X

TesTech owners pay $2.9 million to settle fraud case

Prominent Washington Twp. developers David C. and Shery Oakes, along with their former business partner Sherif Aziz, have agreed to pay the U.S. government nearly $2.9 million to settle civil claims that they defrauded the government by making false statements about a civil engineering company called TesTech to obtain millions of dollars in federally funded transportation contracts.

Federal prosecutors allege the Oakeses and Aziz submitted false claims for payment for airport and highway projects in Ohio, Kentucky, Indiana and Michigan from April 2005 to June 2009. They did it, prosecutors say, by holding out Aziz as TesTech’s owner and president to qualify for a federal minority set-aside program while the company actually was owned and controlled by the millionaire Oakeses.

The Oakeses’ attorney, David N. Reed of Dayton, said the couple would have no comment. David Oakes owns a civil engineering company called CESO Inc. and Shery Oakes is owner of luxury home builder Design Homes and Development Co. Their company and TesTech are all located in Washington Twp. Aziz’s attorney, William E. Hunt of Cincinnati, did not return a phone call seeking comment.

In a settlement agreement released to the Dayton Daily News on Thursday by federal officials, the Oakeses and Aziz admit no liability and the government reserves its right to bring criminal charges. The parties agree that the government has a valid claim against the defendants for more than $5 million, and the government can go after the full amount if the defendants try to avoid their obligation to pay the settlement amount of $2,883,946.30.

According to the settlement agreement, it was reached “to avoid the delay, uncertainty, inconvenience and expense of protracted litigation.”

Federal transportation investigators built a case showing that the Oakeses were the real owners of TesTech Inc., even though Aziz, who is Egyptian-American, represented himself as owner and president on paper in order to convince the government that TesTech was eligible for special federal contracting preference under the Transportation Department’s Disadvantaged Business Enterprise program.

RELATED: Disadvantaged Firm Won Millions in Public Contracts

The Oakeses don’t qualify for the lucrative DBE designation, which is reserved for small businesses majority-owned and operated by certain minorities and other disadvantaged people who meet income eligibility requirements. DBE businesses are required to be independent of other businesses. Aziz, who is related to Shery Oakes by marriage, got into the program by claiming he is “African-American.” Rules state Egyptians are not disadvantaged minorities.

DBE fraud can occur when ineligible contractors hire front men claiming to be the actual owners.

In July 2011, federal transportation agents raided TesTech’s offices in the Galleria Building at 8534 Yankee Street, which also houses the Oakes companies, seizing business records pursuant to a search warrant. The Daily News in October obtained a 900-page transcript of a closed-door Ohio Department of Transportation hearing that referenced some of those records. They included internal memos showing Aziz worried that his hidden business ties with David Oakes would be easily uncovered in an audit and “viewed as fraudulent,” resulting in what he warned could be “serious legal ramifications” for both men.

Hearing Officer Stephanie B. McCloud concluded last year that Aziz’s memos “can only be described as the thoughtful deliberation by the author to legitimize an arrangement that, in its current form, would lead a regulating agency to a finding of fraud.”

Upon her recommendation, ODOT ousted TesTech from the program last year. ODOT administers the federal DBE program in Ohio.

Evidence in the ODOT hearing also included findings of a months-long Daily News investigation published in October 2011, which uncovered numerous ties between TesTech and the Oakeses. Among them: David Oakes’ CESO and Aziz’s TesTech appeared interchangeable in official documents and shared equipment and staff. Based partly on the Daily News findings, McCloud ruled that David Oakes claimed ownership of TesTech when it suited his purposes, but used Aziz, who had been his employee, to give the appearance of minority ownership to obtain government contracts.

The settlement agreement and the complaint that preceeded it were filed under seal in U.S. District Court in Columbus, but unsealed by court order Wednesday. Under the agreement, Ryan Parker, a former TesTech vice president and longtime Oakes employee, is to receive $562,370 of the $2.9 million for cooperating with the government in its investigation.

“This was not a vindictive thing in any way,” Parker said of his cooperation. “I just felt it was the right thing to do.”

He declined to comment further about the case.

Chronology of TesTech case

July 7, 2011 — Under sealed warrant federal agents search the Washington Twp. headquartrs of TesTech Inc., a civil engineering company.

July 8, 2011 — Sherif Aziz, who said he is the sole owner of TesTech, says his company has been in discussions with the U.S. Department of Transportation "over the last few years, responding to their questions about our company."

Oct. 16, 2011 — A Dayton Daily News investigation finds that TesTech won millions of dollars in public contracts through a federal program f0r disadvantaged companies while being controlled by wealthy developers David C. and Shery Oakes of Washington Twp. Aziz, an Egyptian-American, obtained disadvantaged business status for TesTech by claiming to be the owner and of African descent.

Oct. 23, 2011 — The Daily News reports that the U.S. Small Business Administration and the Ohio Department of Administrative Services are investigating TesTech's compliance in minority set-aside programs.

Dec. 16, 2011 — The Ohio Department of Transportation notifies Aziz that it has denied his application to continue certification of TesTech in the Disadvantaged Business Enterprise program. TesTech sues ODOT, but later drops the lawsuit.

Aug. 1, 2012 — TesTech is kicked out of the federal DBE program after a hearing officer overrules the company's appeal and says the Oakeses and Aziz deceived the government to obtain lucrative taxpayer-funded contracts.

June 5, 2013 — A settlement agreement is unsealed at U.S. District Court in Columbus, showing that the Oakeses and Aziz agree to pay nearly $2.9 million to settle civil claims that they defrauded the U.S. government by making false claims about TesTech to obtain government contracts.

Staying with the story

The Dayton Daily News has reported on the TesTech story since the FBI raided the company’s Washington Twp. offices in July 2011. Our stories prompted state and federal authorities to investigate TesTech and disqualify the business from programs that award government contracts to disadvantaged businesses.

ExploreOther stories by Lynn Hulsey

UPDATE: TesTech investigations expanding

ExploreUPDATE: TesTech booted from state program

UPDATE: TesTech owners pay $2.9 million to settle fraud case