About the Author:
My name is Jim Keating. I attended college in Philadelphia, PA and law school in Wilmington, DE. Our team at Compliance Mitigation offers services to help people develop mitigation strategies that lead to lower sentences if they’ve been charged with crimes.
Upon completion of this Case Study, participants will be able to:
- Understand the purposes of Service-Disabled Veteran-Owned Small Business set aside programs and risk associated with non-compliance;
- Describe the consequences of fraud in government contracting programs like the Service-Disabled Veteran-Owned Small Business set aside;
- Identify penalties for making false statements to federal investigators;
- Understand the concept of a Criminal Information as opposed to the Criminal Indictment; and
- Explain basic concepts of how business owners and leaders can avoid being caught in a federal criminal investigation.
Small and mid-sized businesses that regularly contract with the federal government under applicable federal laws and white-collar executives and leaders who may unwittingly be exposed to criminal punishment for non-compliance.
Service-Disabled Veteran-Owned Small Business set aside, Government Procurement, Criminal Information, Procurement Collusion Task Force
Current State of the Industry:
Set-aside contracts for small business help provide a level playing field where the federal government limits competition for certain federal contracts. Those contracts are called “small business set-asides,” and they help small businesses compete for and win federal contracts. A special set-aside program for US military service-disabled veterans limits the competition for federal contracts even further. Several government agencies will investigate any small business awarded a set-aside contract where there may be fraudulent activity. The investigation may uncover unintentional and intentional wrongdoing by the company and employees. Oftentimes individuals, co-owners, and the corporation which view themselves as being “law-abiding citizens” frequently find themselves being accused of white-collar crimes. In this case, we see several business leaders who misled the federal government regarding true ownership of various companies. We also see the consequences that followed.
Future State of the Industry:
Small and mid-sized businesses seeking to contract with the federal government in one of the many federal set aside programs, and corporate executives and leaders should make decisions with a full understanding of how the programs operate and how their actions can negatively impact the company. They should also be mindful of how government investigators will perceive them based on their own action or inaction. At Compliance Mitigation, we strive to assist our corporate executive and business leader clients and their employees avoid situations where they might be unaware of how their actions and decisions could result in victims – which is how government investigators view matters. Knowledge of consequences may result in better decision-making processes for business owners and leaders, lessening the chances of exposure to investigations and prosecutions for white-collar crimes.
Two business owners conspired to defraud the US Small Business Administration (SBA) by concealing the true ownership status of their businesses when submitting bids to the SBA for federal government contracts. Created in 2019, the Procurement Collusion Strike Force provides a joint law enforcement effort to combat white-collar crimes related to fraudulent schemes impacting federal procurement, grant, and program funding at all levels of government, including the federal government and the SBA project discussed herein. After an investigation by several federal law enforcement agencies, federal prosecutors brought charges against these two business owners. These charges exposed the business owners to the potential loss of liberty, loss of time with family, and payment of hundreds of thousands of dollars in fines.
This case study profiles Michael Wibracht and Ruben Villarreal who co-owned several companies in the San Antonio, TX area. As a US service-disabled veteran, Villarreal held himself out to the SBA as the majority owner of several companies seeking to do business with the SBA. The SBA runs the Service-Disabled Veteran-Owned Small Business (SDVOSB) program, which is designed to increase the number of federal government contracts awarded to small businesses owned by service-disabled veterans. In order to qualify for this set-aside program, the service-disabled veteran must hold or own at least 51% of the SDVOSB. Otherwise, the company would not qualify for the set-aside contracts. Wibracht, co-owner with Villarreal, turned out to be the actual majority owner in these companies, not Villarreal. All the information in this Background comes from three sources – the criminal information against Wibracht, the criminal information against Villarreal, and the Department of Justice press release.
According to the Criminal Information, Wibracht and Villarreal conspired to defraud the SBA as early as 2004 and continuing at least through 2017. Villarreal fraudulently held himself out to the SBA as the majority owner of at least two companies obtaining federal set-aside contracts through the SBA. Under this scheme, Wibracht and Villareal procured over $250,000,000 in federal government contracts that would have otherwise gone to legitimate SDVOSB companies. Based on the information gathered during the Procurement Collusion Task Force investigation, investigators prepared and submitted a Criminal Information against Wibracht and Villarreal to a federal magistrate judge. Like a Criminal Indictment, a Criminal Information consists of a formal charging document that describes the criminal charges against a person and the factual basis for those charges. Unlike a Criminal Indictment, however, a Criminal Information does not require the empaneling of a grand jury and a formal vote to indict from the grand jury. Instead, the information is presented to a judicial officer, usually a magistrate judge, who examines the information and decides whether probable cause exists that a crime occurred.
As a result of these charges, Wibracht pled guilty to conspiracy to commit wire fraud and defrauding the US. While Wibracht awaits sentencing, he exposed himself to a maximum penalty of five years in prison and a $250,000 fine. These charges also exposed Wibracht to the federal criminal forfeiture laws which means he may have to turn over his property to the US government, including his primary residence. Villarreal also pled guilty to conspiring to defraud the US, exposed to a maximum fine of $250,000 and five year’s imprisonment.
According to the Criminal Information presented by the prosecutors, Wibracht and Villarreal made decisions with the intention to deceive the SBA and procure federal contracts for which they otherwise would not have been qualified. Although these gentlemen may have lived most of their lives as honorable people, the evidence suggests they became complacent with federal procurement rules in the false belief no one would ever notice. These types of mistakes can lead to decades in prison and hundreds of thousands of dollars of fines and restitution orders.
Wibracht pled guilty to conspiracy to commit wire fraud and defrauding the US. While Wibracht now awaits his sentencing hearing, he exposed himself to a maximum penalty of five years in prison and a $250,000 fine. These charges also exposed Wibracht to the federal criminal forfeiture laws which means he may have to turn over his personal and real property to the US government, possibly including his residence. Villarreal also pled guilty to conspiring to defraud the US, exposed to a maximum fine of $250,000 and five-year’s imprisonment. Since these two defendants pleaded guilty, they will undergo presentence investigations with separate probation officers. Their probation officers will complete a presentence report that will influence the length of their sentences. Each defendant’s best option now will be to craft an effective mitigation strategy. Their individual strategies should show the judge that they have a full grasp of the crimes committed, should show empathy for the victims of his crime, show what he learned from the experience, and help the judge understand what steps he has taken to make things right.
The Criminal Information against each defendant are a direct result of their decisions to mislead the SBA over the course of 13 years. Wibracht and Villarreal chose to ignore federal law which has consequences they may not have considered. Many people convicted of white-collar crimes regret their poor decisions once they understand the gravity of their situation. Loss of personal liberty, loss of time spent with family, loss of financial resources are just a few of those consequences.
At Compliance Mitigation we recommend more and better ongoing training for all small and mid-sized businesses. When people understand how authorities view violations of federal law they may be more inclined to make law-abiding decisions.
At this point and before each of their sentencing hearings, Wibracht and Villarreal’s best option will be to craft an effective mitigation strategy for himself. This strategy should show the judge that he has a full grasp of the crimes he committed. Each defendant’s mitigation strategy should show empathy for the victims of his crime, demonstrate what he learned from the experience, and help the judge understand what steps he has taken to make things right.
- Construction Company Owners Pleaded Guilty to Defrauding Federal Program Intended for Service-Disabled Veteran-Owned Small Businesses | OPA | Department of Justice