03-22-04 -- Andrews, Richard G. -- Guilty Plea -- News Release

Former Delaware River Bay Authority Executive Director Pleads Guilty to Fraud and Tax Charge

WILMINGTON, Del. - Richard G. Andrews, First Assistant United States Attorney for the District of Delaware, and U.S. Attorney Christopher J. Christie, District of New Jersey, along with M. Jane Brady, Attorney General of Delaware, and Peter C. Harvey, Attorney General of New Jersey, announced that Michael E. Harkins pleaded guilty today to an Information charging two felonies relating to his conduct as Executive Director of the Delaware River & Bay Authority (DRBA).

Harkins, 62, of Wilmington, waived indictment and entered his guilty plea before U.S. District Judge Kent A. Jordan, of the District of Delaware. He pleaded guilty to one charge each of mail fraud and false statements on a federal fax return, which together carry a maximum statutory penalty of eight years imprisonment, a $500,000 fine, three years of supervised release, and mandatory restitution to the DRBA.

At his plea hearing, Harkins admitted that during his tenure as Executive Director of the DRBA, from early 1997 to March 2002, he defrauded the DRBA by using DRBA funds to pay for personal expenses such as private airplane travel, limousine travel, hotel expenses, and meals. Harkins further admitted that he covered up the DRBA's payment of private expenses by concealing the personal nature of the expenses. Harkins admitted the steps he took to conceal the DRBA's payment of his personal expenses included his misrepresentation the nature of expenses on administrative forms; creation of false and misleading documents in response to a Delaware News Journal Freedom of Information Act (FOIA) request; and backdating checks used to reimburse the DRBA for some personal expenses. Harkins also admitted that as a result of his conduct, he gained substantial income that he did not report on his federal tax return for the year 1999.

The investigation began after DRBA representatives notified law enforcement authorities that the authority was conducting an internal audit, which was concluded in December 2002. The United States Attorneys for the Districts of Delaware and New Jersey, and the Attorneys General of Delaware and New Jersey agreed to conduct an investigation and any subsequent prosecution jointly. At the conclusion of the investigation, the prosecutors agreed that the District of Delaware was the most appropriate of the four jurisdictions in which to file charges relating to the defendant.

According to the two-count Information, Harkins used an airplane piloted by a DRBA employee for personal uses. Although the DRBA had a contractual relationship with a company to use the airplane for business purposes, Harkins used it on many occasions to attend personal functions, all at the expense of the DRBA. According to the Information, on March 13-14, 1998, Harkins, along with his son-in-law, a friend and a DRBA employee, flew to and from Chicago to watch the University of Delaware play in the first round of the NCAA tournament. On June 5-7, 1998, Harkins and his wife flew to and from Worcester, Mass. to attend Harkins' 35th college reunion. On Jan. 15, 1999, Harkins and a friend flew to and from Georgetown, Del. so that they could be considered for admission to the Rehoboth Country Club. On Aug. 6-8, 1999, he and his wife, with two friends, flew to and from Long Island, N.Y. to attend a wedding of the friends' son. About two weeks later, Harkins, his son-in-law, and his son-in-law's friend flew to and from Fisher's Island, N.Y. to play golf.

The Information also describes the cover-up Harkins engaged in when the News Journal began looking into alleged improprieties by Harkins. For example, Harkins directed that the pilot create another "logbook" that concealed or misdescribed some of the flights. Harkins did this to make it appear that these flights were business-related, when in fact they were personal trips, according to First Assistant Andrews. Harkins also backdated, or asked DRBA financial officers to backdate, some of his personal checks to make it appear as if he had contemporaneously paid for the improper flights, when in fact he had not, Andrews said.

"The people of New Jersey, particularly residents in the southern portion of the state who frequent the bridges and local airports and take advantage of the ferry services controlled by the DRBA expect and are entitled to honesty and integrity from their public officials," said U.S. Attorney Christie. "As hardworking and honest citizens, their tolls should be used for appropriate expenses of the authority rather than for the personal enjoyment and an embellished lifestyle of its executives."

Delaware Attorney General Brady said, "Today's charges reflect a serious misappropriation of public funds and a violation of the public trust. They also reflect an unprecedented level of cooperation between all agencies involved in the investigation who worked to assure the integrity of public monies."

New Jersey Attorney General Harvey said, "This joint agency investigation targeted allegations of corruption at the executive level of the DRBA. The plea agreement assures that Harkins will not only serve time in federal prison, but will be permanently barred from holding any public office in New Jersey. The outcome of this prosecution serves the public and the interests of justice."

Richard G. Andrews, First Assistant United States Attorney for the District of Delaware, praised the DRBA's decision to conduct a thorough internal audit. He said, "The DRBA's internal audit provided a roadmap for the investigators. Even with the internal audit as a starting point, the investigation still involved more than one hundred interviews of witnesses, and the analysis of thousands and thousands of documents relating to hundreds of individual transactions involving, among other things, airplane flights, other travel, and restaurant and hotel expenses."

The actual amount of the loss sustained by the DRBA as a result of Harkins' unlawful conduct will be resolved by Judge Jordan at the time of sentencing, Bumb stated. Pursuant to the terms of the plea agreement, the actual amount of the loss sustained by the DRBA as a result of Harkins' unlawful conduct is agreed to be between $30,000 and $175,000.

The Court did not set a sentencing date, but it is expected that sentencing will be scheduled in early summer after a Pre-sentence Report is prepared and the parties have had an opportunity to review it. The Defendant was released on his own recognizance pending sentencing.

The case was investigated by Special Agents of the Federal Bureau of Investigation in Wilmington and Atlantic City, Special Agents of the Internal Revenue Service Criminal Investigations in Wilmington and Atlantic City, Special Investigators from the Delaware Attorney General's Office, and State Investigators from the New Jersey Attorney General's Office.

The government is represented by First Assistant U.S. Attorney Richard G. Andrews, District of Delaware, and Special Assistant U.S. Attorney Renée M. Bumb, District of New Jersey, who was designated as a Special Assistant United States Attorney to the District of Delaware for the investigation and prosecution of the case.

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Defense Attorney: Victor F. Battaglia, Esq. Wilmington, DE