On Monday May 13, 2014, the Moretrench American Corp. was ordered in federal court to pay $3 million in a fine to the U.S. government. The fine was in regards to to the company lying about the statues of a subcontractor to win a multimillion dollar contract to remove groundwater at the World Trade Center site.
In addition, the company also has to pay $50,000 to the Office of Inspector General of the Port Authority, to cover the cost of their investigation. Moretrench fully admits to making false statements which went against regulations put in place to assist disadvantaged business enterprises in federally funded construction projects.
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The U.S. government filed a False Claims Act suit last week, after discovering that the company hired a disadvantaged business to meet the contract requirements, with no intention of using the subcontractor for any commercially useful function. Port Authority Inspector General Robert E. Van Etten says that he wants this case to serve as an example to the industry, and that he hopes it encourages others to follow the programs intent. “I urge those with information of instances of other fraudulent practices to report them to law enforcement,” he said Tuesday, “working with our law enforcement partners we will continue to vigilantly investigate allegations of fraud in the construction industry.”
The Moretrench company received a contract in 2007 to perform dewatering at the World trade center site. The company is one of the largest contractors of its kind in the country. In the contract, Moretrench agreed to obtain 17 percent participation by a minority or women’s business enterprise. To meet this requirement, the company hired subcontractor Environmental Energy Associates LLC for $1.1 million. However, the complaint files claims the EEA never performed any work on the site. Moretrench hired pump operators, supervised work and managed payroll files, but switched its own pump operators to EEA’s payroll, so it would appear the EEA was contributing.
The company’s payroll system consisted of a Moretrench administrative assistant creating a detailed account of employees and work performed. The form included the EEA as a contractor. Then, the form would be approved by the EEA’s owners before being submitted to the Port Authority. Next, EEA would fax an invoice to Moretrench- with a 10 percent markup fee for being used as a minority business. Thus, federal prosecutors confirmed that Moretrench falsely claimed it had paid the EEA for work it had done itself.
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A representative for Moretrench confirmed Tuesday that the company was cooperating with the U.S. attorney’s investigations.“Years after the EEA completed work for the Moretrench at the World Trade Center in 2007, EEA admitted to defrauding the government during a time period when it was subcontracted by the Moretrench and several other contractors,” the representative claimed. He also asserted that Moretrench was dismayed to hear of the EEA’s actions and is thoroughly reviewing it’s management process and subcontractor selection.
The False Claims Act is complex, and the law is full of “traps” for inexperienced counsel. This area of law is highly specialized, It is best to seek legal counsel knowledgeable and experienced in FCA and related litigation.