NEW ORLEANS – Crooked contractor Praveen Kailas was sentenced to 30 months in prison Wednesday for conspiracy and theft of federal Hurricane Katrina recovery funds, a scheme that was originally exposed by WWL-TV last year.
Kailas, who was teary-eyed in court and admitted that he had disgraced himself and his family, was given 60 days to report to federal prison.
“This is the saddest day of my life,” Kailas said during a last-ditch plea for leniency from Chief U.S. District Judge Sarah Vance. “I never imagined I’d embarrass and disgrace my family to this degree. I thought I was a good person and I’ve realized I was not as good as I thought.”
WWL-TV showed in October 2012 how Kailas’ company, Lago Construction, had billed the state’s Road Home Small Rental Repair Program for construction monitoring services when its employees were actually working on other things, like building Praveen and his brother Naveen a mansion on Bayou St. John, or selling and overseeing home-lifting jobs under another federally financed state recovery program.
Praveen Kailas denied any wrongdoing at the time, and the director of the program, consultant Mark Maier, backed Kailas up in an internal report. But federal agents from the HUD Inspector General’s Office and the FBI took up the case, and in August 2013, Kailas pleaded guilty.
Still, he would only admit to stealing “not more than $236,000,” opening the door to a dispute that has raged in court filings for the last month.
Vance held a full evidentiary hearing Wednesday before sentencing Kailas. Kailas’ all-star defense team contended that he stole only about $60,000, around a quarter of what the government said he took.
But Vance rejected their argument, saying it misinterpreted the rules of Lago’s contract and didn’t take into account all the evidence of a broader fraud. She also didn’t buy their argument that the state’s prime contractors, through Maier as program director, had permitted Lago to bill for “downtime” -- when his employees were at work but had nothing to actually do for the Small Rental program.
She did agree, however, to go below the federal sentencing guidelines, which called for between 41 and 51 months in prison for his two felonies. She said she considered that Praveen Kailas was only 27 years old at the time that the conspiracy began in 2011 and that his father, Mohan Kailas, was apparently in charge and allowing the fraudulent activity.
"The defendant appears to be taking the fall for other family members who participated but were not charged," Vance said.
After Vance read the sentence, Mohan Kailas, who was in the gallery with about two dozen other family members and friends, broke down, holding his head in his hands and weeping. In his appeal for leniency, Praveen Kailas said his parents had come to New Orleans 30 years ago and had expected him to be at his best, but he had "let them all down."
Mohan had established trust funds for his sons and handed the reins of major projects over to Praveen, including a high-profile project turning the historic but abandoned Woolworth Building on Canal Street into a multi-purpose high-rise. When they needed special approvals from the City Council, it was Praveen who did TV interviews and spoke at public hearings.
Now, Mohan Kailas is pushing forward on the Woolworth project without his eldest son – and after a federal judge noted that he was an integral part of the conspiracy to defraud the government.
We asked Mohan what he knew about his son’s fraud, but he wouldn’t respond.
Vance, however, seemed to believe the father was well aware. Praveen “was not receiving proper guidance from his father, who was on the scene and apparently doing the same thing,” Vance said after hearing testimony that Mohan had actually complained when an employee failed to bill the state for hours he had not worked on Small Rental.
The Kailas family is a leading contributor to Gov. Bobby Jindal and one of the largest landowning clans in the New Orleans area. They pulled out all the stops in their defense, hiring leading lights of the criminal defense bar, including Walter Becker, Eddie Castaing and Ralph Capitelli. In the last month before his sentencing, they hired high-profile criminal defense attorneys Kyle Schonekas and Billy Gibbens to take over the arguments to try to reduce their client’s sentence.
They hired an accountant to analyze Kailas’ public billing records and count up the hours Kailas overbilled prime contractors Shaw and ACS/Quadel, the companies being paid by the state to run the Small Rental program.
It came out to 964 hours, about a quarter of the government’s tally.
Gibbens and Schonekas put the accountant, Joey Richard, on the stand to explain his calculations, but under cross-examination from prosecutor Emily Greenfield, Richard had to admit that he basically took the employees' word for how much they actually worked on the Small Rental program and never looked at sworn testimony indicating that they were actually committing a lot more fraud than they acknowledged to him.
Greenfield pointed out particularly egregious examples involving Praveen’s brother, Naveen. Richard gave him credit for working on Small Rental when he was actually studying for and taking the Louisiana Bar Exam to become a lawyer. He also counted a day when Naveen was flying to Boston and another when the younger Kailas was caught on video trying to sign up a homeowner for house elevation work for another Kailas firm, Cajun Elevation.
In another instance, Richard said he accepted the explanation that construction monitor Devon Long gave that he had been working 80 hours a week on several projects, including Small Rental, and only once, for eight hours, did he falsely bill the Small Rental program for work he actually did on one of Kailas’ condo projects. But in sworn testimony, Long admitted working on the Kailas’ mansion, never surpassing 40 hours a week and spending multiple full days on the condo project.
Vance rejected Richard's calculations and accepted the government's numbers, although she acknowledged that they too were only estimates because of a lack of documentary evidence showing exactly how many hours Kailas’ employees were working on Small Rental and how many they spent on other things.
Vance also found that Kailas deserved more punishment as the leader who orchestrated an extensive fraud, and also for stealing from a federal disaster relief program, rejecting Gibbens’ and Schonekas’ arguments to the contrary.
Kailas did succeed in one respect, convincing Vance that he deserved a more lenient sentence as credit for coming forward and admitting his guilt. The government had tried to strip him of that reduction when his legal team started pushing their disputes, but Vance said they had a right to do so.