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Suit: Contract Foul Play Reaped Millions

Tuesday, May 21, 2013

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A national education company is accused of defrauding the federal government and workers by failing to pay required wages on hundreds of federally funded playground construction contracts over nearly 10 years.

The savings in wages allowed Kaplan Early Learning Co. to offer lower bids that reaped the company millions of dollars in government contracts, the Justice Department contends in a new lawsuit filed in U.S. District Court for the Western District of New York.

‘Illegal Conspiracy’

The suit, filed this month on behalf of a construction subcontractor, accuses Kaplan of an “illegal conspiracy” to avoid paying playground construction workers prevailing wages as required under the federal Davis-Bacon Act, which allows the Department of Labor to set minimum wages and other working conditions for federal construction.

Kaplan playground
Kaplan Early Learning Co.

The suit alleges that Kaplan Early Learning Co., a general contractor for playground services, underpaid workers on hundreds of projects over a number of years in order to keep bids low and obtain more government contracts.

The suit alleges wrongdoing on hundreds of construction contracts funded by Head Start and other federal programs.

The suit accuses Kaplan of underpaying the workers of multiple subcontractors, then fraudulently certifying compliance with the Davis-Bacon Act. Kaplan did not immediately respond to a request for comment on the suit. Most of the contractors, the suit adds, did not complain about the practice.

The suit was filed on behalf of John Panarello, a construction subcontractor whose company worked for Kaplan from 2004 to 2010.

‘Corporate Champion’

Founded in 1968 as Kaplan School Supply, Kaplan Early Learning Company describes itself as a “leading international provider of products and services that enhance children's learning.”

The company, based in Lewisville, NC, develops and markets curriculums, testing materials and teacher resources and operates day-care centers worldwide.

Kaplan also offers playground design and construction services.

Spectra Floors
Spectra Contract Flooring Services

Other Kaplan playground subcontractors shortchanged on wages included Spectra Contract Flooring Services, the largest commercial flooring contractor in the U.S., the suit alleges.

“From design to installation, you can trust Kaplan with every aspect of the playground building process,” the company’s website says. “A one-stop shop, Kaplan offers custom playground design and layout, site evaluation, outdoor classroom consultation, and full installation service.”

It is the company’s playground construction arm that is the focus of the federal litigation.

Hundreds of Contracts, Subcontractor Silence

Kaplan enjoys a 40-year relationship with the National Head Start Association, according to the lawsuit. The company is a corporate partner of Head Start, has sponsored events for the agency, and received the NHSA Corporate Champion Award in 2010.

The suit says Kaplan, “[f]rom at least 2004 up to and including the present, and continuing,” received “hundreds” of contracts to build playgrounds for Head Start programs and for hospitals, elementary and secondary schools, and/or public colleges that receive federal money.

Kaplan served as the general contractor on the projects, using a variety of subcontractors.

However, the suit adds, only a “minority” of subcontractors “demanded some degree of compliance with the contracting, certification and documentation mandates of the Davis-Bacon Act.”

The majority of subcontractors did not, the suit says.

‘Avoiding and Ignoring’ Laws

Partly because contractors allowed it, the suit says, Kaplan “followed a policy and practice of avoiding and ignoring whenever possible Kaplan’s obligations under the Davis-Bacon Act in regard to the Playground Construction Contracts and complied with those requirements only when, and only to the extent that, such compliance was demanded by some third party,” the suit says.

When a subcontractor or other party did demand compliance, the suit says, “Kaplan inserted a cursory reference in its contract documents falsely indicating that the contract would be in compliance with the Davis-Bacon Law with respect to the payment of wages at the prevailing wage rate.”

Even in those cases, however, Kaplan “failed to include in those contract documents any of the detailed specified contract language mandated by statute and regulation,” the suit said.

Precision Playgrounds
Precision Playgrounds

Kaplan allegedly "failed to comply with the Davis-Bacon Act and/or failed to pay prevailing wages as required" to subcontractors, including Precision Playgrounds.

It added, “For the majority of Playground Construction Contracts, however, no purchaser or other third party demanded any degree of Davis-Bacon Act compliance by Kaplan.”

And Kaplan even noted in many of its contracts, “Unless specified, this quotation does NOT reflect prevailing wage rates [emphasis in original].”

Subcontractor Sues

Complaints by Panarello, the owner of Celtic Builders Inc., of Springville, NY, led to the federal suit.

According to the lawsuit, Celtic built at least 207 playgrounds for Kaplan from 2004 to 2010. The contracts totaled more than $6 million, the suit says.

In the same period, Kaplan underpaid Celtic’s workers by $510,709, according to a wage summary that accompanies the suit.

The complaint lists these other subcontractors involved in Kaplan projects:

  • Playstallation, Inc., of Lewisville, NC;
  • Spectra Contract Flooring Services Inc., which calls itself the largest commercial flooring contractor in the United States;
  • Pour & Play Surfacing LLC, of Ottawa, OH;
  • G&M Design LLC, which was not further identified;
  • Atlantic Marine Construction Co., Inc., a general contractor based in Virginia Beach, VA; and
  • Precision Playgrounds, a nationwide franchise formerly known as Craft Brothers, Inc., the suit says.
Kaplan store
Kaplan Early Learning Co.

Kaplan, an international education company, received the National Head Start Association's Corporate Champion Award in 2010. Kaplan has a longtime relationship with Head Start.

The suit does not detail the other contracts but said Kaplan "failed to comply with the Davis-Bacon
Act and/or failed to pay prevailing wages as required" to workers of these and other subcontractors.

The suit does not identify which subcontractors complained about the practice and which accepted it.

Seeking Millions

The suit seeks criminal penalties equal to triple the amount of losses the U.S. sustained in the alleged scheme, as well as civil fines of between $5,500 and $11,000 for each violation of federal law.

The three-count complaint alleges violation of the federal False Claims Act, which was enacted in 1863 but substantially strengthened in 2009 and 2010 to help the federal government crack down on program fraud. The law provides financial incentives, and protection, for whistleblowers to report fraud.


Tagged categories: Commercial Construction; Commercial contractors; Enforcement; Floors; Good Technical Practice; Government contracts; Health Care/Hospitals; Laws and litigation; Lawsuits; Schools; Subcontractors; Workers

Comment from Tom Schwerdt, (5/21/2013, 8:24 AM)

Do we really need Davis-Bacon anymore? Not only does it add cost directly to projects, there is significant paperwork and overhead specific to Davis-Bacon requirements.

Comment from peter gibson, (5/21/2013, 11:51 AM)

We don't need D-B anymore.Increases the cost of projects a lot.

Comment from Dennis Guy, (5/21/2013, 12:11 PM)

To Tom's point... Good Luck trying to repeal it. My opinion is the less intrusion (Government or otherwise) the better! God Bless Oklahomans!

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