December 15, 2019

Fraud Case Against Bus Maker Shows Risks of Pay Promises in City Contracts

Either way, New Flyer submitted false information about employee benefits in its quarterly statements, according to the complaint.

California’s False Claims Act, under which the complaint was brought, bars fraudulent claims for payment from the state and local governments. Stephen M. Kohn, a lawyer who represents whistle-blowers and has brought numerous false-claims cases, said that failure to live up to wage commitments would be a potential violation, as would submitting false reports showing compliance.

If Jobs to Move America prevails, New Flyer could face significant penalties, including up to $11,000 for each false claim, and possible damages tied to underpayment of workers or harm to the government agency.

New Flyer is not the only company whose compliance with a contract Ms. Janis’s group has questioned.

In an earlier case in Los Angeles, Jobs to Move America alerted city and state authorities that another bus manufacturer, the Chinese company BYD, had hired fewer workers than it promised and had paid workers less than the required wage for employees of companies receiving city contracts or subsidies.

BYD said at the time that it intended to hire more workers and that it believed it was exempt from the so-called living-wage rule. The dispute was effectively resolved after BYD reached an agreement with a group of nonprofits and unions, which led to better pay for workers.

Ms. Janis said the New Flyer case and others like it showed that public agencies could not simply write provisions into contracts and expect companies to honor them.

“They make deals with public agencies and promise whatever, and think they don’t have to follow through,” she said.

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