$5.9M Settlement Restores Contract Integrity for USPS

Many contract fraud investigations end up in civil court, and the law allows victims and the government to seek multiple damages under the False Claims Act.

The added penalties — sometimes as much as three times the amount defrauded — are meant to act as a deterrent should contractors think about defrauding anyone again.

Our special agents routinely monitor the Postal Service’s massive facilities portfolio for potential fraud. The portfolio manages about 50,000 repairs and maintenance jobs annually, costing the agency well over $100 million per year.

Recently, our investigators found suspicious billing patterns from an EMCOR subsidiary providing repair services for postal facilities (EMCOR is one of the largest contractors the Postal Service does business with). USPS had paid the subsidiary over $5.9 million for almost 2,450 work orders EMCOR had assigned it.

After an in-depth analysis, our special agents found the subsidiary had repeatedly and methodically defrauded the Postal Service for repair work it performed at postal facilities. The company used subcontractors for a large part of the work, which isn’t a problem as long as there’s transparency. In fact, suppliers can mark up subcontractor invoices up to 10 percent.

But there was no transparency, with the subsidiary further directing its employees to doctor invoices to hide the use of subcontrators and inflate the cost of every job by about 25 percent! Until our investigation, the Postal Service was unaware the subsidiary was intentionally failing to disclose the use of subcontractors, falsely certifying work as being self-performed, and falsifying subcontractor invoices as part of its claim submissions.

The U.S. Attorney’s Office in the District of Minnesota successfully prosecuted the case, reaching a settlement agreement that ordered the subsidiary to pay the United States triple damages of more than $5.9 million. Almost $3 million of that was returned directly to the Postal Service.

"Special Agents of the USPS OIG will continue to aggressively investigate those who would engage in fraudulent activities designed to defraud the Postal Service. This settlement demonstrates the USPS OIG will pursue contractors that overcharge the government and enrich themselves at the expense of USPS customers."

– Kenneth Cleevely, ESAC
U.S. Postal Service Office of Inspector General

If you suspect or know of contract fraud involving Postal Service contractors or employees, please report it to our Hotline.

For further reading:

Department of Justice (via uspsoig.gov), Minnesota Construction Company Agrees to Pay $5.9M to Resolve False Claims Act Violations