A company boss has been jailed for installing a service-disabled veteran as the “ostensible owner” of a company in order to win government contracts.
Michael Angelo Padron was sentenced to 27 months in prison and ordered to pay a $1.75m fine for the fraud, in which the company won contracts worth more than $240m.
Padron was convicted of conspiracy to defraud the US government and wire fraud following a trial in June 2022 and was sentenced last week (18 January), according to the US Department of Justice.
Under the fraud Padron conspired with others to install a service-disabled veteran as owner of a construction company, which went on to secure government contracts set aside for service-disabled veteran-owned small businesses.
However, Padron and his business partners maintained financial and operational control over the company. The fraud began as early as 2004 and continued to at least 2017.
Special agent in charge L. Scott Moreland, of the Department of the Army Criminal Investigation Division’s Major Procurement Fraud Field Office, said: “We have a very robust group of highly-trained special agents and analysts who are masters at combating and uncovering fraud, deception, and other criminal acts associated with government contracting and purchasing.”
Special agent in charge Jamie Willemin, of the General Services Administration Office of Inspector General (GSA-OIG) Southwest and Rocky Mountain Division, said: “A level playing field is vital to the procurement process.
“Today’s sentencing signifies GSA OIG’s commitment to aggressively investigate fraudulent business practices that cheat legitimate small businesses and the taxpayer.”
The problem of criminals using smokescreens to win public contracts is not confined to the US. In Australia there have been cases of “black-cladding”, in which indigenous people are installed as ostensible company owners to win contracts set aside for minority groups.
Buyers have been advised to establish longer-term relationships with diverse-led businesses, outside of the bidding process, to overcome wrongdoing.
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