040: Michael Wibracht, Ruben Villarreal SBA Fraud
Learning Objectives
Upon completion of this Case Study, participants should:
- Understand the purposes of Service-Disabled Veteran-Owned Small Business set-aside programs and risks associated with non-compliance;
- Describe the consequences of fraud in government contracting programs like the Service-Disabled Veteran-Owned Small Business set-aside;
- Identify penalties for making false statements to federal investigators;
- Understand the concept of a Criminal Information as opposed to the Criminal Indictment; and
- Explain basic concepts of how business owners and leaders can avoid being caught in a federal criminal investigation.
State of the Industry
Small business set-asides are contracts that help small businesses compete for and win federal contracts. These set asides help level the playing field where the federal government limits competition for certain federal contracts. A special set-aside program for US military service-disabled veterans further limits the competition for federal contracts.
These set-asides benefit small businesses and service-disabled veterans; they also create opportunities for fraud.
Several government agencies investigate have authority to investigate small business when the investigators suspect wrongdoing. Individuals, co-owners, and corporations who view themselves as “law-abiding citizens” frequently find themselves accused of committing white-collar crimes.
Small and mid-sized businesses seeking to contract with federal set-aside programs should make decisions with a full understanding of how the programs operate and how their actions can negatively impact the company. They should also be mindful of how government investigators will perceive them based on their own action or inaction.
Background
This case study profiles Michael Wibracht and Ruben Villarreal. They co-owned several companies in the San Antonio, TX area. As a US service-disabled veteran, Villarreal presented himself as the majority owner of several companies seeking to do business with the SBA.
The SBA runs the Service-Disabled Veteran-Owned Small Business (SDVOSB) program, which increases the number of federal government contracts awarded to small businesses owned by service-disabled veterans. The service-disabled veteran must hold or own at least 51% of the SDVOSB to qualify.
Wibracht, co-owner with Villarreal, turned out to be the actual majority owner in these companies. All the information in this background comes from three sources: the criminal information against Wibracht, the criminal information against Villarreal, and the Department of Justice’s press release.
According to the Criminal Information, Wibracht and Villarreal conspired to defraud the SBA as early as 2004 and continued at least through 2017. Villarreal fraudulently obtained federal set-aside contracts through the SBA by portraying himself as the majority owner of at least two companies.
Under this scheme, Wibracht and Villareal procured more than $250,000,000 in federal government contracts that would have otherwise gone to legitimate SDVOSB companies.
Based on the information gathered during the Procurement Collusion Task Force investigation, investigators prepared and submitted a Criminal Information against Wibracht and Villarreal to a federal magistrate judge.
- Like a Criminal Indictment, a Criminal Information consists of a formal charging document that describes the criminal charges against a person and the factual basis for those charges. Unlike a Criminal Indictment, however, a Criminal Information does not require the empaneling of a grand jury and a formal vote to indict from the grand jury. Instead, the information is presented to a judicial officer, usually a magistrate judge, who examines the information and decides whether probable cause exists that a crime occurred.
As a result of these charges, Wibracht pled guilty to conspiracy to commit wire fraud and defrauding the US. While Wibracht awaits sentencing, he exposed himself to a maximum penalty of five years in prison and a $250,000 fine. These charges also exposed Wibracht to the federal criminal forfeiture laws, so he may be required to turn over his property to the US government, including his primary residence. Villarreal also pled guilty to conspiring to defraud the US, which exposed him to a maximum fine of $250,000 and five years’ imprisonment.
According to the Criminal Information the prosecutors presented, Wibracht and Villarreal made decisions with the intention to deceive the SBA and procure federal contracts for which they otherwise would not qualify. Although they may have lived most of their lives as honorable people, the evidence suggests they became complacent with federal procurement rules in the false belief no one would notice. These actions can lead to decades in prison and hundreds of thousands of dollars of fines and restitution orders.
Many people do not understand the ramifications of decisions they make during the course of business. Nor do they understand the pathway that investigators take to bring criminal charges against people. In our course, Compliance 101, we offer comprehensive information to help citizens understand more about how investigations begin. The more people know about white-collar crime, the more vigilant they will be about protecting their liberty.
Since Wilbacht and Villarreal pled guilty, they will undergo presentence investigations with separate probation officers, who will complete a presentence report that influences their sentence length. Each defendants’ best option is to craft an effective mitigation strategy that displays to the judge that they have a full grasp of the crimes committed, expresses empathy for the victims of his crime, demonstrates what he learned from the experience, and helps the judge understand what steps he has taken to rectify his mistakes.
Recommendation
The Criminal Information against each defendant is a direct result of their decisions to mislead the SBA over the course of 13 years. Wibracht and Villarreal chose to ignore federal law which has consequences they may not have considered.
Many people convicted of white-collar crimes regret their poor decisions once they understand the gravity of their situation. Loss of personal liberty, time spent with family, and financial resources are just a few of those consequences. It is crucial for defendants to craft a mitigation strategy that indicates a full understanding and a plan to amend their crimes.
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