Wife of Former Department of Energy Executive Pleads Guilty in Scheme to Defraud the Government

September 4, 2012

Greenbelt, Maryland - Karen Strayer (formerly Karen Earle), age 48, of Lovettsville, Virginia, pleaded guilty today to aiding a former government employee, who became her husband, to defraud the government by causing government contracts to be awarded which secretly benefitted Earle and her husband personally.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Inspector General for the Department of Energy Gregory H. Friedman. The criminal case is the culmination of a more than two year investigation by the Department of Justice and the Department of Energy’s Office of Inspector General.

According to her plea agreement, from June to August 2006 Dr. Michael Strayer, who was a member of the Senior Executive Service at the Department of Energy (DoE), helped Earle obtain employment as a consultant with a scientific publishing company to obtain articles for a magazine called the SciDAC Review. DoE provided funding to the publishing company to produce the magazine.

Shortly thereafter, Earle and Strayer began dating.

Between June and November 2007, Strayer directed the publisher to contract with Earle. Staryer personally approved the terms of the contract, which provided for payments to Earle of nearly $100,000 per issue. On November 1, 2007, the publisher awarded Earle a second contract for the publication of four issues of the magazine in 2008.

In March 2008, Earle and Strayer purchased a home together in Lovettsville, Virginia. Earle made a $120,000 down payment, in part from funds she obtained on the SciDAC Review contract. For at least the next year, Strayer lived there alone and Earle remained in Tennessee.

In September and October 2008, Strayer helped negotiate an additional contract between the publisher and Earle to cover four issues of SciDAC Review to be published in 2009.

On June 18, 2009, Strayer executed a document with DoE’s General Counsel in which he formally recused himself from participation in any DoE matter in which Earle was a party. Earle and Strayer married in August 2009. Earle helped Strayer make mortgage payments on the Virginia house and paid for home renovations, from funds she received under her contracts with the publisher.

Despite the recusal and their marriage, Strayer remained involved in the publication of the magazine and in procuring further work for Earle. Earle and Strayer met with officials from the Review’s publisher in August 2009 to plan a significant expansion of the magazine to create additional contracts for Earle. As a result of those discussions, Earle and the publisher executed three contracts on September 1, 2009 that would have provided for payments to Earle of over $980,000 to perform work on 2010 issues of the magazine. The publisher stopped payment in October 2009 on the subcontracts due to complaints of impropriety regarding Earle, Strayer and the magazine. During the ensuing criminal investigation, Earle sued on four contracts and received a settlement from the publisher. The net gain to Earle on the contracts executed after the recusal letter was $104,000.

Earle faces a maximum sentence of one year in prison followed by one year of supervised release and a $100,000 fine. As part of her plea agreement, Earle has agreed to pay restitution of $104,000. U.S. District Judge Alexander Williams, Jr. scheduled sentencing for December 6, 2012 at 9:30 a.m.

Co-defendant Dr. Michael Strayer was indicted along with Earle in May 2012. He has since died.

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force - chaired by Assistant Attorney General for the Criminal Division Lanny A. Breuer - includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrate the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.

United States Attorney Rod J. Rosenstein thanked the Department of Energy for its work in the investigation and praised Assistant U.S. Attorney Adam Ake, who is prosecuting the case.

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