The U.S. Justice Dept. has joined a whistleblower lawsuit against AECOM in federal false claims court. Under the lawsuit, a a project manager charges that the firm submitted more than $100 million in fraudulent claims to the Federal Emergency Management Agency for damage to various client facilities caused by Hurricane Katrina in 2005, and that when the employee informed management, they did nothing in response.
In a document filed May 29 with the federal court in New Orleans, DOJ said it was intervening to support a settlement with one former AECOM client, locally-based Xavier University, for its participation in the alleged claims fraud. The school agreed to pay $12 million to resolve its role in the false claim and to cooperate in the case against AECOM and any other parties and in any related litigation. The lawsuit had been previously sealed.
Other former clients cited in the whistleblower complaint include Dillard University, the Archdiocese of New Orleans and the city's public school system.
DOJ says "claims alleged in the lawsuit, including those resolved by Xavier, are allegations only, and there has been no determination of liability."
AECOM says in a statement, that “it’s disappointing that 15 years after Hurricane Katrina, the federal government wants to claw back funds from educational institutions that endured so much damage from the impact of the storm.” It vowed to defend its work, which it said was done under the guidance and supervision of the federal government.
The whistleblower lawsuit was filed in 2016 by Robert Romero, an AECOM project specialist. He claims that company employees repeatedly submitted false or misleading information to FEMA for clients by fraudulently increasing the amount of hurricane damage to buildings.
He contends that company management knew by 2011 that at least one employee, Randall Krause, was committing the fraud but did not inform the government or mitigate the over payments. AECOM later fired Krause.
Romero, still employed by AECOM, received $2.3 million under the Xavier University settlement, says DOJ.
The alleged fraud included claims of damage to non-existing concrete building foundations and fictitious basements, systematic inflation of cost estimates for damaged items, inflation of building square footage and submission of fraudulent damage photographs, the complaint said.
In some cases, AECOM took advantage of a FEMA policy called the “50% rule” by manipulating repair and replacement estimates so the agency would pay for full replacement when it should have paid only for less expensive repairs, the complaint said.
AECOM contends that FEMA directed contractors to “say yes” to applicants and make extra effort to obtain federal payment requested for damages. The government now has " changed their tune,” AECOM said in a statement.
But Romero's complaint also contends that AECOM benefited from the fraud through contract renewals. “FEMA evaluated contractors based on metrics including total productivity," it says, which enabled AECOM to charge FEMA "for hundreds of additional billable hours.”
According to DOJ, AECOM received more than $300 million between 2005 and 2019 from FEMA as a technical assistance contractor that conducted site evaluations and prepared and reviewed damage and repair estimates used to determine whether applicants were eligible for public assistance funds.
Xavier University “knowingly, recklessly with willful blindness” submitted false and misleading documents about the extent of damage to its property, says the lawsuit. Specifically, it received funding based on damage to a gymnasium’s concrete floating slab foundation when the building had no such foundation, said the complaint, which also noted that it received funds to replace its electric distribution system that was not damaged by the storm and ran for six years post-Katrina.
DOJ did not intervene in fraud lawsuits against Dillard University, the Archdiocese or the school system, which were also for alleged submissions of false and misleading claims of damage. The department did not state any reason for not intervening.