For years, I have been blogging and speaking about the very real and very serious civil and potential criminal consequences of a failure to comply with the Davis Bacon Act. Every once in a while, a case comes along that drives those points home. One such case – involving criminal convictions for wire fraud and conspiracy to commit wire fraud in connection with what appears to be a blatant failure to comply with Davis Bacon Act requirements – is the recent decision in United States v. Estepa, No. 19-12272 (11th Cir. May 25, 2021).
Javier Estepa owned, and his brother Diego Estepa-Vasquez operated, Aaron Construction. Aaron Construction’s business included bidding on and winning contracts with the Miami-Dade County Public Housing and Community Development Office (“County”) to perform repair work in vacant public housing units. The repair work was partially funded by the federal government. As a result, both the Requests for Price Quotes (“RPQ”) and invitations to bid issued by the County contained express Davis Bacon Act requirements.
Aaron Construction won three RPQs from the County starting in 2014. In the winning bids, Aaron Construction expressly “acknowledged the Act’s wage requirements and represented that Aaron Construction did not expect to use subcontractors.” In reality, there were more than fifty subcontractor agreements in which Aaron Construction paid subcontractors a flat rate regardless of the actual hours expended. Aaron Construction prepared certified payrolls for some of the subcontractors, claiming the subcontractors worked as Aaron Construction employees and making up the number of hours each “employee” allegedly worked. Some of the certified payrolls substituted names of “employees” to cover up the fact that the workers who actually performed work did not have authorization to work in the United States.
The Estepas were convicted in the United States District Court for the Southern District of Florida on federal charges of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349 and wire fraud, and violation of 18 U.S.C. § 1343 in connection with their demonstrated failures to comply with the Davis Bacon Act. Their original sentences—before being modified to home confinement due to the COVID-19 pandemic—each included nearly four years in federal prison followed by three years of supervised release.
As the Eleventh Circuit noted, when affirming the criminal convictions of the Estepas:
[T]he record evidence demonstrates that the Estepas’ misrepresentations were not isolated mistakes based on their misunderstanding of the paperwork associated with the RPQs. Rather, the Estepas engaged in a pervasive pattern of deceit before, during, and after bidding on the three RPQs enumerated in the indictment. While the Estepas reported to the County that Aaron Construction did not intend to use subcontractors and would comply with the Act and accurately report workers’ wages and hours, the Estepas in fact personally negotiated with various subcontractors to work on the RPQs at issue, asking them for personal information such as driver’s licenses and social security numbers and agreeing to pay them flat rates for the projects contrary to Davis-Bacon wage requirements. The Estepas’ deceit continued with each falsely certified payroll document and the final payment packets from Aaron Construction that they submitted to the County. Although none of the subcontractors who testified in this case reported their hours to the Estepas for the projects they worked, the Estepas, in Aaron Construction’s certified payroll documents, represented that the subcontractors were employees of Aaron Construction and falsely recorded their hours worked and hourly wage.
Slip Op. at 28-29.
As this case demonstrates, people can and will be criminally prosecuted by the federal government for Davis Bacon Act violations. One usually sees federal False Claims Act charges when the federal government is the one purchasing construction services. In this case, because there were federal funds involved and a state/local government was the actual contracting party, the U.S. Attorney instead charged the contractor with wire fraud and conspiracy to commit wire fraud. Either way, as this case demonstrates, contractors can face federal prison for egregious Davis Bacon Act violations. This is a very important lesson to keep in mind in the event the Biden Administration passes an infrastructure bill and billions in federal funds – the receipt of which trigger Davis Bacon Act requirements – are made available to fund a variety of federal, state, and local construction projects. Contractors should take Davis Bacon Act requirements seriously or else be prepared to face the consequences.