Recently the 7th Circuit Court of Appeals upheld nine convictions against a subcontractor who had provided work on a state and federally funded highway project after it failed to comply with the Davis-Beach Act, (the “Act”). Clark Trucking and Excavation (“Clark”) was charged with knowingly making materially false statements on matters “within the jurisdiction of the federal government,” and was held liable under 18 U.S.C. § 1001. The Act provides “every contract in excess of $2,000” that involves the federal government “shall contain a provision stating the minimum wages to be paid various classes of laborers and mechanics.” The minimum wage referred to in this context is also known as the “prevailing wage,” which is a minimum hourly rate each classification of worker must be paid by a contractor or subcontractor while performing public works projects.
Clark’s contract with the general contractor was supposed to include an addendum that specified its drivers were being paid the federal prevailing wage at the time ($35.45), however that attachment was missing. In addition, Clark was actually paying its drivers only $15 an hour, which was reflected in 9 weekly payroll certifications sent to the general contractor. At the end of the project, despite only paying his drivers $15/hour, owner, William Patrick Clark, sent an affidavit to the Missouri Department of Transportation (MDOT) to certify his compliance with the state’s prevailing-wage requirement (which as previously noted was $35.45). At trial and on appeal, Clark conceded his statements in the affidavit were false but argued that the federal government failed to prove they were materially false, as required by statute.
Pursuant to 18 U.S.C. § 1001, it is a criminal offense to render a statement that: (1) is false; (2) is material; (3) is knowingly and willfully made; and (4) concerns a matter within the jurisdiction of a federal department or agency. For a statement to be materially false, it must have a “natural tendency to influence, or be capable of influencing the decision of the decision-making body to which it was addressed.” United States v. Gaudin, 515 U.S. 506 (1995). The statement need not actually influence the agency, rather, the standard is simply whether the misrepresentation or concealment was predictably capable of affecting the official decision. United States v. Turner, 551 F.3d 657 (7th Cir.2008).
Clark argued the affidavit submitted to MDOT was merely the company attesting to its compliance with state prevailing wage determinations, and therefore involved no substantive information that could actually affect the federal government’s decision-making. The 7th Circuit agreed and reversed Clark’s conviction on Count 10. However, the remaining 9 counts pertained to each payroll certification that was sent to the general contractor. Clark argued that although the contract may have referenced payment of a ‘prevailing wage,’ that rate was not actually in the contract or otherwise specified, as required for the Davis-Bacon Act to apply. Therefore, Clark argued, the Department of Labor had no interest in Clark’s statements concerning the drivers’ wages since he was not contractually obligated to pay the federally-mandated wage.
The 7th Circuit rejected Clark’s arguments, finding there was no case law supporting the proposition that the federal prevailing wage must be printed in a subcontractor’s contract for Davis-Bacon to apply. The 7th Circuit ruled that the false statements on the payroll certifications, unlike the affidavit, had a natural tendency to influence the federal government in some way. They also reasoned that the contract stipulated Clark was subject to the Davis-Bacon Act “regardless of any contractual relationship between the contractor or its subcontractors and such laborers and mechanics.” Moreover, in each payroll certification Clark expressly attested to paying his drivers $35/hour and warned Clark “a willful falsification of any of the above statements may subject the contractor or subcontractor to civil or criminal prosecution. See section 1001 of Title 18…of the United States Code.” Accordingly, Clark was criminally liable for knowingly providing false wage information required under the Davis-Bacon Act. This ruling highlights the necessity of carefully scrutinizing applicable state and federal law when handling construction contracts. Rock Fusco & Connelly, LLC can provide the contract review and guidance necessary to ensure compliance with these and other state and federal laws.