A construction contract company decided to do just that… and was caught.

When contracted for work with the Postal Service, the company that is hired for the project is allowed to subcontract the work. When doing so, a subcontractor can only mark the cost up by 10 percent. However, this contract construction company went a little further. A USPS OIG criminal investigator uncovered overinflated labor and materials, and determined the construction company was not billing according to the contract terms.

Image

The company had a multi-year contract to repair Postal Service facilities, both directly and as a supplier to a larger maintenance contract. Through the investigation, USPS OIG special agents discovered the company subcontracted a majority of the jobs for the facility repairs. Receipts for labor, materials, procurement, and service fee charges for those jobs showed the subcontractor’s fees were marked up more than the allowed 10 percent — more like 15 to 300 percent! This proved the construction company hired to complete repairs was methodically defrauding the Postal Service. The OIG recommended terminating the contract with the construction company, which the Postal Service ultimately did, and will not be using this company in the future.

How It All Went Down

In spring 2016, Postal Service employees in facilities alerted the OIG to potential fraud involving the construction company. Through an extensive investigation in which the agent visited approximately 50 USPS facilities in four states, evidence was uncovered indicating a multi-year fraud scheme to defraud the Postal Service.

In December 2018, agents conducted multiple-search warrants across Frederick, Maryland, and collected business records and computers, which contained additional evidence of the complex scheme.

In December 2019, the construction owner was indicted on 31 counts in federal court — including wire fraud and conspiracy. The trial took four weeks and resulted in a hung jury. Following the trial, the owner pled guilty to one count of conspiracy to commit wire fraud in December 2021 and received a year and a half in prison followed by a year of home detention, and three years of supervised release. The owner was also ordered to pay $941,629 in restitution and a $100,000 fine. Read more about the sentencing here.

Projected Savings

Through our agent’s diligent work and the Postal Service’s prompt action to prohibit any future work with this particular construction company, USPS potentially saved more than $4.28 million.

To report suspected fraud by a postal contractor or employee, please report it to our Hotline.

For further reading:

Department of Justice (via uspsoig.gov), Businessman Sentenced for Conspiracy to Commit Wire Fraud in Connection with Overcharging USPS