The former CEO of a Pennsylvania company that made and installed concrete bridge beams is facing decades in prison after his conviction on fraud and conspiracy charges involving a massive Disadvantaged Business Enterprise scam.
The 15-year scheme involved more than $136 million in government contracts, making it the largest DBE fraud in U.S. history, authorities said. Four other members of the ring have already pleaded guilty in the case.
On Thursday (April 5), a federal-court jury in Harrisburg, PA, convicted Joseph W. Nagle, of Deerfield Beach, FL, of 26 charges, including conspiracy to defraud the U.S. Department of Transportation (U.S. DOT) and commit wire and mail fraud.
University of Delaware
|Students from the University of Delaware’s Center for Innovative Bridge Engineering toured Schuylkill Products’ plant in Cressona, PA, in 2003. The company was sold in 2009.|
Nagle was also found guilty of seven counts of wire fraud, six counts of mail fraud, conspiracy to commit money laundering, and 11 counts of money laundering. He was acquitted on four counts of wire fraud.
The verdict followed a four-week jury trial before Senior U.S. District Court Judge Sylvia H. Rambo.
Schuylkill Products Inc.
Nagle was president, CEO and part owner of Schuylkill Products Inc. (SPI), of Cressona, PA, and its subsidiary CDS Engineers Inc. (CDS) until April 2009, when SPI was sold. SPI manufactured concrete bridge beams used on highway construction projects in Pennsylvania and surrounding states. CDS, SPI’s erection division, installed SPI beams and other products on highways in Pennsylvania and nearby states.
Nagle was convicted of joining a long-running conspiracy to use the federal DBE program to defraud U.S. DOT, the Pennsylvania Department of Transportation (PennDOT), and the Southeastern Pennsylvania Transportation Authority (SEPTA) when he became president of SPI in April 2004.
U.S. DOT provides billions of dollars a year to states and municipalities to build and maintain highways and mass transit systems, on the condition that part of those funds goes to small businesses owned and operated by disadvantaged individuals. DOT has been required since 1983 to make sure that at least 10% of its authorized highway and transit funds go to DBEs. The department has a single DBE goal that includes companies owned by women or members of minority groups.
PennDOT and SEPTA receive these funds in Pennsylvania and require contractors to award a percentage of their subcontracts to eligible DBEs.
Authorities said Nagle had participated in a scheme that ran from 1993 to 2008, in which he and other SPI executives diverted more than 300 PennDOT and SEPTA construction contracts reserved for DBEs to SPI and CDS. The scheme used a small Connecticut highway construction firm known as Marikina Construction Corp. as a front to obtain the government contracts.
Marikina was certified by PennDOT and SEPTA as a DBE. The company was owned by Romeo P. Cruz of West Haven, CT, a naturalized American citizen born in the Philippines.
“Although Marikina received the DBE contracts on paper, all the work was performed by SPI and CDS personnel, and SPI and CDS received all the profits,” the U.S. Attorney’s Office said. “In exchange for letting SPI and CDS use its name, Marikina was paid a small fixed fee, set by SPI.”
The scheme was sustained for years by detailed layers of deception, authorities said. SPI and CDS personnel pretended to be Marikina employees by using Marikina business cards, email addresses, stationery, and signature stamps, while magnetic placards and decals bearing the Marikina logo were used to conceal SPI and CDS logos on company vehicles.
Four former executives associated with SPI, CDS and Marikina previously pleaded guilty in the scheme. All testified against Nagle at his trial and are awaiting sentencing:
• Cruz pleaded guilty in 2008 and 2009 to conspiracy and tax fraud charges;
• SPI former vice president, COO and owner Ernest G. Fink, of Orwigsburg, PA, pleaded guilty in 2010 to conspiracy;
• Timothy G. Hubler, of Ashland, PA, CDS’ former vice president in charge of field operations, pleaded guilty in 2008 to conspiracy and tax fraud charges; and
• Dennis F. Campbell, of Orwigsburg, PA, SPI’s former vice president in charge of sales and marketing, pleaded guilty in 2008 to conspiracy charges.
Nagle faces up to five years in prison on the conspiracy count; up to 20 years in prison on each count of wire and mail fraud; and up to 10 years each on the money laundering and money laundering conspiracy counts. He also faces $250,000 in fines and mandatory restitution on each conviction. No date has been set for sentencing.
‘Expose and Shut Down DBE Fraud’
The investigation was conducted by the FBI, U.S. DOT’s Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS.
“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the U.S. DOT Office of Inspector General,” said Doug Shoemaker, OIG Regional Special Agent in Charge.
“This significant conviction, in what is the largest reported DBE fraud case in U.S. DOT history, will serve as a clear signal that severe penalties await those who would attempt to subvert U.S. DOT laws and regulations.”
Shoemaker urged prime contractors and subcontractors to report any suspected DBE fraud to U.S. DOT’s OIG and said his office would work with other federal agencies “to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”
Nagle’s attorney, Michael A. Schwartz, told reporters that he was disappointed by the verdict and had filed a motion to gain additional time to pursue an “an acquittal or a new trial.”