Two former managers for a major privatized housing company have pleaded guilty to fraud charges in connection with a conspiracy to cover up poor maintenance work at military families’ homes — to make sure the company received millions of dollars in performance incentive fees, according to the Justice Department.
These are the first two cases in a scheme that involves 14 total co-conspirators, according to a Justice Department spokesman. One of those unnamed co-conspirators listed in court documents is described as a regional vice president.
While Balfour Beatty Communities was getting millions of dollars in rewards for its maintenance performance, the company wasn’t actually performing the necessary maintenance in some communities, allowing parts of the communities to fall into disrepair and leaving service members in substandard housing, according to court documents filed by the government. The court documents don’t name Balfour Beatty, but names five communities operated by the company.
The actions of the managers between 2013 and 2016 deceived the Air Force into believing that the company was properly maintaining the housing communities, according to court documents.
Rick Cunefare, 61 of Glendale, Arizona, a former regional manager for Balfour Beatty, pleaded guilty to major fraud against the United States in connection with incidents that happened between 2013 and 2015, according to documents filed with the June 9 plea agreement in U.S. District Court for the District of Columbia. He directly supervised community managers at Lackland Air Force Base, Travis Air Force Base, Vandenberg Air Force Base, Tinker Air Force Base, and Fairchild Air Force Base.
Cunefare is scheduled to be sentenced at a later date, facing a maximum penalty of 10 years in prison and a $250,000 fine. Neither Cunefare nor his attorney could be reached for comment.
Stacy M. Cabrera, 47, of Converse, Texas, the community manager at Lackland AFB from about 2013 to 2016, pleaded guilty April 21 to conspiracy to commit wire fraud.
Cabrera is scheduled to be sentenced at a later date, facing a maximum penalty of five years in prison and a $250,000 fine. Neither Cabrera nor her attorney could be reached for comment.
As a former Balfour Beatty regional manager, Cunefare directly supervised the housing community managers who were responsible for the day-day-day operations at those five installations. He was responsible for reviewing and approving quarterly maintenance reports prepared by community managers, and ensuring that the numbers were submitted to the Air Force with the request for performance bonuses — which were based on those reports. From 2013 to 2015, Balfour Beatty received about $2.5 million in performance incentive fees for meeting maintenance objectives at the military housing communities overseen by Cunefare, according to court documents.
Balfour Beatty operates 21 Air Force housing projects and another 34 on Army and Navy installations.
‘We do not know how high up this conspiracy may go’
In Cunefare’s case, there were 10 unnamed co-conspirators, and one was described in a court document as a regional vice president. “Cunefare admits that he participated in the scheme described herein with the full knowledge, consent, and encouragement of his superiors” at the company, the document states.
In a joint statement, Sens. Jack Reed, D-R.I., and Jim Inhofe, R-Okla., chairman and ranking member of the Senate Armed Services Committee, respectively, said they “will be keeping a close eye on the results of this case, which remains ongoing as we do not know how high up this conspiracy may go.
“Should any other charges pan out, we expect all criminals involved to be held accountable to the fullest extent of the law. With the help of the Department of Justice, the Department of Defense and military services must work to ensure this never happens again,” the senators said.
“Military housing companies must take every step to regain the trust of our military families.”
Balfour Beatty: A number of personnel actions, including some people being fired
In a statement provided to Military Times related to the two cases, Balfour Beatty Communities officials said “the company is continuing to work with the Department of Justice to resolve the matter.”
They confirmed that the company has taken a number of personnel actions, including terminating some people, based on investigations they have conducted.
“When concerns about the matter were raised, the company engaged external counsel to investigate, and proactively contacted the Department of Justice,” officials stated. The company appointed PricewaterhouseCoopers to do an extensive review of their work order records; and based on those findings, officials have undertaken a “root cause analysis and an in-depth review of its operations, resulting in changes to its management structure, and implementation of enhancements to its work order procedures designed to ensure the historical conduct that is the subject of the investigation does not happen again.”
Company officials said they are “dismayed that the actions of certain individuals reflect poorly on the efforts of the hundreds of dedicated employees.”
The Air Force Office of Special Investigations and the Defense Criminal Investigative Service are continuing to investigate.
“The defendants defrauded the U.S. Air Force and put corporate profits ahead of the well-being of servicemembers and their families,” said Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division, in the Justice announcement. “The department is committed to protecting our military families from deceit and mistreatment and ensuring the integrity of Department of Defense programs.”
According to court documents, when the company didn’t meet maintenance performance objectives in order to get their incentive fees from the Air Force, Cunefare gave written and oral instructions to community managers and others that resulted in employees manipulating and falsifying maintenance information to indicate the company had met its objectives.
Cabrera was the senior manager at the Lackland housing, and about 20 employees reported to her. She reported directly to two regional managers in Phoenix.
In court documents, she admitted to conspiring with six people to “manipulate and falsify information” in the computer program used to manage maintenance issues so that the reports would falsely show that the company had met performance maintenance objectives. There is overlap of some of the people involved in the Cabrera case and in the Cunefare case, a Justice spokesman said.
In quarters when the company didn’t meet the maintenance performance objectives, according to a court document, “Cabrera received written and oral instructions from her supervisors … to manipulate and falsify information … so that the quarterly maintenance report would falsely reflect that [the company] had met the objectives.”
She directed her subordinates to manipulate information — such as adjusting completion times for work orders, closing work orders early, or marking work orders “complete” prior to maintenance work being performed. Sometimes she personally manipulated and falsified information to create false quarterly maintenance reports that were submitted to the Air Force, according to the court document. The company fraudulently obtained about $1 million in performance bonuses as a result of Cabrera’s conduct, the government stated.
In one email to a number of subordinates on March 4, 2016, cited in the court document, Cabrera wrote: “PLEASE provide real answers to the legitimately open [work orders] and then close the ones that need to be closed – TODAY! I don’t care what it takes. Then moving forward, DO NOT let it get this way again… it’s not only my ass on the line because of these [work orders], but my boss AND her boss!! Understand where this is going?!”
As a result of pressure from her superior, “Cabrera continued to participate in the conspiracy by knowingly and intentionally directing her subordinates to manipulate and falsify information,” the document stated.
Because the company “wasn’t performing necessary maintenance at Lackland as a result of Cabrera’s and her co-conspirators’ actions, substantial parts of the housing community fell into disrepair, leaving servicemembers living in substandard conditions,” according to court documents.
Following Reuters and other media reports and congressional hearings in 2019 that brought attention to mold and other widespread problems with military housing, laws were enacted in late 2019 and late 2020 to address the problems and force defense and service officials to provide better oversight of privatized housing landlords, and to be more responsive to families frustrated by lack of action.
DoD and the services have taken a number of actions, such as increasing the number of personnel at housing offices to provide better oversight, and to act as liaisons with families and landlords.
In 2019, the Air Force issued a stern warning to Balfour Beatty that unless there is “prompt and substantial improvement” in the company’s performance, service officials would start formal action against the company.
In addition to asbestos problems discovered at Tinker Air Force Base, officials cited “a growing list of serious construction, maintenance, repair, management and oversight performance failures” across the company’s Air Force housing projects.