Geologist Pleads Guilty to Bribery Scheme in Which He Assisted Companies to Obtain Contracts with Lehigh Cement Company
Baltimore, Maryland - Michael W. Kilbourne, age 48, formerly of Macungie, Pennsylvania, now of Toronto, Canada, pleaded guilty today to conspiracy, in connection with a scheme in which Kilbourne received bribes and kickbacks in exchange for assisting a company to obtain excavating and hauling contracts with Lehigh Cement Company.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Acting Postal Inspector in Charge Keith A. Fixel of the U.S. Postal Inspection Service - Washington Division; and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.
According to his plea agreement, Kilbourne was a geologist employed to provide assistance at Lehigh Cement Company quarries, including the quarry and manufacturing plant located in Union Bridge, Maryland. Kilbourne’s duties at the Union Bridge quarry included identifying the best locations within the quarry for conducting additional limestone mining activity, which required Kilbourne to calculate the amount of ore that was likely to be obtained by excavating at a particular location, as well as the amount of non-useable dirt, rock and clay, known as “overburden,” that must be removed to mine the limestone ore. Kilbourne also made recommendations as to whether Lehigh should use its own resources or an outside contractor to conduct excavating and hauling work, and he evaluated bids submitted by outside contractors in connection with proposed excavation and hauling projects, as well as verified the accuracy of invoices submitted by the outside contractor once a contract was awarded.
LMS Contracting, Inc. was an Indiana corporation that was in the business of providing excavating and hauling services. Larry D. Spann owned and was president of LMS from approximately 1991 until late December 2005, when ownership of LMS was acquired by Madison Acquisition LLC. However, Spann continued to be employed by LMS until it declared bankruptcy in the first part of 2007.
In 2000 or 2001, LMS carried out an excavating project on behalf of Lehigh at its quarry and cement production plant in Mitchell, Indiana. LMS carried out the project successfully, and Kilbourne was familiar with LMS’s performance on this project. Later in 2001, when Lehigh was seeking bids from hauling companies in connection with an excavation project at its quarry in Union Bridge, Maryland, Kilbourne, who was responsible for soliciting bids from qualified contractors, and evaluating the bids that were submitted, contacted Spann and invited him to submit a bid on the project, which Spann did. Kilbourne contacted Spann asking him to revise LMS’s bid to incorporate additional required equipment. After recalculating his bid, Spann called Kilbourne to advise him that it would be necessary to increase the amount of their bid by $0.15 per bank cubic yard. Kilbourne agreed to the increase, then asked Spann, “Can you add another nickel for me?” Spann agreed, after which LMS was selected to receive the job. Because the total amount of material removed ultimately reached 800,000 bank cubic yards, Kilbourne received $40,000 in kickbacks in connection with this project.
Over the course of the next several years, Kilbourne assisted LMS in obtaining two additional hauling projects with Lehigh – another excavation and hauling project at Lehigh’s Mitchell facility that was carried out between January and July 2004 and a very large project that was carried out at Lehigh’s Union Bridge facility between April 2005 and February 2006.
In exchange for Kilbourne’s assistance, Larry Spann and LMS made secret payments to Kilbourne in cash payments and property worth over $100,000. In addition to cash payments that were delivered to Kilbourne in person or mailed, Spann also paid $19,554.35 to a Canadian geological services company on behalf of Kilbourne in connection with a drilling project in which Kilbourne had an interest, and provided $5,800 in cash to purchase a motorcycle selected by Kilbourne. Kilbourne admits that he received between $100,000 and $120,000 from Larry Spann and LMS as a result of the scheme.
Larry Spann, age 62, of Madison, Indiana, pleaded guilty to wire fraud in connection with the scheme and is scheduled to be sentenced on June 30, 2011 at 9:30 a.m.
Kilbourne faces a maximum sentence of five years in prison for the conspiracy. U.S. District Judge William D. Quarles, Jr. has scheduled sentencing for May 17, 2011 at 1:00 p.m. As part of his plea agreement, Kilbourne is required to pay $180,000 in restitution, which the parties agree represents a reasonable estimate of the value of the bribes and gifts that were received by Kilbourne and of the other costs to Lehigh Cement Company that were reasonably foreseeable to him as a result of his corrupt relationship with LMS/Matrans.
United States Attorney Rod J. Rosenstein praised the U.S. Postal Inspection Service and the FBI for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorney Jefferson M. Gray, who is prosecuting the case.