In previous posts, I have discussed how failing to abide by the Department of Transportation’s DBE regulations can lead to the criminal indictment of construction company executives. Now, a case out of the Southern District of New York – a hotbed of DBE fraud prosecutions – should have all employees of a firms that fail to understand the ramifications of failing to follow the DOT’s DBE rules worried.
Last week, the Department of Justice announced the indictment of a regional manager of a general contractor for wire fraud involving the DBE program. What is unique about this case – and why you should take notice – is that the defendant was not an owner, partner, or executive officer of the general contractor, but rather a regional manager. Previous indictments of individuals almost always involved executive officers or those with an ownership interest. In fact, I cannot recall any DBE indictments involving a B/C level manager. Accordingly to the indictment, the general manager arranged a classic DBE pass-through scheme, which we have previously described on this blog. Importantly, there is no indictment that the defendant received any form of kickback as a result of the scheme. He concocted the scheme ostensibly to further his employers interests.
I doubt that the indictments involving this case will end with the regional manager. But, this case underscores that everyone in your company must know and understand the ramifications of engaging in DBE fraud both for their personal well being an that of your firm.
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.
