- The Washington Times - Thursday, December 4, 2014

The Department of Veterans Affairs pushed ahead on a construction project even after learning that its project manager was under FBI investigation and had been fired from a previous job for embezzlement — a decision that’s now entangled the agency in a multimillion-dollar lawsuit.

VA officials eventually issued a stop work last year, and the project manager, Robert Berryhill, is now serving a prison sentence for impersonating an FBI engineer and embezzlement stemming from a previous job on an FBI construction project in Tennessee. Meanwhile, the $75 million Butler Healthcare center, located about 30 miles north of Pittsburgh, is mired in delays and the contract scandal that has attracted the attention of Congress and resulted in scathing reviews by the VA Office of Inspector General.

The VA's construction office has been under scrutiny for years, but the saga surrounding Butler stands out as a case study in bungled procurement.

On Tuesday, a company that financed part of the project charged in U.S. Federal Claims Court that VA officials had been warned about Berryhill’s background, including a notification from an FBI agent.

“The government had complete knowledge of the investigation of Mr. Berryhill,” attorneys for AmeriServ Trust & Financial Services Company wrote in court papers.

Records filed in the case also show the FBI put the VA on notice that it was investigating the Butler project too.

Still, weeks after VA officials helped the FBI gather documents on the project, the agency balked at replacing the contractor.

That decision was made despite federal procurement laws that require government contracting officers to certify that their contractors are “presently responsible.”

In correspondence revealed in the court case, the VA's construction contracting office downplayed the investigation, saying an FBI probe alone and embezzlement accusations weren’t enough to warrant overturning the award to developer Westar LLC.

“Regarding the claim of non-responsibility, Mr. Berryhill has not been convicted of any crime or civil infraction or indicted as part of any FBI investigation,” the office stated in a reply to a losing bidder.

The VA also said it had “broad discretion” in deciding whether contractors were to be deemed responsible. The ruling was dated July 25, 2012. But records show the FBI had already notified the VA at that point about Berryhill’s troubles.

A spokeswoman for the VA declined to comment on the Federal Claims Court action, citing a policy against discussing matters pending in court. Trust attorneys also declined to comment.

Earlier this year the VA’s inspector general issued a report that found VA officials also failed to conduct due diligence on Westar, the winning bidder to develop the Butler project.

The IG also said investigators received word that Westar was essentially a front for companies controlled by Michael Forlani, who was suspended from VA contracting in December 2011, according to a report on the project from the Pittsburgh Tribune-Review, which has chronicled the setbacks on the Butler project.

Forlani was sentenced to more than 8 years in federal prison last year in a racketeering case.

Forlani was involved in the Butler project from the beginning but still controlled Westar from behind the scenes, according to IG findings.

Sam Calabrese, listed as president of Westar on VA documents, declined to comment in an email this week.

The scandal has exposed weaknesses in the VA’s vetting of contractors. Nobody from the VA checked the company’s claims about its past work, which were contained in project proposal documents. And a simple check of the government’s online, free and public procurement database would have shown “negative results for Westar,” according to the IG.

The time line of what the VA knew and when figures prominently into the trust’s claim against the agency. The trust is arguing that it relied on representations by the VA before making the $7.5 million loan on the project.

The trust is also seeking another roughly $400,000 in interest, fees and expenses on top of the $7.5 million.

It’s not the first time the VA’s contracting decisions have come under scrutiny in the wake of a criminal probe. Last month, The Washington Times reported that the FBI had warned the VA about a security flaw that allowed a Maryland woman and her associates to create bogus companies that won VA contracts and then ripped off subcontractors.

That case raised questions about why past performance checks hadn’t flagged the existence of multiple dummy corporations that were used in the scheme, which ultimately cost the agency more than $2 million.

In a separate troubled project, the House Committee on Veterans’ Affairs held a hearing on delays and cost overruns involving construction of a clinic in Savannah, Georgia, as a case study for the agency’s procurement woes.

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