ALBUQUERQUE—Thursday, Jan. 31, a federal jury sitting in Albuquerque found Armando C. Gutierrez, 65, of Corpus Christi, Texas and Joseph C. Kupfer, 49, of Rio Rancho guilty of conspiracy and theft of government property charges after an eight-day trial.
The jury also convicted Gutierrez on obstruction of justice and money laundering charges. The jury’s guilty verdict was announced by U.S. Attorney Kenneth J. Gonzales, Acting Special Agent in Charge Gabriel L. Grchan of the Phoenix Division of the IRS-Criminal Investigation, and Special Agent in Charge Carol K.O. Lee of the Albuquerque Division of the FBI.
Kupfer and his wife, Elizabeth D. Kupfer, 50, were charged with federal tax evasion offenses Dec. 15, 2010. The three-count indictment charged the couple with willfully failing to report at least $768,333 in taxable income during tax years 2004 through 2006, and evading $286,175 in federal taxes.
On July 27, 2011, the indictment was superseded by an 11-count superseding indictment that added Gutierrez as a co-defendant.
Counts one through five of the superseding indictment included a conspiracy charge and theft of government property charges against Gutierrez and Kupfer relating to federal Help America Vote Act (HAVA) funds administered by former New Mexico Secretary of State (NMSOS) Rebecca Vigil-Giron.
Counts six and seven added obstruction of justice charges against Gutierrez relating to a federal audit and investigation into the misuse of federal HAVA funds, and count eight charged Gutierrez with laundering $630,000 in unlawfully obtained proceeds.
Counts nine through 11 included the three original tax evasion charges against the Kupfers. The superseding indictment also included provisions seeking forfeiture of any property constituting proceeds traceable to the offenses charged and a money judgment in the amount of $2,500,993, the amount involved in the offenses charged.
At the time of the events described in the superseding indictment, Gutierrez and Kupfer were providing consulting services to the NMSOS under HAVA contracts, and Mrs. Kupfer was an employee of the New Mexico Attorney General’s Office (NMAGO) who had been detailed to work for the NMSOS.
In April 2012, the federal judge presiding over the case severed the three tax evasion counts from the other eight counts in the superseding indictment for purposes of trial.
The judge then scheduled separate trials for the Kupfers on the three tax evasion charges (the tax trial) and for Gutierrez and Kupfer on the conspiracy, theft, obstruction of justice, and money laundering charges (the HAVA trial).
The tax trial against the Kupfers commenced on Aug. 13, 2012, and concluded on Aug. 17, 2012, when the jury returned a guilty verdict against the Kupfers on all three tax evasion charges.
The evidence at the tax trial established that, during the years 2004 through 2006, Kupfer received income from Kupfer Consulting (KC), a business owned and operated by Kupfer, including federal HAVA funds, and the Kupfers reported income from KC in their joint personal tax returns.
During those three years, the Kupfers received $1,304,421 in revenue from KC but reported only $502,541 in their tax returns.
The Kupfers concealed approximately $768,333 in income by providing incomplete information to their tax preparer, thus avoiding paying taxes on that money, and signed false and fraudulent tax returns and submitting those returns to the IRS.
The HAVA trial commenced on Jan. 22, 2012, and the evidence established that, following the passage of HAVA in 2002, states received federal funding to educate voters about the electoral process, increase voter registration, and meet new standards for election administration and voting systems.
Between April 2003 and December 2006, the NMSOS administered almost $20 million of federal HAVA funds through a number of contracts, including a multi-million-dollar contract for voting-related advertising that was awarded to A. Gutierrez and Associates, Inc (AGA), a company solely owned and operated by Gutierrez, and three small contracts for increasing voting accessibility for the disabled that were awarded to KC, Kupfer’s business.
In summary, the evidence established Gutierrez and Kupfer conspired together to defraud the United States by stealing federal HAVA funds and converting the funds for their own use.
Specifically, the two men unlawfully obtained federal HAVA funds for work they did not perform and services they did not provide by: (1) submitting false invoices for services that AGA and KC never provided; (2) attempting to obstruct an audit by the Election Assistance Commission (EAC); and (3) attempting to conceal the federal HAVA funds that they stole.
In April 2004, the NMSOS awarded a voting-related advertising contract to AGA. By its terms, the AGA contract was to terminate Dec. 30, 2006, could not exceed $4 million, and required the written approval of the NMSOS before AGA could retain subcontractors.
The AGA contract was amended in May 2006 to include an additional $1,762,000 in federal HAVA funds, and again in October 2006 to add another $186,750 in federal HAVA funds
Between September 2004 and October 2006, AGA received a total of $6,271,810 in federal HAVA funds from the State of New Mexico, but Gutierrez submitted documentation supporting only $3,385,151 in services and costs, resulting in an overpayment of $2,500,993 to which AGA was not entitled.
In addition to the three small contracts ($20,000 in 2003; $20,000 in 2004; and $30,000 in 2005) awarded to KC by the NM SOS, AGA made a series of nine payments totaling $746,375 in federal HAVA funds to Kupfer between October 2004 and November 2006.
The payments far exceeded the value of any work that Kupfer ever actually performed for AGA under the HAVA contract, and Gutierrez and AGA never submitted any documentation to the NMSOS’s reflecting that AGA had retained Kupfer and/or KC as a subcontractor.
In early 2007, the EAC, an independent bipartisan commission established by HAVA to assist states with HAVA compliance and distribution of federal HAVA funds, began an audit into the use of federal HAVA funds by the NMSOS.
The AGA HAVA contract immediately became the primary focus of the EAC’s audit because AGA could not provide documentation to the EAC auditors to support the federal HAVA funds AGA received for services allegedly provided to the State of New Mexico.
In an effort to provide documentation for the federal HAVA funds AGA received, AGA provided 187 fraudulent invoices totaling $1,137,000 that purported to represent payment to media vendors when, in fact, AGA never paid any vendors based on these invoices.
AGA also submitted documents that purported to modify the AGA contract by (1) changing it from a fixed hourly rate contract to a cost-plus-percentage-of cost contract and (2) permitting AGA to hire subcontractors without written approval of the NMSOS.
These documents, signed only by Gutierrez and AGA, were not in the files of the NMSOS, the New Mexico Department of Finance and Administration (NM DFA) or the NMAGO, and were not approved by the NM DFA as required by New Mexico law.
Subsequent to the EAC audit and in response to federal grand jury subpoenas, AGA and KC submitted fraudulent invoices that purported to support the nine payments totaling $746,375 that KC received from AGA between October 2004 and November 2006.
Three of these invoices sought payments in the aggregate amount of $236,605 for production of a poll worker training video that was actually produced by another subcontractor at the cost of $75,000. These invoices had not been submitted to the EAC during its audit and were not in the files of the NMSOS, the NM DFA, or the NMAGO.
The jury deliberated approximately three hours before returning a guilty verdict on counts one through eight of the superseding indictment.
At sentencing, the defendants face a maximum penalty of five years in prison on each of counts one and six, and a maximum penalty of 10 years in prison on each of the remaining counts in the superseding indictment.
The defendants also may be fined up to $250,000 on each count of conviction with the exception of count eight, the money laundering charge against Gutierrez, which provides for a fine up to twice the value of the funds at issue, or $1,260,000.
All three defendants remain on conditions of release pending their sentencing hearings. Mrs. Kupfer is scheduled to be sentenced on March 25, 2013. Sentencing hearings have yet to be set for Gutierrez and Kupfer.
In announcing the jury’s guilty verdict, U.S. Attorney Gonzales said, “The message behind the jury’s guilty verdict is that those who do business with government agencies will be held to the same high standards as government officials. By entering into contracts to provide services paid for with taxpayers’ monies, private citizens become duty-bound to provide honest services for the monies they received. Mr. Gutierrez and Mr. Kupfer violated that duty by stealing more than $2,500,000 in taxpayers’ monies and failing to provide any services for that money. When anyone, including public official and government contractors, abuses the public’s trust in this way, they corrupt the system and erode the public’s confidence in their government. I want to thank the New Mexico Attorney General’s Office for initiating the investigation that led to today’s guilty verdict and commend the IRS and FBI for undertaking the painstaking, comprehensive, and complex investigation that permits us to hold these men responsible for stealing from the public they contracted to serve.”
“The federal government provided voter education funds to the state of New Mexico to ensure all citizens have the opportunity to have their voices heard. Gutierrez and Kupfer instead used a significant portion of these funds to support their lavish lifestyles. IRS-Criminal Investigation, along with our law enforcement partners, will continue to aggressively pursue the blatant waste of taxpayer dollars,” stated IRS-Criminal Investigation Acting Special Agent in Charge Gabriel Grchan.
“The FBI has zero tolerance for those who would steal from U.S. taxpayers, especially when it involves taking advantage of a program created to increase access to one of our nation’s most cherished rights,” said FBI Special Agent in Charge Carol Lee. “Thanks to the efforts of FBI Special Agents working with the IRS-Criminal Investigation and the New Mexico Attorney General’s Office, we have held accountable individuals who lined their pockets with money that should have been used to help Americans vote.”
The case was investigated by the IRS-Criminal Investigation and the Albuquerque Field Office of the FBI, with assistance from the New Mexico Attorney General’s Office. The case was prosecuted by Assistant U.S. Attorneys Tara C. Neda, Jeremy Peña, and Cynthia L. Weisman.