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British construction company Balfour Beatty will pay $65m (£49m) in fines after pleading guilty to fraud committed against the US military.
The company’s US arm was one of the biggest providers of privatised military housing to the US army, navy and air forces at 55 bases across the states of Georgia, Oklahoma and Texas, but it lied about repairs in order to increase bonus payments, the US Department of Justice said on Thursday.
The company, a member of the FTSE 250 index of mid-sized companies, had to meet various maintenance and resident satisfaction targets to qualify for the bonuses. But employees deliberately altered data in its property management software and falsified resident comment cards to reach the required levels.
The payout includes a $34m penalty plus nearly $32m in restitution, and the company will also be supervised for three years by an independent compliance monitor.
It is not the first time that Balfour Beatty has been censured for defence-related work. In the UK in 2019 MI6 sacked the company as a contractor during refurbishment work after it lost sensitive plans of the layout of its headquarters in London’s Vauxhall, which are famously featured in several James Bond spy films.
The deputy head of the FBI, which was also involved in the recent fraud inquiry, said it was a “disgraceful” crime.
Two former Balfour Beatty managers, Stacy Cabrera and Rick Cunefare, have already pleaded guilty to fraud charges related to the case this year.
The fines are more than Balfour Beatty’s entire profit before tax for 2020 of £48m, although they are only a small proportion of revenues of £8.6bn during that year.
The company, valued at £1.6bn, is struggling with other problems in its main UK building business, which counts Hinkley Point nuclear power station and the HS2 and Crossrail rail developments among its major projects. The chief executive, Leo Quinn, who was paid £2.1m in salary and bonuses in 2020, warned in August that the company would not take on any new property construction projects in central London after it was forced to prop up failing subcontractors.
The US deputy attorney general, Lisa Monaco, said: “Instead of promptly repairing housing for US service members as required, Balfour Beatty lied about the repairs to pocket millions of dollars in performance bonuses.
“This pervasive fraud was a consequence of Balfour Beatty’s broken corporate culture, which valued profit over the welfare of service members.”
The fraud meant that crucial maintenance was delayed, harming military personnel and their families, the Department of Justice said.
Balfour Beatty said it had appointed a chief compliance officer for the US after carrying out a review when the fraud was first discovered, as well as adding further ethics and compliance training for all employees.
“The wrongdoing that took place is completely contrary to the way the company expects its people to behave,” Balfour Beatty said in a statement to the stock market on Thursday.
“The company apologises for the actions of communities to all its stakeholders. It has been made clear to all employees that breaches of policies, procedures, or law will not be tolerated.”