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Special Report I Reuters I U.S. Air Force landlord falsified records to boost income: documents
By M.B. PELL
TINKER AIR FORCE BASE, Oklahoma – When Paige and
Nick Ippolito moved to a row house on this air base in 2015, the floors
in the kitchen, living room and hallway were warped. They told the
base’s landlord, Balfour Beatty Communities, but “nothing was done,” a
company maintenance report shows.
Nick, a Navy
petty officer second class stationed at Tinker, worried their baby
daughter might lose a finger in the jagged flooring. After a water leak
further broke up the floor, a company technician noted in a maintenance
log that the eight-month-old “may become sick from chewing on pieces”
breaking away from the flooring.
The floor tiles and adhesive contained asbestos, a carcinogen, an internal company maintenance report shows.
official Balfour Beatty maintenance logs available to the Air Force
indicate the company promptly addressed the problems. The leak, for
instance, was fixed in 20 minutes, the records purport to show. In fact,
the logs were faked. The family said that repair took over a week. The
Ippolitos endured the other hazards for months.
think your family is safe, and then you find out your kid is eating
asbestos flooring. It makes me sick,” Nick Ippolito said. “It seems like
they’re just out for the dollar.”
Beatty, among the U.S. military’s largest housing providers,
systematically falsified its Tinker Air Force Base maintenance logs for
years, Reuters found through a review of company records, Air Force
reports and interviews with former workers. The fake entries made the
company appear responsive to tenant complaints and unsafe conditions,
helping it secure millions in “performance incentive fees” for good
service that it otherwise often would not have qualified for. The
efforts left families in harm’s way and persuaded Air Force brass to
ignore warnings of trouble raised by military base employees.
years, Balfour Beatty kept two sets of maintenance books at Tinker,
Reuters, working in partnership with CBS News, found. A falsified set of
official electronic records was shown to the Air Force, listing quick
response times. A handwritten set of accurate records was also kept by
the company in order to track what was really happening. These records,
never disclosed to the military but examined in part by Reuters, show
that weeks routinely elapsed before hazards were remedied.
Whittington, Balfour Beatty’s manager at Tinker from 2014 until July
2017, told Reuters he doctored work-order information in the electronic
maintenance logs at the direction of his superiors and pressured staff
to close out unfinished work orders, so that late responses would not
count against the company.
said he knew falsifying records left families in peril. A retired Air
Force veteran, he said he was disgusted by his actions, and, after
wrestling with his conscience and refusing further orders to alter
“It’s like they’re operating a
bank robbery at a corporate level,” Whittington said. “I got to the
point where I was waking up in the morning and wondering, ‘Well, how
many people am I going to have to screw over today?’ ”
claims are supported by numerous internal memos to Balfour Beatty
employees instructing them on how to engage in the deception. Reuters
documented at least 65 instances in 2016 and 2017 in which Balfour
Beatty employees backdated repair requests, filed paperwork claiming
false exemptions from response-time requirements, or closed out
unfinished maintenance requests.
were well known to some Air Force housing employees stationed at Tinker.
For years, they told the Air Force of questionable record keeping and
slum-like living conditions. Yet their attempts to hold Balfour Beatty
accountable were blocked by the Air Force Civil Engineering Center, or
AFCEC, a unit based in San Antonio, Texas, that is tasked with
monitoring private landlords.
At least 18 times
since 2015, Tinker-based Air Force housing officials warned that Balfour
Beatty maintenance logs contained false information making it appear
the company promptly responded to service requests, Air Force reports
show. “We do not feel that emergency, urgent and routine work orders are
accurately recorded,” said one periodic report on Balfour Beatty’s
Quarter after quarter, the Air Force
engineering center downplayed these concerns, giving the company high
service marks and advising Tinker officials to drop their complaints.
“It doesn’t matter if they were in compliance or not, they would still
get paid,” a local housing official at Tinker wrote in a February 2018
At the heart of the failure to hold the
Tinker landlord accountable was a conflict within the Air Force. On one
side was the on-site Air Force housing office, whose prime mission was
assisting residents and conducting daily oversight of Balfour Beatty. On
the other was AFCEC, responsible for developing and managing all of the
Air Force’s privatized housing projects. While AFCEC, too, has an
oversight role, it is also responsible for ensuring smooth long-term
relations with the landlords with whom it does business. Over the years,
AFCEC repeatedly sided with its partner, Balfour Beatty.
with the evidence Reuters found of years of false reporting, slow
repairs and hazardous conditions at its homes, Balfour Beatty said the
company learned in 2016 that one employee at Tinker had acted
“improperly,” without providing specifics. It described this as an
isolated incident and said it worked with the Air Force to strengthen
its maintenance system. The company did not comment on instances of
false record-keeping, the internal memos and other irregularities
Reuters documented before and after 2016 at Tinker and other bases.
Beatty said it has cooperated fully with inquiries by the Air Force and
other government agencies into its business. “As an organization, BBC
has not and does not condone the falsification of records in any way,”
the company said in a statement.
In December, Reuters reported widespread instances of shoddy construction and
safety hazards in new housing units private companies, including
Balfour Beatty, built on U.S. bases. Since that report, the Air Force
says, it has been withholding fees from the company at Tinker, pending a
review of the matter.
In response to the new
findings about the company, John Henderson, the Air Force assistant
secretary for installations, said in March he had “real issues” with
Balfour Beatty’s performance at Tinker. But he said he did not believe
housing companies purposefully changed maintenance records to win
In June, after being shown
further details of Reuters’ reporting, he said he will await the outcome
of ongoing investigations to determine what happened. He said there
were “discrepancies in the maintenance records” and that “allegations of
fraud” involving Tinker and at least two other company bases were
referred to the Air Force Office of Special Investigations and the
Federal Bureau of Investigation in 2017.
trust our private sector partners to act in good faith,” Henderson said.
“When this doesn’t happen, we must hold those responsible accountable
for achieving better outcomes to ensure that we continue to be worthy of
earning the trust of our Airmen and our Nation.”
Air Force Office of Special Investigations does not discuss
investigations, said Linda Card, chief of public affairs for the agency.
But she added: “Conversations are still taking place” with the U.S.
Department of Justice “about what avenues (criminal or civil) – if any
– can be pursued against Balfour Beatty.”
“I was waking up in the morning and wondering, ‘Well, how many people am I going to have to screw over today?’ ”
Regardless of that inquiry’s
outcome, the Air Force plans to boost transparency by creating an
automated maintenance-request process allowing residents to view the
status of a work order, Henderson said. It also plans to revamp the
incentive fee system, with details still being worked out. He defended
the work of the Air Force’s engineering center, saying it had taken the
allegations against Balfour Beatty seriously and performed an on-site
review of the company’s work at Tinker.
of accounting irregularities by a major contractor comes as U.S.
lawmakers are overhauling the Pentagon’s family housing program. The
defense spending bill for 2020 proposed by the Senate Armed Services
Committee includes measures to prevent fraudulent work orders, committee
staff told Reuters, in part due to concern that millions in fees have
been paid based on falsified maintenance records.
military families deserve high-quality housing throughout their
service, and that includes ethical and fair treatment by housing
providers,” said Oklahoma Republican Jim Inhofe, the committee chair.
in 1996, the military launched the largest-ever corporate takeover of
U.S. federal housing, shifting ownership of more than 200,000 family
housing units on bases to private real estate developers and property
managers under 50-year contracts.
These lucrative contracts include bonuses, or
incentive fees, that private landlords can earn by meeting performance
goals set with the military. To receive the fees, real estate companies
must meet quarterly and annual goals, such as responding to resident
maintenance requests within a specified time. The fees are payable each
quarter, and are generally worth up to 2% of the total rent payments
from service families living on base.
Beatty Communities, located in Malvern, Pennsylvania, runs the military
housing unit of Balfour Beatty plc, a London-based infrastructure
company with annual revenue of $10.7 billion. The company earns $33
million in annual profit on its military housing operations, Balfour
Beatty Communities President Chris Williams told Congress in February.
The incentive fees alone on those operations are worth about $800
million over the life of the 50-year contracts it holds for 43,000 homes
on 55 Air Force, Navy and Army bases across the country, Reuters
Balfour Beatty took over housing
operations at Tinker in 2008. Since then, Reuters estimates, it has
earned up to $2 million in incentive fees there.
of irregular reporting have surfaced at other Balfour Beatty bases. In
2016, Air Force housing officials stationed at California’s Travis Air
Force Base alleged company employees were using a second set of
maintenance logs, an Air Force statement confirmed. In 2017, the housing
officials found the company was closing out maintenance requests before
they were finished and classifying records incorrectly, the base’s
quarterly housing performance records show. That same year, housing
officials at Fairchild Air Force base in Washington State said Balfour
Beatty submitted inaccurate maintenance data in its application to
receive incentive fees.
The Air Force could not
substantiate the allegations at Travis and Fairchild. But it stopped
paying incentive fees to Balfour Beatty at the two bases late last year,
pending a review, and referred the incidents to Air Force investigators
and the FBI.
Still, the Air Force has never
clawed back incentive fees paid to Balfour Beatty, an Air Force
spokesperson said. Nor has AFCEC audited the maintenance records of any
other base managed by the company.
Big leaks, two sets of books
Tinker, Reuters last year found half of the nearly 400 new homes built
by Balfour Beatty suffered from gushing leaks, raw sewage backups,
rotten wood and severe mold.
Starting in late
2015, Balfour Beatty was overrun with maintenance requests in both old
and new homes. Roofs leaked, plastic water lines burst and heating and
air conditioning failed, former manager Whittington said. Yet that same
year, the company recorded just 23 late work orders out of 6,000 jobs,
internal work order data show.
In early 2016,
Whittington said, executives cut the base’s maintenance staff from six
to five, as corporate headquarters in London demanded larger profits
from their military housing projects. That left about 132 homes for each
worker to cover, he said. Still, Balfour Beatty told the Air Force it
was responding promptly to maintenance requests.
Air Force housing personnel at Tinker considered the number of late
responses suspiciously low, and the incentive fees the company was
winning oddly high, Air Force emails show. “It's funny that all
properties are always 100%” handled on time, one Air Force housing
employee noted in a 2016 email to colleagues.
in July 2016, during a casual conversation, the Tinker housing
personnel noticed a hand-written maintenance schedule on the desk of a
Balfour Beatty work-order clerk named Tina Brown.
was responsible for taking maintenance requests over the phone and
scheduling technicians to resolve them. Since her first day, she told
Reuters, she maintained an unofficial, hand-written set of maintenance
logs in addition to the official computerized records shared with the
The hand-written books allowed Brown and other
employees to accomplish two ends, according to Brown and other people
familiar with the operation. They could accurately track the work so
they could eventually complete it, but do so without triggering the
clock that started ticking once a work order was entered in the official
electronic system. Facilities manager Tim Heath instructed her to enter
work orders in this fashion, according to Brown and Whittington. Heath
did not return calls and text messages seeking comment.
requests were often logged into the official system by Brown the day
they were completed, not the day they were called in. By doing so, the
workers ensured that Balfour Beatty was appearing to meet the
response-time goals set in its Air Force contract: 30 minutes to begin
an emergency request, four hours for an urgent one and 24 hours for a
routine matter. The ruse also allowed the company to meet job completion
goals: 24 hours for an emergency and two business days for both urgent
and routine items.
An example from 2016 shows
how the set-up worked. A page from Brown’s unofficial handwritten
records includes a work request from a family with a broken stove, dated
July 7, 2016. The official electronic maintenance log, captured in a
screenshot from Brown’s work station, shows the family’s request was not
entered until July 12, 2016 – the day before the work was done. If the
request had been accurately logged, it would have failed the incentive
After finding Brown’s shadow set
of books, Air Force housing officials at Tinker interviewed residents in
the summer of 2016 and confirmed that Balfour Beatty was not entering
requests when residents called them in. “These findings are very
disheartening,” one official wrote in a July 2016 email to colleagues.
Beatty later addressed the accusation in an application for an
incentive fee payment. It told the Air Force it had discovered
“discrepancies in the data entry process at Tinker” and quickly acted to
ensure it didn’t recur, according to the fee request it filed.
two weeks earlier, Balfour Beatty had fired Brown. As she was escorted
out of the office, according to people who witnessed the scene, she
shouted to co-workers that she had been axed for keeping a fake set of
books at the direction of her boss, Heath.
“They threw me to the wolves,” Brown said. She filed a wrongful termination suit against the company that is still pending.
In its statement, Balfour Beatty did not name Brown, but said a single employee acted inappropriately.
Internal Balfour Beatty documents show the company issued broad instructions to employees to alter the books.
was the message in a 2013 directive about work orders emailed to
Balfour Beatty employees. “You will modify and ‘correct’ these work
orders so that they comply with the Response Time of 30 minutes – 1
hours, and a Completion Goal of 24 working hours for Emergency work
orders,” the memo states.
Another 2016 internal
memo shared via emailed instructs clerks to place maintenance requests
in a red folder if “workload excessive and can’t schedule right away.”
said Tinker never had enough maintenance staff to tend to the base’s
660 homes. All the while, Whittington said, corporate staff from Phoenix
pushed him to close out maintenance requests so the company could
obtain incentive fees.
“Work orders were closed when they weren’t actually completed,” Whittington said. “Again, that plays into the incentive bonus.”
said he pressured his staff to “fudge the numbers.” In an email dated
September 1, 2016, he directed two employees to close 119 resident
maintenance requests in four hours. “The objective is to get ALL open
Work orders closed today!” he wrote.
said he was directed by his regional manager, Rebecka Bailey, and vice
president Raul Martinez. Bailey is no longer with the company; both she
and Martinez declined to comment.
All those years, families lived with a range of hazards – raw sewage backups, vermin infestations and exposure to asbestos.
the McNarney Manor neighborhood of Tinker, all but a handful of the 262
homes have flooring material containing asbestos, Whittington and two
other former employees said. Balfour Beatty covered that material with
floating floors or carpeting for aesthetic purposes and to seal away the
asbestos tiling, a common and effective abatement strategy.
Much of the new flooring was cheap and poorly
installed, however, according to Balfour Beatty work order records. From
2012 to February 2019, McNarney residents called in at least 350
maintenance requests complaining about flooring, including buckling,
warping and, according to one work order, “black stuff coming thru
In the Ippolitos’ case, Balfour
Beatty’s maintenance records show the company moved the family into the
home knowing the flooring was in “bad” condition, as one log put it, and
that a risk of asbestos exposure existed.
company should have hired a specialist to safely remove the asbestos or
seal it off properly, said Nick Ippolito, who worked for 12 years as a
residential construction supervisor before joining the Navy. “But I
guess that took too much money for them,” he said. In 2018, the couple
left the Navy.
Balfour Beatty declined to
discuss the cases of specific families. It said it was not aware of
widespread flooring problems in the McNarney homes.
The ‘exception’ policy
Tina Brown was fired in mid-2016, Whittington said, company executives
directed Balfour Beatty employees at Tinker to stop keeping a second set
of hand-written maintenance logs.
The number of
late work orders skyrocketed, from eight during the first half of 2016
to 377 during the second half, according to a Reuters analysis of Tinker
work order data. The company completed 12% of its maintenance calls
late, which would have been too many to receive its full incentive fees.
The company didn’t report these numbers to the Air Force, however.
in its application for incentive fees for the third quarter of 2016,
Balfour Beatty again reported stellar figures, saying it completed
between 96% and 98% of maintenance calls on time. The company sought
100% of the incentive fees for which it was eligible that quarter,
Air Force housing officials at Tinker
expressed disbelief. “We have had many complaints from residents from
each category stating work orders were not completed within specified
timeframe,” the Tinker housing office wrote to another outside
contractor, recommending against incentives that quarter.
They were right to be suspicious, said Whittington.
After Brown’s firing, he said, regional manager Bailey directed him to
make sure the maintenance numbers met the incentive fee goals by
massaging the records. The company began taking advantage of a
technicality known as the “work order exception policy” to keep winning
incentive fees, according to Whittington and documents.
the Pentagon’s housing contracts, 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 residents requesting a repair slot after the
mandated response deadline.
Whittington said he
combed through late maintenance requests and edited the records to
include exceptions to the response time policy.
“Shamefully, I complied,” Whittington said.
The next spring, April 17, 2017, eight
residents called in maintenance requests and, the official records say,
all eight requested the work be done later than required, on April 20,
according to an email exchange with the Tinker housing office. Without
those exceptions, all eight jobs would have been late, counting against
Balfour’s incentive goals.
As recently as last
year, Balfour Beatty was still relying on exceptions. Tinker had about
1,850 late work orders in 2018; more than 1,100 fell under a time policy
exception, the records show.
The company says
it did often use exceptions at Tinker starting in 2016. In 2018, Balfour
Beatty says, it and the Air Force implemented a new process for
recording work orders, including the use of exceptions.
The Air Force Civil Engineering Command, or AFCEC, said it is working with Balfour Beatty to correct “challenges.”
Marsh, AFCEC’s regional manager, has defended the company. In May 2017,
a resident invited a Tinker housing official into her home to witness a
persistent leak. Marsh scolded the official for entering the home
without a Balfour Beatty representative. “This isn't showing a
partnering approach,” she wrote.
2017, after Tinker’s housing office provided AFCEC with evidence that
Balfour Beatty was claiming fake exceptions, Tinker staffers urged a
curtailing of fees. Marsh overruled the recommendation.
“AFCEC does not agree that your response validates a decrease in the award incentive,” Marsh wrote.
Marsh did not reply to a request for comment.
warnings continued. In December 2017, AFCEC agreed to cut a small
portion – 3.8% – of Balfour Beatty’s incentive fees for the second and
third quarters of 2017.
Last November, the Tinker housing office asked
Marsh and the Air Force engineering center to investigate Balfour
Beatty, predicting dire consequences if action was not taken. “With
continued inadequate maintenance, our property will not withstand a 50
year lifecycle,” it wrote.
Marsh declined, replying in correspondence that investigations were “ineffective and extremely unproductive.”
Tinker families continue battling the landlord. In May, neighbors
gathered on Mundell Street to discuss those struggles with a Reuters
Derek Rouse, a Navy flight engineer,
said he and wife Jennifer have asked Balfour Beatty for years to stop
rainwater from penetrating their home. In April, Balfour Beatty marked a
work order from the Rouses as finished on time, claiming to have fixed
the couple’s back door by installing new weather stripping. The reporter
examined the door. New weather stripping had not been installed.
get done flying at 4 a.m., and at 6 am I get a phone call from my wife
saying the house is leaking again,” Derek said. “I put my life on the
line, and I shouldn’t have to deal with this.”
Additional reporting by Joshua Schneyer and Deborah Nelson