Former construction exec sentenced to 27 months, $18.7M in restitution for fraud

Patrick Lindsey, former executive with the now defunct MGT Building in Richmond, Virginia, has been sentenced to 27 months in jail for his position in a five-calendar year accounting fraud that, when identified in 2016, unveiled the contractor was not lucrative but was about $28 million in financial debt. For the reason that of this, MGT was pressured to file bankruptcy in 2018, reporting only $50,000 in assets. 

Lindsey commenced doing work for MGT in 2007 as an estimator, according to courtroom paperwork, and the organization promoted him to vice president of preconstruction companies in 2013. From 2011 to 2016, Lindsey took on the duty for monitoring career charges and issuing work in development reports, which are meant to deliver snapshots of exactly where every single job stands monetarily these as overall costs to day, improve orders, full amount of money billed to the proprietor and approximated gains. These reports are key in checking and projecting each and every project’s funds efficiency and profitability.

MGT also applied these experiences in calculating executive bonuses, including individuals paid to Lindsey, and as element of loan application packages submitted to loan companies. The contractor also submitted the WIP experiences to surety firms that used the information and facts, in element, to ascertain bonding ability.

MGT was personnel owned as a result of an ESOP (personnel inventory ownership approach), and Lindsey’s activity also prompted hard cash distributions designed via the prepare to be increased than they need to have been thanks to overvalued inventory. As a substitute of people who been given the income getting compelled to shell out it again, MGT’s mum or dad organization Morton G. Thalhimer Inc. repaid it on their behalf.

As other company officials discovered, Lindsey had shifted subcontractor and vendor invoices concerning jobs, even heading as considerably as to not document them at all, so that assignments appeared a lot more lucrative than they have been. For case in point, as an unprofitable task neared completion, Lindsey would shift specified prices from that task to projects in the early levels of design. Acquiring a regular pipeline of new initiatives was critical in being capable to carry on with the plan, the documents show.

Lindsey reportedly was a co-conspirator and perpetrated the fraud at the route and with the knowledge of other individuals, but prosecutors have not however officially implicated or charged any other men and women.

Restitution strategies

Lindsey’s sentence was the result of a plea arrangement. In addition to his prison sentence, Lindsey will have to also provide a few several years of probation and pay out restitution of $18.7 million to those firms destroyed by the fraud. The checklist of individuals owed dollars consists of Thalhimer, which has a assert of nearly $14.9 million.

Prosecutors acknowledged that, aside from the added benefits of continued work, Lindsey’s acquire from the plan was only $227,000, but, in accordance to attorney Brian Tannebaum with Bast Amron LLP in Miami, restitution legislation are pretty wide and people found guilty are generally saddled with the debt ensuing from their steps no matter of their capacity to shell out.

Convicted co-conspirators, he said, generally share in the burden of restitution.

When Lindsey is unveiled, he will pay monthly $100, or 25% of his web revenue, towards restitution to the court docket after his launch from jail.

The sum of command Lindsey experienced over MGT’s accounting and position costing technique could have performed a part in earning the plan undetectable for a long time.

Angela Morelock, controlling associate and forensics expert at BKD LLP in Springfield, Missouri, told Construction Dive in 2019 that one of the purple flags of fraud, as discovered by the Association of Certified Fraud Examiners, is that 1 human being is unwilling to share duties and insists on preserving a significant volume of command.