Skanska USA Civil Northeast, Inc. has agreed to pay the government $19.6 million as a penalty for using a Disadvantage Business Enterprise (DBE) as a front company. Skanska USA Civil, Inc., based in Sweden, was ranked by ENR as the 6th largest contractor in the United States.
No Work Performed by DBE: Skanska did work on eight projects for New York's Metropolitan Transportation Authority in which they hired a DBE, Environmental Energy Associates (EEA). However, EEA did not actually perform the work, nor were they capable in many instances of performing the work, thus violating the "commercially useful function" rule of the U.S. Department of Transportation's DBE program. In some cases, Skanska actually did the work that EEA was contracted to perform and in other cases, other contractors performed the work. However, Skanska was able to meet the DBE requirements (on the surface) by contracting with EEA.
DBE Owners Indicted: In an indictment unsealed on March 31, 2011, the owners of EEA, Balu Kamat and Carmine Desio were charged with mail and wire fraud conspiracy and with mail fraud.
"Tough Lesson" for Skanska: In agreeing to the payments, Skanska did not admit fault but indicated they did not follow best practices. "We've learned a tough lesson, and we urge others in the industry to learn from it," said Skanska USA Civil, Inc. president Richard Cavallaro.
Skanska Hiring DBE Manager: Skanska has advertised to hire a DBE manager.
More Information:
- New York Times article, dated March 31, 2011
- Press release, United States Attorney, Southern District of New York, dated March 31, 2011
Best Practices: Public agencies receiving federal U.S. Department of Transportation funding with DBE requirements must have sufficient and well-trained staff to monitor the compliance of contractors with the DBE requirements. The purpose of the DBE program is to provide genuine opportunities for DBEs to participate in government contracts.
Mike Purdy's Public Contracting Blog© 2011 by Michael E. Purdy Associates, LLChttp://PublicContracting.blogspot.com
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