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Contractor forfeits $1.7 million in assets, pleads guilty to delivery of cheap versions of products

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Jim A. Meron, owner of California-based WOW Imaging Products LLC and Time Enterprises LLC, has pled guilty to wire fraud related to a procurement fraud scheme involving the General Service Administration (GSA) Federal Supply Schedule program and a Department of Defense (DoD) electronic ordering system.

According to court documents, between May 2011 and July 2017, Meron used his two office supply businesses to defraud federal government agencies out of as much as $3.5 million — involving thousands of transactions — by substituting and delivering cheaper, generic versions of expensive, name-brand products his customers ordered, and pocketing the price difference. As part of his plea, Meron agreed to forfeit more than $1.7 million in assets seized during the investigation of his crimes.

Meron’s companies contracted to sell office supplies to federal agencies through two web-based government sales portals, GSA Advantage and DoD eMall.  After Meron received payments for the premium products his customers ordered, he obtained compatible products from his suppliers that cost him a fraction of what his customer paid for the brand-name products they ordered.  Meron then substituted and delivered those cheaper products for the more expensive products his customers ordered, and retained the difference in cost.  Over time, Meron extended his substitution scheme to nearly all orders for those name-brand products, and never intended to deliver what his customers ordered.

This case is the product of an investigation by GSA’s Office of Inspector General and the Defense Criminal Investigative Service.

Meron is scheduled to be sentenced on February 4, 2019.  Meron faces a maximum statutory penalty of 20 years in prison and a $250,000 fine on each count of conviction. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Source: https://www.justice.gov/usao-edca/pr/granite-bay-man-pleads-guilty-multi-million-dollar-product-substitution-fraud-federal

Military bought thousands of boots labeled ‘Made In the USA’ — but they were from China

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Five executives with a former leading manufacturer of U.S. military boots have been sentenced in federal court for saying the boots were made in Tennessee when they were actually produced in China.

According to an indictment filed in U.S. District Court, the actual Chinese manufacturer of the boots was told to include “USA” on the label of Wellco boot uppers that were then shipped to the U.S. The “Made in China” tags were removed, the indictment says. Soles were affixed to the boots at Wellco’s plant in Morristown, Tennessee, and elsewhere, according to the document.

From 2006 through 2012, the U.S. Department of Defense paid at least $138 million to Wellco for military footwear, according to the indictment.

Keep reading this article at: https://taskandpurpose.com/wellco-execs-military-boots-china/

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Two companies and individuals indicted for exploiting disadvantaged business program

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Stamatios “Tom” Kousisis of Pennsylvania and Emanouel “Manny” Frangos of Ohio, along with Alpha Painting & Construction Co., Inc. of Baltimore, Maryland, and Liberty Maintenance, Inc. of Youngstown, Ohio were charged last week with conspiracy to commit wire fraud, wire fraud, and making false statements in a scheme involving the U.S. Dept. of Transportation’s Disadvantaged Business Program (DBE) in connection with Pennsylvania’s federally-funded Girard Point Bridge project and the federally-funded 30th Street Station.

Kousisis is the Project Manager of Alpha and Frangos is an owner of Liberty Maintenance, which are both bridge painting contractors, although neither is a certified DBE in Pennsylvania.  The alleged scheme involved Alpha-Liberty JV, a joint venture between defendants Liberty Maintenance and Alpha Painting, and Markias, Inc., a now-defunct certified DBE.

In September 2009, PENNDOT awarded a contract for approximately $70.3M to a triventure that included the Alpha-Liberty JV to perform structural steel painting and repairs, and concrete repairs, on the Girard Point Bridge in Philadelphia.  As part of that award, the triventure made a commitment to PENNDOT to subcontract approximately $4.7M in DBE work to Markias to supply materials to be used in performing the contract.  Under governing law, the Alpha-Liberty joint venture was only entitled to credit for work performed by a DBE that was performing a commercially useful function.  Instead, according to the indictment, the Alpha-Liberty JV and Kousisis ordered materials needed for their work on the Girard Point Project directly from suppliers that were not DBEs, and used Markias as a mere pass-through or front, to make it falsely appear that disadvantaged business enterprise requirements had been met on the Girard Point Project when those requirements had in fact not been met.  Markias did not perform a commercially useful function.

In December 2010, PENNDOT awarded a contract for approximately $50.8 million to a joint venture of two companies referred to in the indictment as Company C and Company F, to perform structural steel painting and repairs and roadway reconstruction beneath and around AMTRAK’s 30th Street Train Station in Philadelphia.  Company C and Company F entered into a subcontract, for approximately $15 million, for the Alpha-Liberty JV to perform the structural steel painting beneath 30th Street Station.  As part of the bid process, Company C and Company F committed to subcontract approximately $1.7M in Disadvantaged Business work to Markias to supply paint materials for the 30th Street Project.  Instead, according to the indictment, the Alpha-Liberty JV and Kousisis ordered materials needed for their work on the 30th Station Project directly from suppliers that were not DBEs, and used Markias as a mere pass-through or front, to make it falsely appear that the DBE requirements had been met on the 30th Station Project when those requirements had in fact not been met.  Markias did not perform a commercially useful function.

In addition, the indictment alleges that the Alpha-Liberty JV and Kousisis, and Frangos ordered materials to be delivered to and used on out-of-state projects while directing that the purchase invoices be sent to Markias in New Jersey.  Then, allegedly at the direction of Alpha-Liberty JV and Kousisis, and Frangos, Markias issued invoices that made it falsely appear that those supplies had been used on the Girard Point and 30th Street Projects in Pennsylvania.  Alpha-Liberty JV and Kousisis, and Frangos allegedly caused Company C to falsely report to PENNDOT that the supplies delivered to and used on the out-of-state projects qualified for DBE credit in Pennsylvania when those purchases did not so qualify.  PENNDOT awarded approximately $3.26 million in DBE credit to for the Girard Point Project and approximately $1.275 million in DBE credit for the 30th Street Station Project based on DBE work supposedly performed by a disadvantaged business (Markias). Alpha-Liberty JV paid Markias 2.25% of the face value of the invoices processed by Markias allegedly to act as a pass-through.

If convicted the defendants face a statutory maximum sentence of 170 years in prison, a possible fine, supervised release, and a $1,600 special assessment.

The case was investigated by the U.S. Department of Transportation Office of Inspector General, the FBI, the Department of Labor Office of Inspector General, and Amtrak Office of Inspector General.

An indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.

Source: https://www.justice.gov/usao-edpa/pr/charges-allege-two-individuals-and-their-companies-exploited-usdot-disadvantaged

Multiple defendants charged with 22 counts of fraud and money laundering involving $200 million in small business contracts

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A federal grand jury returned a twenty-two count indictment on April 3rd, charging three defendants with a 12-year fraud and money laundering scheme involving over $200 million in government-funded contracts intended to benefit small businesses.

The indictment names two individuals, Brian L. Ganos and Mark F. Spindler, both of Wisconsin, and the business Sonag Company, Inc. as defendants.  In a related case, Nicholas Rivecca, Sr., also of Wisconsin, agreed to plead guilty to conspiring to defraud the United States.

The indicted defendants are charged with a conspiracy to commit mail fraud and wire fraud.  The alleged conspiracy involves 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 conspirators then fraudulently obtained small business program certifications to win government-funded contracts to which they were not entitled.

Specifically, court documents allege the following:

  • Nuvo Construction Company, Inc., was misrepresented in order to obtain certifications as a Small Disadvantaged Business from the U.S. Small Business Administration (SBA) and as a Disadvantaged Business Enterprise (DBE) from Milwaukee County.  However, the disadvantaged owner 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 another individual to obtain verification as a Service-Disabled Veteran-Owned Small Business.  In reality, for long stretches, the “owner” had virtually no involvement in C3T.
  • Pagasa Construction Company, Inc. was misrepresented to be majority owned and controlled by a third disadvantaged individual in order to obtain certification as a Small Disadvantaged Business from the SBA.  In reality, the owner relied on the assistance of conspirators to form Pagasa.

The federal indictment alleges that the defendants used their certifications to obtain over $200 million in federal, state, and local contract payments.  These included federal construction contracts that were set aside for Small Disadvantaged Businesses or Service-Disabled Veteran-Owned Small Businesses.  The indictment also alleges that the scheme included using Nuvo’s DBE certification to win ready-mix concrete contracts based on the false representation that Nuvo provided ready-mix concrete independently when, in truth, Nuvo’s concrete operations depended heavily on Sonag Ready Mix.  As a part owner of Sonag Ready Mix, Nicholas Rivecca, Sr. agreed to plead guilty to that portion of the scheme.

The government alleges that the conspirators engaged in efforts to conceal the scheme and obstruct investigations into the matter; when interviewed, Ganos and Spindler each gave materially false statements to federal agents.

The indictment also alleges that Ganos conspired with Sonag Company, Inc. and others to launder proceeds of the fraud scheme in order to disguise and conceal the nature, source, and location of those fraud proceeds.  As a part of that conspiracy, Ganos is alleged to have transferred fraud proceeds from accounts of Nuvo and C3T to accounts that Ganos controlled.  The indictment further charged Ganos with three counts of concealment money laundering transactions, one of which involved the purchase of a Corvette with proceeds of the fraud scheme, and seven counts of spending money laundering transactions.

The maximum penalties for each of the wire and mail fraud-related charges are 20 years in prison, a $250,000 fine, and forfeiture of criminal proceeds.  The maximum term of imprisonment for conspiring to defraud the United States is five years.  The maximum term of imprisonment for the money laundering conspiracy and for each of the three concealment money laundering charges is 20 years in prison.  The maximum term of imprisonment for each of the seven spending laundering charges is 10 years in prison.  Each of the 11 money laundering charge also carries a fine of up to $250,000 or twice the amount laundered and subjects the defendant to forfeiture of all money and property involved in the laundering transaction.

Assets of the defendants — including real property, a 2014 Chevrolet Corvette Stingray Convertible, and more than $2.2 million seized from two bank accounts — are subject to civil forfeiture actions filed by the federal government.

The following agencies are participating in this investigation: 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 the U.S. Army Criminal Investigations Command Major Procurement Fraud Unit.

An indictment is only a charge and not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.

Source: https://www.justice.gov/usao-edwi/pr/multiple-defandants-charged-fraud-and-money-laundering-scheme-involving-over-200

Management of DoD contractor pleads guilty to ‘Made in the USA’ contract fraud

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The former president and CEO of Wellco Enterprises, Inc. (Wellco) and Tactical Holdings Operations, Inc. (Tactical Holdings), Vincent Lee Ferguson, of Knoxville, Tennessee, has pled guilty to conspiracy to commit wire fraud.

Wellco’s former sales VP, Matthew Lee Ferguson, of Geneva, Illinois, and former marketing director, Kerry Joseph Ferguson, of Houston, Texas, also pled guilty to conspiracy to commit wire fraud.  In addition, Wellco’s former VP of government contracting, Neil Streeter, of Warren, Massachusetts, and former operations manager, Stephanie Lynn (Ferguson) Kaemmerer, of Knoxville, Tennessee, pled guilty to smuggling goods into the United States.

Sentencing has been set for Vincent Lee Ferguson, Matthew Lee Ferguson, and Kerry Joseph Ferguson for June 6, 2018.  Sentencing for Neil Streeter and Stephanie Lynn Kaemmerer is set for June 11, 2018.  Conspiracy to commit wire fraud and smuggling goods into the United States both carry a maximum penalty of 20 years in prison and a fine of up to $250,000.  Each defendant was released pending sentencing.

According to information on file with the U.S. District Court, Wellco was a leading manufacturer and supplier of military footwear to the U.S. Department of Defense (DoD) and to civilian (commercial) customers for over 70 years.  From 2006 through 2012, DoD alone paid in excess of $138 million to Wellco for the supply of combat boots.  Wellco pioneered and patented the first practical method for molding and attaching a rubber sole to a shoe upper in a single operation.  During the Vietnam War, the U.S. Army adopted Wellco technology for the manufacture of its hot-weather boots for the jungles of Vietnam, a boot that became known as the “Vietnam Boot” or the “jungle boot.”   In May, 2007, in a deal involving approximately $22 million, Wellco was acquired by two investment firms, Golden Gate Private Equity, Inc. and Integrity Brands, Inc.  Wellco became a wholly owned subsidiary of Golden Gate’s portfolio company, Tactical Holdings.

In March 2006, Vincent Lee Ferguson was made President and CEO of Wellco.  At that time, he discussed a turnaround plan with Wellco’s Board of Directors for the company to increase commercial sales and “aggressively pursue” sales to the U.S. government.  From December 2008 through August 2012, he conspired with his executive team to import military-style boots that were made in China into the United States and then deceptively market and sell those boots to DoD (and other federal departments and agencies), government contractors, and the general public as “Made in the USA” and as compliant with the Berry Amendment and the Trade Agreements Act (TAA).   The Berry Amendment prohibits DoD from buying clothing that is not grown, reprocessed, reused or produced in the U.S.   The purpose of the Berry Amendment is to protect the viability of America’s textile and clothing production base.  The TAA provides that the government may acquire only “U.S.-made or designated country end products” and requires government contractors to certify that each “end product” meets applicable requirements.

By December 2008, Wellco was manufacturing certain military boot model uppers and insoles in China.  In order to conceal this fact, the conspirators required the Chinese manufacturing facility to include the American flag and “USA” on labels of certain boot uppers.  After two shipments of these deceptively marked boots were detained and seized by the U.S. Department of Homeland Security’s Customs and Border Protection, the conspirators ordered the Chinese facility to stitch tear-away “Made in China” labels in Wellco boot uppers.  After importation, the conspirators instructed Wellco factory workers in Morristown, Tennessee to tear out the “Made in China” tags prior to shipping the boots to government and commercial purchasers.

The defendants marketed and sold these Chinese-made Wellco boots as “Made in the USA.”  They also submitted false certifications to DoD and other federal agencies, and to government contractors that these boots complied with the Berry Amendment and TAA and met certain safety standards, including electrical hazard and blood-borne pathogen protections for U.S. troops.  For example, on August 15, 2012, the defendants submitted a signed “Certificate of Conformance” to a government contractor, representing that Wellco’s boot model S161 was “100% Berry Compliant” and “fully protective against Electrical Hazard,” even though the model was imported from China and not safety tested.  The boots were then supplied to troops stationed at Sheppard Air Force Base in Wichita Falls, Texas.   In total, Wellco sold at least $8.1 million of fraudulent boots.

This case was investigated by Homeland Security Investigations, Defense Criminal Investigative Service, Air Force Office of Special Investigations, General Services Administration Office of Inspector General, and Defense Contract Audit Agency.

Source: https://www.justice.gov/usao-edtn/pr/former-ceo-and-executive-management-defense-contractor-wellco-enterprises-inc-pleads

Indictment in $40 million alleged fraud case signals increased scrutiny of SDVOSB contractors

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On December 1, 2017, the U.S. Department of Justice (DOJ) announced the federal grand indictment of an army veteran for allegedly engaging in major government program fraud by using his status as a service-disabled veteran to obtain contracts set-aside for service-disabled veteran-owned small businesses (SDVOSBs), despite the fact that he did not control the management and daily operations of the company to which the contracts were awarded.

In the case, U.S. v. Dial Jr., the veteran has been charged with four counts of major program fraud as well as wire fraud in connection with his company United Medical Design Builders, LLC (“UMDB”) receiving over $40 million in government contract funds from the U.S. Army Corps of Engineers between 2008 and 2015.

Specifically, the Government alleged that Dial, who is a disabled Army veteran, acted only as a “figurehead” of UMDB in order for UMDB to obtain a SDVOSB set-aside contract to build health care facilities.

Keep reading this article at: https://www.lexology.com/library/detail.aspx?g=9b298da1-560e-43ad-86b2-2768bc5ba765

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

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