Government Contractor and Executives Pay $21.3 Million for Fraud Scheme That Stole Contracts Meant for Disabled Veterans
ALBANY, N.Y. — A government contractor and two of its top executives have agreed to pay $21.3 million to resolve allegations that they fraudulently obtained federal contracts reserved for service-disabled veteran-owned small businesses (SDVOSBs) — programs specifically designed to help those who sacrificed for their country.
Broadway Electric Inc., Cornerstone Contracting Inc., Chief Executive Officer John Oehler, and President Christian Blake reached the settlement with the Justice Department to resolve False Claims Act allegations that, from approximately April 2017 through May 2025, they engaged in a coordinated scheme to obtain federal set-aside contracts for which they were not eligible.
Neither Oehler nor Blake is a service-disabled veteran, and neither qualified to own or control an SDVOSB. Yet according to the settlement, the defendants used purported SDVOSBs and other small businesses as pass-through entities to win contracts intended for qualifying veteran entrepreneurs.
“Congress intended certain federal contracts to be set aside for small businesses and for service-disabled veterans who sacrificed for this country,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “We will hold accountable those who fraudulently obtain, or assist others in fraudulently obtaining, these set-aside contracts.”
Under federal law, contracts may be set aside for small businesses that meet specific eligibility requirements, including those owned, controlled, and operated by service-disabled veterans. The SDVOSB program is designed to provide contracting opportunities to qualifying veteran entrepreneurs.
But according to the settlement, Broadway and Cornerstone personnel — not the purported small businesses — primarily controlled execution, staffing, and financial administration of the contracts. The defendants identified contracting opportunities, prepared and priced bids submitted in the names of purported small businesses, secured bonding, selected subcontractors, and managed project execution and financial administration, including payroll.
The purported small businesses received fixed payments, typically approximately one to three percent of total contract value, while the remaining contract revenue flowed to Broadway, Cornerstone, and contractors they selected. Broadway and Cornerstone personnel even used small-business email domains and exercised signature authority in communications with federal agencies on behalf of the purported small businesses.
According to the settlement agreement, at least one SDVOSB owner raised concerns regarding compliance with federal control and participation requirements, but the defendants did not implement material changes to the structure or operation of their arrangements.
Oehler and Blake were directly involved in establishing, maintaining, and directing the arrangements throughout the relevant period. They were informed of federal requirements that SDVOSBs control contract performance and receive commensurate benefits, but did not materially alter their scheme.
“The deliberate exploitation of the U.S. Small Business Administration’s set-aside program, designed to give service-disabled veteran-owned small businesses a fair opportunity to compete, compromises the contracting process and the warfighters those resources are meant to support,” said Special Agent in Charge Jason J. Sargenski of the Department of Defense Office of Inspector General’s Defense Criminal Investigative Service. “When large contractors fraudulently control small business entities to capture contracts they are not entitled to, they divert critical defense resources away from their intended purpose, undermine the competitive process, and betray the veterans these programs exist to serve.”
The settlement resolves claims brought under the qui tam provisions of the False Claims Act by two whistleblowers — a veteran of the U.S. Air Force and an executive with an SDVOSB firm. Under the agreement, the whistleblowers will receive $3,674,250. The case is captioned United States ex rel. Welch, et al. v. American First Contracting Inc., et al.
“Fraudulent schemes that target programs designed to support our nation’s disabled veterans are an affront to those who served our country,” said Acting Inspector in Charge Nicholas Bucciarelli of the U.S. Postal Inspection Service’s Chicago Division. “By exploiting these set-aside federal contracts, the defendants stole opportunities from honest, service-disabled veteran business owners.”
Union Bosses Convicted of Racketeering for Stealing Millions in Dues on Lavish Trips, No-Show Jobs, and a $7 Million Secret Loan
KANSAS CITY, Kan. — A federal jury has convicted four former leaders of the International Brotherhood of Boilermakers Union for orchestrating a sprawling 15-year racketeering scheme that bled millions of dollars in union dues through no-show jobs, extravagant international travel, personal shopping sprees, and an unauthorized $7 million loan to a union-related bank.
The convictions, announced Wednesday, mark a stunning downfall for Newton Jones, 72, of Chapel Hill, North Carolina, the former president of the Boilermakers Union; his wife, Kateryna Jones, 33; former Secretary Treasurer William Creeden, 78, of Kearney, Missouri; and former Vice President Lawrence McManamon, 78, of Rocky River, Ohio.
“The Boilermakers Union members were supposed to get representation out of their hard-earned money used to pay union dues,” said Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division. “What they got instead is their money wasted on lavish trips and dinners, and unearned vacation payouts for the union leadership. Union leadership that steals from the American worker will face prosecution, conviction, and prison time.”
According to evidence presented at trial, over a 15-year period the defendants embezzled union funds through a web of corrupt schemes, including:
- Over $5 million in unnecessary luxury international travel, including executive meetings held at extravagant hotels in Paris, France, and Rome, Italy, with no apparent union business purpose.
- Nearly $2 million in salary and benefits paid to Kateryna Jones and others for no-show jobs, including two years of salary to Kateryna Jones while she resided in Ukraine and was dating Newton Jones.
- Over $100,000 in tuition, rent, and relocation expenses for Newton Jones’s family members.
- Hundreds of thousands of dollars in cash payments from fraudulently claimed vacation time.
- Over $100,000 in restaurant charges by Newton and Kateryna Jones for “date night” meals in their hometown of Chapel Hill.
- Over $100,000 spent on unauthorized email surveillance of union employees to defend Newton Jones and McManamon from internal union charges.
- $7 million in unauthorized loans from the Boilermakers Union to the Bank of Labor — a bank where Newton Jones and Creeden held supposed full-time jobs that required little work, each paying nearly $500,000 per year while they also collected full-time salaries from the union.
Trial evidence showed that Newton Jones hired his wife for a job in which she performed little to no work, yet she received nearly $1.8 million in salary over nine years. Newton Jones and Creeden also embezzled hundreds of thousands of dollars in salary and benefits for three of Newton Jones’s family members.
Creeden and Newton Jones also used their union executive positions to obtain high-level roles at the Bank of Labor, where the union is the majority shareholder. While earning full-time salaries at the bank while supposedly working full-time for the union, Jones and Creeden were paid nearly $4 million in salary and $1.4 million in retirement benefits from the bank.
“The absolute hubris and entitlement with which these defendants stole from American workers is disgraceful,” said U.S. Attorney Ryan A. Kriegshauser for the District of Kansas. “While union members were faithfully clocking-in and out of their jobs, these defendants thought they were unaccountable and were callously gallivanting on extravagant trips that spared no expense. With these convictions comes a reckoning.”
The jury convicted Newton Jones, Kateryna Jones, and Creeden of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act. All four defendants were convicted of various embezzlement charges, health care fraud, and wire fraud.
McManamon faces a maximum penalty of five years in prison on each count. Newton Jones, Kateryna Jones, and Creeden each face a maximum of 20 years. Sentencing is scheduled for Sept. 1.
“By using union funds for their private benefit, the fraud committed by these defendants strikes at the very confidence union members place in their leaders to represent their interests,” said Special Agent in Charge Chris Omerod of the FBI Kansas City Field Office. “The evidence presented at trial demonstrated an elaborate and willful deceit of the Boilermakers Union to fund the lavish lifestyle of their former leaders. The FBI will not tolerate this level of financial exploitation against hard working Americans.”
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