Project Manager of Construction Company Pleads Guilty In Connection with Inflation of Project Costs

The United States Department of Justice (“DOJ”) recently announced that a former project manager of a government contractor has pleaded guilty in connection with an alleged conspiracy to inflate project costs on federal government contracts. According to the DOJ, the project manager faces up to 10 years in prison and a fine of $250,000.00.

The case relates to an alleged kickback scheme in connection with construction contracts administered by the United States Army. According to the DOJ’s press release, the project manager in question had allegedly conspired to receive kickbacks from the owner of a commercial flooring services subcontractor. Apparently, under this scheme, the flooring services subcontractor would inflate the costs of the flooring construction subcontracts and the project manager would receive “half of the proceeds as kickback payments.” The DOJ reported that the project manager received more than $100,000 in kickbacks over a 5-year period. The owner of the flooring subcontractor had previously pleaded guilty in connection with his role in the alleged conspiracy.

According to the Deputy Assistant Attorney General, “[t]aking advantage of U.S. taxpayers by defrauding U.S. Army facilities is a crime and will not be tolerated.” The Special Agent in Charge remarked that the “plea marks a significant milestone in the ongoing efforts to combat corruption and uphold integrity within government contracting processes.” The DOJ also included a reminder in its press release that in November of 2019, it had created the “Procurement Collusion Strike Force” which the DOJ described as “a joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant and program funding at all levels of government – federal, state, and local.”

This press release underscores the ongoing need for contractors to instill a culture of compliance at all levels. Contractors are well-advised to establish and administer policies and procedures designed to protect against situations in which employees can become entangled in unlawful conduct. Regular employee training is also critical. Where an employee deviates from applicable requirements, discipline may be warranted. Although this press release was limited to the plea of the individual involved, contractors should want to avoid situations in which their project managers or other employees make the news for the wrong reasons. Certainly, contractors should expect that if an individual is suspected of unlawful activity, the applicable enforcement agencies will consider whether the company can also be charged.

UCANE Construction Outlook, February 2024 | Legal Corner