A former St. Louis construction company co-owner and chief operating officer has been indicted on charges of wire fraud for allegedly falsifying records to inflate minority business participation on construction projects.
More than $900,000 in false labor and materials expenses for “minority business enterprises,” or MBEs, were recorded, according to a federal grand jury indictment.
Brian Kowert Sr., former co-owner, executive vice president and chief operating officer of HBD Construction Company in St. Louis, has been indicted on five counts of wire fraud in U.S. District Court in the Eastern District of Missouri. The charges stemmed from construction and redevelopment projects between 2014 and 2022 in St. Louis and elsewhere in Missouri in which he filed false minority business enterprise records on contracts he obtained, the March 30 indictment says. Set MBE percentages were required in some cases for the projects to earn tax breaks or government funding or both.
In some cases, Kowert paid actual minority businesses enterprises small fees to be named as material suppliers on a project in name only, the indictment says. The actual suppliers were not MBEs, and the real MBEs served only as “pass through” companies for the money.
The indictment says the scheme was meant to defraud the City of St. Louis, the State of Missouri, and several HBD client companies.
The indictment outlined the three following alleged incidents:
From November 2014 through January 2022, property management firm Quadrangle Housing Company contracted with Kowert and HBD for renovation and redevelopment of apartment buildings. Kowert was also the project manager.
Kowert was required to provide 20% minority business enterprise participation. An MBE owner identified only as “C.K.” agreed for a $2,500 fee to allow his company to be listed as having provided materials for the project. It provided no materials. Three non-MBE companies had provided them.
Kowert then directed company checks to be written to and recorded by C.K.’s company, according to the indictment. The names of the actual suppliers were typed above C.K. company’s name on the checks. C.K. then signed and endorsed the checks, which were distributed to the actual suppliers.
In all, 27 checks were written for a total of $345,113.
Kowert also falsely reported to Quadrangle that the materials had come from C.K.’s company, the indictment says. Quadrangle was unaware of the scheme.
Greater Goods Project
From August 2018 through November 2021, Kowert and HBD contracted with Greater Goods LLC, a seller and distributor of kitchen, home and other products, for the redevelopment of the Chouteau Avenue project in St. Louis. The city’s 10-year tax-abatement project required 25% MBE participation to be eligible for the tax abatement. Three non-MBE companies provided custom cabinets, appliances and other goods as well as labor and supplies.
In April 2020, Kowert again used C.K.’s company to be identified as the one supplying the materials and work, according to the indictment. Kowert also issued duplicate subcontracts to C.K.’s company for the work and materials provided by two of the non-MBE companies, and issued a duplicate purchase order for materials provided by the third non-MBE company.
Kowert then submitted a chart of projected costs to the city that falsely listed C.K.’s company as providing labor and materials worth $198,000 and omitted the actual suppliers, according to the indictment.
C.K.’s company also performed the same service as in the Quadrangle project, of receiving and issuing checks to pay the non-MBEs. C.K. received $2,000. In all, C.K.’s company exchanged 14 checks totaling $220,000.
Between May and November 2021, Kowert “caused a false application for tax abatement” to be filed for the project in which $224,361 in project costs were attributed to C.K.’s company and the non-MBEs were omitted, the indictment says. Greater Goods had no knowledge of the scheme.
Logan Villas Project
Between June 2021 and December 2021, real estate developer RAGA through an affiliated entity called Logan Villas LP contracted with Kowert and HBD to serve as general contractor for a senior-citizen apartment building called Logan Villas in Raytown, Missouri. Kowert was also the project manager.
RAGA and its affiliate obtained funding for the project from the Missouri Housing Development Commission, which required 10% MBE participation and that the general contractor and subcontractors provide employment to low-income persons.
Kowert again entered into subcontracts or purchase orders with three non-MBE companies for kitchen cabinets, bathroom vanities and other products. He also reached an agreement with someone identified only as “C.R.” to have his MBE company listed as a subcontractor for work and supplies, according to the indictment. Kowert had duplicate subcontracts and purchase orders prepared on the letterhead of C.R.’s company with the three non-MBE companies.
Kowert falsely listed C.R.’s company on a “Contractor and Subcontractor Summary” to RAGA for $333,858, the indictment says. RAGA then unwittingly submitted the false report to the Missouri Housing Development Commission. RAGA and Logan Villas LLP had no knowledge of the scheme.
Kowert is no longer with HBD Construction, according to a company statement.
The company was originally formed in St. Louis in 1922 and was acquired in 2004 by Kowert and Michael Perry and Daniel O’Keefe III. Brian Kowert Jr. is a partner.
In 2020, HBD merged with Russell construction and development company of Davenport, Iowa.
A statement from Russell HBD says it was made aware of the investigation in December 2021, and it had no prior knowledge of the alleged scheme.
“Brian Kowert Sr. has not been with the company since December 2021,” the statement says.
It adds that the alleged activities began long before Russell acquired HBD in October 2020. The company says it has fully cooperated with the investigation and it also complies with MBE and all other laws, rules and regulations.
“This matter begins and ends with Brian Kowert Sr.,” company President Caitlin Russell says in the statement. “We at Russell are fully committed to transparency and ethical financial stewardship. We do not tolerate fraudulent behavior or misconduct of any kind.”
According to court records, a pretrial-motion hearing for Kowert is set for August 29.
The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorney Hal Goldsmith.