Overhead Question. PBS&J may owe for reimbursed overhead on a Nevada highway.

Tampa-based PBS&J is engaged in a costly effort to repay about 12 to 15 state departments of transportation for reimbursed overhead expenses that were inflated as part of an alleged embezzlement scheme run by the company’s former chief financial officer.

The amount allegedly embezzled by the former CFO, W. Scott DeLoach, and two subordinates from 2000 to 2005 came to $36 million in PBS&J funds, the company has said. The amount that eventually will be returned to state DOTs may be in the millions but has not yet been finalized, says Todd J. Kenner, PBS&J president.

The three employees allegedly inflated many different types of expenses at the company’s former corporate office in Miami. DeLoach and two other PBS&J employees resigned last year when questions about employee health expenses and company reserves surfaced (ENR 4/25/05 p. 16).

Auditing procedures in place to comply with the federal Sarbanes-Oxley Act uncovered the discrepancies. Although privately held, PBS&J files financial reports with the Securities and Exchange Commission due to the high number of employee shareholders.


The three ex-employees are currently negotiating a plea deal with Justice Dept. officials over criminal charges, sources claim. PBS&J recently vowed to repay the overstated costs to clients, including transportation departments of Nevada, Georgia, Florida and Texas. The allocations will be made in lump-sum payouts as soon as possible, Kenner says.

The firm will restate its financial reports from 2000 to 2006. PBS&J had $520 million in revenue in the fiscal year ending Sept. 30, 2005, a 15% gain from the prior fiscal year. The firm ranked 22 on ENR’s Top 500 Design Firms List (ENR 4/25 p. 58).

PBS&J has made several internal business changes since last March when accounting irregularities prompted a 15-month internal investigation. The 3,900-employee firm has since implemented a new enterprise system, named C. Lee Essrig as chief ethics and compliance officer and hired Donald J. Vrana as CFO.

But the damage may already be done. “It has put some of our clients in a position they would rather not be in,” says Kenner, who became company president a few weeks before the embezzlement was discovered.

On May 25, 2006, TexDOT suspended the company from performing new services. PBS&J is the general engineer for the $2.5-billion, 66-mile Central Texas Turnpike Project in Austin. TexDOT work accounted for $43 million, or 8%, of the company’s total revenue in 2005. While it won’t impact 40 current TexDOT jobs, a “prolonged suspension would have a material adverse effect on the company,” PBS&J reported.

In Nevada, PBS&J is co-designer of the $94.8-million, 2-mile widening of U.S. Highway 95 in northwest Las Vegas. It’s the state’s largest road project to date. PBS&J recorded $40 million in revenue from Nevada since 2001. “They have been responsive,” says Nevada DOT Director Jeff Fontaine. “They’ve said they would make us whole.”

PBS&J has one overhead rate covering all direct project and indirect related services, says Kenner. When its expenses were inflated and some unallowable expenses built into its overhead, PBS&J’s overhead rate increased and the amount the firm should have been billing was overstated. “So we started going over every invoice and contract performed with [state DOTs] and working with their staff and determining the amount of overpayment,” he says.

ENR was unable to reach DeLoach for comment. He had been PBS&J’s chief financial officer since January 2004 and previously held the positions of corporate controller, national service director of administration and executive vice president. PBS&J has not identified the two subordinates allegedly involved.