Debarred But Still Selling Under Shell Companies

Company and company president get debarred from Government contracting for selling defective parts to the Air Force. Then, the president promptly sets up several new companies, obscures his involvement/ownership and keeps on selling defective parts. How often does this happen? Probably more often than we think and certainly more often than we know about.

For 10 years, from 2003 to 2013, Aerospec, Inc. sold fasteners (e.g. rivets) to the Air Force. Somewhere along the line, the company started selling fasteners that did not meet specifications. Given that these fasteners were used on B-52s and C-5s, specifications are a big deal and consequently, there is a big price difference between parts that meet spec and those that don't.

Eventually, the company got caught selling these defective parts to the Government and was debarred from further Government contracts. Poor Mr. Skiscim, the President of Aerospec finds himself without the means to keep up his lifestyle including his yacht club membership. So what's he going to do?

No problem, he reasons. He'll just start up some new companies and sell the same old nonconforming parts. So he set up Sun Tech Air Parts, Aerocon Corp, and Specialty Components. But he couldn't use his own name showing ownership because he was already on file as a debarred person. So he used the names of family members as owners of these companies (and fictitious persons, according to the Department of Justice).

Now it would have been one thing if, after his initial debarment, Mr. Skiscim got honest and started selling conforming parts to the Air Force. But he didn't. He continued to sell defective components from his new companies. Then he gets caught again. .Not too surprising, really, given that the Government performs QC testing on what it buys.

This time, Mr. Skiscim doesn't get off so lightly. He has just been sentenced to 26 months in Federal prison for fraud for selling nonconforming parts through his shell companies. He is also required to pay the Government $1 million.

You can read the entire Justice Department press release here.