Once again, the U.S. Department of Transportation’s DBE program is in the news, with a warning for contractors who might think they can evade the DBE rules applicable to federally funded public contracts. In April 2012, the owner of Schuylkill Products, Inc., a Pennsylvania bridge contractor, was found guilty on 26 of 30 charges in an indictment including conspiracy to defraud the U.S. DOT in a DBE fraud scheme.
Joseph W. Nagle, the contractor-owner, was convicted of participating in a 15-year-long scheme, where he and other executives at his firm diverted over 300 PennDOT and SEPTA construction contracts to the firm and a subsidiary firm that were reserved for DBE’s. The contractor owner and his co-conspirators executed the scheme by using Marikina Construction Corporation, a small Connecticut highway construction firm, as a “front” company to obtain these lucrative government contracts.
This prosecution is Exhibit A on why contractors should be especially wary of trying to circumvent the strict DBE rules on U.S. DOT-funded public contracts. If you happen to be caught, the penalties – both criminal and civil – can be severe, including jail time.
According to the press release issued by the United States Attorney’s Office for the Middle District of Pennsylvania, this recent prosecution is just one salvo in the federal government’s continuing battle to shut down DBE fraud schemes:
“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “This significant conviction, in what is the largest reported DBE fraud case in USDOT history, will serve as a clear signal that severe penalties await those who would attempt to subvert USDOT laws and regulations. Prime contractors and subcontractors are cautioned not to engage in fraudulent DBE activity and are encouraged to report any suspected DBE fraud to the USDOT-OIG. Our agents will continue to work with the Secretary of Transportation, the Administrators of the Federal Highway and Transit Administrations, and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”
The full press release explaining the prosecution and its background can be found here. This case has some similarities to the recent prosecution of an Ohio contractor which I commented about here.
Christopher I. McCabe, Esq.
