Spectrum Painting: Tower’s Vests, Spectrum’s Payroll

Spectrum Painting agreed to pay $400,000 to settle a DBE fraud case over its role managing Tower’s purported DBE work on the Brooklyn Bridge and Queens Plaza projects. In its civil settlement, Spectrum admitted to undisclosed consulting and profit-sharing arrangements, directing work assigned to Tower, and presenting its own employees as Tower personnel. For someone who knew the supervisors, approved the material orders or handled their pay, the difference between the company on the paperwork and the company running the job was right there.

The U.S. Attorney’s Office for the Southern District of New York announced Spectrum’s settlement on July 13, 2021. Spectrum was a New York-area painting contractor without Disadvantaged Business Enterprise certification. Tower Maintenance had the certification. The disadvantaged business enterprise fraud case concerned payments obtained through representations that Tower alone performed work that Spectrum helped perform, manage and supervise.

What Is a False Certification?

In this case, the false certification was the representation that Tower alone performed the work credited toward the projects’ disadvantaged business enterprise requirements. The government alleged that Ahern Painting Contractors and Tower submitted false statements and records to the New York City Department of Transportation and the Metropolitan Transportation Authority saying that Tower did all the allocated DBE work and had hired no subcontractor to perform it.

Ahern’s contracts required disadvantaged business enterprises to perform a percentage of the work on both federally funded projects. Tower admitted that it expected its painting and blasting subcontracts to count toward Ahern’s participation goals. At Queens Plaza, the work concerned overcoat painting on the elevated subway structure. At the Brooklyn Bridge, it was part of industrial painting and rehabilitation work.

The public paid for disadvantaged business participation. Spectrum admitted that its own manager ran the work assigned to Tower. Spectrum’s management role, and the documents presenting its employees as Tower’s, directly contradicted the account given to the public agencies.

The Consulting Agreements Carried Half the Profits

Spectrum admitted that its written agreements with Tower entitled it to 50% of all profits from Tower’s DBE work on the projects. The arrangements also called for Spectrum to provide project management support and furnish equipment.

The relationship began before those agreements were put in writing. Around March 2010, a Spectrum manager and a Tower principal agreed to work together on the Brooklyn Bridge project. The manager joined the Tower principal and an Ahern superintendent for a worksite walk-through to help Tower prepare its bid.

In May and June 2011, Spectrum and Tower put their arrangements into two consulting agreements covering the Brooklyn Bridge and Queens Plaza. Spectrum admitted that the key terms, including profit sharing and equipment provision, were not disclosed to Ahern, the city transportation department or the MTA.

We see a participation program turned inside out: Tower’s eligible name went on the bid, while Spectrum’s management and profit-sharing deal stayed out of the disclosures.

Who Actually Managed Tower’s Work?

Spectrum’s manager ran the DBE work Tower had been hired to perform. Spectrum admitted that the manager set work schedules, ordered materials, hired the foreman, inspected completed work and coordinated payment.

The manager also hired a superintendent and a health and safety supervisor for the DBE work on both projects. Spectrum paid both of them. Together with the manager, they were Spectrum employees who presented themselves on the projects as Tower employees.

The Justice Department’s account of Spectrum’s admissions makes the disguise tangible:

Justice Department, Spectrum Painting’s civil settlement admissions, July 13, 2021

In security-clearance documents submitted to Ahern, the manager identified himself as a Tower vice president or employee. The claimed identity traveled from the paperwork onto the worksite. Same people. Different employer on display.

Ahern’s own admissions show why the mismatch was visible beyond Spectrum. Ahern managers communicated directly with the Spectrum manager about schedules, inspections, materials and payment for Tower’s DBE work. Ahern admitted that it recklessly disregarded facts showing Spectrum managed and supervised that work, and that it failed to seek the agreements explaining Spectrum’s role.

What Proof Do You Need as a Whistleblower?

For a case like Spectrum’s, the useful proof connects the promised participation to the people who actually controlled the work and the money. Spectrum’s admissions showed that connection through its consulting agreements, its employment of the supervisors, and security-clearance forms presenting its manager as Tower personnel.

A person dealing with site access might see the Tower identity. Someone handling supervisor pay might see Spectrum. Someone receiving the manager’s instructions might know who actually made the decisions. We examine project and payment records together with you to connect those views of the same job and work out what they show about the claims for public money.

Why DBE Credit Depends on Who Runs the Job

A disadvantaged business enterprise must manage and supervise its own work to earn participation credit, the Justice Department explained in Tower’s settlement announcement. That is part of performing a commercially useful function. Spectrum’s manager made those decisions on these projects, and Ahern admitted that it failed to assess whether Spectrum’s involvement jeopardized Tower’s performance of that function.

The competitive cost falls on the businesses the program was meant to help. An eligible contractor that manages its own work competes against an arrangement that claims the same credit while another business supplies management and equipment and takes a share of the profits. We want the credit to follow the business actually doing the job.

The 2005 Contract Management article Small Business Act Certification Fraud: Raising the Stakes reported that a Department of Transportation investigation had covered 42 DBE-fraud cases in 17 states and territories. The article argued that pressure on contracting officials to meet program requirements contributed to certification abuse. Its broader point fits this case: participation goals lose their purpose when the eligible name receives more attention than the business behind it.

The Same Disguise on Bridge-Beam Work

The Department of Transportation’s inspector general described a similar disguise in its account of an individual’s criminal conviction in the Schuylkill Products case. Schuylkill and CDS Engineers performed concrete bridge-beam work while Marikina Construction appeared as the DBE. Staff used Marikina stationery, email, signature stamps and removable vehicle signs.

That criminal case shows the same practical problem as Spectrum’s civil admissions: the identity displayed to outsiders can differ from the business doing the work. Office records and worksite identifiers can carry the disguise together.

The Civil Settlements Followed Each Company’s Role

Spectrum’s settlement included admissions about its own agreements, management and employees. Ahern’s earlier settlement, announced in November 2019, required it to pay $3 million and included its admissions about disregarding Spectrum’s involvement.

Tower agreed to pay $150,000 in its August 2021 settlement, an amount based on the U.S. Attorney’s Office’s assessment of its ability to pay. Tower also admitted to the financial arrangements and documents identifying Spectrum staff as Tower personnel.

The U.S. Attorney’s Office’s Civil Frauds Unit handled the case. The investigators were the U.S. Department of Transportation Office of Inspector General, the New York City Department of Investigation and the Metropolitan Transportation Authority’s Office of Inspector General.

For someone with knowledge of a similar arrangement, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Who Ran the Work

If the DBE paperwork names one business and you know another supplied the managers, equipment or financial backing, speak to one of our Whistleblower Experts about who really ran the work. We connect the jobsite decisions to the contract’s promises and bring in DBE fraud whistleblower lawyers who understand construction participation cases. We stay beside you to build your strongest DBE fraud whistleblower case from that inside knowledge.