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Edgewater Man Sentenced to 42 Months in Prison for $7M Fraud

Federal prosecutors say Vernon J. Smith III fraudulently obtained more than $52 million in government contracts, then hid income spent at casinos and on luxury vacations.

Vernon J. Smith III, 61, of Edgewater, was sentenced Wednesday to 42 months in prison for conspiring to defraud the United States in schemes to seek federal contracts based on phony applications. File|Patch
Vernon J. Smith III, 61, of Edgewater, was sentenced Wednesday to 42 months in prison for conspiring to defraud the United States in schemes to seek federal contracts based on phony applications. File|Patch

An Edgewater businessman lied about a company he created and used millions of dollars in federal contracts the firm received to pay for gambling, luxury vacations, veterinarian care for pets and limo rides, say federal authorities.

Vernon J. Smith III, 61, of Edgewater, was sentenced Wednesday to 42 months in prison for conspiring to defraud the United States in schemes to seek federal contracts under a Small Business Administration program meant to help disadvantaged small businesses; and to defraud the IRS.

U.S. District Judge Paul W. Grimm found that the actual loss to the government as a result of Smith’s crimes was about $7 million. He ordered Smith to repay the millions and serve three years of probation after prison.

“Americans were victimized twice by the greed of Vernon Smith. Not only did Smith decide not to pay his fair share of federal taxes and ultimately defraud the IRS out of $839,016, his actions also denied legitimate business owners of socially and disadvantaged groups the opportunity to receive government contracts to which they were entitled,” said Thomas J Kelly with the IRS. “Today’s sentencing should put corrupt business owners, like Vernon Smith, on notice that the government will get to the truth no matter how they may try to conceal their involvement and income.”

Smith was the president and sole owner of Capitol Contractors since 2002, a roofing and construction service headquartered in Capitol Heights and later Edgewater. Authorities said the company was largely dormant after 2002.

In 1999, Smith created a new roofing and construction company, Platinum One Contracting, and installed Anthony Wright, a former roofer and project manager at Capitol Contractors, as the president and majority owner of Platinum. However, Smith had complete control over the new company’s business operations, while his wife, Georgia Smith, was in charge of Platinum’s accounting.

According to federal prosecutors, Vernon Smith admitted he filed a fraudulent application and annual updates to win Platinum One more than $52 million in federal contracts.

The Smiths also transferred millions of dollars from Platinum One Contracting to bank accounts in their own names, and to credit card companies to pay for personal expenses they charged to Platinum’s corporate credit cards. Among those expenses: extensive dental work, veterinary visits for the couple’s pets, lavish vacations, a Royal Caribbean cruise, limousine transportation to casinos in Atlantic City, N.J., funeral expenses for a relative, and numerous payments to casinos.

As a result of the scheme, the Smiths owed additional personal income tax to the IRS totaling $264,105, and Capitol Contractors owed an additional $574,911 to the IRS for tax years 2005 and 2006.

Georgia Smith, 52, of Edgewater, pleaded guilty to conspiring to defraud the United States by filing false tax returns and is scheduled to be sentenced on July 21.

Anthony Wright, 42, of Bowie, pleaded guilty to his role in the scheme and will sentenced on Sept. 15.

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