Kuchera Brothers Sentenced For Fraud Against The Government And Conspiracy

JOHNSTOWN, PA. - Two brothers who owned a major defense contracting firm have been sentenced in federal court on charges of major fraud against the government and conspiracy, United States Attorney David J. Hickton announced today. U.S. District Judge Kim Gibson sentenced William Kuchera, 58, of Summerhill, Pa., and Ronald Kuchera, 52, of Johnstown, Pa., each to five years’ probation, the first 18 months on home detention with electronic monitoring, 1,000 hours of community service, and a fine of $500,000.

According to the information presented to the court, William and Ronald Kuchera owned and managed Kuchera Defense Systems, Inc. (KDS), a contractor for the Department of Defense. KDS submitted cost certifications to the government containing unallowable expenses that inflated costs for overhead and general and administrative expenses. These unallowable expenses included the leasing of a private airplane, vacations to Jamaica, personal car leases, improvements on a private residence and lobbying fees.

The Kuchera brothers also submitted a false invoice for $650,000 to Coherent Systems International, Inc. (Coherent), a defense contractor owned by Richard S. Ianieri. As the prime contractor, Coherent was responsible for an $8 million Department of Defense contract for the Ground Mobile Gateway Systems, which involved the development of a new prototype unmanned vehicle that was designed to prevent friendly-fire incidents. The invoice sought payment for a component that had never been manufactured or delivered to Coherent. After receiving the $650,000 payment from Coherent, the Kuchera brothers kicked back to Ianieri approximately $200,000.

The court was further advised that each of the Kuchera brothers filed false income tax returns for themselves and KDS. Their personal tax returns were false because they failed to disclose as income certain personal expenses paid for by their companies. The KDS tax returns were false because they included as business deductions certain expenses that were personal expenditures of the two brothers. The brothers also caused the submission of a false corporate tax return which illegally claimed the kickback to Ianieri as a legitimate business expense.

In July 2009, Ianieri waived indictment and pleaded guilty to a one-count criminal information charging him with soliciting kickbacks and filing false purchase orders related to an Air Force contract in Florida. In February 2010, he was sentenced to five years’ probation and was ordered to pay a $200,000 fine.

As part of their plea agreement, each brother agreed to pay a $50,000 criminal fine to the United States. Judge Gibson will apply this payment toward the $500,000 criminal fine imposed today, for a total additional fine of $450,000 for each of the brothers. Ronald Kuchera agreed to the civil forfeiture of an additional $450,000 and agreed to make payment to the Internal Revenue Service in the amount of $121,313, which represents taxes owed due to his filing of false personal tax returns and his share of the taxes owed by KDS. William Kuchera similarly agreed to the civil forfeiture of $450,000, and to pay restitution to the IRS in the amount of $257,168.

The Kuchera brothers and KDS also paid $2.7 million to resolve their civil liabilities with the United States Department of Defense under the False Claims Act. Ronald Kuchera paid $950,000 and William Kuchera paid $829,566. KDS, now doing business as Currency, Inc., paid $920,434 as a result of an audit conducted by the Defense Contract Audit Agency, which uncovered inflated billings for overhead.

“The Kucheras cheated the government by claiming improper reimbursements, submitting a false invoice, and then kicking back monies to the prime contractor,” said U.S. Attorney Hickton. “Such blatant and outrageous fraud against the United States cannot and will not be tolerated.”

Assistant United States Attorneys Nelson P. Cohen and Paul E. Skirtich prosecuted this case on behalf of the government.

U.S. Attorney Hickton commended the Defense Criminal Investigative Service, the Defense Contract Audit Agency, the U.S. Internal Revenue Service - Criminal Investigation, and the Federal Bureau of Investigation, for the investigation leading to the successful prosecution of William Kuchera and Ronald Kuchera.