According to a criminal information filed in the U.S. District Court for the Eastern District of Pennsylvania, still another fraud scheme involving the U.S. Department of Transportation’s disadvantaged business enterprise (DBE) Program has been uncovered, this time on the federally-funded George C. Platt Memorial Bridge project in Philadelphia.
In April 2011, PennDOT awarded a $42.7M contract to perform structural steel painting and repairs on the Platt Bridge to a joint venture consisting of Hercules Painting Company, Inc., of New Castle, Pa., and Vimas Painting Company, Inc., of Lowellville, Ohio. During the bid process, the Hercules-Vimas JV allegedly committed to subcontract $3.1M in DBE work to Vertech International, Inc., to supply paint materials for the project. Instead, the Hercules-Vimas JV allegedly negotiated contracts and ordered materials for the Platt Bridge project directly with non-DBE suppliers, with Vertech allegedly acting as a pass-through to give the appearance that DBE requirements had been satisfied. PennDOT awarded approximately $1.97M in DBE credit to the Hercules-Vimas JV. Vertech was allegedly paid 1.75% of the face value of the invoices it processed to act as a pass-through.
On February 10, 2016, the U.S. Attorney’s Office for the Eastern District of Pennsylvania charged Rajat K. Verma, the owner of Vertech, with conspiracy. The U.S. Attorney’s Office press release on the charges can be found here. The U.S. DOT Office of Inspector General press release can be found here.
If true, the charges against Vertech’s owner are another example of the type of “pass-through” fraud that is too often encountered within the US DOT DBE program in Pennsylvania and elsewhere.
If you are a prime contractor bidding on a federally-funded transportation contracts, and you truly cannot find a qualified and competent DBE to perform work on your contract, or to supply materials, don’t resort to a fraudulent pass-through scheme to satisfy the DBE goal; instead, document your efforts to meet the DBE goal and fight for the contract award if you are the low bidder. Remember that a low bidder cannot be denied a contract award merely because it did not meet the DBE goal, provided that it has demonstrated “good faith efforts” to meet the DBE goal.
If you need assistance in this complex regulatory area, call or email me for a free consultation.
Christopher I. McCabe, Esq.
