Construction Contractor Indicted For Making Fradulent Bonding Applications To Win Government Contracts

United States Attorney Andrew M. Luger today announced the indictment of GERARD LEAONRD ROY for fraud, money laundering and concealing assets in anticipation of filing for bankruptcy in connection with a series of construction companies he owned and operated. ROY is charged with using the various companies to fraudulently obtain and attempt to obtain government contracts.

“Competitive bidding for government contracts requires all companies to play by the rules,” said U.S. Attorney Luger. “This defendant is charged with gaining an unfair advantage by breaking those rules, failing to meet his obligations and then trying to reap a windfall by declaring bankruptcy. The white collar section in the U.S. Attorney’s Office and our partners in law enforcement will continue to investigate and disrupt fraudulent business practices.”

“The role of IRS Criminal Investigation becomes even more important in bankruptcy and fraud cases due to the complex financial transactions that can take time to unravel,” said Shea Jones, Special Agent in Charge, St. Paul Field Office. “IRS Criminal Investigation is committed to investigating financial fraud and money laundering schemes where individuals attempt to conceal the true source of their money.”

“According to the indictment, committing insurance fraud was just part of business as usual for Gerard Roy and his construction companies,” said Minnesota Commerce Commissioner Mike Rothman. “Roy created fraudulent insurance documents to win bids on multiple construction projects. He took business away from honest contractors, while victimizing his clients and subcontractors with unfinished projects and unpaid bills, all without the financial protection that legitimate insurance bonds would have provided.”

According to the indictment and documents filed in court, between 2010 and February 2015, ROY owned and operated at least seven construction companies, including RSI Associates, Inc., Restoration Specialists, Inc., Road Spec Corporation, Omni Construction Services, Inc., Omni Construction Company, Omni-Midwest, Inc., and Olympic Construction Services, Inc. Through these companies ROY bid on construction contracts offered by public and quasi-governmental organizations, including the City of Minneapolis, City of Hastings, Washington County, Metropolitan Council, Minnesota State Colleges and Universities and others.

According to the indictment and documents filed in court, in order to commission construction projects, public and quasi-governmental entities generally solicit bids from multiple contractors. Among other things, contractors submitting bids are required to obtain surety bonds issued by a third-party insurer, guaranteeing satisfactory completion of the construction project and the payment of all labor and material costs. Such bonds generally cost the contractor between .5 and two percent of the amount of the construction contract.

According to the indictment and documents filed in court, between 2010 and February 2015 ROY used the aforementioned construction companies that he controlled to fraudulently obtain construction contracts from public and private entities through the submission of fraudulent construction bonds asserting that the projects were insured if ROY could not complete the contract or failed to pay subcontractors. In fact, ROY had no such insurance and was ineligible to bid on the projects. ROY fraudulently obtained at least $3 million in construction contracts, at least $1.8 million in payments on those contracts, and caused losses to clients, subcontractors and others of at least $700,000.

According to the indictment and documents filed in court, between 2010 and 2012, ROY controlled and operated Omni Construction Services, through which he bid on construction projects. In order to secure projects commissioned by public or quasi-governmental entities, ROY falsely claimed on bid documents that he had purchased surety bonds. ROY created phony bond documents, including bid bonds, performance bonds and payment bonds, purportedly issued by a surety on behalf of ROY or his company. In order to create these phony documents, ROY forged the signatures of the relevant sureties, witnesses and public notaries. Between 2010 and 2012, ROY obtained at least five construction contracts using fraudulent bid and bond documents, with a total value of at least $850,000.

According to the indictment and documents filed in court, between June 2011 and July 2012, ROY withdrew at least $400,000 from Omni Construction Services’ bank accounts and used that money for his own purposes. In 2012, ROY deposited at least $300,000 in receivables belonging to Omni Construction Services into accounts he opened in the names of other companies. He used a significant portion of those funds for his own purposes, including making house payments and transferring money into a personal bank account. On July 13, 2012, Omni Construction Services filed for Chapter 7 bankruptcy in an attempt to avoid paying approximately $600,000 in liabilities.

According to the indictment and documents filed in court, after serving roughly one year in jail on an unrelated matter, ROY continued operating a construction business, now under the names of RSI Associates and Restoration Specialists. Between 2013 and early 2015, ROY obtained or attempted to obtain at least six construction contracts using fraudulent bid and bond documents, with a total value of at least $2.6 million.

According to the indictment and documents filed in court, between January 2014 and February 2015, ROY used at least $400,000 from RSI’s bank accounts to buy jet skis, snowmobiles, gold coins and luxury automobiles such as a Corvette and Jaguar. ROY also opened a bank account in the name of Road Spec Corporation, into which he deposited at least $100,000 from RSI’s bank accounts. He used those funds for his own purposes. On February 19, 2015, RSI Associates, Inc., filed for Chapter 11 bankruptcy in an attempt to avoid paying approximately $500,000 of RSI’s liabilities.

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, Minnesota Department of Commerce Fraud Bureau, and United States Postal Inspection Service.

This case is being prosecuted by Assistant United States Attorney Benjamin Langner.

Defendant Information:

GERARD LEONARD ROY, 53

Prior Lake, Minn.

Charges:

• Mail fraud, 2 counts

• Wire fraud, 5 counts

• Transactional money laundering, 4 counts

• Concealment of bankruptcy assets, 2 counts

   

  ###

   

  Additional news available on our website.

  Follow us on Twitter and Facebook.

  United States Attorney’s Office, District of Minnesota: (612) 664-5600

The charges contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.