Chicago-based construction company James McHugh Construction settled a suit with Illinois and federal prosecutors and will be forced to pay $12 million to the government in a whistleblower lawsuit. The announcement was made on May 1, and under the agreement, McHugh has admitted to no wrongdoing and will not be barred from being awarded future government contracts.

The suit stems from project manager Ryan Keiser, whose firm partnered with the construction giant, which is a known construction heavyweight in the industry. Keiser said he was coerced into participating into a subcontracting scam,  according to the Chicago Tribune,  spending his days falsifying purchase orders, labor hours and other paperwork to show that his company, which was owned by a woman, was doing jobs that were actually being handled by McHugh.

Keiser was fired after four months, after he questioned whether women or minority subcontractors were doing the work as required by law.

“Instead of working with a team to build a bridge, I was forced to produce documents that were misleading,” Keiser, 42, said of his job at Perdel Contracting Corp. He said that when he raised the issue with his boss, Elizabeth Perino, he was abruptly fired.

Enter the whistleblower phase for Keiser.  Keiser’s allegations subsequently led to a joint investigation by federal prosecutors and Illinois Attorney General Lisa Madigan. According to the Tribune, the probe involved about $150 million in McHugh contracts on some of the biggest recent public works projects in the Chicago area, including the reconstruction of Kennedy Expressway ramps in 2005, the massive 2006 revamp of the CTA Brown Line, the reconstruction of the North Avenue bridge in 2006 and the 2010 Wacker Drive viaduct reconstruction.

Under Illinois State laws, Keiser can collect 17 percent of the $12 million lawsuit – roughly $2 million.

During a press conference, Keiser’s attorney, Mike Kanovitz, blamed the city’s lack of oversight and a “bad whistleblower culture” for fostering an environment that is ripe for fraud.

 “They don’t want the system to change,” Kanovitz said. “But this is a first step. It takes guts to stand up and say, ‘Hey, wait a minute, everyone can see what’s going on here.’”

McHugh chairwoman Patricia McHugh said in a statement Thursday that she was “pleased we were able to reach a successful resolution with the government and put this matter behind us.”

In a letter to employees posted on its website, McHugh said it “recognizes the seriousness of the allegations” but disputed “any suggestion that we intentionally disregarded the requirements of (disadvantaged business) programs.”

According to, McHugh fired two employees, and the government has prosecuted a third.

Meanwhile, a criminal complaint is still pending against Perino, alleging that she helped a company owned by a man get the other work with the city by putting its employees on her payroll, and using its equipment, according to Chicago Business. In 2012, the other of that company pleaded guilty to one count of mail fraud. He subsequently received two years’ probation and was ordered to pay $25,000 fine and $175,000. 

Further reading:

SCOTUS extends Sarbanes-Oxley’s whistleblower protection to employees at private companies