Readers of this blog know that I have been warning that actions brought under the False Claims Act against contractors violating DBE programs have been increasing. Last week, I wrote about a False Claims Act case brought by a project manager, employed by a third party subcontractor, that resulted in a $2 million award to him and over $10 million award to the government.
On the heels of that case, is news out of the Southern District of New York of a False Claims Act case brought by the U.S. Attorney for the Southern District of New York, against Moretrench American Corporation, who allegedly used a “pass through” entity to meet its DBE subcontracting goals on the World Trade Center Project. (Readers of this blog also know that the Southern District of New York is a hot bed of DBE fraud prosecutions, including several high profile cases in the last few years.)
According to the complaint, Moretrench made the common mistake of hiring a certified DBE that performed no commercially useful function. Instead, Moretrench placed is employees on the DBE’s payroll and had those employees perform work using Moretrench equipment. Moretrench then submitted payment applications certifying that the DBE performed work for Moretrench. The complaint seeks only money damages and raises claims under the civil portion of the False Claims Act. Therefore, Moretrench and its executives are lucky that they are not facing criminal mail and wire fraud charges, which the DOJ could have easily brought given the facts alleged. (However, the DOJ can always bring additional charges later and we will see what happens.)
Wally Zimolong
Wally represents contractors (and subcontractors) and developers. His clients build and develop residential, commercial, and industrial properties nationwide. Wally enjoys working with the owners of the businesses he represents because they tend to be entrepreneurs and all around interesting people.
