A federal grand jury indicted a Maryland couple Wednesday on charges of obtaining more than $50 million in government contracts by abusing the minority contracting system.
Vernon J. Smith III, who is not a minority, ran Capitol Contractors, which qualified as a minority contractor because he was listed as owning less than half the company; full control was turned over to Mr. Smith and his wife as soon as the time limit on its minority contracting certification ran out.
Mr. Smith, 61, then set up a second company, Platinum One, a roofing and construction company that listed a black employee, Anthony Wright, and his son as its owners so it qualified for race-based contracts under the Small Business Administration, even though Mr. Smith actually ran the company, the indictment says.
Mr. Smith and his wife, Georgia, 52, both of Edgewater in Anne Arundel County, personally guaranteed bonding for Platinum One and the company paid millions of dollars to the Smiths, according to the indictment — facts that were omitted from the company’s application that swore that it was socially and economically disadvantaged.
The Smiths face a maximum of five years in prison for conspiracy, and Mr. Smith faces up to 20 years in prison for each count of wire fraud.
“Preferences for federal contract awards must not be given to persons who lie in order to claim eligibility,” SBA Inspector General Peggy E. Gustafson said in a statement.
Thomas J. Kelly, special agent in charge of the Internal Revenue Service’s Criminal Investigation field office in Washington, said his office is “committed to maintaining the integrity of our tax system and ensuring that everyone pays their fair share of taxes.”
The indictment says that from August 1999 to June 2013, the Smiths conspired to defraud the SBA by concealing that Mr. Smith controlled Platinum One’s operations, not Wright. Based on the fraudulent application, the indictment said, SBA approved Platinum One for the program.
According to the indictment, Platinum One received more than $50 million in contracts from the federal government under the program.
The indictment said the Smiths also caused more than $1 million, which had been transferred from Platinum One to their bank accounts and to casinos on their behalf, to be falsely recorded in Capitol Contractors’ books and records as corporate expenses paid for subcontractors, and concealed this fact from their tax preparer.
Wright, 42, of Bowie, pleaded guilty this week to his role in the scheme and is scheduled to be sentenced on Sept. 30 in U.S. District Court in Greenbelt.
The Washington Times first reported on abuses in the minority program in April.