DOT DBE Fraud: Construction Company Admits False Statements In “Pass-Through” Case

A Connecticut construction company has agreed to pay more than $2.4 million to resolve fraud claims related to an alleged DOT DBE “pass through” scheme.

According to a DOJ press release, as part of the resolution, the construction company has admitted that it made false statements to the government that a DBE performed more than $3 million in subcontracted work, when in fact, that work was performed by a non-DBE.

The DOJ press release states that in 2007, Manafort Brothers, Inc. submitted a bid to the Connecticut Department of Transportation to serve as the general contractor on a federally and state funded highway project.  Manafort was awarded the prime contract at a price of nearly $40 million.

Manafort represented to the Connecticut DOT that Manafort would use a particular DBE (referred to in the press release as “Company #1”) to perform more than $3 million of the work.  However, an investigation subsequently revealed that Manafort was using Company #1 “essentially as a pass-through entity.”

According to the DOJ, Manafort would negotiate with and supervise subcontractors to perform work that Company #1 was supposed to perform.  In an effort to evade detection, Manafort arranged to pay those subcontractors through Company #1.

Manafort has agreed to pay a civil fine of $2,460,722.02 to resolve the claims against it.  Manafort has also agreed to remove certain personnel directly involved in the misconduct, and take other remedial measures.  The resolution only addresses Manafort’s corporate liability; the government’s investigation of the individuals involved is ongoing.

In some government contracting circles, there is a perception that enforcement is often lacking at the subcontractor level and that prime contractors can easily get away with pass-through fraud.  Perhaps Manafort’s hefty fine will help change that perception.

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