Contractor to Pay $2M in Fraud Case

FRIDAY, DECEMBER 19, 2014


Fraud built on "secret side deals" allowed a Maryland construction firm to massively exploit a federal contracting program designed to help disadvantaged local businesses, federal authorities say.

Thus, Forrester Construction Corp., of Rockville, MD, will pay $2 million to the government to resolve a two-year fraud investigation involving more than $145 million in District of Columbia contracts, the U.S. Attorney and FBI announced Monday (Dec. 15).

The settlement was the second in 18 months surrounding the troubled company, whose founder recently took his own life.

The company admitted to abusing the Certified Business Enterprises program, which aims to help small, disadvantaged businesses compete for government contracts.

The contracts included the high-profile construction of the $64 million Department of Employment Services headquarters; a $56 million renovation of Anacostia Senior High School; and the new $5.4 million Senior Wellness Center in Ward 1.

Fraudulent Scheme

According to the facts of the case, between 2008 and 2009, Forrester teamed up with multiple small businesses with CBE status for the purpose of bidding on the construction contracts.

The joint ventures received the maximum amount of contracting preferences for which the CBE was eligible, providing the contractor and its partners with a competitive advantage during bidding.

When it submitted bids, Forrester promised that the local partner firm would do 51 percent of the work. However, investigators found that the company entered into side agreements that gave the small firms much less work.

‘Secret Side Deals’

The side agreements were signed “Action of Management Committee” memoranda or letter agreements. They  effectively increased Forrester Construction’s control over the day-to-day operations of the projects and reduced the CBE partner’s share of the profits or losses in the projects.

For example, with the Anacostia Senior High School project, the “Action of Management Committee” memo provided that the partner's scope of work equated to about $2.75 million, while Forrester's share was about $46 million.

Forrester
Forrester

Forrester has worked on a number of high-profile projects in the District of Columbia.

“Forrester won lucrative D.C. construction contracts by exploiting a program designed to help disadvantaged local businesses,” said U.S. Attorney Ronald C. Machen Jr.

“Forrester entered secret side deals that wrested control of those contracts away from their historically under-represented partners and undermined the purpose of the CBE program.”

Remedial Measures

As a part of a non-prosecution agreement, the company also agreed to undertake various remedial measures to ensure compliance with the requirements of the District of Columbia’s CBE program (or any such equivalent on federal government projects) and the U.S. Small Business Administration’s 8(a) program on future projects.

Machen
usdoj.gov

“Forrester won lucrative D.C. construction contracts by exploiting a program designed to help disadvantaged local businesses,” said U.S. Attorney Ronald C. Machen Jr.

The remedial measures include:

  • Hiring or designating a compliance officer and an ethics officer;
  • Implementing a comprehensive training program for all company personnel regarding compliance with the CBE and 8(a) programs;
  • Maintaining an effective compliance and ethics program, and
  • Continuing cooperation with law enforcement.

The company also said it would participate in community service to develop improvements in the CBE and 8(a) programs going forward.

Additional Details

In May 2013, Forrester settled with the District for $1 million to resolve related civil claims the District was prepared to bring against the contractor.

The Associated Press reported that the company’s founder 55-year-old John Richard Forrester committed suicide in September.

Founded in 1988, Forrester Construction specializes in preconstruction, general contracting, construction management and design build services and has won more than 100 awards, according to its website.

 

   

Tagged categories: Bidding; Ethics; Fraud; Good Technical Practice; Government; Government contracts; Laws and litigation; North America; Small Business Administration

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