Former Chief Operating Officer And Co-Owner Of Schuylkill Products Resentenced In Largest Disadvantaged Business Enterprise Fraud In Nation’s History
HARRISBURG-Ernest G. Fink, Jr., 70, of Orwigsburg, Pennsylvania, the former Chief Operating Officer and co-owner of Schuylkill Products Inc., was sentenced in federal court in Harrisburg, Pennsylvania, today to 41 months’ imprisonment and ordered to pay fines totaling $25,100 for his role in a massive conspiracy to defraud the Disadvantage Enterprise (DBE) program, announced Peter Smith, U.S. Attorney for the Middle District of Pennsylvania.
According to the U.S. Department of Transportation (USDOT), this scheme, which lasted for over 15 years and involved over $136 million in government contracts in Pennsylvania alone, is the largest reported Disadvantaged Business Enterprise (DBE) fraud in the nation’s history.
On July 14, 2014, Fink was sentenced to 51 months’ imprisonment and ordered to pay fines totaling $25,100 for his role in the offense.
That sentence was vacated by the U.S. Court of Appeals for the Third Circuit on September 30, 2015 based on the findings of an incorrect calculation of the loss amount under the Sentencing Guidelines. Today’s sentence was based on a revised loss amount of $1,037, 828.61, which represents the amount of profit diverted from legitimate DBE’s as a result of the scheme. Previously, the loss was calculated based on the total amount of DBE contracts SPI received as a result of the scheme.
The investigation was conducted by the FBI, the U.S. Department of Transportation Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS. Assistant U.S. Attorney Bruce Brandler handled the prosecution.
Fink was Vice-President, Chief Operating Officer and co- owner of Schuylkill Products Inc. (SPI) and its wholly-owned subsidiary CDS Engineers Inc. (CDS), until April 2009 when SPI was sold. SPI, based in Cressona, Pennsylvania, manufactured concrete bridge beams used on highway construction projects in Pennsylvania and surrounding states. CDS was SPI’s erection division and installed SPI’s bridge beams as well as other suppliers’ products on highways in Pennsylvania and surrounding states. The conspiracy defrauded USDOT, the Pennsylvania Department of Transportation (PennDOT) and the Southeastern Pennsylvania Transportation Authority (SEPTA) in connection with the federal government’s DBE program.
USDOT provides billions of dollars a year to states and municipalities for the construction and maintenance of highways and mass transit systems on the condition that small businesses, owned and operated by disadvantaged individuals, receive a fair share of these federal funds. In Pennsylvania, PennDOT and SEPTA receive these funds and requires contractors to award a percentage of their subcontracts to eligible DBE’s.
Fink and his co- conspirators executed the scheme by using a small Connecticut highway construction firm known as Marikina Construction Corporation as a front company to obtain these lucrative government contracts.
Marikina was owned by Romeo P. Cruz of West Haven, Connecticut, a naturalized American citizen born in the Philippines. Marikina was certified by PennDOT and SEPTA as a DBE. Although Marikina received the DBE contracts on paper, all the work was performed by SPI and CDS personnel, and SPI and CDS received all the profits. In exchange for letting SPI and CDS use its name, Marikina was paid a small fixed-fee, set by SPI.
SPI and CDS personnel pretended to be Marikina employees by using Marikina business cards, email addresses, stationery, and signature stamps, as well as using magnetic placards and decals bearing the Marikina logo to cover up SPI and CDS logos on SPI and CDS vehicles.
In 2014, four other former executives associated with SPI, CDS and Marikina were sentenced for their roles in the scheme.
Joseph W. Nagle, the former President and co-owner of SPI, was found guilty after a four week trial of 26 charges and was sentenced to 84 months imprisonment and ordered to pay fines totaling $27,600. Nagle’s conviction was affirmed by the U.S. Court of Appeals for the Third Circuit on September 30, 2015, but his sentence was vacated along with Fink’s for the same reasons. Nagle has not been resentenced yet. He has a petition for writ of certiorari pending with the U.S. Supreme Court regarding the Third Circuit’s decision to affirm his conviction.
Romeo P. Cruz, the former owner of Marikina, was sentenced to 33 months’ imprisonment, must pay $119 million in restitution and serve two years’ supervised release.
Timothy G. Hubler, of Ashland, Pennsylvania, CDS’ former Vice-President in charge of field operations, was sentenced to 33 months’ imprisonment, pay $119 million in restitution and serve two years’ supervised release.
Dennis F. Campbell, of Orwigsburg, Pennsylvania, SPI’s former Vice-President in charge of sales and marketing was sentenced to 24 months’ imprisonment, $119 million in restitution and serve two years’ supervised release.
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