March 9, 2023. Following a $42.7 million contract from the Pennsylvania Department of Transportation (PENNDOT), three companies allegedly conspired to defraud the federal Disadvantaged Business Enterprise (DBE) program. Two of the three companies reached settlements and judgments in 2016, 2017, and 2020. The third company, The Sherwin-Williams Company, paid $1 million to settle False Claims Act allegations about its involvement in this DBE fraud scheme around painting the George C. Platt Memorial Bridge across the Schuylkill River in Philadelphia. There was no whistleblower in this case, but a qui tam whistleblower reporting fraud under the False Claims Act could have been rewarded 15-25% of the government’s recovery.
According to the allegations, a company called Hercules-Vimas Joint Venture, LLC bid on and won a largely federally-funded contract from PENNDOT for painting the Platt Bridge. This contract required that part of the work should be done by a DBE, meaning a company that is owned by individuals with social and economic disadvantages. As stated by the U.S. Department of Transportation, the “primary remedial goal and objective of the DBE program is to level the playing field by providing small businesses owned and controlled by socially and economically disadvantaged individuals a fair opportunity to compete for federally funded transportation contracts.” Hercules-Vimas brought in a Pennsylvania-certified DBE, Vertech International, as a subcontractor. In order to meet the requirements of the contract, Vertech was supposed to have performed a “commercially useful function” as part of the contract. The government alleged that Hercules-Vimas conspired with Vertech and Sherwin-Williams to take advantage of Vertech’s status while having the larger, non-disadvantaged business perform the work. Furthermore, the government alleged that Sherwin-Williams controlled and delivered supplies, Vertech generated invoices for said supplies, and Hercules-Vimas paid those invoices. Finally, the government alleged that this scheme allowed Hercules-Vimas to undercut other businesses when bidding on the Platt Bridge Project.
The settlement demonstrates the government’s commitment to enforcing the requirements of DBE programs, which are intended to ensure properly designated businesses have an opportunity to compete for government contracts. If you are concerned about retaliation for whistleblowing, reach out to the experienced government contracts fraud attorneys at Tycko & Zavareei LLP.
Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva was the Senior Counsel for Health Care Fraud. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Renée at [email protected] (tel.: 202-417-3664) or contact Eva Gunasekera at [email protected]. You can also go to Tycko & Zavareei LLP’s website for whistleblowers to learn more at https://www.fraudfighters.net/.