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Fine, Monitor Avert Contractor Charges

Tuesday, April 22, 2014

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A major Midwest construction company will pay $4 million and accept independent monitoring of its billing practices to avoid prosecution related to alleged overbilling of public school districts.

The federal Non-Prosecution Agreement (NPA) with Miron Construction Co. Inc. and its two top executives caps a multi-year investigation by the FBI into Miron's billing practices in Wisconsin public school construction projects, Miron's financial reporting practices in "these and other construction projects," and the two executives' roles in the practices.

Lambeau Field
Photos: Miron Construction Co. Inc.

Based in Neenah, WI, Miron Construction calls itself the "Official Provider of Construction Services" for the Green Bay Packers and Lambeau Field.

The Wisconsin-based contractor operates in four states; has more than 1,200 employees; and reported $685 million in sales in 2013. The company bills itself as the "Official Provider of Construction Services" for the Green Bay Packers and Lambeau Field.

Principals and Restitution

Named in the agreement are David G. Voss Jr., president, CEO and half owner of the firm; and Dean J. Basten, who is secretary, treasurer and CFO. The $4 million penalty will be used to provide restitution to five separate school districts, authorities said.

Under the agreement, neither the company nor the executives admit or deny any of the wrongdoing alleged.

In a statement, the company described the contracts in question as "industry standard" and said that the case related to "a handful of" the more than 150 public school projects it had completed between 2003 and 2008.

Miron Construction's website says Voss "has in-depth involvement in the daily operations of the company and participates in all aspects of corporate management. He closely monitors activities associated with all of Miron’s conceptual and hard bid estimating processes."

David Voss and Dean Basten

President and CEO David G. Voss Jr. (left) allegedly directed estimators to apply a "percentage modifier" to costs, which was not disclosed to the school districts. The Non-Prosecution Agreement applies to Voss and CFO Dean Basten (right).

Basten is "responsible for overseeing all accounting functions, including policies and procedures," the site says.

Hidden 'Modifiers'

The case involves cost-plus contracts for new school buildings, additions and renovations in five Wisconsin public school districts, according to the U.S. Attorney's Office.

The project funding in each case was approved by public referenda. In a typical case, prosecutors said, the referendum amount was established by the school board and Miron's estimators, among others. The amount was established before Miron had prepared any plans or specifications, prosecutors said.

At Voss's direction, prosecutors say, the estimators applied a "percentage modifier" to their projected costs, which increased the costs by the percentage. The "modifier" was not disclosed to the school district.

Miron also inflated its labor charges in billing overhead and other expenses, prosecutors said.

'Cost Smoothing'

Prosecutors also criticized what they called Miron's practice of "cost smoothing." That costing approach uses broad averages to uniformly assign the cost of resources to products, services and customers, rather than using the actual cost of each individual item.

MaryLouMahone Middle School

Miron Contruction says it has worked on more than 100 school projects totaling more than $600 million in the past decade. The portfolio includes Mary Lou Mahone Middle School in Kenosha, WI.

In Miron's case, prosecutors said, the company transferred costs from less profitable jobs to more profitable ones on its internal books. That made the supplemental schedules appended to profit and loss statements "inaccurate," authorities said.

Accounting Practices to Change

In addition to the monetary penalty, the three-year Non-Prosecution Agreement:

  • Calls for the appointment of an independent monitor to oversee Miron’s operations while the agreement is in effect (the monitor may also extend the agreement for up to two additional years);
  • Requires Miron to disclose in all future construction contracts "the actual labor rates it is charging the customer";
  • Ends Miron's practice of cost smoothing and requires it to "accurately report its costs, revenues, and income on individual construction projects";
  • Orders Miron to replace its current accounting and auditing firm; and
  • Orders the company to "adopt a document retention policy that is consistent with industry practices and in compliance with its construction contracts."
LakeMillsElementary

Miron Construction's porfolio also includes Lake Mills (WI) Elementary. The Wisconsin firm also has offices in Iowa, Michigan and Minnesota.

The company must also designate a compliance officer to develop a "Corporate Responsibility Program" and train all of its employees in laws and ethics.

'Opportunity to Share'

In a company statement, Miron said that it had "cooperated with the review" and that "a government attorney commended individuals for their willingness to talk to him."

The company said it would use the settlement "as an opportunity to share best practices" with others in the construction industry.

A personal statement by Voss cited the company's cooperation with authorities as "testament" to the company values of "integrity, trust and honesty."

"This agreement is a way for us to move forward and continue our work as a top-notch employer, to provide the best service possible to our clients, and to proudly pursue continued philanthropic efforts to make our communities better places in which to live, work and play."

   

Tagged categories: Bidding; Commercial contractors; Construction; Good Technical Practice; Government; Government contracts; Labor; Laws and litigation; Schools

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