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 $9,987,463 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 ordered to begin serving a five-year prison sentence on May 7.
Doug Harner, 48, 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.
Harner, of Chicago, was ordered to begin serving his sentence on May 8.
Paderta and Harner must also forfeit $9 million in fraudulent proceeds to the federal government.
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.
Krahl, which specialized in interior construction, closed its Chicago office at 322 S. Green St. in January 2010, less than a week after FBI agents executed a search warrant, prosecutors said.
U.S. District Judge Matthew Kennelly, who imposed the sentences on Paderta and Harner last week and will sentence the others, said in a statement: "180 Krahl employees who lost their jobs as a result of the fraud scheme were also victims, as were the company's customers and sub-contractors whose projects were adversely affected when Krahl closed."
© Copyright 2013 Sun-Times Media, LLC