July 21, 2009
HOUSTON FOOD DISTRIBUTOR CONVICTED OF FRAUD IN IRAQ FOOD CONTRACTS
(HOUSTON) - Samir Mahmoud Itani, 49, the owner and operator of American Grocers Inc., has pleaded guilty to conspiring to defraud the United States by misrepresenting the cost to deliver food to U.S. troops in Iraq and Kuwait, U.S. Attorney Tim Johnson announced today.
At a hearing this afternoon before United States District Judge Ewing Werlein, Itani pleaded guilty to the charges in a superseding criminal information filed yesterday admitting that between February 2004 through September 2006, he, Stephen Day and Frederick Kenvin conspired to defraud the United States by obtaining and aiding to obtain the payment and allowance of false, fictitious and fraudulent material claims. Judge Werlein has ordered a presentence investigative report and set the matter for Oct. 16, 2009.
Itani owned, controlled and operated American Grocers Inc., a Houston company that has exported food products to countries in the Middle East. American Grocers furnished food it purchased in the U.S. to Public Warehousing Company (PWC) K.S.C., a Kuwaiti company that has delivered food to U.S. troops in Iraq and Kuwait under prime government contracts since May 2003.
Between February 2004 and September 2006, Itani conspired with others to include and conceal overcharges in American Grocers’ invoices to PWC. Ultimately, PWC presented these overcharges to the United States, which the government paid.
Itani included bogus trucking costs in American Grocers’ invoices. To conceal the presence of these bogus charges, Itani or others acting under his authority negotiated significant price reductions from American Grocers’ suppliers, directing them not to invoice American Grocers at the reduced prices. Itani then matched American Grocers’ invoice prices to these suppliers’ non-reduced invoice prices, concealing the presence of the bogus trucking charges.
In other instances, Itani had an American Grocers employee fabricate invoices from Logistics Group International Inc. (LGI), a Houston freight-brokerage company that arranged truck shipments of food to American Grocers. The employee, Fred Kenvin, who left American Grocers in October 2005, admitted to creating invoices purporting to be from LGI by “whiting out” portions of an LGI invoice, making copies of the “whited-out” version and then filling in the invoices. Itani included trucking costs in American Grocers’ invoice prices based upon these fabricated LGI invoices. Thus, American Grocers’ invoice prices appeared to include trucking costs supported by LGI invoices, when in fact, such costs were not incurred by LGI or American Grocers.
Similarly, Itani used fabricated LGI invoices to support trucking overcharges related to shipments of Smucker’s peanut butter. American Grocers purchased peanut butter from Smucker’s to send to PWC and Smucker’s included the cost of trucking the peanut butter to Houston in the price of the peanut butter. Itani, however, included additional trucking charges in American Grocers’ invoice prices based upon fabricated LGI invoices.
Itani also directed Kenvin to obtain inflated invoices from LGI in some transactions in which LGI did in fact arrange the trucking of food items to American Grocers in Houston. In each of these transactions, Kenvin obtained two invoices per transaction with LGI, one for the amount American Grocers would pay, and another for a higher amount, which American Grocers would not pay. Itani included trucking costs in American Grocers’ invoice prices in these transactions based upon the additional, higher LGI invoices, not on the actual LGI invoices American Grocers paid.
Stephen Day, the 35-year-old President and owner of LGI, pleaded guilty on April 13, 2009, to conspiring to defraud the United States by providing these additional, higher invoices in approximately 37 transactions. Day’s sentencing is set for Aug. 14, 2009.
Fred Kenvin, the 57-year-old former American Grocers employee, pleaded guilty on April 30, 2009, to conspiring to defraud the United States by helping Itani include and conceal overcharges in American Grocers’ invoices. Kenvin’s sentencing is set for Nov. 18, 2009.
Under the plea agreement reached with Itani, the United States has agreed that a sentencing range of up to 24 months is the appropriate disposition of the case.
The investigation leading to the charges was conducted by the U.S. Department of Defense - Defense Criminal Investigative Service in Houston, the U.S. Army Criminal Investigations Major Procurement Fraud Section in San Antonio and the U.S. Department of Agriculture Office of Inspector General in Houston, members of the National Procurement Fraud Task Force created in October 2006 by the Department of Justice. The Task Force, created to promote the prevention, early detection and prosecution of procurement fraud, is chaired by the Assistant Attorney General of the Criminal Division Lanny A. Breuer and includes the FBI, the Department of Justice Inspector General and other federal Inspectors General, defense investigative agencies, federal prosecutors from United States Attorney’s offices across the country, as well as the Criminal, Civil, Antitrust and Tax Divisions of the Department of Justice. The case is being prosecuted by Assistant U.S. Attorney Stephen L. Corso and U.S. Department of Justice Trial Attorney Jennifer R. Taylor.