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2 Guilty in Navy Bribery Scheme

Thursday, March 7, 2013

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Two San Diego-area defense contractors and one of their companies have been convicted in a long-running scheme that authorities said exchanged bribes and gifts for millions of dollars in Navy contracts.

A federal jury in southern California deliberated two days after a week-long trial before finding each defendant guilty Monday (March 4) of conspiracy and bribery charges, the FBI said.

Convicted were Robert Ehnow, 46, owner and president of L&N Industrial Tool & Supply Inc. of Poway, CA; Joanne Loehr, 52, owner and operator of Centerline Industrial Inc., also of Poway; and Centerline itself.

The verdicts were the latest in a widening scandal related to work at the Navy's Fleet Readiness Center located at the NAS North Island. The new verdicts bring to 11 the total number of individuals convicted in the scheme.

TVs, Gift Cards and Cash

Contractors showered Navy officials at Naval Air Station North Island in Coronado, CA, with cash, checks, gift cards, flat screen TVs, luxury massage chairs, bicycles, model airplanes, and other items, the FBI reported.

The defendants also submitted fraudulent invoices to the Department of Defense that appeared to bill the department for goods and services within the scope of legitimate contracts. However, the department was unknowingly paying for the cost of bribes, authorities said.

U.S. Navy

Eleven individuals have been convicted in the scheme, which involved work on the E2/C2 aircraft program at the Navy's Fleet Readiness Center in Coronado, CA.

L&N and Centerline also engaged in money laundering by using their government contracts to fraudulently bill the Navy for items that were never supplied, the FBI said.

According to the FBI, the Defense Department paid more than $3 million to Ehnow's company over the course of the conspiracy; Centerline received more than $1.5 million. A third contractor, X&D Supply Inc., of Carlsbad, CA,  was paid more than $2 million. (X&D's owner is among those previously convicted in the case.)

The charges and verdicts in the current case were as follows:

  • Conspiracy to commit bribery. All defendants were charged with, and found guilty of, one count. The crime carries up to five years in prison and a fine of $250,000.
  • Bribery. Ebnow was charged with six counts and found guilty of one. Loehr and her company were charged with five counts each and convicted of four counts each. Each count carries up to 15 years in prison and a $250,000 fine.

L&N, also known as Mardoc Corporation, filed for Chapter 7 bankruptcy in June 2011, the FBI said. Centerline, which Loehr inherited from her late husband in 2005, remains in business.

Sentencing has been scheduled for May 20.

'Shocking,' 'Brazen' Fraud

Like earlier defendants in the case, Ebnow, Loehr and Centerline were involved in the Navy's E2/C2 aircraft program, which is dedicated to maintaining the tactical readiness of the aircrafts, authorities said.

Centerline Industrial
Centerline Industrial

Centerline Industrial Inc., a full-line industrial tooling distributor, and owner Joanne Loehr were convicted of bribery and conspiracy charges. The California company remains in business.

The investigation into the scandal was triggered by citizen complaints, according to U.S. Attorney Laura Duffy. After six people were charged with corruption and fraud in 2009 at the Space and Naval Warfare Systems Command, the government dedicated a hotline to reporting potential waste, fraud, and abuse related to government and military contracts.

"This case, which has snared 11 Navy officials and defense contractors, is shocking for the brazen way the parties conspired to take millions of dollars out of public coffers for big-screen TVs and massage chairs," said Duffy.

"We won't stand for these secret deals between greedy defense contractors and government officials, who received luxurious gifts at taxpayers' expense ... Today's verdicts send a clear signal that our community will not tolerate corruption."

Wikipedia

In addition to the two individuals found guilty Monday, five Navy officials and four contractors were convicted in 2012 in the bribery scandal at Naval Air Station North Island, shown here in 1977.

Earlier Pleas

In March 2012, nine individuals, including five Navy personnel, pleaded guilty in the case. They were:

  • Donald Vangundy, a Navy official who oversaw tool control for the E2/C2 program and was promoted to supervise and authorize the purchase and replacement of tools for all Fleet Readiness programs;
  • Kiet Luc, a Navy official who served as liaison and coordinator for the tools in the program and was responsible for maintaining and controlling the tool program;
  • David Lindsay, a Navy official who was the supervisory production controller for the program;
  • Brian Delaney, a Navy official who was the E2/C2 deputy program manager;
  • Kenneth Ramos, who worked in North Island’s Industrial Business Operations Department;
  • Michael Graven, owner and operator of X&D Supply Inc. who was paid at least $2.26 million in connection with the fraud;
  • John Newman, a sales manager and former owner of an unidentified defense contractor who was paid at least $3.31 million related to the scheme;
  • Paul Grubiss, a sales manager for an unidentified defense contractor who received about $1 million in connection with the fraud; and
  • Jesse Denome, owner of JD Machine Tech Inc.

Vangundy and Luc also pleaded guilty to filing false tax returns for knowingly failing to report the value of the unlawful benefits they received.

Graven also pleaded guilty to aiding and assisting in the filing of a false tax return by his business, for knowingly taking improper tax deductions for the illegal payments.

"We are extremely pleased at this outcome, which yet again sends the message that corruption will be vigorously investigated and prosecuted," Chris Hendrickson, Special Agent in Charge, Defense Criminal Investigation Service, Western Field Office, said after those pleas,

"This investigation clearly attests that those who compromise the integrity of the United States will face their day of reckoning. Corruption of this nature strikes at the heart of our national security and erodes public confidence."

   

Tagged categories: Department of Defense (DOD); Enforcement; U.S. Navy

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