The federal government announced its largest construction-related False Claims Act settlement of 2013 earlier this month involving alleged disadvantaged business enterprise fraud by a collection of Ohio-based engineering-related companies.
The U.S. Dept. of Justice says it has reached a settlement with Dayton-based TesTech Inc., TesTech owner Sherif Aziz, Dayton companies CESO Testing Technology Inc., CESO International LLC, and CESO Inc., and their owners, David and Shery Oakes. They have agreed to pay $2.88 million to resolve the fraud allegations, DOJ says.
The allegations were brought with the assistance of a whistleblower, former employee Ryan Parker, who will receive $562,370 of the settlement funds under provisions of the False Claims Act.
The prosecution claimed in its allegations that the defendants created TesTech as a subsidiary to the Oakes’ other testing and engineering businesses, falsely filed paperwork that represented Aziz as owner of TesTech and received minority-owned business and DBE status in Ohio and other states under false pretenses.
The complaint indicates that TesTech received federal funds for work on U.S. Dept. of Transportation projects in Ohio such as the Dayton International Airport and Richenbacher Airport. Other projects involved include a hangar renovation at Port Columbus, Fort Wayne International Airport in Indiana and Detroit International Airport in Michigan and highway projects in all three states.
According to the allegations, Parker was an employee of the Oakes’ from 1996 until 2005, when he was transferred to TesTech to be its vice president and director of operations. The complaint claims that Parker witnessed Aziz’s supposed lack of ownership over the business, and in 2009 Parker allegedly refused to sign paperwork to re-apply TesTech for DBE status because he believed the status would not be legal.
The complaint further alleges that Parker was subsequently demoted and then terminated.
Aziz, the Oakes and their legal representatives could not be reached for comment. The Dept. of Justice provided a press release with statements but would not answer further questions.
Other False Claims Cases
The payment is one of two construction False Claims Act settlements this year to include a reward for a whistleblower, and the only one relating to DBE fraud.
In early April, allegations against Fluor Corporation subsidiary Fluor Hanford LLC were resolved with a $1.1 million payment, $200,000 of which went to a former employee for bringing the contractor’s alleged use of federal funds for lobbying to light.
In two other FCA settlements—$1.15 million paid by Montgomery-based Caddell Construction and $367,500 paid by Watsonville, Cali.-based Granite Construction Inc.—whistleblowers were not involved.
Last year saw a substantially larger construction False Claims Act settlement: Harbert Corporation and several of its subsidiaries paid $47 million to resolve allegations that the companies engaged in bid-rigging.
Also in 2012, Cleveland-based Anthony Allega Cement Contractor Inc. paid $500,000 to resolve allegations that the company used a pass-through entity to satisfy DBE requirements on Dept. of Transportation projects.