Dive Brief:
- Hunter Roberts Construction Group, one of New York's largest construction firms, admitted Wednesday it had overcharged clients on several projects by falsifying the number of hours worked on employees' timesheets and inflating rates, The New York Times reported.
- The firm admitted to the scheme — in what the Times refers to as a nonprosecution agreement that avoids a court case — and will pay $1 million to affected clients and an additional $6 million to the government.
- Government investigations into Hunter Roberts' practices began in 2011. As a result of the agreement, the firm fired the employees responsible for the fraud, said it will create new positions within the company including compliance coordinator and general counsel, and set a system of checks in place to better detect falsified time sheets.
Dive Insight:
The U.S. attorney's office for the Eastern District of New York called the firms' practices an "overbilling scheme that impacted virtually all of its projects." Some of those high-profile, overbilled New York jobs included constructing a charter school in Red Hook, rebuilding the Fiterman Hall at the Borough of Manhattan Community College after damage due to the Sept. 11 attacks, and reconstructing the seats of the Brooklyn Academy of Music's Harvey Theater.
The attorney's office said it is working to crack down on the fraudulent practice, which is reportedly widespread in the construction industry and is also known as "gratis" or "foremen's pay," according to the Times. By offering extra bonus pay for the most talented and sought-after project managers, firms can buy their loyalty and ensure they don't leave the company.
Firms are allowed to dish out the extra pay to the managers themselves, but Hunter Roberts secured the funds by billing its clients for more hours than employees worked.
