Highway Robbery? False Claims Act Allegations Against Concrete Mixing. Company

July 29, 2013

Rebar.jpgFalse 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. ยง 3729, et seq.