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Sham Construction Firms Defraud Feds $346M

Thursday, June 13, 2019

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Recently, the U.S. Attorney’s Office for the Western District of Missouri announced the guilty plea of an Olathe, Kansas-based contractor for defrauding the federal government with respect to contracts set aside for certified minorities and disabled veterans.

The contractor, Matthew McPherson, and his co-conspirators are reported to have received $346 million for the set-aside contracts.

What Happened

According to the district’s release, McPherson pleaded guilty before U.S. District Judge Roseann Ketchmark on June 3 for participating in a conspiracy which took place from September 2009 to March 2018.

The sham was made up of two companies, Zieson Construction Co. (established in July 2009 with African-American and service-disabled veteran Stephon Ziegler) and Simcon Corp. (established in 2014).

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Recently, the U.S. Attorney’s Office for the Western District of Missouri announced the guilty plea of an Olathe, Kansas-based contractor for defrauding the federal government with respect to contracts set aside for certified minorities and disabled veterans.

While Ziegler served as a figurehead for Zieson, the company began obtaining federal construction contracts primarily set aside for small businesses owned and controlled by service-disabled veterans and minorities. However, Ziegler didn’t control any of the short- or long-term operations for Zieson, instead McPherson and his co-conspirators controlled and operated the company, ultimately receiving most of the profits through the respective business entities.

Between the time Zieson was established and 2018, the company was awarded 199 federal contracts intended for set asides and was paid approximately $335 million. In addition to the company’s business entities, McPherson and his co-conspirators received another $4.2 million by using false and fraudulent invoices.

By 2014, Zieson was beginning to become too large for small business contracts, causing McPherson and his co-conspirators to use the minority status of another Zieson employee to set up Simon Corp. Like Zieson, the company was created to pick up small set-aside contracts but was ultimately operated by McPherson.

To bring Simcon up to speed with industry experience, past performance and financial profitability to compete for federal set-aside contracts, Zieson issued the company subcontract work. However, Simcon never actually performed said subcontracts.

In July 2016, Simcon was awarded a $4.4 million contract from the U.S. Air Force and a $6.9 million contract in September from the U.S. Army. Additionally, McPherson and his co-conspirators received $319,866 from Simcon using false and fraudulent invoices.

Both companies are reported to have shared the same building (an LLC also owned by McPherson), office space and equipment. In another attempt to gain more profit, as well as hide incoming profits, McPherson also used his own established construction company (listed as “Business C” in the court documents) to submit false and fraudulent invoices to Zieson.

What’s Happening Now

As a result of using Business C to aid the two sham companies—which obtained $5.5 million in fraud proceeds— McPherson must forfeit those profits to the government.

McPherson will also be facing up to five years in a federal prison without parole. Although a maximum statutory sentence is prescribed by Congress, a sentence hearing won’t be scheduled until after a presentence investigation by the U.S. Probation Office is complete.

Ziegler has also pleaded guilty to making a false statement to the U.S. Department of Veteran Affairs.

The case is being prosecuted by Assistant U.S. Attorneys Stacey Perkins Rock and Paul S. Becker.

   

Tagged categories: Business management; Business matters; Business operations; Contracts; Fraud; Good Technical Practice; Government contracts; Lawsuits; NA; North America; PaintSquare App - Commercial

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