Ahern Painting Contractors Agrees to Pay $3 Million and Admits Conduct Alleged in the
Complaint
Geoffrey S. Berman, the United States Attorney for the Southern District of New York,
Douglas Shoemaker, regional Special Agent-in-Charge of the United States Department of
Transportation Office of Inspector General (“USDOT-OIG”), Margaret Garnett, the
Commissioner of the New York City Department of Investigation (“DOI”), and Carolyn
Pokorny, Inspector General of the Metropolitan Transportation Authority (“MTA-OIG”),
announced today that the United States has settled civil fraud claims against New York-area
painting contractor AHERN PAINTING CONTRACTORS CO. (“AHERN”). The settlement
resolves the United States’ allegations in a False Claims Act lawsuit that AHERN fraudulently
obtained payments on two federally funded construction projects by misrepresenting compliance
with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of
businesses owned by women and minorities. Specifically, the United States alleged that
AHERN misrepresented that co-defendant TOWER MAINTENANCE CORP. (“TOWER”), a
certified DBE, was solely performing millions of dollars of work on the two projects when in
fact much of that work was performed by co-defendant SPECTRUM PAINTING CORP.
(“SPECTRUM”), a non-DBE. As part of the settlement approved by U.S. District Judge
Deborah A. Batts, AHERN admits and accepts responsibility for conduct alleged in the Government’s complaint and agrees to pay $3 million to the United States. The case against
defendants TOWER and SPECTRUM is ongoing
Manhattan U.S. Attorney Geoffrey S. Berman said: “Contractors who exploit the
Disadvantaged Business Enterprise program to unlawfully obtain millions of dollars in federal
funding will be held to account. Today’s settlement reflects this Office’s commitment to root out
fraud in federally funded contracts, so that legitimate minority- and women-owned businesses
can participate in public construction projects.”.
USDOT-OIG regional Special Agent-in-Charge Douglas Shoemaker said: “Today’s
settlement is a positive step on the way to closing the chapter on this egregious fraud scheme
involving federally funded contracts administered through the New York City Department of
Transportation and the Metropolitan Transportation Authority. While the damage to the integrity
of DOT’s DBE program in this instance has been done, it only serves to strengthen our resolve in
pursuing those whose greed prevents the legitimate participation of disadvantaged businesses in
federal contracting on public transportation projects.”
DOI Commissioner Margaret Garnett said: “Today’s multimillion-dollar settlement
demonstrates that law enforcement has its sights on exposing fraud by companies that exploit
City and Federal programs aimed at increasing the participation of disadvantaged businesses in
public construction projects. DOI and its partners will continue to protect the integrity and
effectiveness of these programs with investigations that uncover and deter dishonest conduct.”
MTA Inspector General Carolyn Pokorny said: “Disadvantaged Business Enterprise
regulations enable honest competition in construction contracts by ensuring an equal and
inclusive playing field for all. Today’s DBE fraud settlement highlights the commitment of the
Office of the MTA Inspector General, along with all of our prosecutorial and investigative
partners, towards prohibiting and rooting out discrimination.”
As alleged in the complaint filed in Manhattan federal court on March 2, 2019, AHERN
was a contractor on two federally funded steel painting projects to renovate the Brooklyn Bridge
and Queens Plaza. Contracts for both projects required AHERN to hire DBEs to do a percentage
of the work involved and adhere to the DBE regulations. Instead of hiring qualified DBEs to
perform the allotted DBE work, AHERN allowed SPECTRUM and TOWER to use TOWER’s
status as a DBE to take credit for millions of dollars of work performed, managed, and
supervised by non-DBE SPECTRUM. To conceal this scheme, SPECTRUM employees
repeatedly identified themselves as TOWER employees in documents that AHERN passed along
to supervisors on the project. AHERN and TOWER repeatedly submitted false statements and
records to NYC-DOT and MTA misrepresenting that TOWER alone did all of the work allocated
to DBEs and that TOWER did not hire a subcontractor to perform any of that work.
As part of the settlement, AHERN admits, acknowledges, and accepts responsibility for
conduct alleged in the complaint as described below:
In March 2010, AHERN’s superintendent met with a TOWER manager and a
SPECTRUM manager to do a walk-through of the Brooklyn Bridge worksite.
AHERN’s superintendent understood that the SPECTRUM manager would assist
TOWER in preparing the bid TOWER submitted for its work as a DBE
subcontractor on the Brooklyn Bridge Project;
o I
In documents that AHERN received from TOWER and then submitted to Skanska
in 2010, TOWER identified the individual who AHERN knew to be a
SPECTRUM manager as a “TOWER VP” or as a TOWER employee working on
the Brooklyn Bridge Project. In documents AHERN received from TOWER and
then submitted to the MTA in 2011, TOWER identified the individual AHERN
knew to be a SPECTRUM manager as TOWER’s superintendent for the Queens
Plaza Project;
Throughout the Brooklyn Bridge and Queens Plaza Projects, AHERN managers
communicated directly with the SPECTRUM manager regarding the management
and supervision of the projects, including scheduling and inspecting TOWER’s
DBE work, ordering materials for TOWER’s DBE work, and payment for
TOWER’s DBE work. An AHERN executive also communicated directly with
SPECTRUM’s owner regarding the Brooklyn Bridge and Queens Plaza Projects.
AHERN recklessly disregarded facts showing that SPECTRUM managed and supervised
TOWER’s DBE work on the Brooklyn Bridge and Queens Plaza Projects.
AHERN failed to seek clarification regarding the financial and other
arrangements between TOWER and SPECTRUM or request a copy of any
contract or agreement between TOWER and SPECTRUM regarding
SPECTRUM’s role. If AHERN had done so, and TOWER had responded
truthfully, AHERN would have learned that TOWER and SPECTRUM had
entered into written agreements specifying that SPECTRUM would provide
project management support and furnish equipment on the Brooklyn Bridge and
Queens Plaza Projects, that TOWER and SPECTRUM would split any profits
from the TOWER DBE work on the Brooklyn Bridge and Queens Plaza Projects,
and that in addition to the SPECTRUM manager, two other individuals AHERN
believed to be TOWER managers were in fact employed by SPECTRUM.
Mr. Berman praised the outstanding investigative work of the USDOT-OIG, DOI, and
MTA-OIG.
