The presidents of two government contracting companies, as well as the companies themselves, were sentenced today for bribing the so-called “Godfather” of Camp Pendleton in exchange for millions of dollars in construction and service contracts at Camp Pendleton and other federal facilities.

At today’s hearing, U.S. District Judge Anthony J. Battaglia sentenced Hugo Hernandez Alonso, president of Hugo Alonso, Inc. (HAI), to one year in prison, three years of supervised release and a fine of almost $127,000. His company was sentenced to five years of probation and the same fine, which could be offset by payment of Alonso’s individual fine.

Bayani Yabut Abueg, Jr., president of MBR Associates, Inc. (MBRA), was sentenced to six months in prison, three years’ supervised release, $105,025 in restitution to the IRS and a fine of $366,140. His company was sentenced to five years of probation plus a $375,000 fine, which could be offset by payment of Abueg’s individual fine.

The judge ordered both men, who are free on bond, to self-surrender by January 2, 2015.

Alonso, Abueg, their respective companies, and Natividad Cervantes, who was known as the “Godfather” of Camp Pendleton, all pleaded guilty in January, each admitting their parts in the bribery-kickback scheme. Cervantes is scheduled to be sentenced by Judge Battaglia on July 24, 2014.

According to Alonso’s plea agreement, the bribes were made in connection with the awarding of at least six government construction and service contracts from 2008 to 2011.

In addition, Alonso, Abueg and their respective companies pleaded guilty to soliciting and accepting kickbacks from subcontractors in relation to government contracts awarded to Alonso and Abueg’s companies (some of which were steered to them by Cervantes).

The defendants admitted that they solicited and accepted the kickbacks from various subcontractors in exchange for favorable treatment in connection with future subcontracts. Abueg also admitted filing a false federal income tax return for 2010 that failed to report over $268,000 in illegal kickbacks.

Bribery at Camp Pendleton

When he entered his guilty plea, Cervantes admitted using his position at Camp Pendleton to solicit bribes from Alonso and Abueg’s construction companies seeking to do business on the base. Cervantes made it clear that since at least as early as September 2008, he used his position supervising construction and service contracts to seek bribes from Alonso and Abueg, on behalf of either HAI or MBRA.

In return for awarding HAI and MBRA contracts, Cervantes received cash payments from Alonso and Abueg and extensive free construction work on his personal condominium.

As part of his plea agreement, Cervantes admitted that in approximately 2008, he agreed to accept a bribe of $25,000 to assist Alonso and HAI in obtaining a $3.5 million government contract to install flooring at Camp Pendleton.

In arranging for a bribe payment, Cervantes, through a third-party conduit, requested that Alonso “have the 25 package” (code for the $25,000 bribe) available on September 5, 2008. On that same day, Alonso provided the $25,000 to the third party conduit for delivery to Cervantes. Cervantes and Alonso admitted that Alonso paid Cervantes a total of at least $119,000 in bribes between 2008 and 2011. Abueg admitted delivering $20,000 of these bribes to Cervantes, at the direction of Alonso. Alonso’s company, HAI, also entered a guilty plea regarding the paying of bribes to Cervantes.

The bribes to Cervantes were not limited to just HAI. Both Cervantes and Abueg admitted to exchanging a bribe in 2011 related to the awarding of a $3 million contract at Camp Pendleton to Abueg’s company, MBRA. Further, Cervantes admitted that on March 26, 2013, he met with a cooperating witness, who agreed to pay Cervantes a $40,000 bribe in exchange for assistance in obtaining a new $4 million contract at Camp Pendleton. The bribe was to be structured over a number of payments. The first payment was scheduled for March 28, 2013, with the balance of the bribe to be paid after the contract was awarded.

On March 28, 2013, the cooperating witness met with Cervantes at a local business on Miramar Road in San Diego, California, to make the first payment that was discussed earlier in the week. During this meeting, Cervantes discussed, among other things, the payment schedule and the source of funds for the bribe payments. At the end of the meeting, the cooperating witness handed Cervantes an envelope containing $10,000 cash. At that point, FBI agents arrested Cervantes.

Kickbacks Related to Government Contracts and Subcontracts

In addition to the bribery scheme, Alonso and Abueg engaged in a vast scheme to solicit kickbacks from subcontractors in exchange for favorable treatment in the awarding of subcontracts on various government contracts awarded to HAI and MBRA. Some of these government contracts were the same contracts at Camp Pendleton improperly awarded to HAI and MBRA with Cervantes’ help in exchange for bribes.

Abueg, as a representative of HAI and then MBRA, admitted that between 2008 and 2011, he solicited, received, and accepted over $539,000 kickbacks from various subcontractors. The kickbacks typically consisted of cash given to Abueg or to Abueg’s son, and checks issued to Abueg, his son, or his daughter, all in an attempt to conceal the nature of the kickbacks. Other kickbacks to Abueg consisted of subcontractors performing discounted work at the personal residences of Abueg’s wife, relatives, and associates, including Cervantes. For some of the kickbacks, Abueg requested that the subcontractors inflate their original estimate for certain work associated with the government contract. The inflated amount used for the kickback was then improperly included in corporate books and records as a legitimate business expense.

Separately, Alonso, as representative of HAI, admitted that in 2009, he accepted a kickback in the form of discounted remodeling of his Chula Vista residence by a subcontractor. Abueg’s and Alonso’s companies, MBRA and HAI, respectively, also entered guilty pleas regarding the solicitation and acceptance of kickbacks.

“We are not going to allow criminals to turn the contracting system into their own little fiefdoms,” said U.S. Attorney Laura Duffy. “The extreme home makeover party is over for these defendants, who will no longer be ordering up new kitchens and baths for relatives at taxpayer expense.”

FBI Special Agent in Charge Daphne Hearn commented, “Members of our community expect government employees to act ethically and honestly. When even one person dishonors that trust, it rips away the professional dignity that others government servants have spent a lifetime building. At a time when our nation’s military must do more with fewer resources, the actions of the defendants undermine our country’s best interests for their own financial gains.”

“It’s all about playing by the rules—you earn an honest dollar and you report it on your tax return. Failure to do so will land you in prison,” said Erick Martinez, Special Agent in Charge of IRS Criminal Investigation. “IRS Criminal Investigation is proud to work with our law enforcement partners by lending its financial expertise in any investigation involving the improper awarding of government contracts.”

“The Defense Criminal Investigative Service works closely with its law enforcement partners to bring to justice those individuals who seek to illegally enrich themselves at the expense of U.S. taxpayers,” said Chris Hendrickson, Special Agent in Charge of the Western Field Office. “While the vast majority of DoD contractors exercise lawful business practices and engage in fair competition, a few are driven by greed to break the law. Those who do will be caught and punished. The American taxpayer will accept nothing less.”

According to David A. House, Special Agent in Charge, Pacific Rim Regional Office of Investigations General Services Administration, Office of Inspector General: “This investigation demonstrates GSA OIG’s commitment to ensuring the integrity of the procurement process, especially when dealing with public buildings. Bribes and kickbacks are an affront to every taxpayer; we are dedicated to investigating these allegations thoroughly.”

“Hugo Alonso and Bayani Abueg instigated a bribery and kickback scheme that defrauded our government and American taxpayers for personal gain,” said Inspector General Peggy E. Gustafson. “Today’s sentencing demonstrates the SBA OIG’s resolve to bring those who commit fraud in SBA’s set-aside contracting programs and erode the public’s trust in government to justice. I want to thank the U.S. Attorney’s Office for its dedicated leadership and professionalism in pursuit of justice served today.”

The public is encouraged to report possible public corruption criminal activity by calling the FBI’s public corruption/border corruption hotline at (877) NO-BRIBE or (877) 662-7423, or by calling the Department of Defense’s hotline at (800) 424-9098 or e-mailing hotline@dodig.mil.

DEFENDANTS

• Case Number: 14cr0120-AJB
• Hugo Hernandez Alonso
• Age: 50
• Chula Vista, CA

• Case Number: 14cr0144-AJB
• Bayani Yabut Abueg, Jr.
• Age: 51
• San Diego, CA

CORPORATE DEFENDANTS

• Case Number: 14cr0120-AJB
• Hugo Alonso, Inc.
• Chula Vista, CA

• Case Number: 14cr0144-AJB
• MBR Associates, Inc.
• National City, CA

SUMMARY OF CHARGES

• Title 18, United States Code, Section 371 – Conspiracy to commit bribery of public official
• Maximum penalties for individual defendants: five years’ imprisonment, $250,000 fine, or twice the gross amount of defendant’s pecuniary gain from the offense
• (Defendants Alonso and Hugo Alonso, Inc.)

• Title 41, United States Code, Sections 8701, 8702, and 8707 – Anti-Kickback Act Violation
• Maximum penalties for individual defendants: 10 years’ imprisonment, $250,000 fine, or twice the gross amount of defendant’s pecuniary gain from the offense
• (Defendants Alonso, Hugo Alonso, Inc., Abueg, and MBR Associates, Inc.)

• Title 26 United States Code, Section 7206(1) – Filing a False Tax Return
• Maximum penalties: three years’ imprisonment, $250,000 fine, or twice the gross amount of the tax loss from the offense
• (Defendant Abueg only)

AGENCIES

• Federal Bureau of Investigation
• Naval Criminal Investigative Service
• Internal Revenue Service, Criminal Investigation
• Department of Defense Criminal Investigative Service
• General Services Administration, Office of Inspector General
• Small Business Administration, Office of Inspector General