WASHINGTON, D.C. – Nicanor Lotuaco—a Virginia business man—has been sentenced to five months in jail, followed by five months home detention and three years supervised release, for conspiracy to defraud the Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA) and the Small Business Administration (SBA), the Justice Department announced today. In addition, the Honorable Judge Jerome B. Friedman in Norfolk, Virginia, sentenced Lotuaco to a fine of $1 million.
One other individual defendant, James Schaubach of Virginia, and two Virginia corporations, ACS Environmental, Inc. (ACS) and Air Power Enterprises, Inc. (Air Power) are expected to be sentenced within the next few weeks.
All defendants pleaded guilty in June 2005 to buying false training certificates for their employees and then using the unlicensed employees to remove asbestos, lead and hazardous waste from public buildings. The defendants also admitted to submitting false documents to the SBA regarding their eligibility to participate in the SBA’s program for minority-owned businesses and fraudulently obtaining contracts at federal facilities under the program.
“Not only did the defendants defraud the federal government, but they endangered the health and safety of their employees and the public by falsely certifying that the workers had the appropriate credentials to work on asbestos and lead abatement projects,” said Sue Ellen Wooldridge, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “Today’s sentence should send a strong signal that the Justice Department will prosecute companies and individuals who violate our environmental and workplace standards.”
ACS, located in Norfolk, and Air Power, located in Portsmouth, worked in the asbestos and lead abatement and hazardous waste removal industries as abatement and removal contractors. From 1999 through 2004, Air Power received $37 million in federal contracts under the SBA's 8(a) program for minority owned businesses. ACS and Air Power admitted to conspiring to make false statements in connection with the certificates and to submitting false statements to the SBA regarding the ownership of Air Power in order to participate in the agency's 8(a) set-aside program which enabled them to receive federal contracts as a minority-owned firm. James Schaubach—the president of ACS and vice president of Air Power—and Nicanor Lotuaco—the president of Air Power—admitted to making false statements in connection with the false certificates and the SBA's 8(a) program.
All four defendants admitted to buying these false certificates from F&M Environmental Technologies, Inc. a Virginia company, which pleaded guilty in February 2001 to selling hundreds of such false training certificates in Virginia, Maryland, and the District of Columbia.
Schaubach and Lotuaco obtained many of the asbestos, lead, and hazardous waste jobs, on which the employees with false certificates worked, through the SBA's Section 8(a) program by misleading the SBA into believing that Air Power was owned and controlled by a minority, when in fact Schaubach, a non-minority, controlled the company and directed that environmental contracts be sub-contracted to ACS.
Under federal and state law, individuals who intend to work on asbestos and lead abatement projects are required to undergo an extensive training course instructing them how to properly and safely remove asbestos, lead and hazardous waste without contaminating either themselves, co-workers, or members of the public. ACS and Air Power falsely certified that the workers had taken the required courses, passed the exams and were otherwise entitled to work on such projects. In fact, these companies simply paid F&M Environmental Technologies, Inc. to deliver the certificates for workers supposedly taking the course.
Schaubach and Lotuaco purchased these false certificates for ACS and Air Power employees and then used them to obtain contracts to conduct asbestos, lead, and hazardous waste abatement at schools, hospitals, and other public and governmental facilities. These employees did not have the proper training to conduct the abatement, although the falsified certificates were presented to state and federal agencies as proof of appropriate training.
Asbestos has been designated by the EPA and Congress in the Clean Air Act as a hazardous air pollutant. It causes a wide range of illnesses, including various forms of cancer and asbestosis, a usually fatal lung disease. The EPA has determined that there is no safe level of exposure to asbestos.
The guilty pleas are the result of an initiative by the Environmental Crimes Section of the Department of Justice to identify and single out for prosecution the nation's most egregious environmental and workplace safety violators.
Investigation of this case was conducted by special agents of the Defense Criminal Investigative Services; the Federal Bureau of Investigation; the Criminal Investigative Division of the U.S. EPA; Small Business Administration, Office of Inspector General; NASA Office of Inspector General; Army Criminal Investigations Division; Defense Contract Audit Office; and the Virginia Department of Professional and Occupational Regulation.