A New York accountant pleaded guilty in U.S. District Court here yesterday to conspiracy for his role in an alleged scheme to illegally obtain surety bonds for construction companies through a former bond manager at the Allstate Insurance Co.
The scheme was discovered when the accountant, Eugene L. Kass, 44, of Merrick, N.Y., telephoned Olympic Construction Co. of Arlington and offered to help the company obtain the bonds it needed to bid on and accept construction projects.
Kass once did accounting work for Olympic which, apparently unknown to him, had been set up by the FBI in 1979 as part of a federal investigation into allegedly corrupt practices in the construction trade.
Olympic rented a home at 4407 W. St. NW for its employes and then wired it with elaborate video and audio tape equipment as part of the construction probe.
Subsequently, the house also was used in the ABSCAM undercover operation, in which FBI men posing as Arab sheiks offered members of Congress huge amounts of cash for legislative favors. The two investigations were otherwise unrelated.
On three occasions, Kass was videotaped attending meetings at the house, according to law enforcement authorities.
Assistant U.S. Attorney Richard L. Beizer said at a court hearing yesterday that Kass was part of an alleged conspiracy with Louis J. Pugh Jr., a Pennsylvania construction company owner, and Andrew Newell, a former senior bonding manager with Allstate in Northbrook, Ill. Newell allegedly approved bonds for Pugh in exchange for 50 percent interest in a Daytona Beach, Fla., motel owned by Pugh, Beizer told the court.
Neither Pugh nor Newell have been charged in connection with the case, which still is under investigation, law enforcement authorities said. Kass, who was working for Pugh as an accountant, faces five years in jail, a $10,000 fine or both for his guilty plea to conspiracy to commit wire fraud. Judge Barrington D. Parker scheduled sentencing for Oct. 9.
Beizer told the judge that Pugh and Kass allegedly sought out construction companies that needed bonding, asked Newell to approve the bonds from Allstate and then charged the construction companies a percentage or a fee if the bond was obtained. Beizer told Parker that Kass received $300 as a result of the scheme and anticipated further clients and commissions.
Construction companies must obtain surety bonds to bid on or accept construction projects. The bonds, which are like insurance, are intended to guarantee that projects are completed and paid for. Surety bonds, often are difficult to obtain, especially if a company has overextended its own finances on several different construction projects or did not have the expertise to do the work.
According to court record, in November 1979, Kass called the president of Olympic Construction and "proposed a deal" to get additional surety bonds for that comnpany. Kass went to the W Street house on Dec. 20, 1979, Jan. 3 and Jan. 28, 1980, authorities said.
According to court records, Newell allegedly approved 11 bonds for construction bids made by Pugh's company, A.M. Pugh Associates, Inc. of Kingston, Pa., from December 1979 through Jan. 30, 1980. Beizer said in court yesterday that the value of bid and project bonds issued to Pugh's company allegedly doubled during the time of the conspiracy.