Balfour Beatty emerges from US oversight scheme after fraud against military
There was a “landmark moment” for FTSE 250 firm Balfour Beatty on Monday, with the announcement that its US subsidiary emerged from special scrutiny from the Department of Justice (DoJ).
The news came as both a reminder of the global reach of London’s major support services sector and the pitfalls it can face from complex, varied and long-running contracts.
In an announcement to the Stock Exchange, the £3.9bn company said its Balfour Beatty Communities LLC unit was no longer under an “independent compliance monitorship”, which was imposed after it pleaded guilty to fraud against the American military in 2021.
The firm is a major provider of housing to the US Army, Navy, and Air Force. It is responsible for accommodating around 43,000 military personnel at over 55 bases in Texas, Oklahoma and Georgia.
In late 2021, it faced charges that it misrepresented repairs to protect bonus payments. Staff altered data in property management software and faked comment cards from residents to meet targets.
At the time, FBI officials described the offences as “disgraceful” and the then-deputy US attorney general, Lisa Monaco, called it a “pervasive fraud.… which valued profit over the welfare of service members”.
Balfour hit with $34m payout
The case ended with payouts of $34m in penalties and restitution costs of $32m.
Balfour apologised at the time and said the actions taken at the US unit then were “completely contrary to the way the company expects its people to behave”.
The monitoring programme followed. It was to last for the next four-and-a-half years.
As Balfour called the end of the oversight scheme “an important milestone” on Monday, it added that “throughout the period of monitorship” the US unit “worked to implement a broad improvement programme”.
It included: “Strengthening leadership and oversight structures, enhancing reporting and accountability mechanisms, and implementing more robust governance, compliance, and operational processes.”
It added: “[Balfour Beatty] Communities remains committed to working closely with the US military service branches to provide safe, reliable, and well-maintained housing for service members and their families while ensuring a strong compliance environment and operational framework.”
City experts have expected the DoJ’s monitoring of Balfour Beatty Communities to end in June. Peel Hunt’s Andrew Nussey described it as “a fairly major drag on group earnings” in a recent podcast covering the sector.
The 2021 US fraud lines up alongside other high-profile problems which have struck the company and the sector.
In 2019, the BBC reported that Balfour was involved in sensitive floor plans of the MI6 building in London being mislaid during a refurbishment of the highly secret offices, at which the firm was working as a contractor.
There were problems over staff recruited to work for Balfour on various projects – including the HS2 rail link from London to Birmingham, infamous for cost overruns and delays across the entire initiative – relating to their tax status.
A supplier to Balfour, since dismissed, had misinformed the firm whether staff it provided were contractors or employees as defined by the Pay As You Earn (PAYE) scheme.
Balfour is also renowned for some blockbuster successes. It built one of the most well-regarded facilities of the London 2012 Olympics, the Aquatics Centre in Stratford, with its world-famous curving roof.
Balfour shares on the up
It constructed the £830m terminal at Hong Kong’s Chek Lap Kok airport and designed and built the electric train system at Los Angeles International Airport.
It has a long and storied history in London. Its founders, George Balfour and Andrew Beatty, opened the business in a small office on College Hill near Cannon Street station in 1909.
Their first contract was worth £5,000 (around £530,000 at 2026 prices) for running trams in Luton and Dartford. It played a vital role supporting the war effort, including building the vital maritime defences between Orkney and Ronaldsay, which prevented enemy attacks on Scapa Flow.
Balfour entered the US market in 1986 with the acquisition of Heery, an Atlanta-based architectural and engineering business.
The company, now based in Churchill Place in Canary Wharf, has 26,000 staff, with 13,700 in the UK. It has 5,700 direct employees in the US.
Shares in Balfour were one per cent higher at 821p in London on Monday, leaving them almost 65 per cent stronger over the last year. In that time, the stock has been as high as 874p and as low as 492p.
Monday’s move meant Balfour was outperforming its sector, with the FTSE 350 Support Services index down 0.5 per cent overall. The FTSE 250 was down 0.6 per cent at 22,923.51.