$12M whistleblower settlement for McHugh Construction

A $12 million whistleblower settlement with James McHugh Construction Company has been reached after an investigation into allegations it used women-owned businesses to fraudulently secure multimillion public projects.

The settlement was announced by Illinois Attorney General Lisa Madigan and U.S. Attorney Zachary T. Fardon announced Their work on Chicago area roads, highways and public transit included Wacker Drive and the CTA's Red and Brown lines.

A joint investigation by Madigan's office and the U.S. Attorney's Office for the Northern District of Illinois found McHugh Construction falsely represented its subcontracting companies, both of which were certified disadvantaged business enterprises (DBE), as fulfilling legal requirements that a portion of the work on these projects be completed by women- or minority-owned businesses.

"Our investigation revealed that McHugh Construction falsely used subcontractors to help secure bids for major construction projects funded by and for Illinois taxpayers," Attorney General Lisa Madigan said. "The company used women-owned businesses to submit false claims to the state and federal governments for millions of dollars when, in fact, those businesses never completed the level of work required by law."

"It was more costly in the long run for McHugh to avoid its obligations to hire women- and minority-owned businesses than it would have been simply to comply with the requirements and retain disadvantaged businesses to actually participate in these public construction projects," added U.S. Attorney Zachary T. Fardon.

Both the state of Illinois and the U.S. Department of Transportation both have DBE requirements which intend to increase participation in public contracts by small businesses owned and controlled by minorities and women.

Patricia McHugh, chairman of James McHugh Construction Company, released a statement in response to the settlement announcement.

"We are pleased we were able to reach a successful resolution with the government and put this matter behind us," the statement read in part. "We now look forward to moving ahead with the dozens of public and private sector projects we are engaged in, while also continuing our longstanding commitment to improving opportunities for disadvantaged businesses in Chicago." Mayor Rahm Emanuel also announced that McHugh Construction voluntarily donated $2 million to the City of Chicago support minority- and women-owned businesses and DBE programs. As part of the settlement, the City insisted on, and achieved, a compliance agreement which requires McHugh Construction to reform its DBE program and to hire and retain, at its own expense, an independent monitor to evaluate the company's future DBE compliance.