4-450 Shah Engineering-DOT-OIG and IDOT

Report
U. S. Department of Transportation:
Office of Inspector General
Office of Investigations
and
Illinois Department of Transportation:
Financial Review and Investigation Section
Office of Quality Compliance & Review
Shah Engineering Inc.
Todd Kath
Special Agent
Telephone 312-353-0106
[email protected]
Gene Gansz
Supervisory Auditor
Telephone 217-785-4592
[email protected]
1

Per FBI statistics dated between 2006 and
2008, the average dollar loss per offense for:
 Identity theft was $6,383
 Car theft was $6,751
 Bank robbery was $4,854
 Burglary was $2,079
2
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How would you like to end
your career after you caught:
 1,481 Car Thieves, or
 1,566 Identity Thieves, or
 2,060 Bank Robbers, or
 4,810 Burglars???
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You might think that this might be that
retiree...
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In reality it could be any one of you!!!
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Program managers,
Project executives,
Contracting officials,
Analysts,
Engineers,
Attorneys,
Auditors, and
Law enforcement personnel
The Shah Engineering Inc. investigation resulted in a
settlement of $10 MILLION .... equaling 4,810 burglars
or 160 burglars per year for a 30 year career, nearly one
burglar caught every other day.
5
Shah Engineering, Inc. (SEI)
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Engineering firm located in Chicago,
Illinois
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Manu Shah was the sole shareholder and
was solely responsible for the billing and
management of contracts
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SEI provided a full range of engineering
and architectural services to public and
private sector clients with over 20 years in
Consulting/Engineering.
6
Illinois Department of
Transportation (IDOT) Audit
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January 12, 2004 – IDOT audit
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Initial Conference/Conferences
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Claimed no Job cost information
Partial records released to auditors
Field Testing
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Timesheets unsigned or unapproved
Timesheet corrections not initialed
Shifting hours between jobs or office work
Invoices with little or no detail
Assets depreciated and leased by various Shah-owned companies
Employee lists did not match up with payroll summary
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Example of
shifting hours
(with instructions)
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No invoice support
and child’s
company
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Payments to GCM
at end of year
(from warrant)
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Illinois Department of
Transportation (IDOT) Audit
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January 12, 2004 – IDOT audit – Continued
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Observations
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Employee worker caught creating a timesheet
Blank timesheets found on copy machine
Related Companies – owned by children
Noticing number of alterations on timesheets
Accounting contact could not provide information without the
owner’s review
Fresh copies of old invoices
Conclusion
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Based on initial review, IDOT believed SEI had received in excess of
$1,500,000 more than its entitlement and referred the audit to
DOT/OIG, FBI, and the USAO
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IDOT analysis of
timesheet alterations
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Search Warrant
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IDOT gave detailed information on search sites
Simultaneous warrant of SEI corporate office
and Manu Shah’s residence
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Interviews of employees including Manu Shah at
residence
IDOT auditors brought in to sites as experts
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Identification of relevant paperwork
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Investigation / Analysis
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Investigation / analysis took approximately 2 years
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IDOT audit spent time calculating amount of fraud versus
normal audit adjustments
Agents used this information to extend the reach of the
investigation
Interviews of relevant parties
Review of banking documents
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Multiple transfers to friends, family, personal contacts
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Checks endorsed by Manu Shah and deposited back into SEI or
Manu’s accounts
Extensive transfers into trust accounts for tax and
disadvantaged business enterprise (DBE) purposes
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Investigation / Analysis
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Obtained evidence of the following:
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Mail Fraud, 18 U.S.C. § 1341
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Direct billing fraud
Overhead fraud
DBE certification
Money laundering, 18 U.S.C. § 1956 & 1957
False documents / statements, 18 U.S.C. § 1001
Witness tampering, 18 U.S.C., § 1512
RICO, 18 U.S.C. § 1962
Examples….
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Original Invoice
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Fake Invoice
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SEI Outbound
Check to Bipin
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Manu’s Summary
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SEI Inbound
Checks from Bipin
Total of $17,160.00
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Summary of Dirigo
Transactions
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Original Invoice
From
Dirigo
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Manu’s
Fake Invoice
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Investigative Results
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Manu Shah
 Pled to 2 counts of mail fraud
 Pled to 1 count of false statements
 Initial escrow of $5.5 million stock toward loss
 Sentenced to 41 months in prison, starting August 20, 2009
SEI
 Pled to 1 count of mail fraud
 $500,000 fine
Manu Shah and SEI debarred
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$10 million restitution ordered to 12 State and municipal entities
 Actual Overbilling = $12,366,947.45
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Lessons Learned/Fraud Prevention
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Stay Alert!!!
Verify with sources (documents & people)
Document Red Flags
Communicate with Audit or Investigative
counterparts
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
CATCH the Biggest Robbers & Thieves!
Contract fraud
 Grant fraud
 Embezzlement
 Etc.
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Remember..... You can “save” the taxpayer the
equivalent of:
Millions of $$$$$$ (Or More!)
Thousands of cars
Thousands of Identities
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A little visual of the “savings”
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Questions
U. S. Department of Transportation:
Office of Inspector General
Office of Investigations
and
Illinois Department of Transportation: Financial Review
and Investigation Section
Office of Quality Compliance & Review
Todd Kath
Special Agent
Telephone 312-353-0106
[email protected]
Gene Gansz
Supervisory Auditor
Telephone 217-785-4592
[email protected]
28

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