Simple Errors Can Cost Chicago Businesses Dearly

A well-regarded engineering firm that is banned from taking on state contracts for the next three years amid allegations of overcharging is suing the state for what it says amounts to "economic strangulation," according to a recent Chicago Tribune report.

Actions by the state are puzzling to many Chicago business lawyers, who realize that the root of the dispute stems from an apparent accounting error, according to company representatives.

The controversy has pitted government officials against the company - which is not a good place for any business to be. In this case, a three-year hiatus is likely to mean the certain demise of a company that has a 50-year history of completing big-ticket engineering projects for the state.

The whole story underscores the importance of having not only aggressive legal representation in these matters when they arise, but also having attorneys on retainer to help avoid the kind of problems that can lead to costly litigation.

Chicago business lawyers will regularly review your accounting procedures and finances to ensure that there are no discrepancies that could draw the ire of either the client or the Internal Revenue Service. And if a dispute does arise, you have someone on hand who can work as a go-between to settle it as efficiently and effectively as possible.

This is just as important for smaller firms as it is for larger corporations, and it's especially important when working with government entities. When dealing with government contracts, there are special considerations that have to be made because there will be local, state and federal guidelines that must be met. And there's also the understanding that all billing and financing relating to the government contract will be open for public consumption and dissection.

In this case, the company, McDonough Associates, is accused of over-charging nearly $2 million to the state of Illinois between 2000 and 2009 with regard to various projects. However company associates have said the issue was an honest mistake in accounting, which is particularly believable considering that it's earned more than $5 billion from more than 2,000 government contracts. The $2 million amount may seem like a lot, but in the greater context, it would not have been worth the risk of losing those important contracts.

Despite the fact that McDonough has acknowledged the mistakes, state officials have said the overcharging amounts to theft. An investigation by the Illinois Department of Transportation first began to notice problems last summer with certain errors with regard to the charging of overhead costs. Of the five allegations that were lodged against the company, IDOT ultimately ended up finding the company guilty of only one. The agency found the company violated applicable accounting standards that resulted in the significant overcharging of projects that were funded by taxpayers. IDOT officials initially recommended a six-month suspension. But then the agency's chief procurement officer determined that the four unfounded allegations were still a concern. It was he who imposed the three-year penalty.

Given the severe consequences this could have for the company, some are calling for the state to ease restrictions. However there are still a number of other government entities, including Cook County, that are looking to impose their own bans on the company.

Jeremy A. Gibson & Associates is a law firm dedicated to business litigation in Chicago and elsewhere in Illinois. Call 877-452-4529 for a free consultation.