Contractor Pleads Guilty to Paying Kickbacks Related to U.S. Postal Service Facilities Repair Contracts

A contractor pleaded guilty to conspiring to commit an offense against the United States by paying over $465,000 in kickbacks. 

The defendant, Ilya Zagaryuk, 40, of Damascus, Oregon, owned a company that contracted and subcontracted to perform facilities repairs on dozens of U.S. Postal Service facilities in Oregon, Idaho, Wyoming, Montana, and Washington. 

According to documents filed in the U.S. District Court for the Eastern District of California in Sacramento, California, from May 2022 to February 2024, Zagaryuk paid his co-conspirator, who was an employee of a prime contractor on U.S. Postal Service projects, over $465,000 in illegal kickbacks as a reward for the co-conspirator directing additional work to Zagaryuk and his company. The co-conspirators intentionally inflated contracting documents, including estimates and invoices, to build in funds for the kickbacks that were not based on legitimate repair work costs.

“Collusion that harms the U.S. Postal Service, and ultimately the American taxpayer, is illegal and will not be tolerated,” said Associate Attorney General Stanley E. Woodward Jr. “This Department of Justice is committed to prosecuting those who would cheat the U.S. government out of fair prices to line their own pockets, and in this prosecution, we have done just that.”

“Zagaryuk and his co-conspirator conspired to inflate subcontracts to build in a split between themselves,” said Acting Deputy Assistant Attorney General for Criminal Enforcement Daniel W. Glad of the Justice Department’s Antitrust Division. “They did this countless times and cheated the U.S. Postal Service out of honest contracting and invoicing. Criminals who build kickbacks into government contracts threaten the public’s confidence in government institutions and will be held accountable.”

“Protecting taxpayers and federal-agency dollars is central to our mission,” said U.S. Attorney Eric Grant for the Eastern District of California. “Schemes like this drain public resources and undermine confidence in how federal funds are managed. Our Office will continue working closely with our federal partners to uncover procurement fraud and ensure that public money is spent honestly and lawfully.”

“The USPS OIG will continue to aggressively investigate companies that engage in activities designed to defraud the Postal Service’s contracting process,” said Executive Special Agent in Charge Kevin Cloninger of the U.S. Postal Service (USPS), Office of Inspector General (OIG). “This guilty plea demonstrates that our special agents, along with the Department of Justice Antitrust Division and the United States Attorney’s Office, will pursue contractors that defraud the government and enrich themselves at the expense of USPS customers.”

Zagaryuk pleaded guilty to conspiracy to commit an offense against the United States, specifically a conspiracy to pay kickbacks, and faces a maximum penalty of five years in prison and a fine of up to $250,000. Zagaryuk agreed to pay restitution of $465,347.75, jointly and severally liable with co-defendants, to the U.S. Postal Service. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The U.S. Postal Service Office of Inspector General and the FBI Sacramento Field Office are investigating this case. Assistant Chiefs Christopher Carlberg and Jeremy Goldstein and Trial Attorney Anne Veldhuis for the Antitrust Division’s San Francisco Office, and Assistant U.S. Attorney Dhruv Sharma for the U.S. Attorney’s Office for the Eastern District of California are prosecuting the case.

In November 2019, the Justice Department created the Procurement Collusion Strike Force (PCSF), a joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant and program funding at all levels of government — federal, state and local. To learn more about the PCSF, or to report information on bid rigging, price fixing, market allocation and other anticompetitive conduct related to government spending, go to www.justice.gov/procurement-collusion-strike-force.

Anyone with information in connection with this investigation can contact the PCSF at the link listed above. Whistleblowers who voluntarily report original information about antitrust and related offenses that result in criminal fines or other recoveries of at least $1 million may be eligible to receive a whistleblower reward. For more information on the Antitrust Whistleblower Rewards Program, visit www.justice.gov/atr/whistleblower-rewards.