Chesapeake, VA – ACS Environmental Services and its affiliate, Air Power, were sentenced in early 2006 following a federal investigation into fraudulent practices related to asbestos and lead abatement contracts. The companies, operating in the Hampton Roads area of Virginia, systematically defrauded the Small Business Administration (SBA) and endangered public health by employing untrained workers on hazardous material removal projects.
From 1999 to 2004, Air Power secured approximately $37 million in federal contracts through the SBA’s program designed to assist minority-owned businesses. However, investigators discovered that ACS and Air Power knowingly submitted false documentation to the SBA, falsely certifying Air Power’s minority ownership status to illegally qualify for these set-aside contracts. This allowed the companies to unfairly compete for and win lucrative government bids.
Hazardous Work, False Certifications
The scheme extended beyond simply misrepresenting ownership. Both federal and state regulations mandate comprehensive training for individuals handling asbestos, lead, and other hazardous waste. This training is crucial to ensure the safety of workers, the public, and the environment during abatement projects. ACS and Air Power deliberately falsified records, claiming their employees had completed the required courses and passed necessary examinations when, in fact, they had not.
As a result, untrained and unqualified workers were dispatched to perform asbestos and lead abatement at sensitive locations including schools, hospitals, and other government facilities. This created a significant risk of exposure to dangerous materials, potentially endangering the health and safety of students, patients, staff, and the general public. The companies prioritized profit over public well-being, knowingly cutting corners on safety protocols.
Legal Consequences & Penalties
The investigation, led by federal authorities, resulted in felony conspiracy charges against key individuals and the companies themselves, a violation of 18 U.S.C. 371. On June 9, 2005, charges were filed. Both ACS and Air Power pled guilty on June 28, 2005. Lotuaco, a principal involved in the scheme, received a sentence of five months incarceration, five months home detention, and 36 months of probation, along with a $100 assessment fee and a $1 million fine. Schaubach, another key figure, faced a harsher penalty: 21 months incarceration, 36 months supervised release, a $100 assessment fee, and a $1.5 million fine.
The companies themselves were also penalized. Air Power and ACS were both sentenced to five years probation and a $400 special assessment fee. Additionally, Air Power was ordered to pay a $500,000 fine, while ACS faced a $400,000 penalty. The case serves as a stark reminder of the serious consequences associated with defrauding the government and endangering public safety through negligence and illegal practices in the hazardous waste removal industry.
Key Facts
- Defendant(s): ACS Environmental Services and Air Power
- Location: Chesapeake and Portsmouth, Virginia
- Years of Fraud: 1999 – 2004
- Amount of Federal Contracts Obtained Fraudulently: $37 million
- Statute Violated: 18 U.S.C. 371 (Felony Conspiracy)
- Penalties: Imprisonment, Probation, Fines totaling over $3 million, and company probation.
- Hazards: Untrained workers performed asbestos, lead, and hazardous waste abatement at schools, hospitals, and government facilities.
Source: EPA ECHO Enforcement Case Database
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