City “Evaluating Options” For Seven Months in Alleged CBE Fraud Case
Here's more proof that Forrester Construction may have operated sham joint ventures that received more than $100 million in city construction work: two newly obtained documents that show the company having almost complete control of the construction of the new Department of Employment Services headquarters and a senior center in Ward 1, despite the fact that the company was supposed to be a 49 percent partner in those deals.
Forrester's partner was a company called EEC of D.C., which is entitled to preference points when bidding on city projects because it's a Certified Business Enterprise. As the CBE-certified 51 percent partner, EEC of D.C. was required by D.C. law to "receive profits of the joint venture, provide labor hours required of the joint venture, or perform other work for the joint venture as approved by the [District] that is at a minimum equal to its percentage of ownership in the joint venture."
But a letter from Forrester to EEC of D.C. on April 4, 2008, shows that EEC of D.C.'s profits were to be 5 percent of the "gross-stated fee" and that would decrease if EEC of D.C. couldn't put up a small fraction of the bonding required for the $48 million project. A side contract on the Ward 1 senior center shows that EEC of D.C. would provide a joint-venture vice president, an administrative assistant and a laborer for a total of $88,000. Meanwhile, Forrester would do the other $5.4 million's worth of work (keeping whatever profits accrued) and the two companies would split 51/49 a tiny $55,000 profit allotted to the joint venture.
LL's already written at length about a side contract signed between Forrester and EEC of D.C. on a job to renovate Anacostia Senior High School that had Forrester doing about 95 percent of the work. Documents from all three jobs are posted below.
At a D.C. Council hearing last Friday, David Forrester, the company's president, declined to answer specific questions about all three jobs citing ongoing litigation but insisted that EEC of D.C. "performed 51 percent of the joint venture work."
Several councilmembers, however, told Forrester repeatedly they didn't believe him.
"This is a sham, let's fix it," said Councilmember David Catania.
A spokeswoman from Forrester did not immediately return a call seeking comment. Holland & Knight lobbyist Rod Woodson, who sat with Forrester officials during Friday's hearing, was also unavailable for an immediate comment.
Fixing the problem, presumably, would involve the city making some type of official decision that some type of rule breaking had occurred. But city officials appear confused as to whether that's actually happened. At the Anacostia ribbon cutting ceremony last month, City Administrator Allen Lew told LL that if the joint venture between Forrester and EEC of D.C. was illegitimate, then "it will come out in the court findings."
"The courts will go through their due process and make a determination," Lew said.
But a few days later, Lew followed up with a statement saying that the city had already discovered "potential improprieties" and had tried to dole out a mild punishment. Said Lew: "The District discovered potential improprieties with regard to the Anacostia joint venture as well as two other joint ventures between the same parties. The Department of General Services attempted to negotiate a tri-party settlement that would have resolved the financial disputes and barred either EEC or Forrester from entering into any joint ventures for a 2 year period."
Lew said those talks collapsed when Forrester and EEC of D.C. sued each other in July. DGS Director Brian Hanlon told LL last month that the city found that there were "substantial issues" in early March of this year, after a two- to three-month investigation.
But at Friday's hearing, Hanlon didn't offer this information up to the council when he assured Ward 4 Councilmember Muriel Bowser that the city wasn't "waiting for the lawsuit to settle to make a determination."
In any event, more than seven months after Hanlon says the city found "substantial issues" with Forrester and EEC of D.C., the District still can't point to any action it plans to take against the two companies. "All I can say is that the appropriate District regulatory agencies are looking into this and evaluating options," Hanlon told LL last month.
Photo by Darrow Montgomery