The Disadvantaged Business Enterprise (DBE) program was designed by Congress to insure that socially and economically disadvantaged individuals get to participate in federal transportation projects. Since 1983, the Department of Transportation has been required to set aside 10% of highway and transit contract monies for use by DBE vendors.
More recently, Congress added women into the DBE category.
In theory, a DBE is both a small business and one owned by a disadvantaged individual or woman. Most DBE contractors follow the rules but sometimes, other companies try to masquerade as a small, minority owned business simply to reap more highway dollars.
Last week, two executives of Weber Steel Service pleaded guilty to conspiracy to commit wire fraud charges in a scheme designed to allow Weber to participate in the DBE program. A third individual, the president of the supposed DBE business, Karen Construction Company, is also pleading guilty to criminal charges.
According to the charges and the U.S. Department of Justice, Karen Construction was awarded $18.7 million in highway contracts. Karen was supposedly a woman owned company making it eligible for the program, however prosecutors say it was nothing more than a front for Weber Steel.
Charged in the scheme was Judy Noll, the “owner” of Karen Construction, and Dennis and Dale Weber, owners of Carl M. Weber Steel Service, Inc. The businesses are all located in Bucks County, Pennsylvania.
Prosecutors say that the Webers controlled Karen Construction and used Noll to submit bids in the name of the DBE qualified business. Noll used labor and equipment she shared with Weber Steel Service and disguised the payments to the Webers through phony invoices for construction materials.
The charges are felonies and carry possible five year prison terms. Sentencing is scheduled for January.
Recently the Justice Department has ramped up its efforts to combat non-minority owned business from masquerading as being eligible for a DBE or other minority set aside programs. Although this case was a criminal prosecution, many of these cases are brought under the False Claims Act.
Enacted during the Civil War, the False Claims Act allows whistleblowers to file a lawsuit in the name of the government and receive a portion of whatever is collected from the wrongdoers.
To qualify for an award, a whistleblower must have inside information about fraud involving a federally funded program. Since state and federal highway projects rely on federal tax dollars, DBE fraud qualifies under the Act. Many states have similar state False Claims Act laws that allow whistleblowers to receive a portion of whatever the state recover as well.
To qualify as a DBE, the business must certify it is in compliance with the DOT program guidelines. If the business is owned by someone else or otherwise does not qualify for the program, the government can seek to have the business repay the monies it has wrongfully received.
If you have information about individuals or business violating minority owned business regulations, you may qualify for a substantial award.
Weber Steel Service is a bridge and highway contractor. Similar businesses have been known to illegally import and use less expensive Chinese or foreign steel in bridge building. We are always interested in those claims as well.
Interested in learning more? Give us a call. All inquiries are kept confidential and the call is without charge or obligation.
MahanyLaw – America’s Whistleblower Lawyers