The former president of a Pennsylvania-based construction firm has been sentenced for his role in a massive, 15-year scheme to defraud the U.S. Department of Transportation out of more than $136 million in state contracts that were intended to benefit firms managed by disadvantaged individuals.
Joseph W. Nagle, 53, of Deerfield Beach, Fla., and the former president of Schuylkill Products Inc., was ordered in federal court in Harrisburg to serve 84 months’ imprisonment and pay fines totaling $27,600 for his role in a conspiracy to defraud the Disadvantage Business Enterprise (DBE) program, announced U.S. Attorney Peter J. Smith for the Middle District of Pennsylvania. Senior U.S. District Court Judge Sylvia H. Rambo directed that Nagle report to prison no later than Sept. 29, 2014.
According to the U.S. Department of Transportation (USDOT), this scheme is the largest reported instance of DBE fraud in the nation’s history.
In April 2012, after a four-week jury trial, a federal jury found Nagle guilty on 26 charges in the indictment, including conspiracy to defraud the USDOT and commit wire and mail fraud, seven counts of wire fraud, six counts of mail fraud, conspiracy to commit money laundering and 11 counts of money laundering.
“Preventing and detecting DBE fraud are priorities for the Secretary of Transportation and the USDOT Office of Inspector General,” said OIG Regional Special Agent in Charge Doug Shoemaker. “This sentencing of Joseph Nagle, in what is the largest reported DBE fraud case in USDOT history, sends the clear signal that severe penalties await those who would attempt to subvert USDOT laws and regulations. We will continue to work with the Secretary of Transportation, the Administrators of the Federal Highway and Transit Administrations, and our law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes throughout Pennsylvania and the United States.”
Nagle was president, chief executive officer and part-owner of Schuylkill Products Inc. (SPI) and its wholly-owned subsidiary CDS Engineers Inc. (CDS) until April 2009, when SPI was sold. SPI was based in Cressona, Pa., and manufactured concrete bridge beams used on highway construction projects in Pennsylvania and surrounding states.
CDS was SPI’s erection division and installed SPI’s bridge beams, as well as other suppliers’ products, on highways in Pennsylvania and surrounding states. Nagle was convicted of joining an ongoing 15-year conspiracy to defraud USDOT, the Pennsylvania Department of Transportation (PennDOT) and the Southeastern Pennsylvania Transportation Authority (SEPTA) in connection with the federal government’s DBE program when he became president in April 2004.
USDOT provides billions of dollars a year to states and municipalities for the construction and maintenance of highways and mass transit systems on the condition that small businesses, owned and operated by disadvantaged individuals, receive a fair share of these federal funds. In Pennsylvania, PennDOT and SEPTA receive these funds and they require contractors to award a percentage of their subcontracts to eligible DBE’s.
Nagle was convicted of participating in the scheme, which ran from 1993 to 2008, and in which he and other executives at SPI diverted more than 300 PennDOT and SEPTA construction contracts worth $136 million to SPI and CDS that were reserved for DBE’s.
Nagle and his co-conspirators executed the scheme by using a small Connecticut highway construction firm known as Marikina Construction Corporation as a front company to obtain the government contracts.
Marikina was owned by Romeo P. Cruz of West Haven, Conn., a naturalized American citizen born in the Philippines. Marikina was certified by PennDOT and SEPTA as a DBE. Although Marikina received the DBE contracts on paper, all the work was performed by SPI and CDS personnel, and SPI and CDS received all the profits. In exchange for letting SPI and CDS use its name, Marikina was paid a small fixed fee, set by SPI.
The scheme was carried out for more than 15 years because of the numerous fraudulent steps the co-conspirators took to conceal the scheme. SPI and CDS personnel routinely pretended to be Marikina employees by using Marikina business cards, e-mail addresses, stationery and signature stamps, as well as using magnetic placards and decals bearing the Marikina logo to cover up SPI and CDS logos on SPI and CDS vehicles.
Earlier this year, three former executives associated with SPI, CDS and Marikina were sentenced for their roles in the scheme, and one executive is awaiting sentencing.
Cruz was sentenced to serve 33 months’ imprisonment, pay $119 million in restitution and serve two years’ supervised release. Timothy G. Hubler, of Ashland, Pa., CDS’ former vice president in charge of field operations, was sentenced to serve 33 months’ imprisonment, pay $119 million in restitution and serve two years’ supervised release.
Dennis F. Campbell, of Orwigsburg, Pa., SPI’s former vice president in charge of sales and marketing, was sentenced to serve 24 months’ imprisonment, pay $119 million in restitution and serve two years’ supervised release.
Ernest G. Fink, also of Orwigsburg and SPI’s former vice president, chief operating officer and part-owner is scheduled to be sentenced on July 14, 2014.
The investigation was conducted by the FBI, the U.S. Department of Transportation Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS. Senior Litigation Counsel Bruce Brandler and Assistant United States Attorney Kim Douglas Daniel handled the prosecution.