A Roseville man pleaded guilty Tuesday in federal court to duping the city of Sacramento with phony surety bonds to get nearly $3.5 million in contracts to retrofit water meters.

Peter Michael Scott was president of Advantage Demolition and Engineering, a firm that was awarded two contracts in 2009 to install about 3,300 water meters. The contracts were part of a 21,000-water-meter project financed with $22 million in stimulus funds the city garnered from the U.S. Environmental Protection Agency.

Bidders on the project's 10 phases were required to submit "bid proposal guarantees" assuring the city that the job would be done at the bid price and providing insurance to cover the cost of a contract with a higher bidder if the winning bidder failed to execute the contract.

Successful bidders were required to submit "performance" and "payment" bonds, which are insurance to cover any deficiencies in performance by the bidder or the bidder's nonpayment to subcontractors.

Scott, a 48-year-old former prison guard, bid on eight phases of the retrofit through his company and was awarded contracts on two phases. He submitted what were represented to be $5 million in surety bonds issued by Merchants Bonding Co.

The documents he submitted had raised seals and signatures ostensibly of a notary public and an attorney for Merchants.

He admitted Tuesday the notary's signature is a forgery, the attorney is a fictitious character and the form on which the bonds were printed was not in use by Merchants in 2009. He further admitted purchasing a cellphone and identifying its number as the attorney's number.

The two contracts were awarded despite Scott's history of financial problems, including multiple tax liens and a 2001 bankruptcy of another of his companies.

According to court documents, Advantage Demolition and Engineering began work on the retrofit project in November 2009.

Early the following January, city inspectors were aware of problems with the work. On Jan. 7, 2010, the city determined the surety bonds were fake and issued a stop-work order on ADE's two phases. At that point, the city had paid the company $65,000.

Scott is scheduled for sentencing Dec. 13 before U.S. District Judge Lawrence K. Karlton.

He was indicted by a grand jury in July of last year, along with nephew Robert "Robbie" Scott Jr., who was accused of conspiring with his uncle in the counterfeit-bond scam. Charges against him are still pending.

Robert Scott, 33, of Sacramento, who has a felony conviction for pretending to be his brother in a DUI prosecution, told The Bee in January 2010 that Peter Scott acquired the bonds from someone he met on Craigslist.

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