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Illinois man sentenced on fraud charges

May 8, 2012

St. Louis, MO - Joseph Madlinger was sentenced to 24 months in prison, and ordered to pay a $50,000 fine, for his part in a criminal conspiracy involving government contracting fraud and the illegal payment of gratuities to a federal official.

According to court documents, the Service-Disabled Veteran-Owned Small Business Program (SDVOSB Program) was established to help allocate government business to companies owned by service-disabled veterans. By 2007, the SDVOSB program was emerging as a significant program of emphasis for government contracting and presented a significant opportunity to do business on a preferential basis with the government. Joseph Madlinger was a civil engineer and project manager engaged in the commercial construction business in the St. Louis area. His co-conspirator was a contractor doing business through an entity called Gateway Contractors (Gateway). However, Gateway Contractors could not qualify as an SDVOSB because neither of them were service-disabled veterans.

In order to get around the contracting rules and regulations associated with SDVOSB, Madlinger and his co-conspirator approached a service-disabled veteran, who, although having some experience as a construction inspector, had no experience running a construction company. The service-disabled veteran (SDV) also had no capital to invest in a construction company. The veteran’s role was merely to be a nominal owner of an SDVOSB with no additional duties. After getting the SDV’s concurrence, Madlinger and his Gateway co-conspirator subsequently listed him as the owner of CJMS Contracting, LLC (CJMS), a shell company, so that they could get SDVOSB set-aside contracts from VA and other federal government agencies.

Madlinger, his conspirator and the SDV provided benefits from 2007 until 2010 to a VA employee, now retired, to ensure that a continuous flow of work to be performed at the VA medical center in St. Louis and the Jefferson Barracks cemetery would be directed to CJMS. The benefits included luxury box tickets at sporting events, numerous lunches and numerous interest free loans. CJMS was awarded approximately $3.4 million in government contracts at the VA Medical Center and the Jefferson Barracks National Cemetery for CJMS. Gateway received approximately $2.1 million as CJMS’s primary subcontractor on these contracts.

JOSEPH MADLINGER, Dupo, IL, pled guilty in February to one felony count of conspiracy to commit mail and wire fraud involving the payment of gratuities to a federal official, and appeared today for sentencing before United States District Judge Catherine D. Perry.

This case was investigated by the Offices of Inspector General for the Department of Veterans Affairs, the General Services Administration and the Small Business Administration. Assistant United States Attorney Tom Albus is handling the case for the U.S. Attorney’s Office.

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