The U.S. Attorney’s Office for the Middle District of Pennsylvania announced on January 13, 2014 that Dennis F. Campbell, of Orwigsburg, Pennsylvania, and Timothy G. Hubler, of Ashland, Pennsylvania, were sentenced by the Senior U.S. District Judge Sylvia H. Rambo in Harrisburg in connection with their roles in what the U.S. Department of Transportation (USDOT) has called the largest Disadvantaged Business Enterprise (DBE) fraud in the nation’s history.
Campbell, Schuylkill Product’a Inc.’s (SPI) former vice president in charge of Sales and Marketing, was sentenced to 24 months’ imprisonment, $119 million in restitution to the USDOT, and two years’ supervised release. Hubler, SPI’s former vice president in charge of Field Operations, was sentenced to 33 months’ imprisonment, $119 million in restitution to the USDOT, $82,370 in restitution to the Internal Revenue Service, and two years’ supervised release. Both men were ordered to surrender to the Bureau of Prisons by February 17, 2014, to commence service of their sentences.
Campbell pleaded guilty to DBE fraud in 2008, and Hubler pleaded guilty to DBE fraud and tax fraud in 2008. Romeo P. Cruz, of West Haven, Connecticut, the former owner of Marikina Construction Corporation, the DBE firm that operated as a front for SPI to gain lucrative DBE contracts, pleaded guilty to DBE fraud and tax fraud in 2008 and 2009, and is scheduled to be sentenced on Wednesday, January 15, 2014. All three men cooperated with the government’s investigation that led to the conviction of the two former owners of SPI, Ernest G. Fink, of Orwigsburg, Pennsylvania, SPI’s former vice president and chief operating officer; and Joseph W. Nagle, of Deerfield Beach, Florida, SPI’s former president and chief executive officer.
Fink pleaded guilty to DBE fraud in 2010. Nagle was convicted after a four-week jury trial in 2012 of 26 charges relating to the DBE fraud scheme. No sentencing date has been scheduled for Fink and Nagle.
“The sentences handed down today, in what is the largest reported DBE fraud case in USDOT history, serve as clear signals that severe penalties await those who would attempt to subvert USDOT laws and regulations,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General. 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, Transit, and Aviation Administrations; and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”
According to U.S. Attorney Peter J. Smith, the DBE fraud lasted for over 15 years and involved over $136 million in government contracts in Pennsylvania alone. SPI, using Marikina as a front, operated in several other states in the Mid-Atlantic and New England regions. Although Marikina received the contracts on paper, all the work was really performed by SPI personnel, and SPI received all the profits. In exchange for letting SPI use its name and DBE status, Marikina was paid a small fixed-fee set by SPI.
The scheme lasted as long as it did because of the numerous fraudulent steps the co-conspirators took to conceal the scheme. SPI personnel routinely pretended to be Marikina personnel 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’s logo on SPI vehicles.
SPI and its wholly owned subsidiary, CDS Engineers, was sold in 2009 and was based in Cressona, Pennsylvania. SPI manufactured concrete bridge beams, as well as other suppliers’ products. CDS was SPI’s erection division and installed SPI’s bridge beams, as well as other suppliers’ products. 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. The DBE fraud here involved SPI’s use of Marikina’s name and status to obtain DBE contracts that it was not entitled to receive.
The investigation was conducted by the FBI, the USDOT Inspector General’s Office, U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the Internal Revenue Service. Senior Litigation Counsel Bruce Brandler handled the prosecution.