Two ex-Pittsburghers plead guilty to 'Rent-A-Vet' fraud scheme

Two former Pittsburgh men have pleaded guilty in federal court for claiming their companies were owned by disabled veterans so they could obtain special government contracts for their construction businesses.

Edward Kessler, 68, of Myrtle Beach, entered his plea Wednesday before U.S. District Judge William S. Stickman IV. Edward DiGorio Jr., 65, also of Myrtle Beach, followed suit on Friday.

The men each admitted to two counts of major fraud against the U.S. in what is known as a “Rent-A-Vet” scheme.

They will be sentenced in July.

The Veterans Entrepreneurship and Small Business Development Act of 1999 set a goal of awarding 3% of the total value of all government contracts to small businesses owned by service-disabled veterans.

To be eligible, the disabled veteran had to own at least 51% of the company, be the highest paid employee, receive 51% of the annual profits and manage daily operations.

According to the prosecution, the defendants owned ADDVETCO, a construction company incorporated in Pennsylvania in 2007, and Hi-Def Contracting Inc, incorporated in Pennsylvania in 2009.

Neither Kessler, who retired five years ago, nor DiGorio ever served in the military, and they were not disabled, the government said.

However, according to prosecutors, the men participated in a “Rent-A-Vet” scheme where they paid a disabled veteran to seek certification for the program.

As part of the scheme, the disabled veterans who were listed as owning each company were required to kick back a portion of their paychecks to the defendants and their relatives in cash.

The veterans are not named in the court documents.

The government alleged the fraud occurred from January 2007 to January 2018.

Over that time period, the government said, ADDVETCO was awarded 35 prime contracts from the U.S. Department of Veterans Affairs set aside for disabled veteran-owned businesses. Twenty-six of those were valued at more than $1 million each.

Hi-Def, the prosecution said, was awarded 32 prime contracts designated for disabled veterans businesses, with 24 of those being valued at more than $1 million.

The defendants’ guilty plea involved two contracts — one with ADDVETCO for $7.3 million, and another with Hi-Def for nearly $1.4 million.

While the services were performed, the government asserted that the loss to the veterans affairs department totaled $403,142, which was the profit the defendants earned from the contracts.

They will be required to pay that amount in restitution as part of their plea agreement.

Kessler’s attorney, Jennifer Bouriat, had no comment.

DiGorio’s attorney did not return a message seeking comment.