Brothers in Johnstown business get house arrest for paying kickbacks on defense contract

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The Kuchera brothers of Cambria County, who admitted ripping off U.S. taxpayers through a kickback and conspiracy scheme at their Johnstown-area defense contracting firm, avoided prison Tuesday and received house arrest instead.

William and Ronald Kuchera, who ran Kuchera Defense Systems until they sold the company after a federal raid in 2009, pleaded guilty in April to defrauding the U.S. and had faced up to three years behind bars.

But they argued that they didn't deserve jail because their company had provided hundreds of jobs in a depressed region, they'd already paid millions in restitution and they donated time and money to food banks and dozens of charities.

U.S. District Judge Kim Gibson in Johnstown took those factors into consideration and sentenced both to five years of probation, the first 18 months on home confinement with electronic monitoring.

He also ordered each to perform 1,000 hours of community service work and pay $500,000 each in fines.

In addition, the judge ordered the men to pay a total of $2.1 million to the Defense Department and the IRS, plus forfeit $450,000 each. Lawyers for the brothers said they had completed those payments.

The Kucheras, who built a small electronics firm into one of Johnstown's major employers, admitted that they paid $199,000 in kickbacks to Richard Ianieri, part-owner of Coherent Systems International, a prime contractor that won an $8.2 million contract for a prototype device designed to prevent friendly fire incidents in combat zones.

As a subcontractor, the Kucheras submitted a fake invoice to Coherent that sought a $650,000 payment for a component that was never delivered. After Coherent paid the bill, the brothers kicked back two checks to Mr. Ianieri for $102,000 and $97,000 and kept the remaining $450,000 for themselves, according to court records from their guilty plea in April.

Had the case gone to trial, the U.S. attorney's office in Pittsburgh said it also would have proven that the Kucheras claimed the use of a private plane, lobbying costs, home improvements, a car and other personal expenses as business expenses, paid for by the government.

The investigation of the Kucheras began with a criminal referral by the Defense Contract Audit Agency, which suspected Kuchera Defense Systems of fraud and turned the matter over to a team of federal agencies, including the FBI, IRS and Defense Criminal Investigative Service.

The investigation had previously been connected to an FBI probe of the late U.S. Rep. John Murtha, who over the years directed millions in earmarks to the Kucheras as chairman of the House Appropriations Subcommittee on Defense.

Mr. Ianieri had received the contract for the prototype after hiring a lobbying firm that employed Murtha's brother, Kit. Ianieri received probation in 2010 for his role in the case, and he had to repay the $199,000.

Yesterday, the courtroom was filled with Kuchera supporters, many of whom had written letters on their behalf. Lawyers for the men had received 152 letters in all, praising the brothers for hiring disabled veterans and employing so many in a county where the poverty rate is 22 percent.

"You can ask anyone that worked for them and they would happily work for them again," wrote one former employee, Ed Gregorich. "We received bonuses three or four times a year, they matched our retirement plan up to 125 percent, they promoted from within, they provided company social functions, they provided a healthy work environment, and this is just to name a few, but most of all they treated us with respect."

In his own letter to the judge, Ronald Kuchera said he'd made "some serious mistakes in my life" despite being raised as a moral man.

But he also said his company provided opportunity for many, paid millions in federal and state corporation taxes and did good work for the military.

"We never lost sight of the fact that we were supplying high-quality products to our troops in the field," he wrote.

Torsten Ove: tove@post-gazette.com or 412-263-1510.


Torsten Ove: tove@post-gazette.com or 412-263-1510. First Published December 17, 2013 3:10 PM

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