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Business Observer Friday, May 31, 2019 2 months ago

Two sentenced in grant fraud case

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Naples woman faces 10 years in federal prison after being convicted for duping Lee County of nearly $5 million in economic development grant funds.

A Naples woman and a co-conspirator from Suffolk, Va., have been sentenced by a federal court for their roles in a conspiracy to defraud Lee County out of nearly $5 million in grant funds, an individual investor out of $500,000 and the laundering of the proceeds, a case that led to the apparent suicide of a third defendant. 

U.S. District Judge John Steele in Fort Myers, in a May 21 hearing, sentenced Kay Gow, 68, to 10 years in federal prison and entered a money judgment of $1.93 million. Steele also sentenced co-conspirator John Williams Jr., 67, to 30 months in federal prison. 

A federal jury found Gow, her husband Robert Gow and Williams guilty Feb. 22 for their roles in the scheme. On March 2, Robert Gow was found dead by his wife in the couple’s Naples home. The cause of death was a self-inflicted gunshot wound.

The Gows owned and controlled multiple entities, including HerbalScience Group and HerbalScience Singapore. They formed VR Laboratories in Fort Myers in 2010 and applied for a $5 million grant through the Lee County Financial Incentives for Recruiting Strategic Targets (FIRST) program, taxpayer funds earmarked by the county to encourage new economic development projects. (In the aftermath of the criminal case, several people in the business community looked at VR Labs as a prime example of the inherent obstacles in using public funds to help private businesses.)

The Gows were convicted of making false and fraudulent representations to individuals and government entities about the success of their companies, including that VR Labs was poised to become a leading global formulator and manufacturer of botanical pharmaceuticals. Once the agreement with Lee County was secured, Williams, a friend of the Gows, registered the fictitious Williams Specialty Bottling Equipment with the state, representing it would provide the bottling line for the Gows’ products, prosecutors alleged. Although the plant was neither completed nor operational, the Gows submitted to the county fraudulent invoices for bottling services as justification for payment of the grant money.

Grant funds received by the Gows were transferred to entities they owned and controlled, and ultimately to themselves, by disguising the transfers as fees, salaries, expenses and more. They also attempted to conceal the source of the kickbacks through fictitious entities and documents.

Ultimately, Lee County disbursed approximately $4.7 million in FIRST grant funds to VR Labs. Having exhausted the stolen grant funds, authorities contended the Gows then defrauded additional private investors, costing one his retirement savings of $500,000. 

 

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