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Transit Venture to Pay $4.6M in Fraud

Friday, August 26, 2011

More items for Program/Project Management

A group of transit contractors and subcontractors will pay a $4.6 million fine for allegedly misrepresenting minority participation on a federally funded light-rail project in Minneapolis.

At the same time, however, the joint venture Minnesota Transit Constructors Inc. (MnTC) and its subcontractors expressly deny the allegations, under the settlement with the U.S. Department of Justice.

Photos: Minnesota DOT

Disadvantaged Business Enterprises involved in the rail project (shown under construction in 2002) “were merely extra participants used to make it appear as if” they had performed the work,” the Justice Department said.

“We categorically deny any wrongdoing,” said Jacque Fourchy, spokeswoman for Watsonville, CA-based Granite Construction, which led the JV and will pay $1.1 million of the settlement. Granite had the majority interest in the project.

$330M Light Rail Project

The MnTC joint-venture team was the design/build contractor on the 12-mile, $330 million Hiawatha Corridor Light Rail Project for the Minnesota Department of Transportation. The line connected the downtown Minneapolis-St. Paul Airport with the Mall of America.

The venture also included Granite’s construction partner C.S. McCrossan Inc., of Maple Grove, MN; and a joint venture of Parsons Transportation Group, based in Pasadena, CA, and Edwards and Kelcey Inc., an engineering group acquired in 2007 by Jacobs Engineering Group. McCrossan also owns Midwest Pipe & Rebar Coating.

Allegations Disputed

“The claims asserted by MnDOT and the DOJ over the course of this five-year investigation are disappointing, and any inferences that we made misrepresentations in connection with this project are incorrect,” said James H. Roberts, Granite’s president and CEO.

“We disagree with the allegations; however, we felt it was in our best interest to settle the issue and avoid the expense and the distraction of litigation. While some settlements are accompanied by an admission of wrongdoing, notably, this one was not.”

The other companies issued no statements on the settlement.

The Justice Department alleges that the companies “falsely claimed that they had used Disadvantaged Business Enterprises (DBEs) for part of the work on the project when they had not.” The DBE program helps businesses owned by minorities and women work on federal construction projects.

To obtain and maintain their contract on the Hiawatha project, MnTC and its subcontractors were required to comply with the DBE regulations and to accurately report their DBE contracting.

‘Merely Extra Participants’

“MnTC claimed that materials and services for the project were provided by DBEs, when in fact, they were provided by non-DBE subcontractors and the DBEs were merely extra participants used to make it appear as if a DBE had performed the work,” the Justice Department said in a statement. 
 
“When businesses misrepresent those working with them to obtain government contracts, they violate the law and economically harm subcontractors who already face numerous disadvantages in the workplace,” said B. Todd Jones, U.S. Attorney for the District of Minnesota. “This resolution helps to correct that injustice in this instance.”

The Hiawatha Corridor Light Rail Line carries about 10 million riders per year.

The government’s claims were based upon an investigation conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Minnesota, DOT’s Office of Inspector General, and the Federal Transit Administration.

The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $7.5 billion.

“Disadvantaged Business Enterprise (DBE) fraud harms the integrity of the DBE program and law-abiding contractors, including many small businesses, by defeating efforts to ensure a level playing field in which all firms can compete fairly for contracts,” said Michelle McVicker, regional Special Agent-in-Charge of the DOT’s Office of Inspector General.

McVicker said authorities would continue to work “expose and shut down DBE fraud schemes that adversely affect public trust and DOT-funded transit programs throughout Minnesota and elsewhere.”

Comment from Car F., (8/29/2011, 10:47 AM)

Another normal day of corruption, bribery and chicanery. This is probably [I have no empirical evidence] more the rule rather than the exeption: honest contarctors who follow the rules ALWAYS end last.