Michelle Cho, an officer of Far East Construction Corporation (Far East) and other construction companies, pleaded guilty today to a federal charge of conspiring to commit wire fraud. Cho also agreed to pay forfeiture in the amount of $169,166 and pay a criminal fine in the amount of $35,000.
According to court documents filed as part of the plea, Cho utilized two straw companies, including Far East, to conspire with MCC Construction Company (MCC) and others to defraud the SBA. Cho’s two companies were eligible to receive federal government contracts set asides for small, disadvantaged businesses. Cho and MCC understood that MCC would, illegally, perform all of the work on these contracts. In so doing, MCC was able to win 27 government contracts worth over $70 million from 2008 to 2011. The scope and duration of the scheme resulted in a significant number of opportunities lost to legitimate small and disadvantaged businesses.
Cho, 45, of Downers Grove, Illinois, was charged in a criminal information on October 12, 2016 in the U.S. District Court for the District of Columbia with one count of conspiring to commit wire fraud. She waived the requirement of being charged by way of federal indictment, agreed to the filing of the information and accepted responsibility for her criminal conduct. The charge carries a statutory maximum of five years in prison and potential financial penalties.
The Honorable Ketanji Brown Jackson scheduled sentencing for March 7, 2017.
The court documents state that Cho and MCC violated the provisions of the SBA 8(a) program, which is designed to award contracts to businesses that are owned by “one or more socially and economically disadvantaged individuals.” To qualify for the 8(a) program, a business must be at least 51 percent owned and controlled by a U.S. citizen (or citizens) of good character who meets the SBA’s definition of socially and economically disadvantaged. The firm must also be a small business (as defined by the SBA) and show a reasonable potential for success. Participants in the 8(a) program are subject to regulatory and contractual limits. Also, under the program, the disadvantaged business is required to perform a certain percentage of the work. For the types of contracts under investigation here, the SBA 8(a)-certified companies were required to perform 15 percent or more of the work with its own employees.
Court documents also state Cho conspired with MCC and others for MCC to exercise impermissible control over Far East, to obstruct a U.S. Government Agency proceeding, and to reach an agreement whereby MCC would provide all labor, equipment, materials, safety, and supervision and, in return, receive 97 percent of the contract task order amount. This agreement by its terms meant that Cho’s company would violate SBA rules and regulations and would collect a 3 percent fee for allowing its small business status to be used.
Earlier this year, MCC pleaded guilty to conspiring to commit fraud on the United States by illegally obtaining government contracts that were intended for small, disadvantaged businesses and agreed to pay $1,769,924 in criminal penalties and forfeiture. In June, Thomas Harper, another former officer and owner of MCC, pleaded guilty to conspiring to obstruct proceedings before a department or agency. In August, Walter Crummy, another former officer and owner of MCC, pleaded guilty to conspiring to commit wire fraud.