Feds: Construction firm president to pay $10M for overbilling clients
Updated: February 20, 2013 10:55AM
Two former executives of a defunct Chicago construction company will spend time in federal prison and pay more than $9 million each for overcharging clients and giving kickbacks to clients’ employees, federal prosecutors announced Tuesday.
Krahl Construction overbilled two clients for renovation projects and created false documents to support the inflated costs between 2005 and 2009, according to a release from the U.S. Attorney’s office.
John Paderta, former president who owned 80 percent of the company, was ordered to pay about $10 million in restitution to San Francisco-based Digital Realty Trust, federal prosecutors said. Digital hired Krahl to renovate portions of an eight-story building at 350 E. Cermak.
Paderta must also pay $433,059 to Berwind Property Group, a Chicago firm that hired Krahl to develop renovation of a three-story office building and warehouse in Bolingbrook, known as the Tallgrass project, the release said.
Paderta, 54, of Fontana, Wis., and formerly of Burr Ridge, was sentencted to five years in prison.
Doug Harner, 48, of Chicago, Krahl’s former executive vice president and part owner, was sentenced to four years in prison and ordered to pay restitution of $9.5 million to Digital and $100,000 to Berwind, federal prosecutors said.
Paderta and Harner must also forfeit $9 million in fraudulent proceeds to the federal government, prosecutors said.
Two employees of Digital and Berwind pleaded guilty and are awaiting sentencing for accepting money to steer business towards Krahl, federal prosecutors said.
Scott Solano, a Digital employee who managed the Cermak building, solicited and accepted payments of $500,000, and $125,000 worth of renovations to his home, federal prosecutors said.
Timothy Scannell, a Berwind vice president who managed renovation of the property in Bolingbrook, solicited and accepted $100,000 in cash and $19,500 in home renovations, prosecutors said.
In exchange Solano, 41, of Burr Ridge; and Scannell, 49, of Chicago, helped Krahl obtain contracts from their companies
Several other Krahl employees who admitted involvement in the fraud are also awaiting sentencing. They include Thaddeus Stepniewski, 52, of Lisle, Krahl’s CFO; Scott Mousel, 49, of New Orleans and formerly of Lisle, a project manager for the Cermak project; John Bak, 38, of Ringwood, a project manager for the Cermak building; Heather Ellis, 36, of Midlothian, a project manager assistant for the Cermak building; and Erin Scott, 37, of Clarendon Hills, also a project manager assistant for the Cermak building.