Former MGT Construction employee to be sentenced in ‘Ponzi scheme’

A former employee is set to be sentenced next week for his role in the accounting scheme that resulted in MGT Construction’s financial collapse in 2018. (BizSense file)

The first and thus far only former MGT Construction employee to be charged criminally as a result of the general contracting firm’s 2018 collapse is set to have his punishment handed down by a federal judge in Richmond next week.

Patrick Lindsey, who pleaded last February to having a hand in the accounting scheme that caused the 30-year-old Thalhimer subsidiary to implode with nearly $30 million in debt, faces up to five years in federal prison, though prosecutors are asking for a sentence of 27 months.

Lindsey, 43, has asked for a punishment of 12 months, in light of his cooperation with federal investigators and admitting and accepting responsibility for one felony count of conspiracy to commit wire fraud and bank fraud.

Starting with MGT as an estimator in 2007, Lindsey worked his way up to handling the books, before being fired in 2016 when Thalhimer says it internally discovered the fraud at its wholly-owned subsidiary.

It was ultimately found that Lindsey helped orchestrate a five-year scheme that manipulated MGT’s books by moving expenses from one construction project to another in order to make completed jobs appear more profitable. That resulted in boosted bonuses for Lindsey and others, while racking up tens of millions of dollars in losses.

In recent court filings, federal prosecutors called the fraud a “construction Ponzi scheme” and said that Lindsey received $227,000 in bonuses as a result.

In arguing for a 12-month sentence, Lindsey’s attorney paints him as having played a minor role in a scheme he didn’t fully understand.

Prosecutors aren’t buying it, stating “The defendant was an integral participant in the MGT accounting fraud scheme for more than five years. While  the  defendant  took  general  direction  on  which  projects  to  focus  his accounting  manipulations,  the  defendant  was  the  day-to-day,  nuts-and-bolts  operator  of  the accounting  fraud.”

Lindsey is the only former MGT employee to be charged to-date, though court records have stated that others were allegedly involved.

Federal prosecutors have repeatedly referred to Lindsey as a co-conspirator acting at the direction of his boss, though they haven’t explicitly named that boss.

Lindsey, in his arguments for a lighter sentence, refers only to MGT’s president, without naming names. Mike Logan Sr. is known to have been MGT’s longtime president, including during the time in question.

Logan has not been charged civilly or criminally and has previously denied his involvement in the scheme.

Still, Lindsey’s recent court filings describe his role in the scheme as following his boss’s orders.

“Lindsey reported to and took direction from the president of MGT. MGT’s president conceived, directed, orchestrated and concealed the scheme in which Lindsey ultimately became embroiled,” a Feb. 8 court filing claims. “His role began innocently, continued in order to avoid the wrath of his co-conspirator, and eventually he became trapped in a corrupt endeavor from which he couldn’t extricate himself.”

Lindsey’s filings allege that the president was prone to screaming fits directed at anyone that questioned the firm’s accounting methods.

“Despite the president’s frequent abuse, Lindsey viewed him as a father figure. The president had taught Lindsey a great deal about the construction business, gave him an opportunity to work and provide for his family when others hadn’t, and had generally done a great deal for Lindsey at a time in his life when he was struggling.”

While Logan isn’t named in any of the Lindsey criminal filings, Thalhimer has alleged in MGT-related civil cases that Lindsey admitted under oath during bankruptcy hearings that Logan directed him in the fraud.

Thalhimer has said it ultimately discovered the fraud internally. Both Logan and Lindsey were fired as a result. Thalhimer then sought to try to prop up the business to no avail, before putting it into bankruptcy and suing its outside accounting firm for not catching the fraud.

Lindsey, who has remained free on bond since his indictment and has since been working for a construction company in the Hampton Roads area, has asked to serve his time at the federal facility in Petersburg to be close to his wife and child in Midlothian.

The duration of his sentence and where he’ll spend the time are ultimately at the discretion of Judge M. Hannah Lauck. The sentencing hearing is set for 2 p.m. Monday.

Lindsey is represented in the criminal case by attorney Ted Bruns of Richmond firm Blackburn Conte Schilling & Click. Bruns did not return a call by Thursday afternoon.

MGT’s bankruptcy case, meanwhile, was recently steered toward a conclusion, with its dozens of creditors getting about 9 cents on the dollar of what they’re owed.

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