Contractor Pleads Guilty to Disadvantaged-Business Fraud

DBE 'straw' firm knew non-disadvantaged contractor illegally performed SBA 8(a) work

In the latest development in a federal small disadvantaged-business case, a construction company executive has pleaded guilty to a charge of conspiring to commit wire fraud.

The U.S. Dept. of Justice said that Michelle Cho, an official of Far East Construction Corp.—which DOJ describes as a straw company—pleaded guilty on Nov. 15 in federal court in Washington, D.C. Cho also will pay a $169,166 forfeiture and a $35,000 criminal fine. A business-listings web page shows Far East as being based in Prospect Heights, Ill.

According to DOJ, Cho used Far East and another straw company to conspire with MCC Construction Co., to defraud the U.S. Small Business Administration. The two firms were eligible to receive set-aside contracts for SDBs under SBA’s 8 (a) program.

The Justice Dept. said Cho and MCC knew that MCC, illegally, would do all of the work on the set-aside contracts. MCC was not an SDB.

In all, MCC won 27 federal contracts totaling more than $70 million from 2008 to 2011. According to a court document, MCC was founded in 1986 and its headquarters was in Greenwood Village, Colo.

Renata Hesse, acting assistant attorney general in DOJ’s antitrust division, said in a statement, “Michelle Cho knowingly participated in a long-standing scheme that manipulated federal contracts designated for small, disadvantaged businesses.”

Sentencing for Cho, 45, of Downers Grove, Ill., is scheduled for March 7, 2017.

An attorney for Cho declined to said comment.

In earlier, related developments, DOJ had announced on Feb. 2 that MCC pleaded guilty to a fraud conspiracy charge and agreed to pay about $1.3 million in forfeiture and a $500,000 criminal penalty.

Thomas Harper, a former MCC owner and vice president of its northeast region, entered a guilty plea on June 22 to a charge of conspiring to obstruct proceedings before a federal agency.

In August, Walter Crummy, formerly a MCC owner pleaded guilty to conspiracy to commit wire fraud and agreed to pay $105,618 forfeiture. Crummy also was an MCC official, holding a variety of positions, including chief financial officer.

An attorney for MCC did not respond to an ENR request for comment.

KEYWORDS: construction risk management Disadvantaged business enterprises

As ENR's former Washington Bureau Chief, Tom Ichniowski wrote about the federal government since the George H.W. Bush administration, and covered at least five major highway bills. A recognized expert on government policy on infrastructure and regulation, Tom is also a Baltimore native and Orioles fan who grew up rooting for Brooks and Frank Robinson. He is a graduate of Columbia College and Columbia’s graduate school of journalism, where he once used “unrelentless” in a headline.