State Department Official Patricia DeLaughter Pleads Guilty to Procurement Fraud

 

On August 9, 2019, USDOJ announced that State Department employee, Patricia DeLaughter pled guilty to disclosing confidential State Department bid proposals n an effort to help a furniture company executive win a lucrative government contract. Sentencing is scheduled for November 8, 2019.

Photo via State Magazine, April 2009

Via USDOJ: State Department Official Pleads Guilty to Procurement Fraud

ALEXANDRIA, Va. – A Washington, D.C., woman pleaded guilty today to disclosing confidential State Department bid proposals in an effort to help a furniture company executive win a lucrative government contract to provide furniture to a United States embassy abroad.

According to court documents, Patricia DeLaughter, 69, was a State Department official who was responsible for procuring furniture for United States embassies. In or around December 2016, the State Department was constructing a new embassy in a foreign nation. DeLaughter and another Department official participated in the process of soliciting bid proposals from contractors for the procurement of furniture for the new embassy’s offices.

From in or around December 2016 to in or around March 2017, DeLaughter and the other State Department official knowingly disclosed to Steven Anstine, the vice president of sales for an American furniture manufacturer, the confidential bid prices and design plans of at least three of Anstine’s competitors. DeLaughter knowingly disclosed this information in order to give Anstine—with whom DeLaughter had a social relationship—a competitive advantage in securing the procurement contract for the new embassy. The information that DeLaughter and her coworker gave Anstine enabled him and his company to win the contract with a bid of approximately $1.56 million.

According to DeLaughter’s admissions, DeLaughter made intentionally false statements to agents investigating her conduct. She falsely told State Department Office of Inspector General special agents that she had nothing to do with the embassy furniture project. She also falsely told the agents that she did not have a social relationship with Anstine. In fact, DeLaughter and Anstine had a social relationship and attended dinners, sporting events, and concerts together. Anstine paid at least a portion of DeLaughter’s expenses for these events.

In June 2019, Anstine pleaded guilty to one count of illegally obtaining contractor bid or proposal information in the U.S. District Court for the District of South Carolina.

DeLaughter pleaded guilty to one count of illegally disclosing contractor bid or proposal information and faces a maximum penalty of five years in prison when sentenced on November 8. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, Brian A. Benczkowski, Assistant Attorney General for the Justice Department’s Criminal Division, and Steve A. Linick, Inspector General for the Department of State, made the announcement after U.S. District Judge Rossie D. Alston Jr. accepted the plea. Special Assistant U.S. Attorney Russell L. Carlberg, Deputy Chief Robert J. Heberle and Trial Attorney John P. Taddei of the Criminal Division’s Public Integrity Section are prosecuting the case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:19-cr-205.

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Former Senior USAGM Official Haroon K. Ullah Pleads Guilty to Stealing Government Money

 

We’re late on this, but on June 27, 2019, USDOJ announced that Haroon K. Ullah, a former senior official of the U.S. Agency for Global Media (USAGM), the agency formerly known as the Broadcasting Board of Governors (BBG) entered a plea of guilty for stealing over $40,000 in government money in 2018.
Former Senior Official Pleads Guilty to Stealing Government Money
ALEXANDRIA, Va. – An Alexandria man pleaded guilty today to stealing over $40,000 in government money during 2018, while he was employed as a senior government official at the U.S. Agency for Global Media (USAGM) in Washington, D.C.
According to court documents, Haroon K. Ullah, 41, admitted that he fraudulently obtained thousands of dollars in government funds by submitting falsified hotel invoices, falsified and inflated taxi and Uber receipts, and by billing the government for personal travel and for travel that had already been paid by third parties.
Additionally, Ullah admitted that he created a falsified letter from a real medical doctor purportedly claiming that Ullah needed to fly in business class at government expense because of a sore knee. By submitting the forged letter from the doctor, Ullah fraudulently obtained costly business class upgrades at government expense, including on lengthy international flights. Ullah admitted to creating many of the false documents on his government-issued laptop computer. As part of the plea, Ullah also admitted that he submitted falsified invoices and repair estimates to an insurance company regarding a claim for repairs to his home in Alexandria.
A former employee of the U.S. Department of State, Ullah became a member of the Senior Executive Service when he joined USAGM as its Chief Strategy Officer (CSO). Ullah committed his crime from February through October 2018, while serving as CSO. Ullah is no longer employed with USAGM.
Ullah pleaded guilty to theft of government money and faces a maximum penalty of 10 years in prison when sentenced on October 11. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.
G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, and Steve A. Linick, Inspector General for the Department of State, made the announcement after U.S. District Judge T.S. Ellis, III, accepted the plea. Special Assistant U.S. Attorney Russell L. Carlberg is prosecuting the case.
A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:19-cr-183.
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Mr. Ullah’s website still says that he “serves as Chief Strategy Officer at the Broadcasting Board of Governors, an $800 million global media agency. He is a scholar, diplomat and policy practioner with a special focus on digital strategy, countering violent extremism and transmedia engagement.”
USAGM’s website has removed Mr. Ullah’s bio from its website and  info related to him appears not to display prominently on its website; a search still returns events where he was featured as the agency’s CSO, and the Wayback Machine has archived this CSO for eternity.
A Statement of Facts submitted with Mr. Ullah’s Plea Agreement notes that before joining USAGM, he had been employed with the U.S. Department of State since 2010.  It also notes the following:

5. During the approximate ninth—month period of February 2018-October 2018, ULLAH submitted for reimbursement multiple falsified hotel invoices; falsified taxi receipts; double-billed third party sponsors and USAGM for the same trips; and billed USAGM for personal
trips, either to promote his book, or for week-end trips during which little to no USAGM business was conducted. ULLAH used his government computer, a Microsoft Surface Pro, to create the false documents. He would obtain logos and other graphics on-line and use either an invoice generator or Microsofi Excel in order to create fraudulent hotel invoices. Sometimes ULLAH had stayed with a family member or friend or at a budget hotel, but he created the false invoice for the purpose of financial gain in order to maximize his reimbursement from USAGM. With other hotel invoices, ULLAH took a legitimate hotel invoice and changed his address or other data in order to conceal that the hotel room had been paid by a third party, which fact ULLAH intentionally failed to disclose to E2 and USAGM.

8. As part of a scheme to obtain business class travel to which he was not entitled, ULLAH also submitted to USAGM a falsified and forged letter from a real medical doctor, identified here by the initials N.A., claiming that ULLAH required an upgrade to business class because of a medical condition that required him to “lie flat” on long flights. The doctor confirmed to law enforcement that the letter was a forgery; that he did not authorize ULLAH to use his identity or to sign his name for him; and that a business class upgrade for ULLAH’s sore knee
was not medically necessary.

Part of the  Plea Agreement says:

Further, in accordance with Rule 11(c)(l)(B) of the Federal Rules of Criminal Procedure, the United States and the defendant will recommend to the Court that the following provisions of the Sentencing Guidelines apply: Under Section 2B1 .1(b), the intended loss is greater than $40,000 but less than $95,000, thus six levels are added to the base offense level. Under Section 3Bl.2, the United States and the defendant agree to a two level enhancement for abuse of a position of public trust as an employee of the United States.

The Plea also notes:

“The United States will not further criminally prosecute the defendant in the Eastern District of Virginia for the specific conduct descfibed in the information or statement of facts. This plea agreement and statement of facts does not confer on the defendant any immunity from prosecution by any state government in the United States.”

 

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Former @StateDept Employee Pleads Guilty to Conspiring with Foreign Agents

Former @StateDept Employee Pleads Guilty to Conspiring with Foreign Agents

 

 

 

This is a follow-up post to a 2017 case concerning a State Department employee arrested for concealing extensive contacts with intelligence agents from China (see @StateDept OMS Charged With Concealing Extensive Contacts With Chinese Intel Agents). Last month, USDOJ announced that Claiborne pled guilty to conspiring with foreign agents. Sentencing is scheduled for for July 9, 2019.

Download Claiborne Plea Agreement

Via USDOJ:

Former State Department Employee Pleads Guilty to Conspiring with Foreign Agents

Defendant Admitted Receiving Tens of Thousands of Dollars in Benefits From Two Chinese Agents in Exchange for Internal State Department Documents
Candace Marie Claiborne, a former employee of the U.S. Department of State, pleaded guilty today to a charge of conspiracy to defraud the United States, by lying to law enforcement and background investigators, and hiding her extensive contacts with, and gifts from, agents of the People’s Republic of China (PRC), in exchange for providing them with internal documents from the U.S. State Department.

The announcement was made by Assistant Attorney General for National Security John C. Demers, U.S. Attorney Jessie K. Liu of the District of Columbia, Assistant Director in Charge Nancy McNamara of the FBI’s Washington Field Office and Deputy Assistant Secretary Ricardo Colón, Domestic Operations, U.S. Department of State’s Diplomatic Security Service.

The plea took place before the Honorable Randolph D. Moss of the U.S. District Court for the District of Columbia.

“Candace Marie Claiborne traded her integrity and non-public information of the United States government in exchange for cash and other gifts from foreign agents she knew worked for the Chinese intelligence service,” said Assistant Attorney General Demers.  “She withheld information and lied repeatedly about these contacts.  Violations of the public’s trust are an affront to our citizens and to all those who honor their oaths.  With this guilty plea we are one step closer to imposing justice for these dishonorable criminal acts.”

“Candace Claiborne broke the public trust when she accepted gifts and money from foreign officials, and then lied about it to State Department background investigators,” said U.S. Attorney Liu. “The United States will continue to seek to hold accountable those who abuse their positions of trust.”

“Candace Claiborne was entrusted with Top Secret information when she purposefully misled federal investigators about her repeated interactions with foreign contacts which violated her oath of office as a State Department employee,” said Assistant Director McNamara.  “The FBI will continue to investigate individuals who fail to report foreign contacts, which is a key indicator of potential insider threats posed by those in positions of public trust.”

“Our close working relationship with the FBI and the Department of Justice resulted in the conviction of Candace Claiborne who violated the public trust and damaged our national security,” said Deputy Assistant Secretary Colón.  “Diplomatic Security will continue working with our law enforcement partners to vigorously defend the interests and security of the United States of America.”

According to the plea documents, Claiborne, 63, began working as an Office Management Specialist for the Department of State in 1999.  She served overseas at a number of posts, including embassies and consulates in Baghdad, Iraq, Khartoum, Sudan, and Beijing and Shanghai, China.  As a condition of her employment, Claiborne maintained a TOP SECRET security clearance.  Claiborne also was required to report any contacts with persons suspected of affiliation with a foreign intelligence agency as well as any gifts she received from foreign sources over a certain amount.

Despite such a requirement, Claiborne failed to report repeated contacts with two agents of the People’s Republic of China Intelligence Service, even though these agents provided tens of thousands of dollars in gifts and benefits to Claiborne and her family over five years.  The gifts and benefits included cash wired to Claiborne’s USAA account, Chinese New Year’s gifts, international travel and vacations, tuition at a Chinese fashion school, a fully furnished apartment, a monthly stipend and numerous cash payments.  Some of these gifts and benefits were provided directly to Claiborne, while others were provided to a close family member of Claiborne’s.

In exchange for these gifts and benefits, as stated in the plea documents, Claiborne provided copies of internal documents from the State Department on topics ranging from U.S. economic strategies to visits by dignitaries between the two countries.

Claiborne noted in her journal that she could “Generate 20k in 1 year” working with one of the PRC agents.  That same agent at one point tasked her with providing internal U.S. Government analyses on a U.S.-Sino Strategic Economic Dialogue that had just concluded.

Claiborne, who confided to a co-conspirator that the PRC agents were “spies,” willfully misled State Department background investigators and FBI investigators about her contacts with those agents, the plea documents state.  After the State Department and FBI investigators contacted her, Claiborne also instructed her co-conspirators to delete evidence connecting her to the PRC agents.  She was arrested on March 28, 2017, following a law enforcement investigation.

Judge Moss scheduled sentencing for July 9, 2019.  Claiborne, of Washington, D.C., was ordered detained pending sentencing, but will self-surrender for said detention on June 5, 2019.  The statutory maximum penalty for a person convicted of conspiracy to defraud the United States is five years in prison.  The maximum statutory sentences are prescribed by Congress and are provided here for informational purposes.  The sentencing of the defendant will be determined by the court after considering the advisory Sentencing Guidelines and other statutory factors.

The FBI’s Washington Field Office is leading the investigation into this matter.  The case was prosecuted by Thomas A. Gillice and investigated by John L. Hill, both Assistant U.S. Attorneys in the U.S. Attorney’s Office for the District of Columbia, and Deputy Chief Julie A. Edelstein and Trial Attorney Evan N. Turgeon of the National Security Division’s Counterintelligence and Export Control Section.

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Former State/OIG IT Contractor Pleads Guilty to Theft and Embezzlement of USG Computers

 

On March 7, 2019, USDOJ/U.S. Attorney’s Office for the Eastern District of Virginia announced that a former IT contractor for the State Department’s Office of Inspector General pled guilty to theft and embezzlement.

A former federal contractor pleaded guilty today to theft and embezzlement of up to 16 government computers from the U.S. Department of State.

According to court documents, Andrew W. Cheveers, 31, of Bowie, Maryland, was an Information Technology contractor for the State Department’s Office of Inspector General. In this role, Cheveers held a security clearance that allowed him access to certain sensitive information, and he was responsible for configuring the computers prior to the devices being distributed to U.S. government personnel.

Through the course of his criminal conduct, Cheevers admitted to stealing up to 16 Microsoft Surface Pro laptop computers. Cheveers then sold the stolen computers on Internet websites such as Craigslist and eBay from approximately July 2016 through February 2017 in order to profit from his fraudulent scheme.

Cheveers faces a maximum penalty of 10 years in prison when sentenced on June 21. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, and Steve A. Linick, Inspector General for the Department of State, made the announcement after Senior U.S. District Judge Claude M. Hilton accepted the plea.  Assistant U.S. Attorney Raj Parekh and Special Assistant U.S. Attorney Katherine Celeste are prosecuting the case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information is located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:19-cr-64.

The announcement is available here.

Foreign Service Employee Pleads Guilty to Submitting False Claims to @StateDept

 

On October 17, USDOJ announced that a “Foreign Service Officer” Tiffany Thomas  has pleaded guilty  for submitting false claims while employed at the Regional Security Office  in Lome, Togo.

Foreign Service Officer Pleads Guilty to Submitting False Claims to the Department of State

Charleston, South Carolina —- United States Attorney Sherri A. Lydon stated today that Tiffany Thomas, age 34, of Bowie, Maryland, has entered a guilty plea in federal court in Charleston to Submission of False, Fictitious, and Fraudulent Claims, a violation of 18 U.S.C. § 287.  United States District Judge Margaret Seymour, of Charleston, accepted the guilty plea and will impose sentence after she has reviewed the presentence report, which will be prepared by the U.S. Probation Office.

Evidence presented at the change of plea hearing established that Thomas submitted false claims while she was employed in the Department of State’s Regional Security Office in Lome, Togo.  The funds were managed by the Department of State’s Global Financial Services Center in Charleston.   As part of the scheme, Thomas submitted forged receipts for expenses related to official travel in the United States and abroad. The Government alleges the claims exceeded $100,000.

Ms. Lydon stated the maximum penalty for Submission of False, Fictitious, and Fraudulent Claims is imprisonment for 5 years, a fine of $250,000, and up to 3 years of supervised release.

The case was investigated by special agents of the Department of State,  Office of Inspector General, led by Inspector General Steve A. Linick.  Assistant United States Attorney Matt Austin of the Charleston Office is prosecuting the case.

 The slim court documents make no mention of her employment status but she appears to self-described as an FS specialist online (Tiffany Thomas – Foreign Affairs Specialist – U.S. Department of State …).  The DOJ announcement says she worked at the Regional Security Office (RSO) located at the U.S. Embassy in Lome, Togo. Note that Foreign Service officers (sometimes called “generalists”as opposed to specialists) are commissioned officers, nominated by the President and confirmed by the U.S. Senate; they typically do not work at security offices.

A one-page court document labeled “Felony Information” contains the following:

Beginning in or about May 2015 and continuing up until in or about November 2017, in the District of South Carolina, and elsewhere, the Defendant, TIFFANY THOMAS, made and presented to the United States Department of State claims upon and against the United States Treasury worth more than $100,000, that is, the Defendant submitted vouchers claiming lodging reimbursement, knowing that the claims were false, fictitious, and fraudulent in that she fabricated lodging receipts for non-existent properties; she failed to lodge at the addresses listed on the vouchers during the relevant times; and she improperly claimed lodging reimbursement for residences owned by family members; All in violation of Title 18, United States Code, Section 287.

The case is USA v. Thomas 2:2018cr00739.

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@StateDept Contractor Pleads Guilty to Stealing USG Money by Falsifying Travel Expense Claims

Posted: 2:43 am ET
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According to the U.S. Attorney’s Office for the Northern District of Florida, a State Department contractor who worked at USCG Jerusalem has pled guilty to stealing money from the U.S. Government by falsifying his travel expenses. When Timothy James Nelson, the defendant first began working in Jerusalem, the U.S. Department of State Regional Security Office made his hotel arrangements at the Waldorf Astoria Hotel in Jerusalem. The nightly rate at that hotel was $360.00 per night, which was the U.S. Government lodging per diem in Jerusalem.  The Government’s statement of facts alleged that beginning on or about July 3, 2015, the defendant elected to stay at a third location for a cheaper hotel rate but asked for travel reimbursements at the maximum lodging per diem. The defendant was reimbursed a total of $59,300 for five stays of different durations at Jerusalem Apartments. Since he was only charged half of that amount by Jerusalem Apartments, the defendant stole or converted for his own use $29,650 from the U.S. Department of State. See the attached documents below:

Navarre Man Pleads Guilty to Stealing Money from the Government by Falsifying Travel Expense Claims

PENSACOLA, FLORIDA – Timothy James Nelson, 36, of Navarre, Florida, has pled guilty to theft of government funds. The guilty plea was announced by Christopher P. Canova, United States Attorney for the Northern District of Florida.

Documents introduced at the time of the guilty plea reflect that, between July 1, 2015, and April 1, 2016, Nelson submitted false travel expense claims for hotel stays to steal $29,650 from the U.S. Department of State. Nelson did so while working as a contractor in Jerusalem for a security company installing and repairing communication equipment in vehicles operated by employees of the U.S. Department of State.

Nelson faces a maximum of 10 years in prison. The sentencing hearing is scheduled for June 16 at 1:00 p.m. at the United States Courthouse in Pensacola.

The case was investigated by special agents from the United States Department of State’s Office of Inspector General (DOS-OIG), Steve A. Linick inspector general. It was prosecuted by Assistant United States Attorney J. Ryan Love.

The United States Attorney’s Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General. To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website. For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

Financial Fraud
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US Embassy Colombia: DEA Employee/Spouse Plead Guilty to False Statements in Kidnapping Hoax

— Domani Spero
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Via USDOJ:

Nydia L. Perez and John A. Soto, both 44, of Haymarket, Virginia, pleaded guilty to one count of making false statements to law enforcement officials in federal court on Friday, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Director for International Operations John Boles of the FBI.

According to the plea agreement, in December 2013, Perez, an employee of the Drug Enforcement Administration, and her husband Soto, a private contractor in the United States Embassy in Bogotá, Colombia, designed and executed a hoax with the intention of defrauding the United States Embassy in Bogotá.   As part of the hoax, Perez and Soto fabricated a plot to kidnap minors who are United States citizens.

According to court filings, Perez and Soto sent, through electronic mail and courier services, information about a purported threat to the safety of minor United States citizens in Bogotá.   Perez and Soto added detailed descriptions of the targeted United States citizens, including information about their whereabouts and daily routines.   Perez and Soto included photographs of the citizens in order to enhance the seriousness of the threat, and attempted to implicate innocent individuals in the kidnapping plot.   Perez and Soto made numerous false representations to law enforcement and security officials in furtherance of the fabricated kidnapping plot.

Sentencing before U.S. District Judge Amy Berman-Jackson is scheduled for Aug. 21, 2014.

The investigation was conducted by the FBI Legal Attaché in Bogotá and the Extra-Territorial Squad of the FBI Miami Field Office.   Also participating in the investigation were the DEA, the U.S. Embassy Bogota Regional Security Office, and the U.S. Embassy Bogota Force Protection Detail.   The Department is grateful for the assistance of the Colombia National Police Directorate of Anti-Kidnapping and Anti-Extortion.

On the Factual Basis for Plea, the government provides the following details:

  • On December 14, 2013, PEREZ and SOTO caused an e-mail to be sent to the American Citizen Services section of the United States Embassy, which described a plan by unnamed individuals to kidnap SOTO’s minor children, who are United States citizens. The e-mail included photos of the minor children engaged in various everyday activities in order to enhance the seriousness of the threat. In furtherance of the hoax, PEREZ and SOTO also mailed a package to the United States Embassy. The package contained a written description of the threat and additional photos of the children, in order to demonstrate the seriousness of the threat.
  • PEREZ met with agents of the Federal Bureau of Investigation (“FBI”) on December 17, 2013 to discuss the kidnapping threat. PEREZ lied to the FBI as to her knowledge of the purported kidnapping plot, stating that the only person she could think of who was capable of creating a kidnapping plot was her family’s doorman, Heder Vargas. PEREZ falsely represented that she and SOTO, as well as SOTO’s minor children, were potential targets of the purported kidnapping plot, although she knew the kidnapping plot was in fact a hoax. During the December 17, 2013 meeting, PEREZ did not inform the FBI that she knew there existed no actual threat to herself, SOTO, or SOTO’s children.

 

U.S. Embassy Bogota, Colobia Photo via state.gov

U.S. Embassy Bogota, Colombia
Photo via diplomacy.state.gov

We really don’t get this.  The intention was to defraud the U.S. Embassy in Bogota? How were they doing to do that? Since the U.S. Government cannot participate in developing and implementing a ransom strategy in kidnappings, it follows that ACS Sections do not have hidden money in their vaults.  In any case, whatever was the plan, it didn’t work.

Which made us dig up this section of the FAMeven overseas, kidnapping of U.S. citizens are federal crimes for which the FBI has authority to investigate under the U.S. Criminal Code. And certainly, kidnapping threats against a mission employee/family would be handled beyond the Consular Section.

According to court filings, Count One, Making a Materially False Representation, in violation of Title 18, United States Code, Section 1001(a)(2) (a Class D Felony) carries a maximum sentence of five (5) years of imprisonment, a fine of $250,000, and a $100 special assessment, a three (3) year term of supervised release, an order of restitution, and an obligation to pay any applicable interest or penalties on fines or restitution not timely made.

Sentencing is scheduled for 8/21/2014 at 10:00 AM in Courtroom 3 before Judge Amy Berman Jackson. The case is USA v. PEREZ, Magistrate judge case number: 1:14-mj-00086-AK and USA v. SOTO, Magistrate judge case number: 1:14-mj-00087-AK.

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Ex-State Dept Contract Employee And Husband Plead Guilty To $53 Million Fraud

— By Domani Spero

We have previously posted about this case in May 2013 (See State Dept Contract Employee/Husband Indicted For Alleged Secret Scheme to Steer More Than $60 Million Contracts to Their Company).

On August 2, the USDOJ announced that the former contract employee Kathleen D. McGrade, age 64, and her husband, Brian C. Collinsworth, age 47, of Stafford, Va., pleaded guilty to major fraud against the government. Sentencing is scheduled for November 2013. Each faces a maximum sentence of 30 years imprisonment. The Daily Caller who broke this story in 2011 says that McGrade was a contractor working for the State Department’s office of Overseas Building Operation.

Via USDOJ:

ALEXANDRIA, Va. – Kathleen D. McGrade, age 64, and Brian C. Collinsworth, age 47, of Stafford, Va., pleaded guilty today to major fraud against the government, conspiracy to launder monetary instruments, and engaging in unlawful monetary transactions.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Harold W. Geisel, Acting Inspector General for the Department of State; and Thomas J. Kelly, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Section, Washington, D.C. Field Office, made the announcement after the plea was accepted by United States District Judge Liam O’Grady.

“Defendants McGrade and Collinsworth- now convicted felons-defrauded and stole from the American people, plain and simple,” said U.S. Attorney Neil H. MacBride.  “We, along with our law enforcement partners, are committed to ferreting out and prosecuting those that destroy the integrity of the government contracting process.”

“I commend our investigators on their excellent work in this case, and diligence in protecting taxpayer dollars,” said Harold W. Geisel, Acting Inspector General, U.S. Department of State and Broadcasting Board of Governors.

“The scope and breadth of this fraud is reprehensible, not just because of the dollars involved, but because of the position of trust that Ms. McGrady held,” said Special Agent In Charge Kelly.  “Her actions denied small businesses the opportunity to compete for these government contracts and that is unacceptable.  Today’s pleas put corrupt business owners like Ms. McGrade and Mr. Collinsworth on notice, that the government will get to the truth no matter how they try to disguise their business transactions.  IRS-CI will continue to work with the United States Attorney and our other law enforcement partners to root out these corrupt business owners.”

McGrade and Collinsworth were indicted on April 25, 2013, by a federal grand jury on charges of conspiracy, major fraud against the government, wire fraud, false statements, and engaging in unlawful monetary transactions.  Each defendant faces a maximum penalty of 30 years imprisonment when they are sentenced on November 8, 2013.

In a statement of facts filed with the plea agreement, the defendants admitted that McGrade was a contract employee for the Department of State and performed the role of a contract specialist for an office that awarded construction contracts for work done at U.S. embassies worldwide.  Collinsworth worked at one of the companies that received contracts.  In 2006, the defendants married, but did not tell others at the Department of State.  The defendants started a company, the Sterling Royale Group, or SRG, with McGrade serving as the president and Collinsworth the vice-president and project manager.

In late 2007, McGrade caused a State Department contracting officer to sign a contract between the Department of State and SRG, and McGrade failed to disclose her role in SRG, her marriage, or that proper contracting competitive procedures had not been followed.  The contract made SRG eligible to receive task orders for work to be done at embassies and McGrade  began steering work to the company. She acted as the contract negotiator between the Department of State engineers responsible for getting the jobs done, on the one hand, and Collinsworth, who was acting on behalf of SRG and the subcontractors, on the other.  Between 2008 and 2011, McGrade caused  Department of State contracting officers to sign 17 task orders awarding work worth almost $53 million.  In 2010, the defendants also lied about their marriage to investigators conducting McGrade’s background investigation regarding renewal of her security clearance.

In the summer of 2011, a news article disclosed the defendants’ marriage and the Department of State terminated her employment.  The Department of State, however, had paid SRG about $39 million, and after the defendants had paid their subcontractors, they still had millions of dollars.  Among other things, they bought houses, a condominium, a yacht, a Lexus automobile, jewelry, and a Steinway piano with the fraudulently obtained money.  The defendants have agreed to forfeit all of those items.

This case was investigated by the Department of State, Office of Inspector General, and the Global Illicit Financial Team, a task force led by the Criminal Investigation Section of the Internal Revenue Service.  Assistant United States Attorneys Jack Hanly and Mark Lytle are prosecuting the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on https://pcl.uscourts.gov.

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