8 contract executives guilty of 8(a) contracting fraud

Tuesday - 6/18/2013, 9:18am EDT

By Cogan Schneier
Special to Federal News Radio

The Eastern District Court sentenced two federal contractor executives for their part in abusing the Small Business Administration's 8(a) program and obtaining more than $31 million in contracts unlawfully.

The SBA 8(a) program lets minority and socially disadvantaged small businesses receive federal contract preferences and other help to grow their business.

The Department of Justice stated in a press release that U.S. District Judge Leonie Brinkema sentenced Joseph Richards, 52, of Arlington, Va., and David Lux, 66, of Springfield, Va., to 27 and 15 months in prison, respectively. The court ordered Richards to pay $120,378 in restitution, and Lux to forfeit $115,556. The press release said that both men pleaded guilty to conspiracy to commit major government fraud in March 2013.

Richards and Lux were involved in a scheme involving an Arlington-based security contracting firm. The firm, referred to in court records as "Company A," had qualified for 8(a) program because the listed president and CEO was an African American female. Justice said the CEO left the company in 2003, and Keith Hedman, 53, who had formed the company, became its sole owner. Company A was then no longer eligible for the 8(a) program.

In 2003, Hedman created "Company B" to continue to obtain the benefits of the 8(a) program. Hedman selected a Portuguese employee with a history of social disadvantage, Dawn Hamilton, 48 of Brownsville, Md., to head Company B in order receive benefits, according to the press release.

Hedman and others claimed that Hamilton founded the company and was the only member of the management team. This allowed Company B to become 8(a)-eligible in 2004. However, Hedman exercised ultimate control of the company until 2012, deceiving the SBA, DoJ stated.

According to the press release, Richards, who joined the scheme in 2005, moved Company B's payroll to help Hedman in his illegal operations. Lux joined the scheme in 2008, and helped Hedman withdraw more than $1 million in cash from Company B accounts which he then disbursed among conspirators.

Hedman offered both Richards and Lux ownership stakes in Company B in exchange for their aid in deceiving the SBA. Both men accepted the offer, Justice stated.

In total, the scheme netted government contracts valued at more than $153 million. Both Hedman and Hamilton pleaded guilty. Hedman is scheduled to be sentenced on June 21, and Hamilton is scheduled for June 28. In all, Justice got guilty pleas from eight defendants.

Cogan Schneier is an intern with Federal News Radio

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