September 2012

If you have not gotten the point by now that you should take DBE regulations serious, you should.  The DOT Inspector General posted these two item on its web page today:

“On September 11, 2012, Michael Paletta, president of Crossboro Construction Contracting, pled guilty in United States District Court, New York, New York, to a mail fraud conspiracy. Between approximately 1994 and March 2011, Mr. Paletta, on behalf of Crossboro (a non-DBE), conspired with MS Construction (a DBE) to perform construction work on various federally-funded bridge projects in Manhattan and other boroughs where MS Construction was the purported DBE subcontractor. MS Construction was paid approximately 5% as its “fee” and relied upon Crossboro for performance of the actual work.”

“On September 5, 2012, Dennis Degrazia, pled guilty in U.S. District Court, Boston, Massachusetts, for his role in a scheme to impede, impair, and obstruct the U.S. Department of Transportation’s Disadvantaged Business Enterprise (DBE) program. In May 2011, David Hebert, Robert Dickerson, and Mr. Degrazia were indicted in conjunction with this scheme.”

 

 

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A story in Oregon’s Daily Journal of Commerce states that the FHWA announced that an investigation revealed that three highway contractors – Bud Construction LLC, Emery and Sons Inc., and Salt and Pepper Construction Co. – “contrived a relationship” to meet DBE program requirements for a $35 million Oregon DOT project completed in February.

According to the report, Bud, Emery, and Salt and Pepper, enter into a classic pass through scheme to whereby the stated MBE contractor performs no “commercial useful function” but rather that function is performed by a non-DBE contractor.

For now, the only sanctions appear to a removal of Salt and Pepper Construction Co.’s DBE status.  But, based on the allegations more severe sanction could follow.  Both Bud Construction, LLC and Emery and Sons, Inc. could be debarred from bidding on federal highway projects and could face heavy civil fines.  Worse yet could be criminal charges brought against the individuals involved with the scheme.

The most damning evidence could come from a statement given by the owner of Bud Construction where he stated:

“I’ve never been paid for that, and I’ve been doing this same thing 20 years for (Salt and Pepper),” he said. “I don’t know the wording; I’ve never seen (DBE) rules or regulations. All I do is coordinate that X amount of trucks are coming that day and I’m on the job site to make sure they are in place … I do it for a friend.”

As discussed before on this blog, the DOT and FHWA rules require DBE “rules and regulations” to appear in every federal highway contract.  Moreover, lack of knowledge of the rules is unlikely to be much of a defense in any criminal action against any of the individuals involved.

Despite all of this, one of the those involved was undeterred boldly boasting:

“Come after me; I don’t care.”

We can only speculate if he will maintain that same bravado when federal prosecutors come knocking on his door.

 

 

The Wall Street Journal reports (subscription may be required) that the installation of solar panel systems in booming.  While the report notes this is good news to solar installation contractors, the news is not so good for domestic manufacturers of solar panels.  The report notes that the growth in installation has been fueled foreign made panels which make the installation cheaper and, therefore, competitive with other forms of energy.  Growth is forecast to “slow” to 40% a year through 2016, which is still a gaudy number for the construction industry.