Manager of Asbestos Abatement Firm Sentenced for Defrauding SBA’s 8(a) Business Development Program and Money Laundering
Greenbelt, Maryland - U.S. District Judge Peter J. Messitte sentenced Scott Reiter, age 42, of Leesburg, Virginia, today to 18 months in prison, followed by three years of supervised release for conspiracy to defraud the U.S. Small Business Administration’s 8(a) program, which is designed to assist socially and economically disadvantaged small businesses, and a money laundering conspiracy, 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. Judge Messitte also ordered Reiter to pay a $400,000 fine and to make restitution in the amount of $300,000.
According to his plea agreement, since the Fall of 1999, Reiter worked for or was associated with three Maryland companies that performed asbestos and lead abatement and demolition work on federal and private facilities. Between roughly 1998 and 2007, all three companies participated in the SBA’s 8(a) program. For one of the companies, Reiter represented himself to be a division manager, project manager, or officer and represented himself to be a general manager, officer, or key employee of another of the companies.
Unbeknownst to the SBA and in violation of its regulations, Reiter and two co-conspirators, who were also non-disadvantaged individuals, exerted significant financial and operational control over the three Maryland corporations in a variety of ways, including: personally indemnifying the liabilities of one of the companies, which enabled it to obtain higher bonding and 8(a) contracts of higher value than the company otherwise would have been qualified for; exercising significant control over the contracts bid upon by two of the companies; and exercising control over the selection and payment of subcontractors on behalf of two of the companies.
Reiter knew that he and the co-conspirators provided critical bonding, financial and operational support to the two of the 8(a) certified companies, and that between 2002 and 2004, Reiter and his coconspirators received approximately $900,000 more in bonuses and salaries than the president of one of the companies. These salaries and bonuses were given without the SBA’s knowledge and approval. During the course of the conspiracy the presidents of the three companies submitted fraudulent annual updates to the SBA in which they falsely certified that their companies continued to meet the SBA regulations related to eligibility, including those which prohibit financial and operational control of the firm by a non-disadvantaged individual.
Also, according to the statement of facts, in the Spring of 2003, Reiter and a co-conspirator directed the comptroller of one of the 8(a) companies to pay a subcontractor at least $300,000 more than the amount due to the subcontractor for its work. Reiter and his co-conspirator had the subcontractor and an affiliated subcontractor issue two checks totaling $300,000, which were either deposited into a bank account of a company called USA Environmental, which Reiter and another controlled, or funneled through another company. Reiter and the co-conspirator spent the $300,000.
In a related case, David Muir, age 42, of Olney, Maryland, pleaded guilty to conspiracy to defraud the SBA’s 8(a) program and was sentenced to 30 days in prison. Alonso Bernate, age 46, of Rockville, Maryland, and C&R Environmental Associates, Inc., pleaded guilty to conspiracy to defraud the U.S. Small Business Administration’s 8(a) program. Bernate is scheduled to be sentenced on December 17, 2008 and C&R is scheduled to be sentenced on November 12, 2008, both 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, the Naval Criminal Investigative Service and the Internal Revenue Service - Criminal Investigation 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 prosecuted the case.