Hazelwood Company Owner Sentenced to Year in Prison for U.S. Corps of Engineers Contract Fraud

ST. LOUIS - U.S. District Judge Stephen R. Clark on Thursday sentenced the owner of a steel company that falsely claimed parts for a Mississippi River lock and dam had passed safety tests to a year and a day in prison.

Theodore J. "Ted" Stegeman, 60, has already paid restitution of $238,059, representing the cost of removing, testing and re-installing cover plates, or flanges, that his company supplied to a U.S. Army Corps of Engineers contractor.

Stegeman's company, Industrial Steel Fabrication LLC (ISF), was a subcontractor on a project to repair Lock and Dam No. 25 on the Mississippi River near Winfield, in Lincoln County, Missouri. ISF was responsible for fabricating and welding cover plates for all 17 bridge spans. The flanges were supposed to undergo ultrasonic tests to identify any defects in the welded joints.

In October 2019, ISF delivered a flange that had failed an ultrasonic test. To conceal the failed test, Stegeman re-assigned ISF employees who knew about the failed test, his plea agreement says. He then altered the ultrasonic testing report to make it appear as if that flange had passed. Another flange had not been tested and Stegeman told others to falsify a test to make it appear as if the part had passed.

Stegeman pleaded guilty in April in U.S. District Court in St. Louis to one felony count of wire fraud.

On Thursday, Judge Clark called Stegeman's conduct dangerous and said evidence suggested that he had knowledge of the risks that his conduct created.

The Defense Criminal Investigative Service and the Department of the Army Criminal Investigation Division investigated the case. Assistant U.S. Attorney Kyle Bateman is prosecuting the case.