Contractor CEO Pleads Guilty to 20-Year Fraud of USAID

A former CEO of a New Jersey-based construction contractor has pleaded guilty to conspiracy to defraud the federal government during 20 years of cost-reimbursable contracts with the U.S. Agency for International Development.

The Justice Department on Friday announced that Derish Wolff, the onetime president and board chairman of Morristown-based Louis Berger Group Inc., and the ex-chairman of parent company Berger Group Holdings Inc., “admitted today that he enriched himself and his company with money intended for important reconstruction projects in Afghanistan and Iraq.”

The 79-year-old Wolff pleaded guilty in U.S. District Court two years after executives at his firm confessed to defrauding USAID, U.S. Attorney Paul Fishman said, by charging overhead and other indirect costs at falsely inflated rates using cost-reimbursable contracts from 1990 through July 2009.

“Today’s plea is the result of impressive investigative work undertaken to root out fraud that hinders global development,” said Daniel Altman, the special agent in charge at the USAID Office of Inspector General, which worked the case with the Defense Department and the FBI.

Wolff targeted a particular overhead rate, irrespective of what the actual rate was, Justice reported, and ordered numerous subordinates to achieve that target rate through a variety of fraudulent means. LBG’s assistant controller was ordered to “instruct the accounting department to pad its time sheets with hours ostensibly devoted to federal government projects when it had not actually worked on such projects,” the statement said.

In September 2001, LBG controller Salvatore Pepe at an LBG annual meeting presented an overhead rate “that was significantly below Wolff’s target,” Justice said. “In response, Wolff denounced Pepe, called him an ‘assassin’ of the overhead rate and ordered him to target a rate above 140 percent, meaning that for every dollar of labor devoted to a USAID contract, LBG would receive an additional $1.40 in overhead expenses supposedly incurred by LBG.”

Pepe, Wolff and a former controller then “hatched a fraudulent scheme, from 2003 through 2007, to systematically reclassify the work hours of LBG’s corporate employees,” including high-ranking executives and employees in the general accounting division -- sometimes  over the employees’ objections.

Wolff, the statement said, also instructed subordinates to charge all commonly shared overhead expenses, such as rent at LBG’s Washington, D.C., office, to an account created to capture USAID-related expenses, “even though the D.C. office supported many projects unrelated to USAID or other federal government agencies.”

(Image via Andrey_Popov / Shutterstock.com)