SECOND FORMER EXECUTIVE PLEADS GUILTY TO $121 MILLION DISADVANTAGED BUSINESS ENTERPRISE FRAUD AND TAX FRAUD CHARGES

Martin C. Carlson, Acting United States Attorney for the Middle District of Pennsylvania; Janice K. Fedaryck, Special Agent in Charge of the Philadelphia Division of the FBI; Ned Schwartz, Regional Special Agent in Charge, U.S. Department of Transportation, Office of Inspector General; William Turpin, Special Agent in Charge, U.S. Department of Labor, Office of Labor Racketeering and Fraud Investigations, Leslie P. DeMarco, Special Agent in Charge of the Philadelphia Field Office, Internal Revenue Service, Criminal Investigation Division, announced today that a second guilty plea has been entered in connection with a 23-month multi-agency investigation of fraud involving the government’s Disadvantaged Business Enterprise (DBE) program.

Timothy G. Hubler, age 58, of Ashland, Pennsylvania, pleaded guilty in federal court to conspiracy to defraud the United States Department of Transportation (USDOT), the Pennsylvania Department of Transportation (PADOT) and various general contractors in connection with the DBE program. He also pleaded guilty to filing a false income tax return for 2005. The guilty plea was entered before United States District Judge Sylvia Rambo in Harrisburg, Pennsylvania. As a result of the guilty plea, Hubler faces up to eight years’ imprisonment and fines totaling $500,000. Hubler pleaded guilty pursuant to a plea agreement in which he has agreed to cooperate in the on-going investigation of this fraud.

On February 13, 2008, Dennis F. Campbell, a Vice-President of Schuylkill Products Inc. (SPI), a Cressona, Pennsylvania, based manufacturer of concrete products used on highway construction projects also pleaded guilty to the DBE fraud and awaits sentencing. He is also cooperating in the on-going investigation.

Hubler was a Vice-President of CDS Engineers, Inc., (CDS), a wholly owned subsidiary of SPI. SPI and CDS furnish and install concrete products, particularly pre-stressed concrete bridge beams, at federally funded highway construction projects in Pennsylvania, as well as other states in the Northeast. USDOT awards more than $40 billion each year to various state and local agencies to finance transportation projects nationwide and as a condition of receiving those funds, a significant portion is to be expended on small businesses owned and operated by disadvantaged individuals.

Hubler admitted today that between 1992 and 2007, SPI and CDS used a small Connecticut based company known as Marikina Construction Corporation and Marikina Engineers and Construction Corporation, which was certified by PADOT as a DBE, as a front company to pass through $121 million in PADOT subcontracts to SPI and CDS. Hubler admitted that the Marikina subcontracts were really bid, negotiated and performed by SPI and CDS personnel and that CDS paid Marikina a small fixed-fee for the use of its name. Essentially, SPI and CDS, which were not DBE’s, rented Marikina’s name to obtain lucrative government contracts slotted for small and disadvantaged businesses.

Hubler admitted that SPI and CDS concealed this activity for more than 15 years by various fraudulent means including having SPI/CDS personnel prepare bids and contracts on Marikina’s letterhead, logging onto PADOT’s computers using Marikina’s password, having SPIand CDS employees pose as Marikina employees when transacting business, preparing phony payroll records indicating Marikina employees were doing the installation work when in fact CDS workers were used, using phony leases to make it appear that Marikina had its own vehicles and using magnetic placards bearing the Marikina logo to cover-up the SPI and CDS logos on vehicles transporting the CDS employees to the job sites.

Hubler also admitted that in April 2006, he filed a false income tax return for 2005 which failed to include over $80,000 he received from Marikina. As a result, he underpaid his taxes by over $23,000. The plea agreement specifies that Hubler will make restitution to the IRS for all the taxes, interest and penalties due and owing the IRS for the years 2003 through 2006.

Acting U.S. Attorney Carlson praised the dedicated work of the investigating agencies. Carlson went on to note, “This case signifies that our office is continuing to investigate what we consider to be a significant fraud on the DBE program. Any individuals who are found to have participated in this fraud will be dealt with appropriately. ”

“DBE fraud harms the integrity of the DBE program and law-abiding contractors, including many small businesses, by defeating efforts to ensure a level playing field in which all firms can compete fairly for contracts,” said Ned Schwartz, regional Special Agent in Charge, USDOT-OIG. “Our agents will continue to work with the Secretary of Transportation, the Administrator of Federal Highways, and our other Federal, State, and local law enforcement and prosecutorial colleagues to expose and shut down DBE fraud schemes that adversely affect public trust and DOT-assisted highway programs throughout Pennsylvania and elsewhere.”

“This case represents yet another example of the FBI working closely with its federal partners in other investigative agencies to help ensure that unscrupulous individuals are not allowed to continue to circumvent the laws that are intended to protect, and steal the federal funds that are intended to benefit, disadvantaged business owners,” said Janice K. Fedaryck, Special Agent in Charge of the Philadelphia Division of the FBI.

The investigation is being conducted by the FBI, the Inspector General’s Office for the U.S. Department of Transportation, the Inspector General’s Office for the U.S. Department of Labor and the Criminal Investigation Division of the IRS. Assistant United States Attorney Bruce Brandler is handling the prosecution.

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