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U.S. Sues Dragados USA, Judlau Contracting Claiming Fraud

The U.S. sued Dragados USA Inc. and Judlau Contracting Inc., accusing them of running a fraud scheme connected to the construction of the $447 million East Side Access Project, a tunnel linking the Long Island Railroad to Grand Central Terminal.

Dragados and Judlau falsely claimed they would hire disadvantaged business as subcontractors on the federally funded project, government lawyers in the office of Manhattan U.S. Attorney Preet Bharara alleged in the civil suit.

The construction project is partially funded with so-called “New Start” grant money from the Federal Transit Administration, the U.S. says. The government has funded about 42 percent of the project, according to court papers.

As a condition of receiving the funds, a bidder must establish that it made a good-faith effort to meet goals for employing disadvantaged business enterprises, also known as DBEs, as subcontractors, the government said.

Under the East Side Access project, the winning bidder was required to hire such businesses to perform at least $22 million worth of work.

Dragados and Judlau falsely claimed to have paid more than $17 million of the total $22 million to disadvantaged businesses, according to the complaint. The U.S. asked for unspecified damages and penalties.

Dragados Spokesman

John Kelly, a spokesman for Dragados USA, said that company and Judlau reached an agreement with the U.S. Attorney’s Office to resolve the lawsuit. There is no record on the public court docket to reflect such a resolution of the case.

“The issues relating to the DBEs were discovered by Dragados as part of its internal integrity processes and procedures,” Kelly said. “This information was then self-reported by Dragados” to the Metropolitan Transportation Authority.

As a result, he said, the government “initiated a civil investigation with Dragados’s full cooperation.”

Jerika Richardson, a spokeswoman for Bharara’s office, declined to comment on the case.

The case is U.S. v. Dragados/Judlau, 1:12-cv-02563, Southern District of New York (Manhattan).

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