Legal
Former Construction COO Indicted for Using Minority Fronts
The U.S. Attorney's Office for the Eastern District of Missouri is prosecuting the case, which was investigated by the FBI.
Photo courtesy of City of St. Louis
A former construction executive in St. Louis is facing federal wire-fraud charges over alleged minority business enterprise fronts.
A grand jury on March 30 indicted Brian Kowert Sr., the former chief operating officer of HBD Construction Co. in federal district court in St. Louis on five counts of wire fraud. Prosecutors say Kowert, who was also an owner and executive vice president of the firm, schemed to defraud project owners plus St. Louis and Missouri governments by falsifying records to inflate HBD’s minority business enterprise (MBE) participation on its projects.
Federal MBE programs were originally designed to promote the growth of small businesses owned by members of historically economically disadvantaged minority groups, the indictment says. But starting in 2014, Kowert used certified MBE companies, in exchange for a fee, as a front so he could pass payments of hundreds-of-thousands of dollars to non-MBE companies that actually performed work and provided materials for projects, the indictment alleges.
In one case highlighted in the indictment, construction of the Quadrangle Housing project in 2014, prosecutors say Kowert and HBD paid an MBE firm about $2,000 to act as a "pass through" while claiming about $224,000 in project costs to the same firm, though the materials and work were actually provided by three non-MBE companies. In another, prosecutors say HBD gave an MBE company $2,500 while distributing more than $340,000 to non-MBE companies that actually performed the work he attributed to the MBE firm in the contract. Missouri officials and the City of St. Louis had no knowledge of Kowert’s alleged criminal conduct, and fully cooperated with federal law enforcement in the investigation, the office of the U.S. Attorney for the Eastern District of Missouri said in a statement. Two front companies, identified just as C.K. and C.R.'s companies in the indictment, acted as pass-throughs. The document did not mention either company as cooperating with the government. The U.S Attorney's Office declined to comment on whether the MBE firms would face charges.
Project owners—unaware of the scheme—received tax abatements and funding as a result of the phony MBE information Kowert and HBD shared, the indictment states.
Joel Schwartz, an attorney for Kowert, declined to comment on the case.
Iowa-based Russell Group Inc. acquired HBD in 2020. Neither Russell nor HBD were named as a defendant in the case.
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In a statement, the construction and development company said it had no prior knowledge of the alleged fraud. Russell said Kowert has not been with the company since December 2021, when it learned of the investigation, and added that it is cooperating with investigators. Russell is ranked 388th on ENR's 2021 Top 400 Contractors, with $207.3 million in revenue the previous year.
"This matter begins and ends with Brian Kowert Sr.," Russell President Caitlin Russell said in a statement. "We at Russell are fully committed to transparency and ethical financial stewardship. We do not tolerate fraudulent behavior or misconduct of any kind."
