Contractor facing federal kickback charges

Dive Brief:

Federal prosecutors have brought criminal charges against a Tennessee construction company executive whose company performed work at two Georgia Army base construction projects — one at Fort Benning in Columbus and the other at Fort Gordon in Augusta — with a combined value of approximately $37 million.
The charges center around David Kennedy's relationship with a subcontractor, Southern Atlantic Construction LLC (SAC), and its owner, Gary Hamby, in 2015. Prosecutors said Kennedy gave work to SAC in return for cash payments, gifts and wire transfers and approved fake invoices submitted by SAC. The proceeds from the alleged criminal behavior were directed toward a shell company bank account opened by Hamby.
Hamby pleaded guilty in 2017 to violating federal anti-kickback laws, according to TuscaloosaNews.com and has agreed to cooperate with investigators. Kennedy is out on bail awaiting trial.

Dive Insight:

On most construction projects, public or private, there is opportunity for this kind of malfeasance, particularly when individuals work together, as prosecutors allege Kennedy and Hamby did.

Earlier this year, the U.S. Department of Justice filed a lawsuit against a contractor and subcontractor for allegedly conspiring to submit $65 million of false subcontractor invoices to the National Nuclear Security Administration under their contracts for a MOX fuel fabrication facility in Aiken, South Carolina. In return for processing the fake invoices, general contractor CB&I AREVA MOX Services LLC (MOX Services) allegedly received cash, sporting event tickets, firearms and other gifts as bribes.

In May, the owner of an Illinois construction company, Tower Contracting, was charged in federal court for nine counts of wire fraud and one count of federal program bribery for paying the former mayor of Markham, Illinois, approximately $100,000 in bribes in exchange for city construction contracts. The mayor ended up pleading guilty to accepting approximately $300,000 in bribes, and the owner of Tower Contracting, Michael Jarigese, faces up to 10 years in prison for bribery and 20 years for wire fraud.

Also in May, the U.S. Attorney’s Office for the District of Connecticut announced that Michael Flynn, an insulation contractor based in Ridgefield, Connecticut, had pleaded guilty to his role in a $45 million bid-rigging and fraud scheme involving himself and other contractors. Prosecutors said that Flynn and other contractors inflated their prices by 10% for work they performed on projects in Connecticut, New York and Massachusetts between October 2011 and March 2018. The participants, according to authorities, tried to hide their illegal actions by using burner phones and an encrypted disappearing message app.