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RICO suit: MGM casino construction shut out minority businesses

A lawsuit filed in U.S. District Court on Monday claims MGM National Harbor failed to award contracts for a significant portion of the construction of a $1.2 billion casino to minority businesses, despite receiving federal housing and community development funds earmarked for that purpose.

The plaintiffs — which include the federal government, along with the Maryland Business Clergy Partnership and several minority businesses — claim that in filings with the U.S. Department of Housing and Urban Development, Prince George’s County Department of Housing and Community Development Director Eric Brown falsely stated that the casino project was complying with requirements to receive HUD funding.

As part of HUD’s Section 3 program, recipients of certain federal funds must provide job training, employment and contract opportunities for low-income residents. In reality, the lawsuit alleges, MGM and the county were receiving the federal funds without fulfilling their end of the bargain.

“Defendants have made unlawful financial certifications as minority business enterprises to encourage continued local and State government support for the Casino Project, and unlawfully failed to comply with HUD Section 3 regarding minority business contracting opportunities and hiring area low- to moderate income individuals for employment at the Casino project or during the construction process,” the suit states.

The suit, which was filed in Greenbelt, was available online Tuesday morning but the entire file was sealed later in the day.

Brown was in meetings Tuesday and could not comment on the lawsuit, a spokeswoman for the Prince George’s County Department of Housing and Community Development said.

The lawsuit further alleges that the primary contractor on the casino project, Whiting-Turner Construction, and its concrete subcontractor, Schuster Construction, hired a company called Bulldog Construction as one of many “sham bidder-entities” claiming to qualify as minority contractors on the project.

Bulldog Construction falsely claimed disadvantaged business status and later conspired with Schuster Corporation to defraud the minority business community, according to the suit, which accuses all three construction companies of violating the Racketeer Influenced and Corrupt Organizations, or RICO, act.

“Over the past months Plaintiffs [have] repeatedly complained and made both the County and MGM/Whiting Turner officials aware of the persistent mistreatment and disregard for minority contracts,” the complaint reads. “Both the County and MGM have simply ignored Plaintiffs pleas and left Plaintiffs to simply boil in their own frustration.”

Gordon Absher, vice president of corporate communications for MGM Resorts International, called the allegations “absolutely baseless” and said the company will vigorously defend the lawsuit.

On Tuesday, MGM also released information from the construction project’s first quarterly report. The report was submitted to a committee set up to oversee the company’s effort to meet local and minority participation goals laid out in a community benefits agreement MGM and the county signed last year, which stipulated that 30 percent of the construction work on the casino would go to minority businesses and local residents.

“Of the more than $64.5 million spent on construction in 2014, more than $20 million — 31 percent — was spent on minority-owned businesses against an overall project goal of 30 percent,” said Lorenzo Creighton, President and COO for MGM National Harbor, in a statement.

“Having met and exceeded that goal in 2014 means good-paying jobs for our community, and it reflects early momentum and meaningful progress toward our commitment to Prince George’s County, and the region.”

But Charles McNeill, co-chair of the Maryland Business Clergy Partnership, which describes itself as a bipartisan organization with a mission to bridge the gap between businesses, churches, and elected officials, said the lawsuit stemmed from community members’ belief that they were shut out of the project. The organization had raised concerns about MGM’s accountability a year ago when the community benefits agreement was up for debate.

“What they gave us and what they promised us are two different things. The jobs that were promised to the community and the residents of the community haven’t been delivered, especially as it pertains to contracting,” McNeill said in an interview. “We don’t feel that any black contractors have been given any substantial contacts from the job.”

The plaintiffs are seeking $182 million in compensatory damages and $1 million in punitive damages on their claim that the county fraudulently received HUD claims; $360 million in compensatory damages and $1 million in punitive damages on their claim that minority businesses lost out on 30 percent of the construction work; and $300,000 in compensatory damages and $100,000 in punitive damages on a count of negligence.

Construction on the casino project began last summer on a schedule that will allow it to open in 2016, according to the MGM National Harbor website.

The case is United States, ex rel. v. Eric Brown et al., 8:15-cv-01125-TDC.


About Lauren Kirkwood

Lauren Kirkwood covers the business of law beat at The Daily Record.