FOR FURTHER INFORMATION CONTACT
AUSA VICKIE E. LEDUC or
MARCIA MURPHY at 410-209-4885
FEBRUARY 8, 2007
FOR IMMEDIATE RELEASE
FORMER NSA EMPLOYEE PLEADS GUILTY TO CONFLICT OF INTEREST
Over $770,000 in Contracts Awarded to Companies In Which He Had A Financial Interest
Baltimore, Maryland - Wayne J. Schepens, age 37, of Severna Park, Maryland, pleaded guilty today to engaging in a conflict of interest by using his official position as a National Security Agency (NSA) employee to cause government contracts to be awarded to companies owned and operated by Schepens or his spouse, announced United States Attorney for the District of Maryland Rod J. Rosenstein and Alice S. Fisher, Assistant Attorney General for the Criminal Division, United States Department of Justice.
United States Attorney Rod J. Rosenstein said, “While he was working for NSA, Wayne Schepens arranged to award government contracts worth over $770,000 to companies in which he and his wife had a financial interest. It is a crime for government employees to participate in awarding contracts that bring them personal financial benefits."
According to the plea agreement, Schepens was an employee of NSA from January 1998 until his resignation on July 26, 2006. During his government employment, Schepens co-created and directed the Cyber Defense Exercise (CDX), an annual information assurance competition between students at various military service academies. The CDX was first held in the Spring semester of 2001 while Schepens was assigned as an NSA visiting fellow at the U.S. Military Academy at West Point, New York. Thereafter, the CDX was held annually through 2006. In the CDX, “blue” teams from the participating service academies were graded on their ability to protect computer networks from attacks by “red” teams of “hackers.” The red teams were generally comprised of NSA employees and military reservists.
As part of his official duties, Schepens essentially directed the CDX. In particular, he determined which support services were to be provided by government employees or by government contractors for the CDXs; determined the scope of the work to be obtained through government contracts; recommended whether any government contracts should be obtained by competitive bidding or as “sole source” procurements; and determined the sources of funding and obtained funding for government contracts to support the exercise.
Schepens knew that he had financial interests which were likely to be affected by his participation in the CDXs. Between March 2003 and July 2005, companies owned and operated by Schepens or his spouse obtained over $770,000 in government contracts or subcontracts with the U.S. Military Academy, the U.S. Merchant Marine Academy at Kings Point, New York, and the Naval Postgraduate School at Monterey, California to provide support of the CDXs.
Additionally, Schepens and his spouse, through their companies, were paid $54,000 on invoices they submitted to both the U.S. Merchant Marine Academy and the U.S. Military Academy under separate contracts for the same or similar services rendered.
Schepens also recommended that military purchasing requests of $720,000 be issued by NSA to the Naval Postgraduate School for the 2005 and 2006 CDXs, intending that $640,000 of those funds would be used to enter into a subcontract and a contract with his spouse’s company, CDXperts, Inc. Schepens has a financial interest in CDXperts, as payments made on government contracts awarded to CDXperts were deposited into the joint bank account of Schepens and his spouse. Schepens recommended the award of the subcontract and contract to CDXperts without competitive bidding and the contracts were so awarded. During the contract negotiations with other government employees in which he recommended that the contracts be “sole sourced,” Schepens represented CDXperts’ interests. CDXperts was paid a total of $606,402.69 under these two contracts with the Naval Postgraduate School.
Schepens did not identify CDXperts as a source of income for himself and his spouse on the confidential financial disclosure report for 2004, as required. When, after learning of the existence of a governmental investigation into his alleged conflict of interest, Schepens subsequently listed CDXperts on his financial disclosure report for 2005, his supervisor recognized the conflict of interest that existed between Schepens’ official duties and financial interests, and removed him from further participation in the 2006 CDX.
Schepens faces a maximum sentence of five years in prison followed by three years of supervised release and a $250,000 fine. U.S. District Judge Catherine C. Blake has scheduled sentencing for April 6, 2007 at 9:00 a.m.
United States Attorney Rod J. Rosenstein praised the investigative work performed by the National Security Agency Office of Inspector General, with assistance from the Federal Bureau of Investigation. Mr. Rosenstein thanked Assistant U.S. Attorney Jonathan Biran and Trial Attorney Eileen Gleason of the Public Integrity Section of the U.S. Department of Justice, who are prosecuting the case.