Two Men Sentenced to Federal Prison for Fraud in Obtaining City Cable Franchise Subcontracts for Sham Minority Business
|U.S. Attorney’s Office September 10, 2013|
CHICAGO—Two defendants who were convicted at trial earlier this year were sentenced today to federal prison for fraudulently running a sham minority-owned cable television installation business that obtained $8.3 million in subcontracts from a cable company that serves residents on the city’s north side. The defendants, Guy Potter and Matthew Giovenco, neither a minority, actually controlled and operated the now-defunct ICS Cable Inc., which they and others fraudulently disguised as a minority-owned business to obtain city-mandated minority sub-contracts under the lakefront cable franchise held by RCN Telecom Services of Illinois LLC.
Potter, 67, of Versailles, Kentucky, and formerly of Bensenville, was sentenced to four-and-a-half years beginning on October 31, and Giovenco, 43, of Grayslake, was sentenced to three years in prison beginning on December 2. The sentences were imposed by U.S. District Judge Rebecca Pallmeyer, who also ordered both defendants to forfeit $2.2 million in profits and to pay $217,580 in restitution to RCN.
The defendants engaged in a “cynical manipulation of this program...designed to enhance business opportunities for minorities,” Judge Pallmeyer said in sentencing Potter.
Potter and Giovenco, along with two co-defendants, were indicted in April 2011, and they were both convicted of six counts of mail fraud last April after a jury trial in federal court. Two co-defendants, Jerone Brown, who served as the sham minority owner and president of ICS, and his mother, Cherone Mayes, both of Chicago, who paid a $500 bribe to a city employee to expedite the minority-owned business (MBE) certification for ICS, testified as government witnesses after pleading guilty and both are awaiting sentencing.
“The defendants engaged in a lengthy fraud scheme that resulted in millions of dollars of contracts being diverted from legitimate minority- and women-owned businesses,” Assistant U.S. Attorney Jessica Romero argued at sentencing.
According to the trial evidence and court records, RCN’s cable franchise agreement required it to sub-contract 40 percent of the cable installation and disconnection services to city-certified, minority-owned businesses. Between April 2003 and October 2006, Potter and Giovenco, assisted by Brown and Mayes, fraudulently obtained at least $8.3 million from RCN by falsely representing that Brown owned and operated ICS. All four defendants supported the false representations to RCN with an MBE certification for ICS that they obtained by making false representations to the city regarding Brown’s purported ownership and control of ICS, when, in fact, Potter and Giovenco alone controlled ICS and made most, if not all, financial and managerial decisions for the business.
The sentences were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Robert G. Shields, Jr., Acting Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and Joseph Ferguson, Inspector General for the City of Chicago.