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The city of West Fargo contracted with Riley Bros. Construction to reconstruct the 32nd Avenue South bridge over the Sheyenne River during the summer. The project saw numerous problems and delays since it began in June. (Forum file photo)

Morris-based contractors face prison sentences

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news Perham, 56573
Perham Minnesota 222 2nd Avenue SE 56573

FARGO -- The owners of a Morris-based construction company with a history of working in the Fargo area each face up to five years in prison for orchestrating a tax evasion scheme.

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Joe Riley and John Riley of Riley Bros. Construction Inc., pleaded guilty in early November in Minnesota's U.S. District Court to one count of conspiracy to defraud the U.S. government and avoid tax payments.

A sentencing hearing has not yet been scheduled.

The city of West Fargo contracted with Riley Bros. Construction to reconstruct the 32nd Avenue South bridge over the Sheyenne River during the summer. The project saw numerous problems and delays since it began in June.

Riley Bros. Construction also worked for the city of Fargo this year, upgrading sewer and sanitation lines along 45th Street and north 42nd Street, said Mark Bittner, Fargo city engineer.

Fargo and the state of North Dakota have worked with Riley Bros. in the past on other projects, too, Bittner said.

According to the federal indictment, which was filed in April, Joe Riley and John Riley devised a scheme to defraud the U.S. and state of Minnesota by avoiding government taxes on more than $500,000 of income paid to each brother and Riley Bros. Construction employees between 1996 and 2003.

Aside from conspiracy, the brothers face charges of falsifying individual and corporate tax returns. However, those charges could be dismissed when the brothers are sentenced on the conspiracy charge, Minnesota U.S. attorney spokesman David Anderson said.

On Monday, Joe Riley declined comment on the case or the impact the tax evasion charges might have on his company's future contracts in the Fargo area.

But some local officials said the federal case and subsequent guilty plea may change how local governments work with Riley Bros. in the future.

State law requires municipal governments to accept the "lowest responsible bid" for construction contracts, city Attorney Brian Neugebauer said, adding that in the Riley brothers' instance, "a conviction of that nature may lead the city to determine they're not a responsible bidder."

The North Dakota Administrative Code states that the bidding process can include an investigation of a potential contractor's responsibility, including financial background and other criteria.

Fargo City Attorney Erik Johnson said he had not yet heard about the federal case against Riley Bros. Construction and did not want to speak for city leaders on whether Fargo would work with the company in the future.

Riley Bros. Construction and the city of West Fargo are currently trying to resolve issues stemming from the 32nd Avenue project - but Neugebauer said the federal charges shouldn't have an effect on any potential litigation.

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