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Prison, Massive Fines in Historic Fraud

Thursday, January 16, 2014

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Two former executives of a Pennsylvania bridge concrete manufacturer are headed to prison in what authorities call the largest Disadvantaged Business Enterprise scam in U.S. history.

Senior U.S. District Judge Sylvia H. Rambo sentenced Dennis F. Campbell, of Orwigsburg, PA, and Timothy G. Hubler, of Ashland, PA, on Monday (Jan. 13) in the 15-year scheme that illegally diverted more than $136 million from 300 government contracts in Pennsylvania alone, the FBI announced.

57 Months, $300M Restitution

Campbell, the former vice president of sales and marketing for the now-defunct Schuylkill Products Inc. (SPI), was sentenced to 24 months in prison; $119 million in restitution to the U.S. Department of Transportation; and two years of supervised release.

DBE
design.missouristate.edu

The U.S. DOT sets aside billions of dollars for its Disadvantaged Business Enterprise program, which benefits companies owned by socially or economically disadvantaged individuals.

Hubler, SPI's former vice president for field operations, was sentenced to 33 months in prison; $119 million in restitution to DOT; $82,370 in restitution to the Internal Revenue Service; and two years of supervised release.

Both men were ordered to surrender Feb. 17 to begin their sentences.

DBE Front for Hire

SPI manufactured concrete bridge beams and other products. The company's subsidiary, CDS Engineers, served as SPI's installation and erection division. Both companies were based in Cressona, PA. SPI was bought out in April 2009 by Northeast Prestressed Products LLC, which is still located in Cressona.

For more than 15 years, the FBI said, SPI's owners paid off Romeo P. Cruz, of West Haven, CT, to use his DBE-certified company, Marikina Construction Corp., as a front to gain lucrative DBE contracts.

Over time, Marikina obtained tens of millions of dollars in government contracts on paper throughout the mid-Atlantic and New England regions, the FBI said. However, SPI and CDS then performed all of the work and received all of the profits, while Cruz received a fixed fee.

The scam was supported by SPI personnel pretending to be Marikina personnel (using Marikina business cards, email addresses, stationery and signature stamps) and by covering SPI logos on vehicles with magnetic Marikina logos and decals.

Pleas and Convictions

Campbell pleaded guilty to DBE fraud in 2008; Hubler pleaded guilty to DBE and tax fraud the same year. Cruz pleaded guilty to DBE and tax fraud in 2008 and 2009 and is scheduled to be sentenced this month.

SPI student visit
University of Delaware

Students from the University of Delaware’s Center for Innovative Bridge Engineering toured Schuylkill Products’ plant in Cressona, PA, in 2003.

Campbell, Hubler and Cruz all cooperated in the government investigation that led to the conviction of SPI's owners: former vice president and chief operating officer Ernest G. Fink, of Orwigsburg, and Joseph W. Nagle, president and CEO, of Deerfield Beach, FL.

Fink pleaded guilty to DBE fraud in 2010; Nagle was convicted in 2012 of 26 counts of wire and mail fraud, money laundering and other charges after a four-week jury trial. Neither has been sentenced.

How DBE Works

Since 1983, DOT has been required to ensure that 10 percent of the funds authorized for highway and transit financial assistance programs go to DBEs. DOT has established a single DBE goal that encompasses firms owned by women, non-whites (minorities) and economically disadvantaged individuals.

The DBE program is administered by U.S. DOT's Office of Small and Disadvantaged Business Utilization.

In Pennsylvania, DBE funds are administered through the state's Department of Transportation (PennDOT) and the transit agency known as SEPTA.

SPI, the FBI said, was able to divert more than 300 PennDOT and SEPTA contracts through Marikina.

'Severe Penalties Await'

"The sentences handed down today, in what is the largest reported DBE fraud case in U.S. DOT history, serve as clear signals that severe penalties await those who would attempt to subvert U.S. DOT laws and regulations,” said Doug Shoemaker, Office of Inspector General Regional Special Agent in Charge.

“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the U.S. DOT Office of Inspector General."

Shoemaker urged prime contractors and subscontractors to report DBE fraud and said his office would continue to work "to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”

   

Tagged categories: Bridges; Business management; Concrete; Department of Transportation (DOT); Enforcement; Government contracts; Laws and litigation; Public Transit

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