DOJ finds federal employee’s business ownership fraudulent, fines DBE firm $84,000

A Massachusetts-based transportation consulting  company has been charged by the U.S. Department of Justice  with making a false statement in connection with its certification for favored contracting status.

Justice Dept. sealTransit Safety Management, Inc. (TSM) was charged with one count of making a false statement to a state agency in order to maintain its status as a Disadvantaged Business Enterprise (DBE).

In order to qualify as a DBE, a company’s management must be controlled by a socially or economically disadvantaged individual such as a woman or minority.  The purpose of the program is to give an economic advantage to minorities and women who run their own companies.  However, the manager of the DBE cannot also engage in employment that would prevent her from devoting sufficient attention to the affairs of the DBE.  In this case investigators discovered that TSM’s purported owner was a full-time employee of a federal agency and the business was really operated by her husband making it ineligible for certification as a DBE.

US DOTTSM provided consulting services to the railroad industry, focusing on safety and operations management.  Shortly after it was founded in 1999, TSM’s owner certified the company as a DBE.   As such, TSM was able to take advantage of federal regulations aimed at promoting the participation of minority and disadvantaged businesses in federally-funded public construction contracts.  Under the DBE regulations, a contractor on federally-assisted transportation projects must either subcontract a percentage of its work to a DBE or show that it made a good faith effort to subcontract work to a DBE but was unable to do so.  This requirement makes the DBE status a valuable and potentially lucrative designation.

In order to maintain its DBE certification, TSM had to make yearly affirmations that it was still eligible and that nothing had changed that would affect its eligibility for the favored DBE status.  Despite this, TSM lied about whether it met the criteria for DBE status.  According to court documents, TSM’s owner was hired as a full-time employee with a federal agency in 2005.  As a full-time federal employee, TSM’s purported manager could not control TSM under the regulations.  Nevertheless, TSM failed to disclose this change and continued to make its yearly affirmations to maintain is DBE status.

As part of its plea agreement, TSM has agreed to pay a fine of $84,000 and dissolve its operations.

United States Attorney Carmen M. Ortiz; Todd Damiani, Special Agent in Charge of the U.S. Department of Transportation, Office of Inspector General, Office of Investigations; and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement of the plea agreement.  The case is being prosecuted by Assistant U.S. Attorney Eugenia M. Carris of Ortiz’s Public Corruption Unit.

The details contained in the Information are allegations.  The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.


Former contracting official gets 30 months in prison for Iraq contract bribes

A former U.S. Department of Defense (DoD) contracting official was sentenced on Friday (January 8, 2016) to 30 months in prison for his role in a bribery scheme involving U.S. government contracts in Iraq.

US DoD logoJames Edward Addas, 55, of Stafford, Virginia, previously pleaded guilty to charges of bribery and tax evasion.  Senior U.S. District Judge Claude M. Hilton of the Eastern District of Virginia handed down Addas’ sentence today.

According to admissions made in the plea agreement, in August 2004, Addas was a contracting official at the Iraq/Afghanistan Joint Contracting Command in the U.S. Embassy in Baghdad when the owner and CEO of a contracting company based in Jordan offered to pay him a total of $1 million in return for assistance in obtaining U.S. government contracts for major electrical construction projects and related services in Iraq.

The contractor made an initial cash payment of $50,000 in a paper sack, which was handed to Addas inside the “Green Zone” of the U.S. Embassy compound.  With Addas’ assistance, the contractor’s companies subsequently received at least 15 contracts, with a total value of more than $28 million awarded to the companies.  In addition to the initial payment, the contractor later sent funds to Addas via wire transfers that totaled more than $455,000 and paid for other items valued at more than $70,000.  Addas did not declare any of this income on his filed federal tax returns.


State Department employee indicted in $2 million contract conspiracy

Kenneth Apple, 65, of Beaverton, Oregon, has been indicted by a federal grand jury on charges related to his role in awarding $2 million in micro-dairy contracts from the U.S. government for use in Iraq.

State Dept.According to the indictment, Apple, a former employee with the U.S. Department of State, helped to steer the sole-sourcing of $2 million in micro-dairy contracts to a company in which his son, Jonathan Apple, owned a 50 percent interest.  However, Jonathan Apple and his partner had no technical experience in the industry.  Kenneth Apple conspired to use his official position to pass on non-public information to his son in order to fraudulently award and administer government contracts.  The conspirators further provided false information to, and concealed material details from the U.S. government.

According to the indictment, Kenneth Apple provided templates and technical specifications used in the proposal submitted by Jonathan Apple and his partner to the U.S. government.  In addition, Kenneth Apple caused false and misleading statements to be made to the U.S. government regarding his experience, ownership interest, and the status of the projects.  For example, Kenneth Apple directed a conspirator to keep Jonathan Apple’s name off the company’s website and any ownership documents.  When federal law enforcement agents confronted Kenneth Apple about the scheme, he made false statements, including that he could not recall the owner of the company that won the micro-dairy contracts and that he did not receive any money from the contracts.

Kenneth Apple faces a maximum penalty of 20 years in prison if convicted of wire fraud or obstruction of an official proceeding, and five years in prison if convicted of conspiracy or false statements.  The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

A copy of the press release regarding this indictment may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia.  Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:15-cr-363.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

Military contractor sentenced to prison for bribery during Iraq war

The former president of a defense contractor providing services to the U.S. military in Iraq has been sentenced to 12 months and one day in prison for his role in a scheme to pay more than $1.2 million in bribes to U.S. Army contracting personnel in exchange for being awarded lucrative defense contracts.

Justice Dept. sealEarlier this month, U.S. District Judge Joel H. Slomsky in the Eastern District of Pennsylvania sentenced Justin W. Lee, 37, of Philadelphia, the former president of Lee Dynamics International (LDI), who pleaded guilty in July 2011 to one count of conspiracy to commit bribery and four substantive counts of bribery.

In connection with his guilty plea, Lee admitted that as the president of LDI and previously as an officer of American Logistics Services (ALS), a Kuwaiti company providing supplies to the U.S. military in Iraq, he paid multiple bribes in the form of cash, airline tickets, trips and hotel stays, among other things, to military contracting personnel in exchange for their agreement to take official action to award lucrative contracts to both LDI and ALS.

Lee’s father and co-defendant, George Lee, who was the CEO of both companies, was earlier sentenced to 54 months in prison for one count of bribery.

This marks the end of a long-running investigation, which began in 2006, that led to the conviction of seven other defendants, including several high-ranking contracting officers.

The U.S. Army Criminal Investigation Command, the Defense Criminal Investigative Service, and the U.S. Department of Homeland Security’s Immigration and Customs Enforcement investigated the case.  The Office of the Special Inspector General for Iraq Reconstruction, the FBI, and the Internal Revenue Service contributed to the investigation.  The Justice Department’s Criminal Division’s Public Integrity Section and the U.S. Attorney’s Office of the Eastern District of Pennsylvania prosecuted the case.  The U.S. Attorney’s Office of the Southern District of California previously provided substantial assistance.


Contractor pays $25 million for delivering faulty weapon sights

An Ann Arbor, Mich.-based weapons contractor agreed to pay the government $25 million last month for having knowingly delivered flawed holographic rifle sights to the FBI and the Defense and Homeland Security departments.

Thermal DriftEOTech, according to the government’s complaint released December 1st by the Defense Department inspector general, knew during seven years of sales that there were deficiencies in its weapon sights — designed to allow users to find a target and return fire — in environments with extreme heat or cold.

The subsidiary of L3 Communications Corp. has long manufactured and sold “combat optical sights” that can be mounted on weapons used by special operations forces, primarily at the U.S. Naval Surface Warfare Center in Crane, Ind.

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