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Investigation by Attorney General Leads to $1 Million Recoupment to the District in Settlement with Maryland Contractor for Its Abuse of CBE Program

Thursday, May 9, 2013

Investigation by Attorney General Leads to $1 Million Recoupment to the District in Settlement with Maryland Contractor for Its Abuse of CBE Program

WASHINGTON, DC – Attorney General Irvin B. Nathan announced today that the District has settled a contemplated civil enforcement action against Forrester Construction Co., a Maryland-based company, for a $1 million payment by the company to the District and Forrester’s forbearance from seeking any contracting preferences under the District’s Certified Business Enterprise (CBE) program for 30 months.

The settlement followed the Office of the Attorney General’s investigation of the company’s participation in the CBE program, which is intended to provide contracting advantages to small and disadvantaged D.C. businesses. The settlement resolves claims the District was prepared to bring under the civil provisions of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and under the District’s False Claims Act.

The Attorney General’s investigation found that Forrester engaged in a pattern of fraudulently bidding on and winning District government construction contracts by misrepresenting the terms of its joint venture agreements with a D.C.-based company, EEC of DC, Inc.  Through these practices, between 2008 and 2011, Forrester gained significant preference points and won contracts to build a new headquarters building for the D.C. Department of Employment Services (DOES) and to build a senior wellness center, and to renovate Anacostia Senior High School.  
The CBE program gives bidding advantages to D.C. businesses, including small and disadvantaged businesses, and to joint ventures controlled by such businesses.  A joint venture is eligible for the maximum bidding advantage on a construction contract only if the D.C. business is the majority, controlling partner; will do a majority of the joint venture work; and will receive a majority of the profits under the contract.

The investigation showed that Forrester and EEC repeatedly represented to the District that EEC, a company that qualified for bidding advantages under the CBE program, was the majority partner of the joint ventures, would do a majority of the joint venture work, and would earn the majority of the profits. Instead, Forrester and EEC entered into secret side deals providing for Forrester, which did not qualify on its own for any bidding advantages, to receive the overwhelming share of the contract work and profits.  By securing these bidding preferences under the CBE program, Forrester and EEC were able to win at least three construction contracts that the District would otherwise have awarded to other bidders.

The payment to the District will take the form of an offset from the final payment by the District to Forrester of the base contract amount for the Anacostia Senior High School renovation. In full satisfaction of the final base contract bill for $3.2 million, the District will pay and Forrester will accept payment in full of $2.2 million. Under the settlement, Forrester has also agreed not to seek contracting preferences under the CBE program for 30 months.

Attorney General Nathan said, “Through our intensive investigation and our securing even before filing a court suit a $1 million payment from this Maryland contractor for the District and a 30-month ban from attempting to secure any CBE preferences in the District, we send the clear message that we will not tolerate abuse of programs designed to promote D.C. businesses.  We are ready to use all available remedies, including any applicable federal statute, to deter such misconduct and to provide the District with the benefits of honest, competitive bidding.”

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