Project Manager Pleads Guilty to Kickback Scheme to Defraud a U.S. Army Facility

A former project manager for a government contractor pleaded guilty today for his role in a conspiracy to inflate project costs by over $200,000 and receive kickbacks related to contracts for commercial flooring services at a U.S. Army facility in Fairbanks, Alaska. 

Kevin Mahler pleaded guilty to a six-count felony information filed on Jan. 29, in the U.S. District Court for the District of Alaska. According to the plea, from March 2016 to March 2021, Mahler conspired to receive kickbacks from Benjamin McCulloch, the owner of a commercial flooring services company, related to construction contracts administered by the U.S. Army at Fort Wainwright. Mahler pleaded guilty to conspiring with McCulloch to inflate the costs of flooring construction subcontracts and receiving half of the proceeds as kickback payments from McCulloch. During the five-year scheme, Mahler received over $100,000 in kickbacks. As a part of his plea, he has agreed to pay restitution. According to the information, Mahler also failed to report his income from the scheme to the IRS, in violation of federal tax laws. McCulloch previously pleaded guilty for his role in the conspiracy.

“Taking advantage of U.S. taxpayers by defrauding U.S. Army facilities is a crime and will not be tolerated,” said Deputy Assistant Attorney General Manish Kumar of the Justice Department’s Antitrust Division. “The Justice Department’s Procurement Collusion Strike Force will hold accountable individuals who conspire to illegally profit — through kickbacks or otherwise — at the expense of the public.”

“We are very pleased with today's announcement,” said Special Agent in Charge Keith K. Kelly of the Department of the Army Criminal Investigation Division’s Fraud Field Office. “This is a true testament to our continued commitment to work closely and seamlessly with our outstanding fellow law enforcement agencies to help bring those to justice who attempt to defraud the U.S. Government and U.S. Army.”

“The FBI and our partners are committed to protecting the integrity of the government’s competitive contracting practices,” said Special Agent in Charge Antony Jung of the FBI Anchorage Field Office. “This outcome demonstrates that those who engage in fraudulent kickback schemes, harming American taxpayers in the process, will be held accountable for their crimes.”

“This plea marks a significant milestone in the ongoing efforts to combat corruption and uphold integrity within government contracting processes,” said Special Agent in Charge Bryan D. Denny of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS), Western Field Office. “Mahler’s actions, which involved a calculated scheme to defraud the U.S. Army and exploit American taxpayers, were brought to light thanks to the diligent work and collaborative efforts of multiple law enforcement agencies.”

“‘Be all you can be’ is a resounding call by the U.S. Army for excellence, dedication and bravery. It is not a call for fraudsters to fill their coffers illegally at the Army’s expense,” said Special Agent in Charge Adam Jobes of the IRS Criminal Investigation (IRS:CI) Seattle Field Office. “Mahler’s disregard and theft from those who serve our country is being brought to light today, and this guilty plea emphasizes IRS:CI’s commitment to fighting fraud no matter where it is found.”

Mahler faces a maximum penalty of 10 years in prison and a fine of $250,000. The fine for the anti-kickback conspiracy charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The Antitrust Division’s San Francisco Office, U.S. Attorney’s Office for the District of Alaska, FBI Anchorage Field Office, DCIS’s Western Field Office in Seattle and IRS:CI Seattle Office are investigating the case.

Anyone with information in connection with this investigation is urged to contact the Antitrust Division’s San Francisco Office at 415-934-5300, Antitrust Division’s Citizen Complaint Center at 888-647-3258 or www.justice.gov/atr/contact/newcase.html or the FBI Anchorage Field Office at 907-276-4441.

In November 2019, the Justice Department created the Procurement Collusion Strike Force (PCSF), a joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant and program funding at all levels of government – federal, state and local. To learn more about the PCSF, or to report information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to federal government contracts, go to www.justice.gov/procurement-collusion-strike-force.