SAN ANTONIO, Texas (Reuters) - A U.K. company that provides housing to U.S. military families came under official investigation earlier this year, after Reuters disclosed it had faked maintenance records to pocket performance bonuses at an Oklahoma Air Force base.
At the time, Balfour Beatty Communities said it strove to correctly report its maintenance work. It blamed any problems on a sole former employee at the Oklahoma base.
Now, Reuters has found that Balfour Beatty employees systematically doctored records in a similar scheme at a Texas base.
In June, Reuters, working in partnership with CBS News, documented how Balfour Beatty Communities kept two sets of records at Oklahoma's Tinker Air Force Base. The accurate records, not shared with the military but seen in part by Reuters, showed tardiness in making repairs at homes plagued by asbestos, leaks and mold. The other set – filed with the Air Force – was altered to show near-perfect performance in making repairs, helping the company earn millions in fees for a job well done.
Balfour Beatty has been pursuing a similar practice at the Lackland Air Force Base in San Antonio, Texas. With bosses pressing them to meet repair goals, two former Balfour Beatty employees said they were involved in forging records to make it appear their employer completed maintenance work on time at the Texas base, even as work lagged or was never finished.
Stacy Nelson, Balfour's Lackland manager from 2013 to 2016, said she felt pressure to manipulate records to make it appear the company consistently hit maintenance goals. She said she went along with the effort because, diagnosed with multiple sclerosis, she needed to keep her job and benefits.
"You either make these numbers match so we can get the incentive fees, or you may not have a job tomorrow," Nelson said, characterizing the pressure she felt she was under. "We fudged the numbers, and even now it's not easy to say that. I hate to admit it."
Another former worker, Teresa Anderson, who created maintenance records, said she doctored the completion dates and times. Balfour Beatty fired both employees, though for reasons unrelated to falsifying records.
Internal company emails and maintenance reports confirm their accounts of being pressured to hit goals. In one case in 2015, reports showed the company completed 69% of repairs on time. After a Balfour Beatty manager called for higher scores, the pair changed the rate to above 95%, records show, triggering the bonus.
Lackland and Tinker aren't the only bases where Balfour Beatty faces accusations of falsifying its maintenance reports. In Montana, a former manager said her staff regularly doctored records at Malmstrom Air Force Base.
In all, five former Balfour Beatty employees, working at three different bases, have told Reuters they filed false maintenance reports to help the company pocket millions in bonuses.
In a statement, Balfour Beatty said it is working to improve the quality of service at all its bases. "We know we have to continue to demonstrate progress in order to rebuild confidence in our service, and we are determined to do so," the statement said.
The company did not directly respond to specific questions about the falsification of maintenance and work-order records documented by Reuters in Texas and elsewhere.
Since the initial Reuters-CBS report from Oklahoma, Balfour Beatty says it has started an investigation into the fraud allegations, led by its outside counsel Hunton Andrews Kurth LLP. It has also sought an independent audit of the incentive fees approved by the Air Force. Auditor PricewaterhouseCoopers and law firm Hunton Andrews declined comment.
The Federal Bureau of Investigation and the Air Force Office of Special Investigations are pursuing fraud investigations at Tinker and two other Air Force bases where the company serves as landlord, said John Henderson, the Air Force assistant secretary for installations. They are Travis in California and Fairchild in Washington state. OSI is investigating additional allegations at Mountain Home in Idaho.
Henderson said he is "concerned" about the latest Reuters findings at Lackland and has referred the matter to the Office of Special Investigations.
The Army is also investigating "allegations" against Balfour Beatty, said Lieutenant Colonel Crystal Boring. In August, Boring said the service's Inspector General was examining the company; more recently, she said the IG is not involved in the probe, but that she could not name the investigating authority or discuss the broader inquiry because it is ongoing.
A series of Reuters reports in 2018 exposed slum-like conditions in family housing at many U.S. military bases, sparking action by Congress to crack down on the private landlords who run the facilities. In Washington, the Senate Armed Services Committee is working to upgrade military housing through the defense funding bill or standalone legislation, said committee chair Jim Inhofe. Balfour Beatty must fix substandard housing and, should any inquiries find wrongdoing, return any ill-gotten bonus payments, the Oklahoma Republican said.
"If Balfour Beatty proves they aren't up to the challenge, we'll find someone who is — someone who is committed to doing right by our service members and their families," the senator said.
Persistent leaks, disappearing problems
Service families continue to report squalid conditions in their homes on military bases.
In June, Roxanne Roellchen, her active-duty husband and five children moved into a Lackland house with a leaking roof, mold and bugs. She said she found scorpions hiding among boxes and roaches crawling on the feeding tube of her son, 5, who requires treatment because he's not growing. "Every day we were in that house, we were risking his health," she said.
Balfour Beatty said it promptly and effectively addressed the family's concerns and apologized for the inconvenience. The family said it took four weeks for the landlord to find them new lodging. The company, they added, did not submit work orders to remedy the mold and insects; while they waited, the company placed the family in a hotel and then temporary base housing, which also had roaches.
At the Texas base, Balfour Beatty has a history of maintenance problems. On any given day in 2015 and 2016, it routinely had hundreds of unfinished maintenance requests open, records show.
Persistent leaks plagued residents and workers alike. Staff logs documented the woes: "roof leak thru vent in son's room," "kitchen light fixture leaks when it rains" and "water pouring thru smoke detectors." Other times, homes sat vacant for months or years, magnets for rodents, reports show. The company said it has demolished some homes and is targeting others in "due course."
When Balfour Beatty filed maintenance reports to the Air Force, any open, late and unfinished jobs most always disappeared from the records. Quarter after quarter, the Air Force bestowed performance bonuses and, many times, praise on the company.
Balfour Beatty Communities, a unit of British infrastructure conglomerate Balfour Beatty plc <BALF.L>, is among the U.S. military's largest housing providers. The company runs housing at 21 Air Force bases as well as 34 Army and Navy bases.
It and other private real estate firms run 98% of military base housing in the United States. Many can earn "performance incentive fees" by meeting quarterly and annual goals, such as quickly responding to resident repair requests. The fees, based on reports submitted by the landlord, are a major source of income, generally worth about 2% of the total rent payments from base service families. At Lackland, the rate is 2.25%, records show.
There, from 2009 through 2018, Balfour Beatty received up to $3 million in management incentive fees. The Air Force department in charge of base housing oversight gave the company high grades in reports, applauding its "openness of honest communication."
In reality, Balfour Beatty was cooking the books, Reuters found in a review of company records and emails, and through interviews with former staffers.
Every quarter, company leaders pressed on-base staff to hit the quotas so Balfour could collect incentive fees. Often, management demanded staff take whatever steps necessary to obtain the bonuses, including using loopholes to improve the numbers.
Former manager Nelson said she relayed pressure from above to her own staff. Email correspondence document some of the exchanges. "It's not only my ass on the line because of these WO's , but my boss AND her boss!!!" Nelson wrote to Anderson and other staff in May 2016. "Close the ones that need to be closed - TODAY! I don't care what it takes."
Five months later, she was fired. The company said it dismissed Nelson for poor performance and that, since her departure, one metric of success, occupancy numbers, has improved from 89% to 98%. Yet records show the occupancy rate actually ranged from 95-97% under Nelson's watch in early 2016.
Nelson said she tried to balance the need to make her bosses happy by securing the incentive fees, and residents happy by making fixes. She said she lacked the manpower or budget to fully do either.
"I was devastated when I was fired," she said. "I thought everything I was doing was right; yes I was falsifying documents, but I was telling them, 'You need to fix this.' "
From 'magical' to 'woeful'
A former Marine, Nelson took her first job with Balfour Beatty in 2011 at Vandenberg Air Force Base in California. She found Vandenberg housing in good condition, and said Balfour Beatty provided resources to keep it that way. "It was magical," she said.
In 2013, a Balfour Beatty vice president asked her to take on Lackland, one of the company's problem bases. She quickly saw a much different picture in Texas. She found unpaid bills, she said, some more than a year old. Local contractors were wary of working for the company, she said. Employees weren't always qualified to do the work they were assigned, like replacing toxic freon in air conditioners.
Balfour Beatty struggled to convince families to live on base, Nelson told a friend in an email. One in 10 of the 900 homes on base often sat empty, internal occupancy-rate reports say.
"My intention was to fix it," Nelson said, leading to long days.
The quest to hit maintenance goals never eased. Lackland had eight to nine maintenance technicians, one for every 100 homes. By 2016, each tech was responsible for finishing 15 work orders a day; reports showed as many as 466 open work orders on a given day.
The number of maintenance workers per home is standard for the industry, but the number of open work orders was high, Balfour Beatty said in a statement. Another company base, the Fort Carson Army base in Colorado, had similar rates of open work orders in 2016, internal company records show.
In December 2014, after facing heat from a regional manager asking about unclosed repair requests, Nelson wrote an email to staff: "ARE YA'LL TRYING TO GET ME FIRED?!!!"
Company emails and reports from the first quarter of 2015 show how the records were massaged.
In March 2015, Balfour Beatty was far from hitting its Lackland goals, finishing only 69% of routine work orders on time, according to an internal company maintenance report obtained by Reuters. To pocket the full bonus, it needed to respond to and complete 95% of requests on-time.
Rick Cunefare, a Balfour Beatty area manager, emailed Nelson and others shortly after the close of the quarter. He wanted better numbers.
"We need to get this completed and ensure response and completion scores are over 95%," Cunefare told Nelson and the managers at four other Air Force bases, including Vandenberg and three bases now under investigation by the FBI – Tinker, Travis and Fairchild.
Cunefare, who is no longer with Balfour Beatty, declined to comment.
Nelson said she knew changing the scores was wrong but was desperate to keep her job and medical benefits. She had just been diagnosed with multiple sclerosis, a potentially disabling disease of the brain and spinal cord for which she was prescribed injections three times a week and routine assessment by neurologists. Her non-verbal, autistic son required costly therapies.
"I had my son's health to take care of and my own health to take care of," she said.
Less than two hours after receiving her instructions from Cunefare, Nelson emailed Anderson, the work order clerk, instructing her to change the maintenance records.
"I know you're really busy, but I'm getting pressure about the Quarterly Maintenance Report and all the results being over 95%," Nelson wrote. "Will you please take another look at it and make adjustments to ensure we are at 95% response/completion times in all categories."
After receiving the email, Anderson dived back into the data and changed the completion dates and times to make sure 95% were on time, Anderson told Reuters.
A report submitted by Balfour Beatty to the Air Force states 95.9% of maintenance requests were completed on time during the first quarter of 2015. The Air Force paid the full potential bonus of about $75,000 for the quarter.
The story was similar in other quarters. Earlier, in January 2015, Nelson asked Anderson to change fourth quarter 2014 records, writing, "They need to be 95% or higher." Later, in June 2015, she told Anderson, "Completion times in April need to be adjusted."
Nelson was not the first base manager at Lackland to fudge reports, said Anderson, the work order administrator from 2012 until she was let go in October 2016. Anderson said she falsified records every quarter, either under the direction of the community manager or the facility manager, who could not be reached for comment.
Balfour Beatty said it dismissed Anderson for poor performance. Anderson said the company never told her that, telling her instead she was let go for failing to pay rent on the home she was living in at the base. When Reuters first asked the company about the dismissal, it said it was performance and rent-related; later, it changed its response, citing only performance issues.
Push from the top
Across the company, say former managers, the pressure to meet maintenance goals started with Balfour Beatty's corporate leadership and worked its way down.
Jennifer Benski was Balfour Beatty's community manager at Malmstrom Air Force Base in Montana from 2011 until 2017. She said regional managers and executives scrutinized maintenance data used to determine bonus payouts: the number of open maintenance requests, the number of late requests and other details. She said her staff regularly closed out maintenance requests as complete before they were finished.
"There's a lot of pressure from upper management to meet those goals, and I guess you could say it doesn't matter how they're met," Benski said.
For the managers of Balfour Beatty's 21 Air Force bases and two of the company's Army bases, the pressure often flowed from the company's Phoenix regional office.
In June 2015, the administrator in charge of quarterly reports in Phoenix emailed instructions to base managers on how to get "a better completion %" on the reports used by the Air Force to award incentive fees. The instructions suggested base managers make use of so-called exceptions.
When a maintenance request cannot be completed on time because of extenuating circumstances, landlords can file an "exception" so the work order doesn't count against them. Examples include having to order special parts, jobs requiring multiple stages of labor, or cases in which residents requested a repair slot after a deadline.
In June, Reuters and CBS reported that a regional manager, Rebecka Bailey, directed the former manager at Tinker Air Force Base in Oklahoma to use exceptions to help the company meet its goals in late 2016 and early 2017. Following the report, the Air Force suspended all incentive fees to Balfour Beatty pending the outcome of an independent audit. Bailey, who declined an interview request in May, did not respond to a request for comment for this story.
The Phoenix regional office also told local managers to expect a quarterly report highlighting maintenance numbers they needed to "clean up."
In October 2015, the Phoenix office sent Nelson one such report, highlighting the response-time metrics that fell short of meeting incentive fee goals. She was asked to "start reviewing/working" them and provide "explanations to increase % complete."
When base managers hit their goals, the company applauded. "Thank you – well done! All above 95%!!" the Phoenix office wrote Nelson in October 2015.
Work order clerk Anderson said no one at Balfour Beatty or the Air Force inquired to see how the numbers always worked out. "They never questioned me on it," she said.
The Air Force had been warned of problems with Balfour Beatty's maintenance documents.
In a 2012 report, the auditing firm JLL, working for the Air Force Civil Engineering Command, said the Lackland housing office had "difficulty validating … the maintenance data submitted by BBC for its quarterly Performance Incentive Fee." Balfour Beatty staff had entered incorrect or incomplete data, the auditor told AFCEC, which oversees Air Force landlords.
The Air Force continued to pay Balfour Beatty bonuses. From 2012 through 2013, the company received at least a portion of its incentive fees each quarter, the Air Force said. From the fourth quarter of 2013 through 2018, Balfour Beatty received 100% of the bonus fees.
Had the Air Force conducted a relatively simple analysis, it could have spotted how Balfour Beatty was backdating maintenance records, said several former company employees familiar with the maintenance data system. That system allows users to identify when completion times and dates are edited, along with identifying who changed them.
Instead, JLL and AFCEC were generally positive, praising Balfour Beatty for its work order system and its cooperation with the Air Force, site visit reports from 2012, 2013 and 2016 show. JLL declined comment.
All the while, Nelson said she found herself lying to service families to cover up problems. "I cried in front of residents because they showed me the mold," she said, "and I couldn't believe I was in charge of the plight they were going through."