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The National Association of Surety Bond Producers (NASPB) encourages all obligees to verify the authenticity of every bond before acceptance. But why is that important?

While relatively rare, surety bond fraud can cost millions. Take the case of Tommy Lester Watts, who was sentenced to prison for selling over $5 million of bogus surety bonds under various fictitious names. His victims lost businesses, life savings, family properties, and reputations. The scam went on for three years before the FBI tracked Watts down.

To ensure that the surety bond you’re holding is legitimate, follow these straightforward steps:

1. Confirm That the Surety Is Legitimate
In the scam we mentioned above, the perpetrator used several different corporate aliases and claimed that the bonds were backed by billions in assets. Fortunately, it’s easy to verify that a company is authorized to issue surety bonds and has the underwriting capacity it needs:

• Check the Treasury Department Circular 570, which is published annually for the information of Federal bond-approving officers and persons required to give bonds to the United States consistent with 31 CFR 223.16. (You’ll see our listing under GRAY CASUALTY & SURETY COMPANY [THE].)
• Check with your state’s insurance department to make sure the company is authorized to conduct surety business where the bond will be in effect. (Gray Surety is admitted in all 50 states.)
• Check the company’s AM Best rating to assess its financial security. (Gray Surety is rated A- [Excellent] in Category VIII [$100 Million to $250 Million] by AM Best.)

2. Confirm That the Bond Is Legitimate
By following the steps above, you’ll have confidence in the surety company that’s listed on your bond. But what if a dishonest contractor puts a real company name on a fake bond? That’s why it’s vital to contact the surety directly to validate the bond. To validate a Gray Surety bond, just submit the following information using our secure online form:

• Your company name
• Your preferred contact information
• The bond number, principal name, and amount

3. Confirm That the Details Are Correct
Once you’ve verified that the surety and the bond are authentic, it’s smart to double-check that the details on the bond align with your contract requirements:

• Check that the amount accurately reflects your financial exposure.
• Check that the term covers the project timeline.
• Check that your company’s full legal name and address appear on the document.