Pennoni Associates, Inc. False Claims Act Investigation

1. Pennoni Associates, Inc.False Claims Act Investigation

2. Pennoni Associates, Inc. • Pennoni Associates, Inc. (PAI) is an multi-disciplined engineering consulting firm headquartered in Philadelphia, PA with offices throughout the Northeast • PAI contracted with the Delaware Department of Transportation (DelDOT) to provide bridge and overhead structures materials and testing services

3. Introduction • This matter was referred by the Department of Transportation’s Office of Inspector General • DelDOT was substantially involved in all aspects of the investigation • The State Attorney General’s Office was involved to ensure that all amounts lost, state and federal, were recovered • The investigation involved 626 invoices submitted from February 1998 through January 2002

4. The False Claims Act Imposes liability on a defendant who: • presents a claim for payment • the claim was false or fraudulent • the defendant knew the claim was false or fraudulent

5. PAI Submitted Claims • Claim defined. – For purposes of this section, "claim" includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded. 31 U.S.C. § 3729(c).

6. Agreements At Issue • The Agreements at issue were 915 and 915-1 • The invoices involved amounted to $975,760 • The Federal participation amounted to $736,648 (about 75%) • The PAI/DelDOT agreement explicitly stated that the contract involved participation of Federal-aid highway funds and was subject to applicable, State and Federal Laws, both criminal and civil. PAI certified its understanding of this fact

7. Thus, PAI submitted claims to DelDOT on contracts in which the Federal government provided the majority of the money • Accordingly, under the “claims” definition of the False Claims Act, PAI submitted claims amounting to over $975,000

8. Many of the Claims Were False or Fraudulent • Excessive Labor Hours Charged • Billed Travel Time As Direct Time • Not Allowed or Excessive Miles Charged • Subsistence Charges Supported by Fictitious or Missing Receipts • Billed for Non-Subsistence Expenses

9. Billing of Excess Hours • PAI billed the Government for excess labor hours that were not worked • 155 invoices • Amount at issue: $48,848.29

10. Summary of Evidence • Timesheets were not supported by timed toll receipts, hotel check-in and check-out times, and timed meal receipts • Impossible day analysis/two or more inspection locations on the same day • Former inspector admitted that he would leave plants early but still charged full eight hour days • Former inspector admitted that he altered toll and other receipts to hide early departure or late arrival to inspection locations

11. Billing Travel as Direct Time • PAI billed the Government for direct labor hours that were actually travel hours not allowed under the agreements • 135 invoices • Amount at issue: $44,778.25

12. Summary of Evidence • Travel time coded or otherwise indicated on company timesheets was included in invoiced direct hours

13. Not Allowed or Excessive Miles Charged • PAI billed the Government for mileage reimbursements that were not allowed under the agreements • 189 invoices • Amount at issue: $20,242.38

14. Summary of Evidence • Mileage reimbursement not allowed for inspection sites 50 miles or less from the inspector’s office or residence, whichever was less • Mileage reimbursement was excessive when claims were in excess of 10 miles more than the distance between inspector’s residence or office and the inspection location • No claims were submitted for less than or equal to the actual miles

15. Subsistence Charges Supported by Fictitious or Missing Receipts • PAI billed the Government for subsistence charges that were unsupported by receipts • 2 invoices • Amount at issue: $8,323.64

16. Summary of Evidence • No receipts were produced • Consecutive numbered meal receipts were from the same pad but dated days/weeks apart • Former inspector stated that he simply made up receipts. Management did not care. Stated that other inspectors had same practice. Another former inspector admitted practice as well.

17. Billed for Non-Subsistence Expenses • PAI billed the Government for non-subsistence items such as alcohol and toiletries • 1 invoice • Amount at issue: $2,580.12

18. Summary of Evidence • Itemized store receipts reflected unallowed items

19. PAI Knew the Claims Were False or Fraudulent. • For purposes of the False Claims Act, the terms "knowing" and "knowingly" encompass not only those with actual knowledge of the falsity of the claim, but also those who act: in deliberate ignorance of the truth or falsity of the information; or, in reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729.

20. The Inspectors Had Actual Knowledge That Their Submissions Were False • PAI was vicariously liable for their acts. • United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997); • United States v. O'Connell, 890 F.2d 563, 568 (1st Cir. 1989); • United States ex rel. McCready v. Columbia HCA, 251 F. Supp. 2d 11, 119 (D.D.C. 2003); • United States v. Williams Building Corp., 158 F. Supp. 2d 1001, 1008 (D.S.D. 2001).

21. PAI Submitted Claims Based on the Inspectors’ Information In Reckless Disregard, or Deliberate Ignorance, of the Truth or Falsity of that Information • PAI was on notice that the inspectors’ information was potentially false or fraudulent yet, nonetheless, submitted claims based on this information.

22. Damages • We calculated that the government’s single damages were $124,772.68 • The False Claims Act provides for up to trebling of the amount

23. Penalties For False Claims Submitted • PAI submitted at least 125 non-duplicative invoices to the government containing false or fraudulent claims. • The False Claims Act provided for a $5,000 to $10,000 penalty per false claim submitted. For violations occurring after September 1999, penalties are increased.

24. PAI’s Settlement • Damages: $275,000 • Penalties: $75,000 • Total: $350,000 • 14 Inspectors referred to FHWA for suspension/debarment action.