Ahern Painting Contractors: DBE Participation That Spectrum Actually Managed

Ahern Painting Contractors agreed to pay $3 million to resolve False Claims Act allegations over DBE participation that Spectrum actually managed on federally funded painting projects. Ahern admitted disregarding facts showing that Spectrum Painting Corp., which was not a certified disadvantaged business, managed and supervised work assigned to Tower Maintenance Corp., a certified disadvantaged business enterprise. For someone inside a construction project, that is a familiar place to look: the company on the form and the company giving the instructions.

The Justice Department’s announcement concerned the New York-area contractor’s work on the Brooklyn Bridge and Queens Plaza projects. This DBE fraud case turns on the participation the government was told it was buying, and the people actually managing that work.

Two Painting Projects, the Same Participation Promise

Both projects required Ahern to hire disadvantaged businesses to perform a share of the work. Tower’s certified status was supposed to accompany its performance of that work. The government alleged that Ahern and Tower instead submitted false statements and records to the New York City Department of Transportation and the Metropolitan Transportation Authority representing that Tower alone performed the work allotted to disadvantaged businesses and had not hired a subcontractor to perform it.

Ahern’s place in the contracting chain differed between the projects. Tower’s later admissions describe Ahern working under an agreement with Skanska Koch Inc. for industrial painting and rehabilitation on the Brooklyn Bridge. Tower entered into a subcontract with Ahern for painting and blasting, expecting that work to count toward Ahern’s disadvantaged business participation goal.

At Queens Plaza, Ahern contracted with the transportation authority for overcoat painting on the elevated structure at the subway station. Tower again subcontracted with Ahern for painting and blasting that would count toward the participation goal.

That is the false participation representation at the center of the case. The government alleged that work credited to Tower was actually performed, managed and supervised by Spectrum. The subcontract name, the personnel documents and the management of the job were telling different stories.

What Are the Indicators of Government Procurement Fraud?

In Ahern’s case, the indicators of government procurement fraud included a manager identified as working for different companies, direct communications with Spectrum about Tower’s assigned work, and financial arrangements Ahern never asked to see. Ahern admitted what it knew and what it failed to examine.

The Bid Started With a Spectrum Manager

In March 2010, Ahern’s superintendent walked the Brooklyn Bridge worksite with a Tower manager and a Spectrum manager. Ahern’s superintendent understood that the Spectrum manager would help Tower prepare its bid for the disadvantaged business subcontract.

Ahern knew the manager as a Spectrum employee before documents presented him as working for Tower.

The Same Person Acquired a Different Employer on Paper

In 2010, Ahern received documents from Tower identifying the person it knew to be a Spectrum manager as a Tower vice president or employee. Ahern submitted those documents to Skanska. The following year, Ahern received and passed documents to the transportation authority identifying that same person as Tower’s superintendent for Queens Plaza.

Spectrum later admitted that its manager identified himself as a Tower vice president or employee in documents submitted to Ahern to obtain security clearances. We find that contrast hard to miss: Ahern knew him as a Spectrum manager, yet passed along paperwork placing him inside Tower.

The Work Calls Still Went to Spectrum

Throughout both projects, Ahern managers communicated directly with the Spectrum manager about scheduling and inspecting the work assigned to Tower, ordering materials and payment. An Ahern executive also communicated directly with Spectrum’s owner about the projects.

The government’s announcement records Ahern’s admission in unusually direct terms:

Justice Department: Ahern’s civil settlement admissions, November 1, 2019

The Agreements Ahern Never Requested

Ahern admitted that it failed to clarify the financial and other arrangements between Tower and Spectrum or request their agreements. Its settlement account explains what a truthful response would have revealed: Spectrum would provide project management support and equipment, share in the profits, and employ additional people Ahern believed were Tower managers.

The later Spectrum settlement announcement supplies the terms. Spectrum admitted that the companies put consulting agreements in writing in May and June 2011. They provided for Spectrum to receive 50% of the profits from Tower’s work on the projects. Spectrum also admitted that the key terms, including the profit share and equipment arrangement, were not disclosed to Ahern, the city transportation department or the transportation authority.

The agreements describe a business with a substantial stake in the work credited to Tower.

Spectrum’s admissions add another concrete comparison. Its manager hired the superintendent and health and safety supervisor supporting the work assigned to Tower, and Spectrum paid both. Spectrum personnel identified themselves on the projects as Tower employees, including by wearing Tower vests and security identification.

The vest said Tower. The employer paying those supervisors was Spectrum.

Why Commercially Useful Function Mattered

Ahern admitted that it never assessed whether Spectrum’s actual involvement jeopardized Tower’s performance of a commercially useful function. In the government’s account of these projects, the participation requirements called for the disadvantaged business to manage and supervise its own work.

Commercially useful function gets at the substance of participation: responsibility for performing, managing and supervising the work. The program’s test also examines commercial decisions such as negotiating prices, ordering and paying for materials, and taking responsibility for them. Those are the same kinds of decisions that appeared in Ahern’s direct communications with Spectrum.

The distinction matters to the disadvantaged businesses the program was meant to include. A participation requirement promises them a role in the business of construction. Crediting one company while another manages its work turns that opportunity into a name on project documents. Taxpayers fund the promised participation, and honest contractors have to deliver it.

The Later Spectrum and Tower Settlements

Spectrum and Tower later reached their own civil settlements, both for smaller amounts than Ahern’s.

On July 13, 2021, the Justice Department announced that Spectrum had agreed to pay $400,000 to the United States.

The Tower settlement announced on August 17, 2021 required Tower to pay $150,000. The government based that amount on its assessment of Tower’s ability to pay. Tower admitted signing documents stating that it alone would perform the Brooklyn Bridge work assigned to it, requesting Spectrum’s project management support, and identifying Spectrum personnel as its own.

Tower also accepted responsibility for failures to disclose Spectrum’s involvement and the financial arrangement to the projects’ disadvantaged business officers. Its admissions included financing provisions as well as profit sharing.

The U.S. Attorney’s Office for the Southern District of New York handled the civil case. The U.S. Department of Transportation Office of Inspector General, the New York City Department of Investigation and the Inspector General of the Metropolitan Transportation Authority conducted the investigation.

What Proof Do You Need as a Whistleblower?

We work with you to understand which records connect the company on the paperwork to the company running the job. Ahern’s admissions show how much of that comparison can sit inside ordinary project communications and personnel documents.

We examine project records alongside the payment claim: what the contractor represented, who directed the work and what the contractor knew about the difference. A superintendent may recognize the people giving instructions. Someone handling materials or payment may know which company actually made the decisions. Those observations can explain a project record that looks convincing from outside the job. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

A 2022 review in CEUR Workshop Proceedings, Public Procurement Fraud Detection and Artificial Intelligence Techniques: a Literature Review, reports weak construction-fraud predictions from Croatian procurement data lacking information about technical and professional abilities. We see a practical reason to listen to insiders: they may know who has the people and skills to do the work.

You Know Who Ran the Painting Work

If you handled the subcontract, managed the crews or saw one company’s employees presented as another’s, speak with our whistleblower experts about who really ran the work. We work with you to build your strongest DBE whistleblower case around the participation claims and the decisions behind them, bringing in construction fraud whistleblower lawyers who understand DBE disputes. You have a partner beside you from the first conversation through the case.