Owner of Sham ‘Veteran-Owned’ Company Sentenced for $100 Million Fraud
BOSTON – A Chelmsford man was sentenced today in U.S. District Court in Boston in connection with recruiting veterans as figurehead owners of a construction company in order to receive specialized government contracts.
“Taking advantage of set-aside programs intended to support the economic welfare and stability of veterans is appalling,” said United States Attorney Carmen M. Ortiz. “Through his scheme, Mr. Gorski undercut the efforts of hard-working veterans to compete for valuable government contracts and, as such, defrauded federal agencies dedicated to serving veterans of our armed services.”
“Those who defraud the Federal government by abusing Service-Disabled Veteran-Owned Small Business (SDVOSB) set-asides for their own financial gain are effectively taking money out of the hands of deserving veterans,” said Michael J. Missal, Inspector General of the U.S. Department of Veterans Affairs, Office of Inspector General. “The VA OIG will continue to expose those committing fraud and bring them to justice. Today’s sentencing is a reminder to those who abuse set aside programs and the construction industry as a whole, that they must adhere to the laws established by Congress. It also reflects the commitment of Federal law enforcement organizations to pursue illegal conduct within such programs.”
David Gorski, 51, of Chelmsford, was sentenced by U.S. District Court Judge F. Dennis Saylor to 30 months in prison, one year of supervised release and ordered to pay a fine of $1 million. In June 2016, Gorski was found guilty by a jury following a 12-day trial of conspiring to defraud the United States by impairing the lawful governmental function of the Department of Veterans Affairs, the General Services Administration, the Army, and the Navy in the implementation and administration of the Service Disabled Veteran Owned Small Business (SDVOSB) Program. He was also convicted of four counts of wire fraud.
In 2006, Gorski established a company, Legion Construction, Inc., after recruiting a disabled Korean War veteran to act as the company’s straw owner for the sole purpose of obtaining federal construction contracts set aside under the SDVOSB Program. The purpose of the SDVOSB program is to provide federal contracting assistance to service-disabled veterans who own small businesses by creating set-aside and sole-source acquisitions for such businesses. When the veteran’s deteriorated, Gorski added a second disabled veteran, Peter Ianuzzi, to serve as the figurehead owner of Legion. Legion acquired more than $113 million in federal contracts between 2006 and November 2010, after Gorski falsely represented to federal contracting officers that the company was owned and operated by service-disabled veterans.
In March 2010, a different SDVOSB registered a bid protest against Legion, alleging that Legion should not have been awarded a contract with the U.S. Department of Veterans Affairs at its medical center in White River Junction, VT. The company specifically challenged Legion’s SDVOSB status, noting that it appeared that Gorski, not one of the veterans, was the person running Legion. After retaining the services of a large Boston law firm to assist him, Gorski filed an opposition to the bid protest that contained backdated documents containing false and misleading information. The Small Business Administration denied the bid protest based on Legion’s submission. Gorski then began exploring ways to siphon money from Legion that would not appear as compensation exceeding the pay of the nominal veteran owner, Ianuzzi, in violation of federal regulations, including Ianuzzi “gifting” him $900,000 and establishing private bank accounts into which the company would deposit $2.5 million for Gorski’s benefit. Before the bank accounts could be opened, however, a federal grand jury issued subpoenas to Legion and several witnesses.
“Our nation’s veterans are the ultimate victims when individuals scheme to fraudulently obtain access to federal contracting opportunities set-aside for deserving small businesses owned and operated by service-disabled veterans,” said Inspector General Peggy E. Gustafson. “SBA OIG is committed to protecting the integrity of SBA’s Service-Disabled Veteran-Owned Small Business Concern Procurement Program. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their leadership and dedication to serving justice.”
“We are pleased with today's sentencing and it is quite satisfying to know that people who commit these types of crimes are held accountable,” said Frank Robey, Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit. “There is an important purpose for the Service Disabled Veteran Owned Small Business Program and this individual attempted to exploit that program for his own personal gain while pushing those who deserve it aside.”
Special Agent in Charge, Leo Lamont of Naval Criminal Investigative Service, Northeast Field Office said: “NCIS will continue to work with our law enforcement partners to hold accountable those who would harm, rather than serve, the Department of the Navy warfighters and American taxpayers. By conspiring to manipulate the contracting process through lies and deceit, those involved have drained significant resources from the Navy and have made it harder for legitimate companies that play by the rules, especially those owned by service-disabled veterans, to participate in programs that support the military.”
The case was prosecuted by Assistant U.S. Attorney William F. Bloomer of Ortiz’s Public Corruption Unit.