On March 13, 2014, the Department of Justice announced that a the owner of a Chicago based utility contract was sentenced to 17 months in federal prison and ordered to pay over $500,000 in restitution for DBE fraud scheme used to obtain over $5 million in contracts from the City of Chicago.
What is important about this case is that it involved only City of Chicago contracts, not projects partial or wholly funded by the Department of Transportation. In my recent webinar on complying with DBE programs (free download here), I underscored that contractors and their executives that operate under a State, County, or Municipal DBE program need to be just as vigilant in complying with those programs as they do the federal DOT program
When fraud is committed using a DBE program, the underlying crime is usually mail or wire fraud. The federal mail and wire fraud statutes apply equally to the DOT’s DBE program and state and local DBE programs. That is because whenever you submit a payment application or other certification that falsely states that a DBE performed a certain percentage of work, you have likely committed wire or mail fraud. In fact, wire fraud is what the contractor in the Chicago pleaded guilty to.