U.S. Attorney's Office
Western District of Texas
(210) 384-7100
January 29, 2015

Businessman Sentenced in El Paso for Small Business Administration Contract Fraud Scheme

In El Paso today, U.S. District Judge Philip R. Martinez sentenced Thomas Gregory Harris of Friendswood, TX, to two years in federal prison for his scheme to defraud the Small Business Administration (SBA) with respect to “Section 8(a) program” contracts announced Acting United States Attorney Richard L. Durbin, Jr., and Federal Bureau of Investigation (FBI) Special Agent in Charge Douglas E. Lindquist, El Paso Division.

In addition to the prison term, Judge Martinez ordered that the former Sr. Vice President for Luster National Inc., pay a $25,000 fine and a $1,600 special assessment. Judge Martinez also ordered that Harris be placed on supervised release for a period of three years after completing his prison term. Harris must surrender by March 3, 2015, to begin serving his prison term.

The SBA administers a program pursuant to the Small Business Act called the “Section 8(a) program” that is intended to promote the business development of companies owned and operated by “socially and economically disadvantaged individuals.” In that program, certain government contracts are sometimes set aside for performance by so-called “8(a) concerns,” that is, business entities whose owners/operators the SBA has determined meet the criteria for being “socially and economically disadvantaged.”

In July 2010, the SBA approved a joint venture, called Tropical Luster Joint Venture (“TLJV”), between two business entities: Tropical Contracting, LLC (“Tropical”), which is based in San Antonio, and Luster National, Inc. (“Luster”), which has offices in Houston and California. The SBA had approved Tropical as an 8(a) concern in 2009. Luster was not a qualifying 8(a) concern.

Evidence presented during trial revealed that in 2010 and 2011, Harris, unbeknownst to the SBA, used Tropical’s qualifying 8(a) status to obtain three restricted contracts awarded by the SBA.

In 2011, the SBA awarded Harris and TLJV the “Net Zero contract” at Fort Bliss in El Paso to design and implement a written plan to reduce energy consumption at the base. In January 2012, the U.S. Army paid TLJV approximately $492,000 as compensation for work on the Net Zero contract.

In 2010 and 2011, the SBA awarded Harris and TLJV two separate contracts with the U.S. Army Corps of Engineers (USACE) in Galveston, TX for project management duties as assigned by USACE. From 2010 to 2012, USACE paid TLJV approximately $895,000 as compensation for work on USACE projects.

In all three matters, Tropical, the 8(a) concern, did not manage and control TLJV’s performance of the contracts as required by law. In fact, personnel associated with Tropical did no work whatsoever on the contracts. Harris managed and controlled TLJV’s entire performance of the contracts. Luster personnel, or subcontractors Luster retained, did all of the work. Had the SBA known that Tropical was not managing and controlling TLJV’s work on any of the contracts, it would have disqualified TLJV as an approved 8(a) joint venture, which would have rendered it ineligible for the contracts to perform the work at Fort Bliss or USACE in Galveston.

On September 17, 2014, a federal jury in El Paso convicted Harris of 16 counts of wire fraud.

“Today’s sentencing of Mr. Harris demonstrates the FBI’s dedication and unwavering commitment to investigate and bring to justice those individuals involved in corruption within our community. The FBI will continue to hold accountable vendors and public servants who illegally and unfairly obtain public contracts for their own interests, depriving their constituents of honest services,” stated FBI Special Agent in Charge Douglas E. Lindquist.

This case was investigated by the Federal Bureau of Investigation (FBI) together with the United States Army Criminal Investigation Command, Major Procurement Fraud Unit. Assistant United States Attorneys John Klassen and Gregory McDonald prosecuted this case on behalf of the Government.

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