July 27, 2015
In construction you’ll find physical problems you’ll be able to solve by plastering over them. In the arena of surety bonds, managing, massaging, covering over, (plastering) may also be undertaken to manage negative facts or situations which are hindering the issuance of surety bonds.
Bond underwriters all know the fantastic earnestness which bid and performance bonds are required.
“We require a bid bond because we require the project to find the revenues to meet our obligations where you can successful year!”
The pressure’s on! Sometimes that top a higher level motivation leads people to take extreme measures… Where do you draw the line?
Let’s discuss some real life examples and also you decide (our opinion to check out):
Joe, the founder / person who owns ABC Company has an unavoidable problem with bad results. It could be the bankruptcy of these largest client, forcing ABC into bankruptcy. It could be a major accident producing a lawsuit and devastating judgement from the company. As a result, a new company is formed with Joe’s child as owner and President. Joe is not an official and officially functions as being a consultant to the company, although he really runs the show. Is legitimate?
Smith Co. cannot have the bonding capacity they require because of poorly or improperly prepared financial statements from other accountant. They decide, at the time of the subsequent fiscal year, to engage a professional Public Accountant informed about construction clients. Are these claims appropriate?
For Ajax Inc. the initial half the entire year didn’t meet expectations, nevertheless the year altogether needs to be OK. In the event the bonding company asks for their 6 month financial results, the corporation accocunts for an excuse saying these people have a software problem and should not make the statement. The blueprint is usually to stonewall the underwriter in support of provide the fiscal year-end. Does this really hurt anyone considering that the Couple of months statement is comparatively less important?
Before choosing those circumstances, here are the important picture. Is there a nature of the relationship between the contractor and surety?
The surety pays to look at a threat on the part of the contractor, they become their guarantor. It is a true partnership meaning which they succeed or fail together. Everyone loses in the event the contractor defaults on a project.
The surety bases their underwriting decisions on info as provided by the applicant, and depends upon these to be “forthcoming.” To put it mildly, intentionally misrepresenting or concealing relevant facts could be considered fraudulent. Then there is the grey area.
In your three examples, did you find #1 objectionable? This example does occur, and we appreciate the motivation. The underwriter should accept it about the condition that this consultant gives personal indemnity, even though he is not a stockholder.
#2? This looks like an appropriately timed, logical response to the challenge. A-OK!
#3? The sin being committed is the violation of trust using the surety. If there is a true partnership, they’ll proceed determined by full disclosure, knowing every one of the bad and the good. Whether or not the info being withheld does not matter, it is inappropriate for just one party to intentionally conceal it for perceived benefit.
July 27, 2015