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Rockville’s Forrester Construction will avoid a RICO lawsuit after all. With the firm about to be sued by the District’s Office of the Attorney General for fraud in city construction joint ventures, Attorney General Irv Nathan announced in a press release that Forrester instead settled for paying $1 million.
Forrester’s construction practices, which were at the center of a Washington City Paper cover story on problems with the Certified Business Enterprise program, involved presenting its bids as joint ventures with EEC of DC, Inc., which, as a CBE, received special consideration in construction bidding. Forrester and EEC’s joint ventures, which were ostensibly controlled by EEC, eventually won several city contracts, including one to remodel Anacostia Senior High School.
But in fact, according to the attorney general, Forrester was fraudulently running the joint ventures, so they shouldn’t have gotten the advantages the CBE program confers, which are intended for D.C-based businesses. In addition to the $1 million, Forrester has agreed to not pursue CBE preferences for two and a half years.
Issues with Forrester’s contracting initially surfaced in May 2012 after EEC, dissatisfied with Forrester, started alleging fraud in the program. When evidence of fraud surfaced, though, contracting officials seemed unconcerned. In November 2011, private consultant Will Mangrum, who was involved in the selection of EEC and Forrester’s joint venture, dismissed the idea of what would turn out to be fraud being more than a private business dispute. “Being that this is a dispute between the contractor and their sub, there isn’t much we can do,” Mangrum wrote in an email to Brian Hanlon, the director of the District’s Department of General Services.
And while D.C. will receive $1 million in the settlement, some involved were initially willing to use government money to settle the argument quietly. Attorney Thomas Bridenbaugh, who works on DGS contracting but doesn’t work for the government, wrote in an email that he could settle the issue between the two scrapping companies for just $250,000 of public money.
While Forrester won’t be involved for 30 months, according to its legal agreement, that doesn’t mean problems with the program are over. DGS’ Hanlon appeared to think as much in January 2012, writing an email to City Administrator Allen Lew that the dispute between the two companies, and the resulting allegations of fraud, could “have ramifications across the District.”
Press release from the Office of the Attorney General:
INVESTIGATION BY ATTORNEY GENERAL LEADS TO $1 MILLION RECOUPMENT TO THE DISTRICT IN SETTLEMENT WITH MARYLAND CONTRACTOR FOR ITS ABUSE OF CBE PROGRAM
WASHINGTON, D.C. – Attorney General Irvin B. Nathan announced today that the District has settled a contemplated civil enforcement action against Forrester Construction Co., a Maryland-based company, for a $1 million payment by the company to the District and Forrester’s forbearance from seeking any contracting preferences under the District’s Certified Business Enterprise (CBE) program for 30 months.
The settlement followed the Office of the Attorney General’s investigation of the company’s participation in the CBE program, which is intended to provide contracting advantages to small and disadvantaged D.C. businesses. The settlement resolves claims the District was prepared to bring under the civil provisions of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and under the District’s False Claims Act.
The Attorney General’s investigation found that Forrester engaged in a pattern of fraudulently bidding on and winning District government construction contracts by misrepresenting the terms of its joint venture agreements with a D.C.-based company, EEC of DC, Inc. Through these practices, between 2008 and 2011, Forrester gained significant preference points and won contracts to build a new headquarters building for the D.C. Department of Employment Services (DOES) and to build a senior wellness center, and to renovate Anacostia Senior High School.
The CBE program gives bidding advantages to D.C. businesses, including small and disadvantaged businesses, and to joint ventures controlled by such businesses. A joint venture is eligible for the maximum bidding advantage on a construction contract only if the D.C. business is the majority, controlling partner; will do a majority of the joint venture work; and will receive a majority of the profits under the contract.
The investigation showed that Forrester and EEC repeatedly represented to the District that EEC, a company that qualified for bidding advantages under the CBE program, was the majority partner of the joint ventures, would do a majority of the joint venture work, and would earn the majority of the profits. Instead, Forrester and EEC entered into secret side deals providing for Forrester, which did not qualify on its own for any bidding advantages, to receive the overwhelming share of the contract work and profits. By securing these bidding preferences under the CBE program, Forrester and EEC were able to win at least three construction contracts that the District would otherwise have awarded to other bidders.
The payment to the District will take the form of an offset from the final payment by the District to Forrester of the base contract amount for the Anacostia Senior High School renovation. In full satisfaction of the final base contract bill for $3.2 million, the District will pay and Forrester will accept payment in full of $2.2 million. Under the settlement, Forrester has also agreed not to seek contracting preferences under the CBE program for 30 months.
Attorney General Nathan said, “Through our intensive investigation and our securing even before filing a court suit a $1 million payment from this Maryland contractor for the District and a 30-month ban from attempting to secure any CBE preferences in the District, we send the clear message that we will not tolerate abuse of programs designed to promote D.C. businesses. We are ready to use all available remedies, including any applicable federal statute, to deter such misconduct and to provide the District with the benefits of honest, competitive bidding.”
The settlement agreement:
Photo by Darrow Montgomery