$136 million fraud case
The two former owners of a Schuylkill County business have been indicted in a $136 million Disadvantaged Business Enterprise (DBE) fraud scheme. It is one of the largest DBE fraud schemes in U.S. Department of Transportation (USDOT) history.
Joseph W. Nagle, Deerfield Beach, Fla., and Ernest G. Fink Jr., of Orwigsburg, co-owned and operated Schuylkill Products Inc. (SPI), and its wholly-owned subsidiary CDS Engineers (CDS), until April 2009 when they sold the companies to Northeast Prestressed Products. SPI manufactured concrete products for use on highway construction projects and CDS operated as its engineering and erection division. Both companies were based in Cressona. Nagle was the president and chief executive officer and Fink was vice president and chief operating officer.
The 32-count indictment filed Thursday charges Nagle and Fink with two counts of conspiracy, 11 counts of wire fraud, six counts of mail fraud and 11 counts of unlawful monetary transactions, as well as two forfeiture counts.
If convicted, Nagle and Fink face up to five years in prison on the first conspiracy count, up to 10 years in jail on the second conspiracy count, up to 20 years on each wire and mail fraud count, and up to 10 years on each unlawful monetary transaction count. Each count also carries potential fines of up to $250,000 or twice the gross gain or gross loss and the indictment subjects the two to potential forfeiture of the proceeds traceable to the offenses.
The indictment alleges that Nalge and Fink and others used a small Connecticut highway construction firm known as Marikina Construction Company as a front company to obtain lucrative government contracts reserved for small and disadvantaged businesses. Marikina was owned by Romeo P. Cruz, of West Haven, Conn., a naturalized American citizen with origins from the Philippines.
Marikina was designated a disadvantaged business by PennDOT in 1993, which made it eligible to bid on and receive state highway construction contracts reserved for DBE's.
The indictment alleges that between 1993-2008, Marikina received hundreds of federally-funded contracts for highway and mass transit construction projects worth millions of dollars but did not perform the work. In Pennsylvania alone, over 300 federally-funded contracts that were worth about $136 million were awarded to Marikina, and the indictment alleges that the work was actually performed by SPI and CDS personnel.
The indictment alleges the money from the contracts was merely passed through Marikina to make it appear that a DBE was involved, when in reality, SPI and CDS personnel actually found, negotiated, coordinated, performed, managed and supervised all the contracts awarded to Marikina.
All profits from the contracts allegedly ended up with SPI and CDS and in exchange for allowing those firms to use its name, Marikina was paid a small fixed fee. Essentially, SPI and CDS, which were not DBE's, rented Marikina's name to obtain lucrative government contracts reserved for small and disadvantaged businesses.
Previously, three former executives associated with SPI, CDS and Marikina entered guilty pleas for their role in the scheme.
On Feb. 13, 2008, Dennis F. Campbell, SPI's former vice president in charge of field operations, pleaded guilty to conspiracy and tax fraud charges. On April 15, 2008, Timothy G. Hubler, CDS's vice president in charge of field operations, pleaded guilty to conspiracy and tax fraud charges. On Aug. 28, 2008, Romeo P. Cruz, the former owner and president of Marikina, pleaded guilty to conspiracy and on Jan. 9, he pleaded guilty to tax fraud.
All three men are cooperating with the investigation and await sentencing. All three previously admitted that the scheme was able to last for so long without detection because of the numerous fraudulent steps the co-conspirators took to conceal the true relationship between SPI, CDS and Marikina. These steps included SPI and CDS personnel pretending to be Marikina employees by using Marikina passwords, Marikina signature stamps, business cards, letterhead and e-mail addresses as well as using magnetic placards and decals bearing the Marikina logo to cover up SPI and CDS logos on those firms' trucks.
The investigation is being conducted by the FBI, U.S. Department of Transportation Inspector General's Office, the US. Department of Labor Inspector General's Office, and the Criminal Investigation Division of the IRS. Senior Litigation Counsel Bruce Brandler is supervising the prosecution.
The announcement of the indictment was made by U.S. Attorney Dennis C. Pfannenschmidt, of the Middle District of Pennsylvania, who is in charge of the probe.
(Note: Information in this article was supplied by Pfannenschmidt's office.)