Friday, May 24, 2013

NASA Contractor Pleads Guilty To Faking Minority Status

ALEXANDRIA, Va. – Michael Brian Dunkel, 59, of Merritt Island, Fl., pleaded guilty today to fraudulently obtaining more than $4.4 million in government contract payments that should have gone to what the U.S. government considers a disadvantaged small businesses.  


Dunkel was charged by criminal information on May 23, 2013, with one count of major government fraud. He faces a maximum penalty of 10 years in prison when he is sentenced on October 4, 2013.  As part of his plea agreement, Dunkel has agreed to forfeit $2.9 million. 


According to court documents, Dunkel admitted that in 2005, he learned that Keith Hedman, an executive at an Arlington-based security service consulting company referred to as Company A in court records, illegally controlled Company B, another Arlington-based security service consulting company. 


Company B was a participant in the SBA “Section 8(a)” program, which enables certain small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses. Although Hedman controlled Company B, Company B had obtained its 8(a) status based on the disadvantaged status of Dawn Hamilton, its nominal owner.


According to the SBA website, the following individuals are presumed socially disadvantaged for purposes of the 8(a) Business Development program: Blacks, Hispanics, Native Americans, Asian Pacific, or Subcontinent Asians.


The individual must provide evidence to SBA proving one’s individual social disadvantage. Evidence of individual social disadvantage must include:
  • At least one objective distinguishing feature such as race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar causes not common to individuals who are not socially disadvantaged.
  • Personal experiences of substantial and chronic social disadvantage in American society, not in other countries.
  • Negative impact on the individual’s entrance into the business world or advancement in the business world because of the stated disadvantage(s).


Dunkel admitted that he agreed to pay Hedman and Company B a fee in exchange for Company B allowing Dunkel to use its 8(a) status to obtain NASA and other U.S. government contracts. 


Although Company B was required to perform at least 50% of the work on the contracts and had represented it would do so, no Company B employees actually performed any work. Instead, Dunkel and others did all of the work as independent contractors, but they concealed that fact from the government agencies. 


In addition, Dunkel submitted fraudulent proposals and invoices to hide their scheme, used a third-party company’s Federal Employer Identification Number to prevent reporting of his contractor income to the IRS, and did not pay any income taxes on the income he received from Company B.
 

Seven defendants, including Hedman and Hamilton, have previously pleaded guilty in connection with the government contracting fraud scheme and a related bribery scheme.