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Government Contracts Monitor

Short Take: Some Government Contracts Business Models Should Be Avoided

February 1, 2018

By: Hopewell Darneille

Earlier this week, the Department of Justice unsealed charges against a government contractor for his role in allegedly carrying out a multi-year, $2.6 million scheme to defraud at least 35 subcontractors located across the United States. The indictment, filed on January 30, 2018 in the Eastern District of California, charges Chester L. Neal Jr., 43, of Fresno, California, with two counts of mail fraud.

According to the indictment, Mr. Neal established and controlled several companies through which he secured at least 105 government contracts to provide various goods and services to federal agencies including the Department of Interior, U.S. Army and U.S. Air Force. The indictment describes a “business model” under which Mr. Neal allegedly (i) made several misrepresentations in order to induce subcontractors to provide all of the required goods and services to the contracting federal agencies; (ii) got paid by the Government for those subcontractors’ work; and (iii) then kept the money for his personal use instead of paying his subcontractors. 

Obviously, such an approach can do wonders for your bottom line, at least for a while. In total, between July 2008 and December 2017, Neal allegedly defrauded his subcontractors out of at least $2.6 million.

Of course, an indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. But if you want to avoid facing an indictment, you would be well-advised to avoid Chester Neal’s approach to doing business with subcontractors.

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