The former owners of a defunct Richmond company are expected to plead not guilty next week on criminal charges that they milked a federal stimulus program in the wake of the recession.
Morris Cephas Sr. and Chiroya Cephas will be arraigned Nov. 20 on allegations from the U.S. government that they stole hundreds of thousands of dollars from the American Recovery and Reinvestment Act and pocketed the money, rather than using it for its intended purpose of helping build a recycling facility and creating jobs on the Southside.
The charges were filed Oct. 6 through a grand jury indictment in Richmond federal court. Their former company Cephas Industries is also a defendant in the case.
The couple has enlisted a pair of veteran white collar criminal attorneys to take their case. John Davis of Williams Mullen is representing Morris Cephas, as well as the business entity. Chiroya Cephas has retained Bill Dinkin of Stone Cardwell & Dinkin for her defense.
Neither attorney had any comment beyond saying their clients will plead not guilty and will seek a trial, likely sometime next year.
The 18-page indictment alleges that the Cephases schemed to defraud the U.S. Department of Energy and the Virginia Department of Mines, Minerals and Energy over a four-year period beginning in 2010. The government agencies dispersed around $500,000 in Recovery Act funds to Cephas Industries on the promise that it would construct a $3.5 million biomass recycling complex on Formex Road on the Southside.
The act was created to award grants that would stimulate the economy by providing incentives to diversify the state’s energy supply. The Cephas facility was expected to create 50-75 jobs and be operational by spring 2011, but it never materialized. Instead, the U.S. Attorney’s Office charges, the Cephases used the money to pay their personal bills, including rent and IRS debts.
The indictment alleges 28 counts including conspiracy, theft of government property and fraudulent monetary transactions. They carry a combined potential maximum penalty of decades in prison, according to federal guidelines.
The government claims the funds dispersed to Cephas have not been repaid, and it pegs the alleged loss to the Recovery Act program at $340,477.
The Cephases are allowed to remain free on personal recognizance bonds. They were not arrested as a result of the charges.
The couple said in their initial court appearance last month that they are both working at another recycling company.
Their case was initially heard in front of federal Magistrate Judge David Novak. Beginning with the arraignment, the case will be handled going forward by Judge James Spencer.