As we have written about before, DBE fraud involving a pass-through scheme, whereby a certified DBE performs no commercially useful function but receives a a commission for allowing their status to be used by a prime contractor, is by far the most common form of DBE fraud.
While less common, but no less illegal, is a the form of DBE fraud known as a front scheme. There a DBE is certified and performs a commercially useful function but the DBE is not actually owned and operated by a socially and economically disadvantaged individual.
A recent case from Idaho shows that federal prosecutors are just as willing to prosecute DBE front schemes as they are DBE pass-through schemes and the consequences of engaging in this type of scheme are just as severe. Elaine Martin, former president of Marcon, Inc. a certified DBE, was sentenced to 7 years in jail, ordered to forfeit over $3 million, pay over $120,000 in fines, and pay prosecution costs of $32,575, for her role in a DBE front scheme. Martin submitted false documents in order to become a certified DBE. The documents submitted made it appear that Marcon was owned and controlled by Elaine Martin. In reality, other persons and shareholders had a role in the firm that raised questions about Marcon’s independence. Martin was also guilty of concealing her net worth for DBE and SBA purposes and tax evasion – among other transgressions.
Wally Zimolong
Wally represents contractors (and subcontractors) and developers. His clients build and develop residential, commercial, and industrial properties nationwide. Wally enjoys working with the owners of the businesses he represents because they tend to be entrepreneurs and all around interesting people.
