Derish Wolff, the former chief executive of Louis Berger Group, pleaded guilty Dec. 12 to inflating overhead rates for work on cost-reimbursable U.S. Agency for International Development contracts and now faces a possible prison sentence and heavy fines.
His sentencing is scheduled for March, 2015.
The plea agreement in federal court in Trenton represents a bitter conclusion to a career in which Wolff, now 79, led one of the country's most prominent engineering consultants and contractors, excelling at work overseas in difficult environments. A member of the Berger family through marriage, Wolff's worldly and outspoken style made him an engaging figure. He appeared on the cover of ENR on July 28, 2003.
Wolff and Louis Berger Group parted ways in 2010, when his former company settled potential charges against it.
At that time, former Berger chief financial officer Salvatore Pepe and former controller Precy Pelletieri, admitted to participating in a scheme in which they reclassified work hours of accounting employees in the company's New Jersey headquarters from 2003 to 2007 as hours worked by employees who worked on federal projects.
In federal court, according to a statement released by U.S. Attorney Paul Fishman, Wolff admitted to ordering Pepe to target an overhead rate for USAID work of 140%.
"In addition to padding employee's work hours with fake hours supposedly devoted to USAID work," Fishman's statement said, "Wolff instructed his subordinates to charge all commonly shared overhead expenses, such as rent" at Berger's Washington, D.C., office, "unrelated to USAID or other federal government agencies."
The window in which prosecutors claim Berger Group overbilled federal agencies was described in a press release as a "nearly 20-year period" but the focus of the prosecution was on 2003 to 2006. According to an official information released by Fishman's office, Wolff directed staff at Louis Berger Group to reclassify hours raising the overhead recovery rate "despite the objections" or without the knowledge of the employees that performed the work.
Millions in Revenue
The scheme, according to federal prosecutors, added tens of millions of dollars to Berger Group's reimbursable expenses, including work performed on contracts in Afghanistan and Iraq.
A former financial employee of Berger Group tipped federal prosecutors to the practices and in theory is entitled to a significant portion of the settlement with Louis Berger Group.
At the time of Pepe and Pellettieri's plea, Louis Berger Group resolved potential criminal and civil fraud charges related to Wolff's actions by entering a deferred prosecution agreement under which it paid almost $70 million in penalties and restitution and revamped its internal controls and initiated and an ethics training program. The company completed its deferred prosecution agreement in 2012 and has, in its own words, undertaken "massive reforms" to meet its obligations to USAID and the Dept. of Justice.
"We have made extraordinary efforts to reform the company and close the chapter on the pre-2010 era," the company said in a statement.
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