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Firm to Pay $1.3M in PennDOT Fraud

Monday, February 9, 2015

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A Philadelphia-area engineering firm will pay more than $1.3 million to reimburse state and federal transportation agencies for losses due to fraud by the consultant's bridge inspectors.

The agreement by Construction Methods and Coordination Inc. (dba CMC Engineering), of Kimberton, PA, signals the first disposition since the December indictment of 10 people in a widening corruption and bribery scandal involving the Pennsylvania Department of Transportation's District 6.

CMC Engineering

CMC Engineering, of Kimberton, PA, provides construction, engineering, inspection and surveying services for public-works projects in three states. The firm will pay $1.3 million to compensate public agencies for fraud.

The district consists of Philadelphia and its five surrounding suburban counties. The indictments, by a state grand jury, followed testimony and evidence from dozens of individuals, authorities said.

Contracts and Conspiracy

The scheme involves two former PennDOT managers who allegedly took kickbacks from consultant highway inspectors to ignore fake time sheets and mileage reports—a pattern that played out in 27 federally funded contracts and cost state taxpayers at least $1.2 million, said state Attorney General Kathleen G. Kane.

The December presentment detailed "how a pattern of nepotism and cronyism" led to the 10 defendants being hired by PennDOT, CMC and another consulting firm, CZOP Spector Inc., "which allowed their conspiracy to continue and flourish."

Three of the defendants worked as inspectors for CMC; three worked as inspectors for CZOP Spector; two were then inspectors for PennDOT; and two were former PennDOT permit managers who are alleged to be the scheme's ringleaders.

PennDOT corruption

This flowchart illustrates the kickback scheme's pecking order, according to the AG's office.

The ongoing investigation, which also produced additional indictments earlier, is being conducted jointly by the Pennsylvania AG's Office and the U.S. Department of Transportation-Office of Inspector General.

'Fraudulent Activity'

Last week, DOT's Inspector General announced that CMC had "entered into an administrative agreement" Jan. 14 with PennDOT and the Federal Highway Administration.

The statement said the two agencies "will be reimbursed in excess of $1.3 million" for "losses incurred as a result of the fraudulent activity of CMC consultant inspectors that were recently charged with corruption and other various crimes."

"The investigation revealed that at least one CMC inspector participated in the fraud while working on the 100% federally funded Girard Point Bridge construction project in Philadelphia," OIG said.

PennDOT is currently calculating the exact amount of those losses and will reimburse FHWA for them, the statement said. The CMC inspector was not identified, and none of the individuals indicted was mentioned.

Davidt8 / Licensed under Public Domain via Wikimedia Commons

"The investigation revealed that at least one CMC inspector participated in the fraud while working on the 100% federally funded Girard Point Bridge construction project," pictured here in September 2010, the Office of Inspector General said.

On its website, CMC calls itself "a progressive Consulting Engineering Company dedicated to providing our clients with innovative and quality engineering, while maintaining control of construction and life cycle costs." The company has a thick portfolio of public-works projects across Pennsylvania, New Jersey and Delaware.

The double-decked cantilever Girard Point Bridge, which opened in 1973, carries Interstate 95 across the Schuylkill River in Philadelphia.

Demanding Kickbacks

The complaints alleged that the two former PennDOT permit managers demanded kickbacks from project inspectors, including CMC employees. The managers "required" the inspectors "to falsify time, attendance, and payroll records to generate illicit cash flow," the charges said.

The inspectors were paid more than $500,000 through false payroll and invoice submissions, while CMC and CZOP were paid more than $700,000 for their employees' unearned overtime, OIG said. The inspectors then falsified documents to inflate their overtime and mileage and kicked back the money to the PennDOT managers, authorities said.

The investigation started in March 2013 after the Bureau of Criminal Investigation received evidence of widespread abuse in the Highway Occupation Permit Program (HOP) in District 6.

Alex Morrone William Rosetti
Images: PA Attorney General's Office

Former PennDOT managers Alex Morrone (left) and William Rosetti allegedly led the conspiracy.

PennDOT issues HOP permits for any construction or other encroachment on interstates, U.S. routes and state highways. The agency pays inspectors, directly and through outside firms, to ensure permit holders comply with laws, regulations and permit conditions.

Defendant Roundup

The two PennDOT managers alleged to be at the center of the conspiracy are former Assistant District 6 Permits Manager Alex Morrone, 50; and former Philadelphia County Permit Manager William Rosetti, 36.

Also charged are:

  • PennDOT Inspector Frank DiMichele, 49, of Norristown, PA;
  • PennDOT Inspector Generoso Palmieri, 60, of Glenside, PA;
  • CMC Inspector John Cavanaugh, 61, of Philadelphia;
  • CMC Inspector Joseph DeSimone, 34, of Philadelphia;
  • CMC Inspector John Laspada, 40, of Philadelphia;
  • CZOP Inspector Chris Lauch, 50, of Dover, DE;
  • CZOP Inspector David Betzner, 72, of Port Saint Lucie, FL; and
  • CZOP Inspector Brandon Grosso, 33, of Boothwyn, PA.
PennDOT scheme

Also charged are (clockwise from top left): PennDOT inspector Frank DiMichele, PennDOT inspector Generoso Palmieri, CMC inspector John Cavanaugh, CMC inspector Joseph DeSimone, CZOP inspector Brandon Grosso, CZOP inspector Chris Lauch, and CMC inspector Jason Laspada. Not pictured: CZOP inspector David Betzner.

All 10 are charged with two counts of corrupt organizations and one count each of theft by deception, theft by unlawful taking, bribery in official and political matters (except DiMichele), tampering with public records and criminal conspiracy.

Morrone and Rosetti are also charged with one count of receiving stolen property.

DeSimone was also arrested in April 2014 and charged with perjury for allegedly lying to a grand jury during the investigation.

In July, contractor Thanh Nguyen was arrested for allegedly stealing at least $3.6 million by submitting false invoices. Nguyen also bribed Robert Slamon, a CZOP inspector who was also arrested in July, to ignore his own fraud, according to the grand jury.

"Our ongoing investigation of PennDOT District 6 has exposed nearly $5 million in fraud in Philadelphia and the surrounding counties," Kane said.


Tagged categories: Bridges; Consultants; Contractors; Department of Transportation (DOT); Engineers; Fraud; Government contracts; Inspection; Laws and litigation; Program/Project Management; Roads/Highways

Comment from Mark Puckett, (2/9/2015, 1:28 PM)

tip of the iceberg....

Comment from Raymond Merrill, (2/10/2015, 12:01 AM)

Looking at the pictures of this cast of characters, if anyone was thinking of doing a sequel to "Goodfellas", the casting director need look no further.

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