July 20, 2021
The False Claims Division of the Massachusetts Attorney General’s office successfully fought fraud over the past fiscal year by investigating and prosecuting opportunists who sought to line their own pockets with taxpayer money. Specifically, many fraudsters took advantage of the COVID-related economic emergency measures that the government put into place. These measures include the Paycheck Protection Program and the CARES Act. However, run-of-the-mill fraud doesn’t stop during a public health crisis, and many people continued to engage in non-COVID-related fraudulent behavior.
The Covid-19 pandemic has unfortunately created many opportunities for fraud. Luckily, the Massachusetts AG’s office has brought some of these wrongdoers to justice.
We wrote previously about BedRock LLC, a Massachusetts company that opportunistically reached out to the Commonwealth’s Operational Services Division (OSD) with an offer to provide N95 masks. At the time, the Commonwealth was reeling from the effects of the Covid-19 pandemic. There was not enough personal protective equipment (PPE) for all of the Commonwealth’s frontline workers. As such, Massachusetts entered into a $3,600,000 deal with BedRock, in which BedRock promised to provide one million masks. Unfortunately, the vast majority of those masks were never delivered. According to AG Healey, “this company tried to take advantage of the state by holding onto millions of taxpayer dollars it owed for masks that it never delivered.”
Last month, the Mass AG’s office settled the matter with BedRock, which will pay $3.2 million in the settlement, as well as an additional $250,000 in false claims penalties. Additionally, BedRock is barred from contracting with the Commonwealth, or any other political subdivision, for the next five years.
During the pandemic, Massachusetts mandated that car dealerships shut down to slow the spread of the virus. Colonial Automotive Group, Inc., brazenly ignored that order and continued to sell cars out of its “closed” showrooms. Colonial pulled this off by taking advantage of the Commonwealth’s emergency unemployment benefits system. Specifically, the company furloughed its employees, who then began collecting unemployment checks from Massachusetts. Colonial subsequently directed its employees to continue working by calling prospective leads, setting appointments with customers, and finalizing sales. The company never paid its employees for their work during this time.
Colonial set up this scheme in an effort to maximize its profits during the Covid-19 pandemic. Massachusetts taxpayers paid Colonial’s employees, while Colonial benefitted from their free labor. The AG’s office alleges that in April and May following the dealership’s showroom closure, the company sold over 800 cars. These sales were made by furloughed employees who were collecting unemployment benefits at the time.
In January 2021, the AG’s office and Colonial reached a settlement agreement where Colonial agreed to pay $1 million in penalties for this scheme. Additionally, Colonial agreed to enact policies to ensure that furloughed employees do not perform any functions related to their job or Colonial’s business.
We wrote previously about the Federal Resources Supply Company (FRSC), a Maryland-based company. FRSC agreed to pay $550,000 to resolve claims that it deceived the Massachusetts Bay Transportation Authority (MBTA) about hand sanitizer purchased to prevent the spread of COVID-19. FRSC told the MBTA that the hand sanitizer contained alcohol – a key ingredient to make the hand sanitizer effective – when in reality it did not. Relying on FRSC’s representations, the MBTA placed orders for three large purchases of the hand sanitizer. AG Healey said,
This company’s reckless and deceptive actions put the health of our frontline workers and the public at even further risk during this unprecedented public health crisis. We took action against this company because their attempt to exploit people during the COVID-19 pandemic for their own profit was not only unacceptable, it was illegal.
According to the terms of the settlement, FRSC will pay $400,000 which will go to the state’s general fund and will issue a credit of over $150,000 to the MBTA for the amount of product it used.
Since March 2020, our civic life has been chaotic as the both the country and individual states attempted to deal with COVID-19. The pandemic, however, did not deter fraudsters from hatching other types of fraudulent schemes. Luckily, the Mass AG’s office was successful in discovering and prosecuting some of these unscrupulous endeavors.
A Stoughton fuel delivery company, Diesel Direct, LLC, along with its chief executive officer and senior vice president, will pay $850,000 to resolve allegations that the company violated the False Claims Act. The settlement resolves allegations by one of our whistleblower clients that the defendants knowingly delivered nonconforming fuel to state agencies while charging for higher-priced, environmentally-friendly biodiesel fuel. Additionally, Diesel Direct agreed not to bid on any contract with the state or its agencies for five years.
To our knowledge, this is the first settlement in a whistleblower-initiated qui tam action by the AG’s False Claims Division. The False Claims Division was created by AG Healey. Its mission is to safeguard public funds and promote integrity and accountability in public contracting.
VJ Associates provides consulting services on public works projects across New Jersey, New York, and Massachusetts. Specifically, in Massachusetts, it provided subcontracting, cost estimating, and scheduling services for over 100 projects. VJ Associates bills for these projects on an hourly basis. The company engaged in a fraudulent over-billing scheme where it routinely inflated the hours spent working on the projects. Eventually, a former employee of VJ Associates filed a qui tam suit under the Massachusetts False Claims Act. In doing so, the whistleblower effectively exposed AJ Associates’ duplicitous activity. The AG’s office then started an investigation into the company.
In November 2020, the U.S. Attorney’s Office in Massachusetts announced that it reached a criminal settlement with VJ Associates relating to this long-running over-billing scheme. In the agreement, VJ Associates agreed to plead guilty to conspiracy to commit wire fraud. Additionally, VJ Associates agreed to pay a criminal fine of $530,000.
In March 2021, AG Healey announced that Massachusetts will recover almost $200,000 as part of its civil settlement agreement with VJ Associates. As part of this agreement, VJ Associates admitted to submitting false bills and agreed to be debarred from submitting bids or being awarded any public works contracts with Massachusetts or any other government entity within the Commonwealth for a period of five years.
Peterson Oil entered into two contracts with Massachusetts’ Operational Services Division. In these contracts, it agreed to provide the state with heating oil that contained less than 5% biodiesel. Instead of abiding by these contractual terms, Peterson Oil regularly delivered fuel with levels of biodiesel that far exceeded 5%. At times, it delivered fuel that had 40% biodiesel by volume – more than 8 times its allotted percentage. As a result, several state entities that purchased heating oil from Peterson Oil experienced performance issues with their heating systems. The AG’s Office additionally alleges that Peterson Oil knowingly submitted false documents over the course of its state contracts. These contracts claimed the company was delivering compliant heating oil when, in fact, it was not. AG Healey said,
Cities and towns relied on Peterson Oil to deliver heating fuel in accordance with its contract so they could stay warm, but they instead received noncompliant fuel that caused problems for many heating systems. Those who accept taxpayer dollars to contract with our state have a duty to operate with integrity and fulfill those contracts.
As a result of the AG’s office’s hard work, Peterson Oil has agreed to pay $450,000 for violating the Massachusetts False Claims Act.
NEL Corporation (NEL), a Middleton-based bridge repair and maintenance contractor, has agreed to pay $700,000 to resolve allegations that it knowingly over-billed the Massachusetts Department of Transportation (MassDOT) for its work repairing and maintaining bridges throughout Greater Boston, the South Shore, and Cape Cod. NEL charged MassDOT for equipment, PPE, sanitary facilities, and other items that NEL was contractually obligated to pay for. As a result, MassDOT spent far more money than it should have on these projects. Specifically, according to AG Healey,
NEL knowingly over-billed MassDOT thousands of dollars for years, forcing the state to pay double for incidental items the contractor itself was responsible for.
As part of this $700,000 settlement and assurance of discontinuance, NEL has agreed to implement measures to prevent future over-billing. For example, NEL must hire an outside auditor to annually review NEL’s billing on all open MassDOT contracts. These measures will remain in effect for five years.
The Massachusetts Attorney General’s Office has made it a top priority to fight fraud over the past year. AG Healey and her staff have worked tirelessly to bring justice upon fraudsters. They encourage anyone with knowledge of fraud to reach out to the AG’s False Claims Division’s tip line at 617-963-2600. Additionally, our office specializes in helping whistleblowers of all types report fraud to the government. You can contact us to discuss your options.