Clarification: This story has been updated to make it clearer that the Washington Metropolitan Area Transit Authority did not raise taxes or fees after a meeting in June. WMATA cannot raise taxes.

Commuters wait at the Tysons Corner Metro station to board a Silver Line train. Officials said Wednesday that the transit agency has agreed to pay millions to settle a whistleblower lawsuit. (Astrid Riecken/For The Washington Post)

Metro has agreed to pay nearly $5 million to settle a whistleblower lawsuit after a former employee alleged that the transit agency violated federal rules by awarding a $14 million contract without seeking competitive bids, government officials and attorneys in the case said Wednesday.

Metro also has agreed to pay $390,000 to the former worker to settle his claim that he was fired in retaliation for speaking out about the no-bid contract, according to the U.S. Attorney’s Office in the District, which announced the settlements and sharply criticized Metro’s conduct.

“The American people have a right to know that their government is following rules and regulations in spending the taxpayers’ money,” U.S. Attorney Ronald C. Machen Jr. said in a statement. After investigating the former Metro worker’s allegations, Machen’s office joined in the whistleblower’s federal lawsuit.

Although Metro officials admitted no wrongdoing in settling the contracting matter and the wrongful-termination claim, the multimillion-dollar payments are another financial black eye for the transit agency — one of several embarrassments in recent years involving allegations of misspending and mismanagement of federal grant money.

More than half of the $14 million no-bid contract was paid with grants from the Federal Transit Administration, authorities said.

“We expect agencies that receive federal funding to honor the integrity of the contracting process,” U.S. Attorney Ronald C. Machen Jr. said Wednesday. (Pablo Martinez Monsivais/AP)

“Our office has targeted government contractors who fail to meet their obligations,” Machen declared, “and this settlement shows that we expect agencies that receive federal funding to honor the integrity of the contracting process as well.”

Metro also is on the hook for nearly $190,000 in legal fees for the plaintiff, meaning that the settlements will cost the transit authority about $5.6 million, attorneys in the case said.

At issue was a contract awarded in 2010 to Metaformers, a McLean-based computer technology consulting company hired to oversee an integration of the transit service’s financial and business computer systems. Russell J. Gaspar, an attorney for the firm, said Wednesday that “It is our understanding” that the investigation found no “improper or unlawful conduct on the part of Metaformers.”

The awarding of that no-bid contract appears symptomatic of a broader problem detailed this year in an FTA-commissioned audit.

The report, covering April 2012 to March 2013, paints a troubling picture of Metro’s procurement practices, saying the agency awarded millions of dollars in no-bid contracts and appeared to steer work to preferred vendors even though they lacked adequate qualifications. The report did not name any vendors.

The audit also found other examples of questionable management, including instances in which Metro might have overbilled the federal government and, in at least one case, an employee continuing to be paid after leaving the agency.

As a result, Metro’s use of federal grant money has been restricted until federal transit officials are satisfied that Metro has implemented procedures to ensure that U.S. funds are properly managed. In the meantime, according to an internal Metro report, the agency has been forced to increase borrowing to cover expenses and might have to postpone or scrap some projects.

Metro spokesman Dan Stessel said the transit agency, while conceding no wrongdoing in the Metaformers matter, agreed to the settlements “to avoid protracted litigation and expense for Metro’s customers and the region’s taxpayers.”

Echoing Metro’s response to the critical audit, Stessel said any improper contracting procedures involving Metaformers resulted from poor financial systems that were in place before General Manager Richard Sarles took charge of the Washington Metropolitan Area Transit Authority in 2010.

“WMATA has been working to overhaul financial controls, and has made substantial progress in procurement, accounting and grants management,” Stessel said in an e-mail. He added that the agency’s “financial management has been strengthened with an improved procurement manual” and that “hundreds” of employees have been trained in new procedures “to tighten grants management compliance.”

Carol Kissal, who was Metro’s chief financial officer during the period covered by the audit and was a defendant in the whistleblower lawsuit, resigned in April after the audit’s findings were made public. Kissal’s replacement, Dennis Anosike, a former chief financial officer of the Chicago Transit Authority, was hired last month.

As Metro copes with allegations of improper financial management, it also is trying to persuade the Washington-area jurisdictions that foot the bill for the transit network to invest in Metro in the years ahead.

For example, Metro is seeking local leaders’ support for $26 billion in proposed improvements to the aging subway, including building a second Potomac River tunnel and upgrading its electrical system to allow for more eight-car trains. Also, in June, Metro discussed a plan that would include new taxes or fees from around the the region over the next decade to raise $6 billion for rapid transit.

Metro’s budget for the current fiscal year is nearly $3 billion, much of it coming from the District, Maryland, Virginia and federal governments as well as suburban counties and municipalities served by WMATA.

The whistleblower lawsuit was filed in 2012 by Shahiq Khwaja of McLean, who worked for Metro for a year beginning in September 2010 and was involved in upgrading WMATA’s troubled integrated financial-management system. He said he was fired after he complained about the awarding of the no-bid contract.

Khwaja sued Metro under the federal False Claims Act, which allows private citizens to sue on behalf of the U.S. government in alleging improper use of government resources and share in the proceeds of successful cases. After looking into Khwaja’s claims, federal authorities joined the litigation this year.

In his lawsuit, Khwaja alleged that the work performed by Metaformers under the $14 million contract could have been done at a much lower cost by another qualified company had Metro solicited bids. He also alleged that WMATA officials, overall, tried to steer about $40 million worth of work to Metaformers.

The settlements, however, focused only on how WMATA awarded the contract, not on Metaformers’ performance or allegations of overspending.

One of Khwaja’s attorneys, David Colapinto, said that Metro agreed to pay $4.2 million to the federal government, about $600,000 to the D.C. government and about $155,000 to Khwaja to settle the no-bid contract matter. In addition, out of the federal government’s $4.2 million, Khwaja will get $996,480, the U.S. Attorney’s Office said.

Wednesday morning, Machen announced the $4.2 million payment. Later in the day, lawyers for the plaintiffs said

that Metro had also reached a settlement with the D.C. government, increasing the total amount that the transit authority will pay.

As for Khwaja’s claim that his firing by Metro was retaliatory, Machen said that after an investigation, the U.S. Department of Transportation “found that the weight of evidence indicated that Mr. Khwaja’s disclosures [about the no-bid contract] were a contributing factor in his termination.” Rather than fight the matter in court, Machen said, Metro agreed to a $390,000 settlement with Khwaja.

“The government would not have recovered these funds . . . without Mr. Khwaja stepping forward,” Colapinto said in a statement, calling the settlements a “testament to Mr. Khwaja’s courage . . . in the face of resistance and hostility from his superiors.”

This story has been updated.

Mary Pat Flaherty contributed to this report.

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