CHICAGO - Siemens Medical Solutions USA Inc., two of its employees, and two partners in a joint venture were indicted on federal fraud charges relating to a $49 million radiology equipment contract that required minority business participation and was awarded during the construction of Cook County's new Stroger Hospital, federal authorities have announced. The company allegedly formed a sham joint venture with a minority business enterprise (MBE) to successfully bid on the public contract in 2000, and its employees allegedly schemed to cover up the initial fraud when the contract was challenged by a competitor in a federal court lawsuit. The sham joint venture partners, Faustech Industries, Inc., a local consulting firm that was certified by Cook County as a minority-owned business, and its sole owner, Faust Villazan, were re-indicted for allegedly paying a $20,000 bribe to a county contract compliance official a month after the contract to provide and service the hospital's radiology equipment was awarded to Siemens-Faustech.

Between May 2000 and November 2001, the indictment alleges that the defendants engaged in a fraud scheme by creating a sham joint venture in which they represented to Cook County that Villazan, through Faustech, was a true joint venture partner with Siemens Medical Solutions (SMS), and that it shared in the risks and rewards in proportion with its declared 30 percent ownership in the joint venture. The defendants allegedly knew, however, that the Siemens-Faustech relationship was a facade that did not comply with the county's bid requirements because Faustech and Villazan's risk in the venture was zero and Villazan's compensation was a flat fee of $500,000, which was not tied to the venture's loss or profit.

Five defendants - two companies and three individuals - were charged in a five-count superseding indictment that was returned by a federal grand jury late yesterday, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. "Sham joint ventures deprive legitimate minority businesses of a level playing field in seeking contracts," Mr. Fitzgerald said. "When individuals or companies compete for public contracts they must be honest about describing whether the minority participation is real, and not enter into secret side agreements. If instead they commit fraud, they will face criminal prosecution.

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