August 19, 2021.  The United States Department of Justice settled a case against a New York-based government contractor who falsely represented that a Disadvantaged Business Enterprise (DBE) contractor performed a percentage of work on a public works project.  In other settlements, the prime contractors, Spectrum and Ahern Painting Contractors Co. (“Ahern”) settled allegations that they hired a non-DBE contractor (“Spectrum”) to supervise work performed by a DBE contractor Tower Maintenance Corp. (“TOWER”) and falsely represented Spectrum employees as TOWER employees in order to conceal the other contractor’s involvement.  The projects entailed the United States Department of Transportation (“US-DOT”) providing federal funding to support the New York City Department of Transportation (“NYC-DOT”) in the Brooklyn Bridge Rehabilitation Project and the Metropolitan Transportation Authority and the New York City Transit Authority (“MTA”) for work at the Queens Plaza.  Both New York transportation bodies set goals that a percentage of the value of the work was to be done by DBE contractors.  Moreover, DBE participation only counts towards the DBE goal if the DBE is both supervising and performing its work on the contract.

According to the allegations, Ahern represented it would “make good faith efforts” to fulfill the DBE participation goals on both the Brooklyn Bridge and Queens Plaza projects.  TOWER was aware Ahern hired their firm to meet DBE obligations.  However, TOWER also entered into agreements with Spectrum for “project management support” for both projects on which it was purportedly a DBE subcontractor.  TOWER represented to Ahern that two Spectrum employees were TOWER employees for the projects.  Neither TOWER nor Ahern alerted NYC-DOT nor MTA about the Spectrum relationship.  Spectrum’s supervision and project management meant that TOWER was not working on both projects with its sole resources.  Indeed, Spectrum provided equipment and project management support in exchange for 50% of TOWER’S profits from the two public works projects.

While the allegations do not discuss the quality of work performed, this kind of government contractor fraud represents mismanagement of taxpayer dollars and violates the spirit of choosing Disadvantaged Business Enterprises for public works projects.  Whistleblowers can help report this kind of misconduct and protect the public from contract malfeasance.  When whistleblowers report fraud in government programs, per the False Claims Act, they are entitled to receive 15-25% of the government’s recovery.

As Manhattan U.S. Attorney Audrey Strauss said, “All contractors are on notice that we are committed to rooting out public works contracting fraud.”