Wednesday, January 31, 2018

Failure to Pay Subcontractors Results in Fraud Indictment

The Justice Department announced yesterday the indictment of Chester Neal of Fresno, California on two counts of mail fraud. Two counts? That's only a tiny fraction of the charges he is potentially facing. There is a lot more to this case than the Justice Department has so far acknowledged. And, the court documents remain sealed and unavailable to the public.

Consider the cast of characters assembled to make the announcement:

  • Assistant Attorney General of the Justice Department's Criminal Division
  • U.S. Attorney of the Eastern District of California
  • Department of Interior Office of Inspector General
  • Western Region Office of Investigations, U.S. Army Criminal Investigation Command
  • Pacific Fraud Field Office, FBI
  • Air Force Office of Special Investigations, Office of Procurement Fraud Investigations, and
  • Defense Criminal Investigative Service, Western Field Office

Really? This many individuals for two counts of mail fraud, or more specifically, because one rogue Government contractor didn't pay its subcontractors?

Here's the facts that the Justice Department has disclosed concerning the case.

Chester Neal established several companies through which he secured at least 105 Government contracts. Neal subcontracted the work to other vendors who provided all of the goods and services required under the contracts. Neal made several misrepresentations in order to induce the subcontractors to perform. Neal did not pay his subcontractors even though the Government paid Neal for the work. Between July 2008 and December 2017 (nine and a half years), Neal is alleged to have bilked 35 subcontractors out of $2.6 million.

As we stated at the beginning of this post, there is a lot more to this case than has been revealed so far. Stay tuned for further developments. Pressure to meet socio-economic contracting goals coupled with a charismatic individual may have contributed to this problem. Or, not. Just speculating.

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