April 4 (Bloomberg) -- Dragados USA Inc. and Judlau Contracting Inc. settled a suit brought by the U.S. accusing the companies of fraudulently claiming they used disadvantaged subcontractors for a $447 million New York tunnel project.
As part of the accord, Dragados and Judlau have agreed to pay $6.5 million to the U.S. and $1 million to New York’s Metropolitan Transportation Authority. Dragados and Judlau, a joint venture, also “admitted and accepted responsibility” for violating federal regulations governing contracts with the MTA and the U.S., according to a copy of the agreement.
U.S. District Judge Laura Taylor Swain, in New York, approved the accord today, said Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, whose office filed the lawsuit today.
Federal regulations required the joint venture to hire disadvantaged business enterprises, or DBEs, businesses owned by socially and economically disadvantaged individuals, as subcontractors, the U.S. said.
The companies falsely claimed they had hired such businesses for the construction of the $447 million East Side Access Project, a tunnel linking the Long Island Rail Road to Grand Central Terminal in New York, Bharara’s office said.
“The Disadvantaged Business Enterprise Program plays an important role in ensuring that qualified minority- and women-owned businesses get a fair shot at government contracts that eluded them for years,” Bharara said in a statement. “Compliance with the program is not optional.”
The U.S. Transportation Department, which is funding approximately 42 percent of the project, requires a winning bidder to establish that it has made good-faith efforts to meet established goals to employ DBEs as sub-contractors.
Federal regulations required the winning bidder to hire disadvantaged businesses to perform at least $22 million worth of work. The U.S. said New York-based Dragados and Judlau falsely claimed to have paid out more than $17 million of the total project to disadvantaged businesses.
“The issues relating to the DBEs were discovered by Dragados as part of its internal integrity processes and procedures,” John Kelly, a spokesman for Dragados USA said. Dragados reported the information to the MTA, Kelly said. “As a result, the U.S. Attorney initiated a civil investigation with Dragados’s full cooperation.”
Mark Rosen, a lawyer for Judlau, didn’t return a voice-mail message left after business hours seeking comment on the case.
The case is U.S. v. Dragados/Judlau, 12-CV-2563, U.S. District Court, Southern District of New York (Manhattan).
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