Mountain States Settles Whistleblower's Allegations of DBE Fraud at $2.25M

Tennessee highway building firm, Mountain States Contractors, has agreed to pay $2.25 million to the U.S. government this week to resolve allegations they violated the False Claims Act (FCA) by falsely claiming to have subcontracted work to a minority-owned business. Whistleblower Ron Meadows, filed the initial lawsuit that triggered the investigation of Mountain States. The U.S. Department of Justice reports Meadows will collect a $500,000 cash whistleblower award as allowed under the FCA for his efforts in putting a stop to the contractor fraud scheme.

Mountain States Settles Whistleblower's Allegations of DBE Fraud at $2.25M

Whistleblower Ron Meadows Alleges Mountain States DBE

Meadows’ March 2012 whistleblower lawsuit claimed that the Jones Brothers affiliate, Mountain States, violated the FCA when it allegedly lied about subcontracting work out to minority-owned G&M Associates to qualify for federal funding under the United States Department of Transportation’s Disadvantaged Business Enterprise (DBE) program.

The DBE federal contracting program is designed to ensure that small, minority-owned businesses can compete for federally funded transportation projects. The program requires companies working on these projects to subcontract work out to DBE-certified companies. Mountain States received government funding for highway construction projects under the guise that a percentage of the work would be subcontracted out to G&M, a certified DBE.

A former Mountain States executive, Meadows claimed Mountain States employees were actually doing the work, but were being paid under the name G&M to make it appear a DBE subcontractor was involved. Mountain States employees were still obtaining health insurance benefits under Mountain States and Meadows claims he was asked to falsify documents to appear he was working under G&M.

G&M Search Warrant Reveals False DBE Claims

Meadows whistleblower lawsuit prompted a search of G&M headquarters by federal investigators in 2014. According to a report in The Tennessean, after a warrant was obtained to search computers and records at the G&M College Grove offices, agents discovered Mountain States took steps to falsely claim that G&M employees were working on Tennessee Department of Transportation and the Metro Nashville Airport Authority projects.

Meadows Earns $500K Whistleblower Award

Meadows brought his initial allegations under the qui tam, whistleblower provisions of the FCA, which enable private citizens with original information on false claims to bring civil lawsuits on behalf of the government and to collect between 10% and 30% of any recovery.  Meadows has been awarded $500,000 as his share of the $2.25 million settlement in this case.

Official says Mountain States’ Actions Harm Small Business Contractors

“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 regional Special Agent-in-Charge of the U.S. Department of Transportation Office of Inspector General, Marlies Gonzalez. “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.”

Mountain States Enters Federal Highway Association Monitoring Agreement

In addition to the $2.25 million settlement, Mountain States has entered into a monitoring agreement with the Federal Highway Administration (FHA) to help prevent future misconduct.

“Enforcement of the False Claims Act is a top priority of the Department of Justice and this office,” said 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.”

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