The United States Department of Justice said that Walsh Construction Company and Melo’s Rodbusters, Inc have agreed to pay US$1.24 million collectively. The payment is to resolve False Claims Act allegations that they participated in a fraudulent scheme designed to take advantage of the Disadvantaged Business Enterprise (DBE) programme in connection with their work on the federally funded project.
Walsh, an Illinois corporation, is a general contracting and construction management firm. Melo’s is a Massachusetts corporation and a certified DBE that subcontracted with Walsh on the project to perform furnishing and installation of steel rebar.
The DBE programme provides opportunities for businesses owned by socially and economically disadvantaged individuals to work on projects financed by the federal government. It requires contractors to award, or make good faith efforts to award, a percentage of subcontracts on a given project to DBEs that serve a ‘commercially useful function’. The Department of Justice said that a DBE does not serve a commercially useful function if it acts as a mere pass-through—that is, a DBE through which funds are passed to create the appearance that historically disadvantaged persons did the work, when they did not. Companies regularly certify their compliance with the DBE regulations when making claims for payment on federally funded contracts.
In February 2013, Massachusetts Department of Transportation (MassDOT) selected Walsh, along with its joint venture partner, to be the prime contractor for the federally funded MassDOT project known as the Whittier Bridge/I-95 Improvement Project. Walsh, in turn, subcontracted with DBEs, including Melo’s, for portions of the work. The project was completed in 2018.
As part of the settlement agreement, Walsh admitted that it assisted with certain work functions for Melo’s, and for another DBE on the project that is not a party to the settlement, including assistance in the selection of suppliers and participation in price discussion and negotiation. As part of its own settlement agreement, Melo’s admitted that Walsh performed these functions even though they should have been performed by Melo’s. Melo’s also admitted to providing inaccurate information in response to a MassDOT inquiry regarding Melo’s price negotiation with suppliers. Melo’s has agreed to pay US$146,102 to resolve the government’s investigation and Walsh has agreed to pay US$1,099,000.