Monthly Archives: June 2013

Former Security Contractor Executives Sentenced for Illegally Obtaining More Than $31 Million Intended for Disadvantaged Small Businesses

Posted on by
Two executives at a Virginia-based security contracting firm were sentenced in the Eastern District of Virginia for their roles in using a front company to obtain more than $31 million intended for disadvantaged small businesses as part of the Small Business Administration’s (SBA) Section 8(a) program. This program allows qualified small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses.

 Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Neil H. MacBride of the Eastern District of Virginia; National Aeronautics and Space Administration (NASA) Inspector General Paul K. Martin; SBA Inspector General Peggy E. Gustafson; Defense Criminal Investigative Service (DCIS) Special Agent in Charge of Mid-Atlantic Field Office Robert E. Craig; General Services Administration (GSA) Inspector General Brian D. Miller; and Department of Homeland Security (DHS) Deputy Inspector General Charles K. Edwards made the announcement after sentencing by United States District Judge Leonie M. Brinkema.

Joseph Richards, 52, of Arlington, Va., and David Lux, 66, of Springfield, Va., were sentenced today to 27 and 15 months in prison, respectively, after pleading guilty in March 2013 to conspiracy to commit major government fraud. Both men were ordered to complete community service as part of their supervised release following their prison terms. Richards was ordered to pay $120,378 in restitution, and Lux was ordered to forfeit $115,556.

According to court documents, Richards and Lux were executives at an Arlington-based security contracting firm referred to as Company A in court records. In approximately 2001, Keith Hedman, 53, of Arlington, formed Company A, which was approved to participate in the 8(a) program based on the 8(a) eligibility of its listed president and CEO, an African-American female. When the listed president and CEO left Company A in 2003, Hedman became its sole owner, and the company was no longer 8(a)-eligible.

In 2003, Hedman created Company B, another Arlington-based security contractor, to ensure that he could continue to gain access to 8(a) contracting preferences for which Company A was no longer qualified. Prior to applying for Company B’s 8(a) status, Hedman selected an employee, Dawn Hamilton, 48, of Brownsville, Md., to serve as a figurehead owner based on her Portuguese heritage and history of social disadvantage. In reality, the new company was managed by Hedman and Company A senior leadership in violation of 8(a) rules and regulations. To deceive the SBA, the co-conspirators falsely claimed that Hamilton formed and founded the company and that she was the only member of the company’s management. Based on those misrepresentations, Company B obtained 8(a) status in 2004. From 2004 through February 2012, Hedman – not Hamilton – impermissibly exercised ultimate decision-making authority and control over Company B by directing its finances, allocation of personnel, and government contracting activities.

Richards and Lux joined the scheme in 2005 and 2008, respectively. Hedman offered Richards and Lux ownership stakes in Company B in exchange for their assistance in misleading the SBA and other U.S. government agencies, and both men accepted. Once they joined the conspiracy, Richards and Lux took a variety of actions to further the fraud against the United States. In 2008, for example, both Richards and Lux helped Company B overcome a protest by another company that accused Company A and Company B of improperly obtaining a $48 million Coast Guard contract.

From 2008 to 2010, Richards moved to Company B’s payroll to help Hedman illegally operate Company B. In 2010, Lux helped Hedman withdraw more than $1 million in cash from Company B’s accounts, which Hedman then disbursed to various conspirators, including $100,000 in cash to both Richards and Lux. Richards and Lux also assisted Hedman, Hamilton, and other co-conspirators prepare false documents, including annual reviews, to submit to SBA and other government agencies.

In total, the scheme netted government contracts valued at more than $153 million, from which Company B obtained more than $31 million in contract payments. The various conspirators netted more than $6.1 million that they were not entitled to receive from those payments.

Six other defendants have pleaded guilty in the scheme:

• Hedman is scheduled to be sentenced by U.S. District Judge Gerald Bruce Lee on June 21, 2013. • Hamilton is scheduled to be sentenced by U.S. District Judge T. S. Ellis, III on June 28, 2013. • David Sanborn, 60, of Lexington, S.C., Company A’s former president, is scheduled to be sentenced by U.S District Judge Claude M. Hilton on July 19, 2013. • John Hertogs, 42, of Winter Springs, Fl., Company B’s former director of operations, is scheduled to be sentenced by Judge Hilton on July 12, 2013, for submitting a fraudulent 8(a) application for a follow-on company that Hedman and Hamilton intended to use once Company B graduated from the 8(a) program. • Derek Matthews, 47, of Harwood, Md., former Regional Director for the National Capital Region of the Federal Protective Service, is scheduled to be sentenced by Judge Brinkema on July 19, 2013, for a related bribery scheme in which Hedman agreed to pay Matthews $50,000 and a percentage of new business in exchange for Matthews helping Company B obtain contracts. • Michael Dunkel, 59, of Merritt Island, Fl., is scheduled to be sentenced by Judge Lee on Oct. 4, 2013, for obtaining more than $4.4 million in payments by using Company B as a pass-through company on NASA contracts.

This case is being investigated by NASA Office of the Inspector General (OIG), the SBA -OIG, DCIS-OIG, GSA-OIG, and DHS-OIG, with assistance from the Defense Contract Audit Agency. Assistant U.S. Attorneys Chad Golder and Ryan Faulconer, a former Trial Attorney for the Criminal Division’s Fraud Section, are prosecuting the case on behalf of the United States.

Science Applications International Corporation Pays $11.75 Million to Settle False Claims Allegations

Posted on by
The Justice Department and U.S. Attorney Kenneth J. Gonzales of the District of New Mexico announced today that Science Applications International Corporation (SAIC) has paid $11.75 million to settle allegations filed in the U.S. District Court for the District of New Mexico that it violated the False Claims Act by charging inflated prices under grants to train first responder personnel to prevent and respond to terrorism attacks.  SAIC provides scientific, engineering, and technical services to commercial and government customers and is headquartered in Northern Virginia.

Between 2002 and 2012, the New Mexico Institute of Mining and Technology (New Mexico Tech) received six federal grants from the Department of Justice, the Department of Homeland Security, and the Federal Emergency Management Agency to train first responder personnel to prevent and respond to terrorism events involving explosive devices.  New Mexico Tech awarded subgrants to SAIC to provide course management, development, and instruction.  The United States alleged that SAIC’s cost proposals falsely represented that SAIC would use far more expensive personnel to carry out its efforts than it intended to use and actually did use, resulting in inflated charges to the United States.

“To ensure that federal tax dollars are properly spent, federal grant recipients and contractors must provide cost proposals and estimates that reflect their honest judgment about project costs,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division of the Department of Justice.  “We will continue to ensure that funds designated for vital programs such as this one are properly used for their intended purpose.”

The False Claims Act is sometimes referred to as “Lincoln’s Law” because it was enacted at the urging of President Lincoln to combat widespread fraud which was being perpetrated on the Union Army by Civil War defense contractors.  While originally enacted to combat defense contractor fraud, the False Claims Act has long been successfully employed to combat false claims against the United States in many other contexts, including healthcare fraud.  The Act prohibits the submission of false claims for government money or property and allows the United States to recover up to three times the actual damages and penalties for a violation.

The lawsuit against SAIC was originally filed under the whistleblower provisions of the False Claims Act by Richard Priem, SAIC’s former project manager for the first responder training program.  Under the Act’s whistleblower provisions, a private party may file suit on behalf of the United States and share in any recovery, and the United States may elect to intervene and take over the case, as it did here.  Mr. Priem’s share has not yet been determined.

“The False Claims Act is a critical tool for weeding out fraud and protecting taxpayers,” said U.S. Attorney Kenneth J. Gonzales of the District of New Mexico.  “The Act provides an incentive for individuals with knowledge of fraud against the government to disclose that information.  When whistleblowers bring fraud allegations to the government’s attention and assist us in this public-private partnership to fight fraud, the public benefits and potential fraudsters are deterred.”

The case was jointly handled by Trial Attorneys Don Williamson and Daniel Hugo Fruchter of the Commercial Litigation Branch of the Justice Department’s Civil Division and Assistant U.S. Attorney Howard R. Thomas and Auditor Julie A. Ford of the U.S. Attorney’s Office for the District of New Mexico.  The claims resolved by this settlement are allegations only and there has been no determination of liability.  The case is United States ex rel. Priem v. SAIC, No-12-cv-148 (D.N.M.).

County Commissioner Sentenced for Attempted Extortion and Bribery

Posted on by
Al J. Hurley, a former county commissioner in Sumter County, Ga., was sentenced today to 36 months in prison stemming from his acceptance of illicit payments in exchange for his official efforts to secure government contracts for a private contractor, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and Middle District of Georgia U.S. Attorney Michael J. Moore announced.

Hurley, 55, of Americus, Ga., was sentenced today by U.S. District Judge W. Louis Sands.  On Dec. 3, 2012, a federal jury sitting in the Albany Division of the Middle District of Georgia found Hurley guilty of one count each of attempted extortion and federal program bribery.

Hurley was first elected to the five-member Sumter County board of commissioners in 1999.  As the primary governing body for the county, the board presided over a variety of official matters, including the bidding process for and award of various county contracts.

Evidence at trial showed that from September to December 2011, Hurley, in his capacity as a county commissioner, solicited and agreed to accept cash payments – including $5,000 on Oct. 23, 2011, and $15,000 on Dec. 19, 2011 – from a private contractor, in exchange for Hurley’s repeated promises to use official action and influence to help facilitate the award of county contracting work to the contractor.

In particular, Hurley told the contractor that he would help him win a $100,000 depot renovation contract in a city within Hurley’s district.  Trial testimony also established that, in order to drive up the bribe amount, Hurley invented two inside contacts that he claimed to have at a new racetrack project in his district, and claimed the contacts could influence the award of related contracting work in favor of the contractor.  Hurley, who testified, admitted the contacts did not exist.

This case was investigated by the FBI. This case was prosecuted by Trial Attorney Eric G. Olshan of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia.

Former Congressman Richard G. Renzi Convicted of Extortion and Bribery in Illegal Federal Land Swap

Posted on by
A former U.S. Congressman and a real-estate investor were convicted today by a federal jury in Tucson, Ariz., of conspiring together to extort and bribe individuals seeking a federal land exchange, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney John Leonardo of the District of Arizona and Special Agent in Charge Douglas F. Price of the FBI’s Phoenix Division.

Richard G. Renzi, 55, of Burke, Va., was found guilty of 17 felony offenses including conspiracy, honest services wire fraud, extortion under color of official right, racketeering, money laundering and making false statements to insurance regulators.

James W. Sandlin, 62, of Sherman, Texas, was found guilty of 13 felony offenses including conspiracy, honest services wire fraud, extortion under color of official right and money laundering.

Sentencing is set before U. S. District Judge David C. Bury on Aug. 19, 2013.

“Former Congressman Renzi’s streak of criminal activity was a betrayal of the public trust and abuse of the political process,” said Acting Assistant Attorney General Raman. “After years of misconduct as a businessman, political candidate and member of Congress, Mr. Renzi now faces the consequences for breaking the laws that he took an oath to support and defend.”

“Our democracy is undermined whenever our elected officials misuse the power entrusted to them by the voters to serve their own private interests rather than in the service of the public interest,” said U.S. Attorney Leonardo. “The jury’s verdict reinforces the fundamental principle that our society is governed by the rule of law, and that no citizen, including the most influential and powerful among us, is above the law.”

“Today’s conviction is a culmination of the investigative efforts of the FBI and IRS-Criminal Investigation over a period of several years,” said FBI Special Agent in Charge Price. “Public corruption is one of the top criminal priorities of the FBI, and it is imperative that elected public officials be held accountable to uphold the public’s trust.  The FBI remains committed to this criminal priority in combating public corruption at all levels.”

According to evidence at trial, Renzi, then a member of Congress from Arizona’s 1st Congressional District, promised in 2005 to use his legislative influence to profit from a federal land exchange that involved property owned by Sandlin, a real-estate investor.

At the time, Sandlin owed Renzi $700,000 in future payments from their business dealings, and Renzi threatened a proponent of the land exchange that he would not support it unless they purchased Sandlin’s property in Cochise County, Ariz.  When that individual refused, Renzi promised a second proponent of a land exchange that he would support the exchange if they purchased Sandlin’s property.  According to an agreement reached in May 2005, Sandlin was paid $1 million in earnest money, out of which he paid $200,000 to Renzi.  Just before Sandlin received the $1.6 million balance owed on the exchange, he paid an additional $533,000 to Renzi.

Evidence at trial further showed that from 2001 to 2003, Renzi engaged in insurance fraud by diverting his clients’ insurance premiums to fund his first campaign for Congress, and he provided false statements to various state regulators who were investigating his activities.

Renzi was indicted in February 2008, and in October 2008, Renzi moved to dismiss the indictment under his rights as a member of Congress under the Speech or Debate Clause. The court denied his motion in February 2010, and Renzi pursued an interlocutory appeal. After Renzi’s appeal was unsuccessful, trial was set for May 2013.

Honest services wire fraud, extortion under color of official right, concealment money laundering and racketeering each carry maximum penalties of 20 years in prison. Conspiracy carries a maximum penalty of five years in prison, and making false statements to insurance regulators and transactional money laundering each carry maximum penalties of 10 years in prison.

This case was investigated by the FBI and the Internal Revenue Service – Criminal Investigation.  The prosecution was handled by Trial Attorneys David Harbach and Sean Mulryne of the Department of Justice’s Public Integrity Section and Assistant U.S. Attorneys Gary Restaino and James Knapp of the District of Arizona.

GeyerGorey LLP first international law firm to beta test PerfectShield™

Posted on by

GeyerGorey LLP first international law firm to beta test PerfectShield™

WASHINGTON — GeyerGorey LLP today announced that it had been chosen by FormerFeds LLC to be the first international law firm to beta test its revolutionary “PerfectShield™” Compliance system designed and deployed by former American fraud enforcers (a/k/a “FormerFeds”).  PerfectShield™ is the newest weapon in our arsenal

to provide a ‘redundant complex risk prevention array’ for clients that is affordable and provides automated and organized support for a company’s compliance operations overseen and administered by our law firm,” said firm partner Robert Zastrow.  “Because PerfectShield™ delivers the things we need most right now for our clients, we were happy to help FormerFeds LLC fine tune its compliance system to assist its other law firm clients later in the year.  We believe this gives GeyerGorey and its clients an advantage in our constant struggle to implement and maintain a vigilant compliance culture that innovates and reinforces productive corporate behavior moving forward.”

PerfectShield™ provides:

  • centralized, whole-of-business risk and compliance visibility and benchmarking
  • easy configuration to meet any regulatory environment in any sector
  • unique compliance portal for customized assessments and notifications
  • red flag generation and tracking system designed to protect privilege
  • cost effective, low-risk, pay-as-you-go pricing

“We were looking ‘software as a service’ (SAS) that provided an organizational ‘fire and forget’ system embedding compliance, transparency and corporate governance into one program solution,” stated Hays Gorey.  “FormerFedsCompliance™ developed its system across disciplines so that the wall that exists between various specialties within a law firm—for instance, cartel enforcement and FCPA, is rendered obsolete by PerfectShield™; efforts in each area informs the other area and efforts to embed compliance on the “sell” side of operations informs the “buy” side of operations capturing incremental improvements, innovating the program and constantly improving and solidifying the program on an affordable schedule that factors in legal counsel’s expert assessments regarding risk,” said Brad Geyer.

“It allows us to focus on the risk and emerging legal threats while PerfectShield™ gathers the information, red flags threats and channels those threats back to us in real time so that we can immediately follow through in a way that preserves the attorney client privilege.  Customized tracking and notification preferences allows inside compliance counsel, inside legal counsel and or management to track , statistically analyze performance and benchmark results moving forward,” said Geyer.  All the while, PerfectShield™ documents and records the performance and comprehensiveness of the compliance program for presentations to interested enforcement agencies, standards boards, acquisition candidates, large suppliers or large customers.

GeyerGorey LLP, with offices in Washington, New York, Boston and Philadelphia, provides international and inside-the-beltway experience to individuals and companies that have become — or wish to avoid becoming — the subject of federal law enforcement agency interest.

Four Former Wellcare Executives Found Guilty in Florida

Posted on by
A federal jury in Tampa found four former executives of WellCare Health Plans Inc., a health maintenance organization (HMO) operator, guilty of various charges, including health care fraud, making false statements relating to health care matters and making false statements to a law enforcement officer, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Robert E. O’Neill of the Middle District of Florida and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office

Today, former WellCare Chief Executive Officer Todd S. Farha, 45, of Tampa, was convicted of two counts of health care fraud; former WellCare Chief Financial Officer Paul L. Behrens, 51, Odessa, Fla., was convicted of two counts of making false statements relating to health care matters and two counts of health care fraud; William L. Kale, 63, of Oldsmar, Fla., former vice president of Harmony Behavioral Health Inc. (a wholly-owned subsidiary of WellCare), was found guilty of two counts of health care fraud; and Peter E. Clay, 56, of Wellesley, Mass., former WellCare vice president of medical economics, was found guilty of making false statements to a law enforcement officer.

On March 2, 2011, a federal grand jury sitting in Tampa returned an indictment charging Farha, Behrens, Kale and Clay with various federal criminal violations related to a scheme to defraud the Florida Medicaid program, from the summer of 2003 through the fall of 2007, by making false and fraudulent statements relating to expenditure information for behavioral health care services.

WellCare operates HMOs in several states targeted for government-sponsored health care benefit programs like Medicaid.  Two WellCare HMOs operating in Florida, StayWell and Healthease, contracted with the Agency for Health Care Administration (AHCA), the Florida agency which administers the Medicaid program, to provide Florida Medicaid program recipients with an array of services, including behavioral health services.

In 2002, Florida enacted a statute that required Florida Medicaid HMOs to expend 80 percent of the Medicaid premium paid for certain behavioral health services upon the provision of those services.  In the event that the HMO expended less than 80 percent of the premium, the difference was required to be returned to AHCA.  As part of the scheme, the defendants falsely and fraudulently submitted inflated expenditure information in the company’s annual reports to AHCA, in order to reduce the WellCare HMOs’ contractual payback obligations for behavioral health care services.

On May 5, 2009, the government filed related charges in an information and deferred prosecution agreement (DPA) against WellCare.  Under that DPA, WellCare was required to pay $40 million in restitution, forfeit another $40 million to the United States and cooperate with the government’s criminal investigation.  The company complied with all of the requirements of the DPA.  As a result, the information was later dismissed by the court following a government motion.

In May 2009, an information and plea agreement for Gregory West, 55, of Tampa, a former WellCare analyst, was unsealed.  In his plea agreement, West admitted to participating in the scheme to defraud the Medicaid program and agreed to cooperate in the government’s investigation.  At trial, West provided extensive and detailed testimony explaining the complex scheme.  Other former WellCare executives provided additional testimony about the four individuals’ roles in the scheme.

The maximum penalty for each of the health care fraud counts is 10 years in prison.  The maximum penalty for all other counts is five years in prison. A sentencing date has not yet been set.

Thaddeus M.S. Bereday, of Tampa, WellCare’s former general counsel, was severed from the trial in February of this year.  He will be tried separately, at a later date.  Defendants are presumed innocent until proven guilty in a court of law.

The jury returned not guilty verdicts with respect to several counts and was unable to reach a verdict on others.  The judge declared a mistrial as to those counts on which the jury was deadlocked.  The Justice Department will decide, at a later date, whether to retry the individuals on those charges.

This case was investigated by HHS-OIG, the FBI and the Florida Attorney General’s Medicaid Fraud Control Unit.  It was prosecuted by Senior Litigation Counsel John Michelich of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Jay Trezevant and Cherie Krigsman of the Middle District of Florida and Special Assistant U.S. Attorney John Bowers.

Phillip C. Zane, Antitrust Practitioner and Scholar, Joins GeyerGorey LLP

Posted on by

 

GeyerGorey LLP announced today that Phillip C. Zane has joined the Firm as of counsel.  Mr. Zane, a former federal appellate clerk, has counseled and defended clients accused of serious crimes and civil offenses for more than twenty years.  He received his law degree cum laude from New York University School of Law, and holds a bachelor’s degree in Economic History from Pomona College.  Proficient in speaking or reading a number of languages a number of languages, including Swedish, Russian, German, Polish, and Spanish, he has conducted internal investigations of alleged wrongdoing in more than twenty countries and has defended companies and individuals accused of participating in international cartels.

 

Mr. Zane’s practice areas include civil and criminal antitrust law (including litigation and counseling), fraud, money laundering, foreign asset control, public corruption, whistleblower cases, and national security issues.  He will also continue to counsel nonprofit organizations on compliance with tax law and other matters.

 

Mr. Zane’s work has changed the course of the law.  His representation of one of the nation’s leading law firms led to a clarification and narrowing of the meaning of “arising under an Act of Congress relating to patents,” which resulted in the dismissal of a malpractice claim against that law firm.  His application of game theory to decisions of whether and when a client should plead guilty to a criminal antitrust offense contributed to the adoption of a new statute limiting civil liability for antitrust offenders who accept responsibility for criminal offenses.  His groundbreaking scholarship on criminal procedure and criminal sentencing affected how many  scholars, practitioners, and judges think about maximum fines in cases involving the most serious financial crimes.  In a case he brought on behalf of an indigent client, he convinced the District of Columbia Court of Appeals to recognize a property interest in subsidized housing benefits, establishing a new procedural due process right in the District of Columbia.

 

“Mr. Zane is truly a lawyer’s lawyer, and we are delighted that he is joining our Firm,” said managing partner Bradford Geyer.

 

Mr. Zane will be resident in the Washington office.

 

Former Army National Guard Soldier Sentenced to 57 Months in Prison for Lead Role in Fraudulent Military Recruiting Referral Bonus Scheme

Posted on by
A former member of the U.S. Army National Guard was sentenced today to serve 57 months in prison for leading a conspiracy to obtain approximately $244,000 in fraudulent recruiting referral bonuses from various U.S. military components and their contractor, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.

Former U.S. Army National Guard Specialist Xavier Aves, 42, of San Antonio, was sentenced by Chief U.S. District Judge Fred Biery in the Western District of Texas.  In addition to his prison term, Chief Judge Biery sentenced Aves to serve three years of supervised release and ordered Aves to pay $244,000 in restitution, jointly and severally with co-conspirators.

On Sept. 16, 2011, a grand jury in the Western District of Texas returned a 41-count indictment against Aves and five co-defendants, in which Aves was charged with one count of conspiracy to commit wire fraud, 30 counts of wire fraud and 10 counts of aggravated identity theft.

On Feb. 3, 2012, Aves pleaded guilty to one count of conspiracy to commit wire fraud and one count of aggravated identity theft.

The case against Aves and his co-defendants arose from an investigation concerning allegations that former and current soldiers and military and civilian contract recruiters in the San Antonio area engaged in a wide-ranging scheme to obtain fraudulent recruiting referral bonuses.  To date, 11 individuals have been charged, 10 of whom have pleaded guilty and been sentenced.  The investigation is ongoing.

According to court documents, between 2005 and 2008, the U.S. Army, the U.S. Army Reserves and the National Guard Bureau entered into contracts with Document and Packaging Broker Inc. to administer recruiting bonus programs designed to offer monetary incentives to soldiers who referred others to serve in the U.S. military.  In addition, the Army managed its own recruiting bonus programs, which offered referral bonuses to soldiers who referred other individuals to serve in the Army or Army Reserves after registering online as recruiting assistants (RA) or sponsors.

Through these recruiting programs, a participating soldier could receive up to $2,000 in bonus payments for every person he referred to join the U.S. military.  Based on certain milestones achieved by the referred soldier, a participating soldier would receive the recruiting bonus payments in the form of direct deposits and pre-paid debit card payments.

According to court documents, between February 2006 and February 2011, Xavier Aves, Christopher Castro, Grant Bibb, Paul Escobar, Richard Garcia, Ernest Gonzales and others paid military recruiters, including Jesus Torres-Alvarez, for the names and social security numbers of potential soldiers.  Aves, Castro, Bibb, Escobar, Garcia, Gonzales and others used the information they obtained from recruiters to claim credit in their online RA and sponsor accounts for referring certain new soldiers to join the military, when in fact they did not refer those individuals.

Aves orchestrated the scheme by serving as a key intermediary between the recruiters and the participating RAs.  Aves arranged for the money to be split among his co-conspirators and directed a portion of the proceeds to be wired to his and his girlfriend’s personal bank accounts.

As a result of the fraudulent referrals, Aves and his co-conspirators received a total of approximately $244,000 in fraudulent recruiting bonuses.

The case is being prosecuted by Trial Attorneys Edward J. Loya Jr., Brian A. Lichter, Mark J. Cipolletti and Sean F. Mulryne of the Criminal Division’s Public Integrity Section.  The case is being investigated by agents from the San Antonio Fraud Resident Agency of the Major Procurement Fraud Unit, U.S. Army Criminal Investigation Division.

Testech and Ceso Agree to Pay $2.88 Million to Resolve False Claims Act Allegations

Posted on by
The Justice Department announced today that a number of related entities and individuals agreed to pay $2,883,947 to resolve allegations that they falsely claimed disadvantaged business status on a number of federally-funded transportation projects.  These entities are Dayton-based TesTech, Inc. and its owner, Sherif Aziz, and Dayton-based CESO Testing Technology, Inc., CESO International, LLC, and CESO, Inc. (collectively CESO), and their owners, David and Shery Oakes.

“The Disadvantaged Business Enterprises program helps businesses owned by minorities and women work on federal transportation projects,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division of the Department of Justice.  “Those who falsely claim credits under the program to obtain federal funds victimize both the businesses that the program is designed to assist and the American taxpayer.”

The Department of Transportation’s Disadvantaged Business Enterprise (DBE) program encourages the use of woman- and minority-owned businesses on federally-funded transportation projects.  Contractors on such projects must make good-faith attempts to meet DBE participation goals as a condition of federal funding.

“DBE fraud harms the integrity of the program and adversely impacts law-abiding, small business contractors trying to compete on a level playing field,” said Michelle McVicker, regional Special Agent-in-Charge of the DOT’s Office of Inspector General. “Working with our Federal, State, and local law enforcement and prosecutorial colleagues, we will vigorously pursue those who violate the law, and expose and shut down fraud schemes that adversely affect public trust and DOT-assisted airport and highway programs.”

The settlement announced today resolves allegations that the defendants claimed DBE status for TesTech, a civil engineering firm, on numerous highway and airport construction projects in Ohio, Indiana, Michigan, and Kentucky.  The United States alleged that TesTech was owned and controlled by CESO, a non-DBE firm, and its owners, the Oakes, who falsely claimed that TesTech was owned by Aziz and qualified as a minority-owned business in order to take advantage of the DBE program.

“The message is that we will work to uphold the integrity of the Disadvantaged Business Enterprise (DBE) and similar programs,” US Attorney Carter Stewart said.  “Those who attempt to defraud the system will be held accountable.”

The allegations resolved by today’s settlement were initially alleged in a whistleblower lawsuit filed under the False Claims Act by Ryan Parker, a former employee of TesTech.  Under the False Claims Act, private citizens can sue on behalf of the United States and share in the recovery.  Mr. Parker will receive $562,370 of the settlement amount.

This case was handled by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Southern District of Ohio, and the Department of Transportation Office of Inspector General.

The False Claims Act suit was filed in the United States District Court for the Southern District of Ohio, and is captioned United States ex rel. Parker v. TesTech et al., No. 2:10-cv-1028 (S.D. Ohio).  The claims settled in this case are allegations only; there has been no determination of liability.

Three Georgia Residents Sentenced for Their Roles in Bribery Scheme Related to the Award of Government Contracts

Posted on by
A former employee at the Marine Corps Logistics Base Albany (MCLB-Albany) and two local businessmen were sentenced today for their roles in a bribery scheme related to the award of contracts for machine products that resulted in approximately $907,000 in fraudulent overcharges to the U.S. Marines, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore of the Middle District of Georgia.

Michelle Rodriguez, 32; Thomas J. Cole, 43; and Fredrick W. Simon, 55, all of Albany, Ga., were sentenced today by U.S. District Judge W. Louis Sands in the Middle District of Georgia.  Rodriguez was sentenced to 70 months in prison and ordered to pay $161,000 in restitution; Cole was sentenced to 46 months in prison and ordered to pay $209,000 in restitution; and Simon was sentenced to 32 months in prison and ordered to pay $74,500 in restitution.  Each is also subject to a $907,000 forfeiture order and three years of supervised release.

During her guilty plea in February 2013, Rodriguez, a supply technician in the Maintenance Center Albany (MCA), admitted to participating in a scheme to award contracts for machine products to Company A and Company B, companies operated by Cole and Simon. Cole and Simon pleaded guilty to bribery charges related to the same scheme in January 2013 and cooperated with the government’s criminal investigation.  The MCA is responsible for rebuilding and repairing ground combat and combat support equipment, much of which has been utilized in military missions in Afghanistan and Iraq, as well as other parts of the world.  To accomplish the scheme, Rodriguez would transmit bid solicitations to Simon via facsimile or email, and then usually follow that communication with a text message specifying how much Company A should bid.  Simon, on Company A’s behalf, and with Cole’s knowledge, bid the amount specified by Rodriguez on each order, which was normally in excess of fair market value.  Rodriguez was then paid $75 in cash for each order awarded to Simon and Cole during the previous week.  According to court records, during the relevant period Rodriguez awarded Cole and Simon’s companies nearly 1,300 machine product orders, all of which were in exchange for bribes paid to Rodriguez.

Rodriguez further admitted that in 2011, she began routing some orders through a second company, Company B, owned by Cole, because the volume of orders MCA placed with the first company was so high. Company A, however, continued to perform the required services. Court records state that Rodriguez received approximately $161,000 in bribes during the nearly two-year scheme, while Cole and Simon personally received $209,000 and $74,500, respectively.  Court records also indicate that the total loss to the U.S. Marines from overcharges associated with the machine product orders placed during the scheme was approximately $907,000.

The case was investigated by the Naval Criminal Investigative Service, with assistance from the Dougherty County District Attorney’s Office Economic Crime Unit and the Defense Criminal Investigative Service.  The case was prosecuted by Trial Attorneys Richard B. Evans and J.P. Cooney of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia.