Bloomberg News

Ex-Louis Berger Group President Charged With False Claims

October 20, 2011

(Updates with attorney’s comments in seventh paragraph.)

Oct. 20 (Bloomberg) -- The former president and chief executive officer of Louis Berger Group Inc., a New Jersey engineering consulting firm, was charged with overbilling the U.S. government on overseas reconstruction projects.

Derish Wolff, 76, was accused of conspiring to defraud the U.S. Agency for International Development by inflating overhead and other indirect costs over almost two decades on hundreds of millions of dollars in contracts in Iraq and Afghanistan. He surrendered today to the Federal Bureau of Investigation in Newark, New Jersey.

“During decades at the helm of a company entrusted with the rebuilding of battle-scarred nations Derish Wolff focused on profits over progress,” U.S. Attorney Paul Fishman said in a statement. “Wolff allegedly used his position to lead others in the scheme, setting targets that could be reached only through fraud.”

The indictment follows an agreement by the company on Nov. 5 to pay $69.3 million to resolve criminal and civil probes related to overbilling for reconstruction contracts in Iraq and Afghanistan and other work. Two former executives also pleaded guilty that day in federal court in Newark.

Wolff was charged with conspiring with Salvatore Pepe, the former chief financial officer, and Precy Pellettieri, the former controller, who admitted to conspiring to defraud USAID. The Wolff indictment, unsealed today, doesn’t specify a specific amount of loss by the government.

Miami Resident

Wolff, a resident of Miami and Bernardsville, New Jersey, appeared in federal court in Newark, where he was released on $1 million bail. He faces as long as 10 years in prison on the conspiracy charge and five years on each of five counts of filing false claims.

“Mr. Wolff intends to plead not guilty because he is not guilty, and he looks forward to establishing it in court,” his attorney, Herbert Stern, said in a phone interview.

The company, based in Morristown, New Jersey, admitted to filing claims for more than $10 million in inflated overhead rates to USAID. The company agreed to pay an $18.7 million criminal penalty and $50.6 million to resolve civil claims, including allegations it violated the False Claims Act. The U.S. examined billings over a 17-year period.

From at least 1990 through 2009, Wolff intentionally overbilled USAID and ordered subordinates to achieve an overhead target rate “through a variety of fraudulent means,” according to the Fishman statement.

‘Below Wolff’s Target’

At a Louis Berger annual meeting in September 2001, Pepe presented an overhead rate that was “significantly below Wolff’s target,” Fishman said. In response, “Wolff denounced Pepe, called him an ‘assassin’ of the overhead rate,” and told him to target a rate of $1.40 in overhead expenses for every $1 of labor devoted to the USAID contract, according to the Fishman statement.

Wolff was the president and CEO of Louis Berger Group from 1982 until 2002 and chairman of Berger Group Holdings Inc., which owns Louis Berger Group, from 2002 until August 2010, according to the indictment.

“The individuals associated with the government’s allegations are no longer with the company,” Louis Berger Group said in a statement. “The company has enacted substantial remediation to its accounting internal controls, made significant changes in personnel, and upgraded the company’s administrative and accounting expertise while under U.S. government oversight.”

The case is U.S. v. Wolff, U.S. District Court, District of New Jersey (Newark).

--Editors: Fred Strasser, Peter Blumberg

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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