LOS ANGELES – The owner of a parking lot business was sentenced today to 70 months in federal prison for orchestrating a long-running bribery scheme that allowed him to bilk the U.S. Department of Veterans Affairs out of more than $13 million that should have been paid in relation to the operation of parking facilities on the VA’s Los Angeles medical campuses.
David Richard Scott, 58, of Santa Monica, the owner of Westside Services LLC (WSS), was sentenced this afternoon by United States District Judge R. Gary Klausner. In addition to the prison sentence, Judge Klausner ordered Scott to pay $12,619,693 in restitution to the VA, a figure that takes into account some money already repaid to the agency.
Additionally, Judge Klausner has ordered the forfeiture of millions of dollars worth of assets Scott amassed during the scheme to defraud the VA, which lasted approximately 14 years. The assets include three condominiums in Santa Monica, with a cumulative estimated value of $7 million; numerous high-end collectible cars, including several classic Corvettes and three Ferrari automobiles; a Cigarette “Top Gun” racing boat; and bank and brokerage accounts that contained more than $1 million; and just over $213,000 in cash that was seized from Scott’s residence.
Scott, who has been in custody since his arrest last November, was sentenced after pleading guilty on May 17 to conspiracy and wire fraud.
The scheme, which resulted in the payment of nearly $300,000 in bribes to VA contracting officer Ralph Tillman, cost the VA more than $13 million it should have received under a contract with WSS to operate parking lots on the campuses of the VA Greater Los Angeles Healthcare System (VA GLAHS). The vast majority of the activity authorized under the contract took place at the West Los Angeles VA Medical Center near Westwood and included parking for UCLA baseball games, the Wadsworth and Brentwood theaters, and the PGA golf tournament at the Riviera Country Club.
“This defendant engaged in reprehensible and disgraceful conduct that had a direct impact on our nation’s veterans,” said United States Attorney Nick Hanna. “This elaborate scheme stole money from the federal agency charged with providing important services and medical care to the men and women who bravely served this nation.”
For approximately 18 years, Scott had a contract to operate parking lots at VA GLAHS that required him to pay 60 percent of the gross revenues from the parking lots. Scott was required to submit annual reports detailing revenue generated by parking fees, as well as improvements and services his company provided that could be used to offset payments due to the VA.
As part of the scheme, Scott maintained at least two sets of financial books, according to court documents. The numbers reported to the VA contained false revenue and expense statements, while a second set of books maintained by Scott’s bookkeeper/tax preparer contained the actual revenues and expenditures, except for unreported cash. Scott’s “goal was to pay the VA as little as possible,” he admitted in a plea agreement filed in court.
Scott began bribing Tillman in 2003 and continued to bribe him on a regular basis until Tillman abruptly retired in 2014 after he was confronted by federal agents. Scott continued making “hush money” payments to Tillman after his retirement to continue the scheme and attempt to avoid termination of his parking contract. Scott used cash collected at the parking lots – cash revenue he rarely reported to the VA – to pay Tillman at least $286,000 in bribes.
Over the course of the scheme, Scott underreported at least $4.6 million in revenues and failed to report an unknown amount of cash collected at the parking lots, according to the plea agreement. Additionally, Scott avoided making payments to the VA by marking up expenses associated with the parking lots – in some cases, up to 600 percent – and claiming to have spent $11.6 million to improve and maintain the facilities. During the scheme, Scott managed to avoid making payments to the VA for nearly 10 years.
Tillman, who cooperated in the federal investigation, pleaded guilty in February to charges of making false statements to VA criminal investigators and subscribing to a false tax return. Tillman is scheduled to be sentenced by Judge Klausner on August 27.
“Veterans Affairs employees who engage in collusive relationships with contractors will be aggressively pursued by the Office of Inspector General and prosecuted to the full extent of the law,” said Special Agent in Charge A.E. Pleasant, U.S. Department of Veterans Affairs, Office of Inspector General, Criminal Investigations Division, Western Field Office.
The cases against Scott and Tillman are the result of an investigation by the United States Department of Veterans Affairs, Office of Inspector General; the Federal Bureau of Investigation; and IRS Criminal Investigation.
The prosecution of these cases is being handled by Assistant United States Attorney Ruth C. Pinkel of the Public Corruption and Civil Rights Section.