Georgia Tech Procurement Assistance Center

Former Army colonel pleads guilty to role in Fort Gordon fraud, kickback scheme

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A former active-duty U.S. Army colonel has pled guilty to accepting bribes in return for helping steer military contracts to a business fraudulently claiming status as a small business.

Anthony R. Williams of Vienna, VA, pled guilty to Conspiracy to Commit Bribery and felony conflict of interest in U.S. District Court, said Bobby L. Christine, U.S. Attorney for the Southern District of Georgia.

Williams faces a sentence of up to five years in prison, and has agreed to forfeit more than $1.2 million in proceeds derived from the scheme.

According to court documents and evidence entered during court proceedings, Williams, while serving as a colonel in the U.S. Army, accepted bribes to steer federal procurement contracts to the CREC Group, a company owned by Calvin Devear Lawyer, a retired U.S. Army colonel. The CREC Group had received Small Business Administration (SBA) status as a small, disadvantaged business based on false representations from Lawyer and from Dwayne Oswald Fulton, then an employee of a defense contractor.

Lawyer previously pled guilty in the case and is serving a 60-month prison sentence, while co-conspirator, Anthony Roper, a former active duty U.S. Army colonel at Fort Gordon, also pled guilty and is serving a 60-month sentence.

The cases were investigated by the United States Army Criminal Investigations Division (CID), the Defense Criminal Investigative Service (DCIS), the Small Business Administration’s Office of Inspector General, and the United States Attorney’s Office.

Source: https://www.justice.gov/usao-sdga/pr/former-army-colonel-pleads-guilty-role-fort-gordon-fraud-kickback-scheme

$3.6 million settlement resolves procurement fraud investigation involving 8(a) firm

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VMJ Construction, LLC (VMJ) and its owner, Colorado resident Michael T. Vigil, as well as Maryland-based Vigil Contracting, Inc. (Vigil Contracting) and its operations manager, John J. Vigil, have agreed to pay the United States $3.6 million to resolve allegations that they defrauded the Small Business Administration (SBA) 8(a) Business Development Program.

The SBA’s 8(a) Business Development Program for economically and socially disadvantaged small businesses serves dual roles.

  • First, the program helps socially and economically disadvantaged small business owners gain access to valuable federal contracts, thereby promoting economic and social mobility.
  • Second, the program saves taxpayers money by spurring a competitive marketplace.  By promoting the development of small businesses, the 8(a) Program helps prevent the formation of monopolies that would stifle innovation and restrict consumers’ ability to negotiate lower prices.

It is important that the 8(a) Program is reserved only for companies that actually meet the program’s criteria because misuse of the program deprives legitimate 8(a) Program participants of valuable economic opportunities and undermines the integrity of the program.

There are several rules that businesses in the 8(a) program must abide by.

  • The socially and economically disadvantaged owner of the business must manage the day-to-day operations of the company and have responsibility for the long-term decision-making for the company.
  • 8(a) Program applicants must also truthfully disclose any affiliation with other businesses so that SBA may accurately assess whether the applicant meets the definition of a small business, and whether the applicant shows potential for success and the ability to perform the requisite percentage of the contracts secured through the Program.
  • Businesses also cannot remain in the 8(a) Program indefinitely; after nine years, they graduate from the program and are no longer eligible to bid on 8(a) contracts.

VMJ was accepted into the 8(a) Program in 2011.  Michael T. Vigil, who is Hispanic, was the 91% owner of VMJ, and was the socially and economically disadvantaged individual upon which VMJ based its application to the 8(a) program.  John J. Vigil was a 9% owner of VMJ.  John J. Vigil was also the operations manager of Vigil Contracting.  Vigil Contracting is a 2011 graduate of the 8(a) Program.  Since 2011, Vigil Contracting has not been eligible to bid for contracts reserved for 8(a) program participants.

The United States contends that VMJ made false statements to the SBA regarding its eligibility to participate in the 8(a) program.  Specifically, VMJ relied almost exclusively upon Vigil Contracting to bid on and complete the work awarded to VMJ under the 8(a) program.  VMJ used Vigil Contracting’s bonding, office space, employees, contractors, software, computers, and vehicles.  Vigil Contracting employees and contractors, including John J. Vigil, made the high-level business decisions of VMJ and managed the day-to-day operations of VMJ.   Michael T. Vigil did not control VMJ, did not set the long-term policy, nor manage the day-to-day management of the business.  VMJ knowingly misrepresented these facts to SBA, in both VMJ’s initial application to participate in the 8(a) program and in an annual update to SBA.  As a result of the deception, the Army, the Navy, and the Department of Agriculture awarded VMJ several federal government contracts set aside for 8(a) program participants.

“The United States uses these set-aside contracts for a clear reason — to help small businesses owned by economically and socially disadvantaged individuals.  This program continues the promise of the American Dream by helping new small businesses get on their feet, and with more businesses on their feet, our markets are healthier and more competitive,” said U.S. Attorney Jason Dunn. “When companies lie about their eligibility to get these contracts, they prevent other deserving small businesses from getting the assistance that Congress intended.”

Source: https://www.justice.gov/usao-co/pr/36-million-settlement-resolves-procurement-fraud-investigation-against-colorado-and

Former Army colonel, wife sentenced to prison for roles in Fort Gordon fraud, kickback scheme

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A former active-duty U.S. Army colonel and his wife were sentenced to federal prison and fined more than $200,000 Feb. 5th for their roles in steering government contracts to co-conspirators in return for cash.

Anthony Roper of Augusta, Georgia pled guilty to Procurement Integrity Fraud and was sentenced to 60 months in prison and fined $200,000. He also will be subject to three years of supervised release after his sentence is completed.  There is no parole in the federal prison system. Roper’s wife, Audra Roper, pled guilty to Accessory After the Fact and was sentenced to 28 days in prison, fined $10,000, and placed on five years of probation.

According to evidence presented during guilty pleas and sentencing hearings, Anthony Roper, then in active-duty status at Fort Gordon, accepted bribes from Calvin Devear Lawyer, a retired U.S. Army colonel, to steer Army contracts worth more than $20 million to Lawyer’s company, the CREC group. Based on false representations from Lawyer and Dwayne Oswald Fulton, then an employee of a defense contractor, CREC group had been awarded Small Business Administration (SBA) status as a small, disadvantaged business, and the company used that status to gain competitive advantage in contracting.

The conspiracy also included the creation of fraudulent documents in an attempt to cover up bribes to Anthony Roper after law enforcement agencies discovered the scheme. Lawyer previously pled guilty in the case and was sentenced to 60 months in prison. As part of his sentence, Lawyer also paid a $3 million personal money judgment and a $2 million civil penalty.

The cases were investigated by the United States Army Criminal Investigations Division (CID), the Defense Criminal Investigative Service (DCIS), the Small Business Administration’s Office of Inspector General, and the United States Attorney’s Office.

“Taxpayers deserve above-board behavior from those who do business with the federal government, especially with the military,’” said Southern District of Georgia U.S. Attorney Bobby L. Christine. “It is particularly disappointing when members of the armed forces violate their oaths of office to steal from the public, and our office will prosecute those crimes vigorously.”

Source: https://www.justice.gov/usao-sdga/pr/former-army-colonel-wife-sentenced-prison-roles-fort-gordon-fraud-kickback-scheme

SBA is deleting ‘direct’ ownership requirement from HUBZone program

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HUBZone companies owned by U.S. citizens will no longer be required to demonstrate that the ownership is “direct.”

The SBA’s HUBZone program rules have long required that a HUBZone company owned by U.S. citizens be at least 51% directly owned by those citizens – as opposed to allowing the qualifying citizens to own those interests through legal vehicles like holding companies.  But the SBA has had second thoughts, and effective May 25, 2018, the direct ownership requirement will be eliminated.

In a direct final rule issued on March 26, the SBA writes that “[d]irect ownership is not statutorily mandated” by the portion of the Small Business Act governing the HUBZone program.  The SBA has concluded that “the purposes of the HUBZone program – capital infusion in underutilized geographic areas and employment of individuals living in those areas – may be achieved whether ownership by U.S. citizens is direct or indirect.”

Keep reading this article at: http://smallgovcon.com/hubzone-program/hubzone-program-sba-will-delete-direct-ownership-requirement/

Infrastructure projects should include more minority- and women-owned contractors

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The need to rebuild, repair, operate and maintain our country’s infrastructure is, and always will be, an ongoing endeavor. The problem is that minorities, women, veterans and other groups are seldom the contractors or high-wage earners on infrastructure projects.

Historically, the primary funding source for the U.S. Dept. of Transportation and its infrastructure projects is an 18.4¢-per-gallon gasoline tax and a 24.4¢-per-gallon tax on diesel fuel that millions of consumers pay at the pump. These taxes account for nearly $200 billion annually. In addition to the federal tax, states collect gasoline taxes that often are much higher, with some state rates adding as much as 57¢ per gallon to a fuel purchase. Couple these taxes with airport fees, tolls and so on, and we see that much of America’s infrastructure is supported by consumers—people who should have the right to participate in rebuilding it. The inclusion of all Americans must be a top priority for local, state and federal representatives and the companies awarded these contracts.

As financial models for these projects become more creative, including the wider use of public-private partnerships (P3s), we need to ensure that funds are being used for their intended purpose—to rebuild infrastructure—and that all Americans benefit from this funding.

Keep reading this article at: https://www.enr.com/articles/44181-infrastructure-projects-should-include-more-minority–and-women-owned-contractors

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

Woman in DBE front scheme gets 12 months in federal prison

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The former owner of a suburban Chicago construction business convicted of acting as an illegal front so another company could secure a lucrative city airport contract was sentenced Thursday (Mar. 16, 2017) to 12 months in federal prison.

Lawyers for Elizabeth Perino had sought probation and home confinement, but U.S. District Judge Gary Feinerman said he opted for prison to send a message to “an industry that needs to clean up its act.”

Perino’s conviction is the latest turn in an eight-year saga sparked in 2008 when Perino’s former project manager filed a whistleblower lawsuit alleging misconduct in massive projects run by industry giant McHugh Construction, a century-old company that reported more than a half-billion dollars in revenue in 2015.

That sparked a joint investigation by federal prosecutors and Illinois Attorney General Lisa Madigan resulting in the criminal charges.

Perino’s company posed as a legitimate woman-owned business, allowing Chicago-based Diamond Coring Co. to meet its requirements for hiring disadvantaged businesses in order to win a multimillion-dollar runway repair contract at O’Hare International Airport. Perino did no work for the bills submitted by her company.

Keep reading this article at: http://www.chicagotribune.com/news/local/breaking/ct-phony-woman-business-owner-sentencing-met-20170316-story.html

DBE contracting opportunities under the Trump Administration

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good-time-for-dbes-01-2017With President-elect Trump’s promise to turn America’s crumbling infrastructure into an opportunity for accelerated economic growth, there are likely to be significant investments in the next four years in transportation, construction, and other similar projects.

The new administration’s plans are likely to have a particularly big impact on the highway construction industry, which stands to ultimately receive billions in federally-financed dollars. State and local governments will be first in line to receive the funds so they can be trickled down to create thousands of new jobs. Those dollars will be filtered through prime contractors and their disadvantaged business enterprise (DBE) partners, which will be performing many of these federally-funded projects. With billions of dollars likely to hit the streets, this is a good time for firms to look into the DBE program.

While not as well-known as the Small Business Administration’s 8(a) and other small business programs, the Department of Transportation’s (DOT) DBE program has been around for some time. It was established by Congress in 1983 with legislation that required that at least 10 percent of the funds authorized for highway and transit federal financial assistance programs be expended with DBEs. The three agencies with those programs are the Federal Highway Administration, Federal Aviation Administration, and Federal Transit Administration.

Keep reading this article at: http://www.jdsupra.com/legalnews/dbe-contracting-opportunities-under-the-95974/

Court of Appeals affirms lengthy prison sentences for men engaging in DBE fraud 

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The U.S. Attorney’s Office for the Middle District of Pennsylvania has announced that Joseph W. Nagle of Deerfield Beach, Florida and Ernest G. Fink, Jr. of Orwigsburg, Pennsylvania, the former owners of Schuylkill Products Inc., (SPI) had their sentences affirmed by the Third Circuit Court of Appeals.

Nagle was sentenced to 84 months’ imprisonment on November 30, 2015, and Fink was sentenced to 41 months’ imprisonment on February 24, 2016, for their roles in a massive conspiracy to defraud the U.S. Department of Transportation’s Disadvantage Enterprise (DBE) program.

According to USDOT, their scheme, which lasted for over 15 years and involved over $136 million in government contracts in Pennsylvania alone, is the largest reported DBE fraud in the nation’s history.

In April 2012, after a four-week jury trial, a jury convicted Nagle on 26 charges relating to the scheme, including conspiracy to defraud USDOT, mail fraud, wire fraud, and money laundering.  Fink previously pleaded guilty to conspiracy to defraud the USDOT in August 2010.

In 2014, three other former executives associated with SPI were sentenced for their roles in the scheme.

  • Romeo P. Cruz, of Westhaven, Connecticut, the former owner of Marikina Construction Corp., which operated as a front for SPI, was sentenced to 33 months’ imprisonment.
  • Timothy G. Hubler, of Ashland, Pennsylvania, SPI’s former Vice-President in charge of field operations, was sentenced to 33 months’ imprisonment.
  • Dennis F. Campbell, of Orwigsburg, Pennsylvania, SPI’s former Vice-President in charge of sales and marketing, was sentenced to 24 months’ imprisonment.

The investigation was conducted by the FBI, USDOT’s Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS.

Source: https://www.justice.gov/usao-mdpa/pr/third-circuit-court-appeals-affirms-lengthy-prison-sentences-two-men-who-executed

 

S.C. feds allege contractor, associates bilked government of $350 million

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SC Fraud 08.2016Federal prosecutors have indicted five men, two women and two corporations, alleging they illegally won government contracts worth some $350 million by misrepresenting themselves as straw companies controlled by either low-income men and women or disabled veterans.

Most of the seven are from the Columbia, South Carolina area.

An 18-count indictment in the case charges that Thomas Brock, 49 of Camden; Jerry Eddins, 66, of Aspermont, Texas; Harry Michael White, 65, of Columbia; Cory J. Adams, 43, of Columbia; Tory Brock, 51, of Camden; Alfonza McCutchen Jr., 39, of Irmo; and Allison Amanda Sauls, 46, of New York, N.Y., secretly set up an interlocking set of businesses and conspired to defraud the federal government by falsifying their eligibility to get government contracts.

The conspirators also identified, created and recruited “businesses owned by qualifying minorities, women, veterans and disabled veterans” and “hid their roles in the companies from the Small Business Administration and the Veterans Administration,” the indictment states.

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