For any contractors who have ever considered manipulating disadvantaged business enterprise (DBE) requirements as a way to obtain work, this recent FBI press release provides a cautionary tale.
According to the press release, in 2007 a Connecticut contractor was awarded a highway project, funded by state and federal sources, based on its low bid of $39.6 million. In its bid documents, the contractor had represented that a certain DBE subcontractor would perform about $3.1 million of the work, furnishing all supervision, labor, and materials. Instead, the government claims the contractor used the DBE subcontractor as a shell to pass through payment to other subcontractors that the contractor negotiated with and supervised in actual performance of the work.
Under the non-prosecution and civil settlement agreement reached between the government and the contractor, the contractor agreed to a number of reforms, such as establishing an Ethics and Compliance Officer and removing the personnel directly involved in the scheme, in addition to paying a $2.4 million fine. The non-prosecution agreement only addressed the contractor's corporate criminal liability--the government's investigation of individuals continues.