FOR FURTHER INFORMATION CONTACT
AUSA VICKIE E. LEDUC or
MARCIA MURPHY at 410-209-4885
SEPTEMBER 24, 2007
FOR IMMEDIATE RELEASE
VICE PRESIDENT OF PUBLIC AFFAIRS INTERNATIONAL, INC. SENTENCED FOR DEFRAUDING THE UNITED STATES OF OVER $1 MILLION
IN PROCUREMENT FRAUD SCHEME
Obstructed Investigation by Falsifying Invoices
GREENBELT, Maryland - U.S. District Judge Roger W. Titus sentenced Ketan R. Shah, age 51, of Clarksville, Maryland, today to 30 months in prison followed by three years of supervised release for conspiracy to defraud the United States and obstruction of a federal audit, in connection with a conspiracy to submit false claims under a contract between the Internal Revenue Service and Public Affairs International, Inc. (PAI), announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also ordered Shah to pay restitution of $1,379,630.
“We will continue to pursue criminal and civil charges to recover money stolen by government contractors. The government relies upon contractors to submit truthful information about their expenses. The evidence shows that Mr. Shah and Mr. Ekpone overstated their expenses and understated the related income in order to justify more than $1.3 million in false claims for reimbursement from the IRS,” said U.S. Attorney Rod J. Rosenstein.
According to the plea agreement, PAI, located in Silver Spring, Maryland, entered into an IRS contract to organize and host informational programs concerning changes in federal tax law, as well as IRS policies. According to the contract, PAI was to use the fees from attendees and exhibitors at these “tax forums” to pay for expenses, and use the surplus at the end of each fiscal year to offset PAI’s management fee under the contract. The IRS was then obligated to pay any unpaid balance after the tax forum income was applied to the fee.
From 2000 through 2003, Shah, who served as vice president of PAI, and Brosim S. Ekpone, age 46, of Potomac, Maryland who served as President of the company, under-reported the tax forum income and over-reported the expenses so that there appeared to be no surplus income to apply to the management fee at the end of each fiscal year. If accurately reported, PAI’s actual income and expenses from the tax forums would have completely offset PAI’s management fee and PAI would not have been entitled to any management fee during contract years 2000 through 2003. As a result of the false invoices, the IRS paid PAI management fees totaling approximately $1,379,630.
During October 2003, the Office of Audit of the Treasury Inspector General for Tax Administration (TIGTA) initiated an audit of PAI’s records relating to the contract. TIGTA subpoenaed PAI for production of documents relating to its earnings and expenses under the contract. Following receipt of that subpoena, Shah and Ekpone directed employees of PAI to alter or manufacture invoices from vendors to increase PAI’s apparent expenses, and to remove participant names from the tax forum participant lists, thereby reducing PAI’s apparent income. Furthermore, Shah and Ekpone intentionally failed to provide certain documents requested in the subpoena.
In addition to the criminal charges in the indictment, the United States Attorney’s Office also filed a civil complaint against Ekpone, Shah and PAI under the False Claims Act seeking damages of $4.2 million based upon the same general factual allegations. Under the False Claims Act the government can recover triple damages, or three times the amount of actual damages caused by the defendants’ fraudulent conduct, as well as a penalty for each false claim submitted. That complaint was stayed pending resolution of the criminal charges.
Ekpone pleaded guilty to the same charges on September 12, 2007 and is scheduled to be sentenced on December 10th at 9:00 a.m. Ekpone faces a maximum of five years in prison for the obstruction of a federal audit charges, and a maximum of 10 years in prison for conspiracy to defraud the United States, as well as a $250,000 fine and supervised release of three years for each count. In addition, he could be ordered to pay restitution in excess of $1 million.
Rodney A. Davis, Special Agent in Charge, Treasury Inspector General for Tax Administration stated that this case exemplifies the cooperation between the U.S. Attorney's Office and TIGTA's Office of Investigations. Davis commended TIGTA's Procurement Fraud Section on its continued effort to identify and address procurement fraud, which affects tax administration.
In October 2006, the Department of Justice formed the National Procurement Fraud Task Force to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force - chaired by Assistant Attorney General Alice S. Fisher for the Criminal Division - includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community, and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrate the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.
United States Attorney Rod J. Rosenstein praised the Treasury Inspector General for Tax Administration for its investigative work. Mr. Rosenstein also thanked Assistant U.S. Attorneys Tamera Fine, Jonathan Su and Michael Hanlon, who prosecuted the case.