Loose Lips

D.C. Set to Sue Construction Firms Over Alleged Fraud

City sources tell LL that District Attorney General Irv Nathan's office is set to file a lawsuit soon—possibly Wednesday—against two construction firms that teamed up to manage construction of Anacostia High School.

The lawsuit will allege that Rockville, Md.-based Forrester Construction and nominally D.C.-based EEC of D.C. conspired to defraud the District government through a phony joint venture that benefited from the city's beleaguered contracting set-aside effort known as the Certified Business Enterprise program.

The lawsuit filed by the city will be a civil lawsuit filed under the Racketeer Influenced and Corrupt Organizations Act, or RICO, the sources say. It will allege that the two companies conspired to commit fraud, according to the sources. One source, who was not authorized to speak on the record, says the allegations in the civil case could form the foundation for a future criminal case. Calls to both firms were not immediately returned Tuesday evening.

LL has written extensively about CBE-related problems at the $62 million Anacostia renovation project. EEC of D.C. is a certified as a local CBE and enjoys preference points when bidding on city contracts, making it easier for the company to win bids than it would be for a non-certified competitor. Those preference points were extended to a joint venture between EEC of D.C. and Forrester when they bid on the Anacostia job, with the proviso that EEC of D.C. would control at least 51 percent of the venture. But as part of a civil court case last year between the two firms, EEC of D.C. filed contracts that showed that Forrester controlled about 95 percent of the project, instead of 49 percent. EEC of D.C.'s owner, Andre Downey, also alleged that Forrester did the same thing on other city projects, including subcontracting 100 percent of the work to itself on a senior center in Ward 1, and kept more than $47 million worth of work for itself on the $48 million construction of the new Department of Employment Services headquarters on Minnesota Avenue NE. In total, Forrester and EEC of D.C. partnered for more than $100 million worth of city construction projects.

The lawsuit will mark the first time in recent memory that the city has gone after contractors officials believe have abused the CBE program. Forrester is a well-known, mid-sized firm that does work around the region as well as with the federal government. On its website, the company has a picture of President Barack Obama and former President Bill Clinton taking a tour of a Forrester-managed project of an office building near the White House at 815 Connecticut Ave. NW.  The company is active around the city, and is currently part of a joint-venture building a new $40 million student center at the University of the District of Columbia.

Forrester officials have declined to discuss Downey's allegations with LL or during a public D.C. Council hearing that was held following LL's articles on the problems at Anacostia.

The lawsuit could reflect poorly on the stewardship of City Administrator Allen Lew and Department of General Services Director Brian Hanlon of the city's multi-billion dollar school construction effort. Lew was in charge of school construction when the Anacostia project got started, and Hanlon had taken over for Lew by the project's completion. 

Emails obtained through a Freedom of Information Act request show not only did city officials first ignore potential warning signs of a fraudulent CBE-certified joint venture, but one official later suggested trying to quiet the problem with a $250,000 payment using public money.

The emails show that Hanlon and the private contractors Lew has installed at DGS to oversee public construction projects initially ignored Downey in late 2011 when he alleged to city officials that the joint venture was a sham.

“Being that this is a dispute between the contractor and their sub, there isn’t much we can do,” wrote Will Mangrum, a private contractor who oversees school construction for DGS, in an email that was copied to Hanlon and other DGS officials on Nov. 12, 2011. Last September, Hanlon told LL that he never received a letter from Downey outlining his allegations, a claim the emails obtained through FOIA suggest is inaccurate. A month after Downey tried to alert city officials to the potential fraud, DGS awarded Forrester a new $6.8 million contract.

Last May, Thomas Bridenbaugh, a private attorney who handles the legal side of DGS' construction contracting, wrote to Hanlon saying that he was working on finding a settlement between EEC of D.C. and Forrester, who were in a dispute over money. Hanlon wrote that the settlement he "floated" would have cost the District an additional $250,000 for the Anacostia project. It appears that Bridenbaugh's suggestion never gained traction; both he and Hanlon have declined multiple requests for comment.

In June, an aide to Hanlon warned that DGS “may be asked what actions have been taken … to punish this admittedly fraudulent behavior.” But Hanlon did not refer the matter to the OAG until several months later, either in late September or early October of last year.

Lew said he wanted to punish both companies by prohibiting them from forming joint ventures for two or three years. The details of the forthcoming lawsuit from the attorney general aren't immediately available, but it's a fair guess that the city's going after a much stronger punishment.

Keep in mind that the mess at Anacostia wasn't just limited to its general contractors, either. Other questionable activity at the Anacostia project includes a mysterious $2.4 million payment to general contracting company owned by Keith Lomax, former Mayor Adrian Fenty's driver, for drywall work Lomax's company did not perform.

Mayor Vince Gray says he's committed to reforming the broken CBE program, but says he's frustrated by the slow pace of reform. He recently asked 17 business leaders to form an advisory panel to help him craft new legislation aimed at improving the program. Among those named to the panel: the principals at two firms that oversaw the Anacostia project.

Photo by Darrow Montgomery

Comments

  1. #1

    Why are you writing about this now instead of focusing on the at-large race next week? WCP hosted a good forum last night, made real news by getting the candidates to promise they'd disclose their tax returns TODAY, and then . . . . nothing.

    As far as I can tell, Silverman's the only one who kept her word. Hello??

  2. #2

    Can anyone here help me understand why Irv Nathan and the Office of Attorney General would be willing to pursue this action on a city contract, but not pursue similar charges against Emmanuel Bailey and others involved with the lottery contract? Is it because Nat Gandhi, Jim Graham and Vince Gray are involved, among others? If the actions behind the scene in these construction contracts amount to RICO violations, then don't the lottery actions require similar examination by the D.C. OAG?

    Fortunately, it looks as if the U.S. Attorney's office will act where Irv Nathan failed to act. I hope that the next AG for D.C. will truly represent the interests of the people, as opposed to the interest of a few.

  3. #3

    I think that there is enough room to write about both. I don't think that we would be in a place where this kind of waste would be exposed and recovery sought but for Suderman's early and frequent reporting.

  4. #4

    I think that IG report issues in January reveals a larger mess with the city's contracting. It would pull in Emanual Baily, Ghandi, Graham Gray, Fenty and Nickles. That would be pretty messy and I am not sure it would be a good idea for the city to sue itself.

    I think it is better that the US Attorney peel that onion and make people pay regardless of their political affiliations or ties to the current or former mayor.

  5. #5

    Thank you, LL, for perservering with these issues, and very good luck at your new job.

    Contracting--especially development contracting--is a big fat cesspool and needs to be drained. The fact that Lew still has a job and the City continues to retain Keith Lomax (who was operating his faux small DC business in the Williams Admin.) as a contractor shows how absolutely nothing has changed.

  6. #6

    This whole CBE program needs to go away and let the low and most qualified bidder get the work. All these programs do is bring out the low lifes that figure out how to get over the system and the honest guy gets past by; whats new , right.

  7. #7

    CBE doesn't sound like a good idea in the first place. Hopefully this lawsuit will raise some big picture questions raised by The Guy from DC. Small or local business set-asides end up distorting behavior and resulting in lower quality higher cost work being done by not-necessarily-the-most-qualified firms.

  8. #8

    Forrester has earned a reputation as the worst of the worst contractors in the DC area over the past year. Their constant abuse of subcontractors, a disregard for rules, regulations, and the law, poor craftsmanship, unfair payment terms, and desire to end every project in court has caught up with them. Based on the mass layoffs and employee turnover they have seen over the past 3 months, my guess is they knew this was coming. At least the office of the Attorney General is demonstrating they wont be lied to or defrauded by a C+ mid-sized unethical poor man's general contractor.

  9. #9

    Well, you gotta expect this sort of thing to happen when your government is FORCED to setaside a percentage of contract work to "Urban Kleptocracy Solutions, LLC."

  10. #10

    CBE isn't going anywhere so long as incumbents continue to get their kickbacks in the form of "shadow campaign" contributions. OneCity!

  11. #11

    Everyone knows that the current CBE program is no more
    than an "Economic Whore" ripe for exploitation. Because of strict bonding requirements, small, minority, owned companies have no choice but to JV with large, greedy,
    deep pocketed (primarily OUT OF TOWN) developers and contractors -- just to be able to get a "foot in the door." The current CBE program started out as the "Minority Business Opportunities Commission (MBOC) to give small, minority businesses a chance to be awarded D C govt contracts. However, after the discrimination lawsuit filed and won by a white contractor a few years ago, the entire program has morphed into a virtual "free for all" for any and all big, developers and rich contractors to explioit to their heart's content with the small, minority owned businesses so desperate to be able participate that they allow themselves to be exploited and usually end up with the "sh** end of the stick," make only crumbs off of the project and, are, therefore, pimped by the big guys who make all the money and laugh all the way to the bank!
    There oughta be a law!

  12. #12

    SameOleSh** -

    As soon as your peers who own small businesses turn away illegal business opportunities with the rich contractors, this will stop.

    Don't act like CBEs are the victims here

  13. #13

    SameOlSh**

    In terms of bonding requirements - this is the case with all government projects, not just DC. It protects the government if you fail to deliver on the terms.

    The District doesn't force anyone to do anything. If you don't have a reputable business with the financial backing to bond a job, then you shouldn't be bidding government projects. Private sector jobs are more your speed.

  14. comingindictments
    #14

    This is just a start..Same shit was pulled by Tompkins which is owned by Turner and then Turner itself. Hope they will go after them as well. Hess is in one with CCC for Balou..Of course with blessings of Mayor barry. There are crooks every where that does not mean there are no honest to goodness local companies who deserve this work. The way some contracts are designed CBE's will not land them because they have to compete dollar for dollar to any firm located any where. The Chairman of the LSDB Agency bids in joint venture with Schlloser..20 times. Can you beat the audicity of that..

  15. #15

    THE WHOLE PROCESS IS CORRUPT.

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