Patrick Lindsay, former CEO of MGT Construction, now discontinued in Richmond, Virginia, was sentenced to 27 months in prison for his role in a five-year accounting fraud that revealed, upon its discovery in 2016, that the contractor was not profitable but was on the verge of 28 One million dollars in debt. Because of this, MGT was forced to declare bankruptcy in 2018, reporting assets of only $ 50,000. Lindsay began working at MGT in 2007 as an estimator, according to court documents, and the company promoted him to Vice President of Pre-Construction Services in 2013. From 2011 to 2016, Lindsay was responsible for tracking work costs and issuing work progress reports, which aim to provide Snapshots of the financial condition of each project such as total costs to date, change orders, total amount invoiced to the owner and estimated profits. These reports are essential in monitoring and projecting the performance, profitability, and profitability of each project’s budget. MGT also used these reports in calculating executive compensation, including bonuses paid to Lindsey, and as part of loan application packages submitted to lenders. The contractor also provided work-in-progress reports to the guarantee companies who used the information in part to determine bonding capacity. MGT was owned by an employee through ESOP (Employee Stock Ownership Plan), and Lindsey’s business also caused the cash dividends made through the plan to be higher than it should have been due to overvaluation of inventory. Rather than forcing those who received the money to pay it back, Morton G. Thalhimer Inc. Mother to MGT repaid it on their behalf. As other company officials discovered, Lindsay shifted the subcontractor and vendor bills between projects, even going so far as not to record them at all, so that the projects looked more profitable than they were. For example, as an unprofitable project nears completion, Lindsey will transfer some of the costs from that project to projects in the early stages of construction. The documents show that having a consistent set of new projects was critical to being able to continue with the blueprint. Lindsay was reportedly a co-conspirator and committed fraud based on the directions and knowledge of others, but the prosecutors did not implicate or charge any other individuals formally. Compensation Plans Lindsay’s sentence was the result of a plea bargain agreement. In addition to his prison sentence, Lindsay must also serve three years of probation and make $ 18.7 million in damages to those companies harmed by fraud. These debtors include Thalheimer, who is claiming nearly $ 14.9 million. Prosecutors have acknowledged that aside from the benefits of continuing employment, what Lindsay earned from the scheme was only $ 227,000, but according to attorney Brian Tannbaum of Bast Amron LLP in Miami, restitution laws are very broad and those found guilty are usually burdened with debt. Resulting from their actions regardless of their ability to pay. He said that convicted conspirators usually share the burden of recovery. When Lindsay is released, he will pay $ 100 a month, or 25% of his net income, in order to compensate him to the court after his release from prison. The amount of control Lindsey had over MGT’s business and cost accounting system could have played a role in making the scheme undetectable for years. Angela Morelloc, managing partner and forensic expert at BKD LLP in Springfield, Missouri, told Construction Dive in 2019 that one of the red flags of fraud, as identified by the ACFA, is that one person is unwilling to share duties and insists on preserving a pot of Great out of control.
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