CO construction company pleads guilty to major fraud, agrees to pay $1.8M

Dive Brief:

Colorado-based MCC Construction Company has pleaded guilty in federal district court to knowingly and willfully conspiring to commit major fraud on the U.S., according to The Hill. The company has agreed to pay a $500,000 fine and to forfeit $1.3 million as part of a plea deal that must be approved at the March 15 sentencing hearing.
The Department of Justice alleges that MCC conspired with two other companies to use their small business status to win government contracts. The DOJ said the two smaller companies then illegally turned over 27 contracts worth more than $70 million to MCC in exchange for a fee — 3% of the contract amount.
The DOJ said MCC violated the Small Business Administration development program, which awards contracts to businesses owned by "one or more socially and economically disadvantaged individuals."

Dive Insight:

"An uneven marketplace is created when businesses engage in illegal backroom deals to fraudulently obtain government contracts, placing competitors at an unfair disadvantage," Paul Abbate, assistant director in charge of the FBI’s Washington Field Office, said in a release.

State and federal agencies often set disadvantaged business enterprise (DBE) participation goals at 5%-10% or more, meaning that there are billions of dollars available to qualifying construction DBEs. With that much money at stake and a shortage of DBEs bidding on jobs, experts say some companies make a grab for it — even if they have to break the law — and prosecutors are increasingly focused on this area of fraud.

In November, the CEO of a North Carolina paving company was sentenced to 30 months in federal prison for fraud and money laundering related to a minority contractor scheme that steered $90 million in highway contracts to his company. Prosecutors said he scored more than 36 state and federal highway contracts over a 10-year period by using a small minority contractor to bid on projects.

And in October, three Pennsylvania executives pleaded guilty in October to setting up a shell company, with a woman as figurehead, in order to win $19 million of federal and state transportation projects over a period of 16 years.