City Paper: D.C. Set to Sue Construction Firms Over Alleged Fraud
April 17, 2013 Leave a comment
D.C. Set to Sue Construction Firms Over Alleged Fraud
Posted by Alan Suderman on Apr. 16, 2013 at 9:17 pm
City sources tell LL that District Attorney General Irv Nathan‘s office is set to file a lawsuit soon—possibly Wednesday—against two construction firms that teamed up to manage construction of Anacostia High School.
The lawsuit will allege that Rockville, Md.-based Forrester Construction and nominally D.C.-based EEC of D.C. conspired to defraud the District government through a phony joint venture that benefited from the city’s beleaguered contracting set-aside effort known as the Certified Business Enterprise program.
The lawsuit filed by the city will be a civil lawsuit filed under the Racketeer Influenced and Corrupt Organizations Act, or RICO, the sources say. It will allege that the two companies conspired to commit fraud, according to the sources. One source, who was not authorized to speak on the record, says the allegations in the civil case could form the foundation for a future criminal case. Calls to both firms were not immediately returned Tuesday evening.
LL has written extensively about CBE-related problems at the $62 million Anacostia renovation project. EEC of D.C. is a certified as a local CBE and enjoys preference points when bidding on city contracts, making it easier for the company to win bids than it would be for a non-certified competitor. Those preference points were extended to a joint venture between EEC of D.C. and Forrester when they bid on the Anacostia job, with the proviso that EEC of D.C. would control at least 51 percent of the venture. But as part of a civil court case last year between the two firms, EEC of D.C. filed contracts that showed that Forrester controlled about 95 percent of the project, instead of 49 percent. EEC of D.C.’s owner, Andre Downey, also alleged that Forrester did the same thing on other city projects, including subcontracting 100 percent of the work to itself on a senior center in Ward 1, and kept more than $47 million worth of work for itself on the $48 million construction of the new Department of Employment Services headquarters on Minnesota Avenue NE. In total, Forrester and EEC of D.C. partnered for more than $100 million worth of city construction projects.
The lawsuit will mark the first time in recent memory that the city has gone after contractors officials believe have abused the CBE program. Forrester is a well-known, mid-sized firm that does work around the region as well as with the federal government. On its website, the company has a picture of President Barack Obama and former President Bill Clinton taking a tour of a Forrester-managed project of an office building near the White House at 815 Connecticut Ave. NW. The company is active around the city, and is currently part of a joint-venture building a new $40 million student center at the University of the District of Columbia.
Forrester officials have declined to discuss Downey’s allegations with LL or during a public D.C. Council hearing that was held following LL’s articles on the problems at Anacostia.
The lawsuit could reflect poorly on the stewardship of City Administrator Allen Lew and Department of General Services Director Brian Hanlon of the city’s multi-billion dollar school construction effort. Lew was in charge of school construction when the Anacostia project got started, and Hanlon had taken over for Lew by the project’s completion.
Emails obtained through a Freedom of Information Act request show not only did city officials first ignore potential warning signs of a fraudulent CBE-certified joint venture, but one official later suggested trying to quiet the problem with a $250,000 payment using public money.
The emails show that Hanlon and the private contractors Lew has installed at DGS to oversee public construction projects initially ignored Downey in late 2011 when he alleged to city officials that the joint venture was a sham.
“Being that this is a dispute between the contractor and their sub, there isn’t much we can do,” wrote Will Mangrum, a private contractor who oversees school construction for DGS, in an email that was copied to Hanlon and other DGS officials on Nov. 12, 2011. Last September, Hanlon told LL that he never received a letter from Downey outlining his allegations, a claim the emails obtained through FOIA suggest is inaccurate. A month after Downey tried to alert city officials to the potential fraud, DGS awarded Forrester a new $6.8 million contract.
Last May, Thomas Bridenbaugh, a private attorney who handles the legal side of DGS’ construction contracting, wrote to Hanlon saying that he was working on finding a settlement between EEC of D.C. and Forrester, who were in a dispute over money. Hanlon wrote that the settlement he "floated" would have cost the District an additional $250,000 for the Anacostia project. It appears that Bridenbaugh’s suggestion never gained traction; both he and Hanlon have declined multiple requests for comment.
In June, an aide to Hanlon warned that DGS “may be asked what actions have been taken … to punish this admittedly fraudulent behavior.” But Hanlon did not refer the matter to the OAG until several months later, either in late September or early October of last year.
Lew said he wanted to punish both companies by prohibiting them from forming joint ventures for two or three years. The details of the forthcoming lawsuit from the attorney general aren’t immediately available, but it’s a fair guess that the city’s going after a much stronger punishment.
Keep in mind that the mess at Anacostia wasn’t just limited to its general contractors, either. Other questionable activity at the Anacostia project includes a mysterious $2.4 million payment to general contracting company owned by Keith Lomax, former Mayor Adrian Fenty‘s driver, for drywall work Lomax’s company did not perform.
Mayor Vince Gray says he’s committed to reforming the broken CBE program, but says he’s frustrated by the slow pace of reform. He recently asked 17 business leaders to form an advisory panel to help him craft new legislation aimed at improving the program. Among those named to the panel: the principals at two firms that oversaw the Anacostia project.