The operator of parking lots at the Veterans Affairs Medical Center in West Los Angeles was arrested Wednesday on charges of bilking the government out of more than $11 million he allegedly used to purchase three $2.5 million condominiums in Santa Monica, various high-end collectible cars and a Cigarette Top Gun racing boat docked in Miami.
Richard Scott, 58, owner of Westside Services LLC, was arrested without incident at his Santa Monica home in connection with a federal criminal complaint charging him with major fraud against the United States, according to the U.S. Attorney’s Office. Scott was expected to make his first court appearance Wednesday afternoon in downtown Los Angeles.
Pursuant to court orders, federal authorities moved to seize Scott’s assets, including the racing boat, three Ferraris, a 1969 Corvette L88, two high-end Mercedes-Benzes and a Shelby Super Snake Mustang, federal prosecutors said.
An FBI agent described the charges in a 103-page affidavit that alleges Scott obtained a contract to operate parking lots on the campuses of the VA Greater Los Angeles Healthcare System and soon after began defrauding the government by failing to properly report income and expenses.
For the past 15 years, Scott has had a contract with the VA that required him to provide the VA with 60 percent of the gross revenues from the parking lots, according to the affidavit. In order to determine the amounts, Scott was required to submit annual reports detailing revenue generated by parking fees, as well as improvements and services his company provided that could be used to offset payments due to the VA.
The investigation determined that Scott maintained at least two sets of financial books, according to the affidavit. The numbers reported to the VA contained false revenue and expense statements, while a second set of books maintained by Scott’s bookkeeper/tax preparer contained the actual revenues and expenditures, except for unreported cash, federal prosecutors allege.
“The investigation has revealed that Scott underreported revenue to the VA by a minimum of $4,689,081 and over-reported expenses to the VA by a minimum of $8,219,762, which caused a direct loss to the VA of $11,397,779,” according to the affidavit.
The court document notes that the amount of unreported revenue is likely greater because cash generated from parking during UCLA baseball games and other events — which potentially totals more than $1 million — also was not reported to the VA.
As part of the scheme, Scott began bribing then-VA contracting official Ralph Tillman, who was responsible for overseeing the contract in 2003, and continued to bribe him on a regular basis until Tillman abruptly retired in 2014 after he was confronted by federal agents, prosecutors allege.
Prosecutors allege Scott continued making payments to Tillman — who has not been charged — to continue the scheme and attempt to avoid termination of his parking contract.
Between 2003 and 2016, Scott used Westside Services’ business accounts to pay for about $740,000 in travel, $413,000 in meals and entertainment, his salary of $3.1 million, and numerous personal expenses and owner’s draws, according to court documents.
The affidavit states, “The travel and meal/entertainment expenses are especially suspicious because the business of WSS consisted of overseeing parking lots at the VA GLAHS, only two of which were regularly staffed, which did not require any travel beyond the few mile area” around the VA’s West Los Angeles campus.
Tillman began cooperating with the federal investigation in May, according to the affidavit, which states that the retired official admitted he participated in the bribery scheme and knew Scott was underreporting revenue and inflating expenses reported to the VA.
Furthermore, Tillman said that Scott used proceeds from cash parking events to pay him, the government alleges. During an interview earlier this year, recounted in the affidavit, Tillman allegedly said Scott “was definitely bribing me and I was definitely looking the other way.”
If Scott is convicted of the charge of committing a major fraud against the United States, he would face up to 10 years in federal prison, according to the U.S. Attorney’s Office.
The VA contract with Westside Services was terminated early this year after the VA settled a lawsuit that challenged the VA’s use of its West Los Angeles campus for any purposes not specifically related to the care and housing of veterans. However, pursuant to the agreement, WSS will continue to operate the parking lots until January.
The case against Scott is part of an ongoing investigation being conducted by the U.S. Department of Veterans Affairs, Office of Inspector General; the FBI; and the IRS Criminal Investigation unit.
–City News Service
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