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| L.A. Times photo |
Kickbacks
exist in other industries other than healthcare and can result in federal and
state charges. For corporations, it can be charged embezzlement where the person receiving
the kickback is obtaining a corporate benefit. If there is a federal or state
contract, then it is a violation of federal or state laws. There are also tax implications for the person receiving the kickback (unreported income) and for the person or company paying the kickback if it is written off (improper deduction). There can also be money structuring or money laundering charges.
A recent case involved defense construction contracts. On June 27, 2014, the
presidents of two San Diego contracting firms were sentenced to federal prison
terms after pleading guilty to bribing a civilian employee of the Department of
Defense to get construction and service contracts worth millions of dollars at
Camp Pendleton.
In
a separate case, that civilian employee, Natividad (Nate) Lara Cervantes, who
was the supervisor for construction and service contracts in the inspection
branch of the department has plead guilty and will be sentenced later this
year. The Los Angeles Times reported on this case in an article.
Mr. Abueg appears to
have cooperated in an FBI sting operation since Mr. Cervantes was arrested by
the FBI in 2013 after receiving an envelope with $10,000, a down payment of a
promised $40,000 bribe from Mr. Abueg. This explains his lower sentence (6
months). This is fairly typical in federal criminal cases where plea agreements are the norm and cooperation allows more flexible and lenient sentencing.
The kickbacks (or bribes as the government would call them) stretch back from 2008 to 2011, with Mr. Cervantes receiving thousands
of dollars in cash and remodeling work on his San Diego condominium, according
to court documents. Mr. Abueg also demanded kickbacks from subcontractors
totaling $539,000 and to cover the cost of the kickbacks, the value of the work
done by the subcontractors was inflated. Other subcontractors were required to
do discounted work at the homes of Abueg and his relatives as well as
Cervantes’ home.
In industries, I have had clients tell me how they will not get business if they do not pay kickbacks. The unfortunate consequence of the payment of kickbacks can be criminal charges. There are cases where clients have paid kickbacks in the past, and then the decision has been made on the advice of counsel to cease payments in order to start the statute of limitations running and to minimize the risk of future charges. In this case, the federal government waited to charge until they were able to catch Mr. Cervantes in the act of receiving the cash payments.
If your company has engaged in kickback arrangements, even creative ones to get around the anti-kickback statutes, it is better to evaluate the law, seek representation and cease the conduct before it comes to the attention of the government. Having a strategy for damage control can be useful and even if there is reduced business it is far better than having a criminal case which completely destroys an entire business and can result in loss of liberty.
If your company has engaged in kickback arrangements, even creative ones to get around the anti-kickback statutes, it is better to evaluate the law, seek representation and cease the conduct before it comes to the attention of the government. Having a strategy for damage control can be useful and even if there is reduced business it is far better than having a criminal case which completely destroys an entire business and can result in loss of liberty.
Posted by Tracy Green, Esq.
Phone: 213-233-2260
Email: tgreen@greenassoc.com
