Corporate CEO, Vice President and Accountant Plead Guilty to Conspiracy to Defraud Publicly Traded Maryland Company of over $1.4 Million

Corporate Officers Lined Their Pockets By Secretly Controlling
Side Business that Overcharged Company

April 29, 2010

Greenbelt, Maryland - Richard Vernon Priddy, age 61, of Glenn Dale, Maryland, Charles Loren Sample, age 62, of Annapolis and Joseph Michael Broullire, age 57, of Bethesda, Maryland, pleaded guilty to their roles in a scheme to defraud the company where Priddy and Sample worked of over $1.4 million. Priddy pleaded guilty yesterday and Sample and Broullier pleaded guilty today to conspiracy to commit wire fraud. Priddy and Sample also pleaded guilty to filing a false tax return in connection with the scheme.

The guilty pleas were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge C. André Martin of the Internal Revenue Service - Criminal Investigation; and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

“High-ranking corporate officials hold positions of trust not only in their companies but also in the eyes of the public. That trust is broken when such officials abuse their power and misuse their positions,” stated C. André Martin, Internal Revenue Service-Criminal Investigation Special Agent in Charge, Washington DC Field Office. “No matter what your career or position is in a corporation, all U.S. citizens are obligated to comply with the tax laws.”

According to their plea agreements, from 2002 to 2007, during the period of the conspiracy, Priddy and Sample were employed by TVI Corporation, including as Chief Executive Officer/President and Executive Vice President, respectively. TVI Corporation, which at that time was a publicly traded company, was located in Glenn Dale, Maryland, and supplied products designed to assist first responders in addressing homeland security emergencies, including systems designed to decontaminate first responders exposed to toxic compounds, such as radiological agents. By the fall of 2002, Priddy and Sample learned that certain parts TVI was purchasing to manufacture decontamination systems were available at a significantly lower price from another manufacturer in Seattle, Washington. Priddy and Sample decided to secretly form a separate company, which would purchase the parts from the Seattle company and resell them to TVI. They had their personal accountant, Broullire, a certified public accountant, form the new company and act as its representative. In February 2003, Broullire formed Containment & Transfer Systems, LLC (“CATS”) which purchased the parts from the Seattle company and re-sold them to TVI at approximately double the price that CATS paid to purchase the parts. Between 2003 and 2005, Priddy, Sample and Broullire caused TVI to pay CATS more than $2.5 million for the parts, approximately $1.4 million more than the price CATS paid. Priddy and Sample agreed to receive most of the proceeds. Broullire formed trusts and opened bank accounts in the names of the trusts, into which $400,000 was transferred for the benefit of Priddy and Sample. Broullire was supposed to receive about 15% of the proceeds.

In October, 2005, the use of CATS was discontinued, and another company was formed, called Torrence Emergency Response Products, LLC (“TERPS”), to do business with TVI in the same way.

Between 2003 and 2005, Priddy and Sample received hundreds of thousands of dollars from the sale of parts to their own company. In addition to receiving other payments, Priddy used more than $40,000 in proceeds from the sale of these parts to purchase a yacht. Neither Priddy nor Sample disclosed to TVI’s Board of Directors their roles with respect to CATS and TERPS, including their benefit from those roles.

Priddy and Sample also failed to report to the IRS this income, as well as income from another side business in Europe. In the fall of 2002, Priddy and Broullire formed a foreign corporation to purchase decontamination heaters from a manufacturer based in Verona, Italy, and re-sell them to a manufacturer based in Buckinghamshire, England. Broullire and Priddy traveled to the Island of Jersey, a dependency of the British Crown in the Channel Islands, where they established the foreign corporation. To store the proceeds of the European business, Priddy established a second foreign company called Global Contract Manufacturing Ltd., and opened a foreign bank account in that company’s name. In 2005, Priddy and Sample received approximately $177,000 in income that was transferred from the foreign account to the United States. On their individual income tax returns for 2004 and 2005, Priddy and Sample failed to report this income, in addition to the CATS and TERPS income, and failed to report their interest in the foreign bank account.

In addition to defrauding TVI, for tax years 2004 and 2005, the CATS and TERPs income was not reported on the individual income tax returns filed by Priddy and Sample, nor did they report their financial interest in the foreign bank accounts.

The defendants face a maximum sentence of five years in prison for the wire fraud conspiracy. Priddy and Sample also face a maximum of three years in prison for filing a false tax return. U.S. District Judge Alexander Williams, Jr. has scheduled sentencing for Priddy and Sample on July 23, 2010 at 9:30 a.m. and 2:00 p.m., respectively, and for Broullire on July 22, 2010 at 10:00 a.m.

On March 25, 2010, the Securities and Exchange Commission filed a settled injunctive action in the United States District Court for the District of Maryland against the defendants related to their schemes to defraud TVI and its shareholders.

United States Attorney Rod J. Rosenstein commended Assistant United States Attorney Michael R. Pauzé, who is prosecuting the case.


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