Government Settlement of Fraud Allegations Against Perini Corporation

Perini Corporation, a Framingham, Massachusetts-based construction contractor, has agreed to pay the United States $998,500 to resolve allegations that the company knowingly inflated its request for equitable adjustment filed at the Armed Services Board of Contract Appeals under a contract with the United States Department of State to build an embassy building in Caracas, Venezuela, the State Department announced today. The settlement also resolves other claims that the State Department and the company had under the contract.

The settlement resolved the government’s contention that Perini violated the False Claims Act and the Contract Disputes Act (CDA) in 1995 when it submitted a claim for more than $8 million dollars. Perini’s claim asserted a right to compensation for delays on the completion of the embassy building that Perini claimed were the government’s responsibility. The State Department rejected Perini’s claim and assessed liquidated damages and penalties against Perini for the delay. After several years of administrative litigation, the Armed Service Board of Contract Appeals rejected Perini’s claim in its entirety and awarded the United States liquidated damages and penalties in the amount of $286,000. This settlement resolves the administrative claims, as well as the government’s allegations of fraud.

The Contract Disputes Act (CDA) allows a government contractor to assert claims against the government for money claimed to be owed under a contract. The CDA is also an important tool in combating fraud by government contractors. The statute contains stiff penalties for a contractor who is "unable to support any part of his claim [due to] misrepresentation of fact or fraud." If a contractor is found liable under the CDA, it can be held liable for the amount of the unsupported part of the claim, and investigative costs, even if the claim was never paid by the government. The CDA is intended to prevent the so-called horse-trading theory of negotiating where an amount beyond that which can be legitimately claimed is submitted merely as a negotiating tactic. Inflated claims waste the resources of the State Department and every government agency even if the claims are never paid. In this case, the United States alleged that Perini inflated its claim by about $2 million in the hopes of negotiating a favorable resolution. "In taking the actions which we have in this case", the Bureau of Overseas Buildings Operations stated, "we hope to send a message to contractors to submit only legitimate claims".
The investigation was conducted with the cooperation of the United States Department of Justice, and the United States Department of State, Office of Legal Advisor for Building and Acquisitions, which also handled the administrative litigation.

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