Regulation of the Dutch construction market

When it comes to any crime or series of crimes, there are three main components that are typically present when it comes to the people involved. Those three parts would be the opportunity, the financial pressure involved and the rationalization.


In the case of the 2001 Dutch construction fraud episode, the opportunity would be created by the fact that the regulation and control of the Dutch construction market was not pressing or present enough to stop the fraud from starting of perpetuating. As will be explained later in this section, the opportunity for crime in the Dutch construction industry from 1992 to 2001 was substantial due to the lack of clarity the law and the even lesser enforcement quality that underpinned the same (Vulperhorst, 2005).

Financial Pressure

The financial pressure involved in that scandal would be to create and extend profits and money stores more so than is typically allowed for by the Dutch construction market, the government limitations involved and so forth. One intriguing facet of the 2001 construction scandal in the Netherlands is that even those directly involved in the crime itself lamented the fact that the crime was going on. Indeed, they noted how it was made easy to be doing the actions involved but that it was also a negative for them because they felt that the behavior was “crippling the renewal of entrepreneurship in the building trade”. In other words, the actors involved were not necessarily fond of what they were doing to create and perpetuate the fraud. At the same time, they apparently felt financial or other pressure to engage in the fraud because the opportunity was there and there was money to be made from the same. This was apparently enough to get them to pounce on what they felt they could take (Vulperhorst, 2005).


The rationalizations involved from such a scandal like the Dutch scandal in 2001 would obviously vary. However, the point is that the rationalization would somehow deign to justify why the cheating or bad ethics are acceptable. A few examples did or would include that the regulations are too strict, that the profit margins are not high enough, that there is more value to the work being done than is being created, that the people involved deserve the extra money as part of their service to the construction company and/or the public and so forth. When it comes to public sector employees involved in the fraud like the 2001 scandal, there is the concept of them warping and otherwise changing what is permissible and what is allowable under the law. Further, the consent and involvement of such government officials is often necessary to even allow the fraud to begin with as the scandal would not be possible were it not for their cooperation in such a crime (Vulperhorst, 2005).

A specific example of rationalization that can be directly attributed to what was revealed during the 2001 Dutch construction fraud scandal can be seen with the ostensible wrongness of the pre-planning and improper negotiations that were going on as juxtaposed with what the construction directors said about the same. Indeed, they looked back at the clandestine deal-making and negotiations that are otherwise mentioned in this report and said that while they felt the system of collusion should be stopped, there was “scarcely a single contractor has argued that doing business illegally was totally inappropriate in itself”. As for how these construction leaders could justify known and continued violation of the law, they felt that the Dutch laws circa 1992 were lacking in clarity. Beyond that lack of clarity, the enforcement of those same rules was basically absent. Thus, the construction leaders involved had little incentive to comply with the law because there was money to be made from engaging in the behavior and there was seemingly little to no negative consequence for doing so (Vulperhorst, 2005).

The Crime – Fraud Activity Triangle

When it comes to any crime, whether it be a smaller crime or a rather large systemic one, there are three major components. Those parts are the act itself, the concealment of the act and the conversion.

The Act

The first two parts of the fraud activity triangle are fairly obvious to explain and recount while the latter might not be as obvious. The first part is the act itself. The act alone is not enough to “get away” with the crime. However, it is the genesis and onset of the malfeasance that is going on. Just a few examples that can be pulled directly from the 2001 Dutch constructions scandal include bid-rigging, collusion and so forth. One of the acts that was part of the 2001 fraud revelations was supposedly dealt with in the earlier part of the 1990’s. Apparently, it was not dealt with firmly enough. At issue is when the parties involved in a project are allowed to consult and work with each other. There is a defined period of consultation and working together that is expected and allowed for. Coordination in addition to or prior to that is not generally allowed. There was apparently knowledge of this pattern as far back as 1992 but the proper reactions and enforcement mechanisms were not put in place. Fast forward to the 2001 kerfuffle and the seventy million in euros that were i9mproperly handled or charged and it was clear that the same tricks and acts were still in place (Vulperhorst, 2005).


No matter how small or large the crime that is committed, it has to be done in a way that is not obvious and/or that can be concealed. When it comes to collusion and bid rigging, among other things, along the lines of what was seen with the 2001 Dutch construction scandal, this can be easier said than done. They would tend to include using methods and options that lend themselves to not get getting caught as well as getting others to “play along” and otherwise facilitate the fraud or crime that is going on. Participation and cooperation of government officials or the silence of people that know better but say nothing, both of which were very present during the 2001 Dutch construction fraud scandal, would be good examples. A more specific example would be the “clandestine” pre-planning and pre-coordination that was happening up to 2001 that was addition to what was allowed for, not to mention it was against the relevant laws of the country. Even with the knowledge and reactions from earlier events in the 1990’s, it took the fuller and swift action of the Dutch Parliament in 2001 and beyond to truly get to the root of what was going on in the industry. Despite being revealed in part before 2001, the concealment of back-room deals and negotiation was still going on with no end in sight (Vulperhorst, 2005).


The conversion would be the synthesis and filtering of any given act to make it appear to be genuine and legal. Money laundering is a good example. In the case of money laundering, the illegal source and genesis of some funds is concealed and “washed” so as to help to not reveal the fraud or other crime. In the case of the 2001 Dutch construction fraud scandal, this would refer to portraying that the extra funds from inflated bids, kickbacks and subsidies that were not applicable or earned were actually legitimate in nature. The cycle in its totality as it pertains to the 2001 scandal would be the illegal or unethical acts themselves, the concealment of the same and then the conversion of the funds or other activity to make it appear as if the entire process was proper and legal. The illegal subsidies that were procured by the three big construction firms that were later caught and fined would be a great example of the fraud triangle. A more specific example is the padding of profits in general. Indeed, it was found as a result of the Dutch scandal coming to light that customers typically suffered a “detriment” of about 8.8 percent. What this would mean is that they generally paid almost nine percent more than they normally would or should under normal market conditions and proper government oversight. The padding of bids, the collusion between parties and the acquiescence or cooperation of government officials is what all leads to these bids and amounts going higher than they should and thus “converting” them to appear to be normal costs of doing business and part of the legal and normal process of allocating construction projects. In the case of the Dutch construction fraud scandal, some of the names that came to light as being participatory and aiding in the cost inflation were Benk Kothals of the Ministry of Justice and Annemarie Jorritsma, the former Ministry of Transport. It was noted that both of them aided and abetted the fraud on some level. Jorritsma apparently had a rather chummy relationship with the construction executives and power-brokers and Korthals is shown to have revealed “incorrect information” to the House as it relates to the investigation of the fraud and collusion (Vulperhorst, 2005).

Anti-Fraud Efforts

When it comes to the 2001 construction fraud scandal in the Netherlands, it would generally be accepted that there are three parts to the proverbial anti-fraud triangle. Those components would happen to be detection, prevention and deterrence. What is fairly obvious is that detection became much more necessary and part of the issue than prevention and deterrence ever were. Even so, it would be valuable to look at prevention and deterrence and why they did not work, or did not work fully, as it pertains specifically to that scandal.



The first part to stop a fraud once it is in motion is to actually do something about it when it is detected. What is particularly vexing about the 2001 Dutch construction fraud scandal is that there are plenty of times where someone knew something or should have known something but did nothing, for one reason or another. This is more of an issue when it comes to the public officials that were involved with the 2001 scandal or that at least knew about it. However, the ambivalence levied towards and the “playing down” of the scandal by people within the Dutch construction field was apparently pretty think and obvious. Beyond that, it was clear at one point that the news show Zembla had the story and was moving with it. Even so, there was not a lot of concern about the matter because it was seen as though that nobody was taking the story seriously. Thus, the players involved, despite knowing that the media was at least trying to drum up outrage, were apparently not overly concerned. What makes that whole situation even more surreal is that one of the linchpins and drivers of the investigation behind that show and the revelations that were to come is that despite all of the silence and inaction from other players, one of the primary people behind the story was indeed a contractor who worked for one of the large construction firms by the name of Ad Bos. He was a former technical manager for Koop Tjuchem. Just part of what he revealed as part of his whistleblowing included that “building contractors were breaking the law by fixing prices among themselves, giving each other calculation allowances and bribing officials” (Vulperhorst, 2005).

One condition that came out with the 2001 scandal was that allowing fraud to go on for so long and so pervasively means that it can literally take years (if not decades) to truly dissect and discover everything that occurred. For example, one of the scandals that came to light in wake of the 2001 Dutch construction scandal did not fully come to light until three full years later. Per a story in Expatica in 2004, the Public Prosecutions Office was just launching an inquiry about a firm based in Rijswijk that is known as Boele and Ven Eesteren. They are a subsidiary of Koninklijke Volker Wessels Steven. The documents discovered at that point reveal even more crimes that occurred prior to 2001, dating back to at least 19989. There was apparently a litany of price agreements that were wholly illegal in nature. The projects and victims involved included universities, hospitals and schools. There was apparently the defrauding of hundreds of thousands and possibly up to about one million euros as part of the various building projects that were in question. Both commercial and residential projects were rife with fraud, per an initial review. In total, about 250 projects were involved. Large companies that were clearly involved in the fraud, whether as victims or participants, included Bam, Ballast Nedam, IBC Bouw, TBI and Dura Vermeer. One of the major tools o the fraud was a shadow account that was maintained by Koop Tjuchem. In light of the revealing of all of this information, there was an immediate response from a number of forms and groups to reach out to the NMa. These include Ballast Nedam, BAM Groep, Heijmans and Volker Wessels. As might be expected, the Lower House of Parliament demanded answers as information like this started to come out in 2001 and just kept on coming in the years to follow, rather than just weeks and months (Expatica, 2004).


Even if prevention was a bit of an antithesis of what happened during the Dutch construction scandal in 2001, it is still the best way to prevent these events from happening in the first place, or at least limiting them. Due to the pervasive amount of “it’s just the way it is” mentality that existed during the 2001 scandal, it is apparent that a systemic paradigm shift was necessary to prevent the 2001-related frauds from starting and continuing as they did. Even if the reaction was delayed, there was a ramping up of prevention and investigation as a result of the 2001 scandal. The Schiphol tunnel part of the fraud issue, as will be covered more in-depth in the next section, led to a flurry of investigations including from the primary one from the Dutch Parliament as well as similar and concurrent ones from the Public Prosecutions Department and the Dutch Competition Office. The latter is the cartel watchdog in the Netherlands. One major part of prevention that was sorely missing or at least under-utilized during the 2001 Dutch scandal was the proper risk analysis and other due diligence that is typically done for larger projects and that should be done per procedure. Since that was simply not there, there was instead a “culture of backhanders and junkets” as well as “lack of alertness and firm action” by the relevant authorities. For example, there were a number of financial “settlements” that were just good on paper and that were not real. Had there been lack of cooperation from corrupt officials and/or proper oversight from the ones that were supposedly not involved in the fraud, detection would have (and should have) happened earlier (Vulperhorst, 2005).

One major aspect to consider when it comes to prevention and creating a culture that leads to the same is how the culture and society perceives itself. When it comes to the Netherlands, that would seem to be at least part of what caused the 2001 scandal (and those before it) to be as bad and protracted as they were. Indeed, the Dutch would seem to think that they are among the least corrupt societies in the world. As shown by the 2001 revelations of Ad Bos and others, that would seem to be at least partially untrue. Indeed and instead, there seems to be “no major interest in fighting corruption” (Haar, 2015).

Something else to consider is that while the Prosecutor’s Office could and should be part of any resolution and prosecution of a scandal like the one mentioned in this report, they cannot be the primary prevention and/or enforcement apparatus. Under the constructs and limitations of Dutch law, it is the administrative arms and realms of the Dutch government that could have and should have been part of preventing the illegal behavior in question, or at least catching it earlier than they did. Further, when said administrative officers and personnel are made directly aware of the problem and they still find a way to dawdle and do little for two full years, that is a problem that cannot be allowed to reoccur (Van Den Heuvel, 2005). Something else to consider is that a proper amount of control must be exerted when it comes to highly competitive markets. The reaction of some firms in such a paradigm are to start inflating bids and cost reimbursements. If this is nto stopped right away, it creates a vicious cycle that can spiral out of control, such as was the case in the 2001 Dutch scandal (Doree, 2004). One thing to keep in mind about the 2001 scandal is that the body of work on collusive bidding was rather weak in 2001 (and still is) and thus what happened prior to 2001 is not entirely unexpected, and this can be said in direction relation to the scandal that is the case study of this report (Chotibhongs & Arditi, 2012).


Another important part of preventing a system of fraud and deceit from becoming entrenched and so massive is to deter the people involved from engaging in the behavior to begin with. This could mean bigger and more significant fines. It should also mean actually jailing some of the people involved so that there are personal stakes involved when it comes to engaging in the relevant behavior rather than just punishing the business and its financial stability. Thankfully, there were indeed a decent number of people that were personally fined or prosecuted in response to the crimes. This will hopefully create a new normal whereby people avoid engaging in such fraud because they are deterred by both the consequences to the business as well as themselves (Vulperhorst, 2005).

It should be noted that there were indeed about a dozen staff members that were criminally prosecuted on a personal level in the wake of the scandal. Those included a total of three people that were bribing public officials. Overall, the people that were prosecuted included four people from KWS, two from BAM and three from Heijmans. This is easily justified given that some projects were charged at a 90 percent premium. There was also the possibility extended that many more people would be prosecuted. Indeed, a scant dozen does not seem to be nearly enough given the magnitude and gravity involved, at least to many experts (Expatica, 2003).

Even with those decent results noted above, it is clear that the fear of these sorts of punishments were simply not there prior to the scandal truly coming to light in 2001. Indeed, there was a common and pervasive reaction of nonchalance and ambivalence about what was obviously going on. Part of the reason that Ad Bos went to the trouble of reporting the crimes he was aware of to the media was that he himself had tried to go as far as the Ministry of Justice and the police as a means to try and get any of them to take fraud seriously and thus something to be deterred. However, his results when it comes to trying to get a response can be summed up by the revelation that “he found it practically impossible to get the Ministry of Justice and the police to take the subject of fraud in the construction industry seriously” (Vulperhorst, 2005).

Even if it was fairly delayed, there was indeed a political and law enforcement “storm” that was coming. One of the catalysts for there to finally be action and some later focus on deterring future acts was what happened with the Schiphol tunnel. The three main contractors involved with that project as well as the governmental and other bodies were engaged in a massive amount of collusion and coordination. The scandal was so entrenched and massive that the profit-takers involved netted a gaudy 95 million euros over a five-year period when the more rational and reasonable number would have been 37 million, which is obviously less than half than what ended up happening. As alluded elsewhere in this report, it is perhaps a bit frustrating and underwhelming that only the businesses and agencies had their proverbial hand slapped a result of the scandal. Even so, there was at least a full revelation of what happened and some punishment rendered for what occurred (Vulperhorst, 2005).




















Chotibhongs, R, & Arditi, D 2012, ‘Detection of Collusive Behavior’, Journal Of Construction

Engineering & Management, 138, 11, pp. 1251-1258, Academic Search Premier,

EBSCOhost, viewed 13 August 2017.

Dorée, AG 2004, ‘Collusion in the Dutch construction industry: an industrial organization

perspective’, Building Research & Information, 32, 2, pp. 146-156, Business Source

Premier, EBSCOhost, viewed 13 August 2017.

Expatica (2003). Dutch building companies face fraud charges. [online] Available


charges_114811.html [Accessed 13 Aug. 2017].

Expatica (2017). Construction sector hit by more fraud allegations. [online]

Available at:

allegations_116013.html [Accessed 13 Aug. 2017].

Haar, H. (2015). Thesis about fraud and corruption in the Netherlands: “No major interest

in fighting corruption” | Today Newspaper St. Maarten. [online] Available


major-interest-in-fighting-corruption/ [Accessed 13 Aug. 2017].

Van Den Heuvel, G 2005, ‘The Parliamentary Enquiry on Fraud in the Dutch Construction

Industry Collusion as Concept Between Corruption and State-Corporate Crime’, Crime, Law

& Social Change, 44, 2, pp. 133-151, SocINDEX with Full Text, EBSCOhost, viewed 13

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