Federal Jury In El Paso Convicts Businessman For Small Business Administration Contract Fraud Scheme
In El Paso, a federal jury convicted 55–year-old Thomas Gregory Harris of Friendswood, TX, former Sr. Vice President for Luster National Inc., yesterday afternoon of 16 counts of wire fraud in connection with a scheme to defraud the Small Business Administration (SBA) announced United States Attorney Robert Pitman and Special Agent in Charge Douglas E. Lindquist of the FBI’s El Paso Division.
SBA administers a program pursuant to the Small Business Act called the “Section 8(a) program” that is intended to promote the business development of companies owned and operated by “socially and economically disadvantaged individuals.” In that program, certain government contracts are sometimes set aside for performance by so-called “8(a) concerns,” that is, business entities whose owners/operators the SBA has determined meet the criteria for being "socially and economically disadvantaged."
In July 2010, the SBA approved a joint venture, called Tropical Luster Joint Venture ("TLJV"), between two business entities: Tropical Contracting, LLC ("Tropical"), which is based in San Antonio, and Luster National, Inc. ("Luster"), which has offices in Houston and California. The SBA had approved Tropical as an 8(a) concern in 2009. Luster was not a qualifying 8(a) concern.
Evidence presented during trial revealed that in 2010 and 2011, Harris, unbeknownst to the SBA, used Tropical’s qualifying 8(a) status to obtain three restricted contracts awarded by the SBA.
In 2011, the SBA awarded Harris and TLJV the “Net Zero contract” at Fort Bliss in El Paso to design and implement a written plan to reduce energy consumption at the base. In January 2012, the U.S. Army paid TLJV approximately $492,000 as compensation for work on the Net Zero contract.
In 2010 and 2011, the SBA awarded Harris and TLJV two separate contracts with the U.S. Army Corps of Engineers (USACE) in Galveston, TX for project management duties as assigned by USACE. From 2010 to 2012, USACE paid TLJV approximately $895,000 as compensation for work on USACE projects.
In all three matters, Tropical, the 8(a) concern, did not manage and control TLJV's performance of the contracts as required by law. In fact, personnel associated with Tropical did no work whatsoever on the contracts. Harris managed and controlled TLJV's entire performance of the contracts. Luster personnel, or subcontractors Luster retained, did all of the work. Had the SBA known that Tropical was not managing and controlling TLJV's work on any of the contracts, it would have disqualified TLJV as an approved 8(a) joint venture, which would have rendered it ineligible for the contracts to perform the work at Fort Bliss or USACE in Galveston.
“Today’s conviction of Mr. Harris, should serve as a strong message regarding the FBI’s pursuit and prosecution of vendors in the El Paso community who take advantage of socially and economically disadvantaged small businesses for self-profit. Nothing erodes the public trust more than those who illegally manipulate a contract acquisition process to benefit from taxpayer dollars,” stated FBI Special Agent in Charge Douglas E. Lindquist.
Harris is on bond pending sentencing. Sentencing is scheduled for 8:00am on December 10, 2014, before United States District Judge Philip R. Martinez in El Paso. Each wire fraud charge calls for up to 20 years in federal prison.
This case was investigated by the Federal Bureau of Investigation (FBI) together with the United States Army Criminal Investigation Command, Major Procurement Fraud Unit. Assistant United States Attorneys John Klassen and Gregory McDonald are prosecuting this case on behalf of the Government.