Law enforcement authorities have conducted 464 prosecutions involving alleged fraud of stimulus funds since the Recovery Act was signed into law in February 2009. Recently, six individuals and one corporation were indicted with defrauding the U.S. government of almost $1 million of Recovery money.
The defendants include a corporate CEO and a Salvation Army case worker. All investigations involved the relevant Office of Inspector General working jointly with state, local, or other federal authorities in different locations.
In January 2010, HUBTEC International Corporation received a contract from the Department of Transportation for $1.8 million – $1.4 million of which was Recovery Act funds – to reconstruct and rehabilitate culverts along Guam’s Route 2. The contract stipulated that HUBTEC comply with the Buy America requirement that all steel and iron used in the project be manufactured in the U.S.
But DOT IG investigators working together with the FBI concluded that HUBTEC and its CEO and project manager, Young C. Kim, falsely represented that the company had used U.S.-made reinforcement steel bars for the project, when they had knowingly used Korean-made reinforcement steel bars.
Moreover, investigators said they uncovered evidence of a fraudulent billing scheme with Kim allegedly submitting inflated invoices for material to DOT. According to DOT IG, “The overall loss to the government is estimated to be $913,277.79.”
On April 25, 2012, a federal grand jury indicted HUBTEC and Kim on multiple counts of fraud.
A county official and a case manager for the Salvation Army were also indicted in April for felony theft of Recovery Act money intended to help prevent homelessness. The Texas Attorney General’s Office said that Felecia Gonzalez, a county coordinator for the Community Council of South Texas, and Channan Cardella, a case manager at the Salvation Army, were charged with “defrauding a federal program that was intended to serve financially challenged families and prevent homelessness. Rather than helping the poor, the defendants allegedly orchestrated a scheme to divert taxpayer dollars into their own pocketbooks.”
Gonzalez and Cardella were employed by local nonprofit agencies that help needy people obtain funds from a federal grant assisting near-homeless individuals and families secure an apartment. According to investigators with the Department of Housing and Urban Development Inspector General, Gonzalez and Cardella created phony grant applications using actual applicants’ names, dates of birth, and Social Security numbers.
The defendants then hired third parties to pose as landlords who received the federal grant funds from the forged applications, authorities said. The “landlords” and the defendants allegedly divided and kept the money for themselves. Investigators estimate the scheme defrauded taxpayers of approximately $40,000.
Three Florida residents were indicted separately on the same charges – fraudulently obtaining unemployment insurance payments from a Recovery funded program. According to U.S. Attorney Robert E. O’Neill, defendants Roseland Redding, Nicole Cannon, and Miguel Pabon, all of Orlando, could each be facing as many as 10 years in prison for their alleged crimes.
Redding was charged in January 2012 with fraudulently taking more than $27,000 in unemployment payments, Cannon with more than $10,000, and Pabon with $1,650. The funds allegedly stolen were federal funds related to the Extended Unemployment Compensation Account, part of the Recovery Act or stimulus initiative.
State authorities worked with investigators from the Department of Labor’s Office of Inspector General.
Indictments are merely formal charges that a defendant has committed a violation of the federal criminal laws. Every defendant is presumed innocent unless, and until, proven guilty.
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