officials paid to sign off despite defects	No publicly available examples found in NZ courts, tribunal hearings or reports.
Unjustified Change orders	Manipulating project scope or details after award to increase cost or increase profit	No publicly available examples found in NZ courts, tribunal hearings or reports

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Private adjudication on contractual disputes is widely used in New Zealand’s construction sector. Outcomes are not made public unless they proceed to judicial review. The Building Disputes Tribunal, for example, focuses on contractual and workmanship issues and not professional conduct. The Tribunal publishes generalized insights.

Complaints about professional misconduct can be considered if the practitioner is a member of the Licensed Building Practitioners (LBP) Board, administered by MBIE. Findings of misconduct seem to be published.

Lancranjan also identified “political conflict of interest” as a corrupt practice, citing cases in Romania where politically connected actors directed infrastructure priorities or funding for personal gain. New Zealand’s only parliamentary conviction for corruption resulted in relatively small personal benefit when Taito Philip Field MP was found guilty of providing immigration assistance to Thai migrants in exchange for building services.

Conflict of interest has recently been raised in relation to the Fast-Track Legislation Bill. The Office of the Auditor General (OAG) considered whether and how conflicts of interest were identified and managed while Ministers made decisions about which projects to include in the Fast-Track legislation Bill. This list included construction and infrastructure projects.

The Auditor-General found that overall the system to manage conflicts was sound, with plans in place to manage conflicts of interest. However, OAG also found that there were opportunities to further strengthen conflict management which were not taken, e.g. Ministers could have declared their conflicts of interest earlier in the process. The Auditor-General also encouraged consideration about the current Cabinet Manual, which allows Ministers to participate in Cabinet discussions that they have a conflict with.

ICRAT: A tool to identify and mitigate red-flag corruption hotspots

The Australian chapter of Transparency International has produced a tool to help identify and prevent corruption in the infrastructure and corruption sectors. The ICRAT: Infrastructure Corruption Risk Assessment Tool helps users identify loopholes that enable corruption to thrive . The tool provides a practical, easily applicable roadmap to identify and mitigate red-flag corruption hotspots during the process of project selection and project management.

TI Australia is working with partners in the Solomon Islands and Indonesia to pilot this work. TI Indonesia will assess a national infrastructure prioritisation project responsible for accelerating over 200 large-scale infrastructure projects. TI Solomons will use evidence from their local research to call for stronger transparency and oversight of infrastructure projects in the country.