Kuchera Brothers Hit With Fraud & Kickback Sentence

JOHNSTOWN, PA – Two Pennsylvania brothers running a major defense contracting firm have been sentenced for a brazen scheme to defraud the United States government and conspiracy. William Kuchera, 58, of Summerhill, Pa., and Ronald Kuchera, 52, of Johnstown, Pa., each received five years’ probation, with the first 18 months confined to home detention under electronic monitoring. They were also slapped with 1,000 hours of community service and a hefty $500,000 fine, U.S. Attorney David J. Hickton announced today.

The brothers, who owned and operated Kuchera Defense Systems, Inc. (KDS), systematically inflated costs billed to the Department of Defense. Prosecutors laid out evidence in court showing KDS submitted cost certifications riddled with unallowable expenses. These weren’t minor overcharges, either. We’re talking about a private airplane lease, lavish vacations to Jamaica, personal car leases, improvements to a private residence, and even lobbying fees – all falsely claimed as business expenses.

The fraud didn’t stop there. The Kuchera brothers also concocted a false $650,000 invoice sent to Coherent Systems International, Inc. (Coherent), another defense contractor led by Richard S. Ianieri. This invoice was for a component never actually manufactured or delivered for an $8 million Department of Defense contract focused on a new unmanned vehicle designed to prevent friendly fire. After Coherent paid the bogus bill, the Kucheras allegedly kicked back approximately $200,000 to Ianieri. A classic quid pro quo.

But the deception ran even deeper. Both William and Ronald Kuchera were found to have filed false income tax returns, both personally and for KDS. Their personal returns failed to report personal expenses covered by the company as income. The KDS returns falsely deducted personal expenditures as legitimate business costs. They even attempted to disguise the kickback to Ianieri as a legitimate business expense on the corporate tax return – a desperate attempt to cover their tracks.

This wasn’t a standalone operation. Richard Ianieri previously pleaded guilty in July 2009 to soliciting kickbacks and filing false purchase orders related to an Air Force contract in Florida, receiving a five-year probation sentence and a $200,000 fine in February 2010. The web of deceit extended far beyond just the Kuchera brothers. As part of their plea agreements, the Kucheras agreed to pay a $50,000 criminal fine each, applied towards the larger $500,000 imposed by Judge Gibson. Ronald Kuchera will also forfeit an additional $450,000 and pay $121,313 to the IRS, while William Kuchera will forfeit $450,000 and pay $257,168 in restitution.

The damage wasn’t just criminal; it was substantial. KDS, now operating as Currency, Inc., already paid $2.7 million to resolve civil liabilities with the Department of Defense under the False Claims Act. Ronald Kuchera contributed $950,000, while William Kuchera paid $829,566. This payout stemmed from an audit by the Defense Contract Audit Agency which uncovered the inflated overhead billing. “The Kucheras cheated the government by claiming improper reimbursements, submitting a false invoice, and then kicking back monies to the prime contractor,” stated U.S. Attorney Hickton. “Such blatant and outrageous fraud against the United States cannot and will not be tolerated.” Assistant United States Attorneys Nelson P. Cohen and Paul E. Skirtich led the prosecution.