March 1, 2023
Sherwin-Williams Company To Pay $1 Million To Resolve Alleged False Claims Act Violations Arising From Pennsylvania Bridge Painting Project
On March 1, 2023, the U.S. Attorney's Office for the Eastern District of Pennsylvania entered into a civil settlement agreement with The Sherwin-Williams Company. Sherwin-Williams agreed to pay $1 million to resolve allegations that it violated the False Claims Act when it participated in a scheme to defraud the Federal Disadvantaged Business Enterprise (DBE) program in connection with a federally funded bridge painting contract. The agreement also requires Sherwin-Williams to implement and maintain a compliance program to monitor internal controls to ensure compliance with all applicable Federal laws and regulations regarding the DBE Program until 2025.
In 2011, the Pennsylvania Department of Transportation (PENNDOT) awarded Hercules-Vimas Joint Venture, LLC a federally funded $42.7 million contract to paint the George C. Platt Memorial Bridge in Philadelphia. The contract required a percentage of the work be performed by a DBE. To meet this requirement, Hercules-Vimas subcontracted with Vertech International, Inc., a minority-owned company certified as a DBE in Pennsylvania, to supply materials. The Government contends that instead, Hercules-Vimas worked directly with Sherwin-Williams, a non-DBE, to deliver paint and materials to the project site, and that Vertech created false invoices to conceal the fraud in exchange for a nominal fee.
According to the Government, Sherwin-Williams was knowingly complicit with the fraud scheme and is therefore liable as a third-party supplier. The Government contends that Sherwin-Williams maintained, stored, and delivered the ordered supplies directly to Hercules-Vimas's job site. The company then submitted invoices for payment to Vertech with knowledge and intent that Vertech would create invoices on Vertech's letterhead, add a mark-up to represent its profit, and submit those invoices to Hercules-Vimas for payment. In 2016, the owner of Vertech pleaded guilty to criminal charges associated with this fraud scheme. In 2020, the Government reached a civil settlement with Hercules-Vimas of $310,000 for alleged False Claims Act violations.
The settled civil claims were allegations only. There has been no determination of civil liability.
DOT-OIG conducted this investigation with the Department of Labor-OIG and the FBI. The Federal Highway Administration provided substantial assistance.