Two Individuals Admit to Scheming for Over $80 Million in Government Contracts Through Deception

The United States Attorney’s Office for the Middle District of Pennsylvania has announced that two individuals, Thomas E. Lauer, age 64, and Rebecca J. Davis, age 77, have pleaded guilty to conspiracy charges related to defrauding the government in obtaining lucrative federal contracts. Both defendants admitted to their involvement in a scheme that spanned several years and secured over $80 million in contracts through fraudulent means.

The fraudulent activities, which took place between 2007 and 2014, involved manipulating the eligibility requirements for government contracts set aside for specific small businesses. Thomas E. Lauer and Rebecca J. Davis, formerly known by other surnames, conspired with each other and other individuals to secure five contracts awarded to Davis’s company, Elstner Construction Company (ECC), at the Letterkenny Army Depot. These contracts were designated for businesses participating in the Small Business Administration’s (SBA) 8(a) Business Development Program, which aims to assist disadvantaged businesses. The combined value of these contracts exceeded $80 million.

Beyond the Letterkenny Army Depot contracts, Lauer also admitted to participating in a conspiracy to obtain a separate contract valued at $5.3 million. This contract was awarded to Bon Secour Management at the VA Medical Center in Salem, Virginia, and was intended for small businesses owned and controlled by service-disabled veterans.

According to the U.S. Attorney’s Office, Davis, through Elstner Construction Company, had joined the SBA’s 8(a) Business Development Program around 2001. However, her participation was in violation of the program’s “one-time eligibility” rule, as she had previously participated in the program under a different business name. Lauer was also involved in assisting others to obtain certification for Bon Secour Management as a service-disabled veteran-owned small business (SDVOSB) in approximately 2011, based on the premise of false representations. Both Lauer and Davis acknowledged that they entered into agreements for ECC at Letterkenny Army Depot with the knowledge that they were violating specific rules of the 8(a) Program, including contractual requirements for performance by the prime contractor.

Further details of the scheme revealed that Davis submitted false and fraudulent information to the U.S. Small Business Administration. This included a false certification in 2008, asserting that she and her company were compliant with the 8(a) Business Development Program’s regulations concerning “control” and “one-time eligibility.” Lauer, in relation to the Bon Secour Management contract, admitted that the company secured the award in March 2013 by falsely claiming that at least 15 percent of the contract’s performance costs would be allocated to Bon Secour Management’s employees.

As part of their plea agreements, both defendants have agreed to pay significant restitution. Davis will pay $6 million, representing the approximate revenue retained by Elstner Construction Company from the Letterkenny Army Depot contracts. Lauer has agreed to pay approximately $6.45 million in restitution, which includes $6 million for losses associated with the Letterkenny contracts and an additional $459,000 for proceeds maintained by Bon Secour Management from the Salem VA Medical Center contract. The creation of the National Fraud Enforcement Division by the Department of Justice was also highlighted, signaling a focused effort to investigate and prosecute those committing fraud against the American public, supporting a broader governmental initiative to eliminate fraud, waste, and abuse within federal benefit programs. The case was investigated by multiple Inspector General offices from the Department of Defense, Department of the Army Criminal Investigation Division, Department of Veterans Affairs, and the Small Business Administration, with prosecution being handled by Assistant U.S. Attorneys. The maximum penalty for conspiracy to commit major fraud against the United States includes five years of imprisonment, supervised release, and a fine.

Article by Mel Anara, based upon information from the U.S. Attorney’s Office, Middle District of Pennsylvania

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