False Claims Act lawsuits cover fraud of all types, from doctors and hospitals
cheating on Medicare claims to defense contractors overbilling. But many
people do not realize that the Act also covers fraud related to all types
of procurement contracts, including highway contract fraud related to
projects that are partially funded by federal dollars. In states that
have FCA statutes, highway contractors also may be liable to the state
government under the state’s version of the False Claims Act.
According to a press release from the U.S. Attorney’s Office for
the Middle District of Tennessee,
Sherman-Dixie Concrete Industries, Inc. to Pay $664,000 to Settle False
Claims Act Allegations, a Tennessee concrete mixing company is learning that fact the hard way.
The Tennessee company is accused of cutting corners in making concrete
products. According to Department of Justice (DOJ), Sherman-Dixie was
cranking out concrete end walls and catch basis that did not meet the
specifications set out in its contract. Sherman-Dixie was making these
concrete pieces under a contract with the Tennessee Department of Transportation
(TDOT). The pre-cast concrete pieces did not have the appropriate “strength
and placement of rebar” inside them. Despite the fact that the pieces
did not meet the contract specifications, the company certified that they did.
Marlies Gonzalez was the DOT-OIG Regional Special Agent-in-Charge of the
investigation into the allegations that the concrete did not meet the
specifications about how the rebar was placed. In commenting on the settlement,
Gonzalez stressed that the Government was using the FCA to send ”
a strong message” to companies that tried to “substitute inferior
products in transportation-related projects.” Gonzalez pointed out
that cutting corners on these concrete pieces is a safety issue, not just
a fraud issue.
The case was unusual in that the Tennessee Department of Transportation
learned of the fraud on its own. Since by definition fraud is something
people try to cover up, usually fraud is not detected unless a whistleblower
comes forward with inside information that is being hidden from the Government.
The Federal Government became involved because the U.S. Department of Transportation
provided a substantial portion of the funding for the highway project.
Because both the state and the federal governments contributed to the
funding for the project, the U.S. Department of Transportation, the FBI
and the U.S. attorney for the Middle District of Tennessee jointly conducted
the investigation into the fraud.
The concrete company also agreed to a monitoring agreement. Under a monitoring
agreement, a company agrees to take measures that will enable to company
and the government to monitor the company’s future compliance on
its procurement contracts.
Whistleblowers who come forward to tell the Government about fraud do
an immense service to all of us as taxpayers. In order to reward them
for bringing the information, the Government awards between 15% and 30%
of its recovery to the whistleblower. In order for the whistleblower to
be paid under the Act, the whistleblower’s lawyer must file suit
and help the whistleblower follow the somewhat complex rules set out in
the federal False Claims Act, which is found at
31 U.S.C. § 3729, et seq.