Poway-Based Defense Contractors Sentenced for Fraud

Four former Navy officials and three defense contractors were sentenced to prison and probation terms Tuesday for their admitted roles in a wide-ranging fraud and corruption scheme at Naval Air Station North Island.

U.S. District Judge Larry Burns handed down the sentences in federal court in downtown San Diego. Two of the defense contractors worked for Poway-based companies.

The defendants pleaded guilty in March to taking part in a conspiracy in which defense contractors provided Navy officials with over $1 million worth of gifts—including cash, gift cards, flat-screen televisions and home-remodeling services—in return for millions of dollars in fraudulent work orders, according to the U.S. Attorney’s Office in San Diego.

The ex-naval officials charged in the case were Brian Delaney, David Lindsay, Kiet Luc and Donald Vangundy. They worked in a maintenance program for the Navy’s E-2 and C-2 aircraft at the Coronado air base.

The four admitted to receiving a total of more than $1 million in cash, goods and services for their personal use, all fraudulently charged to and paid for by the Department of Defense.

Delaney and Lindsay were each sentenced to five years’ probation, along with 30 consecutive weekends in federal custody. Luc received a 30-month prison term, while Vangundy was ordered to serve 41 months behind bars.

The three other co-defendants were Michael Graven, owner-operator of X&D Supply Inc. in Carlsbad; Paul Grubiss, sales manager of Centerline Industrial Inc. in Poway; and John Newman, sales manager of L&N Industrial Tool & Supply in Poway. Each was sentenced to serve 18 months in custody.

All seven defendants pleaded guilty to conspiracy to commit wire fraud. Grubiss and Vangundy also admitted to conspiring to commit bribery, and Graven, Luc and Vangundy pleaded guilty to filing false tax returns.

Each defendant was ordered to pay restitution to the Department of the Navy, and three of them must reimburse the Internal Revenue Service. The combined awards total over $3 million.

Additionally, the court ordered forfeiture of dozens of valuables deemed proceeds of the fraud scheme, and the defendants who received prison terms also were sentenced to serve three years of supervised release upon their release.

Two other defendants in the case—Robert Ehnow, owner of L&N; Joanne Loehr, owner of Centerline; and the latter company itself, as a corporate entity—have entered not guilty pleas to bribery charges and are awaiting trial.

The investigation into the crimes was prompted by citizen complaints following the July 2009 indictment of six people on similar allegations at Space and Naval Warfare Systems Command in San Diego, according to prosecutors.

As part of the SPAWAR corruption case, the government created a hotline dedicated to the reporting of possible waste, fraud and abuse in government and military contracts.

-City News Service