The United States Attorney’s Office for the Middle District of Pennsylvania has announced that Joseph W. Nagle, of Deerfield Beach, Florida, was convicted after a four-week jury trial before Senior United States District Court Judge Sylvia H. Rambo in Harrisburg.
Late Thursday, the jury returned a verdict of guilty on 26 of 30 charges in the indictment including conspiracy to defraud the United States Department of Transportation (USDOT) and commit wire and mail fraud, 11 counts of wire fraud, six counts of mail fraud, conspiracy to commit money laundering, and 11 counts of money laundering.
According to the U.S. Department of Transportation, this scheme, which lasted for over 15 years and involved over $136 million in government contracts, is the largest reported Disadvantaged Business Enterprise (DBE) fraud in the nation’s history.
According to United States Attorney Peter J. Smith, Mr. Nagle faces up to five years’ imprisonment on the conspiracy count; up to 20 years’ imprisonment on each of the wire and mail fraud counts; up to 10 years’ imprisonment on the money laundering conspiracy and each of the money laundering counts of conviction; and $250,000 in fines and mandatory restitution on each of the convictions. Nagle was acquitted on four counts of wire fraud. No date has been set for sentencing.
Mr. Nagle was president, chief executive fficer and part-owner of Schuylkill Products Inc. (SPI) and its wholly-owned subsidiary CDS Engineers Inc. (CDS) until April 2009, when SPI was sold. SPI was based in Cressona, Pennsylvania and manufactured concrete bridge beams used on highway construction projects in Pennsylvania and surrounding states. CDS was SPI’s erection division and installed SPI’s bridge beams, as well as other suppliers’ products, on highways in Pennsylvania and surrounding states. Mr. Nagle was convicted of joining an on-going 15-year conspiracy to defraud USDOT, the Pennsylvania Department of Transportation (PennDOT), and the Southeastern Pennsylvania Transportation Authority (SEPTA) in connection with the federal government’s DBE program when he became president in April 2004.
USDOT provides billions of dollars a year to states and municipalities for the construction and maintenance of highways and mass transit systems on the condition that small businesses, owned and operated by disadvantaged individuals, receive a fair share of these federal funds. In Pennsylvania, PennDOT and SEPTA receive these funds and they require contractors to award a percentage of their subcontracts to eligible DBEs.
Mr. Nagle was convicted of participating in the scheme, which ran from 1993 to 2008, where he and other executives at SPI diverted over 300 PennDOT and SEPTA construction contracts to SPI and CDS that were reserved for DBEs. Mr. Nagle and his co-conspirators executed the scheme by using a small Connecticut highway construction firm known as Marikina Construction Corporation as a front company to obtain these lucrative government contracts.
Marikina was owned by Romeo P. Cruz, of West Haven, Connecticut, a naturalized American citizen born in the Philippines. Marikina was certified by PennDOT and SEPTA as a DBE. Although Marikina received the DBE contracts on paper, all the work was performed by SPI and CDS personnel, and SPI and CDS received all the profits. In exchange for letting SPI and CDS use its name, Marikina was paid a small fixed-fee, set by SPI.
The scheme was carried out for over 15 years because of the numerous fraudulent steps the co-conspirators took to conceal the scheme. SPI and CDS personnel routinely pretended to be Marikina employees by using Marikina business cards, e-mail addresses, stationery, and signature stamps, as well as using magnetic placards and decals bearing the Marikina logo to cover up SPI and CDS logos on SPI and CDS vehicles.
Previously, four former executives associated with SPI, CDS, and Marikina entered guilty pleas for their roles in the scheme:
Romeo P. Cruz, the former owner of Marikina, pleaded guilty to conspiracy and tax fraud charges in 2008 and 2009. Ernest G. Fink, of Orwigsburg, Pennsylvania, SPI’s former vice-president, chief operating officer, and owner, pleaded guilty to conspiracy in 2010. Timothy G. Hubler, of Ashland, Pennsylvania, CDS’ former vice-president in charge of field operations, pleaded guilty to conspiracy and tax fraud charges in 2008. Dennis F. Campbell, of Orwigsburg, Pennsylvania, SPI’s former vice-president in charge of sales and marketing pleaded guilty to conspiracy charges in 2008. All four testified during the Nagle trial and await sentencing.
“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “This significant conviction, in what is the largest reported DBE fraud case in USDOT history, will serve as a clear signal that severe penalties await those who would attempt to subvert USDOT laws and regulations. Prime contractors and subcontractors are cautioned not to engage in fraudulent DBE activity and are encouraged to report any suspected DBE fraud to the USDOT-OIG. Our agents will continue to work with the Secretary of Transportation, the Administrators of the Federal Highway and Transit Administrations, and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”
“Schemes to defraud the Department of Transportation’s Disadvantaged Business Enterprise program cheat not only the government and taxpayers, but also cheat those small, minority-owned businesses that the program is intended to help,” said Special Agent in Charge George C. Venizelos of the Philadelphia Division of the FBI. “This long-term joint investigation, culminating in the conviction announced here today, shows our determination to work together with our partners to safeguard the taxpayer dollars that support these important programs.”
The investigation was conducted by the FBI, the U.S. Department of Transportation Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS. Senior Litigation Counsel Bruce Brandler and Assistant United States Attorney Kim Douglas Daniel handled the prosecution.
— from an FBI News Release issued Apr. 6, 2012 at http://www.fbi.gov/philadelphia/press-releases/2012/former-president-and-owner-of-schuylkill-products-convicted-in-largest-disadvantaged-business-enterprise-fraud-in-nations-history.