Anderson Brothers Construction in Brainerd has agreed to pay $1.3 million to settle allegations that it intentionally falsified asphalt quality tests on 25 public works contracts in Minnesota.

A former employee of Anderson Brothers filed a federal whistleblower suit in 2022, accusing the company of making "systemic and consistent false statements" to regulators.

As a result, asphalt projects for roads, airports and schools — all publicly funded — were built with "substandard and defective" materials, said the suit, which was unsealed last week.

The federal government and the state of Minnesota joined the suit filed by Kacie Dixon, a bituminous technician at Anderson Brothers from May 2019 to at least August 2022. The suit claims Anderson Brothers violated federal and state false claims statutes.

"Minnesotans expect their hard-earned tax dollars to go to things like roads, bridges, schools and public safety, not into the pockets of corrupt contractors," Minnesota Attorney General Keith Ellison said in a press statement. "My thanks go out to whistleblowers like Kacie Dixon who help us fight fraud."

Anderson Brothers' CEO Terry McFarlin said in a press statement that the company is "pleased to have resolved the government's concerns about our past testing protocols through a no-fault agreement."

The settlement "lets us avoid the time, distraction and expense of lengthy government litigation and instead focus on taking care of our customers," McFarlin said.

He said the suit covered "about one-half of one percent of the value of the projects" the company was working on at the time.

The state and federal governments alleged that due to its false test results, Anderson Brothers received $1.3 million more than it should have.

"The state of Minnesota paid Anderson Brothers for higher quality asphalt than it, in fact, received," the attorney general's office said in a court document.

The state will receive nearly $635,000 from the $1.3 million settlement; the federal government, nearly $661,000.

As part of the state settlement, Anderson Brothers must develop a quality control program and submit to compliance monitoring by the Minnesota Department of Transportation.

The company "will be closely monitored during the upcoming construction season," according to Ellison's office.

McFarlin said the "settlement does not affect our ability to serve our customers, take on new projects, or achieve our long-term goals."

Plaintiffs in federal whistleblower suits typically receive 15% to 30% of any recovery. Dixon is slated to get $114,273 from the state, according to a state settlement document, along with money from the federal government.

In her job, Dixon evaluated test results for quality compliance. She witnessed doctoring of asphalt test results and other fraudulent compliance actions by other Anderson Brothers employees, one in particular, the suit says.

Dixon claimed she reported her allegations to the company's human resources office, as well as to one of the company's owners — but that nothing was done.

Employees told her that Anderson Brothers made more money by using substandard materials and "cheating" on quality tests, the suit alleges.

Since 2017, Anderson Brothers has worked on dozens of contracts or sub-contracts for federally and state-funded projects.

The suit lists 25 Minnesota projects that involved alleged falsification of laboratory test results, including for roads in Crow Wing, Wadena, Morrison, Cass and Hubbard counties; airports in or near Brainerd, Detroit Lakes and Pine River; and schools in Brainerd and Nisswa.

"When fraudulent conduct like this undermines the integrity of highway paving putting the safety of the travelling public at risk, it's our job … to put an end to it," Anthony Licardi of the U.S. Department of Transportation's Office of the Inspector General said in a press statement.