Former Department of Veterans Affairs Official Admits Taking $1.2 Million in Kickbacks in Fraud Scheme

TRENTON, NJ—A former Department of Veterans Affairs (VA) employee who worked as a supervisory engineer at the VA’s campus in East Orange, New Jersey today admitted accepting more than $1.2 million in kickback payments in connection with VA contracts awarded to companies with which he had relationships and to engaging in a scheme to defraud the VA by claiming one of those companies was owned by a service-disabled veteran when it was not, New Jersey U.S. Attorney Paul J. Fishman announced.

Jarod Machinga, 43, of Hopewell, New Jersey, pleaded guilty today to an information charging him with one count of honest services wire fraud, one count of wire fraud, and one count of engaging in a monetary transaction in criminally derived property. Machinga entered his guilty plea before U.S. District Judge Mary L. Cooper in Trenton federal court.

“When trusted with the important work of serving and honoring our nation’s veterans, Jarod Machinga took the opportunity to serve himself,” said U.S. Attorney Fishman. “Taking more than $1 million in kickbacks—including money meant for service-disabled, veteran-owned businesses—not only violates the law, it violates our sense of decency.”

“Jarod Machinga’s criminal behavior violated the public trust, betrayed the best interests of disabled veteran entrepreneurs, and besmirched the reputations of the overwhelming majority of the employees in the Department of Veterans Affairs who are dedicated to serving veterans,” said Department of Veterans Affairs Inspector General George Opfer. “We will spare no effort to protect the interests of veterans and taxpayers in identifying and prosecuting those who seek to criminally enrich themselves by virtue of their employment.”

According to documents filed in this case and statements made in court:

In his position as a supervisory engineer, Machinga had the authority and influence to direct certain VA construction contracts to particular companies. Machinga partnered with a person—identified in the information as “Individual 1”—to set up three companies that could be used to obtain VA work and then directed more than $6 million worth of VA construction projects to those companies. Machinga admitted he accepted approximately $1,277,205 in kickbacks in exchange for his official action and influence between 2007 and July 2012.

Congress has established a program through which certain VA contracts are reserved for small businesses that are owned and controlled by service-disabled veterans. One of Individual 1’s companies entered into such a contract with the VA after Machinga falsely represented to the VA that it was a service-disabled, veteran-owned small business—even though Individual 1 was not a veteran. Machinga then used his official position and influence at the VA to award such a contract to Company 1. The company was paid more than $3 million by the VA in connection with the contract.

Machinga also admitted that for many of the projects awarded to Individual 1’s companies, he recruited other contractors to perform the work so the companies were able to keep the money paid to them without having to incur the expense of actually completing the projects.

The two wire fraud counts each carry a maximum potential penalty of 20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense. The monetary transaction count carries a maximum potential penalty of 10 years in prison and a fine equal to the greatest of: $250,000, twice the pecuniary gain or loss or not more than twice the amount of the criminally derived property involved in the transaction. Sentencing is scheduled for January 15, 2014.

U.S. Attorney Fishman praised special agents of the Department of Veterans Affairs, Office of Inspector General, under the direction of Special Agent in Charge Jeffrey Hughes; the FBI, under the direction of Special Agent in Charge Aaron T. Ford; and IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, for their work leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorneys Vikas Khanna of the U.S. Attorney’s Office Special Prosecutions Division and Peter Gaeta of the U.S. Attorney’s Office Asset Forfeiture and Money Laundering Unit in Newark.