September 24, 2001
(410) 209-4854

BALTIMORE, MD. -- United States Attorney Thomas M. DiBiagio announced today that McCoy Systems, Inc., a Maryland corporation based in Columbia, Maryland, and its president and owner, Paul McCoy, have agreed to pay $600,000.00 in penalties for failing to disclose to the Internal Revenue Service (IRS) that they were paying fees contingent on the award of a contract with the IRS. Paul McCoy and his company, formerly known as Washington Data Systems, Inc., entered into a multi-million dollar computer maintenance contract with the IRS in 1993. The contract lasted until 1996 and covered hardware and software maintenance support at IRS Computing Centers in Martinsburg, West Virginia and Detroit, Michigan and the IRS National Office in Washington, D.C.

Under federal law, McCoy and his company were required to disclose to the IRS whether or not they were paying fees that were contingent on obtaining the IRS contract. These disclosures are mandated because such contingent fee arrangements may lead to attempted or actual exercise of improper influence on officials overseeing government contracts.

In this case, McCoy and his company paid contingent fees of approximately 5 percent of the contract proceeds to two individuals, Mark Nicholas and Paul Kinter. These arrangements were never disclosed to the IRS. Both Nicholas and Kinter were later indicted by the United States Attorney's Office and pled guilty to bribery of Scott King, an IRS employee who was pivotal in awarding the contract. King was also indicted and pled guilty to accepting a bribe. Nicholas, Kinter and King are now serving prison terms. This investigation underscores the fact that contractors with the federal government have to be honest and forthright. Further, they have to provide complete and truthful disclosures when required by federal law. Had the IRS known about the contingent fee agreements in this case, McCoy and his company never would have been awarded the IRS contract and the bribery scheme would have been thwarted. The large monetary penalties are needed to deter such conduct in the future.

The government's investigation was handled by Assistant U.S. Attorneys Charles J. Peters with support from the Office of Treasury Inspector General for Tax Administration in the Department of the Treasury.