United States Attorney
Northern District of Texas

1100 Commerce St., 3rd Fl.
Dallas, Texas 75242-1699

Telephone (214) 659-8600
Fax (214) 767-0978

FORMER PRESIDENT OF TOOLS AND METALS INC. (TMI)
SENTENCED TO MORE THAN 7 YEARS IN FEDERAL PRISON

Todd Brian Loftis Admitted Conspiring to Defraud the
Defense Department and Lockheed Martin Aeronautics of $20 Million

Richard B. Roper, United States Attorney for the Northern District of Texas, announced that Todd Brian Loftis was sentenced this morning in federal court in Fort Worth, Texas, by the Honorable Terry R. Means, United States District Judge, to 87 months imprisonment and ordered to pay $20,000,000 in restitution. Loftis, age 38 of Colleyville, Texas, was ordered to surrender to the Bureau of Prisons on April 24, 2006.

In December, Loftis waived indictment and pled guilty to a one-count Information, charging conspiracy to defraud the Government with false and fraudulent claims. Loftis admitted that from 1998 through 2004, as President and Chief Operating Officer of Tools and Metals, Inc. (TMI), he, along with others conspired to defraud the U.S. Department of Defense and Lockheed Martin Aeronautics by obtaining payments from Lockheed and the Department of Defense by making false and fraudulent billings.

U.S. Attorney Roper said, “I applaud the tough sentence imposed by Judge Means today. This office is committed to using all resources necessary to continue to prosecute these types of significant procurement fraud cases.”

In 1998 TMI, acting through Loftis, obtained a sole source integrated supply contract with Lockheed Martin Aeronautics to supply all of Lockheed's perishable tools for the manufacture of airplanes including Department of Defense’s F-16, F-22, and other military needs in Fort Worth, Texas; Marietta, Georgia; and San Diego, California. Perishable tools are the drill bits, router bits, and other small tools that are consumed in the manufacturing process.

TMI's contract with Lockheed called for very specific markup percentages over TMI's cost on all tools sold to the aircraft manufacturer. Loftis and others were able to falsely and fraudulently misrepresent TMI's costs as higher than actually paid so that the profit dollars to TMI would be inflated above what was allowed by the contract. Todd Loftis trained TMI buyers and customer service representatives to obtain multiple quotes from supplies and then to quote to Lockheed a high price. The tools would then be purchased at a lower cost allowing TMI to realize a fraudulent profit. Lockheed passed the cost of these fraudulently priced tools onto the Department of Defense as material monetary claims in the manufacturing overhead billings.

In order to cover up this activity when Lockheed performed audits, Loftis and others under his direction created false invoices using a computer scanner to remove actual pricing data and substitute fictitious data to give the appearance of legitimate pricing. Loftis was able to control the audit sample of invoices as well so as to limit the possibility that a fraudulently priced part would be found. After the audits Loftis ordered the fraudulently created documents and computer files to be destroyed.

TMI and Loftis realized approximately $20 million in profits on these fraudulent sales to the government.

TMI was founded in the 1950's in California and moved its corporate offices to Fort Worth in the late 1990's to provide services to Lockheed Martin Aeronautics. In 1998 with the award of the Lockheed contract, TMI also opened a branch in Marietta, Georgia to supply the plant there. Todd Loftis was employed by TMI for more than 12 years and was in charge of the company for most of that time. Until 2004 the company was owned by a family trust in California and its members and directors did not participate in daily operations. In September 2005 the company sought Chapter 7 bankruptcy protections as the scope of the fraud became apparent and the company lacked resources to repair the damage caused by the fraud.

U.S. Attorney Roper praised the investigative efforts of the Department of Defense, Defense Criminal Investigative Service (DCIS), the Defense Contract Audit Agency (DCAA), the Internal Revenue Service - Criminal Investigation, U.S. Air Force - Office of Special Investigation (OSI) and the Federal Bureau of Investigation. Assistant United States Attorney Ronald C.H. Eddins prosecuted the case.

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