Quick Cases: Government Contracting Fraud

By: Sara Kropf

They say hell has no fury like a woman scorned. (Technically, William Congreve wrote “Heaven has no rage like love to hatred turned, nor hell a fury like a woman scorned.”) Maybe there’s also no fury like a government defrauded, because there are always several government contracting fraud cases reported by the various U.S. Attorney’s Offices across the country each week.

This summer was no exception. There was no vacation from government contracting investigations and convictions over the last few weeks. The cases involve everything from former UBS executives in New York to small contractors in Massachusetts and New Jersey. Let’s take a look.

United States v. Peter Ghavami, Gary Heinz and Michael Welty (S.D.N.Y.). These three defendants were former UBS AG executives. According to the government, the men participated in multiple municipal bond conspiracies from 2001 to 2006. They would bid on “investment agreements” which were used by state, county and local governments to invest money, mainly from municipal bond proceeds. The defendants, as brokers, arranged for UBS to receive kickbacks “in exchange for manipulating the bidding process and steering investment agreements to certain providers.” They were convicted after a five-week trial, during which the government presented evidence of 26 supposedly corrupt bids and evidence that the scheme cost these government entities millions of dollars by denying them the benefit of competitive interest rates. They were found guilty of wire fraud and conspiracy. Mr. Ghavami was sentenced to 18 months in prison; Mr. Heinz was sentenced to 27 months in prison; Mr. Welty was sentenced to 16 months in prison.

United States v. Dawn Hamilton (E.D.V.A.). Ms. Hamilton was the supposed owner of a Virginia security contracting company. Her sentencing is one of many in this major fraud case out of the Eastern District of Virginia. (See my other post about this case here.) According to the government, Ms. Hamilton was the “figurehead” owner of a company created by her co-conspirators to take advantage of the Small Business Association (SBA) Section 8(a) program for minority-owned and disadvantaged small businesses. The contract value for the fraudulently-obtained contracts was $153 million. Ms. Hamilton pleaded guilty to major fraud in March 2013. She was sentenced to 48 months in prison, three years of supervised release and over $2 million in forfeiture and fines.

United States v. Leo Viguie (D.N.J.).  Mr. Viguie was the owner of a general contracting company in Bayonne, New Jersey. The City of Bayonne’s housing authority received grants of up to $20,000 per home from HUD to repair conditions that violated the housing code or were unsafe. The government filed an information alleging that Mr. Viguie conspired with another contractor to have the other contractor submit a higher bid so that Mr. Viguie’s bid would be chosen instead. He also did the reverse—agreeing to submit a higher bid with someone else so that the other contractor’s bid would be chosen. Mr. Viguie pleaded guilty to the scheme and will be sentenced in December 2013.

United States v. Joseph Shane Terry (N.D. Ala.).  Mr. Terry was the owner of Government Technical Services (GTS) which applied for and received certification as a small disadvantaged or minority-owned business status from the SBA. According to the government, Mr. Terry submitted false tax returns each year from 2003 to 2008 to maintain this status. The government alleges that GTS obtained more than $14 million in government contracts over the years. He supposedly “submitted forged performance and payment bonds and a power of attorney from a Mississippi bond company and its parent surety company in Louisiana.” He pleaded guilty to five counts of wire fraud and three counts of mortgage fraud, as well as money laundering and false statements. Interestingly, the USAO’s press release notes that this is the first time this district has used the Wartime Suspension of Limitations Act which allows for suspension of the five-year statute of limitations during a time of war or use of force, as in Afghanistan and Iraq.

United States v. Tyrone Jones and Brian Bauman (D. Mass.). Mr. Jones was a small business owner in Sterling, Massachusetts. According to the government, he falsely claimed that his business was a minority and service-disabled veteran owned business. As part of the certification process, he submitted false statements to the SBA about his status. He pleaded guilty to conspiracy to commit wire fraud and was sentenced to a year and a day in prison plus two years of supervised release. He will forfeit $399,000.

United States v. Hitesh Desai (D.N.J.). Mr. Desai was a contractor who worked on several projects with the Veterans Administration. He was affiliated with two companies that were applying to be on a VA list called the “Multiple Award Task Order Contract” (MATOC). To help their applications, Mr. Desai offered a $5000 bribe to the VA official that he believed was in charge of placing companies on the MATOC list. He actually paid $1000 of the bribe. He pleaded guilty to one count of bribery of a public official and will be sentenced in October.

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