SAVANNAH: Balfour Beatty Communities LLC (BBC), one of the nation’s largest providers of privatized military housing to the U.S. Armed Forces, pled guilty to defrauding the U.S. Army, the U.S. Air Force, and the U.S. Navy, in connection with a fraudulent scheme to obtain performance bonuses by submitting false information to the U.S. military.
BBC entered the plea, pursuant to plea agreement with the United States, before U.S. District Judge Emmet G. Sullivan in the District of Columbia on Dec. 22. Under the terms of the plea agreement, BBC agreed to pay more than $33.6 million in criminal fines and over $31.8 million in restitution to the U.S. military, serve three years of probation, and engage an independent compliance monitor for a period of three years.
Separately, BBC entered into a False Claims Act (FCA) settlement under which it is obligated to pay approximately $35.2 million in civil restitution and penalties to the United States, which the Justice Department credited against BBC’s criminal restitution and fine. Law enforcement within the Southern District of Georgia assisted in reaching this settlement by investigating BBC’s misconduct at Fort Stewart/Hunter Army Airfield in Savannah, and Fort Gordon in Augusta.
“The men and women who live in our nation’s military housing, including those at Fort Stewart and Fort Gordon, deserve prompt and professional maintenance service from their housing providers,” said David H. Estes, U.S. Attorney for the Southern District of Georgia. “That BBC would not only fail to deliver this service, but also falsify information to line their own pockets is despicable. Our office will work tirelessly with our law enforcement partners, and other components of the Department of Justice, to make sure those who provide subpar service to the military and lie about it are held accountable.”
According to court documents, BBC was a diversified real estate services company, headquartered in Malvern, Pennsylvania, that operated privatized military housing communities at 21 U.S. Air Force, 16 U.S. Army, and 18 U.S. Navy bases across the United States, in which tens of thousands of service members and their families lived. BBC earned fees for the various phases of development and management of each housing community, from design and construction to ongoing community management and maintenance, and service members paid their living allowance, known as Basic Allowance for Housing, in the form of rest to BBC to live in the communities.
BBC’s fees for the ongoing property management and maintenance of its military housing communities generally consisted of (1) a base fee, paid to BBC monthly and (2) performance incentive fees, paid to BBC quarterly or semi-annually. Performance Incentive Fees were payable only upon the approval of the relevant service branch. To obtain the incentive fees, BBC was required to submit to the service branches proof that it had satisfied written performance objectives related to, among other things, maintenance of the housing communities and resident satisfaction. The service branches relied on BBC’s submissions in deciding whether to approve the payment of relevant performance incentive fees.
According to court documents, from around 2013 to around 2019, BBC employees falsified information so that BBC’s incentive fee requests falsely reflected that BBC had met performance objectives. In reality, BBC did not legitimately meet those objectives in many of the quarters during that time, primarily the objectives related to maintenance and resident satisfaction, at various military housing projects. Specifically, BBC employees altered or manipulated data in property management software and destroyed and falsified resident comment cards to falsely inflate these metrics and, ultimately, to fraudulently induce the service branches to pay performance incentive fees which BBC had not earned.
As a result, according to court documents, there were lengthy and unnecessary delays in the resolution of maintenance issues to the detriment of residents. In addition, the military service branches had an inaccurate view of the state of BBC’s military housing communities and were unable to assess, and potentially correct, BBC’s performance.
A number of relevant considerations contributed to the department’s criminal resolution with BBC, including the nature and seriousness of the offense, the pervasiveness of the misconduct among BBC’s employees and at multiple military installations, and the state of BBC’s compliance program and the progress of its remediation, including the fact that BBC’s compliance program and internal controls have not been fully implemented or tested to demonstrate that they would prevent and detect similar misconduct in the future.
As part of BBC’s plea agreement, BBC agreed to cooperate fully with the United States in all matters relating to the conduct covered by the plea agreement and other conduct under investigation by the United States, to 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.
This resolution follows the prior entry of guilty pleas by two BBC managers. In April 2021, Stacy Cabrera, a former community manager of BBC, pleaded guilty to conspiracy to commit wire fraud. In June 2021, Rick Cunefare, a former regional manager of BBC, pleaded guilty to major fraud against the United States.