Category Archives: Special Inspector General For Iraq Reconstruction

Former U.S. Army Reserve Captain Pleads Guilty in Nevada to Bribery Scheme

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A former U.S. Army Reserve captain pleaded guilty today to accepting more than $90,000 in bribes from contractors while he was deployed to Iraq, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Daniel G. Bogden of the District of Nevada.

Edward William Knotts III, 51, of Gibbon, Neb., pleaded guilty before U.S. District Judge James Mahan in the District of Nevada to a criminal information charging him with one count of bribery. He faces a maximum penalty of 15 years in prison when he is sentenced on Oct. 8, 2013.

According to court documents, from December 2005 until December 2007, Knotts was stationed at Camp Buehring, Kuwait, as a contracting officer’s representative for contracts between the U.S. Army and local contractors to provide services to support the operations at Camp Buehring and another U.S. camp in Kuwait.

In November 2006, Knotts entered into an agreement with a Kuwait-based corporation to receive a monthly fee from the corporation in return for providing confidential bidding information about U.S. Army contracts.  Between November 2006 and November 2007, the corporation paid him approximately $31,500 in cash.  In June 2007, a representative of the corporation paid Knotts $40,000 at a hotel room in Las Vegas in return for his promise to provide confidential bid information and in anticipation of the corporation hiring him.  Knotts received another similar cash payment of $20,000 in August 2008 in a different Las Vegas hotel.

This case was investigated by the Special Inspector General for Iraq Reconstruction, Defense Criminal Investigative Service and U.S. Army Criminal Investigation Command. The case is being prosecuted by Director of Procurement Fraud Litigation Catherine Votaw and Trial Attorney Brian Young of the Criminal Division’s Fraud Section.

Iraqi Company Business Manager Pleads Guilty in Texas to Illegal Gratuities Scheme

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A business manager for an Iraqi company pleaded guilty today to giving thousands of dollars in illegal gratuities to a U.S. pay agent from contractors while the business manager was in Iraq, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.

 Mario G. Khalil, 50, of Houston, pleaded guilty before U.S. District Judge David Hittner in the Southern District of Texas to a criminal information charging him with one count of giving a gratuity to a public official.  At sentencing, scheduled for Oct. 3, 2013, he faces a maximum sentence of two years in prison.

According to court documents, from 2007 through 2009, Khalil worked at Camp Liberty in Iraq as a business manager for an Iraqi contracting company, holding various contracts with the U. S. Army, Air Force and Department of Defense to provide logistical services and supplies.

Khalil told Richard Gilliland – a U.S. Army staff sergeant serving as a pay agent for civil investment projects in Iraq from October 2007 through November 2008 – that Khalil’s company was interested in obtaining contracts and acquiring used and non-working generators from the Defense Reutilization and Marketing Office (DRMO) and was seeking Gilliland’s assistance as an Army official.  Khalil gave and offered Gilliland approximately $10,000 in cash and a laptop computer in return for his influence in obtaining generators and future contracts.

Gilliland pleaded guilty in February 2013 to an information stemming from the same scheme and is awaiting an August 2013 sentencing.

The case was investigated by the Special Inspector General for Iraq Reconstruction.  The case is being prosecuted by Director of Procurement Fraud Litigation Catherine Votaw and Trial Attorney Mark Grider of the Criminal Division’s Fraud Section and Assistant U.S. Attorney James Buchanan of the Southern District of Texas.

U.S. Army Major Pleads Guilty in South Carolina to Defrauding U.S. Government

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WASHINGTON – A U.S. Army Major has pleaded guilty today to accepting thousands of dollars in gratuities from contractors while he was a U.S. Army captain deployed to Iraq, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the District of South Carolina William N. Nettles.

Ulysses S. Hicks, 40, of Sumter, S.C., pleaded guilty before U.S. District Chief Judge Margaret B. Seymour in the District of South Carolina to a criminal information charging him with one count of conspiracy to accept illegal gratuities.

According to court documents, Hicks was a captain in the U.S. Army, who was deployed to Forward Operating Base (FOB) Hammer in Iraq as a pay agent for field ordering officer (FOO) funds.  FOO funds are used to purchase miscellaneous items and supplies such as paint, lumber and plywood from local vendors.  It is a violation of federal law for pay agents to accept gratuities from contractors dependent upon them for contracts.

From about March 2007 through October 2008, Hicks, along with co-conspirator former U.S. Army Master Sergeant Julio Soto Jr., was involved with the construction of a government building at FOB Hammer by local Iraqi contractors.  According to court documents, Hicks and Soto unlawfully sought, received and accepted illegal gratuities for helping Iraqi contractors gain U.S. government contracts.  After accepting the illegal gratuities, Hicks and Soto purchased U.S. Postal money orders with the illegal proceeds and mailed them back to the United States.

At sentencing, Hicks faces a maximum penalty of five years in prison, a fine of $250,000 and up to three years of supervised release.  As part of his plea agreement, Hicks agreed to pay $65,409 plus interest in restitution to the United States.

Soto pleaded guilty on Aug. 29, 2012, before U.S. District Chief Judge Seymour to a criminal information charging him with one count of conspiracy to accept illegal gratuities.  On Dec. 7, 2012, Soto was sentenced to serve five years of probation and ordered to pay $62,542 in restitution.

This case is being prosecuted by Special Trial Attorney Mark Grider of the Criminal Division’s Fraud Section, on detail from the Special Inspector General for Iraq Reconstruction (SIGIR), and by Assistant U.S. Attorney Winston Holliday, Deputy Chief of the General Crimes Section of the U.S. Attorney’s Office for the District of South Carolina.  The case was investigated by SIGIR, the Defense Criminal Investigative Service and the Major Procurement Fraud Unit of the U.S. Army Criminal Investigation Command.

British Contractor Agrees to Plead Guilty to Wire Fraud Conspiracy Related to Iraq Reconstruction Efforts

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FOR IMMEDIATE RELEASE
Monday, December 10, 2012
British Contractor Agrees to Plead Guilty to Wire Fraud Conspiracy Related to Iraq Reconstruction Efforts

WASHINGTON – British contractor APTx Vehicle Systems Limited agreed today to plead guilty to conspiracy to defraud the United States, the Coalition Provisional Authority that governed Iraq from April 2003 to June 2004, the government of Iraq and JP Morgan Chase Bank.  A civil settlement agreement resolving a related action filed under the False Claims Act was also announced today.

APTx was charged with one count of wire fraud conspiracy in a criminal information filed today in U.S. District Court in Massachusetts.  As part of the plea agreement filed with the information, APTx agreed to pay a criminal fine of $1 million.

The charges and resolutions were announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, Principal Deputy Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division and U.S. Attorney for the District of Massachusetts Carmen M. Ortiz.

According to the criminal information, APTx engaged in a fraudulent scheme involving an August 2004 contract valued at over $8.4 million for the procurement of 51 vehicles for the Iraqi Police Authority.  The contract was initially awarded to a different, “prime” contractor, which in turn subcontracted the procurement to APTx for over $5.7 million.  Payment under the contract was by letters of credit issued by JP Morgan Bank.

The criminal information further charges that in May and June 2005, APTx submitted shipping documents to JP Morgan to draw down on the letters of credit, which falsely and fraudulently asserted that all 51 vehicles were produced and ready to ship to Iraq.   In fact, as APTx knew, none of the vehicles had been built, none of the vehicles were legally owned or held by APTx and none of the vehicles were in the process of transport to Iraq.  The fraudulent shipping documents also listed a company as the freight carrier that APTx knew was not a shipping company and named a fictitious company as the freight forwarder.

In a related civil settlement agreement, APTx, along with Alchemie Grp Ltd., a United Kingdom corporation, and Haslen Back, the director and shareholder of Alchemie, agreed to pay $2 million to the United States to resolve claims originated by Ian Rycroft, an individual retained by the prime contractor to oversee transportation of the vehicles, under the qui tam, or whistleblower, provisions of the False Claims Act in the District of Massachusetts.  The False Claims Act authorizes private whistleblowers to bring suit for false claims submitted to the United States and to share in any recovery.  Rycroft’s estate will receive $540,000 as its share of the settlement amount.

Benjamin Kafka, a representative for APTx in the United States, was charged on April 13, 2009, with one count of misprision of a felony in connection with his role in the wire fraud conspiracy.  According to court documents, Kafka allegedly allowed APTx to use his corporate name and identity as the freight carrier and freight forwarder on the fraudulent shipping documents presented to JP Morgan.

The criminal case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Trial Attorney William H. Bowne III of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Eugenia M. Carris and Jeffrey Cohen of the District of Massachusetts.  The civil case is being handled by Trial Attorney Diana Younts of the Civil Division, and by Assistant U.S. Attorney Christine Wichers of the District of Massachusetts.  The investigation was conducted by the Special Inspector General for Iraq Reconstruction, the Defense Criminal Investigative Service Boston Resident Agency and U.S. Immigration and Customs Enforcement Homeland Security Investigations in Washington, D.C.

Former U.S. Army Major Sentenced to 18 Months in Prison for Bribery Scheme Related to Department of Defense Contracts in Kuwait

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Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, November 13, 2012
Former U.S. Army Major Sentenced to 18 Months in Prison for Bribery Scheme Related to Department of Defense Contracts in Kuwait
To Date, 19 Individuals Have Pleaded Guilty or Been Convicted at Trial in Ongoing Corruption Investigation

WASHINGTON – A former U.S. Army Major was sentenced today to 18 months in prison for his participation in a bribery scheme related to his activities as a contracting official in Camp Arifjan, Kuwait, in 2005 and 2006, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

 

James Momon Jr., 40, of Alexandria, Va., was sentenced today by U.S. District Judge Emmet G. Sullivan in the District of Columbia.   In addition to his prison term, Momon was sentenced to serve three years of supervised release and pay $5.8 million in restitution, jointly and severally with co-defendants.

 

Momon pleaded guilty on Aug. 13, 2008, to two counts of bribery and one count of conspiracy.

 

According to plea documents, Momon, was involved in a criminal conspiracy to accept cash bribes from multiple U.S. Department of Defense (DoD) contracting firms that supplied bottled water and other goods and services to U.S. military bases in Kuwait.   In return, Momon assisted in the award of contracts as well as blanket purchase agreements (BPA) – contracts that allow DoD to order supplies on an as-needed basis at a pre-negotiated price.   Momon agreed to accept approximately $5.8 million from his co-conspirators as payment for his actions, including $1.6 million in cash and luxury items.

 

According to plea documents, Momon took over contracting duties at Camp Arifjan from former U.S. Army Major John C. Cockerham, who served as a contracting official in Kuwait in 2004 and 2005.  Cockerham, who solicited and received bribes from DoD contractors in exchange for contracts and BPAs for bottled water and other goods and services, pleaded guilty for his role in the conspiracy in February 2008 and was sentenced to serve 210 months in prison and ordered to pay $9 million in restitution.

 

To date, a total of 19 individuals have pleaded guilty or been convicted at trial in the ongoing investigation of corrupt contracting at Camp Arifjan.

 

This case was prosecuted by Trial Attorneys Peter C. Sprung, Eric G. Olshan, Edward J. Loya Jr. and Timothy J. Kelly of the Criminal Division’s Public Integrity Section.   The case is being investigated by special agents of the Defense Criminal Investigative Service, the Army Criminal Investigation Command Division, Internal Revenue Service-Criminal Investigation, the FBI and the Special Inspector General for Iraqi Reconstruction.

Two U.S. Contractor Employees Sentenced for Kickback Conspiracy and Tax Crimes Related to Iraq Reconstruction Efforts

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FOR IMMEDIATE RELEASE
Wednesday, October 10, 2012
Two U.S. Contractor Employees Sentenced for Kickback Conspiracy and Tax Crimes Related to Iraq Reconstruction Efforts

WASHINGTON – Two former employees of The Parsons Company, an international engineering and construction firm, were sentenced in federal court in the Northern District of Alabama for their participation in a kickback conspiracy in Iraq and related tax crimes, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney for the Northern District of Alabama Joyce White Vance.

Billy Joe Hunt, 57, was sentenced today by U.S. District Judge Abdul Kallon in federal court in Huntsville, Ala., to 15 months in prison, three years of supervised release, $66,212 in restitution to the Internal Revenue Service (IRS) and forfeiture of $236,472.  Gaines R. Newell Jr., 53, was sentenced yesterday by U.S. District Judge Virginia Hopkins in federal court in Birmingham, Ala., to 27 months in prison, three years of supervised release, $1,102,115 in restitution ($861,027 to the U.S. Army Corps of Engineers and $241,088 to the IRS) and forfeiture of $861,027.

On May 8, 2012, Hunt pleaded guilty to one count of conspiracy to commit mail and wire fraud and pay kickbacks, and one count of subscribing a false tax return.  On April 10, 2012, Newell pleaded guilty to one count of conspiracy to commit mail and wire fraud and to pay kickbacks, and one count of subscribing a false tax return.

According to court documents, Newell and Hunt were employed by Parsons in Iraq as program manager and deputy program manager, respectively, under a contract that Parsons held to support the Coalition Munitions Clearance Program operated by the U.S. Army Corps of Engineers in Huntsville.  The Coalition Munitions Program sought to preclude insurgents and other unfriendly groups from getting munitions that had been stockpiled, abandoned or seized, and using them against Coalition forces or the Iraqi public.  In their plea proceedings, Newell and Hunt admitted taking over $1 million in kickbacks from subcontractors from 2005 to 2007, in return for arranging to award contracts on the munitions clearance program to subcontractors.  Newell and Hunt also admitted filing false federal income tax returns by not disclosing kickback income.

On May 21, 2012, Hunt and Newell’s co-conspirator Ahmed Sarchil Kazzaz, 45, pleaded guilty for his role in the scheme. Kazzaz and his business, Leadstay Company, were indicted in the Northern District of Alabama in September 2011 for paying over $947,000 in kickbacks to Newell and Hunt.  According to the plea agreement, between March 2006 and June 2007, Kazzaz agreed to pay kickbacks to Newell and Hunt totaling 13 percent of the amounts paid by Parsons, and thus obtained over $23 million in subcontracts providing materials and equipment to Parsons. After Kazzaz’s arrest in Los Angeles on Dec. 2, 2011, this case was transferred to the Central District of California, where Kazzaz pleaded guilty.  His sentencing is set for Oct. 29, 2012 before U.S. District Judge R. Gary Klausner in the Central District of California.

The cases are being prosecuted by Catherine Votaw, Director of Procurement Fraud for the Criminal Division’s Fraud Section, and Assistant U.S. Attorney David Estes of the Northern District of Alabama.  The investigation was handled by the Special Inspector General for Iraq Reconstruction, the Defense Criminal Investigative Service, the IRS-Criminal Investigations Division and the FBI.

U.S. Army Master Sergeant Pleads Guilty to Defrauding U.S. Government

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FOR IMMEDIATE RELEASE
Wednesday, August 29, 2012
U.S. Army Master Sergeant Pleads Guilty to Defrauding U.S. Government

WASHINGTON – A U.S. Army master sergeant pleaded guilty today to accepting thousands of dollars in gratuities from contractors during his deployment to Iraq as a field ordering officer at a forward operating base in Iraq, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the District of South Carolina William N. Nettles.

Julio Soto Jr., 52, of Columbus, Ga., pleaded guilty today before U.S. District Chief Judge Margaret B. Seymour in the District of South Carolina to a criminal information charging him with one count of conspiracy to accept illegal gratuities.

According to court documents, Soto was a master sergeant in the U.S. Army, deployed to Forward Operating Base (FOB) Hammer in Iraq, as a field ordering officer (FOO), a public official.  FOO funds are used to purchase miscellaneous items and supplies such as paint, lumber and plywood from local vendors.  It is a violation of federal law for field ordering officers to accept gratuities from contractors dependent upon them for contracts.

In or about March 2007 through October 2008, Soto, along with an alleged U.S. Army co-conspirator, was involved with the construction of a government building at FOB Hammer by local Iraqi contractors.  Soto and his alleged co-conspirator unlawfully sought, received and accepted illegal gratuities for helping Iraqi contractors gain U.S. government contracts, and then purchased U.S. Postal money orders with the illegal proceeds and mailed them back to the United States.

At sentencing, Soto faces a maximum penalty of five years in prison, a fine of $250,000, or twice the pecuniary gain or loss, and up to three years of supervised release.  As part of his plea agreement, Soto agreed to pay $62,542 plus interest in restitution to the United States.

This case is being prosecuted by Special Trial Attorney Mark Grider of the Justice Department Criminal Division’s Fraud Section, on detail from the Special Inspector General for Iraq Reconstruction (SIGIR), and by Assistant U.S. Attorney Dean A. Eichelberger of the District of South Carolina.  The case is being investigated by SIGIR, the Defense Criminal Investigative Service and the Major Procurement Fraud Unit of the U.S. Army Criminal Investigation Command.