Man defrauds feds $346M through sham construction firms


June 10, 2019

The U.S. Attorney’s Office for the Western District of Missouri announced June 3 that a Kansas contractor has pleaded guilty to defrauding the federal government by bidding on and accepting payment for construction contracts set aside for small businesses and for service-disabled veterans and minorities. Through two sham companies, Olathe, Kansas, contractor Matthew McPherson and his co-conspirators received a total of $346 million through more than 200 federal set-aside contracts. 

 

  • Prosecutors said McPherson set up the first sham company, Zieson Construction Co., in July 2009 with African-American and service-disabled veteran Stephon Ziegler, who served as a figurehead while McPherson and others actually ran and profited from the ill-gotten projects. Then, in 2014, McPherson and a Zieson employee created another company, Simcon Corp., to bid on work intended for small businesses after Zieson grew too big to do so. Zieson and Simcon shared office space, equipment and other resources.

 

  • McPherson faces up to five years in prison with no possibility of parole, and would have to forfeit more than $5.5 million in fraud proceeds. Ziegler pleaded guilty to making a false statement to the U.S. Department of Veteran Affairs.

 

Even though Ziegler was qualified to enter into those federal set-aside contracts, he didn’t run the day-to-day operations of Zieson nor did he wield significant control over deciding which projects to bid on or what subcontractors and material suppliers to use, which is also a condition of doing work with the federal government as a minority, service-disabled or certified small business. This same goes for contracts set aside for women-owned businesses. 

 

.And whether it’s due to a shortage of qualified firms or just plain greed, contractors continue to get caught trying to fake their way through the set-aside requirements of publicly funded work. 

 

Nichter Construction Inc of New York, for instance, pleaded guilty in February to making false statements about minority participation on the $350,000 renovation of a Buffalo, New York, psychiatric facility. Nichter hired all non-minority subcontractors for the project, even though it carried a 13% minority requirement. Instead, Nichter engaged a minority contractor to falsely assert that it had performed work on the project. Nichter faces a maximum fine of $10,000.  

 

And sometimes particularly brazen contractors will go to great lengths to come across as qualified minority contractors, even if it means moving forward without the permission of the minority contractor. 

 

Last year, two New York men were charged with stealing the identities of two minority-owned businesses and then fraudulently securing work in their names. Michael Martin and D. Scott Henzel allegedly approached the minority firms under the guise of mentors but started bidding work in their names and without their knowledge. ​ Original article HERE

 

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