Hazelwood Company Owner Admits Contract Fraud

ST. LOUIS – The owner of a steel company in Hazelwood, Missouri on Tuesday admitted committing fraud during a repair project for a Mississippi River lock and dam.

Theodore J. “Ted” Stegeman, 60, pleaded guilty in U.S. District Court in St. Louis to one felony count of wire fraud. In his plea agreement, Stegeman admitted that between October and December of 2019, he devised a scheme to defraud the contractor and the U.S. Army Corps of Engineers by falsely claiming that a part manufactured by his company passed safety tests.

Stegeman is owner and CEO of Industrial Steel Fabrication LLC (ISF), which 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, or flanges, for all 17 bridge spans. The flanges were supposed to undergo ultrasonic tests to identify any defects in the welded joints.

The government believes that these flanges are critical, load-bearing components. If a span weld cracks, there is a possibility the bridge and dam could fail, leading to possible fatalities and major damage to a large crane weighing up to 220,000 pounds that traverses the dam. Stegeman’s position, according to the plea agreement, is that the flanges are not “fracture critical components.”

In October 2019, Stegeman’s company delivered a flange for bridge span #10 that had failed an ultrasonic test. To conceal the failed test, Stegeman re-assigned ISF employees who knew about the failed test. He then altered the ultrasonic testing report to make it appear as if that flange had passed. ISF also supplied a flange for bridge span #12 that had not been tested and Stegeman told others to falsify a test to make it appear as if the part had passed. The contractor installed the flanges on bridge span #10 in October and November of 2019 and the upstream bottom flange on span #12 in December of 2019.

Stegeman’s crime caused a total loss of $238,059, representing the cost of removing, testing and re-installing flanges. He has agreed to repay that money.

Stegeman is scheduled to be sentenced September 12. Wire fraud is punishable by up to 20 years in prison, a $250,000 fine or both prison and a fine.

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.