Pennsylvania Engineering Firm Agrees to Pay $1.3 Million in Corruption Fraud Scheme
On January 14, 2015, Construction Methods and Coordination, Inc., dba CMC Engineering (CMC) entered into an administrative agreement with the Pennsylvania Department of Transportation (PENNDOT) whereby PENNDOT and the FHWA will be reimbursed in excess of $1.3 million. The reimbursement is for losses incurred as a result of the fraudulent activity of CMC consultant inspectors that were recently charged with corruption and other various crimes. The investigation revealed that at least one CMC inspector participated in the fraud while working on the 100% federally funded Girard Point Bridge construction project in Philadelphia, Pennsylvania. PENNDOT is currently calculating the amounts and will reimburse FHWA for the fraud losses incurred on the affected federal project(s).
Previously, in December 2014, state criminal complaints were filed charging ten individuals for their alleged roles in a widespread corruption and bribery scheme that affected 27 federally funded contracts in Pennsylvania. The complaints alleged that a former PENNDOT permits manager, along with others, demanded kickbacks from project inspectors. This included CMC employees and required them to falsify time, attendance, and payroll records to generate illicit cash flow. The complaints also alleged that the corrupt inspectors were paid more than $500,000 through false payroll and invoice submissions. Additionally, two leading inspection firms, CMC and CZOP Corporation, were allegedly paid more than $700,000 for their employees’ unearned overtime. The inspectors then falsified documents to inflate overtime income and mileage reimbursements, kicking the money back to the PENNDOT managers.
Based on this joint investigation with the Pennsylvania Attorney General’s Office and the pending criminal charges, FHWA and PENNDOT have organized a proactive inspection team to review design and construction contracts that may have been affected by this fraud.
Ten Charged in Pennsylvania Department of Transportation Corruption Scheme
On December 17, 2014, state criminal complaints were filed in Bridgeport, Pennsylvania, charging ten individuals for their alleged roles in a widespread $1.2 million corruption and bribery scheme that affected 27 federally funded maintenance and construction contracts in Pennsylvania.
The complaints allege that Alex Morrone, former PENNDOT permits manager, and William Rosetti, former Philadelphia County permit manager, demanded kickbacks from project inspectors while requiring them to falsify time, attendance, and payroll records to generate illicit cash flow. They also allege that the corrupt inspectors were paid more than $500,000 through false payroll and invoice submissions. Additionally, two leading inspection firms, CMC Engineering and CZOP Corporation, were allegedly paid more than $700,000 for their employees unearned overtime.
The complaints also state that project inspectors performed home improvement services for PENNDOT officials while payroll records falsely indicated that they were performing inspection duties. In addition to the monetary fraud, the state grand jury contended that the scheme jeopardized safety because paid project inspectors, hired to protect the public and Pennsylvania highway infrastructure, were often absent from jobsites and therefore failed to perform inspection duties.
The investigation further revealed that the subject PENNDOT managers instructed the consultant inspectors, who were close friends and relatives, to falsify their resumes, and in turn, the PENNDOT officials allegedly used their influence with the contract engineering companies to hire these unqualified individuals as consultant inspectors. These inspectors then falsified documents to inflate overtime income and mileage reimbursements and then kicked money back to the PENNDOT managers.
In addition to Morrone and Rosetti, those charged included PENNDOT inspectors Frank DiMichele and Generoso Palmieri, and consultant inspectors Joseph DiSimone, John Cavanaugh, John Laspada, Brandon Grosso, David Betzner, and Christopher Lauch.
We are conducting this investigation with the Pennsylvania Attorney General’s Office.
Note: Indictments, informations, and criminal complaints are only accusations by the Government. All defendants are presumed innocent unless and until proven guilty.