South Korean Businessman Convicted on Fraud Charges in Scheme to Deceive U.S. Municipalities out of Federal Stimulus Funds

CHICAGO — A jury has convicted a South Korean businessman on multiple fraud charges for deceiving U.S. municipalities into spending federal stimulus money on his company’s foreign-made products.

HEON SEOK LEE, Chief Executive Officer and President of KTURBO and KTURBO USA, secured contracts to supply numerous municipalities across the United States with wastewater-treatment aeration blowers that Lee falsely represented had been manufactured in the United States. The false representations entitled Lee’s companies to win contracts funded through the stimulus package that the federal government provided to municipalities under the American Recovery and Reinvestment Act of 2009. In reality, Lee knew that KTURBO fully assembled its aeration blowers in South Korea and shipped them in final form to the United States, with the intention of obtaining in excess of $1.3 million from the fraudulently obtained contracts.

After an eight-day trial in federal court in Chicago, the jury on Wednesday found Lee, 50, of Seoul, South Korea, guilty of five counts of wire fraud and three counts of fraudulent importation of goods into the United States. Each count is punishable by up to 20 years in prison.

U.S. District Judge Sharon Johnson Coleman has not yet scheduled sentencing.

The conviction was announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; James M. Gibbons, Special Agent-in-Charge of the Chicago Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; and Joseph Gonzales, Special Agent-in-Charge of the U.S. Environmental Protection Agency Office of Inspector General. The U.S. Department of Health and Human Services Office of Inspector General also provided assistance.

Congress passed ARRA to combat the Great Recession of 2008. Billions of dollars in stimulus funds went into the U.S. economy, including funds provided to municipalities and other local governments for the construction and renovation of wastewater treatment facilities. In order to receive ARRA funding, municipalities had their general contractors and engineering firms confirm that the contractors, subcontractors and vendors provided manufactured goods that complied with the “Buy American” provision in ARRA, which required that manufactured goods be “substantially transformed” in the United States.

Evidence at trial revealed that South Korea-based KTURBO, under Lee’s leadership and direction, in 2010 placed phony placards on its equipment stating that it was “Assembled in USA.” The fully assembled equipment – with placards – was then shipped from South Korea to the United States, for distribution to several municipalities across the country.

Law enforcement in 2011 searched KTURBO’s local facility in suburban Batavia, seizing blowers that had been fully manufactured in South Korea, as well as other relevant evidence. Lee was extradited to the United States in 2015.

The government is represented by Assistant U.S. Attorneys Patrick Otlewski and Megan Cunniff Church.