ST. LOUIS — The former co-owner of a Clayton construction company was accused in a federal indictment Wednesday of defrauding the city of St. Louis, the state of Missouri and clients by fraudulently claiming that minority-owned subcontractors were doing the work.
Brian Kowert Sr. was a co-owner, executive vice president and chief operating officer of HBD Construction at the time, prosecutors said, and also managed construction projects.
For more than eight years, Kowert falsified records to inflate statistics regarding participation by minority-owned businesses on his projects in the Kansas City and St. Louis areas, prosecutors said.
Kowert also used minority-owned companies as “fronts,” paying them a small fee to pass hundreds of thousands of dollars to the contractors who actually did the work, they said.
The requirements for minority participation on construction projects are designed “to address historical social and economic disadvantages experienced by minority group members” and “foster participation by minority owned businesses,” prosecutors said.
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Government officials and HBD clients had no knowledge of the fraud and cooperated with the investigation, prosecutors said.
In one example in the indictment, Kowert was project manager for the 2018-2020 renovation of a building on Chouteau Avenue in St. Louis for Greater Goods LLC, a company that sells and distributes kitchen, home, fitness, health and wellness products. The project was looking for tax incentives from St. Louis, which required 25% minority business participation.
But Kowert falsely claimed that a minority-owned company provided custom cabinets, appliances, doors, door frames, steel railings and stairs for the project when those items had actually been supplied by three non-minority companies, the indictment says.
The owner of the front company, identified only as “C.K.” in the indictment, transferred about $220,000 to the non-minority companies in exchange for a $2,000 fee, the indictment says. Kowert created duplicate subcontracts and purchase orders and submitted false documents for tax abatement.
In 2014, C.K. agreed to take $2,500 to pass through more than $340,000 in checks to non-minority-owned companies working on apartment buildings near Washington University, the indictment says. The property management company required 20% participation from a minority-owned company.
And in 2021, Kowert falsely listed a different front company as recipient of $333,858 worth of labor and materials used for a multifamily apartment building for seniors in Raytown, in the Kansas City suburbs, the indictment says. That project was funded by the Missouri Housing Development Commission, which requires 10% minority participation.
Prosecutors and the indictment do not name the front company or the contractors.
Kowert was indicted in U.S. District Court in St. Louis Wednesday on five counts of wire fraud.
Adolphus Pruitt, president of the St. Louis branch of the NAACP, praised the federal investigation and said he hopes “this case would act as a deterrent for activities like this in the future.”
Pruitt said racism has long hurt minority-owned firms, but favoritism has also hurt small firms and those owned by women. “In order for businesses to grow, they have to be able to participate in the marketplace,” he said.
HBD is a national general contractor that builds hotels, retail, senior living facilities and other commercial projects. Locally, the company is working on the 21c Museum Hotel in the Downtown West neighborhood.
An HBD predecessor was founded in St. Louis in 1922 and was long headquartered on Manchester Avenue in St. Louis’ Cheltenham neighborhood south of Forest Park.
Kowert and two others took over H.B.D. Contracting Inc. in 2004 and renamed it HBD Construction Inc., according to the company’s website.
HBD merged with Russell, a construction and development firm headquartered in Davenport, Iowa, in 2020. Kowert’s son Brian Kowert Jr. serves as a vice president.
In a statement, Russell said it “had no prior knowledge of the fraudulent activity by Kowert Sr. alleged in the indictment” and has been cooperating in the investigation. “Russell HBD policy is to fully comply with all requirements related to minority-owned business and women-owned business participation, as well as all other laws, rules, and regulations,” the statement says.
The company said they terminated Kowert’s employment in December.
“This matter begins and ends with Brian Kowert Sr. We at Russell are fully committed to transparency and ethical financial stewardship. We do not tolerate fraudulent behavior or misconduct of any kind,” Caitlin Russell, company president, said in the statement.
Kowert could not be reached for comment.