State Contractor Sentenced to 18 Months in Federal Prison Following Conviction for Mail and Wire Fraud in Connection with State-Run and Federally Funded Bridge Maintenance Project
On May 2, 2019, Nathaniel Lorenz was sentenced to 18 months in prison following his November 8, 2018 conviction on eight counts of wire fraud and one count of mail fraud for defrauding the government in connection with a bridge maintenance project administered by New York State and funded primarily by the Federal Highway Administration (“FHWA”). Lorenz’s sentence and conviction serve as a warning that contractors who cut corners on government contracts do so at their own peril.
Lorenz’s company, ACME Powerwashing, Inc., contracted with the New York State Department of Transportation (“NYSDOT”) to provide cleaning and sealing services on a number of bridges in the Binghamton and Buffalo areas. According to the indictment, ACME’s work involved powerwashing bridge decks and applying a chemical sealer.
ACME was required to purchase a specific chemical sealer and to submit documentary proof to the NYSDOT of the kind and amount of approved sealer used. Lorenz was charged and convicted for purchasing less than the amount of materials required under ACME’s contracts with the NYSDOT, and then submitting fraudulent invoices to the NYSDOT which purported to show that ACME was in fact purchasing the appropriate amount of materials. Although a company called Allied Building Products Corp. was the exclusive authorized seller of the sealer, Lorenz falsely represented to the NYSDOT on multiple occasions that ACME had purchased the sealer, in the required amounts, from a company called S.E. Brett, Inc. In reality, Lorenz was the sole owner of S.E. Brett, and he had not purchased any of the required sealer from that company.
The sentence of 18 months—which was lower than the 46 months sought by federal prosecutors—will be followed by two years of supervised release and restitution in the amount of $600,000, which is the amount of loss that the parties agreed the government sustained by way of Lorenz’s fraud.
Following Lorenz’s conviction, the United States Attorney for the Northern District of New York stated: “Nathaniel Lorenz ripped off New York State taxpayers by doing shoddy maintenance work on bridges New Yorkers depend on every day and then submitting phony paperwork to cover up his fraud. Together with our state and federal law enforcement partners, we will continue to vigilantly watch over federally funded contractors so that taxpayers get what they pay for.”
This case demonstrates the grave risks attendant to misconduct in connection with government contracts. Had Lorenz’s counterparty been a private citizen or entity, he may never have been federally charged, as the Department of Justice (“DOJ”) charging policy on mail and wire fraud provides that “[p]rosecutions of fraud ordinarily should not be undertaken if the scheme employed consists of some isolated transactions between individuals, involving minor loss to the victims, in which case the parties should be left to settle their differences by civil or criminal litigation in the state courts.” While this statement in no way insulates fraud in private construction projects from federal investigation and prosecution, it suggests that such purely private conduct is not as likely to be of interest to the DOJ as is fraud in connection with public projects. Indeed, the DOJ policy goes on to state that “serious consideration” should be given to the prosecution of “any scheme which in its nature is directed to defrauding a class of persons, or the general public, with a substantial pattern of conduct.” Thus, the DOJ policy generally provides that a substantial element of public harm makes it more likely that a particular fraudulent course of conduct will be pursued as a federal criminal matter.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.
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