Former Owner Of Connecticut Construction Company Sentenced In Largest Disadvantaged Business Enterprise Fraud In Nation’s History
The U.S. Attorney's Office for the Middle District of Pennsylvania announced today that Romeo P. Cruz, of West Haven, Connecticut was sentenced by Senior U.S. District Judge Sylvia H. Rambo in Harrisburg in connection with his role in what the U.S. Department of Transportation (USDOT) has called the largest Disadvantaged Business Enterprise (DBE) fraud in the nation's history. Cruz was sentenced to 33 months’ imprisonment, $119 million in restitution to the USDOT and $79,450 in restitution to the IRS, and 2 years supervised release. He was ordered to surrender to the Bureau of Prisons on February 17, 2014 to begin service of his sentence.
On Monday January 13, 2014, Dennis F. Campbell, Schuylkill Products, Inc.'s (SPI) former Vice-President in charge of Sales and Marketing, was sentenced to 24 months’ imprisonment, $119 million in restitution to the USDOT and 2 years supervised release. Timothy G. Hubler, SPI's former Vice-President in charge of Field Operations, was sentenced to 33 months’ imprisonment, $119 million in restitution to the USDOT, $82,370 in restitution to the Internal Revenue Service, and 2 years supervised release.
Cruz was the owner of Marikina Construction Corporation, the DBE firm which operated as a front for SPI to gain lucrative DBE contracts, pleaded guilty to DBE fraud and tax fraud in 2008 and 2009. Cruz, Campbell and Hubler cooperated with the government's investigation which led to the conviction of the two former owners of SPI, Ernest G. Fink, of Orwigsburg, Pennsylvania, SPI's former Vice-President and Chief Operating Officer, and Joseph W. Nagle, of Deerfield Beach, Florida, SPI's former President and Chief Executive Officer.
Fink pleaded guilty to DBE fraud in 2010. Nagle was convicted after a four-week jury trial in 2012 of 26 charges relating to the DBE fraud scheme. No sentencing date has been scheduled for Fink and Nagle.
"The sentence handed down today, in what is the largest reported DBE fraud case in USDOT history, serves as a clear signal that severe penalties await those who would attempt to subvert USDOT laws and regulations,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General. Prime contractors and subcontractors are cautioned not to engage in fraudulent DBE activity and are encouraged to report any suspected DBE fraud to the USDOT-OIG. Our agents will continue to work with the Secretary of Transportation, the Administrators of the Federal Highway, Transit and Aviation Administrations, and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”
According to U.S. Attorney Peter J. Smith, the DBE fraud lasted for over 15 years and involved over $136 million in government contracts in Pennsylvania alone. SPI, using Marikina as a front, operated in several other states in the Mid-Atlantic and New England regions. Although Marikina received the contracts on paper, all the work was really performed by SPI personnel, and SPI received all the profits. In exchange for letting SPI use its name and DBE status, Marikina was paid a small fixed-fee set by SPI.
The scheme lasted as long as it did because of the numerous fraudulent steps the co-conspirators took to conceal the scheme. SPI personnel routinely pretended to be Marikina personnel by using Marikina business cards, email addresses, stationery, and signature stamps, as well as using magnetic placards and decals bearing the Marikina logo to cover up SPI's logo on SPI vehicles.
SPI and its wholly-owned subsidiary, CDS Engineers, was sold in 2009 and was based in Cressona, Pennsylvania. SPI manufactured concrete bridge beams. CDS was SPI’s erection division and installed SPI’s bridge beams as well as other suppliers’ products. USDOT provides billions of dollars a year to states and municipalities for the construction and maintenance of highways and mass transit systems on the condition that small businesses owned and operated by disadvantaged individuals receive a fair share of these federal funds. The DBE fraud here involved SPI's use of Marikina's name and status to obtain DBE contracts that it was not entitled to receive.
The investigation was conducted by the FBI, the USDOT Inspector General's Office, U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the Internal Revenue Service. Senior Litigation Counsel Bruce Brandler handled the prosecution.