Business Crimes Hotline

ILLINOIS

Former KBR Employee and Subcontractor Charged With $3.5 Million Fraud in Kuwait

Jeff Alex Mazon, a former employee of Kellogg, Brown & Root (KBR), and Ali Hijazi, the managing partner of LaNouvelle General Trading and Contracting Company, a Kuwaiti business, were indicted in the Central District of Illinois on charges of devising a scheme to defraud the United States of more than $3.5 million related to the award of a subcontract to Hijazi's company, which had contracted with KBR to supply fuel tankers for military operations in Kuwait. The 10-count indictment charges Mazon and Hijazi with four counts of major fraud and six counts of wire fraud.

A U.S. Army-based program permits civilian contractors to support military operations in certain circumstances. In his position at KBR, Mazon's duties included fielding bids from subcontractors for military services. The indictment alleges that Mazon solicited bids by email from potential subcontractors for fuel tankers to store and dispense fuel at the airport used by the U.S. military for military operations in Kuwait. The indictment further alleges that Mazon inflated Hajazi's bid by 300% to ensure that LaNouvelle would be overpaid for its work. In order to ensure that Hajazi's bid would be the low bid, Mazon also inflated a competing bid by 300% without the knowledge or consent of the competitor. As a result, Hajazi's bid was the low bid and KBR, which had estimated the contract would cost just over $680,000, awarded LaNouvelle the contract for more than $5.5 million. As LaNouvelle fulfilled the contract, it submitted invoices to KBR, which paid LaNouvelle the full amount. As a result of the scheme, Mazon and Hijazi also submitted invoices to the United States government. Soon after Mazon left his employment with KBR, Hijazi allegedly gave Mazon a $1 million check in exchange for Mazon's favorable treatment of LaNouvelle.

NEW JERSEY

Company Pleads Guilty to Stealing Lucent Technologies' Trade Secrets

A New Jersey company, ComTriad Technologies, Inc., which was co-founded by two former Lucent Technologies employees, Kai Xu and Yong-Qing Cheng, pled guilty in a corporate plea agreement to one count of wire fraud related to a scheme in which it unlawfully appropriated copyrighted source code, software and components associated with Lucent's PathStar Access Server, which allows telephone calls to be placed over the Internet. The company will pay a $250,000 fine.

The indictment accused the company and its founders of appropriating and storing Lucent PathStar proprietary data on ComTriad's password-protected server and subsequently transferring that proprietary data to Datang Telecom Technology, a company in China that is majority-owned by the Chinese government. It was alleged that ComTriad had entered into a joint venture with the Chinese company in order to use Lucent's proprietary information for the development of its own server and to market it in China.

The plea agreement resolves criminal charges against ComTriad and two of the three ComTriad co-founders: Kai Xu and Yong-Qing Cheng. The third founder, Hai Lin, is a fugitive, who fled prosecution and charges against him remain. Xu and Lin were Lucent employees in the United States, and both held high-level technology positions with the company before they left to form ComTriad. Cheng was a former Lucent consultant.

NEW YORK

Aon Corporation Settles Corruption Probe

Chicago-based Aon Corporation, the nation's second-largest insurance brokerage firm, announced a $190- million settlement with the Attorneys General of New York and Illinois to resolve allegations of fraud and anti-competitive practices. The $190 million will be paid by Aon over 30 months and dispersed as restitution to policyholders. In addition to the cash settlement, Aon pledged to adopt a new business model.

The allegations against Aon focused largely on its repeated conflicts of interest by allegedly accepting secret cash payments from insurers in return for steering its policyholders to those insurers. These special payments from the insurance companies, which were known as “contingent commissions,” were characterized as compensation for “services to underwriters,” but were in fact rewards for the business that the firm brought to these companies. In addition to promising to send business to insurance companies that made these “contingent commission” payments to Aon, it was further alleged that it promised to place business with insurers in exchange for the insurers' agreements to use its reinsurance brokerage services. As part of the settlement, Aon further agreed to accept only a single payment for an insurance contract and that the payment amount will be disclosed and approved by the policyholder.

ILLINOIS

Former KBR Employee and Subcontractor Charged With $3.5 Million Fraud in Kuwait

Jeff Alex Mazon, a former employee of Kellogg, Brown & Root (KBR), and Ali Hijazi, the managing partner of LaNouvelle General Trading and Contracting Company, a Kuwaiti business, were indicted in the Central District of Illinois on charges of devising a scheme to defraud the United States of more than $3.5 million related to the award of a subcontract to Hijazi's company, which had contracted with KBR to supply fuel tankers for military operations in Kuwait. The 10-count indictment charges Mazon and Hijazi with four counts of major fraud and six counts of wire fraud.

A U.S. Army-based program permits civilian contractors to support military operations in certain circumstances. In his position at KBR, Mazon's duties included fielding bids from subcontractors for military services. The indictment alleges that Mazon solicited bids by email from potential subcontractors for fuel tankers to store and dispense fuel at the airport used by the U.S. military for military operations in Kuwait. The indictment further alleges that Mazon inflated Hajazi's bid by 300% to ensure that LaNouvelle would be overpaid for its work. In order to ensure that Hajazi's bid would be the low bid, Mazon also inflated a competing bid by 300% without the knowledge or consent of the competitor. As a result, Hajazi's bid was the low bid and KBR, which had estimated the contract would cost just over $680,000, awarded LaNouvelle the contract for more than $5.5 million. As LaNouvelle fulfilled the contract, it submitted invoices to KBR, which paid LaNouvelle the full amount. As a result of the scheme, Mazon and Hijazi also submitted invoices to the United States government. Soon after Mazon left his employment with KBR, Hijazi allegedly gave Mazon a $1 million check in exchange for Mazon's favorable treatment of LaNouvelle.

NEW JERSEY

Company Pleads Guilty to Stealing Lucent Technologies' Trade Secrets

A New Jersey company, ComTriad Technologies, Inc., which was co-founded by two former Lucent Technologies employees, Kai Xu and Yong-Qing Cheng, pled guilty in a corporate plea agreement to one count of wire fraud related to a scheme in which it unlawfully appropriated copyrighted source code, software and components associated with Lucent's PathStar Access Server, which allows telephone calls to be placed over the Internet. The company will pay a $250,000 fine.

The indictment accused the company and its founders of appropriating and storing Lucent PathStar proprietary data on ComTriad's password-protected server and subsequently transferring that proprietary data to Datang Telecom Technology, a company in China that is majority-owned by the Chinese government. It was alleged that ComTriad had entered into a joint venture with the Chinese company in order to use Lucent's proprietary information for the development of its own server and to market it in China.

The plea agreement resolves criminal charges against ComTriad and two of the three ComTriad co-founders: Kai Xu and Yong-Qing Cheng. The third founder, Hai Lin, is a fugitive, who fled prosecution and charges against him remain. Xu and Lin were Lucent employees in the United States, and both held high-level technology positions with the company before they left to form ComTriad. Cheng was a former Lucent consultant.

NEW YORK

Aon Corporation Settles Corruption Probe

Chicago-based Aon Corporation, the nation's second-largest insurance brokerage firm, announced a $190- million settlement with the Attorneys General of New York and Illinois to resolve allegations of fraud and anti-competitive practices. The $190 million will be paid by Aon over 30 months and dispersed as restitution to policyholders. In addition to the cash settlement, Aon pledged to adopt a new business model.

The allegations against Aon focused largely on its repeated conflicts of interest by allegedly accepting secret cash payments from insurers in return for steering its policyholders to those insurers. These special payments from the insurance companies, which were known as “contingent commissions,” were characterized as compensation for “services to underwriters,” but were in fact rewards for the business that the firm brought to these companies. In addition to promising to send business to insurance companies that made these “contingent commission” payments to Aon, it was further alleged that it promised to place business with insurers in exchange for the insurers' agreements to use its reinsurance brokerage services. As part of the settlement, Aon further agreed to accept only a single payment for an insurance contract and that the payment amount will be disclosed and approved by the policyholder.