Company operating military housing reaches settlement over fraud accusations

Balfour Beatty Communities hard hats and shovels are staged for the Van Horne ground breaking ceremony at March 19, 2013. Photo by Sgt. Ida Irby

Aaron Martinez

El Paso Times

One of the largest privatized military housing companies, which manages houses at Fort Bliss, will pay more than $65 million in fines and restitution after pleading guilty to defrauding the U.S. military.

Balfour Beatty Communities LLC pleaded guilty Dec. 22 to one count of major fraud against the U.S. as part of a plea agreement where company officials admitted their employees falsified records of maintenance and resident satisfaction of military housing, including at Fort Bliss, to continue to receive government funds.

As part of the plea agreement, Balfour Beatty Communities agreed to pay about $33.6 million in criminal fines and $31.8 million in restitution, U.S. Department of Justice officials said.

The allegations made against Balfour Beatty Communities were that from about 2013 to 2019, company employees falsified information so that BBC’s incentive fee requests reflected that BBC had met performance objectives, officials said.

However, the company actually failed to meet those objectives in many of the quarters during that time, officials said.

The objectives included primarily related to maintenance and resident satisfaction at various military housing projects.

“Instead of promptly repairing housing for U.S. servicemembers as required, BBC lied about the repairs to pocket millions of dollars in performance bonuses,” U.S. Deputy Attorney General Lisa O. Monaco said in a statement. “This pervasive fraud was a consequence of BBC’s broken corporate culture, which valued profit over the welfare of servicemembers.”

The company is required to submit to U.S. military service branches proof that it had satisfied performance objectives.

Balfour Beatty Communities officials in a statement accepted responsibility for the falsified records and stated they would make changes to prevent further fraud against the U.S. government.

“Balfour Beatty is committed to the highest standards of ethical conduct,” company officials said in a statement. “The wrongdoing that took place is completely contrary to the way the company expects its people to behave. The Company apologizes for the actions of communities to all its stakeholders. It has been made clear to all employees that breaches of policies, procedures, or law will not be tolerated.”

The company headquartered in Malvern, Pennsylvania, agreed to serve three years of probation and engage an independent compliance monitor for a period of three years, officials said.

Monaco said the Dec. 22 settlement “sends a clear message to companies that if they do not maintain adequate compliance programs, voluntarily self-disclose misconduct, and fully cooperate with the government, they will pay a price that outweighs the profits they once reaped.”

The company also separately entered into a False Claims Act settlement with the U.S. to resolve its civil liability for $35.2 million. The amounts paid under the civil settlement will be credited against the amounts owed under company’s criminal plea, officials said.

Balfour Beatty Communities LLC operates privatized military housing communities at 21 U.S. Air Force, 18 U.S. Navy and 16 U.S. Army bases.

” The Western District of Texas is home to some of the largest military installations in the country and our district works tirelessly to protect and serve our military families,” U.S. Attorney for the Western District of Texas Ashley C. Hoff said in a statement. “The resolution entered with BBC concerns conduct that impacted military families in our district at Lackland Air Force Base and Fort Bliss Army Base. This resolution is an important step in holding private military housing providers accountable to our servicemembers and their families.”

According to court documents, two employees have pleaded guilty to their roles in the fraud scheme.

Former community manager Stacy Cabrera pleaded guilty April 21 to conspiracy to commit wire fraud., while former regional manager Rick Cunefare pleaded guilty June 9 to major fraud against the United States.

Court records do not show when the defendants will be sentenced.

The employees were accused of altering or manipulating data in property management software. They also allegedly destroyed and falsified “resident comment cards to falsely inflate these metrics and, ultimately, to fraudulently induce the service branches to pay performance incentive fees which BBC had not earned,” Department of Justice officials said.

The actions of the employees led to “lengthy and unnecessary delays in the resolution of maintenance issues to the detriment of servicemembers and their families,” Department of Justice officials said.

Changes implemented by BBC, according to a statement, include “restructuring of the Communities management team including the additional appointment of several key executives and a Chief Compliance Officer for the U.S.,” company officials said.

The company also “enhanced its ethics and compliance training for all employees and has made significant improvements to the maintenance work order processing system, underpinned by enhanced controls and protocols that are aimed to prevent misuse and strengthen oversight,” company officials said.

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