Georgia Tech Procurement Assistance Center

3 charged in fraud scheme involving small business contracts

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Last week in Wisconsin, three defendants agreed to plead guilty to federal crimes related to a long-term fraud scheme led by Brian L. Ganos involving government-funded contracts intended to benefit small businesses.

The three defendants are James E. Hubbell of Sussex, WI, Jorge Lopez of Worthington, Minnesota, and Telemachos Agoudemos  of Big Bend, WI.

According to the charges, the scheme involved Ganos, Hubbell, and others operating construction companies with straw owners who qualified as a disadvantaged individual or as a service-disabled veteran, but who did not actually control the companies.  The scheme participants fraudulently obtained small business program certifications to win millions of dollars in government-funded contracts to which they were not entitled.  Specifically, the following is alleged:

  • Nuvo Construction Company, Inc. (Nuvo”) was misrepresented to be majority-owned and controlled by Lopez to obtain certifications as a Small Disadvantaged Business from the U.S. Small Business Administration and as a Disadvantaged Business Enterprise from Milwaukee County.  In reality, Lopez worked full-time for a different entity in Minnesota and did not actually control Nuvo.
  • C3T, Inc. was misrepresented to be majority owned and controlled by Agoudemos to obtain verification as a Service-Disabled Veteran-Owned Small Business.  In reality, for long stretches, Agoudemos had virtually no involvement in C3T.

Hubbell and Lopez agreed to plead guilty to conspiring to defraud the United States by virtue of the scheme in violation of 18 U.S.C. § 371.  Agoudemos agreed to plead guilty to making false statements to federal agents in order to conceal that C3T, Inc. did not qualify as a Service-Disabled Veteran-Owned Small Business in violation of 18 U.S.C. § 1001.  The maximum penalties for these offenses is five years in prison and a $250,000 fine.

Earlier this month, on April 3, 2018, charges were filed against four defendants in two cases that are related to the April 18 charges.  (See: http://gtpac.org/?p=14290.) 

  • First, in Case No. 18-CR-62, an indictment was filed charging Brian L. Ganos of Muskego and Mark F. Spindler of Menomonee Falls, and the business Sonag Company, Inc. with crimes related to the fraud scheme.  The indictment also alleged that Ganos engaged in money laundering with proceeds from the scheme. The indictment included a forfeiture notice indicating that the United States seeks to forfeit a condominium located in Winter Park, Colorado; the office building used by the companies at 5500-5510 West Florist Avenue, Milwaukee, Wisconsin; a 2014 Chevrolet Corvette Stingray Convertible; and more than $2.2 million seized from two bank accounts.  Each of those assets is subject to civil forfeiture actions filed by the United States.
  • Second, in Case No. 18-CR-64, Nicholas Rivecca agreed to plead guilty to an Information charging him with conspiring with Ganos and others to use Nuvo’s DBE status to win government-funded concrete orders.  Rivecca and Ganos were the co-owners of Sonag Ready Mix, LLC, which is alleged to have filled the concrete orders in Nuvo’s name.

The following agencies are participating in the investigation that led to these charges: the Federal Bureau of Investigation; U.S. General Services Administration, Office of Inspector General; Department of Veterans Affairs, Office of Inspector General; Department of Defense, Office of the Inspector General, Defense Criminal Investigative Service; U.S. Department of Transportation, Office of Inspector General; U.S. Small Business Administration, Office of Inspector General, Investigations Division; Defense Contract Audit Agency; and U.S. Army Criminal Investigations Command Major Procurement Fraud Unit.

Source: https://www.justice.gov/usao-edwi/pr/three-more-defendants-charged-fraud-scheme-involving-small-business-contracts

Business owner sentenced to 20 months in prison for fraudulent billing scheme against federal government

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Nikita Davis, 48, a business owner with a firm in Washington, D.C., has been sentenced to 20 months in prison for a scheme in which she improperly qualified for government contracts and then fraudulently billed the United States more than $1.1 million.

Davis pled guilty in June 2017, in the U.S. District Court for the District of Columbia, to major fraud against the United States.  She was sentenced on October 20, 2017.  The plea agreement calls for her to pay $1,189,697 in restitution to the United States. Upon completion of her prison term, Davis will be placed on three years of supervised release.

Davis was the president and chief executive officer of Federal Acquisition Consultants Inc. (FACI), a company based in Washington, D.C., that specialized in acquisition and program management support. The company was formed in 2007 as an economically disadvantaged, woman-owned, small business.

According to a statement of offense submitted at the plea hearing, Davis made fraudulent representations when she applied in March 2013 for a contract under a GSA program created to streamline the federal procurement process through pre-negotiated prices and terms. GSA provided centralized procurement for the federal government through this program, known as the GSA Multiple Awards Schedule Program (GSA MAS or simply “GSA Schedule”).

The GSA awarded Davis’s company a Schedule contract in May 2013.  Later in 2013, the Department of Commerce solicited requests for quotes from Schedule contractors for work related to the mission of the Afghanistan Investment and Reconstruction Task Force.  The Task Force, part of the Commerce Department, aimed to facilitate and coordinate activities designed to help Afghanistan develop a sustainable economy, stabilize the market, and create strong Afghan-American partnerships.

Davis’s company submitted quotes and in September of 2013 was awarded seven contracts, worth a total of more than $3.1 million.  In April 2014, the Commerce Department’s Office of Inspector General initiated an investigation into Davis and the company, based on an allegation that she submitted false invoices and made false statements to government agencies.  The investigation revealed that, in obtaining the GSA Schedule contract designation, Davis made false representations about her company’s past work experience.  It also determined that Davis’s company improperly billed and collected from the government a total of $1,189,697 under the contracts by billing improperly for travel, danger pay, insurance, security and labor.

Those investigating this case included representatives of the Offices of the Inspector General for the General Services Administration and Department of Commerce.

Source: https://www.justice.gov/usao-dc/pr/business-owner-sentenced-20-months-prison-fraudulent-billing-scheme-against-federal

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

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

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