Legal
Balfour Beatty Unit Will Pay $65.4M in Military Housing Fraud Settlement
Isaul Garcia, a U.S. Air Force resident construction manager, shows visiting officials at Tinker AFB in Oklahoma in 2019 the space in which it was found that a Balfour Beatty Communities subcontractor failed to install fire protection paneling in 77 base housing units.
Photo by U.S. Air Force/Kelly White
Balfour Beatty Communities LLC, one of the largest private residential managers for the U.S. military, has pleaded guilty to defrauding the three service branches in a scheme to obtain performance bonuses by misrepresenting maintenance records, the U.S. Justice Dept. said in announcing an agreement in which the firm will pay $65.4 million to settle a federal criminal probe and civil lawsuits by military families.
The firm is a subsidiary of Balfour Beatty plc, the large UK-based global contractor. That firm reported about $9.7 billion in 2020 revenue. It is not ranked on ENR's Top Global Contractors list, but its U.S. construction arm ranks at No. 16 on ENR’s 2021 Top 400 Contractors list, reporting $5.08 billion in revenue for that year.
The Malvern, Pa.-based subsidiary pleaded guilty to one count of fraud, the Justice Dept. said last month.
Under terms of the settlement ordered by a U.S. District Court judge, the company will pay the government $33.6 million in criminal fines and $31.8 million in restitution. It will also serve three years of probation, work with an independent compliance monitor and implement a compliance and ethics program.
Major Landlord
Balfour Beatty Communities operated privatized military residences at 16 Army, 21 Air Force and 18 Navy bases across the U.S.,that houses tens of thousands of service members and families, court documents state. The company was paid for design, construction, management and maintenance of each housing community, and was also eligible for performance incentive fees that depended on service branch approval and documentation of objectives such as maintenance and resident satisfaction.
Deputy Attorney General Lisa Monaco said in a statement, however, that the company lied about promptly making repairs to the housing. Court records state that between 2013 and 2019, employees falsified incentive fee requests to show the company had met performance objectives when, in reality, it had failed to meet them in many cases.
Company employees destroyed and falsified resident comment cards and altered data in property management software to inflate their metrics as part of the scheme, with tenants facing long, unnecessary delays for maintenance issues, according to court documents.
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“This pervasive fraud was a consequence of [Balfour Beatty Communities’] broken corporate culture, which valued profit over the welfare of service members,” Monaco said.
Two former company employees previously pleaded guilty to related charges. Stacy Cabrera, a former community manager, pleaded guilty in April to conspiracy to commit wire fraud and Rick Cunefare, a former regional manager, pleaded guilty in June to major fraud against the U.S.
No other executives or employees were charged.
Balfour Beatty plc says it did its own investigation of the unit's operations and made changes to prevent a similar type of misconduct from happening again, including restructuring its management team and appointing a chief compliance officer.
“Balfour Beatty is committed to the highest standards of ethical conduct,” the company said in a statement. “The wrongdoing that took place is completely contrary to the way the company expects its people to behave. The company apologizes for the actions of [the unit] to all its stakeholders.”
The probe developed from a report by Reuters of the mismanaged repairs, the news service said.
The parent firm is set to release its 2021 year-end corporate results on March 10.
