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WA Contractor Settles DBE Fraud Case

Thursday, July 16, 2015

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BELLEVUE, WA--A major civil construction contractor in the Pacific Northwest will pay $142,440 to settle claims of contract fraud on a federally funded highway project.

Tri-State Construction Inc. is accused of submitting false records to the Washington State Department of Transportation related to the Interstate 5 HOV lane project.

Tri-State Construction Inc.

The settlement involves claims by Tri-State Construction that it rented a specialized piece of equipment during the years of an I-5 HOV project from OMA Construction Inc., a DBE firm to which it had close ties. The FBI found otherwise.

The settlement involves Tri-State’s claims from 2010 to 2014 that it was renting a specialized machine from a certified Disadvantaged Business Enterprise (DBE) called OMA Construction Inc. The machine is used to process and clean wastewater generated by construction projects.

Tri-State admits no misconduct in the settlement, and its government contracting status is unaffected. Established in 1965, the company has a major public-works portfolio of more than 1,000 projects across six states in the West and Northwest.

Hidden Connection

Founded in 1998, Seattle-based OMA is a Washington State certified Minority Business Enterprise [MBE] and a federally certified Disadvantaged Business Enterprise [DBE].

In fact, the FBI reported, the machine was not owned by OMA, but by Tri-State itself. Tri-State "attempted to use a lease/purchase agreement to make it appear, consistent with DBE set-aside requirements for federally funded highway projects, that OMA owned the machine."

OMA Construction Inc.

Founded in 1998, OMA Construction is a Washington State Certified Minority Business Enterprise [MBE] and a Federally Certified Disadvantaged Business Enterprise [DBE].

The FBI did not allege wrongdoing by OMA, but a local TV station reported in 2012 that the two companies were close. OMA is headed by a former project manager for Tri-State, said.

In reference to another case at the time, KING-TV reported that Tri-State was using OMA as a pass-through, paying the company to fulfill the DBE requirement but doing the work itself.

KING5 reported that Tri-State was "under investigation by the FBI, the state Department of Transportation, and the state Office of Minority and Women's Business Enterprises."

DBE Crackdown

The U.S. Department of Transportation DBE program, established in 1983, requires that at least 10 percent of the funds authorized for highway and transit financial assistance programs be expended with DBEs.

To be certified as a DBE, a firm must be a small business owned and controlled by "socially and economically disadvantaged individuals." Since 1987, the program has had a single DBE goal that encompasses both women and nonwhites.

CindyTaylor Stewart

Cindy Taylor Stewart held more than $1.7 million in property alone when she certified that she was worth less than $750,000, DOT said. Her DBE-certified company, worth more than $13 million, was debarred in March for fraud.

Several construction firms have been caught in DBE fraud recently. In June, two Pennsylvania highway and bridge contractors were accused of a 16-year DBE scheme that took in millions of dollars.

In April, a Georgia general contractor paid more than $1 million to settle similar claims.

The month before that, the Federal Highway Administration debarred a millionaire construction company owner whose network far outstripped the $750,000 threshold to participate in the DBE program.

“Disadvantaged Business Enterprise fraud harms the integrity of the DBE program and law-abiding contractors by defeating efforts to ensure a level playing field in which all firms can compete fairly for contracts,” said William Swallow, Regional Special Agent-in-Charge of U.S. DOT's Office of Inspector General.

About the Project

Tri-State was awarded a $31 million contract on July 15, 2009, to do the I-5 HOV extension, reports, the website for the economic stimulus plan called the American Recovery & Reinvestment Act.

The project that led to the settlement involved widening a stretch of I-5 that included six bridges and three overpasses, and eight on-off ramps.


Tagged categories: Enforcement; Federal Highway Administration (FHWA); General contractors; Government; Government contracts; North America; Program/Project Management; Roads/Highways

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