San Diego Contractor Sentenced For Defrauding Federal Agencies, Agrees to Pay $3.2 Million to Resolve Civil Allegations
Company and owner falsely claimed “service-disabled veteran-owned small business” status to defraud the Department of Veterans Affairs and Army Corps of Engineers
NEWS RELEASE SUMMARY – June 28, 2019
San Diego contractor Andrew Otero and his company A&D General Contracting were sentenced today in San Diego federal court by U.S. District Judge John A. Houston. In November, a federal jury convicted A&D and Otero of fraudulently obtaining over $11 million in government contracts which had been set aside for service-disabled veteran-owned small businesses (SDVOSBs).
Judge Houston sentenced Otero to 18 months in custody and ordered him to pay $400,000 in criminal fines. Judge Houston ordered A&D to pay $1.5 million in criminal fines, and imposed criminal forfeiture of $334,561.
Earlier this month, A&D and Otero settled civil False Claims Act allegations arising out of the same conduct, agreeing to pay the United States $3,259,679. Payment of the civil settlement amount will offset the criminal fines imposed by Judge Houston.
The evidence at trial proved that A&D and Otero created a fraudulent joint venture to secure government contract work. To appear qualified for SDVOSB contracts, Otero and veteran Roger Ramsey initially executed an agreement to create the joint venture, which stated that Ramsey’s company (Action Telecom) would manage the joint venture, employ a project manager for each of the set-aside contracts, and receive the majority of the profits.
However, as proved at trial, Otero and Ramsey signed a secret side agreement that made clear the joint venture was ineligible under the SDVOSB program. The side agreement proved the parties formed the joint venture so that A&D could simply “use the Disabled Veteran Status of Action Telecom” to bid on contracts. The side agreement stated that A&D – not Action Telecom – would run the construction jobs, and “A&D will keep 98% of every payment; Action Telecom will receive 2% of every payment.”
In imposing the sentences, Judge Houston emphasized that Otero’s and A&D’s scheme took contracts away from veterans who “bore the weight of war.” Defendants’ crimes harmed disabled veterans by diverting contracts that should have been awarded to legitimate SDVOSBs, and “snatched” contracts “right out of their hands.” Judge Houston also stated that the sentences would deter government contractors from similar crimes, and make clear that defrauding the programs was not “worth the gamble.”
“The United States sets aside important contract work for service-disabled veterans as one small way to recognize their patriotism and repay the enormous debt we owe them for their service,” said United States Attorney Robert S. Brewer, Jr. “Our office will continue to protect these programs and hold those who abuse them fully accountable.”
The criminal case was prosecuted by Assistant United States Attorneys Rebecca Kanter and Aaron Arnzen. The civil case was brought by Assistant United States Attorneys Joseph Price and Doug Keehn.
A&D General Contracting, Inc., Santee, California
Andrew Otero El Cajon, CA
Criminal Case No. 17CR0879-JAH
Civil Case No. 15CV0441-JAH
SUMMARY OF CHARGES
Count 1: Conspiracy to defraud and commit offenses (18 U.S.C. § 371)
Maximum penalties: 5 years’ imprisonment; 3 years’ supervised release; a fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greatest; and a mandatory special assessment of $10
Count 2-4: Major fraud against the United States (18 U.S.C. § 1031)
Maximum penalties: 10years’ imprisonment; supervised release; a fine of $1,000,000 per count ($5,000,000 total); and a mandatory special assessment of $100
Counts 5-7: Wire fraud (18 U.S.C. § 1343)
Maximum penalties: 20 years’ imprisonment; a fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greatest; and a mandatory special assessment of $100
Counts: 10, 14:
False statements (18 U.S.C. § 1001)
Maximum penalties: 5 years’ imprisonment; a fine; and a mandatory special assessment of $100
Department of Veterans Affairs, Office of Inspector General