Asbestos Abatement Firm Pleads Guilty to Defrauding SBA’s 8(a) Business Development Program
Greenbelt, Maryland - C&R Environmental Associates, Inc., pleaded guilty today to conspiracy to defraud the U.S. Small Business Administration’s 8(a) program, which is designed to assist socially and economically disadvantaged small businesses, announced United States Attorney for the District of Maryland Rod J. Rosenstein and Assistant Attorney General Ronald J. Tenpas, of the Department of Justice Environment and Natural Resources Division.
According to the plea agreement and court documents in related cases, beginning in or about early Summer 2001 until the present, C&R conducted asbestos and lead abatement and demolition work in Maryland and elsewhere. The president of C&R qualified under the 8(a) program as a socially and economically disadvantaged individual. C&R participated in the 8(a) program from in or about November 2000 until the present.
Environmental & Demolitions Services, Inc (“EDS”), a Maryland corporation, conducted asbestos and lead abatement and demolition work in Maryland and participated in the 8(a) program from December 1998 until the summer of 2007. The president of record for EDS, Alonso Bernate, was an individual who qualified under the 8(a) program as a socially and economically disadvantaged individual. Unbeknownst to the SBA and in violation of its regulations, beginning as early as 1998 and continuing until 2007, David Muir, Scott Reiter and another non-disadvantaged individual, were at times agents of EDS, and exercised significant financial and operational control over EDS. Also unbeknownst to the SBA, beginning in early 2000 and continuing until Summer 2006, Muir, Reiter and another non-disadvantaged individual, were at some points also agents of C&R, and simultaneously exerted significant financial and operation control over C&R as they did at EDS, including by exercising authority over the federal asbestos and demolition contracts bid on by the companies, providing personal indemnification in order for the companies to gain critical bonding, and managing the daily operational and financial control over the companies.
From 2000 through the present, C&R did not disclose to the SBA that non-disadvantaged individuals, such as Muir and Reiter, had the authority to speak on behalf of C&R. Such disclosures were required by the regulations, and the failure to disclose such information misled the SBA regarding the true involvement in the company by the non-disadvantaged individuals. Furthermore, without the SBA’s approval, in 2005, Reiter received compensation from C&R that exceeded the compensation paid to the president of C&R.
In order to continue participating in the 8(a) program, each year C&R was required to submit annual updates to the SBA which certified that the company remained eligible. On November 14, 2006, an agent of C & R submitted an annual report to the SBA containing materially false information and omitting information required by law to be disclosed, including the fact that Reiter received compensation in an amount greater than the compensation paid to the principal of C&R.
C&R faces a maximum penalty of a fine consisting of the greater of $500,000 or twice the amount of the gross gain to the defendant and five years probation. U.S. District Judge Peter J. Messitte has scheduled sentencing for November 12, 2008 at 9:30 a.m.
David Muir, age 42, of Olney, Maryland, Scott Reiter, age 42 of Leesburg, Virginia, and Alonso Bernate, age 46, of Rockville, Maryland, previously pleaded guilty to conspiracy to defraud the SBA’s 8(a) program. Reiter also pleaded guilty to money laundering. Muir is scheduled to be sentenced on October 30, 2008, Reiter on November 10, 2008 and Bernate on December 17, 2008, all at 9:30 a.m.
United States Attorney Rod J. Rosenstein and Assistant Attorney General Ronald J. Tenpas thanked the Small Business Administration - Office of Inspector General, the Environmental Protection Agency - Criminal Investigation Division and the Naval Criminal Investigative Service for their investigative work. Mr. Rosenstein and Mr. Tenpas commended Assistant United States Attorney Gina L. Simms and Trial Attorney Mary Dee Carraway, of the Justice Department Environment and Natural Resources Division, who are prosecuting the case.