Wednesday, February 14, 2007

$36.6 million embezzlement scheme lasted nearly 12 years before it was detected in early 2005


Auditors: PBS&J overcharged

PBS&J, where three former employees are accused of embezzlement, has overcharged clients, investigators said.

Feb. 14, 2007

Patrick Danner and Dan Christensen
The Miami Herald
Copyright 2007

Engineering firm PBS&J overcharged government clients for several years, auditors investigating embezzlement at the company have found.

PBS&J has attributed some of the millions in overbilling to three former employees who tried to cover up a $36.6 million embezzlement. But in filings with the Securities and Exchange Commission, the firm also admitted to its own overbilling, although it won't say by how much. One big client, the Florida Department of Transportation, estimated that more than half of the approximately $11 million it was overcharged had nothing to do with the embezzlement.

The discovery is part of the fallout from the investigation of a $36.6 million embezzlement scheme that lasted about a dozen years before it was detected in early 2005. The probe was conducted by a team of lawyers and forensic accountants hired by PBS&J, formerly headquartered in Miami but now in Tampa.

PBS&J will say only that refunds for overbilling, whether related to the embezzlement or otherwise, came to $37.1 million through the end of its 2005 fiscal year. The company said it was unaware it was overcharging government clients for years but notified them as soon as it learned of the overbilling.

''If we unknowingly overbilled our clients, we have sought to make restitution for all of our clients from day one,'' the company said in an e-mailed statement.

PBS&J said the three ex-employees -- who are set to be sentenced Friday -- overstated its overhead rates, which it uses to determine billings on contracts with clients. Overhead includes costs like management salaries, office rent and employee insurance and benefits.

However, former accounting manager Maria M. Garcia, who has pleaded guilty for her part in the embezzlement, said she and her co-defendants mostly used other methods to conceal their thefts. For example, checks from the healthcare-benefit account of PBS&J, a self-insured company, were deposited in a bank account in the name of a bogus PBS&J political action committee. The unauthorized checks were whited out in bank statements.

Attorneys for Garcia said in a court filing that PBS&J is using the embezzlement to hide its own overbilling. They object to PBS&J's attempt to force Garcia to pay $20 million in investigation costs, even though the company acknowledged in the recent SEC filing that its poor accounting controls contributed to overstated overhead rates on government contracts.

''Because of the hornet's nest of corporate criminality which exploded when Maria opened Pandora's Box, there is really no way of knowing whether the paybacks and settlement of claims by PBSJ were due to their frauds and corruption of the political process or the defendants,'' Garcia's attorneys wrote.

Separately, Garcia also has accused PBS&J of illegally reimbursing employees for campaign contributions. Authorities are investigating, but PBS&J has said it doesn't expect to be criminally charged.

Mark Schnapp, an attorney representing PBS&J, said in an e-mailed response: "We have not yet seen the document [filed by Garcia's attorneys]. However, we think it is high time that Maria accepts responsibility for her conduct.''

PBS&J was founded in Miami in 1960. The parent company is known as PBSJ Corp., and about 300 of its 3,900 employees are based in South Florida.

The FDOT has settled with the company. The overhead rates PBS&J set for FDOT were overstated for more than 10 years, the settlement agreement reveals. Two PBS&J divisions also charged double for ''general and administrative costs'' for at least five years.

Department auditors estimated about 60 percent, or $6.5 million, of the $11 million the agency was overcharged was not related to the embezzlement. PBS&J in November agreed to refund about $12.5 million, which includes about $1.4 million in interest.

But the refund amount likely will go up. PBS&J last week informed the department of overbillings of $411,458 for the current year. In addition, PBS&J found it needed to make $641,000 in adjustments in the agency's favor on other contracts for which the company has not yet been paid. Those figures are preliminary, however.

The transportation department examined figures provided by PBS&J's forensic accountants rather than looking at the company's books itself. Joseph K. Maleszewski, audit director for the inspector general's office at FDOT, said the $12.5 million settlement it negotiated with PBS&J was ''our best estimate of the damage done to the department.'' PBS&J had originally proposed paying about $7.9 million, according to the inspector general's office.

Two other government clients have settled with PBS&J.

The Justice Department accepted nearly $6.5 million on behalf of more than a dozen federal agencies that were ''submitted false and fraudulent claims'' by PBS&J, a Jan. 24 news release stated. A Justice Department spokesman wouldn't comment. The settlement indicates PBS&J failed to exclude unallowable costs from at least 1999.

In settling with the Florida Transportation Department, PBS&J's president vowed in a letter to implement ''a more robust ethics and compliance program.'' President Todd J. Kenner also promised PBS&J would have an independent auditor certify its overhead audit for 2007 and 2008.

© 2007 The Miami Herald:

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