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Parking Company Pays Massachusetts $5.6 Million to Settle False Claims Act Case

JWgqu6dY_400x400-300x300LAZ Parking (“LAZ”), hired by the Massachusetts Bay Transportation Authority (“MBTA”) to operate and manage parking lots in Greater Boston, will pay $5.6 million to settle allegations that it failed to detect and deter theft of millions of dollars of cash revenue belonging to the MBTA. LAZ owns or operates hundreds of thousands of parking slots in more than 2,500 locations.

According to the settlement agreement announced by Massachusetts Attorney General Maura Healey, LAZ Parking has agreed to pay $1.1 million to the Commonwealth to resolve allegations that its failure to implement contractually-required controls and auditing tools at thirteen state-owned MBTA parking lots resulted significant revenue losses in violation of the Massachusetts False Claims Act and Consumer Protection Act.

LAZ has also agreed to pay the MBTA an additional $4.5 million to settle a May 2017 lawsuit filed by the MBTA claiming LAZ breached its contract.

Jeffrey N. Karp, the president of LAZ, issued a statement placing the blame on three former employees. “After review by third party auditors, and on mutual agreement with the MBTA, LAZ acknowledges the alleged theft by three dishonest employees at a limited number of these parking lots,” Karp said. “Once the loss was discovered, we acted swiftly to identify and immediately terminate those allegedly responsible.”

However, Healey’s office believes the scheme went beyond a few bad apples. “LAZ employees skimmed millions of dollars in cash from MBTA parking facilities, robbing the public of funds we need to invest in transportation,” said Attorney General Healey. “Through this settlement, we’re recovering millions of dollars for the state and forcing the company to change its bidding practices.” The Attorney General’s Office alleges that LAZ submitted false daily revenue reports and monthly audits and falsely certified monthly invoices to the MBTA due to its failure to properly track or audit revenue collection and usage at the thirteen attended lots.

Unreported revenue is often hard to detect for the government, and schemes can be spread amongst many operational structures. Often, “rooting-out” fraud is difficult because accounting techniques corporations use to mask fraud are dense, complex, and often inaccessible to run-of-the-mill employees. But, more often than not, those on the “inside” are best posed to put a stop to waste and abuse of government programs. Or, in this case, the underreporting of receipt of taxpayer funds.

As for future preventative measures, the settlement with the State Attorney General’s Office requires LAZ to conduct pre-bid analyses of the feasibility and cost of compliance with key bid requirements, including revenue and auditing requirements, and to affirmatively correct any statements made in connection with a public bid or contract which it learns are untrue.

The fraud described in the LAZ case is fairly cut-and-dry – simple theft and the submission of false billing reports. However, the successful prosecution of many False Claims Act cases rely on regulations and agency decisions heavily. An accurate and up-to-date interpretation of these regulations is often pivotal in making-out a case against corporate fraudsters.

In the late 1990s, founding Greene LLP Partner Tom Greene was one of the first attorneys to successfully litigate a multi-hundred million-dollar False Claims Act suit using an innovative theory of recovery, “off-label promotion.” In 2016, the U.S. Supreme Court ruled that a new Greene LLP theory of recovery under the FCA, “implied certification,” is a viable way to allege fraud against defendants. Plaintiffs suing corporations have benefitted greatly from Greene LLP’s novel theories of liability.

In evaluating one’s potential claims of False Claims Act fraud, consulting an experienced whistleblower attorney or an attorney who specializes in the False Claims Act will help evaluate and guide a potential whistleblower’s claim.

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