Local Construction Company Settles Allegations Of Fraud Involving A Disadvantaged Business Enterprise

Mountain States Contractors, LLC, an affiliated company of Jones Brothers, has agreed to pay the United States more than $2,250,000 to settle False Claims Act (“FCA”) allegations, announced Jack Smith, Acting United States Attorney for the Middle District of Tennessee for the administration of this settlement.  The settlement resolves a civil investigation of Mountain States and affiliated companies for submitting false claims for payment to the United States in connection with the United States Department of Transportation’s Disadvantaged Business Enterprise (“DBE”) Program.

The DBE Program provides a vehicle for increasing the participation by Minority Business Enterprises in state and local transportation projects and ensures that DBEs can compete fairly for federally funded transportation-related work.  

“Enforcement of the False Claims Act is a top priority of the Department of Justice and this office,” said Acting U.S. Attorney Jack Smith. “This enforcement effort includes investigating schemes to exploit federal programs aimed to help small and minority businesses to compete in the federal marketplace.  The U.S. Attorney’s Office will continue to devote the resources necessary to investigated these and other False Claims Act violations in order to protect taxpayers’ interests and aggressively pursue fraud, waste, and abuse.”

The United States alleged that Mountain States and its affiliated company, HMA, as the prime contractors on a federally-funded construction projects, agreed that they would use DBEs to perform subcontracted work on the projects.  For a number of these projects, Mountain States and HMA subcontracted with G&M Associates.  Although G&M Associates is a certified DBE, evidence obtained during the investigation indicated that Mountain States had improperly “loaned” its employees to G&M to perform the DBE work on the projects.  The entities claimed these employees as DBE employees for purposes of obtaining payment for their work despite the fact that the prime contractors continued to provide their health insurance.  The prime contractors also improperly leased equipment to G&M, which the entities then counted against the projects’ DBE goals.

“Fraud schemes like that committed by Mountain States harms the integrity of law abiding, small business contractors trying to compete for contracts on a level playing field,” said Marlies Gonzalez, regional Special Agent-in-Charge of the U.S. Department of Transportation Office of Inspector General. “Working with our Federal, State, and local law enforcement and prosecutorial partners, we will continue our vigorous efforts to pursue those who violate the law, and hold individuals and companies accountable that choose to illegally take advantage of minority and women-owned business enterprise programs.”

The allegations resolved by today’s settlement were originally raised in a lawsuit filed against Mountain States by a former Mountain States employee who brought his claims under the qui tam, or whistleblower, provisions of the FCA, which allow private citizens with knowledge of false claims to bring civil suits on behalf of the government and to share in any recovery.  The whistleblower will receive $500,000 as his share of the settlement.

In addition to the settlement, Mountain States will enter into a monitoring agreement with the Federal Highway Administration.  This agreement will help to prevent similar conduct in the future.

This matter was investigated by the DOT-Office of Inspector General and the United States Attorney’s Office for the Middle District of Tennessee.  The United States was represented by Assistant U.S. Attorney Christopher C. Sabis.

This case is docketed as United States ex rel. Meadows v. Mountain States Construction, LLC, No. 3:12-cv-0523 (M.D. Tenn.).