Arlington man who led government fraud scheme is sentenced to 6 years

June 21, 2013

An Arlington executive who masterminded a scheme to win lucrative government work meant for small, minority-owned businesses was sentenced Friday to six years in prison.

Keith Hedman, 53, was “at the top of the hierarchy” in a ring of businessmen who defrauded the government for more than a decade, federal prosecutors said in court papers. Hedman, they said, conceived a scheme that netted him and others more than $31 million in government contracts, and he personally pocketed more than $1.5 million.

Assistant U.S. Attorney Ryan Faulconer said in court that Hedman’s scheme “was unparalleled in its breadth, its depth and its scope.” He said Hedman was undoubtedly a “good businessman,” but “in the end, he was also a good criminal.”

During the hearing in federal district court in Alexandria, Hedman said he knew his actions were wrong but convinced himself that it was okay because the contracts brought work for his employees.

“I guess I just justified in my head through all of this that I was helping out friends and co-workers,” Hedman said. The decorated Marine and father of two daughters pleaded guilty in March to major fraud against the United States and conspiracy to commit bribery of a public official.

Seven others have pleaded guilty in connection with the case, and two men who worked for Hedman were sentenced last week. Joseph Richards, 52, who prosecutors called Hedman’s “right-hand man,” received a prison term of two years and three months, and David Lux, 66, another executive, received a sentence of one year and three months.

According to court filings from prosecutors and defense lawyers, Hedman was the owner of Protection Strategies Inc., or PSI, a security consulting firm that at one time was eligible for contracts designated for minority-owned businesses because it had an African American woman listed as its chief executive. When she left in 2003, Hedman set up a shell company called Security Assistance Corp., or SAC, and installed a minority woman as its figure­head owner to win the same work, according to the filings.

Hedman and others were paid more than $31 million to do work for NASA, the Coast Guard, the Defense Department and other agencies, and the work they did was satisfactory, prosecutors wrote. The contracts, though, were supposed to go to minority-owned small businesses.

The owner of one such business, Micheal Davis, came to the hearing in hopes of telling the judge about how Hedman’s scheme had affected his company, Annandale-based Davis-Paige Management Systems. Though he did not speak in court, he said afterward that Hedman outbid Davis-Paige for a Defense Department contract about three years ago, and as a result, he had to lay off several employees and cut others to part time. He said the company spent about $100,000 chasing the contract and that it could have used the roughly $11 million in revenue it would have brought.

“We had to let people go,” he said. “We had to put people on part time because of that.”

U.S. Attorney Neil H. MacBride said in a statement that Hedman “undermined the trust of the U.S. government.” In addition to the fraud, Hedman admitted bribing the Federal Protective Service’s former regional director for the National Capital Region to help win contracts, court filings show.

Matt Zapotosky covers the federal district courthouse in Alexandria, where he tries to break news from a windowless office in which he is not allowed to bring his cell phone.
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