Small government construction contractors often have difficulty obtaining required bonding–which sometimes causes them to turn to their subcontractors for bonding assistance.
But what if a subcontractor cannot (or will not) provide the necessary bonding assistance? According to a recent federal grand jury indictment, one California man took advantage of these situations by offering fraudulent bonds–at higher premiums–to government contractors. The man now faces the possibility of more than 30 years in prison.
According to the indictment, between 2005 and 2011, Abel Carreon ran a business that offered bonding services to prospective government contractors throughout the country. Carreon specifically targeted government contractors who had difficulty obtaining bonding from traditional sources. Because his clients had difficulty obtaining traditional bonding, Carreon charged higher-than-ordinary premiums.
Carreon’s high premiums were just the top of the iceberg. According to the indictment, Carreon’s bond packages were works of forgery. For example, Carreon claimed individual sureties that did not exist, pledged non-existent stock as collateral, used forged notary stamps and signatures, and made other false and misleading statements.
Carreon has been charged with mail fraud, wire fraud, major fraud against the United States, aggravated identity theft, and money laundering. Like all criminal defendants, Carreon is entitled to a presumption of innocence. However, if convicted, he could face more than 30 years in prison (although a lesser sentence is likely under sentencing guidelines).
Bonding remains an ongoing concern for many small government contractors, but Carreon’s indictment is a cautionary tale when it comes to obtaining bonding from non-traditional sources. Before signing on the dotted line, small government contractors would be wise to ensure that the non-traditional source is on the up-and-up.