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The United States Attorney’s Office for the Middle District of Pennsylvania announced that Thomas E. Lauer, age 64, and Rebecca J. Davis, age 77, pleaded guilty before United States District Judge Jennifer P. Wilson to one count of conspiracy to commit major fraud against the United States.
According to United States Attorney Brian D. Miller, Lauer and Davis (formerly Rebecca J. Numer and Rebecca J. Elstner) each admitted that, from 2007 to 2014, they conspired with each other, and with other individuals, to obtain five contracts awarded to Davis’s company, Elstner Construction Company, at Letterkenny Army Depot. These contracts were “set aside” for eligible small, disadvantaged businesses who were participating in an SBA program devoted to their development, known as the 8(a) Business Development Program. The collective value of these contracts exceeded $80 million.
Lauer also admitted to conspiring with others to obtain a $5.3 million contract awarded to Bon Secour Management, at the VA Medical Center in Salem, Virginia. This contract was awarded to Bon Secour Management, which was a participant in a small business program devoted to small businesses owned and controlled by service-disabled veterans.
Davis, through Elstner Construction Company (ECC), joined the U.S. Small Business Administration’s 8(a) Business Development Program in or around 2001, despite not being eligible because she had previously entered the program under a different company name. Davis admitted that her 2001 entry into the program violated the rule on “one-time eligibility.”
Lauer assisted others to obtain certification for Bon Secour Management as a “service-disabled veteran owned small business,” or SDVOSB, in or around 2011.
Lauer and Davis admitted to entering contracts awarded to ECC at Letterkenny Army Depot knowing, based on their agreement with one another and with others, that ECC would violate certain 8(a) Program rules. The contracts awarded to ECC at Letterkenny Army Depot also imposed various specific requirements, including requirements relating to performance by the prime contractor, ECC. Lauer and Davis admitted to knowingly violating these contract provisions as well.
Davis also admitted to making false and fraudulent submissions to the U.S. Small Business Administration during and in relation to this criminal conduct, including a false 2008 certification that she and her company were in compliance with 8(a) Business Development Program rules relating to “control” and “one-time eligibility.”
Lauer also admitted that Bon Secour Management was awarded a Salem VAMC contract in March 2013 based on the company’s false representation that at least 15 percent of the cost of the contract performance would be spent on Bon Secour Management’s employees.
As part of her plea agreement, Davis agreed to pay $6 million in restitution, which she agreed was the approximate revenue that ECC retained and was derived from contracts awarded to ECC at Letterkenny Army Depot. Lauer agreed to pay about $6.45 million in restitution. Lauer also agreed to pay $6 million for the loss associated with the Letterkenny Army Depot contracts, as well as the approximately $459 thousand in proceeds maintained by Bon Secour Management from the Salem VA Medical Center contract.
On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division (“Fraud Division”). The Fraud Division is laser-focused on investigating and prosecuting those who commit fraud against the American people. The Department’s work to combat fraud supports President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.
The case was investigated by the U.S. Department of Defense Office of Inspector General, Department of the Army Criminal Investigation Division, U.S. Department of Veterans Affairs Office of Inspector General, and the U.S. Small Business Administration Office of Inspector General. Assistant U.S. Attorneys Ravi Romel Sharma, Christian T. Haugsby, and K. Wesley Mishoe are prosecuting the case.
The maximum penalty for conspiracy to commit major fraud against the United States is 5 years of imprisonment, a term of supervised release following imprisonment, and a fine.
A sentence following the finding of guilt is imposed by the Judge after consideration of the applicable federal sentencing statutes and the Federal Sentencing Guidelines.