Major Landlord Pleads Guilty To Defrauding U.S. Military, Will Pay $65M In Fines
Pennsylvania-based Balfour Beatty Communities, one of the largest private landlords for the U.S. military, will pay over $65M in fines after pleading guilty to defrauding the U.S. Army, U.S. Air Force and U.S. Navy.
BBC operates housing developments across approximately 55 U.S. military bases and earns fees from its development and property management business lines. According to a U.S. Department of Justice release, from 2013 to 2019, BBC falsified incentive fee requests.
BBC receives those fees when it reaches performance goals like maintenance standards and resident satisfaction; the DOJ said the company altered property management data and destroyed or falsified resident comment cards to receive unearned incentive fees.
Service members living in BBC housing were exposed to asbestos, pests, mold and raw sewage, according to a 2019 Reuters report. The report said BBC faked maintenance logs indicating the company resolved issues promptly, and earned incentives as a result, such as north of $41K in the third quarter of 2016.
“Instead of promptly repairing housing for U.S. servicemembers as required, BBC lied about the repairs to pocket millions of dollars in performance bonuses,” Deputy Attorney General Lisa O. Monaco said in a DOJ release. “This pervasive fraud was a consequence of BBC’s broken corporate culture, which valued profit over the welfare of servicemembers."
The fine is split between $33.6M in criminal fees and $31.8M in restitution to the U.S. military. In addition, BBC will serve three years of probation, during which it will have an independent compliance monitor. BBC has also entered a False Claims Act settlement where it will pay $35.2M to the United States.
"Today’s global resolution 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," Monaco said.
BBC entered the plea agreement on Wednesday and agreed to cooperate fully and "self-report violations of U.S. federal criminal law, and to continue to implement a compliance and ethics program designed to effectively detect and deter violations of U.S. anti-fraud laws throughout its operations," the DOJ said.
In a statement issued by BBC on Wednesday, the company said it has been implementing changes since an “in-depth review of operations” in 2019 “to prevent this type of misconduct from occurring in the future.”
This includes restructuring management teams and adding a chief compliance officer, increasing compliance training and improving the maintenance work order processing system.
The resolution follows prior guilty pleas made by two BBC executives. In April, former BBC Community Manager Stacy Cabrera pleaded guilty to conspiracy to commit wire fraud, the DOJ stated. In June, former BBC Regional Manager Rick Cunefare pleaded guilty to major fraud against the U.S.
“In defrauding our country's military services, BBC took advantage of their unique position as a military housing provider and put greed and personal profit above our servicemembers,” FBI Deputy Director Paul M. Abbate said in the DOJ statement. “Today's guilty plea reaffirms the FBI, along with our partners, are committed to preventing such disgraceful crimes and will work tirelessly to bring those who engage in this type of crime to justice.”