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Contractor Admits $11M Veteran Fraud

Monday, November 18, 2013

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The owner and manager of a New Mexico construction company are headed to prison after pleading guilty to raking in millions of dollars from a federal program designed to help disabled veterans.

Max R. Tafoya, 63, and his son-in-law, Tyler Cole, 41, the owner and manager, respectively, of M.R. Tafoya Construction Inc., had been charged with falsely claiming that their company qualified to participate in the program, which set aside federal contracts for small businesses owned by service-disabled veterans.

Tafoya was also charged with witness tampering and obstruction of justice.

Tafoya will spend 57 months in prison and Cole will serve a 37-month prison term, under plea agreements entered Tuesday (Nov. 12).

Sante Fe National Cemetery
Department of Veterans Affairs, National Cemetery Administration

M.F. Tafoya Construction was awarded almost $11 million in federal contracts, including one to perform work at the Sante Fe National Cemetary.

The company illegally received five federal contracts totaling nearly $11 million through the U.S. Department of Veterans Affairs’ Service-Disabled Veteran Owned Small Business Program, according to an announcement by U.S. Attorney Steven C. Yarbrough.

Restitution and fines in the case will later be determined by a federal judge.

In addition, Tafoya’s step-brother, Andrew Castillo, pleaded guilty to conspiracy in October 2011 and remains free pending sentencing, which has not yet been scheduled, according to authorities.

Scheme Admitted

Tafoya admitted that his company was awarded $10,984,189 in federal contracts in 2009 and 2010 that required the firm to hold SDVOSB status. The contracts were for work at cemeteries, including the Fort Bliss National Cemetery and Santa Fe National Cemetery.

During that period, Tafoya, a veteran without a service-connected disability, admitted that he paid his step-brother Castillo, a service-disabled veteran who lives and works in Florida, $600 a week to use his name and status to qualify for the program.

President Veterans Day 2012
Official White House Photo / Pete Souza

The SDVOSB program, established in 1999, is part of a federal effort to increase the number of contracts awarded to small businesses owned by service-disabled veterans.

According to prosecutors, Tafoya admitted asking Cole to complete certifications stating that Tafoya Construction was a SDVOSB and to submit them to the V.A. so that Tafoya Construction could obtain lucrative SDVOSB contracts.

Tafoya also admitted producing a number of false documents designed to create the appearance that Castillo was the majority owner and controller of Tafoya Construction; meanwhile, Tafoya owned 100 percent of the company's stock.

Lies and Dummy Documents

In February 2011, Tafoya he lied to a V.A. investigator to support the fraudulent claim that the company was a legitimate program participant, documents said.

He told the investigator that:

  • Castillo had paid $100,000 to purchase 51 percent of the business;
  • Castillo worked in the company’s Albuquerque office;
  • Castillo was working at a V.A. construction site the day of the inquiry; and
  • Castillo personally signed the V.A. contracts and bonding paperwork on SDVOSB contracts the company was awarded.

Later that month, Tafoya said he traveled to Florida to meet with Castillo for the purpose of creating fraudulent documents to cover up the scheme.

Tafoya later submitted these documents to a federal grand jury in July 2011, prosecutors noted.

In addition, Cole admitted participating in the scheme as manager of Tafoya Construction from 2008 to 2011. He said he had forged Castillo’s signature on documents submitted to the federal agency.

About the Company

Details about the company were not immediately available via M.R. Construction’s website; however, an online Yellow Pages listing reads in part:

“Founded in 1977, M.R. Tafoya Construction is one of the leading companies in the construction industry in the New Mexico area. The company has completed various cemetery projects with more than 45,000 crypts manufactured and installed. It offers site excavation and crypt and columbarium manufacturing and installation services.”

Nationwide Crackdown

Prosecutors said the case was “part of a nationwide effort to protect service-disabled veterans who own businesses by tightening controls” on fraud and abuse.

“Contracts under the SDVOSB Program are supposed to go to small businesses that are actually owned by service-disabled veterans, and not to imposters who break the rules and scheme to beat the system,” said Yarbrough.

Generally, a small business is owned and controlled by a service-disabled veteran when the veteran directly owns at least 51 percent of the business, holds the highest officer position, and manages the daily operations.

“Max Tafoya and Tyler Cole are being held accountable for abusing a program that seeks to fulfill our moral obligation to provide disabled veterans with benefits designed to ease the losses and disadvantages they have incurred as a consequence of disabilities they sustained while serving our country,” the U.S. Attorney said.

The case was investigated by the V.A.'s Office of Inspector General and is being prosecuted by Assistant U.S. Attorneys C. Paige Messec and Tara C. Neda.

   

Tagged categories: Bidding; Building operations; Business matters; Contract awards; Criminal acts; Good Technical Practice; Government; Government contracts

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