Georgia Tech Procurement Assistance Center

Atlanta man pleads guilty to cyber crime that cost a Kansas county $566,088

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An Atlanta-area man pleaded guilty last Thursday (July 6, 2017) to federal charges he was part of an e-mail spoofing scheme that cost Sedgwick County, Kansas more than $566,000, District of Kansas U.S. Attorney Tom Beall said.

George S. James, 49, Brookhaven, Georgia, pleaded guilty to one count of wire fraud.

In his plea, James admitted that on Oct. 7, 2016, Sedgwick County sent approximately $566,088 to his Wells Fargo bank account. James transferred part of the money he received from Sedgwick County to a bank account in Shanghai, China, and part of the money to an account at Deutsche Bank in Bremen, Germany. James also spent some of the money.

In his plea, James denied that the fraud scheme was his idea. He said that on Sept. 23, 2016, he was contacted by a person identified in court records as A.H., who asked to deposit some money into James’ account at Wells Fargo. James said he knew A.H. was engaged in fraud, but James denied knowing that Sedgwick County was the victim.

In his plea, James said it was A.H. – or someone working with A.H. – who sent an email to Sedgwick County on Sept. 23, 2016, purporting to be from Cornejo and Sons, LLC, and requesting the county send future payments to a new account number at Wells Fargo. On Oct. 7, 2016, the county sent $566,088 to James’ account at Wells Fargo. The county learned later that Cornejo did not request the change of account and did not receive the payment.

Sentencing is set for Sept. 21. James faces a penalty of up to 20 years in federal prison and a fine up to $250,000.

 

Source: https://www.justice.gov/usao-ks/pr/georgia-man-pleads-guilty-cyber-crime-cost-sedgwick-county-566000

Officer of construction company sentenced for illegally obtaining federal contracts meant for small disadvantaged businesses

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Michelle Cho, an officer of Far East Construction Corporation (Far East) and other construction companies, was sentenced on Apr. 25, 2017 to six months in prison and 24 months of supervised release on a federal charge of conspiring to commit wire fraud. Cho was also ordered to pay forfeiture in the amount of $169,166 and pay a criminal fine in the amount of $35,000.  The sentencing came about as a result of Cho’s guilty plea made on Nov. 15, 2016.

According to court documents, Cho was an initiator and mastermind of a scheme lasting more than five years to defraud a disadvantaged business assistance program of tens of millions of dollars. Cho utilized two straw companies, including Far East, to conspire with MCC Construction Company (MCC) and others to defraud the Small Business Administration (SBA).

Cho’s two companies were eligible to receive federal government contracts that had been set asides for small, disadvantaged businesses under the SBA 8(a) program. Cho and MCC understood that MCC would illegally perform all of the work on these contracts and pay three percent of the proceeds to Cho’s companies rather than have Cho’s companies perform at least 15 percent of the work as required by the SBA 8(a) program.  In so doing, MCC was able to win 27 government contracts worth over $70 million during the period 2008 to 2011. The scope and duration of the scheme resulted in a significant number of opportunities lost to legitimate small, disadvantaged businesses.

To qualify for the 8(a) program, a business must be at least 51 percent owned and controlled by a U.S. citizen (or citizens) of good character who meets the SBA’s definition of socially and economically disadvantaged. The firm must also be a small business and show a reasonable potential for success.  Participants in the 8(a) program are subject to regulatory and contractual limits. Also, under the program, the disadvantaged business is required to perform a certain percentage of the work. For the types of contracts investigated in this case, the SBA 8(a)-certified companies were required to perform at least 15 percent of the work with its own employees.

On Feb. 2, 2016, MCC agreed to pay $1,769,924 in criminal penalties and forfeiture. Thomas Harper, a former officer and owner of MCC, pleaded guilty on June 22, 2016, to conspiring to obstruct proceedings before a department or agency. He is to be sentenced on May 15, 2017. Walter Crummy, another former officer and owner of MCC, pleaded guilty on Aug. 23, 2016, to conspiring to commit wire fraud and was sentenced earlier this month to a year of probation, two months of which were home confinement, and forfeiture in the amount of $105,618.

The investigation was conducted by the FBI’s Washington Field Office, the SBA’s Inspector General, the Inspector General of the U.S. General Services Administration (GSA), the Central Field Office of the Defense Criminal Investigative Service (DCIS), and the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU).

Source: https://www.justice.gov/opa/pr/construction-company-officer-sentenced-prison-conspiring-defraud-government

Feds say Navy contractor stole $13 million, but U.S. government still works with it

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A North Carolina-based defense contractor defrauded the U.S. government of more than $13.6 million over the course of a decade, according to documents filed in U.S. District Court in Norfolk.

But the government is still doing business with the company: Global Services Corp. of Fayetteville, N.C.

Two men – one of whom lives in Hampton Roads – have pleaded guilty, but federal prosecutors have worked the past several months to keep secret the identity of the contractor and its owner.

Court documents do not name the firm or two Newport News-based companies that they say were integral to the conspiracy. They are identified only as Firm G, Company A and Company B.

In most cases, the documents also do not name the president of the defense contracting firm – who prosecutors say was the primary beneficiary of the fraud. The documents generally identify him only by the initials “PAM.”

On one occasion, however, prosecutors filed a document in connection with an accomplice’s case that identified him as Philip A. Mearing – the president of Global Services Corp.

Keep reading this article at: http://pilotonline.com/news/local/crime/feds-say-navy-contractor-stole-million-but-u-s-government/article_f0e96b82-c45c-5577-b9f9-6a2cc5ffdfbc.html 

Military base contractor admits paying bribes and kickbacks

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A Pennsylvania man who operated a construction company that did work at construction projects at two military bases in New Jersey admitted on Feb. 21, 2017 to paying bribes and kickbacks to get the contracts.

George Grassie, 54, of Covington Township, Pennsylvania, pleaded guilty in Newark, NJ federal court to an indictment charging him with one count of conspiracy to defraud the United States and commit bribery and one count of providing unlawful kickbacks.

According to documents filed in the case and statements made in court:

  • Grassie owned a business that did construction, excavation and landscaping and did work as a subcontractor at Picattiny Arsenal (PICA) and Joint Base McGuire-Dix Lakehurst (Ft. Dix).
  • He admitted that from December 2010 to December 2013, he paid bribes valued at $95,000 to $150,000 to an individual employed by the U.S. Army Contracting Command in New Jersey to obtain and retain subcontracts and other favorable assistance at PICA and Fort Dix.
  • He also admitted that he paid kickbacks valued at $40,000 to $95,000 to Shawn Fuller and James Conway, who were then project managers for a prime contractor at PICA and Fort Dix.

Conway previously pleaded guilty to wire fraud and accepting unlawful kickbacks on August 2016. Fuller previously pleaded guilty to accepting unlawful kickbacks in November 2015.

The conspiracy charge to which Grassie pleaded guilty carries a maximum potential penalty of five years in prison. The charge for making unlawful kickbacks to which Grassie pleaded guilty carries a maximum potential penalty of 10 years in prison. Both charges carry a maximum fine of $250,000 or twice the gross gain or loss associated with the offense, whichever is greatest. Sentencing is scheduled for May 31, 2017.

Agencies responsible for investigating this case include the FBI, the Defense Criminal Investigative Service of the Dept. of Defense, and the U.S. Army’s Major Procurement Fraud Unit, Criminal Investigation Command.

Source: https://www.justice.gov/usao-nj/pr/contractor-us-military-bases-admits-paying-bribes-and-kickbacks

Five indicted in TN for fraudulent ‘Made in the USA’ sales to Armed Forces

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A federal grand jury in Tennessee has indicted five individuals for wire fraud, conspiracy to commit wire fraud, major fraud against the United States, and smuggling in connection with Chinese-made military boots to the U.S. Armed Forces and others.

Justice Dept. sealThese individuals appeared in court on Sept. 15, 2016 and pleaded not guilty.  All were released on bond pending trial, which has been set for Nov. 1, 2016, in U.S. District Court, in Greeneville, TN.

If convicted, they all face a term of 20 years in prison as to each wire fraud charge and smuggling charge, and up to 10 years in prison for the charge of major fraud against the United States.  Additionally, they face fines of up to $250,000 and up to three years of supervised release as to each count.  The indictment also seeks forfeiture of approximately $8.1 million.

Details of this conspiracy are included in the indictment on file with the U.S. District Court, which alleges that these individuals, all of whom were executives and management at Wellco Enterprises, Inc., conspired from December 2008 through August 2012 to defraud the United States government and other purchasers through a scheme to fraudulently import military-style boots that were made in China into the United States and then deceptively market and sell those boots to the United States Armed Forces, government contractors, and the general public as “Made in the USA,” and as compliant with certain domestic content preference laws, including the Trade Agreements Act and the Berry Amendment.

This indictment is the result of an investigation by Homeland Security Investigations, the Defense Criminal Investigative Service, Air Force Office of Special Investigation, General Services Administration Office of Inspector General, and the Defense Contracts Audit Agency.

Members of the public are reminded that an indictment constitutes only charges and that every person is presumed innocent until his/her guilt has been proven beyond a reasonable doubt.

Source: https://www.justice.gov/usao-edtn/pr/five-indicted-fraud-against-us-government-and-other-purchasers-made-usa-marketing

Jury convicts contractor of defrauding city’s womens business program

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FBI SealA federal jury on Friday (June 17, 2016) convicted a suburban Chicago construction subcontracting firm on fraud charges for scheming to help a general contractor falsely satisfy the woman’s business enterprise (WBE) requirement on city of Chicago construction projects.

As the owner of the WBE, Elizabeth Perino agreed to allow her company to be claimed as a subcontractor on city projects so that the prime contractor could satisfy its requirement to assign a portion of the work to female-owned businesses.  Perino falsified paperwork to conceal the fact that her business, Perdel Contracting Co., would perform no actual work on the projects.  As a result of Perino’s fraud, Perdel expected to receive payment equivalent to a percentage of the work that Perdel Contracting fraudulently claimed to have performed.

Perino, 62, was convicted on three counts of wire fraud and one count of mail fraud.  The conviction is punishable by a maximum sentence of 80 years in prison.  U.S. District Judge Gary Feinerman indicated he will schedule a sentencing hearing at a later date.

Background

A city of Chicago ordinance establishes an overall goal of awarding at least 5% of total annual funding of all city contracts to WBEs.  The city’s program mirrors the federal government’s WOSB, or women-owned small-business, contracting program.  For contracts with values exceeding $10,000, each contractor has to commit a certain percentage of labor to WBEs, either as a joint venture or subcontractor, or by purchasing goods or services from a WBE.  In addition to being a WBE, the Perdel firm, which specializes in concrete and carpentry work, also qualified to participate in city projects as a certified Disadvantaged Business Enterprise (DBE).  The DBE program is a requirement by the U.S. Dept. of Transportation, applicable to federally-assisted transportation projects like airports, highways, and public transit systems.

Facts

Evidence at the four-day trial revealed:

  • Perino and a co-worker agreed to act as a “pass-through” WBE/DBE on two city projects, meaning that Perdel’s employees would perform no work and Perdel’s equipment would not be used.
  • For one of the projects – at O’Hare International Airport – Perino agreed to place the general contractor’s employees on Perdel’s payroll to perform the work that would be credited to Perdel.
  • Perino also entered into a sham contract to “purchase” street sweepers from the general contractor and title them in Perdel’s name while the general contractor’s workers performed the street sweeping as purported employees of Perdel.  Perino and the general contractor further agreed that, at the conclusion of the O’Hare project, the street sweepers would be returned to the general contractor for $1 per machine, and Perdel would receive 18% on top of the labor costs and $20 per hour for the street sweepers.

The conviction was announced by the U.S. Attorney for the Northern District of Illinois, along with representatives of the Federal Bureau of Investigation, and the Inspector General’s offices of the U.S. Dept. of Transportation, the U.S. Dept. of Labor, and the City of Chicago.

Source: https://www.justice.gov/usao-ndil/pr/jury-convicts-lockport-contractor-defrauding-city-chicago-s-women-owned-business-entity

See the FBI’s 2012 announcement of the charges filed against Perino at: https://www.fbi.gov/chicago/press-releases/2012/two-area-contractors-charged-with-fraud-involving-minority-and-women-set-asides-for-government-construction-contracts

Company owner going to prison for tax fraud involving 8(a) and DBE eligibility

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Financial Fraud Enforcement Task Force - DOJThe former president and majority stockholder of an Idaho construction company was sentenced to five years in prison this week following her plea of guilty to filing a false tax return and her conviction by a jury of conspiracy to defraud the United States, wire fraud, mail fraud, false statements, interstate transportation of property taken by fraud, conspiracy to obstruct justice, and obstruction of justice.

Elaine Martin, 69, of Meridian, Idaho, was the president of construction company MarCon, Inc.  In September 2013, after a 26-day jury trial, Martin was convicted of tax and fraud charges and sentenced to 84 months in prison.  In August 2015, the U.S. Court of Appeals for the Ninth Circuit vacated Martin’s sentence and her tax conviction and remanded for resentencing and further proceedings on the tax charge.  Today, Martin pleaded guilty to filing a false tax return and U.S. District Judge B. Lynn Winmill of the District of Idaho sentenced her to 60 months in prison on both the tax and fraud charges.  In addition to the prison term, Judge Winmill ordered Martin to pay restitution to the Internal Revenue Service (IRS) and Idaho Department of Transportation in the amount of $131,400.48, costs of prosecution in the amount of $22,859.60 and a forfeiture money judgment of $3,084,038.05, amounts Martin previously paid.

In the plea agreement, Martin admitted that she willfully signed false and fraudulent corporate income tax returns for Marcon Inc. for tax years 2005 and 2006.  Martin also admitted that she caused these tax returns to be false and fraudulent by keeping the unreported income off of the books and that she falsely told an IRS revenue agent, who was conducting a civil audit of Marcon, that all of Marcon’s gross receipts were deposited into its Wells Fargo operating account, when in fact, Martin was diverting and depositing gross receipts into Marcon’s Bank of Cascades account.  Martin withheld the records for Marcon’s Bank of Cascades from the individual who prepared her and Marcon’s tax returns for tax years 2005 and 2006.  Martin admitted that the total tax loss was $73,678.

Martin also admitted to conspiring to defraud the SBA 8(a) Program and the U.S. Department of Transportation, Disadvantaged Business Enterprise (DBE) Program, by submitting fraudulent tax returns and making false statements concerning her finances that caused Marcon to qualify and/or remain eligible for these programs.  Martin further admitted that her behavior affected the award of contracts pursuant to the 8(a) Program and DBE Programs.  For example, Marcon’s status as an Idaho DBE affected how and what DBE goals were set for particular construction projects and helped Marcon maintain a virtual monopoly in its geographic region between 2000 and 2006.  Marcon participated in the SBA 8(a) Program pursuant to direct negotiations with the awarding agency, rather than through fair and open competition.  Martin admitted that during the relevant time period, she would not have been awarded the 33 contracts at issue in the case but for the fraud.

As part of the plea agreement that Martin entered into today, she waived her right to further appeal.

This case is an outgrowth of the Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.  For more information on the task force, visit www.stopfraud.gov.

Source: http://www.justice.gov/opa/pr/former-idaho-construction-company-president-sentenced-prison-fraud-scheme

Jury finds NC couple guilty of small business fraud

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Justice Dept. seal - CopyFollowing a 13-day trial in U.S. District Court, a jury convicted Ricky Anthony Lanier, 48, and his wife Katrina Reshina Lanier, 43, both of LaGrange, N.C., of conspiracy to commit wire fraud, wire fraud, and major fraud against the United States.  Together, they orchestrated a scheme to fraudulently obtain federal contracts intended to be awarded to businesses lawfully participating in the Department of Veterans Affairs’ Service-Disabled Veteran-Owned Small Business (SDVOSB) program and the Small Business Administration’s 8(a) Business Development program.

We last reported on this case on September 15, 2014 (see: http://gtpac.org/?p=8302) when a federal grand jury indicted this couple.  They pleaded not guilty at that time.

SBA - IGSentencing is set for 9:00 a.m., on June 20, 2016, in U.S. District Court in Greeneville.  Ricky Lanier faces a possible sentence of up to 60 years in prison and $1 million in fines; Katrina Lanier faces a possible sentence of up to 50 years in prison and $750,000 in fines.  The Laniers agreed to forfeit their interests in approximately $170,000 in funds seized from bank accounts as well as five houses in Kinston, N.C., purchased with proceeds of the fraud.

SBA sealAccording to the evidence presented at trial, the Laniers conspired from November 2005 to April 2013 to defraud the United States government through a scheme to fraudulently obtain federal contracts intended for SDVOSB and 8(a) firms.  The scheme involved false representations that JMR Investments was eligible as an 8(a) business and that Kylee Construction was eligible as an SDVOSB and an 8(a) business.

VA sealRicky Lanier, who had previously owned and operated an 8(a) business receiving government contracts, became ineligible to participate in the 8(a) program after that business graduated from the 8(a) program in 2008.  Lanier used a friend and service-disabled veteran as the purported owner of Kylee Construction, representing that the friend was involved in the daily management of the business, even while the friend was working for a government contractor in Afghanistan.  The Laniers used a business owned by Ricky Lanier’s college roommate, JMR Investments, as a front to obtain construction contracts from the National Park Service and other federal agencies under the 8(a) program, misrepresenting the friend’s involvement in the management and operation of the business.

National Park ServiceThe scheme also involved sub-contracting out all or almost all of the work on the contracts in violation of program requirements.  Among other contracts, Ricky Lanier defrauded the National Park Service in connection with a contract to replace a wastewater treatment facility at the Tremont Institute in the Great Smoky Mountains National Park, falsely representing that subcontractor costs were over $400,000 more than they actually were, resulting in the award of a contract for $1.1 million when all work on the project was performed by a Kodak contractor for $550,000.  Lanier also fraudulently obtained a $1.3 million construction contract at the James H. Quillen VA Medical Center which had been set aside for SDVOSBs.

As a result of the false representations, Kylee Construction was awarded over $5 million in government contracts and JMR Investments was awarded over $9 million in government contracts, to include contracts for construction at the VA Medical Center at Mountain Home, Tenn., and in the Great Smoky Mountains National Park. The Laniers received almost $2 million in financial benefit from the scheme, using accounts of the shell companies for payment of personal expenses.

Nancy Harr, Acting U.S. Attorney for the Eastern District of Tennessee said, “The integrity of the Service-Disabled Veteran-Owned Small Business program is vital to its continued success. The U.S. Attorney’s Office will aggressively pursue and prosecute those who attempt to defraud that federal program and therefore the United States.”

Law enforcement agencies participating in the joint investigation which led to indictment and subsequent conviction of Ricky and Katrina Lanier included the Offices of Inspector General of both the VA and the SBA, with assistance from the U.S. Secret Service.

Source: http://www.justice.gov/usao-edtn/pr/federal-jury-convicts-north-carolina-couple-fraud 

Business owner sentenced for fraudulently obtaining $2.6 million in government contracts

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Yogesh K. Patel, age 48, of Gaithersburg, Maryland, was sentenced August 3, 2015 to 21 months in prison followed by three years of supervised release for conspiring to commit wire fraud in connection with a scheme to fraudulently obtain more than $2.6 million in federal government contracts through a Small Business Administration (SBA) program designed to assist disadvantaged businesses.  Patel also was ordered to forfeit $554,541.07.

SBA logo smallAccording to his plea agreement and court documents, Patel owned 91% of United Native Technologies, Inc. (UNTI), which purported to perform information technology services to the government and commercial clients.  In 2005, Patel applied for and was granted certification as a socially and economically disadvantaged owned business under SBA’s program.  In addition to a broad scope of assistance from SBA, participants in the program can receive sole source government contracts that are reserved for socially disadvantaged owned companies.

In 2007, Patel met co-defendant Wesley Burnett at a business conference in Costa Rica. Burnett, who was not a member of any economically or socially disadvantaged group, had experience constructing and maintaining barriers at military and government installations.  Patel and Burnett agreed that they would use UNTI to bid on SBA set aside contracts for barrier-related work. Burnett would perform the work under the contracts and would pay Patel 4.5 percent of the value of the contracts. In preparing a bid for a contact at Andrews Air Force, which was ultimately awarded to UNTI, Burnett and Patel exchanged emails in June 2011 in which they made statements indicating that they knew this arrangement was illegal.

In 2011, Patel met another individual identified as N.P., and they agreed to a fraudulent pass-thru arrangement similar to the one Patel had entered into with Burnett.

From October 2010 to July 2013, UNTI was fraudulently awarded $2,682,430 in set-aside U.S. government contracts.

In 2011, 2012 and 2013, Patel falsely certified to the SBA that no outside entity or individual provided financial support to UNTI when in fact Burnett and N.P. provided financial support to UNTI; and that Patel ran UNTI full-time, when in fact he did not because he was receiving disability compensation from the Social Security Administration in each of those years.

From November 2012 to October 2013, Patel received $973,407.37 in government funds under the fraudulently obtained set-aside contracts.  Patel kept a portion of these funds and turned the majority of them over to Burnett.  Prior to November 2012, payments under contracts went to Burnett, who provided a portion of the funds to Patel.

Wesley Burnett, age 46, of Hermosa Beach, California, previously pleaded guilty to his role in the scheme.  Burnett was sentenced to 42 months in prison and ordered to forfeit $694,893.99.

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs.  The Procurement Fraud Task Force includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrates the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.

The SBA’s Office of Inspector General (OIG), the U.S. Air Force Office of Special Investigations, and the Department of the Interior’s OIG participated in the investigation.

Company and its owners charged with DBE fraud on 224 contracts dating back to 1995

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Two owners of Carl M. Weber Steel Service, Inc. (Weber Steel), of Kutztown, PA, were charged with one count of conspiracy to commit wire fraud, the Philadelphia U.S. Attorney’s Office announced June 16, 2015.

DBE Fraud HotlineThe conspiracy charge states that Dennis Weber, president of Weber Steel, and Dale Weber, vice president, engaged in a scheme to defraud the U.S. Department of Transportation through DOT’s Disadvantaged Business Enterprise program (DBE). Weber Steel, a bridge and highway construction contractor, was not a certified DBE, but set-up and utilized a sham DBE called Karen Construction Co., Inc. (Karen Construction) to obtain DBE subcontracts for bridge and highway construction.

From approximately April 1995 through November 2011, Karen Construction, posing as a DBE, obtained an estimated $18.7 million from approximately 224 federally-funded projects, when, in reality, it was controlled by Weber Steel, a non-DBE.

If convicted, defendants Dennis and Dale Weber each face a maximum sentence of five years in prison, two years of supervised release, a fine of up to $250,000, and a $100 special assessment.  Defendant Weber Steel faces a maximum sentence of five years of probation, a fine of up to $500,000, and a $100 special assessment.

The case was investigated by USDOT’s Office of Inspector General, the Federal Bureau of Investigation, and the U.S. Department of Labor’s Office of Inspector General/Office of Labor Racketeering and Fraud Investigations.

Source: https://www.fbi.gov/philadelphia/press-releases/2015/kutztown-steel-company-and-owners-charged-with-conspiracy

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