Former President And Owner Of Schuylkill Products Sentenced In Largest Disadvantaged Business Enterprise Fraud In Nation’s History
Joseph W. Nagle, 53, of Deerfield Beach, Florida and the former president of Schuylkill Products Inc., was sentenced in federal court in Harrisburg, Pennsylvania, today to 84 months imprisonment and ordered to pay fines totaling $27,600 for his role in a massive conspiracy to defraud the Disadvantage Enterprise (DBE) program, announced Peter J. Smith, the U.S. Attorney for the Middle District of Pennsylvania. Senior U.S. District Court Judge Sylvia H. Rambo directed that Nagle report to prison no later than September 29, 2014.
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.
In April 2012, after a four-week jury trial, a federal jury found Nagle guilty on 26 charges in the indictment, including conspiracy to defraud the USDOT and commit wire and mail fraud, seven counts of wire fraud, six counts of mail fraud, conspiracy to commit money laundering and 11 counts of money laundering.
“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General,” said Doug Shoemaker, OIG Regional Special Agent in Charge. “This sentencing of Joseph Nagle, in what is the largest reported DBE fraud case in USDOT history, sends the clear signal that severe penalties await those who would attempt to subvert USDOT laws and regulations. We will continue to work with the Secretary of Transportation, the Administrators of the Federal Highway and Transit Administrations, and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”
"This case represents our continued commitment to protecting the American workplace by identifying and prosecuting criminals who violate the laws relating to public contracts. We will continue to work with our law enforcement partners to combat these types of crimes" stated John T. Spratley, Special Agent in Charge of the Philadelphia Office of Labor Racketeering and Fraud Investigations, Office of Inspector General, U.S. Department of Labor.
"The audacious, long-term scheme perpetrated by Mr. Nagle and his cohorts stole money from taxpayers, and opportunity from legitimate small-business owners," said FBI Special Agent in Charge Edward J. Hanko. "This case highlights the FBI's commitment to fighting DBE fraud, and seeing those responsible brought to justice."
Nagle was President, Chief Executive Officer and part- owner of Schuylkill Products Inc. (SPI) and its wholly-owned subsidiary CDS Engineers Inc. (CDS) until April 2009 when SPI was sold. SPI was based in Cressona, Pennsylvania, and 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. Nagle was convicted of joining an on-going 15-year conspiracy to defraud USDOT, the Pennsylvania Department of Transportation (PennDOT) and the Southeastern Pennsylvania Transportation Authority (SEPTA) in connection with the federal government’s DBE program when he became President in April 2004.
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 they require contractors to award a percentage of their subcontracts to eligible DBE’s.
The OIG Regional Special Agent in Charge Shoemaker cautioned prime contractors and subcontractors not to engage in fraudulent DBE activity and encouraged them to report any suspected DBE fraud to us at www.oig.dot.gov/hotline.
Nagle was convicted of participating in the scheme which ran from 1993 to 2008, in which he and other executives at SPI diverted over 300 PennDOT and SEPTA construction contracts worth $136 million to SPI and CDS that were reserved for DBE’s. Nagle 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.
The scheme was carried out for over 15 years because of the numerous fraudulent steps the co-conspirators took to conceal the scheme. SPI and CDS personnel routinely 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.
Earlier this year, three former executives associated with SPI, CDS and Marikina were sentenced for their roles in the scheme and one executive is awaiting sentencing.
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.
Ernest G. Fink, of Orwigsburg, Pennsylvania, SPI’s former Vice-President, Chief Operating Officer and part-owner is scheduled to be sentenced on July 14, 2014.
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. Senior Litigation Counsel Bruce Brandler and Assistant United States Attorney Kim Douglas Daniel handled the prosecution.