‘Right-hand man’ in government fraud case sentenced to 27 months

An Arlington County business executive who prosecutors say was at the center of a scheme that netted him and others more than $31 million in government contracts meant for small, minority-owned businesses was sentenced Friday to two years and three months in federal prison.

Joseph Richards, 52, breathed heavily and choked back tears as he told a federal district judge in Alexandria that he initially thought that what he was doing was justifiable because even if his company fraudulently obtained the contracts, its employees still were able to do the work as well as anyone.

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“We were providing jobs to people,” Richards said. “The government was getting excellent service.”

Judge Leonie M. Brinkema seemed unmoved by Richards’s rationale. In sentencing the decorated Marine veteran to more than two years in federal prison, she said it was important that he and others recognize that legitimate, minority-owned businesses were cheated out of work.

“There has to be a clear message out there, because government contracting is very lucrative, especially in this area,” Brinkema said.

Also Friday, Brinkema sentenced another executive involved in the fraud, 66-year-old David Lux of Springfield, to a year and three months in prison. Prosecutors had asked that Richards be sentenced to four years in prison and Lux to three.

In March, Richards and Lux pleaded guilty to conspiracy to commit major fraud against the U.S. government. Prosecutors say the two were among a group that fraudulently won more than 20 government contracts worth more than $153 million, even bribing an official with the Department of Homeland Security’s Federal Protective Service to help them get the business.

Their companies were paid more than $31 million to do work for NASA, the Coast Guard, the Department of Defense and other agencies. Those involved in the scheme pocketed more than $6 million for themselves, prosecutors said.

Four others — including Derek Matthews, the Federal Protective Service’s former regional director for the National Capital Region — also have pleaded guilty in connection with the case and are awaiting sentencing. Matthews acknowledged that he was paid at least $12,500 to help the group win contracts, court filings show.

The conspiracy was largely organized by Keith Hedman, 53, of Arlington, who owned a security consulting firm identified by prosecutors in court filings only as “Company A.” Defense attorneys identified that company as “PSI” in court Friday and as “Protective Strategies, Inc.” in court records. Officials at the company, listed online as Protection Strategies Inc., did not immediately return phone or e-mail messages seeking comment.

At one time, prosecutors said, Company A was eligible for contracts designated for minority-owned businesses because it had an African American woman listed as its president and chief executive. But when she left in 2003, Hedman and others turned to fraud to win the same work, prosecutors said.

Hedman, who pleaded guilty in March to major fraud against the United States and conspiracy to commit bribery, set up a shell company referred to in court papers as “Company B” and made 48-year-old Dawn Hamilton, who is Portuguese, its figure­head owner. In reality, Hedman ran the company, and employees at Company A worked on contracts awarded to the shell company, prosecutors wrote.

Assistant U.S. Attorney Ryan Faulconer said in court Friday that Richards was Hedman’s “right-hand man” and that Lux’s role in their scheme was a “crucial” one.

Prosecutors did not identify the shell company, but defense attorneys referred to it in court as SAC, or Security Assistance Corp. Wesley Severson, the head of human resources for SAC, declined to comment.

Lux, who spent six years in the Air Force Reserve, was listed as the chief financial officer at Company A, and Richards was listed as the chief of staff at both companies at varying times, prosecutors wrote. When government auditors came in 2008, for example, the men moved all of Company B’s files into a room at Company A’s Arlington office, and Lux drew up a fake document showing that Company B was renting space, court records show.

Lux and Richards acknowledged Friday that what they did was wrong, and their attorneys pleaded that their sentences be probation only, noting that the pair’s once-successful careers were all but ruined.

Steven J. McCool, Richards’s defense attorney, said Richards was a “soldier” who merely “followed orders” in perpetuating the fraud. He said that after being charged, Richards had gone back to community college to get a degree.

Thomas J. Kelly Jr., Lux’s defense attorney, said that Lux was a “good man” who moved to the D.C. area to be closer to his two daughters and five grandchildren and that his role in the fraud was “one major mistake.” He said that instead of his client spending the $115,000 he made, Lux had kept it in a closet.

 
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