Richmond-Area Man Pleads Guilty to Defrauding Northrop Gruman, Navy
NORFOLK, Va. – Gregory Kirk Walsh, 37, of Glen Allen, Va., pleaded guilty today in Norfolk federal court to wire fraud relating to Navy contracts.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement after Walsh’s plea was accepted by United States District Judge Raymond A. Jackson.
Walsh was charged on July 10, 2012. He faces a maximum penalty of 20 years in prison and a fine of $250,000 when he is sentenced on November 1, 2012.
According to the statement of facts filed with the plea agreement, Walsh was an Inside Salesperson at the Anixter Shipboard Group at Richmond, Va. Anixter, Inc. (“Anixter”) is a global distributor of communication and security products, electrical and electronic wire and cable fasteners, and other products. Trillium Development Ltd. Co. (“Trillium”) was a distributor and reseller of cable and similar products; it was owned by Greg and Claudia Anixter and operated out of the owners’ residence in Scottsdale, Ariz. Northrop Grumman Corp. (“NGC”) and Anixter entered into Corporate Award for Electrical Wire and Cable in May 2007. This contract contained a pricing provision which allowed NGC to buy spot requirements for specified items. The provision limited the price for these items to Anixter’s manufacturer’s invoice cost plus a maximum of 10% gross margin. From September 6, 2007 through July 21, 2010, Walsh devised a scheme to defraud NGC by fraudulently representing the participation of small businesses in the sales transactions performed by Anixter in response to purchase orders made by NGC Newport News Shipyard in Newport News, Va.
In order to represent the participation of small businesses, Walsh sought out two small family-owned corporations through which he could fraudulently and artificially sell and buy back Anixter wire and cable products. The transactions with the small businesses increased the ultimate sales price of the Anixter wire and cable products when they were eventually sold to the NGC Newport News Shipyard. For the scheme to work, Walsh would receive a purchase order from NGC for a specific Anixter product. Walsh would thereafter request the product from the Anixter inventory (warehouse) or, if not available in inventory, would purchase the product from an outside vendor. Walsh would then sell the product to one of two small corporations at an increased price. He would then repurchase the same product for Anixter from the small corporation at an additional price increase. Walsh would then complete the sale and delivery of the product to NGC with yet another price increase. Despite the financial and shipping paperwork transactions between Anixter and the small corporations, the actual product remained in Anixter’s custody (inventory/warehouse) until it was finally shipped to NGC as the end customer. Walsh would create or assist with the creation of sales invoices and shipping documents to and from the small corporations that reflected the initial sale and the subsequent repurchase of the product by Anixter. Walsh admitted that the purpose of these fraudulent transactions with the small corporations was to satisfy NGC’s small business requirements.
During this period, Walsh engaged in 19 separate transactions with the two small companies and, in so doing, increased the cost of goods sold to NGC Newport News Shipyard by $83,121.94, which in turn resulted in an overcharge by NGC Newport News Shipyard to the United States Navy in the same amount. As a result, Walsh also increased his gross profit margin from his commissions on the sales to the small corporations and then to NGC.
This case was investigated by the Naval Criminal Investigative Service and the Defense Criminal Investigative Service. Assistant United States Attorney Stephen W. Haynie is prosecuting the case. This investigation was brought as part of the Hampton Roads Procurement Fraud Initiative, a collaboration of defense investigative agencies, Inspectors General, and law enforcement dedicated to strengthening the integrity of the federal procurement system.A copy of this press release may be found on the website of the United States Attorney's Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on https://pcl.uscourts.gov.