President of Asbestos Abatement Firm Pleads Guilty to Defrauding SBA’s 8(a) Business Development Program

August 29, 2008

Greenbelt, Maryland - Alonso Bernate, age 46, of Rockville, Maryland, 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, from March 1998 through the present, Alonso Bernate was President and owner of Environmental & Demolition Services, Inc. (“EDS”). EDS, a Maryland corporation, conducted asbestos, lead-abatement, and demolition work in the District of Maryland and elsewhere. Bernate qualified under the 8(a) program as a socially and economically disadvantaged individual and EDS participated in the 8(a) program from April 1999 until the Summer of 2007.

Unbeknownst to the SBA and in violation of its regulations, beginning in early 1998 until Summer 2007, three non-disadvantaged individuals at times exerted significant financial and operational control over EDS by, among other things, exercising authority over the federal contracts bid on by EDS, providing personal indemnification in order for EDS to gain critical bonding, and managing the daily operation and financial control over EDS. In addition, between 2002 and 2004, three non-disadvantaged individuals received approximately $900,000 more in bonuses and salaries than Bernate. These salaries and bonuses were given without the SBA’s knowledge and approval.

In order to continue participating in the 8(a) program, Bernate, as president of EDS, was required to submit annual updates to the SBA in which he certified that his company remained eligible. On April 30, 2004 , Bernate certified to the SBA that the firm continued to meet all of the SBA regulatory requirements for the 8(a) program, including those which prohibit financial and operational control of the firm by a non-disadvantaged individual. Bernate knew that, in fact, the non-disadvantaged co-conspirators were providing critical bonding, insurance and other financial and operational support to EDS and that Bernate was not acting independently of the non-disadvantaged co-conspirators.

Bernate faces a maximum sentence of five years in prison, followed by three years of supervised release. U.S. District Judge Peter J. Messitte has scheduled sentencing for December 17, 2008 at 9:30 a.m.

In related cases, David Muir, age 42, of Olney, Maryland, and Scott Reiter, age 42 of Leesburg, Virginia, 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 at 9:30 a.m. and Reiter is scheduled to be sentenced on November 10, 2008 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.


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