FOX Undercover: Convicted felon awarded state contracts

Michael Molway is a man with a past that doesn’t seem to haunt him.

Molway, the majority owner of FM Generator, counts some of the most security-sensitive agencies in the state as his customers even though he spent 15 months in prison for fraud.

Molway pleaded guilty to fraud charges in 2007 for helping run in a kickback scheme to win business for the company, then known as FM Emergency Generator. Despite his record, Molway says he can be trusted with the taxpayers' money.

“I think the state is aware of my conviction and my conviction had nothing to do with public funds,” he told FOX Undercover reporter Mike Beaudet.

Molway’s conviction barely stopped him from obtaining contracts with security-sensitive agencies such as the State Police, the Trial Court and the Department of Corrections, raising serious questions about just who’s watching how the government is spending taxpayer money.

Court records show Molway, along with his father, paid nearly $400,000 to an AT&T employee to secure contracts for FM Emergency Generator. Molway says he told the state about his record.

“We were absolutely, in our disclosure, and (we) met all the disclosure requirements to the agencies,” he said. “We were very thorough in disclosing. Whatever was asked we disclosed.”

But the state's purchasing agency has a different story.

Robert Bliss, a spokesman for the state Operational Services Division, says the state didn’t learn of Molway’s conviction until a competitor tipped them off. FM Generator was suspended from doing business with state agencies for six months after that. But now, it's back in business.

Bliss said the conviction did raise a red flag with the state.

“That's why he was suspended for six months. But it wasn't judged a matter that warranted termination,” he said. “We'd certainly be concerned if it should happen again.”

Even after the suspension, not everyone in government knew of Molway’s record.

The Massachusetts Port Authority, which runs Logan International Airport, says it learned about it from FOX Undercover, and canceled its maintenance contract soon after.

The MBTA also canceled a contract after we began asking questions.

Molway says he told the T about his conviction, but wouldn't provide paperwork to back up his claim. Then last month, the company won a new contract to maintain MBTA generators.

In a statement, T spokesman Joe Pesaturo said, "Unlike its bid proposal in 2008, FM Generator this year properly disclosed that its majority owner had a prior conviction stemming from his work at a separate company nine years ago."

That kind of failure to disclose should bring stiff penalties, according to state Inspector General Gregory Sullivan.

“What we're saying is if you fail to disclose it and fail to report it, that's it. It's the end, lights out,” Sullivan said.

But in Massachusetts it's not lights out, even when there's a serious criminal conviction.

“It's very important but it often doesn't happen, that government officials be aware of contractors who have been convicted of bid rigging, kickbacks, bribery,” he said.

Weeding out shoddy contractors is a big problem for the federal government, too. Congressional investigators reported earlier this year that companies or people with egregious offenses are still getting big federal contracts. In one case, the army paid more than $4 million to a German company that was debarred for selling equipment to North Korea that could be used to make a nuclear bomb.