Minority contracting fraud case ends with 3 guilty pleas after 7 years

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A Western New York company that fraudulently obtained government contracts worth millions of dollars through a minority contracting scheme pleaded guilty Thursday to a felony mail fraud conspiracy. 

Presidents of the two companies involved in the scheme also pleaded guilty Thursday to a bank larceny charge.    

The guilty pleas came seven years after the executives of Man O’Trees Inc. and Sue-Perior Concrete and Paving were indicted on 13 felonies by a federal grand jury investigating minority contracting fraud. 

Man O’Trees Inc., headquartered in West Seneca, pleaded guilty to a felony charge of conspiracy to commit mail fraud, admitting in a plea agreement that it conspired with Sue-Perior to fraudulently obtain $3.5 million in government contracts from 2009 to 2013 by falsely claiming that Sue-Perior qualified as an independent minority-owned business that employed its own workforce and was capable of performing work on contracts. 

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In documents Man O’Trees sent through the mail, it claimed that Sue-Perior could fulfill goals of hiring Disadvantaged Business Enterprises on federally funded government contracts by working as a subcontractor for Man O’Trees. 

But Man O’Trees president David Pfeiffer was a part-owner of Sue-Perior. Man O’Trees knew that Sue-Perior shared an office with Man O’Trees in West Seneca, that it had no independent workforce, and that Man O’Trees employees were the ones who performed the labor on government contracts that Sue-Perior was supposedly completing.    

Man O’Trees and Sue-Perior both obtained an unfair advantage in obtaining government contracts through the conspiracy, Man O’Trees admitted. 

Man O’Trees admitted that it defrauded the U.S. Department of Transportation, the New York State Department of Transportation, the City of Niagara Falls, the Buffalo Urban Development Corp. and the Niagara Frontier Transportation Authority. 

Federal sentencing guidelines call for Man O’Trees to be fined $2.8 million to $5.6 million and put on probation up to five years, according to the plea agreement. But prosecutors agreed with the company that it was not able, even with an installment schedule, to pay even $2.8 million, and that the company was entitled to a penalty reduction based on its inability to pay.

Man O’Trees agreed to waive its right to appeal the conviction if it is sentenced to pay a fine of $500,000 or less. 

Meanwhile, Man O’Trees President Pfeiffer and Thomas Colton, president of Sue-Perior, both pleaded guilty to a misdemeanor bank larceny charge that carries a possible a sentence of up to 1 year in jail and a $100,000 fine. Pfeiffer admitted he defrauded Five Star Bank by lying about his assets to maintain a line of credit for both Man O’Trees and Sue-Perior. Pfeiffer told the bank that he owned a property in Florida that he had sold years before to Colton. Colton admitted he helped Pfeiffer commit the bank larceny. 

Assistant U.S. Attorney Russell T. Ippolito Jr. agreed to dismiss a total of nine felony counts of conspiracy to commit mail fraud and mail fraud against the two men as part of their plea agreement, as well as four felony charges against Pfeiffer of making false statements to a financial institution. 

The prosecution of Pfeiffer and Colton under the original indictment was paused for years as the defense lawyers and U.S. Attorney’s Office awaited 2nd Circuit Court of Appeals and U.S. Supreme Court rulings in cases that rested upon a similar prosecution theory.

Earlier this year, the Supreme Court upheld the Second Circuit’s ruling that overturned the Buffalo Billion convictions of Buffalo developer Louis Ciminelli and Alain Kaloyeros, former head of the SUNY Polytechnic Institute, saying government prosecutors took too aggressive a stance in bending federal laws to try to put them behind bars. In that case, the justices ended the use of the controversial “right to control” legal theory under which a jury found those men guilty in 2018 of illegally steering a $750 million state contract to Ciminelli’s company.

Defense attorneys Justin Ginter, who represented Pfeiffer, and Daniel Henry, who represented Colton, argued that the same prosecution theory was being used in this fraud case. 

Sentencing for Pfeiffer and Colton is scheduled on Dec. 14 by U.S. District Judge Richard J. Arcara. 

Contact Mike McAndrew at mmcandrew@buffnews.com 

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