A federal employee who engages in fraud against the federal government is, fortunately, relatively rare. But, while there are not many well publicized cases involving these issues, they do happen and can involve a considerable amount of money.
The latest annual report from the Office of Government Ethics (OGE) was recently issued highlighting cases of particular interest.
Wire Fraud, Illegal Gratuities and Conflict of Interest
One significant case involved a military facility in Prince George’s County, Maryland under the jurisdiction of the Air Force. The charges against a retired federal employee included wire fraud, receiving illegal gratuities and having a conflict of interest while he was a federal employee.
The federal employee involved was James Shank. According to the indictment, from about August 28, 2006 until he retired on or about June 30, 2011, Shank was a Program Manager with the Navy’s Space and Naval Warfare (SPAWAR) Systems Center. Shank’s job was to work with various military services and agencies within the Department of Defense to procure telecommunications equipment and software and related services.
There were “co-conspirators” working with Shank on the scheme according to the indictment.
Co-Conspirator 1 was a Department of Defense Account Manager for Iron Bow Technologies, LLC (Iron Bow). Iron Bow “provided IT consulting and services to the government.” According to the indictment, co-conspirator 1 received $565,488.92 in salary and commission from Iron Bow, principally for sales associated with government contracts.
Co-Conspirator 1 was an owner of and operated an information technology company, Superior Communications Solutions, Inc. (SCSI).
Co-Conspirator 2 was a program manager for Advanced C4 Solutions (AC4S) from 2005 until 2011. AC4S was an information technology company with headquarters in Tampa, Florida. In 2011, Co-Conspirator 2 left AC4S and went to work for Co- Conspirator 1 at SCSI.
According to the idictment, Co-Conspirator 1 and Co-Conspirator 2 conspired to devise, execute and attempt to execute a scheme to defraud the United States, and to obtain money and property through false and fraudulent pretenses, representations and promises.
It was part of the conspiracy and scheme to defraud that James Shank improperly shared information with Co-Conspirator 1 and Co-Conspirator 2 to give them and the companies they worked for and owned an unfair competitive advantage in the government procurement process. This also involved submitting false invoices.
Co-Conspirator 1 also offered Shank a job with SCSI while Shank was still a federal employee and while he was taking official actions that benefited the co-conspirator.
In 2009, Shank was the SPAWAR program manager for a project to buy technology for two buildings at at the military facility in Maryland. From 2009 through 2012, Shank conspired with John Wilkerson, an employee and part owner of contracting companies to steer government contracts to these defense contractor companies.
Shank allegedly approved more than $1.1 million dollars of invoices that benefitted a defense contractor and John Wilkerson. He was also accused of falsely asserting the federal government received more than $1 million dollars of goods which the government did not actually receive. Wilkerson paid Shank $86,000 after he retired from government service and funneled the payment through two other companies as a way to conceal the source of the funds.
According to the Office of Government Ethics report, Shank entered into a plea agreement after an initial charge of wire fraud conspiracy; receipt of illegal gratuities; and conflict of interest. In a plea agreement, he pleaded guilty to conspiracy to commit wire fraud and was sentenced to three months of imprisonment, three years of supervised release (with the additional condition of 30 months of home detention), restitution in the amount of $1,000,000, and an assessment of $100.
In a separate proceeding, Wilkerson was charged with illegal gratuities and wire fraud conspiracy. Wilkerson ultimately pleaded guilty to the wire fraud conspiracy charge and was sentenced to five years of imprisonment, three years of supervised release, and a $100 assessment. Wilkerson also was ordered to pay forfeiture and restitution in the amount of $9,441,340.11.