$1 Million Settlement with Payne & Dolan, Inc.
A landmark qui tam settlement involving false quality assurance data on federally-funded Michigan Department of Transportation highway projects demonstrates how the False Claims Act protects taxpayer interests in government contracting.
Case Overview
David L. Harrison announced that the United States had entered into a $1 million settlement with Payne & Dolan, Inc., a road construction firm headquartered in Waukesha, Wisconsin, which conducts business operations in Wisconsin and Michigan.
The case, US ex rel Todd Gervae and Michael Inman v Payne & Dolan, Inc., a Wisconsin Corporation(Case No. 2:03CV0153) (W.D. Mi.), was filed in 2001 under the qui tam provisions of the False Claims Act, Title 31, United States Code, Section 3730 (b)-(h), on behalf of Todd Gervae and Michael Inman, two Upper Peninsula Michigan residents and former employees of the defendant.
Understanding the False Claims Act
The False Claims Act, passed by Congress in 1863 to combat fraud during the Civil War, provides powerful incentives to private citizens who discover fraud against the federal government and bring their information forward to pursue defrauding contractors.
A qui tam lawsuit is an action brought by a private party seeking to represent the interests of a governmental entity under the federal statute that establishes damages and civil penalties for violations of law. If the action is successful, the statute provides for payment of a portion of the recovery to the party—known as the relator—who initiated the action.
The Fraud Allegations
The settlement resolves allegations (which the defendant denies) that Payne & Dolan submitted false quality assurance and quality control data in connection with two federally-funded Michigan Department of Transportation (MDOT) projects in the Upper Peninsula:
- Maas Street Project: Asphalt paving project in the City of Negaunee, Michigan
- US-41 Project: Highway construction near Baraga, Michigan (US-41 north of M-38 to the Houghton County line)
The allegations involved Payne & Dolan's construction activities, testing procedures, reporting practices, and other activities related to these federally-funded highway projects. This type of government contract fraud represents a significant category of False Claims Act violations.
Settlement Terms
The comprehensive settlement included multiple components totaling approximately $1 million in value:
Federal Payment
Payne & Dolan paid $440,000 to the United States (Federal Highway Administration—FHWA) representing damages with respect to the Maas Street project.
State Remediation
Payne & Dolan entered into an agreement with the State of Michigan (MDOT) to furnish materials and services, at no cost, in connection with repairs to 8.6 miles of US-41. The estimated value of these repairs ranges from $500,000 to over $600,000.
Compliance Requirements
Payne & Dolan established a Code of Ethical Conduct and Corporate Compliance program which it must maintain along with an ongoing audit program to prevent future violations.
Whistleblower Reward
The two former employees who initiated the qui tam suit were awarded a $140,000 share of the recovery plus attorneys' fees. This represents approximately 32% of the federal monetary settlement, within the typical 15-30% reward range provided by the False Claims Act for cases where the government intervenes.
This case demonstrates how employees with direct knowledge of fraud can receive substantial financial rewards for coming forward, while also receiving protection from employer retaliation.
Government Litigation Team
Western District of Michigan United States Attorney Margaret M. Chiara and Assistant United States Attorneys Joan Meyer, Jennifer McManus, and James Santelle litigated the case on behalf of the United States. The government's decision to intervene in this case was crucial to achieving the substantial settlement.
Key Takeaways for Potential Whistleblowers
Construction Fraud Cases Are Viable
False quality assurance data and testing fraud on government-funded construction projects can result in substantial False Claims Act recoveries.
Former Employees Have Standing
Former employees with direct knowledge of fraud can file qui tam cases and receive rewards even after leaving the company.
Settlements Can Include Non-Monetary Terms
Beyond cash payments, settlements may require defendants to provide remediation services and establish compliance programs.
Cases Take Time
This case was filed in 2001 and took several years to resolve. Understanding the typical timeline helps set realistic expectations.
Do You Have Knowledge of Similar Fraud?
If you have information about false claims, false quality data, or other fraud against the government, you may be entitled to a significant reward. Contact our network for a confidential consultation.