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VA Hospital Exec Admits Contract Fraud

Tuesday, March 11, 2014

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A former director of two Veterans Affairs hospitals has admitted taking nearly $400,000 in bribes and kickbacks to steer contracts to a nationwide design-build firm—apparently, just the beginning of what the firm saw as a long and lucrative relationship.

William D. Montague, 61, of Brecksville, OH, former director of the Cleveland and Dayton VA Medical Center, pleaded guilty Feb. 20 to 64 federal criminal counts related to trading confidential construction information with the as-yet-unidentified firm in exchange for cash and gifts.

William D. Montague
VA

As Acting Medical Center Director of the Dayton VA Medical Center, Montague had "extraordinary access" to project information that would benefit bidders, said one of those firms.

The firm had been bidding on a series of fixed-price services contracts (known as Indefinite Delivery, Indefinite Quantity, or IDIQ, contracts) with the VA. Among other things, Montague "solicited money and a consulting contract" from the firm "in exchange for information related to VA contracts and projects."

'Business 75'

The FBI has so far identified the firm only as Business 75, "an integrated design firm with offices throughout the United States, including New York, Illinois, Virginia, Missouri, and California."

The company performed work for the VA directly and through joint ventures and other teaming agreements, according to the indictment.

Montague pleaded guilty Feb. 20 to conspiracy to commit honest services mail fraud, violating the Hobbs Act, money laundering, multiple counts of wire fraud, mail fraud, disclosing public contract information, and a host of other charges, the FBI announced.

Montague served as director of the Cleveland VA Medical Center from 1995 until Feb. 3, 2010. On March 11, 2011, he began working as director of the Dayton VA Medical Center, a position he held through Dec. 17, 2011, according to the indictment.

Email Trail

The superseding indictment details interactions between Montague and Business 75, including internal emails by both parties, the FBI said.

In one email in March 2011, a Business 75 executive noted one $15 million contract that would include $12 million in sales, leaving a $3 million fee for the firm "on the table... ."

"[O]ne of MONTAGUE’s jobs will be to fill up the bucket by directing task orders toward our contract, Going forward, we have two $15M buckets to fill (Central and Eastern regions). That’s a lot of shoveling to get to $30M…BILL has the relationships to help us maximize the contracts…"

West Los Angeles VA Center
VA

A contract on the $750 million West Los Angeles (CA) VA Medical Center could have reaped "Business 75" $20 million, according to one internal memo.

The same email noted that five additional VA hospital projects totaling more than $1.2 billion were in the pipeline, adding: "Montague told us about these before they were advertised, which has allowed us to get an early start in developing the team. If we bring him on board, he can help us pull in one or two of these large projects."

House of Montague

Montague used a financial-services firm he created, called House of Montague, to facilitate the scheme, according to the FBI.

For example, on March 1, 2011, Business 75 issued a $20,000 check to Montague, which he deposited into the House of Montague’s account.

Ten days later, the FBI said, Business 75’s principal emailed employees with Montague’s consulting agreement, explaining: “His job is to help us bring in more work from the VA, in part by helping us access key decision makers,” according to the indictment.

The indictment also spells out double-dipping by Montague.

On May 26, 2011, it says, Montague traveled to Washington, D.C., on VA business. Several weeks later, he submitted a government expense report for $1,204 for the trip. Even before he submitted that report, however, he also invoiced Business 75 for $2,741 for “consulting services” related to the same trip, including the hotel bill for which he also later billed the government.

Montague also deceived other VA employees into providing him with documents and information later shared with Business 75, the indictment said.

'The Motherlode'

On another occasion, the indictment says, Montague boasted by email to another firm (identified as Business 74) that he had "obtained the priority scored list of all scored projects for next fiscal year. It is unpublished and unavailable elsewhere."

Rear Adm Julius Caesar Stokes VA Med Center
U.S. Navy photo by Mass Communication Specialist 1st class Terry Matlock (left); VA (right)

William Montague was director of the new Louis Stokes VA Medical Center in Cleveland in 2010 when Rear Adm. Julius S. Caesar (right) toured the facility.

"This is considered the motherlode [sic] by my other clients, all of whom pay more than $5000 a quarter," the email said. "These lists would be excellent examples of a project by project system. This is every project in the entire VA in priority order by category. I also have obtained all planned Major projects through 2022."

Yet another email by the Business 75 principal approves $30,000 annual consulting contract for Montague, but notes, "I do not see BILL's contract as running on forever . . . Currently, BILL is the interim Medical Director of VA Dayton.  As such, he has extraordinary access right now to information. When that position ends, his access and influence will begin to diminish," the indictment says.

The next day, it says, an employee responded to that email by saying, "Interesting math. At $30k per year for BILL, we would have to win [$]300,000 in VA fee[s] every year ($30k profit) for us to break even. I think VA West LA is worth $20,000,000."

The VA Medical Center in West Los Angeles, CA, was a $750 million construction project.

'Misled and Misused'

Montague's guilty plea capped a two-year investigation by the FBI and Cleveland Veterans Affairs Office of Inspector General. He is to be sentenced May 20. His potential prison time will depend on a "review of factors unique to this case" and will likely be less than the maximum, the FBI said without elaboration.

Montague will have to pay $390,000 in restitution.

“As a Veterans Affairs Medical Center Director, William Montague misled staff and misused his position to enrich himself and businesses pursuing contracts with the agency,” said Stephen D. Anthony, Special Agent in Charge of the FBI’s Cleveland Field Office.

Added Gavin McClaren, Resident Agent in Charge of the VA Inspector General's Cleveland Office: “We will continue to protect taxpayers against those who would enrich themselves at the expense of our nation’s veterans.”

   

Tagged categories: Architects; Bidding; Commercial Construction; Design; Enforcement; Good Technical Practice; Government contracts; Laws and litigation

Comment from Theresa Lowe, (3/14/2014, 8:36 AM)

Not entirely surprised. BTW, not sure why “motherlode” is [sic]’d? It is an acceptable variant of the word (vs mother lode)


Comment from Mary Chollet, (3/14/2014, 8:42 AM)

Theresa, good eye! The [sic] is from the indictment. We did not add it. Thanks!


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