A Massachusetts-based transportation consulting  company has been charged by the U.S. Department of Justice  with making a false statement in connection with its certification for favored contracting status.

Transit Safety Management, Inc. (TSM) was charged with one count of making a false statement to a state agency in order to maintain its status as a Disadvantaged Business Enterprise (DBE).

In order to qualify as a DBE, a company’s management must be controlled by a socially or economically disadvantaged individual such as a woman or minority.  The purpose of the program is to give an economic advantage to minorities and women who run their own companies.  However, the manager of the DBE cannot also engage in employment that would prevent her from devoting sufficient attention to the affairs of the DBE.  In this case investigators discovered that TSM’s purported owner was a full-time employee of a federal agency and the business was really operated by her husband making it ineligible for certification as a DBE.

TSM provided consulting services to the railroad industry, focusing on safety and operations management.  Shortly after it was founded in 1999, TSM’s owner certified the company as a DBE.   As such, TSM was able to take advantage of federal regulations aimed at promoting the participation of minority and disadvantaged businesses in federally-funded public construction contracts.  Under the DBE regulations, a contractor on federally-assisted transportation projects must either subcontract a percentage of its work to a DBE or show that it made a good faith effort to subcontract work to a DBE but was unable to do so.  This requirement makes the DBE status a valuable and potentially lucrative designation.

In order to maintain its DBE certification, TSM had to make yearly affirmations that it was still eligible and that nothing had changed that would affect its eligibility for the favored DBE status.  Despite this, TSM lied about whether it met the criteria for DBE status.  According to court documents, TSM’s owner was hired as a full-time employee with a federal agency in 2005.  As a full-time federal employee, TSM’s purported manager could not control TSM under the regulations.  Nevertheless, TSM failed to disclose this change and continued to make its yearly affirmations to maintain is DBE status.

As part of its plea agreement, TSM has agreed to pay a fine of $84,000 and dissolve its operations.

United States Attorney Carmen M. Ortiz; Todd Damiani, Special Agent in Charge of the U.S. Department of Transportation, Office of Inspector General, Office of Investigations; and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement of the plea agreement.  The case is being prosecuted by Assistant U.S. Attorney Eugenia M. Carris of Ortiz’s Public Corruption Unit.

The details contained in the Information are allegations.  The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Source: http://www.justice.gov/usao-ma/pr/massachusetts-company-charged-connection-disadvantaged-business-enterprise-fraud