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Federal fraud case against Cheektowaga contractor settled for $4.75 million

Federal fraud case against Cheektowaga contractor settled for $4.75 million

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A Cheektowaga contracting firm accused of fraudulently claiming to be owned and operated by a veteran with a service-related disability must pay the federal government $4.75 million, under the terms of a consent judgment in federal court.

Between 2008 and 2013, Veteran Enterprises Company won $24 million in federal contracts set aside for firms owned and operated by veterans who became disabled due to their military service.

A Buffalo-area contracting company, its owners and a former employee of a subsidiary are being sued by the federal government for allegedly obtaining millions of dollars worth of federal contracts by falsely claiming to be a small business operated by a disabled veteran, U.S. Attorney William J. Hochul Jr. said Friday. Hochul said the civil complaint filed against Strock

On paper, VECO was 51% owned by Terry Anderson, a veteran with a service-connected disability who served as VECO’s president, according to a 2015 complaint filed by the U.S. Attorney Western District of New York Office.

In practice, VECO was simply a pass-through company for Strock Contracting and its owners Lee Strock and Kenneth Carter, court papers alleged.

Neither Strock nor Carter was a veteran with a service-related disability, and so Strock Contracting was not eligible for government contracts as a service-disabled, veteran owned (SDVO) small business.

Strock said he did nothing wrong and has spent years – and millions of dollars – fighting the government in court and has no money left to continue.

Carter, who owned 10% of Strock Contracting, died after federal prosecutors filed the initial civil complaint six years ago.

Strock Contracting is no longer in business, said Strock, who filed in July for Chapter 7 bankruptcy protection, citing debts of $3.7 million and $7,200 in monthly income from Social Security and an individual retirement account.

“I don’t have any money. How can I continue fighting?” he said. “It’s a battle that no citizen in this country could ever win.”

Federal prosecutors accused Strock Contracting, Strock, Carter and Cynthia Ann Golde, a former Strock employee, with fraud, unjust enrichment and violating the False Claims Act.

The plaintiffs and defendants filed a joint motion for entry of judgment and dismissal of claims. Judge Frank P. Geraci Jr. ordered a judgment of $4,752,000 against Strock Contracting and dismissed all claims against the company, with prejudice.

U.S. Attorney Trini Ross said in a news release that her office’s complaint had accused Strock Contracting of directing VECO to submit false certifications of eligibility to the government, allowing the firm to profit from numerous federal contracts that should have gone to eligible companies.

Strock Contracting was accused of profiting from these contracts through phony loans, sham lease agreements and other deceitful financial arrangements, Ross said.

The complaint alleges that Strock and Carter recruited Anderson in 2006 to form VECO and then applied to the U.S. Department of Veterans Affairs for the new company to be recognized as a SDVO business.

VECO subsequently won several contracts from the VA, the Army and the Air Force, but Anderson had little to do with running the company, aside from signing paperwork related to the contracts and attending some meetings with government customers, according to federal court papers.

Strock hired and fired VECO employees, and Anderson had no role in identifying or approving subcontractors. Anderson wasn’t even given a key to the VECO building at 2095 Old Union Road that was shared with Strock Contracting. The only way for him to get inside was to be admitted by Strock employees, and in particular Cynthia Ann Golde, a former Strock employee who handled all the VECO financial paperwork, including invoices and requests for payment, according to court papers.

Anderson was paid less than 5% of VECO’s profits, the federal complaint said.

Trial Attorney Glenn Harris of the Civil Division’s Commercial Litigation Branch and Assistant U.S. Attorney David Coriell of the Western District of New York prosecuted the case. Strock was represented by attorney Robert C. Singer, who could not be reached Saturday to comment.

Strock disputed prosecutors’ portrayal of how the businesses operated.

The Small Business Administration encouraged Strock to work with a veteran with a service-connected disability, and Anderson was largely responsible for running VECO, Strock said.

“We had instant success,” he said. “We had a strong reputation, strong organization and great performance.”

The only reason Anderson didn’t have a key fob to the office building is because he refused it, Strock said.

“Everybody had keys. It was a fob. He was given it. He didn’t take it,” Strock said. “The reason he said is, ‘What’s the sense of me coming here when there’s nobody here.’ He says, ‘I don’t need it.’ ”

Strock also maintained that he did not reap huge financial benefits from his work with VECO and was more interested in building up the company.

“I tried to help somebody, and it ended up backfiring,” he said. “It’s just a sad-ending story.”

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My byline has run in the Ithaca Journal, USA Today, the Rochester Democrat & Chronicle and the New York Times. I have been a staff reporter at The Buffalo News since 2002 and currently am part of the watchdog team.

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