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Bridge Sub Held in DBE Contract Fraud

Tuesday, November 4, 2014

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A Pennsylvania subcontractor is facing fraud conspiracy charges after allegedly allowing his company to be used as a DBE-certified front for contractors seeking federal contracts.

Watson Maloy, president of Finleyville, PA-based WMCC Incorporated, has been charged with conspiracy to commit mail and wire fraud in connection with a Disadvantaged Business Enterprise (DBE) scheme involving federally funded bridge projects, the U.S. Department of Transportation Office of Inspector General announced Oct. 21.

WMCC, a certified DBE, entered into DBE subcontracts worth about $2.3 million with Century Steel Erectors, a precast concrete erection firm in Dravosburg, PA, according to the OIG.

Maloy and co-conspirators allegedly used WMCC as a front company to obtain profits from DBE contracts slated for legitimate DBE firms.

$1.8M in Illicit Proceeds

The prime contracts related to the scheme are valued at $42.6 million, authorities said. The scheme resulted in about $1.8 million in illicit proceeds, and Maloy allegedly received a fee for his participation.

Century Steel Erectors
Century Steel Erectors

Watson Maloy, president of WMCC Incorporated, was charged with conspiracy to commit mail and wire fraud after allegedly using his DBE company to profit from subcontracts with Century Steel Erectors.

A call to WMCC's listed phone number was not returned Monday (Nov. 3), and an email sent to the company's listed address was returned as undeliverable.

According to its listing on the Ironworker Employers Association website, WMCC is a certified, qualified Minority Business Enterprise that performs work on both building and heavy/highway construction jobs.

“WMCC’s unique position in the construction industry has its foundation in the belief that a minority business must offer the same, or better services and quality as any contractor or subcontractor,” the website says.

Attempts to Conceal

Officials from CSE, not WMCC personnel, “found, negotiated, coordinated, performed, managed, and supervised the DBE subcontracts,” according to the OIG.

Maloy’s firm “failed to perform a commercially useful function,” and CSE completed WMCC's work, including negotiating crane rentals, ordering supplies and materials, and recruiting union workers, authorities said.

CSE officials tried to conceal the scheme by using WMCC letterhead and email accounts to communicate with the general contractor and Pennsylvania Department of Transportation officials.

CSE personnel allegedly also possessed WMCC business cards, t-shirts, and hard hats, as well as magnetic WMCC placards to conceal CSE logos on construction vehicles.

CSE did not immediately respond to a request for comment Monday.

Judge Sylvia Rambo
gmanetwork.org (left); official photo

Romeo P. Cruz is serving 33 months in prison and owes $119 million in restitution for his part in the largest DBE fraud in U.S. history. "DBE fraud is pervasive in the construction industry," Senior U.S. District Court Judge Sylvia H. Rambo said at sentencing.

The DOT OIG is conducting the continuing investigation with the Federal Bureau of Investigation and the Pennsylvania Turnpike Commission-Office of Inspector General.

DBE Fraud

The WMCC case is the latest in a recent rash of DBE fraud cases announced by federal investigators.

In September, federal authorities debarred two New York construction companies and three people from federal contracts for three years following criminal convictions for a 17-year-long DBE fraud scheme.

Earlier that month, the owner of a North Carolina paving company became the sixth defendant to plead guilty in a massive fraud that raked in government contracts by using a DBE firm as a pass-through.

In April, a Connecticut contractor was fined $2.4 million construction contractor will pay $2.4 million for faking a DBE requirement in order to win a $39.6 million contract.

And in August, two more highway construction executives were sentenced to prison as part of the largest DBE fraud in U.S. history: 300 contracts totaling more than $136 million.

   

Tagged categories: Bridges; Contractors; Department of Transportation (DOT); Ethics; Government contracts; Laws and litigation; North America; Program/Project Management; Subcontractors

Comment from Steve Sparks, (11/4/2014, 5:27 PM)

Perfect excuse to rid ourselves of set asides and go with the best, not Guvmint authorized contractor.


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