NEW JERSEY MAN SENTENCED IN $3.7 MILLION INTERNATIONAL SCHEME TO SELL BOGUS PARTS TO U.S. MILITARY

(Richmond, VA) – Nathan Carroll, age 56, formerly of Lake Hopatcong, New Jersey, was sentenced today to federal prison for conspiring to sell non-conforming and defective parts to the Department of Defense (“DoD”), and for aggravated identity theft. Carroll, who had previously entered guilty pleas, was sentenced to 94 months’ imprisonment; restitution to DoD of $3,696,235; forfeiture of seized cash ($5487), three 10 oz. gold bars, four domestic bank accounts, real property in New Jersey, a 1999 Ford Expedition, and nine foreign bank accounts held in Estonia, Singapore, Mexico, Panama, Belize, and Switzerland; and three years’ supervised release. United States District Judge Richard L. Williams imposed the sentences, which were announced by Chuck Rosenberg, United States Attorney for the Eastern District of Virginia. Also announcing the sentence today is Special Agent-in-Charge Edward Bradley, Northeast Field Office, Office of Inspector General, Defense Criminal Investigative Service.

According to court documents, over a two-year period Carroll and other members of the conspiracy bid on and won contracts to provide parts to the U.S. military. (The Defense Logistics Agency’s Defense Supply Center – Richmond was one of the buying centers that awarded purchase orders to members of the scheme.) Some of the parts in question were called “critical application items,” which were essential to weapons system performance or operation or to the preservation of life or safety of operational personnel. Under DoD’s procurement procedures, contractors were permitted to submit electronic invoices upon shipment of the needed parts, and were paid electronically by the Defense Finance and Accounting Service.

In the course of the scheme, Carroll and other conspirators, operating in the United States, Canada, and Mexico, formed more than a dozen companies that posed as legitimate contractors, and collectively used a computer program to allocate hundreds of lucrative awards among the various companies. Carroll and his confederates then purchased and shipped cheaper non-conforming and defective parts to the military services, and submitted invoices resulting in
wired payments to their affiliated companies of nearly $3.7 million. In all known cases, the parts sent by Carroll and the conspirators could not be used for their intended purpose.

Carroll and his confederates compounded the fraud by concealing their identities through the use of multiple nominee companies, and by assuming the identities of other persons and operating the scheme in their names. Further, when the DoD requested proof that the companies had purchased and intended to supply the correct parts from approved manufacturers, Carroll and others submitted fabricated documents that falsely represented that the correct parts had been purchased. And when the DoD debarred several of the companies from doing further business with the military, Carroll and the members of the scheme discontinued bidding through the companies in question, and instead formed and used new companies in the bidding process. To conceal the proceeds of the scheme and to prevent recovery, Carroll and his co-conspirators transferred proceeds of the scheme to offshore bank accounts and to the purchase of gold and other assets.

Also charged in the case are Roger Charles Day, Jr., formerly of New Jersey, Gregory Allen Stewart, of Toronto, Canada, and Susan V. Crotty, of Portland, Oregon. Stewart and Crotty are scheduled for trial beginning February 25, 2008. Day is currently a fugitive.

The case is being prosecuted by Assistant United States Attorney John S. Davis.

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