Supplier Agrees to $5M Fraud Settlement
A national supplier of water, sewer, fire protection and storm drain products has agreed to pay nearly $5 million to settle allegations that it fraudulently received federal money for which it did not qualify.
HD Supply Waterworks entered into the agreement Tuesday (Aug. 11) with the U.S. Attorney’s Office for the Northern District of New York, according to the settlement agreement. The U.S. Attorney’s Office released a statement Wednesday (Aug. 12) regarding the settlement.
In that statement, the office said that Georgia-based Waterworks acted as a “pass-through” with another company, American Indian Builders & Suppliers Inc. (AIB), and Waterwork’s subcontractors to receive federal money intended for disadvantaged businesses. AIB was a certified Disadvantaged Business Enterprise (DBE) at the time the alleged fraud occurred, according to the statement.
The DBE program was established by the federal Department of Transportation (DOT) and Environmental Protection Agency (EPA) to provide federal money for historically disadvantaged groups. However, in the case of Waterworks, the company was using AIB—a Native American owned company—to simply make it appear as though AIB was performing the work or providing materials for the work when it was not.
Instead, the government said, Waterworks selected other contractors that actually performed the work or provided the materials. Waterworks sent its invoices to AIB, which transferred the information to its own invoices and added a markup. AIB then would send its new invoices to the selected contractors to make it appear that it had provided the work and/or supplies.
AIB, now defunct, received a percentage fee for its part in the pass-through scheme.
‘Thwarting the Program’s Objective’
“Waterworks enabled prime contractors to certify falsely that American Indian Builders & Suppliers served as a subcontractor on government-funded projects, thwarting the program’s objective of creating a level playing field for legitimate minority and women-owned businesses to compete fairly on such projects,” said U.S. Attorney Richard S. Hartunian in the statement.
Authorities began investigating Waterworks in 2008. In the settlement, the company admits to no wrongdoing, but acknowledges that the government had enough evidence to take the matter to trial.
As of Friday (Aug. 14), the company’s website did not have a corporate or general information phone number for inquiries. An email sent to an address listed on the site for media inquires came back with a failure notification.
On its site, Waterworks says it has the “No. 1 Market Position in the United States” in its field. The company says its products and services include water and sewer line installation; storm water retention systems; water/wastewater treatment plant construction; and fire protection equipment. Waterworks also offers data management systems for its clients.
The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of New York, DOT’s Office of the Inspector General (OIG), EPA-OIG, and the Federal Bureau of Investigation, with the assistance of the United States Department of Justice’s Civil Division and the New York State Department of Transportation’s Investigations Bureau. Assistant U.S. Attorney Adam J. Katz prepared the settlement with Waterworks.