A Florida resident has pleaded guilty in an 8(a) Program fraud case that seemingly has it all in terms of small business violations, from affiliation to subcontracting limits.

According to a press release issued by the U.S. Attorney’s Office for the Eastern District of Virginia, Michael Dunkel has pleaded guilty on charges of major government fraud, and faces the potential of significant prison time when sentencing occurs this fall.

The press release makes clear that Dunkel is just the tip of the iceberg as part of a larger scheme involving two companies and multiple individuals.  According to the press release, in 2005, Dunkel learned that an individual named Keith Hedman, who controlled an entity referred to as “Company A” also illegally controlled “Company B,” an 8(a) participant.  Company B had been certified as an 8(a) firm on the basis of the disadvantaged status of Dawn Hamilton, “its nominal owner.”

Once Dunkel became aware of the fraud, he decided he wanted a piece of the action.  In exchange for a fee, Company B passed-through 100% of certain 8(a) set-aside contracts to Dunkel and others, who did all of the work.  Dunkel tried his best to cover up the scheme, including by submitting fraudulent proposals and using a third company’s Employer Identification Number to prevent reporting of his contractor income to the IRS (he also failed to pay some taxes).

Dunkel is one of seven defendants, including Hedman and Hamilton, who have now pleaded guilty in this 8(a) program fraud case.  Dunkel has agreed to forfeit $2.9 million and faces a maximum penalty of 10 years in jail when he is sentenced on October 4.

I’ll keep you posted.