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Hiawatha Line contractors to pay $4.6M in hiring dispute

The Justice Department says the joint venture in charge of the light-rail project falsely claimed it hired minority and disadvantaged subcontractors.

Article by: DAVID PHELPS , Star Tribune

Updated: August 25, 2011 - 10:56 AM

During construction of the Hiawatha Line, the joint venture in charge of the light-rail project told federal authorities that minority and disadvantaged subcontractors were being included. Now it has agreed to pay the government $4.6 million to resolve allegations that those claims were false.

According to the Justice Department, Minnesota Transit Constructors Inc. violated the federal false claims act by telling federal transportation officials that it hired companies qualified as Disadvantaged Business Enterprises to work on the light rail. The program helps businesses owned by minorities, women and other disadvantaged individuals obtain work on federal construction projects.

The government said token companies were employed "to make it appear as if they were truly involved" in the 11.6-mile project, which opened in 2004 and cost $715 million, including $424 million from federal sources.

The companies in the joint venture denied the allegations, calling them baseless. The settlement agreement notes the contractors' denial, and their attorney suggested the government was overzealous in its pursuit of the claims.

"We settled these claims without admitting liability," said Dean Thomson, an attorney representing Minnesota Transit and two of the joint-venture partners, Maple Grove-based C.S. McCrossan and California-based Granite Construction. "These allegations are contested. There were no charges. There were no lawsuits. This is a more than six-year investigation. The settlement is to avoid further expensive litigation."

Thomson said the companies have already spent $1 million in legal fees dealing with the matter.

When companies accept federal contracts, as was the case in the construction of the Hiawatha Line, they are obligated to use some disadvantaged businesses.

Other companies and individuals have faced criminal and civil charges over misrepresentations about hiring disadvantage businesses. Fines have ranged from several hundred thousand dollars to millions of dollars. The Minnesota settlement appears to rank near the middle. Two Michigan construction firms paid $11.75 million for alleged false claims about hiring disadvantaged enterprises.

Prosecutors criticize firms

But the government still had harsh words about the conduct of the lead Hiawatha Line contractors in a press release issued Wednesday afternoon.

"Those who make misrepresentation in order to participate in the program and obtain federal funds take advantage both of the taxpayers and the businesses that the program is designed to assist," said Tony West, assistant attorney for the Justice Department's civil division.

B. Todd Jones, the U.S. attorney for Minnesota, said false representation of hiring activities can "economically harm subcontractors who already face numerous disadvantages in the workplace."

The government said Minnesota Transit Constructors claimed that some materials and services for the Hiawatha project were furnished by disadvantaged businesses, but the materials actually were furnished by companies that didn't qualify for the program. The settlement agreement said the alleged false claims occurred between 2000 and 2005.

A third member in the joint venture, California-based Parsons Transportation Group, said it isn’t a contributor to the settlement or a signatory to the agreement. The company said it had just a six percent stake in the company and had no “control or input into the selection of the construction DBE’s” that were the subject of the government investigation.

According to the settlement, the contractors will not be barred from future government work.

David Phelps • 612-673-7269

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