Georgia Tech Procurement Assistance Center

Two companies and individuals indicted for exploiting disadvantaged business program

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Stamatios “Tom” Kousisis of Pennsylvania and Emanouel “Manny” Frangos of Ohio, along with Alpha Painting & Construction Co., Inc. of Baltimore, Maryland, and Liberty Maintenance, Inc. of Youngstown, Ohio were charged last week with conspiracy to commit wire fraud, wire fraud, and making false statements in a scheme involving the U.S. Dept. of Transportation’s Disadvantaged Business Program (DBE) in connection with Pennsylvania’s federally-funded Girard Point Bridge project and the federally-funded 30th Street Station.

Kousisis is the Project Manager of Alpha and Frangos is an owner of Liberty Maintenance, which are both bridge painting contractors, although neither is a certified DBE in Pennsylvania.  The alleged scheme involved Alpha-Liberty JV, a joint venture between defendants Liberty Maintenance and Alpha Painting, and Markias, Inc., a now-defunct certified DBE.

In September 2009, PENNDOT awarded a contract for approximately $70.3M to a triventure that included the Alpha-Liberty JV to perform structural steel painting and repairs, and concrete repairs, on the Girard Point Bridge in Philadelphia.  As part of that award, the triventure made a commitment to PENNDOT to subcontract approximately $4.7M in DBE work to Markias to supply materials to be used in performing the contract.  Under governing law, the Alpha-Liberty joint venture was only entitled to credit for work performed by a DBE that was performing a commercially useful function.  Instead, according to the indictment, the Alpha-Liberty JV and Kousisis ordered materials needed for their work on the Girard Point Project directly from suppliers that were not DBEs, and used Markias as a mere pass-through or front, to make it falsely appear that disadvantaged business enterprise requirements had been met on the Girard Point Project when those requirements had in fact not been met.  Markias did not perform a commercially useful function.

In December 2010, PENNDOT awarded a contract for approximately $50.8 million to a joint venture of two companies referred to in the indictment as Company C and Company F, to perform structural steel painting and repairs and roadway reconstruction beneath and around AMTRAK’s 30th Street Train Station in Philadelphia.  Company C and Company F entered into a subcontract, for approximately $15 million, for the Alpha-Liberty JV to perform the structural steel painting beneath 30th Street Station.  As part of the bid process, Company C and Company F committed to subcontract approximately $1.7M in Disadvantaged Business work to Markias to supply paint materials for the 30th Street Project.  Instead, according to the indictment, the Alpha-Liberty JV and Kousisis ordered materials needed for their work on the 30th Station Project directly from suppliers that were not DBEs, and used Markias as a mere pass-through or front, to make it falsely appear that the DBE requirements had been met on the 30th Station Project when those requirements had in fact not been met.  Markias did not perform a commercially useful function.

In addition, the indictment alleges that the Alpha-Liberty JV and Kousisis, and Frangos ordered materials to be delivered to and used on out-of-state projects while directing that the purchase invoices be sent to Markias in New Jersey.  Then, allegedly at the direction of Alpha-Liberty JV and Kousisis, and Frangos, Markias issued invoices that made it falsely appear that those supplies had been used on the Girard Point and 30th Street Projects in Pennsylvania.  Alpha-Liberty JV and Kousisis, and Frangos allegedly caused Company C to falsely report to PENNDOT that the supplies delivered to and used on the out-of-state projects qualified for DBE credit in Pennsylvania when those purchases did not so qualify.  PENNDOT awarded approximately $3.26 million in DBE credit to for the Girard Point Project and approximately $1.275 million in DBE credit for the 30th Street Station Project based on DBE work supposedly performed by a disadvantaged business (Markias). Alpha-Liberty JV paid Markias 2.25% of the face value of the invoices processed by Markias allegedly to act as a pass-through.

If convicted the defendants face a statutory maximum sentence of 170 years in prison, a possible fine, supervised release, and a $1,600 special assessment.

The case was investigated by the U.S. Department of Transportation Office of Inspector General, the FBI, the Department of Labor Office of Inspector General, and Amtrak Office of Inspector General.

An indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.

Source: https://www.justice.gov/usao-edpa/pr/charges-allege-two-individuals-and-their-companies-exploited-usdot-disadvantaged

Indictment in $40 million alleged fraud case signals increased scrutiny of SDVOSB contractors

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On December 1, 2017, the U.S. Department of Justice (DOJ) announced the federal grand indictment of an army veteran for allegedly engaging in major government program fraud by using his status as a service-disabled veteran to obtain contracts set-aside for service-disabled veteran-owned small businesses (SDVOSBs), despite the fact that he did not control the management and daily operations of the company to which the contracts were awarded.

In the case, U.S. v. Dial Jr., the veteran has been charged with four counts of major program fraud as well as wire fraud in connection with his company United Medical Design Builders, LLC (“UMDB”) receiving over $40 million in government contract funds from the U.S. Army Corps of Engineers between 2008 and 2015.

Specifically, the Government alleged that Dial, who is a disabled Army veteran, acted only as a “figurehead” of UMDB in order for UMDB to obtain a SDVOSB set-aside contract to build health care facilities.

Keep reading this article at: https://www.lexology.com/library/detail.aspx?g=9b298da1-560e-43ad-86b2-2768bc5ba765

“Reverse” False Claims Act liability extended to bonding companies

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On Monday, the U.S. District Court for the District of Columbia ruled that bonding companies can be held liable for treble damages under the False Claims Act for issuing surety bonds to construction companies that falsely claim to be a Service-Disabled Veteran-Owned Small Business (SDVOSB).

In a novel reverse False Claims Act case, whistleblower Andrew Scollick alleged that the bonding companies “knew or should have known” the construction companies were shell companies acting as a front for larger non-veteran owned entities violating the government’s contracting requirements.

A reverse false claim action can occur when defendants knowingly make a false statement in order to avoid having to pay the government when payment is otherwise due in violation of 31 U.S.C. § 3729(a)(1)(G) (reverse false claims).  See United States ex. rel. Scollick v. Narula, Case No: 14-cv-01339-RCL (District Court, District of Columbia. July 31, 2017).

Under the Miller Act, government construction contractors must post bid bonds, performance bonds, and payment bonds that guarantee that the contractor will perform the work according to the terms of the contract. In this case, the contract terms required that the construction be performed by a SDVOSB entity.  Michael Kohn, of Kohn, Kohn & Colapinto, who represents the whistleblower, argued that given their role in providing a surety bond to the contractor the bonding companies would know whether the invoicing being billed against the contract is being performed by a SDVOSB.  The district court agreed and found that a “reverse false claims” violation occurred because the bonding company knew or should have known that the construction organization was not a SDVOSB and the act of issuing surety bonds furthered the fraud.  As a result, the bonding companies were held legally obligated to return to the government funds the bonding company knew to be paid to contractor firms fraudulently posing as SDVOSBs. Being held liable under the False Claims Act means that treble damages will be awarded for every dollar up to the amount of the bond that the government paid out under each contract.

Because of the substantial dollar amounts involved, it is not all that uncommon for contractors to falsify service-disabled veteran status. Holding bonding companies liable when they have reason to know of the fraud could have an immense impact on stamping out such contract fraud. “Holding bonding companies liable for treble damages in these types of case will have a huge impact on preventing fraud in government contracts and will help ensure these contracts go to disabled veteran-owned companies as intended,” said Kohn.

The Scollick case alleges that two of the largest surety bonding companies, Hanover Insurance Company and Hudson Insurance Company, knowingly bonded dozens of Veteran Administration construction contracts totaling more than $12.5 million with the knowledge that the bonded contractors did not qualify as service-disabled, veteran-owned small businesses.

 

Source: http://www.webwire.com/ViewPressRel.asp?aId=211708

S.C. feds allege contractor, associates bilked government of $350 million

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SC Fraud 08.2016Federal prosecutors have indicted five men, two women and two corporations, alleging they illegally won government contracts worth some $350 million by misrepresenting themselves as straw companies controlled by either low-income men and women or disabled veterans.

Most of the seven are from the Columbia, South Carolina area.

An 18-count indictment in the case charges that Thomas Brock, 49 of Camden; Jerry Eddins, 66, of Aspermont, Texas; Harry Michael White, 65, of Columbia; Cory J. Adams, 43, of Columbia; Tory Brock, 51, of Camden; Alfonza McCutchen Jr., 39, of Irmo; and Allison Amanda Sauls, 46, of New York, N.Y., secretly set up an interlocking set of businesses and conspired to defraud the federal government by falsifying their eligibility to get government contracts.

The conspirators also identified, created and recruited “businesses owned by qualifying minorities, women, veterans and disabled veterans” and “hid their roles in the companies from the Small Business Administration and the Veterans Administration,” the indictment states.

Jury convicts contractor of defrauding city’s womens business program

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FBI SealA federal jury on Friday (June 17, 2016) convicted a suburban Chicago construction subcontracting firm on fraud charges for scheming to help a general contractor falsely satisfy the woman’s business enterprise (WBE) requirement on city of Chicago construction projects.

As the owner of the WBE, Elizabeth Perino agreed to allow her company to be claimed as a subcontractor on city projects so that the prime contractor could satisfy its requirement to assign a portion of the work to female-owned businesses.  Perino falsified paperwork to conceal the fact that her business, Perdel Contracting Co., would perform no actual work on the projects.  As a result of Perino’s fraud, Perdel expected to receive payment equivalent to a percentage of the work that Perdel Contracting fraudulently claimed to have performed.

Perino, 62, was convicted on three counts of wire fraud and one count of mail fraud.  The conviction is punishable by a maximum sentence of 80 years in prison.  U.S. District Judge Gary Feinerman indicated he will schedule a sentencing hearing at a later date.

Background

A city of Chicago ordinance establishes an overall goal of awarding at least 5% of total annual funding of all city contracts to WBEs.  The city’s program mirrors the federal government’s WOSB, or women-owned small-business, contracting program.  For contracts with values exceeding $10,000, each contractor has to commit a certain percentage of labor to WBEs, either as a joint venture or subcontractor, or by purchasing goods or services from a WBE.  In addition to being a WBE, the Perdel firm, which specializes in concrete and carpentry work, also qualified to participate in city projects as a certified Disadvantaged Business Enterprise (DBE).  The DBE program is a requirement by the U.S. Dept. of Transportation, applicable to federally-assisted transportation projects like airports, highways, and public transit systems.

Facts

Evidence at the four-day trial revealed:

  • Perino and a co-worker agreed to act as a “pass-through” WBE/DBE on two city projects, meaning that Perdel’s employees would perform no work and Perdel’s equipment would not be used.
  • For one of the projects – at O’Hare International Airport – Perino agreed to place the general contractor’s employees on Perdel’s payroll to perform the work that would be credited to Perdel.
  • Perino also entered into a sham contract to “purchase” street sweepers from the general contractor and title them in Perdel’s name while the general contractor’s workers performed the street sweeping as purported employees of Perdel.  Perino and the general contractor further agreed that, at the conclusion of the O’Hare project, the street sweepers would be returned to the general contractor for $1 per machine, and Perdel would receive 18% on top of the labor costs and $20 per hour for the street sweepers.

The conviction was announced by the U.S. Attorney for the Northern District of Illinois, along with representatives of the Federal Bureau of Investigation, and the Inspector General’s offices of the U.S. Dept. of Transportation, the U.S. Dept. of Labor, and the City of Chicago.

Source: https://www.justice.gov/usao-ndil/pr/jury-convicts-lockport-contractor-defrauding-city-chicago-s-women-owned-business-entity

See the FBI’s 2012 announcement of the charges filed against Perino at: https://www.fbi.gov/chicago/press-releases/2012/two-area-contractors-charged-with-fraud-involving-minority-and-women-set-asides-for-government-construction-contracts

Yet another DBE fraud case: Steel company execs get $1 million fine, 5 years’ probation

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Phony owner of DBE gets 3 years of probation and is ordered to pay $336,219 in restitution.

Two Pennsylvania men who funneled business to their family’s steel construction firm by using a shell company to qualify as a disadvantaged business enterprise (DBE) must repay the government $1 million.

USDOTU.S. District Judge Lawrence Stengel last week sentenced brothers Dennis Weber, 66, and Dale Weber, 52, to five years of probation and ordered them to pay restitution to the government for the scheme, which netted Carl M. Weber Steel Service hundreds of government construction contacts between 1995 and 2011.

Stengel also sentenced Judy Noll, of Mertztown, the owner of Karen Construction, to three years of probation and ordered her to pay $336,219 in restitution, according to a court filing Wednesday.

Each pleaded guilty in October to conspiracy to commit wire fraud. Their attorneys could not be reached.

Prosecutors said Karen Construction was a sham that the three used to obtain bridge and highway construction contracts through a U.S. Department of Transportation program for disadvantaged businesses.

Keep reading this article at: http://www.mcall.com/news/breaking/mc-berks-steel-fraud-sentences-20160207-story.html

Construction officials pay $1 million to settle DBE fraud

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Justice Dept. sealAn upstate New York construction company and three individuals have paid $1,012,000 to resolve claims that they defrauded a government program designed to benefit women- and minority-owned contractors, announced U.S. Attorney Richard S. Hartunian. The settling parties are ING Civil, Inc. and its owner, Corey Ingerson; James Beaudoin, who is the former president of Rexford Albany Municipal Supply Company, Inc. (RAMSCO); and former RAMSCO salesman John Leary.

USDOTThe U.S. Department of Transportation (USDOT) has promulgated regulations intended to provide opportunities for businesses owned by socially and economically disadvantaged individuals to perform work on projects financed, at least in part, by the federal government. USDOT also administers a Disadvantaged Business Enterprise (DBE) program that requires state and local governments receiving federal funding to establish goals for the participation of DBEs on federally-funded projects. A contractor may claim credit for a DBE’s participation on a project only if the DBE serves a “commercially useful function.” A DBE performs a commercially useful function when it is responsible for execution of a distinct element of work on a contract. A DBE does not serve a commercially useful function if its role is limited to that of an extra participant to a transaction through which funds are passed to create the impression that members of a historically disadvantaged group worked on a contract.

The settlements resolve the following allegations:

  • In 2009, when preparing to submit a bid to the City of Cohoes to reconstruct the Bridge Avenue Bridge over the Mohawk River, Corey Ingerson spoke with John Leary to see if RAMSCO would provide a quote for materials that ING Civil would need if awarded the project. Leary explained to Ingerson that RAMSCO could both provide the materials for the project and bill them through a DBE, American Indian Builders & Suppliers, Inc. (AIB), to help ING Civil satisfy the project’s DBE goals. Shortly thereafter, Ingerson learned that ING Civil had been awarded the project, and he signed a DBE Utilization Worksheet representing that AIB would supply $306,285 worth of materials for the project. When Ingerson signed the DBE Utilization Worksheet agreeing to work with AIB, he knew virtually nothing about the company and had not had any substantive discussions with anyone from AIB about the materials needed for the project. All of Ingerson’s discussions on that topic were with RAMSCO officials. ING Civil ended up purchasing all materials on its DBE Utilization Worksheet from RAMSCO, rather than AIB.
  • In November 2010, after work on the Bridge Avenue Bridge was substantially complete, local government officials asked Ingerson to document ING Civil’s DBE expenditures on the project. Ingerson then contacted Leary to explain that ING Civil did not have the documentation necessary to support a claim that it had purchased materials from AIB, as it had represented it would do on its DBE Utilization Worksheet. At that time, Leary and Ingerson decided to prepare documents to create the appearance that the materials ING Civil purchased from RAMSCO had been purchased from AIB. Over the next few months, officials from ING Civil, RAMSCO, and AIB exchanged invoices, purchase orders and other documents to make it appear as though ING Civil had purchased materials from AIB that it had actually purchased from RAMSCO. In February 2011, ING Civil submitted electronic documentation to the City of Cohoes falsely representing that it had satisfied its DBE goals on the project by working with AIB.

In the settlement agreement, Ingerson admitted that he made a false filing indicating that materials for the Bridge Avenue Bridge project had been supplied by AIB when, at the time he made that filing, he knew the materials had been provided by RAMSCO, which was not a DBE. Beaudoin (for RAMSCO) and Leary admitted that they took steps to aid ING Civil in making that false filing. The parties also acknowledged that their conduct violated the False Claims Act.

In August 2015, HD Supply Waterworks, a company that acquired RAMSCO, paid $4,945,000 to resolve allegations that it also enabled several prime contractors to represent falsely that AIB had performed commercially useful functions on federally-funded contracts. Each of these investigations and settlements were the result of a coordinated effort among the United States Attorney’s Office for the Northern District of New York, USDOT’s Office of Inspector General and the U.S. Environmental Protection Agency’s Office of Inspector General, with the assistance of the Federal Bureau of Investigation and the New York State Department of Transportation’s Investigations Bureau.

Source: http://www.justice.gov/usao-ndny/pr/upstate-new-york-construction-company-and-individuals-pay-more-1-million-settle-fraud

Company to pay fine and forfeiture of $1.8 million for obtaining federal contracts earmarked for 8(a) firms

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The Justice Department’s Antitrust Division has announced that MCC Construction Company (MCC), a construction management company and general contractor headquartered in Colorado, has agreed to pay $1.8 million in criminal penalties and forfeiture for conspiring to commit fraud by illegally obtaining government contracts that were intended for small disadvantaged businesses.  

Justice Dept. seal - CopyThe firms were certified by the Small Business Administration (SBA) as 8(a) firms.

MCC Construction Company secured millions of dollars in contracts by hiding behind two small businesses that did not perform labor on the projects. In doing so, MCC took away opportunities that could have gone to companies that are socially and economically disadvantaged.

The case against MCC was filed last month in the U.S. District Court for the District of Columbia charging the company with one count of knowingly and willfully conspiring to commit major fraud on the United States.  MCC waived the requirement of being charged by way of federal indictment, agreed to the filing of the information and accepted responsibility for its criminal conduct and that of its employees.  U.S. District Judge Ketanji B. Jackson accepted the company’s guilty plea on Feb. 2, 2016.  The plea agreement is subject to the court’s approval at a sentencing hearing scheduled for March 15, 2016.

SBA sealAccording to court documents, MCC conspired with two companies that were eligible to receive federal government contracts set aside for 8(a) firms with the understanding that MCC would, illegally, perform all of the work.  In so doing, MCC was able to win 27 government contracts worth over $70 million from 2008 to 2011.  The scope and duration of the scheme resulted in a significant number of opportunities lost to legitimate 8(a) businesses.

Under the illegal agreement, the companies awarded these government contracts were allowed to keep 3 percent of the value of the contracts for allowing MCC to use the companies small business status to win the contracts.

Court documents state that MCC violated the provisions of the SBA 8(a) program.  The SBA’s 8(a) Business Development Program is designed to award contracts to businesses that are owned by “one or more socially and economically disadvantaged individuals.”  To qualify for the 8(a) program, a business must be at least 51 percent owned and controlled by a U.S. citizen (or citizens) of good character who meet the SBA’s definition of socially and economically disadvantaged.  The firm must also be a small business (as defined by the SBA) and show a reasonable potential for success.  Participants in the 8(a) program are subject to regulatory and contractual limits.  Also, under the program, the disadvantaged business is required to perform a certain percentage of the work.  For the types of contracts under investigation here, the SBA 8(a)-certified companies were required to perform 15 percent or more of the work with its own employees.

MCC, along with the two 8(a) companies used to illegally obtain the contracts, engaged in and executed a scheme to defraud the SBA by, among other things:

  • Allowing the two 8(a) companies to retain a guaranteed percentage of each contract for simply obtaining the contracts for MCC;
  • Allowing the two 8(a) companies to perform no labor on these projects;
  • Performing the accounting and government reporting for the two 8(a) companies on certain projects;
  • Falsely representing to the government that MCC employees were in fact employees of the 8(a) companies;
  • Obtaining certain contracts on behalf of the 8(a) companies without first informing those 8(a) companies prior to bidding; and
  • Conspiring with the 8(a) companies to hire straw employees for the 8(a) companies whose labor and salaries were paid for by MCC.

For the contracts obtained through this scheme on which MCC made a profit, MCC’s profit was at least $1,269,294.  The criminal penalty in this case includes a $500,000 fine and a forfeiture money judgment of $1,269,294.

Source: http://www.justice.gov/opa/pr/mcc-construction-company-agrees-pay-nearly-18-million-conspiring-illegally-obtain-federal

Owners of phony disadvantaged business to pay $7.8 million to settle false claim allegations

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LB&B Associates Inc. and its principals, Lily A. Brandon and F. Edward Brandon, have agreed to pay the government $7.8 million to resolve allegations that they made false statements to obtain contracts through the Small Business Administration’s (SBA’s) 8(a) Business Development Program for Small Disadvantaged Businesses, the Justice Department announced July 6, 2015.   LB&B is a North Carolina corporation headquartered in Columbia, Maryland.

Justice Dept. seal“The purpose of the 8(a) Program is to assist small disadvantaged businesses to compete in the American economy,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.  “The Justice Department is committed to making sure that those who participate in 8(a) contracts do so honestly and fairly.”

“The basic purpose of this federal program is undermined when contractors falsely claim to be a small or disadvantaged business,” said Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia.  “This $7.8 million settlement demonstrates our commitment to protecting the integrity of this important program.  Working with relators and federal investigators, we will do all that we can to act against those who illegitimately bill the American taxpayers.”

The government alleged that in seeking certification under SBA’s 8(a) Program, LB&B falsely represented that Lily Brandon – who satisfied the criteria for a socially and economically disadvantaged person under the program – controlled the operations of LB&B, when she did not.  Securing 8(a) certification allowed LB&B to obtain 8(a) set aside contracts from various government agencies.  Throughout the performance of these contracts, Lily Brandon allegedly failed to exercise actual control over LB&B’s operations, a key component to qualifying for the set aside contracts.

“This case shows the lengths we will go to protect the integrity of SBA’s 8(a) program,” said General Counsel Melvin F. Williams Jr. of the SBA.  “Both the Justice Department and SBA are prepared to do what it takes to make certain that the program helps folks who are really disadvantaged, and for whom it is intended to assist.”

The civil settlement resolves a lawsuit filed by Steven O. Sansbury and James T. Buechler, former employees of LB&B, under the whistleblower provision of the False Claims Act, which permits private parties, known as relators, to file suit on behalf of the government for false claims and to share in any recovery.  The act permits the government either to intervene in and take over the whistleblowers’ suit, or to allow the whistleblowers to pursue the action.  In addition to alleging LB&B’s improper receipt of 8(a) set aside contracts, Mr. Sansbury and Mr. Buechler alleged that LB&B made false claims in connection with contracts it obtained pursuant to the SBA’s Mentor-Protégé Program, which allows participants to obtain set aside contracts following LB&B’s graduation from the 8(a) Program.  The United States intervened in the whistleblowers’ 8(a) claims but not the Mentor-Protégé claims.  The settlement resolves both claims, and Mr. Sansbury and Mr. Buechler will recover a total of $1.5 million of the settlement.

The settlement with LB&B was the result of a coordinated effort among the Civil Division, the U.S. Attorney’s Office of the District of Columbia, the SBA’s Office of Inspector General and SBA’s Office of General Counsel.

The civil lawsuit was filed in the District of Columbia and is captioned United States ex rel. Sansbury, et al.  v. LB&B Associates, Inc., et al., No. 07-cv-00251 (D. D.C.).

The claims resolved by this settlement are allegations only, and there has been no determination of liability.

Source: http://www.justice.gov/opa/pr/lbb-associates-inc-agrees-pay-78-million-alleged-false-claims-related-small-business

GA-based construction firm to pay $1 million to settle alleged DBE-related False Claims violations

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C.W. Matthews Contracting Company (C.W. Matthews), a Marietta, GA-based construction firm, has agreed to pay $1 million dollars to settle allegations that it violated the False Claims Act almost eight years ago by submitting false and misleading certifications to the Government regarding: 1) work performed on several federally funded highway construction projects; as well as 2) the company’s compliance with the U.S. Department of Transportation’s Disadvantaged Business Enterprise Program (DBE Program).

DBE ownership and controlThe agreement was announced by the U.S. Attorney’s Office of the Northern District of Georgia on Monday, April 13, 2015.

Additionally, C.W. Matthews has reached a separate settlement with the U.S. Federal Highway Administration, pursuant to which the company has agreed to: 1) adopt an ethics code and a corporate compliance program; 2) appoint a compliance officer; and 3) retain an independent monitor to assess its performance.

“To receive the tangible and intangible benefits that it contracts for, the United States expects companies that actively seek and obtain federally funded contracts to be diligent and forthright in fulfilling their contractual obligations to the Government,” said Acting U.S. Attorney John Horn.

The settlement concerns false certifications that C.W. Matthews provided the Government regarding its compliance with requirements associated with the DBE Program.  Pursuant to the DBE Program, federally funded construction contracts contain DBE clauses, which require that a specified percentage of the work be sub-contracted to firms meeting the statutory definition of a Disadvantaged Business Enterprise (DBE).

As a precondition to bidding, a contractor must acknowledge the project’s DBE goals, and then identify the DBE that it proposes to subcontract with if awarded the contract.  Additionally, DBE regulations (49 C.F.R. § 26.55) require “real and substantial” work performed by a “viable” and “independent” DBE firm, and state that “there cannot be a contrived arrangement for the purpose of meeting DBE goals.”  The DBE Program is intended to ensure that DBEs are able to compete for federal construction contracts.

Between 2006 and 2007, C.W. Matthews was awarded several highway construction contracts that contained DBE clauses.  In bidding on the contracts, C.W. Matthews promised to subcontract with a DBE firm called Longoria Trucking (Longoria) to satisfy the contracts’ DBE goals.  As work progressed, C.W. Matthews submitted the requisite DBE Reports to the Government, which: 1) described work Longoria had purportedly performed; and 2) quantified the monetary amounts purportedly paid to Longoria.

The Government’s investigation revealed that the DBE reports submitted by C.W. Matthews were false and misleading as, in truth, it was a non-DBE trucking firm called G.E. Robinson – not Longoria – that performed most of the work, and received most of the payments, described in the reports.  Indeed, the investigation revealed that G.E. Robinson used Longoria as a “front” to obtain, and receive payment under, the applicable contracts.  As a non-DBE firm, G.E. Robinson was ineligible to even bid on these subcontracts.  To circumvent this restriction, G.E. Robinson assumed the identify of, and controlled, Longoria, which did little work and was paid a small fee by G.E. Robinson for its complicity.

The investigation revealed C.W. Matthews either knew, or should have known, of the scheme between Longoria and G.E. Robinson.  However, despite this knowledge, C.W. Matthews continued issuing false and misleading certifications to the Government regarding Longoria’s role in the applicable highway projects.

In certifying that Longoria was performing work under the contracts, despite clear signs that the work was actually being performed by G.E. Robinson, C.W. Matthews, at minimum, was either reckless or deliberately indifferent.

Source: http://www.justice.gov/usao/gan/press/2015/04-13-15.html

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