7 Plead Guilty in Corruption Scheme: US Attorney - NBC 7 San Diego

7 Plead Guilty in Corruption Scheme: US Attorney

Defense contractors provided Navy officials with more than $1 million in personal benefits, according to U.S. Attorney



    Defense contractors vying for lucrative Navy contracts admitted to spending more than $1 million on gifts like massage chairs, model airplanes and flat screen TVs according to federal prosecutors.

    On Wednesday, prosecutors revealed the names of those contractors along with the Navy officials who accepted them.

    Four Navy officials and three defense contractors plead guilty in a wide-range corruption scheme at the Naval Fleet Readiness Center at NAS North Island in Coronado, according to the U.S. Attorney’s Office.

    U.S.  Attorney Laura E. Duffy said in a statement as part of the conspiracy, defense contractors provided Navy officials with more than $1 million in personal benefits, including cash, luxury massage chairs, home furniture and appliances, bicycles, model airplanes, gift cards and flat screen televisions.

    7 Plead Guilty in Corruption Scheme: US Attorney

    [DGO] 7 Plead Guilty in Corruption Scheme: US Attorney
    Seven people pleaded guilty Wednesday in a wide-ranging corruption scheme at Naval air station North Island in Coronado. Lea Sutton spoke with Assistant U.S. Attorney Robert Huie, who is prosecuting the case, and Mari Payton also investigated the background of the contractors behind the scheme.
    (Published Monday, May 28, 2012)

    In addition to fraudulently charging the government for these benefits the contractor co-conspirators charged the government a "mark-up" in the amount of 25 percent or more.

    Court documents show Vangundy received new cabinets and counter tops, gift cards to Best Buy, Lowe’s, Apple and REI along with a boat transmission and car repairs.

    These complaints followed the July 2009 indictment of six individuals on fraud and corruption charges centered at the Space and Naval Warfare Systems Command, according to prosecutors.

    In return, the Navy officials allegedly placed millions of dollars in fraudulent orders with the defense contractors.

    Defendants include: Donald Vangundy, 54, from Chula Vista; Kiet Luc, 53, from San Diego; Brian Delaney, 55, from La Mesa; David Lindsay, 57, from San Diego; John Newman, 51, from Poway; Michael Graven, 43, from Carlsbad and Paul Grubiss, 39, from Wickliffe, Ohio.

    Luc received benefits amounting to at least $559,700 including checks, gift cards and cash, a shed and grill worth approximately $4,000 and a massage chair worth $3,700, according to court documents.

    Luc’s supervisor, Lindsay, received $20,000 in labor and appliances for the remodeling of his home, $4,900 in electronics including three televisions and a computer and a massage chair worth $1,500.

    Documents also showed that contractors paid $50,000 in labor and materials to remodel Delaney’s home and bought him three televisions worth $5,000 and a massage chair worth $3,700.

    In addition, documents show contractors gave Vangundy $413,500 worth of gifts including a bicycle frame and parts totaling $5,000 in July 2008 and a model aircraft engine worth $4,400 in December 2009.

    On Aug. 23, two other individuals were charged in the same case. Robert Ehnow, the owner and president of Poway defense contracting company L&N and Joanne Loehr, the owner and operator of Poway defense contracting company Centerline Industrial Inc. Centerline was also charged as a corporation.

    Loehr and Ehnow were charged with six felony counts of bribery. Both plead not guilty to the charges.

    U.S. Attorney Duffy said in a statement that the investigation is ongoing and urged anyone with information is encouraged to contact the Procurement Fraud Working Group hotline at 877-662-7423

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