Former Senior Project Manager And Subcontractor Convicted For Conspiring To Defraud Matrix Service Company
OAKLAND – Yesterday, Kevin Laney, a former Senior Project Manager at Matrix Service Company, and Brian Federico, a former subcontractor of Matrix, were convicted of mail fraud conspiracy and mail fraud, announced United States Attorney Melinda Haag and Federal Bureau of Investigation Special Agent in Charge David J. Johnson. The guilty verdicts followed a three-week bench trial in front of The Honorable Yvonne Gonzalez Rogers, United States District Judge.
Evidence at trial showed that in 2010, Matrix, a company that constructs tanks and provides tank maintenance and repair services to petrochemical companies, discovered suspicious billing in its Suisun City, Calif. office. The suspicious billing involved concrete subcontractor Imperial Shotcrete, for whom Federico worked. Through additional investigation, Matrix and the FBI uncovered a complex fraudulent invoicing scheme involving bogus companies and downstream kickbacks through Imperial involving three Matrix project managers, including Laney. At the conclusion of its investigation, Matrix immediately reimbursed its customers over $1.3 million.
Prior to trial, the two remaining Matrix project managers and one owner of Imperial pleaded guilty for their roles in the scheme.
For Laney’s part, the trial evidence showed he established a bogus company called “Rogue Consultants” to submit false and fraudulent invoices to Imperial in order to collect and conceal later downstream kickback payments. Laney invoiced and was paid just over $1 million related to Matrix projects. From this money, Laney paid Federico just under $600,000, keeping the rest of the money for his own benefit. For his part, Federico created and submitted false and fraudulent invoices using inauthentic invoices from a real company and invoices from his company, CEMS. Federico also directed two Matrix project managers to submit false and fraudulent invoices and pocketed a total of $875,000 as a result of the scheme. In the scheme, the Matrix project managers receiving the downstream kickback payments were often the project managers responsible for authorizing Matrix to pay the Imperial invoices. Matrix’s project managers and its subcontractors were expressly forbidden by Matrix from engaging in this type of self-dealing.
In addressing the defendants’ “elaborate scheme,” the court rejected their contention that the law sanctions “under-the-table side deals, vigilante justice, and corporate facades created for the sole purpose of facilitating self-gain at the expense of one’s employer.” The court, however, acquitted Federico of two substantive counts of mail fraud.
Laney, of Three Forks, Mont., and Federico, of Tracy, Calif., were charged by Indictment on December 6, 2012. Laney and Federico have remained on bond pending trial, but were both ordered to surrender their passports.
Laney’s and Federico’s sentencing hearings are scheduled for November 13, 2015, before Judge Gonzalez Rogers in Oakland. The maximum statutory penalties for a violation of 18 U.S.C. §§ 1341 and 1349 are a maximum prison term of 20 years, a fine of $250,000, 3 years of supervised release, and restitution. However, any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorneys Brian C. Lewis and Wade M. Rhyne prosecuted this case with the assistance of Legal Assistant Janice Pagsanjan and Paralegal Noble Hughes. This prosecution is the result of an investigation by the Federal Bureau of Investigation.