Two officers of a North Little Rock construction company were quietly indicted last week on 31 felony counts related to an alleged scheme to get millions of dollars in federal contracts by falsely claiming their company was headed by a disabled veteran.
R. Alan Hope and Mikel C. Kullander intend to plead not guilty in U.S. District Court at an arraignment scheduled for Tuesday, their defense lawyers told Arkansas Business. In the meantime, the federal government has seized more than $772,000 from various accounts.
Hope and Kullander formed DAV Construction Co. in 2007 along with a disabled veteran identified in the indictment as "J.W." Incorporation records filed with the Arkansas Secretary of State suggest this was likely James M. Wells.
The charges, including "major fraud against the United States," are related to contracts awarded to DAV, which prosecutors describe as "a pass-through and/or front company" funneling work to the subcontracting companies the two men run, Powers of Arkansas and Kullander Construction Co.
More: Read the indictment here.
Hope, president of Powers of Arkansas, personally received at least $1.25 million from DAV and Kullander at least $268,000, the indictment alleges, while J.W. received less than $100,000.
No one besides Hope and Kullander has been charged.
The U.S. Attorney's Office in Little Rock did not announce the indictment, which was handed down by a grand jury last Wednesday, but it was not unexpected. DAV shared office space in the NorthShore Business Park with Powers of Arkansas, and it was searched by federal agents in August 2015. Kullander Construction on Cantrell Road in Little Rock was searched the same day.
Arkansas Business reported in August of this year that prosecutors were presenting evidence in the case to a federal grand jury.
The 28-page indictment outlines a conspiracy by Hope and Kullander to set up a company specifically to get federal contracts set aside for disabled veterans even though neither man was a veteran.
J.W., an employee of Powers of Arkansas who was classified as a 100 percent service-disabled veteran, was named in the incorporation documents as president and owner of 51 percent of the company, with vice president Kullander and secretary-treasurer Hope dividing the remaining shares. But within months Kullander replaced J.W. as president, and J.W. lost his authority to enter contracts or sign checks for the company.
DAV Construction landed its first federal contract, with the Veterans Administration, in July 2008 and continued to bid on and receive federal contracts based on its disabled veteran-owned status until mid-2015.
A VA department called the Center for Verification & Evaluation denied DAV's veteran-owned status in 2011, in part because J.W. himself told CVE that he didn't control the company and didn't even have an office, but DAV continued to receive federal set-aside contracts. The indictment describes subsequent efforts by Hope and Kullander to persuade CVE that J.W. was in fact running DAV as part of a single charge of conspiracy to defraud the federal government.
The indictment describes five contracts of between $1.26 million and $3 million each, which were awarded by the VA and the Food & Drug Administrations between March 2009 and September 2014, as separate counts of major fraud against the United States. Hope and Kullander are also charged with 24 counts of wire fraud for transactions in which the federal government transferred money to a DAV account.
Kullander alone faces the 31st count in the indictment: making a false statement to an investigator for the FDA when he claimed that J.W. had much more involvement with the operation of DAV than he really did.
Little Rock attorney Jane Duke, a former federal prosecutor, is representing Kullander. "We are entering a plea of not guilty," she said Tuesday.
Hope is being represented by Little Rock attorney Tim Dudley, who said his client, too, will plead not guilty.
Assistant U.S. Attorney Stephanie Mazzanti is prosecuting the case.
