Three BART contractors have been implicated in an alleged scheme to defraud the Bay Area transit agency by submitting false invoices for work on a multi-hundred-million-dollar project to retrofit the Transbay Tube.
The contractors involved are Jacobs, Shimmick Construction and the California Engineering Contractors Joint Venture, according to three sources with knowledge of the situation.
BART’s Office of Inspector General released a report on Tuesday detailing elements of the alleged scheme without naming the contractors or the project involved. The probe found the contractors had acted in violation of the California False Claims Act, which allows for legal action against parties who obtain money illegally from public authorities.
The Office of Inspector General—which is led by Claudette Biemeret—is charged with investigating fraud, waste and abuse within the agency’s programs and operations.
According to the report, the Inspector General hired a fraud examiner to investigate the financial records after a whistleblower claimed that a Jacobs employee was involved in a kickback scheme with the construction contractors to defraud BART for $1.9 million in false labor, hours and equipment. The investigation ultimately found that there was "'high potential' that the contractors 'defrauded' BART."
Based on the California False Claims Act, the contractors could be liable for up to $8.3 million in penalties and damages if BART pursues a civil lawsuit against them.
The Transbay Tube is an underwater tunnel that carries four BART train lines under San Francisco Bay between San Francisco and Oakland.
Jacobs was awarded a construction management contract to oversee the Transbay retrofit project. In 2016, the BART Board of Directors awarded a $313 million contract to Shimmick Construction and California Engineering Contractors Joint Venture for work on the project.
The contracts were related to an internal retrofit project that included the installation of a steel liner inside the tube and the installation of a new water pumping system.
Jacobs and its subsidiaries, which include CH2M Hill, Jacobs Engineering and Jacobs Project Management, have been subject to an indefinite order to stop work that began on Sept. 7, according to emails viewed by The Standard.
A similar action was taken against contractor PGH Wong Engineering before the release of an Inspector General report detailing that a BART manager failed to disclose family ties in a $40 million contract awarded to the company.
Jacobs has multiple existing contracts with BART, including an on-call contract worth $40 million that was awarded in February—months after the alleged misconduct occurred. During the same meeting, PGH Wong was awarded a similar $40 million contract.
Jacobs, Shimmick Construction and California Engineering Contractors did not respond to a request for comment.
The three contractors have signed a tolling agreement that suspends the statute of limitations on the issue as they negotiate with BART on a potential settlement.
“BART is grateful for the work the Inspector General and her team does in safeguarding the interests of the public,” BART spokesperson James Allison said in a statement. “As to the specifics of this investigation, it would be premature to comment until the Inspector General issues a full report.”
Notably, BART has no process for suspending or banning contractors who have committed misconduct.
The Inspector General report says that having a way to suspend or eliminate contractors who break the rules would protect BART from fraud, waste and abuse by giving the district the “tools to avoid doing business with contractors that fail to meet their contractual or fiduciary obligations.”
The lack of such a process, the Inspector General report notes, leaves the district open to contracting again with those who have failed to perform or submitted false claims illegally.