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Retail Supplier Affiliate Offering Distributed Generation, Efficiency Services to Pay $2.5 Million Under Agreement with Department of Justice

November 20, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Washington Gas Energy Systems has agreed to pay more than $2.5 million in fines and monetary penalties for, "conspiring to commit fraud on the United States by illegally obtaining contracts that were meant for small, disadvantaged businesses," the U.S. Department of Justice said yesterday.

A criminal information was filed November 19 in the U.S. District Court for the District of Columbia charging Washington Gas Energy Systems with one count of knowingly and willfully conspiring to commit major fraud on the United States.

According to the DOJ, Washington Gas Energy Systems, "waived the requirement of being charged by way of federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees."

In addition, as part of a deferred prosecution agreement reached with the U.S. Attorney's Office for the District of Columbia and the Antitrust Division, Washington Gas Energy Systems agreed to pay a fine of $1,560,000 and a monetary penalty of $1,027,261 within five days of the approval of the agreement by the court.

The DOJ alleged that Washington Gas Energy Systems, "conspired with a company that was eligible to receive federal government contracts set aside for small, disadvantaged businesses with the understanding that the business would illegally subcontract all of the work on the projects to WGESystems."

"In this way, WGESystems was able to capture a total of eight contracts worth $17,711,405 that should have gone to an eligible company. These contracts, awarded in 2010, were focused on making federal buildings in the Washington, D.C., area more energy efficient," the DOJ alleged.

"Under the illegal agreement, the company that was awarded these government contracts was allowed to keep 5.8 percent of the value of the contracts for allowing WGESystems to use the company's small business status to win these contracts," the DOJ alleged.

"This Washington Gas subsidiary obtained millions of dollars in federal contracts by using a small business that had no ability to actually complete the contract as a front company," alleged Principal Assistant U.S. Attorney Cohen.

The DOJ alleged that, "WGESystems, along with an 8(a) company it used to obtain these contracts, and others, engaged in and executed a scheme to defraud the SBA and GSA by, among other things: concealing that WGESystems, which was not eligible for the aforementioned SBA contracting preferences, exercised impermissible control over the 8(a) company's bidding for and performance on GSA contracts; and misrepresenting that the 8(a) company was in compliance with SBA regulations pertaining to work on these contracts, including that the company's employees had performed the required percentage of work on these contracts. Through these unlawful efforts, WGESystems and the 8(a) company with which it conspired obtained, at least, approximately $17,711,405 in U.S. government contracts related to work at eight different federal buildings. When these contracts were awarded, the 8(a) company's registered place of business was the president of the company's home, and the company had no employees who could provide design-build or contracting services."

"Under the agreement with WGESystems, the 8(a) company was entitled to 5.8 percent of the $17,711,405 total value of the contracts, which equals $1,027,261. To date, with all but one of the eight contracts completed or suspended, WGESystems has lost approximately $1,122,581 on the projects. WGESystems initially anticipated a profit margin that would have equaled about $1,560,000," the DOJ alleged.

Since being informed of this investigation by the Justice Department, Washington Gas Energy Systems has taken steps to enhance and optimize its internal controls, policies and procedures, the DOJ said.

In light of the company's remedial actions to date and its willingness to acknowledge responsibility for its actions, the U.S. Attorney's Office for the District of Columbia and the Antitrust Division will recommend the dismissal of the Information in two years, provided Washington Gas Energy Systems fully cooperates with, and abides by, the terms of the deferred prosecution agreement.

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