AMEC and Morse Diesel: False Bond Claims and Kickbacks on GSA Construction

AMEC Construction Management, formerly Morse Diesel International, agreed to a $19,040,256 civil settlement over false bond claims and kickbacks on General Services Administration construction and the cost of completing a courthouse. The court had already held the contractor liable for fraud. Behind the recovery were two trails of money: what the contractor asked GSA to reimburse for construction bonds, and what the bond broker paid back to the contractor’s parent. Someone who knows the bond invoice may know only half the story.

AMEC performed the federal construction work. Its United Kingdom parent, AMEC plc, was the recipient of bond-premium kickbacks alleged in the government’s case. The construction company’s false invoices moved government payment ahead of the work. The broker’s commission payments took money back to the parent.

Four GSA Contracts, False Bond Bills and Broker Payments

The construction fraud case concerned four GSA contracts awarded in 1994 and 1995. Two covered construction of the federal courthouse in St. Louis. Another covered the U.S. courthouse and federal building in Sacramento. The fourth covered renovations to the U.S. customs house in San Francisco.

The Justice Department’s account describes false bond reimbursement claims submitted by AMEC and kickbacks paid by its bond broker to AMEC plc. The construction company sent the reimbursement claims to GSA. The broker made the disputed payments to the parent. Following only the government’s payment to the contractor would leave the broker’s payment out of view.

The General Services Administration’s inspector general makes the false billing concrete: falsified invoices let AMEC receive payments for work that had not been accomplished in Missouri and California. Morse Diesel front-loaded over 2 million dollars in contract value through false invoices, false documents and false statements, according to that account. The paperwork moved payment ahead of the work.

The kickback discovery added a different question: where did the broker’s commission go? The inspector general reported that civil proceedings uncovered kickbacks from the bonding agent’s commissions.

How GSA Auditors Found the Bond Fraud

Auditors from the General Services Administration’s inspector general found suspected fraud in construction-bond invoices while reviewing AMEC’s construction claims. The Heartland Field Office in Kansas City referred the matter to the inspector general’s Office of Investigations. The Justice Department says the audit and investigation revealed the bond fraud, while the kickbacks surfaced during litigation. The case grew when the investigation reached that second relationship.

The construction-payment setting explains why the supporting documents matter. Under the federal construction payment clause, progress payments are based on accomplished work meeting the contract’s quality requirements. The progress-payment certificate says that amounts due to subcontractors and suppliers from previous payments have been paid, and addresses how the contractor will use the next payment.

Bond premiums have distinct treatment in that system. Documented premiums are excluded from retainage, the money the government can hold back when progress is unsatisfactory. That puts particular weight on the bond invoice: it supports a cost that escapes that holdback. In AMEC’s case, the inspector general found false documents supporting payment for work not accomplished.

The inspector general also reports that AMEC pleaded guilty in the criminal case over presenting a false bond claim for the St. Louis courthouse. The Justice Department reports guilty pleas in Missouri and California for the bond frauds involved in the civil settlement.

AMEC Asked for Payment, and the Government Answered With Fraud Claims

AMEC started the payment dispute by claiming the government owed it money. The government answered with civil fraud claims over the bond bills.

The Court of Federal Claims held AMEC liable under the Anti-Kickback Act in July 2005 and under the False Claims Act in January 2007. It also held that the company had lost its right to pursue its own claims against the government.

AMEC ultimately gave up pending claims that the inspector general valued at approximately $83.5 million in avoided costs to the government. We see a costly reversal: AMEC came seeking payment, then agreed to pay the government and abandon its own demands. Its false paperwork reached beyond the bond bills.

What the Settlement Paid For

The settlement combined payment for the fraud claims with payment for completing the courthouse. Under the January 29, 2009 agreement, AMEC agreed to pay $8,010,335 for the fraud counterclaims and $3,700,000 for re-procurement costs, the expense of having the work finished.

AMEC also gave up its claim to $7,329,921 that GSA had already withheld under another construction contract, awarded in 1996, against the St. Louis completion claim. That was money the government already held, distinct from the payments AMEC agreed to make.

GSA had terminated AMEC’s St. Louis contract for default in 1999 and undertaken completion of the courthouse. Taxpayers had paid against false documents and still had a courthouse to finish.

What Are the Indicators of Government Procurement Fraud?

In a construction bond case, the indicators include false support for a premium reimbursement claim and commission payments returning from the broker to the contractor’s side. In AMEC’s case, auditors found false invoice support, and the civil proceedings exposed payments from the bonding agent’s commissions.

A person handling construction claims may recognize the invoice submitted to GSA. Someone in the brokerage may recognize the commission payment. Someone at the parent may know why the money arrived. We connect those accounts to the records behind the government charge and the decisions that produced it.

A later bond-broker case shows why that outside participant can matter. In the Northland and Diverse construction settlement, the government alleged that broker Rose & Kiernan enabled required bonding despite knowing or having reason to know about an undisclosed affiliation between the contractors. Both cases put the broker’s knowledge and conduct inside the procurement story.

How Much Money Can a Whistleblower Get From a Qui Tam Lawsuit?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If you know the bond bills or broker payments, our whistleblower experts can help build that knowledge into a case and pursue a whistleblower reward.

You Know the Bond Bill and Who Got Paid

If your work puts you inside GSA construction billing, bond commissions or payments to a contractor’s parent, speak to one of our Whistleblower Experts about the bond bill and where the commission went. We build the case with you around the reimbursement claim and the money behind it, bring in government construction fraud whistleblower lawyers who know GSA billing cases, and stay with you to build your strongest government procurement whistleblower case.