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DBE Fraud Costs Company $2.4M

Friday, April 11, 2014

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A construction contractor will pay $2.4 million for faking a disadvantaged-business requirement in order to win a $39.6 million contract in Connecticut, the FBI announced Monday (April 7).

As part of a non-prosecution agreement, Manafort Brothers Inc., based in Plainville, CT, admitted to falsely telling the U.S. and the Connecticut Department of Transportation that a disadvantaged business enterprise (DBE) would perform subcontract work on the project when it did not, according to the FBI.

The fraud, connected to a federally and state funded relocation project for part of Route 72 in Bristol and Plainville, CT, in 2007, launched a multi-agency joint criminal and civil investigation.

Manafort Brothers
Photos: Manafort Brothers Inc.

Federal prosecutors said they reached a non-prosecution agreement with Manafort Brothers over their alleged attempt to falsely claim a DBE company performed work. The agreement only applies to the company, and an investigation into potential criminal charges for individuals is ongoing.

Manafort obtained the contract and completed the project in 2010.

The non-prosecution agreement addresses only the corporate criminal liability; a criminal investigation of the individuals is ongoing.

DBE Fraud Scheme

"By entering into this agreement, Manafort recognized that it made false statements to the government and committed to change," said Deirdre Daly, U.S. Attorney for the District of Connecticut.

"While our investigation of individuals continues, we agreed to this corporate resolution in order to reflect the company's efforts to reform itself and to avoid further damage to its many blameless employees."

Manafort submitted a bid to ConnDOT in 2007 to be the general contractor on a project to relocate a two-mile section of Route 72, as well as the reconstruction of 2.4 miles of secondary roads.

The project required that a percentage of the work be performed by a DBE, a requirement designed to provide socially and economically disadvantaged contractors with opportunities to compete for federally funded work.

"DBE fraud harms the integrity of the program and adversely impacts law-abiding, small-business contractors trying to compete on a level playing field, said Ted Doherty, regional Special Agent in Charge for the DOT.

"[W]e will vigorously pursue those who violate the law and expose and shut down fraud schemes that adversely affect public trust and DOT-assisted programs," Doherty said.

Ethics Remediation

The non-prosecution agreement and civil settlement require Manafort to pay a civil fine of $2,460,722, and take remedial measures to ensure current and future compliance with DBE programs. The measures include:

  • Establishing an Ethics and Compliance Officer;
  • Forming a DBE compliance committee that meets regularly to review related issues;
  • Mandating DBE compliance training for employees;
  • Using software to make sure DBEs are qualified to perform the work that they bid;
  • Removing the Manafort personnel directly involved in the misconduct; and
  • Continuing to assist law enforcment in the investigation.
Route 72 relocation project

Manafort was awarded a $39.7 million project to move and reconstruct parts of Route 72. They have agreed to pay a $2.4 million penalty and implement several remedial measures as part of an alleged fraud scheme investigation.

"While MBI respectfully disagrees with aspects of the government's characterization of the company's shortcomings in this matter, the company acknowledges that it needed to improve its DBE compliance process, and therefore it has entered these agreements in the best long-term interests of MBI and its nearly 800 employees, subcontractors and customers," the company said in a statement reported by, NewBritainHerald.com reported.

According to the news outlet, at least one employee has been fired.

The company did not immediately respond to a request for comment Thursday (April 10).

'Pass-Through Entity'

With a bid of about $39,663,000, Manafort was awarded the contract. According to pre-award bid documents, the company said it had a DBE (only identified as "Company #1") to perform work totaling about 70 percent of the overall DBE goal, or $3,064,372, the FBI said.

According to Manafort's bid, Company #1 would provide all supervision, labor and materials for the subcontract work, which included being responsible for the project's reinforcing steel, materials for structural steel, furnishing a pedestrian bridge to span the new roadway, and the majority of work for a large retaining wall.

However, during the project, it was determined that Company #1 was not performing the work.

DBE fraud

Manafort Brothers' bid included a DBE subcontractor to furnish a pedestrian bridge over the new roadway; however, the FBI says the DBE company never performed the work.

In fact, according to the FBI, the investigation revealed Company #1 was being used by Manafort "essentially as a pass-through entity." Manafort was negotiating with and supervising subcontractors for work supposed to be done by Company #1, and then arranged to pay those subcontractors through Company #1 to bypass DBE regulations.

FBI Special Agent in Charge Patricia Ferrick said, "Manafort Brothers Inc. sought to circumvent, misrepresent, and outright deceive the U.S. government. Contractors that work on government-funded projects, such as those with disadvantaged business enterprise requirements, need to operate above-board or be excluded from the bidding process."

Ferrick called Manafort's remedial compliance measures a "step in the right direction."

The investigation is being handled by the U.S. Department of Transportation, the FBI, and the U.S. Department of Labor, with assistance from ConnDOT. Assistant U.S. Attorneys Christopher Mattei and WIlliam Collier are prosecuting the case.

   

Tagged categories: Bidding; Business operations; Department of Transportation (DOT); Enforcement; Ethics; Government contracts; Subcontractors; Transportation

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