ALEXANDRIA, Va. (CN) – A former delegate for the Virginia General Assembly pleaded guilty in federal court Tuesday to defrauding the federal government out of over $80 million in bogus contracts.
From 2005 until 2014, prosecutors claim onetime Republican state lawmaker Ronald Villanueva, 48, conspired with Khalil Naim, his former business partner at the Virginia Beach-based tech firm SEK Solutions, to falsify records submitted to the Small Business Administration.
The administration, which assists entrepreneurs in accessing capital and competing for government contracts, oversees a program known as Section 8(a) which is specifically aimed at helping minority and women-owned businesses gain traction.
But for a small business to gain assistance from the administration, it must meet various criteria.
For one, the business must be under the sole control of one or more “economically or socially disadvantaged people.” Applicants must also prove they are the sole arbiter of all strategic company decisions and “non-disadvantaged” people or immediate family members cannot have any control over a company for it to qualify.
But on five separate occasions between December 2005 and January 2010, as Villaneuva served as managing director for SEK Solutions, he falsely claimed on applications that it was Naim’s wife who was the sole owner and person in charge of daily operations at the Virginia Beach firm, according to prosecutors.
Not only did he deceive the administration about that, prosecutors say, but he also failed to disclose in an annual review that SEK obtained a “substantial” credit extension from one of its suppliers.
The fraud continued well into 2014, prosecutors said Tuesday.
Records were found year after year in an online government contract database showing Villanueva falsely certified SEK Solutions as “women-owned” by using Naim’s wife as a front, court records show. By 2007, with SEK’s Section 8(a) status set to expire in 2010, the onetime lawmaker and Naim hatched a scheme to form a new company that they could secretly control, yet again.
Villanueva’s brother-in-law Sam Caragan was brought in on the new deal and according to court documents, the Virginia Beach-based Karda Systems was born.
Prosecutors claim at one point, Villanueva, who was a state lawmaker until he lost re-election in 2017, even used Virginia General Assembly letterhead to send a letter of support for Karda’s application to the Small Business Administration.
“As a result of the fraud, [SEK and Karda Systems] were awarded over $80 million in government contracts for which they were not eligible and Villanueva received over $1 million in income from these companies,” G. Zachary Twerwilliger, the U.S. Attorney for the Eastern District of Virginia, said in a statement Tuesday.
Naim and Caragan pleaded guilty last year to their roles in the scheme.
In addition to the charge of conspiracy to defraud the federal government, the former Virginia delegate also faced charges of falsifying records and helping others file false documents. But as a part of a plea agreement with prosecutors, defense attorney Tom Bondurant of Gentry Locke said in a statement Tuesday that only the conspiracy charge will stick.
Villanueva faces up to five years in prison and will be sentenced at the federal courthouse in Alexandria, Virginia on July 2.
In a written statement Monday, Villanueva expressed remorse, saying he has come to a “painful intersection in his life” which “runs contrary” to everything he has worked and stood for.
“I am deeply regretful for my poor judgment that I exercised and involved my brother-in-law when I should have followed the rules accordingly,” he said. “I should have adhered to the law and implemented compliance standards at the workplace in working with the Small Business Administration socioeconomic programs, knowing full well that any deviation would lead me to where I am today.”
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