The Louis Berger Group of Morristown, one of the largest American engineering contractors in Iraq and Afghanistan, agreed Friday to pay more than $69 million to settle allegations of cheating the U.S. government through an overbilling scheme uncovered by a whistleblower at the firm. The company’s settlement is among the biggest to stem from a case involving war-zone contractors...
Precy Pellettieri and Salvatore Pepe at the Federal Courthouse in Newark. Both pleaded guilty to roles in the overbilling scheme. The Louis Berger Group of Morristown, one of the largest American engineering contractors in Iraq and Afghanistan, agreed Friday to pay more than $69 million to settle allegations of cheating the U.S. government through an overbilling scheme uncovered by a whistleblower at the firm.
The company’s settlement is among the biggest to stem from a case involving war-zone contractors in Iraq and Afghanistan. In exchange, federal prosecutors will not pursue criminal charges accusing Louis Berger Group Inc., or LBG, of intentionally overcharging the government by at least $10 million on $2 billion in charges between 1999 and 2007.
"That conduct is intolerable, not just because it rips off the United States taxpayer. But because it allows a corrupt few to send the wrong message to the world about the ethics of American businesses," U.S. Attorney Paul J. Fishman said in a news conference.
The settlement came on the same day two former high-ranking LBG officials pleaded guilty before a U.S. District Magistrate Judge Patty Shwartz, sitting in Newark. The two said they boosted company profits by systematically inflating bills to the United States Agency for International Development. One of those employees, Salvatore Pepe, former chief financial officer, said he carried out the scheme at the behest of an unnamed former LBG executive.
Prosecutors declined to identify the executive referred to by Pepe, but said the probe is continuing.
The investigation began in 2006 when Harold Salomon, a senior LBG financial analyst and auditor, filed a whistleblower lawsuit under seal. It accused the company of illegally billing the government for costs not directly related to its work overseas, including legal and accounting fees, rent and other general company costs tied to its offices in New Jersey and Washington D.C.
With 5,000 employees in 60 countries, the Louis Berger Group was founded in 1953 and offers engineering, construction management, and disaster and emergency management services, according to its website. It has handled more than $2 billion in contacts in Afghanistan and Iraq, including building schools, health clinics, roads and developing agribusiness and agricultural markets.
Friday’s settlement came through a deferred prosecution agreement, which gives prosecutors authority to reopen the investigation if the company engages in future wrongdoing. It calls for LBG to pay $18.7 million in criminal penalties and $50.6 million to resolve civil claims. The firm has agreed to reform its practices under a federally appointed independent monitor.
Authorities say the company took steps to rehabilitate itself before the probe even began. These steps included firing employees who participated in the scheme, revamping financial controls and repaying the government $4.33 million. LBG’s president, Larry D. Walker, said those measures have began to ensure the firm operates in a "transparent and compliant manner."
Pepe, 58, of Tuckahoe, N.Y., pleaded guilty to conspiring to defraud the United States along with LBG’s former controller, Precy Pellettieri, 54, of Rahway. They face between 30 and 37 months in prison under the terms of their deals with prosecutors.
Friday’s settlement does not bar LBG from reconstruction work in Iraq and Afghanistan. And indeed, the firm continued to receive government contracts throughout the course of the probe. Fishman defended the move during Friday’s press conference, saying the fraud was perpetrated by just a handful of former company officials and the firm cooperated with the investigation and took steps to reform itself.