Feds: At least $45M stolen from minority set-aside program
Between 1994 and October 2007, employees of Schuylkill Products Inc. and its subsidiary, CDS Engineers Inc., used a minority-owned business in Connecticut as a front to win contracts for at least 19 federally funded highway projects, according to a criminal information sheet filed in Harrisburg last week.
Neither Cressona-based Schuylkill Products nor CDS was eligible to participate in the set-aside program, which requires that at least 10 percent of the money budgeted for highway and bridge construction each year is awarded to minority-owned contractors.
To get around the prohibition, the companies allegedly paid West Haven, Conn.-based Marikina Construction Corp., a bridge and highway construction firm enrolled in the minority-contractor program, to act as a front.
"The co-conspirators fraudulently induced the award of federally funded highway construction subcontracts to (Marikina) by creating the illusion that (Marikina) would perform" the construction work, prosecutors wrote.
Instead, the work allegedly was handled by Schuylkill Products and CDS, and Marikina forwarded the contract awards to them.
Marikina has won $121 million in highway contracts over the past 14 years, making it the largest beneficiary of the federal minority-contractor program in Pennsylvania, according to court records. The U.S. Attorney's Office declined to comment Tuesday on whether the alleged fraud involved that entire amount. Court documents list 19 highway projects, "among others," that were defrauded of about $45 million.
Marikina's owner, Romeo Cruz, refused comment when contacted by The Associated Press. "You have to talk to my lawyer about that one," said Cruz, who then hung up on a reporter without providing the lawyer's name. Cruz did not return a subsequent phone call.
Officials at Schuylkill Products did not return a phone call or e-mail.
Workers at Schuylkill Products and CDS went to great lengths to conceal their involvement in the scheme, prosecutors said.
The employees submitted bids on Marikina letterhead; used Marikina's password to access a secure Web site run by the state Department of Transportation; falsified payroll records; and posed as Marikina employees when dealing with general contractors, prosecutors said.
On job sites, the workers went so far as to use magnetic placards with the Marikina logo to cover up CDS and Schuylkill Products logos on company vehicles in a bid to deceive PennDOT inspectors and general contractors "as to who was actually performing the work," prosecutors said.
Marikina received a small fee for allowing its name to be used, according to court documents. Half of the fee was allegedly kicked back to a former Schuylkill Products vice president, Dennis F. Campbell, and to an unnamed supervisor at CDS.
Campbell was charged last week with conspiracy to defraud the United States. He is scheduled to plead guilty on Feb. 13 and will cooperate with the government "concerning the unlawful activities of others," according to court documents.
He faces up to five years in prison and a $250,000 fine, although prosecutors said they would recommend a reduced sentence in exchange for his cooperation.
Campbell's attorney, Frederick Fanelli, declined comment.
Assistant U.S. Attorney Bruce Brandler said only that the investigation is ongoing.
"We can't comment on the details of the investigation but we will have more to say after Mr. Campbell appears in federal court to enter his plea," he said.
Founded in 1950, Schuylkill Products manufactures concrete bridge components; its subsidiary CDS installs them.
Marikina was launched in 1989. Cruz, the company's co-founder and principal stockholder, is a naturalized American citizen of Filipino descent. Marikina's Web site said Cruz has more than 30 years of construction experience.
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