Texas Construction Company’s Owner and CEO Sentenced to Prison for Defrauding the State Department

The owner, chief executive officer, and former president of a Texas construction company, HERC Solutions, was sentenced to 18 months in prison today for defrauding the U.S. Department of State out of $1.37 million.  Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney G. Zachary Terwilliger of the Eastern District of Virginia, Inspector General Steve A. Linick of the U.S. Department of State and Assistant Director in Charge Nancy McNamara of the FBI’s Washington Field Office made the announcement.

Gary A. Duff, 53, of Kansas City, Kansas, was sentenced by U.S. District Judge Liam O’Grady of the Eastern District of Virginia.  On Feb. 12, Duff pleaded guilty to a one-count criminal information charging him with conspiracy to defraud the United States and commit wire fraud.

According to admissions made in connection with Duff’s plea, HERC specialized in international construction projects for the State Department and other agencies in military zones and developing countries.  Duff’s co-conspirator, Steven J. Graves, 66, of Woodbridge, Virginia, was a contract specialist and senior contracts administrator for the State Department’s Office of Acquisitions Management from November 2011 to February 2013.  In this capacity, Graves often served as a point of contact for contracts awarded to HERC and other companies seeking to perform construction work or provide supplies and materials to U.S. embassies and consular buildings.

Duff and Graves used Graves’ official positions to steer contracts to HERC during a time-period when Graves was an actual or de facto partner in HERC.  Graves served as the assigned point of contact for State Department contracts awarded to HERC while Graves was simultaneously attempting to generate business and raise capital for HERC, was concealing his conflict of interest from others, was participating in HERC’s internal business operations, and was disclosing confidential procurement information to HERC and its business partners.  Upon his departure from government service, Graves immediately became HERC’s majority owner and a company executive.

On Sept. 20, 2017, Graves pleaded guilty to a two-count criminal information charging him with conspiracy to defraud the United States and commit wire fraud and a willful violation of the conflict of interest statute.  Graves was sentenced to serve 15 months in prison by District Judge O’Grady on Jan. 19.

Special agents with the Department of State’s Office of Inspector General and the FBI’s Washington Field Office investigated the case.  Trial Attorney Edward P. Sullivan of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Jack Hanly of the Eastern District of Virginia are prosecuting the case.