The head of an engineering firm that was once positioned to manage the construction of the new Hidalgo County Courthouse will be sentenced in federal court next week for using his company to make illegal campaign contributions, and prosecutors are suggesting two years imprisonment and a $225,000 fine.
James B. Dannenbaum, former president and CEO of Houston-based Dannenbaum Engineering Corporation, pleaded guilty in December to one count of knowingly and willfully making political contributions in the names of others, federal court records indicate.
Prosecutors believe Dannenbaum directed 45 company employees and their family members to donate $323,300 to his political allies in order to circumvent federal limits on individual campaign contributions. Prosecutors described it in federal court documents as a “sophisticated scheme” deployed over the course of “at least” three years, beginning in 2015.
FBI agents raided several of the company’s offices, including one in McAllen, on April 26, 2017. Agents walked away with several boxes of documents from the local office.
The company is well established in South Texas and has been awarded millions of dollars in contracts for public projects, including the construction of Hidalgo County’s first border wall — a levee project worth over $200 million — and the failed construction of an international bridge in Brownsville that was never built.
At the time of the raids, Dannenbaum Engineering was on the verge of finalizing a contract with Hidalgo County to manage its biggest project in recent history: the construction of the new county courthouse. The subsequent negative attention, however, led then-commissioners to terminate negotiations with the firm and award the contract to their second option, Jacobs Project Management Company.
On Thursday, the federal government submitted a sentencing memorandum recommending the “maximum term of imprisonment” allowed by federal statute.
“Over the course of at least three years, (Dannenbaum) ran a sophisticated scheme to funnel $323,300 in illegal federal campaign contributions to candidates seeking the most powerful offices in our nation—those running for the United States Congress, the United States Senate, and the Office of the President of the United States,” the memorandum stated. “This crime was neither a simple mistake nor the product of mere confusion.”
Federal authorities reportedly recorded a conversation Dannenbaum had with an employee in February 2017. Prosecutors allege Dannenbaum was directing the employee to staple campaign contribution checks that had been made by his employees and their families with a company business card to let the campaigns know where the donations were really coming from.
“I normally have all the checks together and then staple, you know, my business card . . . to the checks…so there’s no confusion about . . . where they came from,” Dannenbaum reportedly said.
Prosecutors believe he made 95 contributions to 26 federal campaigns and political action committees, though the names of the candidates and PACs are not included in court documents.
After the checks were sent out, Dannenbaum would usually reimburse his employees and their family members through the company’s corporate account, writing it off as “fictitious marketing expenses,” prosecutors said. On several occasions, he would use his own checking account and would later reimburse himself from the firm’s account.
“In 2016 alone, (the company) allocated $2.9 million for what its accounting records dubbed “marketing expenses,’” court documents stated.
Prosecutors believe Dannenbaums’s political activity overlapped with his business interests because the firm’s success “hinged largely upon its ability to win public contracts,” they wrote, noting that over 80% of the corporation’s business originated from contracts with federal, state and local governments.
And even though employees made the donations, some of them didn’t know who they were supporting or what the candidates’ party affiliations were.
“Few had ever contributed to a candidate for public office, and none had done so at a level approaching the maximum contribution,” prosecutors wrote in the sentencing memorandum. “Several of the defendant’s employees noted that but for his reimbursement check, they would have lacked sufficient funds to cover the contribution checks that they wrote.”
Prosecutors said the head of the company “told employees that this was simply the way business was done.”
Dannenbaum appears to have asked for leniency based on his “uniquely precarious medical conditions” coupled with the COVID-19 pandemic, according to court the government’s own filings, but the documents he submitted remained under seal Wednesday.
“Government is mindful that at this point, the COVID-19 pandemic, coupled with the defendant’s medical needs, renders a sentence of incarceration potentially hazardous. Even so, a probationary sentence is insufficient,” prosecutors wrote in their sentencing memo. “If such an egregious affront is punished only with probation, wealthy executives may conclude that violating the law in exchange for ingratiating themselves to politicians may be a gamble worth making—especially in industries where millions of dollars in public contracts are at stake.”
Dannenbaum also reportedly suggested his public humiliation was enough punishment and highlighted his contributions to charity in his sealed sentencing memorandum.
“The defendant’s philanthropy should not shield him,” prosecutors countered. “(He) believed that his political connections and wealth entitled him to violate the law. He was wrong.”
Dannenbaum’s sentencing is set for May 27.