Tuesday, March 8, 2016

Cattaraugus County men indicted for conspiring to defraud government program

U.S. Attorney William J. Hochul, Jr. announced today that a federal grand jury has returned an indictment charging David Pfeiffer, 64, of Killbuck, NY, and Thomas Colton, 53, of Salamanca, NY, with conspiracy to commit mail fraud and mail fraud. Pfeiffer was also charged with making a false statement to a financial institution. The charges carry a maximum sentence of 30 years in prison and a $1,000,000 fine.  
Assistant U.S. Attorney Russell T. Ippolito, Jr., who is handling the prosecution, stated that according to the indictment, Pfeiffer and Colton conspired to defraud government agencies and the Disadvantaged Business Enterprise (DBE) Program. A business can be designated a DBE if at least 51% of the business is owned and controlled by socially and economically disadvantaged individuals. Since 1980, the U.S. the Department of Transportation has utilized the DBE Program in an effort to increase the number of minority and economically disadvantaged individuals who participate in construction projects that receive federal funding.
As set forth in the indictment, between May 2009 and 2013, Pfeiffer and Colton are accused of defrauding among others:
•       the U.S. Department of Transportation;
•       the New York State Department of Transportation;
•       the City of Niagara Falls, NY;
•       the Buffalo Urban Development Corporation (BUDC); and
•       the Niagara Frontier Transportation Authority (NFTA). 
Pfeiffer and Colton used Colton’s business, Sue-Perior Concrete and Paving, Inc., as a subcontractor on federal government contracts. Sue-Perior was used to allow Pfeiffer’s construction company Man O’ Trees to obtain government contracts that it would have otherwise been unable to obtain. Sue-Perior was qualified as a DBE by the NFTA based upon a fraudulent application submitted by Pfeiffer and Colton. 
As a result of the alleged fraud, Pfeiffer and Colton illegally obtained government construction contracts involving at least three projects:
•       the New York State Route 104 Project;
•       the Union Ship Canal Project; and
•       the Gallagher Beach Project.
In total, the value of the three projects was approximately $15,500,000.
General contractors are only permitted to count funds paid to DBE’s that performed a “commercially useful function.” The indictment alleges that Sue-Perior did not serve a commercially useful function in relation to these construction projects.      
In addition, the indictment alleges that Pfeiffer also submitted false personal financial statements to Five Star bank to obtain credit extensions for his businesses. 
The defendants were arraigned this afternoon before U.S. Magistrate Judge Michael J. Roemer and released on bond.
The indictment is the culmination of an investigation conducted by the United States Department of Transportation, Office of Inspector General, the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Acting Special Agent in Charge Jonathan Mellone, New York Regional Office, and the Federal Bureau of Investigation, under the direction of Special Agent in Charge Adam S. Cohen.