After a settlement with the federal government over a False Claims Act complaint, local luxury home developer Shery Oakes is getting scrutiny over her connection to a company formed by two former employees who are seeking special status as a disadvantaged business, the Dayton Daily News has learned.
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DBE fraud cases in 2013
July 11: Trucking company owner Benjamin Marshall agreed to pay $12,000 to settle False Claims Act allegations that he performed DBE work at Detroit Wayne County Airport when a non-DBE company actually did the work.
June 17: Kleinberg Electric Co. agreed to pay the government $936,000 to settle a civil False Claims Act case after admitting it caused the prime contractor on a New York public transit project to submit false certifications that a DBE firm performed work that was performed by Kleinberg.
June 6: TesTech defendants agree to pay $2,883,947 to settle False Claims Act case to resolve allegations that they fraudulently used DBE status on federally funded transportation projects.
May 17: Madeline Pepe, owner of MS Construction Corp. of Staten Island, N.Y., was sentenced in U.S. District Court in Manhattan to two years’ probation on mail and wire fraud charges. She was the third person sentenced in a DBE fraud conspiracy. Co-conspirator Richard Schultz was sentenced to six months of home confinement, followed by three years’ probation and 100 hours of community service. Another contractor got three years’ probation, a $50,000 criminal fine and 100 hours of community service. All three were subject to cash forfeitures.
May 16: A federal grand jury in Boise, Idaho, returned an indictment charging Elaine Martin, president of Marcon Construction, with making false statements, conspiracy, mail and wire fraud and obstruction of justice in connection with an alleged DBE fraud scheme. A minority shareholder also was charged. The government is seeking a forfeiture of more than $9 million. The indictment alleges Martin took fraudulent steps to lower her net worth to obtain more than $6 million in public projects in Idaho and Utah.
March 21: Yona Jimenez, president and owner of the DBE-certified Global Marine Construction Supply of White Plains, N.Y., pleaded guilty to mail fraud. She served as a “pass-through” DBE, receiving a kickback for pretending to be a subcontractor when non-DBE companies actually performed the work.
Feb. 22: Anthony Cappello was sentenced to six months of home confinement in federal court in Chicago for mail fraud. He admitted he defrauded the government of $2.3 million in contracts by falsely claiming that his wife’s DBE company performed work for the Chicago Department of Aviation when his company actually did the work.
Source: U.S. Department of Transportation Office of Inspector General
December 1987: The predecessor to Shery Oakes’ Design Homes & Development Co. is created.
December 1993: David Oakes’ CESO Testing Technology is established. It performs engineering and technical work at construction sites, sometimes going by the name TesTech.
February 1997: TesTech Inc. is incorporated. Although Sherif Aziz, related to Shery Oakes by marriage, is listed as president, the Oakeses sometimes say they own and run the company. Aziz quickly begins seeking certifications for TesTech as a disadvantaged, minority-owned business, giving it preferential treatment in obtaining public contracts.
2005: After two rejections, Aziz is certified as a Disadvantaged Business Enterprise after convincing an appeals officer that he is an “African-American”, even though Aziz is Egyptian-American, an ethnicity that’s specifically barred. The DBE is a key to receiving lucrative federal highway and airport contracts.
September 2008: Aziz states in a memo that he’s worried about repercussions because customers and a competitor are asking questions about the true ownership of TesTech. Saying “I cannot put myself or my family at risk anymore,” he outlines proposals to sever business ties with the Oakeses so TesTech could withstand an audit.
November 2008: The U.S. Department of Transportation’s inspector general is investigating ties between TesTech and the Oakeses, who are not eligible for the DBE program.
June 1, 2009: Aziz’s TesTech buys the assets of CESO Testing Technology for $3.3 million, most of which is loaned to him by CESO Testing Technology.
November 2009: Shery Oakes launches DHDC Inc., a company performing services similar to TesTech.
April 2010: Shery Oakes tells black businessman Donald Branch that DHDC would perform any work Branch received under his DBE certification and Branch would receive a “commission,” according to an affidavit on behalf of a search warrant filed by federal transportation agents. A federal lawsuit says DHDC also approached Start 2 Finish Excavating Inc. about using its DBE status to perform work.
August 2010: A Columbus company called Lee Testing goes out of business after being denied DBE status by state transportation officials. Staffers from Lee, including project director Savvas Sophocleous, immediately go to work for Shery Oakes’ DHDC Inc.
January 2011: Mohammed Obaidul Haque joins DHDC as director of geotechnical and construction materials testing services. Haque later reports to the IRS that he earned $52,072 in 2011.
July 7, 2011: Federal agents raid the Washington Twp., headquarters of the Oakes companies and TesTech, seizing financial records.
April 2012: Haque and Sophocleous register the name DHDC Engineering Consulting Services Inc. with the Ohio Secretary of State’s office.
June 2012: DHDC Engineering Consulting Services Inc. purchases the assets of DHDC Inc. for $315,835, paying entirely with a 5 percent interest loan from Shery Oakes’ Design Homes and Development Co., which holds all the new company’s assets as collateral. DHDC Engineering soon begins applying for minority set-aside programs.
August 1, 2012: TesTech loses Disadvantaged Business Enterprise certification after an Ohio Department of Transportation appeals hearing officer says the Oakeses, not Aziz, owned and controlled TesTech.
March 15, 2013: Ohio transportation officials deny DHDC Engineering’s DBE application, saying Haque and Sophocleous failed to demonstrate they are independent from Shery Oakes. DHDC’s appeal is pending.
June 6, 2013: Aziz, Shery and David Oakes and their companies agree to pay the federal government nearly $2.9 million to settle DBE fraud allegations.
July 15, 2013: The Ohio Department of Administrative Services notifies Aziz that it plans to strip TesTech of two other set-aside certifications — the Minority Business Enterprise and the Encouraging Diversity, Growth & Equity programs.
DOCUMENTS: To see the False Claims Act settlement agreement under which Sherif Aziz and David and Shery Oakes agreed to pay the government nearly $2.9 million, plus other documents involving their cases, go to our new subscriber website, MyDaytonDailyNews.com
Staying with the story
The Dayton Daily News fought to obtain important public records, some under seal for nearly three years, to bring you this story about the federal fraud investigation involving TesTech Inc., Washington Twp. developers David and Shery Oakes, and their business partner Sherif Aziz.