Investigations

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Former Owners of Pennsylvania Business Indicted In $136 Million DBE Fraud

On November 19, 2009, a federal grand jury returned a thirty–two count Indictment charging Joseph W. Nagle and Ernest G. Fink, the former owners of Schuylkill Products, Inc. (SPI), with various crimes in connection with a “pass–through” scheme to defraud the U.S. Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE). The scheme is alleged to have run for over 15 years, and involved the improper award of over 300 federally–funded highway and transit contracts in Pennsylvania valued at over $136 million.

More specifically, the Indictment alleged that Mr. Nagle, Mr. Fink, and others used a small Connecticut highway construction firm, Marikina Construction Company, as a front company to obtain lucrative government contracts reserved for small and disadvantaged businesses. Marikina was designated a disadvantaged business by Pennsylvania Department of Transportation in 1993, which made it eligible to bid on and receive Pennsylvania highway and transit construction contracts reserved for DBE’s. The Indictment alleged that between 1993 and 2008, Marikina received over $136 million DOT funded contracts but SPI and CDS Engineers (CDS), a subsidiary of SPI, personnel actually performed the work. The contract money merely passed through Marikina to make it appear that a DBE was involved, when in reality, SPI and CDS personnel actually found, negotiated, coordinated, performed, managed, and supervised all the contracts awarded to Marikina. All the profits from the contracts allegedly ended up with SPI and CDS and in exchange for allowing SPI and CDS to use its name, Marikina was paid a small fixed–fee.

This is the largest reported DBE fraud scheme in DOT history and was jointly investigated by the DOT Office of Inspector General with the Federal Bureau of Investigation, the U.S. Department of Labor–Office of Inspector General, and the Internal Revenue Service–Criminal Investigation Division.

Click here for the U.S. Department of Justice’s press release on the indictment.

Note: Indictments, informations, and criminal complaints are only accusations by the government, all defendants are presumed innocent unless and until proven guilty.