A Richland company has agreed to pay $2 million to resolve allegations of improper subcontracting at the Hanford nuclear reservation.
Federal Engineers & Constructors, or FE&C, admitted no liability in the settlement agreement.
The company was accused of using a woman-owned company, Sage Tec, as a front company to earn money for work set aside for certain small businesses, including businesses owned by women.
Former Hanford contractor Washington Closure Hanford was required by the Department of Energy to award a percentage of its work to companies that the Small Business Administration determined were disadvantaged, which includes women-owned firms
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A lawsuit was filed by Savage Logistics — a small, woman-owned business doing Hanford work — in 2010 alleging, among other complaints, that two subcontracts worth millions of dollars were improperly awarded to Sage Tec.
Savage Logistics alleged that Washington Closure Hanford, FE&C and Sage Tec misrepresented a subcontracting arrangement to allow Washington Closure to falsely claim credit for awarding subcontracts to Sage Tec as a small, woman-owned business.
In December 2013, the Justice Department joined Savage Logistics in filing a civil lawsuit.
“The false statements in this case were intended to deceive the government into believing that a woman-owned small, disadvantaged business was performing valuable work as a government subcontractor,” said Hannibal “Mike” Ware,” the Small Business Administration acting inspector general.
$4.5 millionsubcontract to Sage Tec in 2010 for chromium cleanup
$15 million subcontract to Sage Tec in 2012 for 300 Area cleanup
Sage Tec had been awarded a $4.5 million subcontract in November 2010 to clean up chromium contamination near Hanford’s C Reactor.
However, Sage Tec had no relevant experience, no equipment and no employees other than its owner, according to the legal complaint. All it had to offer was its name and status as a woman-owned small company, federal prosecutors said.
The company had been formed by Laura Shikashio, the wife of an FE&C vice president, the lawsuit claimed.
FE&C employees, who stayed on that company’s payroll, performed most of the work, prosecutors said in 2013.
Two years later, Washington Closure awarded Sage Tec a $15 million subcontract for cleanup of contaminated structures, soil and pipelines in the 300 Area just north of Richland, but Sage Tec still had only one employee and no equipment, according to the Department of Justice complaint.
Dick French, an owner of FE&C, has previously said that teaming arrangements are common and encouraged on projects at Hanford. He disagreed with prosecutors, saying the companies FE&C has teamed with have done an appropriate share of the work.
The federal case against Washington Closure, Sage Tec and Sage Tec’s owner continues to be prosecuted, said the U.S. Attorney’s Office.
Savage Logistics and its owner, Salina Savage, will receive about $470,000 of the $2 million settlement, under a federal law that allows whistleblowers to claim a portion of the money recovered by the federal government.
In a separate agreement, FE&C will pay Savage and her company $100,000 for attorney fees and costs.
The federal case against Washington Closure, Sage Tec and Shikashio continues to be prosecuted, said the U.S. Attorney’s Office. The defendants deny liability.
Washington Closure was responsible for environmental cleanup of Hanford along the Columbia River, and its DOE contractor expired a year ago with most of the work completed.
In August, U.S. Judge Salvador Mendoza Jr. denied a Washington Closure motion to dismiss most of the remaining damages sought by the Department of Justice in the case. Trial is set for Feb. 12 in Richland.