Schneider Electric Buildings Americas: Hiding the Costs of Saving Energy

Schneider Electric Buildings Americas agreed to pay $9.3 million to settle civil allegations involving inflated energy-contract estimates, improper design costs and subcontractor kickbacks. Under its criminal non-prosecution agreement, Schneider admitted how the design charges reached the government: employees spread prohibited costs across unrelated price lines. An estimator who knew what went into those lines could explain what the agency never saw.

The Justice Department’s December 17, 2020 announcement described eight federally funded energy savings performance contracts. Schneider, a nationwide provider of electricity solutions for buildings and data centers, was to install upgrades including solar panels, LED lighting and insulation in federal buildings. The case reached both the costs presented to the agencies and the money subcontractors paid a manager inside the company.

How Schneider Hid Design Costs in Energy Savings Project Estimates

When a government contractor hides design costs in an energy savings project estimate, the concealment sits inside unrelated charges. Under its criminal non-prosecution agreement, Schneider admitted charging nearly $1.7 million in design costs by disguising them and spreading them across other pricing components. The admission concerned three contracts funded by the General Services Administration, the Department of Agriculture and the Navy.

Schneider was prohibited from charging the government for those design costs. In the same agreement, Schneider admitted that it distributed them across project line items so the agencies would pay without knowing what the amounts represented. Employees called the process “burying” or “hiding” the costs.

That language gets to the decision inside the business. The employees handling the costs knew what they were moving. The agencies saw a price with the design work concealed inside it. We see a particularly cynical way to sell energy savings: make the government pay costs the contractor knew it could not charge.

The relevant cost mischarging was a change in how the expense appeared to the customer. For someone who worked on the estimate, the useful connection is between the design expense, the line that absorbed it and the instruction to put it there. A final proposal can hide that history. The person who prepared it may know the history exactly.

The Project Manager and the Subcontractor Kickbacks

In its criminal non-prosecution agreement, Schneider also admitted that a former senior project manager solicited and received more than $2.5 million in kickbacks from subcontractors. The energy projects involved GSA, Agriculture, the Department of Veterans Affairs, the Navy and the Coast Guard.

The manager’s role included control over subcontractor selection. That puts the corrupt exchange inside the prime contractor’s business: subcontractors paying someone positioned to influence who gets the work.

What an Energy Savings Performance Contract Buys

Energy savings performance contracts combine private financing with installation and maintenance of energy-saving equipment. The Department of Defense Office of Inspector General explained that structure in its 2018 Semiannual Report to the Congress: an energy services contractor finances, acquires, installs and maintains equipment and systems for a federal agency. The agency gets energy savings and facility improvements without upfront capital costs or special congressional appropriations.

Knowing how an expense entered that financed package reveals more than the total on the cover sheet.

The government’s payment also depends on the contract’s pricing terms. We connect an internal cost record to the particular price or charge it helped justify. In Schneider’s admitted design-cost scheme, that connection was explicit: costs the company could not charge as design work were placed in other components so the government would pay them.

The Civil Settlement and the Company’s Response

The civil settlement resolved the government’s allegations under the False Claims Act and the Anti-Kickback Act. The government alleged that Schneider included inflated estimates and improper costs in proposals and overcharged agencies under the contracts. The resolution covered civilian agencies as well as Navy and Coast Guard work.

The U.S. Attorney’s Office for the District of Vermont and the Justice Department’s Civil Division jointly handled the civil investigation. The Offices of Inspector General for Veterans Affairs, Agriculture and GSA supported the investigation, along with the Naval Criminal Investigative Service.

In announcing the outcome, the Justice Department said Schneider had terminated two employees involved in the schemes and overhauled its compliance program. The department also cited shortcomings in the company’s cooperation and its failure to accept responsibility promptly.

The Estimate Before It Reached the Agency

For a case involving concealed costs, the original estimate and the version sent to the agency answer different questions. The original can show what the contractor expected the work to cost. The submitted version shows what the government was asked to accept. Cost allocations, subcontractor decisions and payment records connect those versions to the people and money behind them.

The distinction also appears in government contract change order fraud. In its criminal non-prosecution agreement, Alutiiq International Solutions admitted inflating subcontractor estimates and charging for nonexistent superintendent services on GSA’s modernization of a State Department building. One part of that conduct changed the cost attributed to work. Another charged for services that did not exist. The original estimate and the site records test different parts of the price.

In a separate VA boiler-renovation case, the court’s 1994 account of Young-Montenay described an employee altering a $104,000 supplier invoice to $153,000 to obtain an early progress payment. A later invoice for the larger amount did not make the earlier alteration true. The date and version of the document mattered because they showed what the contractor used to obtain the money at that point.

These cases give an employee’s knowledge of the paperwork real weight. In each, understanding the document before it reached the government helps explain the charge that followed.

An estimator, subcontractor or accounting employee may know the design allocation, the original subcontract price or why a manager required a payment. That specific knowledge is where our work with you starts. We connect it to what the agency was told, what it paid and who made the decisions inside the contractor.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What Went Into the Price

If you saw design costs moved between price lines or payments demanded from a subcontractor, speak to one of our whistleblower experts about the energy contracts you know. We build your strongest whistleblower case with you around those decisions and bring in government contracting whistleblower lawyers who understand energy-project pricing and kickbacks. You bring the inside view, and we stay beside you from the first conversation through the pursuit of a recovery.