Albuquerque Construction Company Owner Sentenced to Prison for Defrauding Federal Program for Service-Disabled Veterans
ALBUQUERQUE – Max R. Tafoya, 64, the owner of an Albuquerque-area construction company, and his son-in-law, Tyler Cole, 41, of Los Ranchos de Albuquerque, N.M., were sentenced this afternoon for defrauding a federal program that sets aside federal contracts for businesses owned by service-disabled veterans.
Tafoya was sentenced to 57 months in federal prison to be followed by a year of supervised release while Cole was sentenced to a 37-month term of imprisonment followed by a year of release. Tafoya was ordered to pay $1,350,000, the proceeds fraudulently obtained as the result of the criminal activity, to the United States, with Cole being jointly liable for $500,000 of that amount.
“Today Max Tafoya and Tyler Cole were held accountable for abusing a program that seeks to fulfill our obligation to provide disabled veterans with benefits designed to ease the losses and disadvantages they have incurred as a consequence of disabilities they sustained while serving our country,” said U.S. Attorney Damon P. Martinez. “This prosecution is part of a nationwide effort to protect service-disabled veterans who own small businesses by tightening controls to prevent fraud and abuse.”
“Our agency remains committed to protecting the integrity of the programs that provide business opportunities to those who have struggled and sacrificed for our freedom. Today, individuals who seek to follow in the footsteps of Tafoya and Cole are on notice that justice will be served,” said Acting Inspector General of the VA, Richard J. Griffin.
Tafoya and Cole were charged in Feb. 2012, in an indictment alleging that the two men obtained almost $11 million in federal contracts by falsely claiming that Tafoya’s company, M.R. Tafoya Construction, Incorporated (Tafoya Construction), was qualified to participate in the U.S. Department of Veterans Affairs’ (VA) Service-Disabled Veteran Owned Small Business (SDVOSB) Program. A superseding indictment filed in March 2013, added charges of witness tampering and obstruction of justice against Tafoya.
The SDVOSB Program was established pursuant to the Veterans Entrepreneurship and Small Business Development Act of 1999, to achieve a government-wide goal to increase the number of government contracts awarded to small businesses owned and operated by service-disabled veterans. The Veterans Benefits, Health Care, and Information Technology Act of 2006 gave SDVOSBs the highest priority in contracting preferences for VA contracts awarded to small businesses. A small business must be both owned and controlled by one or more service-disabled veterans to qualify as an SDVOSB. Generally, a small business is owned and controlled by a service-disabled veteran when the veteran directly owns at least 51% of the business, holds the highest officer position in the business, and manages and administers the business’s day-to-day operations.
On Nov. 12, 2013, Tafoya and Cole each entered guilty pleas to Counts 1 and 2 of the superseding indictment charging them with conspiracy and committing a major fraud against the United States.
In entering his guilty plea, Tafoya admitted that between 2009 and 2010, Tafoya Construction was awarded five contracts valued at an aggregate amount of $10,984,189 that required the company to hold SDVOSB status. During that period, Tafoya, a veteran without any service-connected disability, owned 100% of Tafoya Construction stock. Tafoya admitted obtaining the lucrative contracts by paying his step-brother Andrew Castillo, a service-disabled veteran who works and resides in Florida, a $600 weekly fee to allow Tafoya Construction to use Castillo’s name and service-disabled status in its bids for SDVOSB contracts. Tafoya acknowledged asking Cole to complete certifications stating that Tafoya Construction was a SDVOSB and submit them to the VA so that Tafoya Construction could obtain SDVOSB contracts. Tafoya also admitted that he drew up a number of false documents designed to create the appearance that Castillo was the majority owner and controller of Tafoya Construction, when in fact he did not own or operate the company, and that Cole forged Castillo’s signature on the documents.
Tafoya also admitted that in Feb. 2011, he lied to a VA investigator to support the fraudulent claim that Tafoya Construction was a SDVOSB. Tafoya made the following false statements to the investigator: (1) that Castillo paid $100,000 to purchase 51% of Tafoya Construction; (2) that Castillo worked in Tafoya Construction’s Albuquerque office; (3) that Castillo was working at a VA construction site in Santa Fe that day; and (4) that Castillo personally signed the VA contracts and bonding paperwork on the SDVOSB contracts awarded to Tafoya Construction. Tafoya also admitted traveling to Florida later in Feb. 2011, to meet with Castillo for the purpose of creating fraudulent documents in an attempt to cover up their fraudulent scheme. Tafoya subsequently submitted these fraudulent documents to a federal grand jury in July 2011.
In his plea agreement, Cole admitted serving as manager of Tafoya Construction from 2008 to 2011, and participating in Tafoya’s illegal scheme to defraud the United States by falsely claiming that Tafoya Construction was a SDVOSB. Cole admitted to filling out and submitting certifications to the VA that falsely claimed that Tafoya Construction was owned by Castillo, a service-disabled veteran. Cole further admitted signing Castillo’s signature on bids and other paper work submitted to the VA and on documents created to make it appear that Castillo was the 51% owner of Tafoya Construction.
As a result of Tafoya’s and Cole’s fraudulent scheme, from 2009 to 2010, the VA awarded Tafoya Construction five contracts in the aggregate amount of $11,568,999 for work at the Fort Bliss National Cemetery, the Santa Fe National Cemetery, the Fort Logan National Cemetery, and the Jefferson Barracks National Cemetery.
Castillo entered a guilty plea in Oct. 2011, to a conspiracy charge. He remains on conditions of release pending his sentencing hearing, which is scheduled for June 19, 2014.
This case was investigated by the Office of Inspector General of the U.S. Department of Veterans Affairs and is being prosecuted by Assistant U.S. Attorneys C. Paige Messec and Tara C. Neda. Assistant U.S. Attorney Cynthia L. Weisman assisted with the forfeiture proceedings in this case.