DEPARTMENT OF THE ARMY SAVANNAH CORPS OF ENGINEERS 190 W. OGLETHORPE AVENUE SAVANNAN. GEORGIA 31401-45849 REPLYTO a ammo? on ct?sA3~oc 2 September 2014 MEMORANDUM FOR HQDA, PROCUREMENT FRAUD (JALS-PF), 9275 Gunston Road, Suite 2100, Fort Belvoir, VA 22060 SUBJECT: Referral for Fact~based Debarment: Caddell Construction (30., inc. and its protege, Mountain Chief Management Services, Contract Nos. DACA21-01-C-0022 and with the Savannah District US. Army Corps of Engineers 1. Pursuant to Section 94062 of the Federal Acquisition Regulation (FAR), the Savannah District USACE asserts that it is in the Government?s interest to debar Caddell Construction Co. Inc. (Caddell), Mountain Chief Management Services (Mountain Chief), and their respective principals listed below based upon the submission of numerous false statements and/or false claims to obtain payment under the Mentor-Protege program and lndian incentive Program. 2. The following information. required by 209406-360, is provided: a._lProourement raud Adviser, Savannah District USAGE, 100 W. Oglethorpe Ave, Savannah, Georgia 31402, (912 b. Caddeli Construction Co., inc. and Mountain Chief Management Services 2700 Lagoon Park Drive 4156 Hwy 89 Montgomery, AL 3610941 10 Babb, MT 5941 1 DUNS 102087285 DUNS 024793213 c. Mark L. Hill and Daniel W. Chattin Mentor-Protege Program Coord. Project Manager/Consultant Caddell Mountain Chief d. No known affiliates other than the parties identified. e. Not applicable f. Not available 3. The following information, required by is provided: a. Combat Aviation Building Complex, Contract No. Fort Bragg, NC, awarded to Caddell, Total contract amount: $65,681,468.45. CESAS-OC SUBJECT: Referral for Fact-based Debarment: Caddell Construction Co., Inc. and Mountain Chief Management Services b. Separate Battalions Barracks Complex Contract No. Fort Bragg, NC, awarded to Caddell, Total contract amount: $66,022,281.00. c. DISCOM Barracks Phase 3 Contract No. Fort Campbell, KY, Total contract amount: approximately $34,000,000. 4. The following facts are pertinent to this referral for debarment: a. The Defense Department administered certain programs designed to provide incentives for major Defense Department contractors to engage small disadvantaged businesses and minority-owned businesses as subcontractors and suppliers under Defense Department contracts and other contracts and subcontracts in order to increase the participation of those small business concerns as subcontractors and suppliers under Defense Department contracts, other federal government contracts, and commercial contracts. Two such programs were the Mentor?Prot?g? Program and the Indian Incentive Program. b. The Mentor-Protege Program provided incentives for major Defense Department contractors (mentor firms) to contract with and help develop disadvantaged small business concerns (?prot?g? firms?). Under the Mentor-Protege Program, the Defense Department reimbursed the mentor firm for costs the mentor ?rm incurred providing developmental assistance to its prot?g? firm. In addition to the requests sent to the Defense Department by the mentor ?rm for reimbursement of those costs, the mentor ?rm was required to report semiannually on the progress made under the mentor? prot?g? agreement, and among other things, described the developmental assistance it had provided to the protege ?rm, the number of employees working for the prot?g? ?rm, and the prot?g? firm?s gross revenue. c. The Indian Incentive Program was designed to provide incentives to prime government contractors to use Indian-owned businesses as subcontractors, to maximize the opportunity for such businesses to participate in performing contracts awarded by federal agencies. Under the Indian Incentive Program, the Defense Department paid prime contractors ?ve percent of the amount those prime contractors paid to an Indian-owned subcontractor performing a subcontract on a Defense Department contract. d. In or about February 2003, Caddell entered into a mentor-protege agreement (?the agreement?) with Mt. Chief. The agreement outlined specific areas of developmental assistance that Caddell would provide to Mt. Chief in connection with two contracts which Caddell had been awarded by the United States Army Corps of Engineers Savannah District (USACE) for construction projects at Fort Bragg, North Carolina (?the Fort Bragg contracts?). Each of the Fort Bragg contracts had a value of more than $65 million. Caddell submitted the agreement to the USACE, and the CESAS-OC SUBJECT: Referral for Fact?based Debarment: Caddell Construction Co., Inc. and Mountain Chief Management Services USACE approved Caddell?s participation in the Mentor-Protege Program. Mr. Mark L. Hill (Hill) was the coordinator of the Mentor?Prot?g? Program for Caddell. e. Pursuant to the agreement, from in or about February 2004 through in or about March 2005, Caddell submitted in excess of 20 requests to the USACE seeking payments under the Fort Bragg contracts. As Hill and one other executive with Caddell knew, those requests claimed, among other things, that Caddell had incurred costs that were eligible for reimbursement under the Mentor-Protege Program, that is, costs for providing developmental assistance to Mt. Chief. Specifically, the requests included individual and summary timesheets for certain employees of Caddell purporting to show the hours those employees spent providing a variety of types of developmental assistance to Mt. Chief. The payment requests significantly overstated the amount of developmental assistance that Caddell had provided to Mt. Chief. f. From in or about February 2004 through in or about March 2005, Caddell also submitted documents reporting on Mt. Chief?s development as a prot?g? company (?the Semi-Annual Reports?) to the Defense Department. Hill and at least one other Caddell executive knew that Mt. Chief was a small company with few employees. Nevertheless, the Semi-Annual Reports falsely claimed that Mt. Chief had over 40 employees and over $18,000,000 in annual gross revenues, despite the fact that, as Mr. Hill and at least one other Caddell executive knew, Mt. Chief did not have over 40 employees and over $18,000,000 in annual gross revenues. In addition, the Semi-Annual Reports falsely claimed that Mt. Chief had realized or was in the process of achieving certain technical capabilities and business infrastructure. In fact, Mt. Chief neither achieved nor was in the process of achieving the capabilities or infrastructure identi?ed in the Semi-Annual Reports. 9. In or about January 2010, an of?cial from the Defense Department?s Army Office of Small Business Programs contacted Caddell with questions about the information Caddell reported to the Defense Department pursuant to the Mentor-Protege Program. Hill returned the call and answered the questions about the relationship between Caddell and Mt. Chief and certain representations that appeared in the Semi-Annual Reports. During the call, indicated that to the best of his knowledge, Mt. Chief had received the full amount of training in the technology areas listed in the Semi-Annual Reports. As Hill knew, however, Mt. Chief had not received the full amount of training represented in the Semi-Annual Reports. h. From'in or about April 2003 through in or about October 2004, Caddell submitted at least eight requests to the USACE for Indian Incentive Program payments in connection with the two Ft. Bragg contracts, as well as with a third USACE contract awarded to Caddell at Fort Campbell, Kentucky, which had a value of approximately $34 million. i. In these payment requests and in other oral representations, as Mr. Hill and at least one other Caddell executive knew, Caddell represented to USACE that Mt. Chief CESAS-OC SUBJECT: Referral for Fact-based Debarment: Caddell Construction Co., Inc. and Mountain Chief Management Services had performed on its subcontracts, and provided the USACE with evidence of that performance in the form of invoices from Mt. Chief ?for services rendered? over a specified time period. As Hill and at least one other Caddell executive knew, however, Mt. Chief performed few, if any ?services? for Caddell, and the invoices were created solely to support Caddell?s applications for payment under the Indian Incentive Program. j. Caddell obtained approximately $1.2 million from the United States under the Mentor-Protege and Indian Incentive Programs. k. DCIS and GSA-OIG thoroughly investigated this matter through DCIS Case Number 200900551 P-1 and GSA-OIG Case Number l?09-60379, identi?ed actual damages sustained by the United States, and jointly refer this matter for debarment. A copy of the most recent DCIS Report is attached as Tab A. A copy of the most recent GSA-OIG Report is attached as Tab B. I. On or about 15 February 2012, Contractor Integrity Solutions, LLC, a company hired by Caddell to conduct an independent review of Caddell?s government contracts compliance and ethics program, concluded its review and presented its findings to the Caddell?s Chairman of the Board. The findings are attached as Tab C. m. On or about 20 December 2012, the United States Department of Justice Criminal Division entered into a Non-Prosecution Agreement with Caddell in which Caddell admitted to the facts set forth in the Statement of Facts and agreed to pay a monetary penalty of $2 million. A copy of the Non-Prosecution Agreement and Statement of Facts are attached at Tab D. n. On or about 25 March 2013, the United States Department of Justice Civil Division entered into a Settlement Agreement with Caddell to settle certain civil claims against Caddell for submitting false claims for payment under the Department of Defense?s Mentor-Protege Program and Indian Incentive Program on three federal contracts. Through paragraph 3(c) of the settlement agreement, the United States expressly reserved the rights of any federal agency to pursue suspension and debarment. A copy of the Settlement Agreement is attached as Tab E. o. On January 19, 2012, Hill and Chattin were charged by a federal grand jury as part of a four count indictment in the United States District Court, Middle District of Alabama, Northern Division. Hill, was indicted on three counts of major fraud against the government in violation of 18 U.S.C. 1031 and one count of false statements in violation of 18 U.S.C. 1001. Chattin, was charged with three counts of major fraud against the government in violation of 18 U.S.C. 1031. p. On January 24, 2012, Chattin was arrested following the issuance of an arrest warrant, United States District Court, Middle District of Alabama. CESAS-OC SUBJECT: Referral for Fact-based Debannent: Caddell Construction Co.. inc. and. Mountain Chief Management Services q. On January 25, 2012, Hill voluntarily surrendered in the Middle District of Alabama following the issuance of an arrest warrant, United States District Court, Middle District of Alabama. r. On July 30, 2013, after a jury trial in US. Court, Middle District of Alabama, Northern Division, Hill was found guilty on one count of false statements in violation of 18 U.S.C. 1001. A Judgment of Acquittal was granted for Chattln. 5. Pursuant to Section of the Federal Acquisition Regulation (FAR), the debarring of?cial may debar contractor, based upon a preponderance of the evidence, for any of the following?? Violation of the terms of a Government contract or subcontract so serious as to justify debarment, such sew-(A) Willful failure to perform in accordance with the terms of one or more contracts; (vi) Knowing failure by a principal, until 3 years after ?nal payment on any Government contract awarded to the contractor, to timely disclose to the Government, in connection with the award, performance, or closeout of the contract or a subcontract thereunder, credible evidence of (B) Violation of the False Claims Act (31 U.S.C. 3729-3733). 6. Pursuant to Section of the Federal Acquisition Regulation (FAR), the debarring of?cial may debar contractor or subcontractor based on any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor. 8. Pursuant to FAR 9.4064, it is the debarring of?cials responsibility to determine whether debarrnent is in the Government?s interest. The debarring of?cial should consider factors such as the following: a. Whether the contractor had effective standards of conduct and internal control systems in place at the time of the activity which constitutes cause for debarment or had adopted such procedures prior to any Government investigation of the activity cited as a cause for debarment. b. Whether the contractor brought the activity cited as a cause for debarment to the attention of the appropriate Government agency in a timely manner. Ur CESAS-OC SUBJECT: Referral for Factsbased Debarrnent: Caddell Construction Co, inc. and Mountain Chief Management Services 0. Whether the contractor has fully investigated the circumstances surrounding the cause for debarment and, if so, made the result of the investigation avaiiable to the debarring of?cial. d. Whether the contractor cooperated fully with Government agencies during the investigation and any court or administrative action. e. Whether the contractor has paid or has agreed to pay all criminal, civil, and administrative liability for the improper activity, including any investigative or administrative costs incurred by the Government, and has made or agreed to make full restitution. f. Whether the contractor has taken approoriate disciplinary action against the individuals responsible for the activity which constitutes cause for debarment. 9, Whether the contractor has implemented or agreed to implement remedial measures, including any identified by the Government. h. Whether the contractor has instituted or agreed to institute new or revised review and control procedures and ethics training programs. i. Whether the contractor has had adequate time to eliminate the circumstances within the contractor?s organization that led to the cause for debarment. j. Whether the contractor?s management recognizes and understands the seriousness of the misconduct giving rise to the cause for debarment and has implemented programs to prevent recurrence. CESAS-OC SUBJECT: Referrai for Fact-based Debarment: Caddeli Construction Co., Inc. and Mountain Chief Management Services SUBJECT: Referral for Fact-based Debarment: Caddelt Construction Co., Inc. and Mountain Chief Management Services 11. Potnt of contact for this memorandum i Savannah Procurement Fraud Advisor, at 912~ 5 Encis 1. DCIS Report, 10 Jui 14 Procurement Fraud Advisor 2. GSA-03G Report Savannah District 3. Contractor Integrity Sot?n, 15 Feb 12 4. Non-Prosecution Agreement, 20 Dec 12 5. Agreement, 25 Mar 13 CF: enciosuret Special Agent: DCIS Kansas City Post of Buty 500 State Avenue, Suite 565 Kansas City, KS 66101