British Contractor Agrees to Plead Guilty to Wire Fraud Conspiracy Related to Iraq Reconstruction Efforts
WASHINGTON – British contractor APTx Vehicle Systems Limited agreed today to plead guilty to conspiracy to defraud the United States, the Coalition Provisional Authority that governed Iraq from April 2003 to June 2004, the government of Iraq and JP Morgan Chase Bank. A civil settlement agreement resolving a related action filed under the False Claims Act was also announced today.
APTx was charged with one count of wire fraud conspiracy in a criminal information filed today in U.S. District Court in Massachusetts. As part of the plea agreement filed with the information, APTx agreed to pay a criminal fine of $1 million.
The charges and resolutions were announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, Principal Deputy Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division and U.S. Attorney for the District of Massachusetts Carmen M. Ortiz.
According to the criminal information, APTx engaged in a fraudulent scheme involving an August 2004 contract valued at over $8.4 million for the procurement of 51 vehicles for the Iraqi Police Authority. The contract was initially awarded to a different, “prime” contractor, which in turn subcontracted the procurement to APTx for over $5.7 million. Payment under the contract was by letters of credit issued by JP Morgan Bank.
The criminal information further charges that in May and June 2005, APTx submitted shipping documents to JP Morgan to draw down on the letters of credit, which falsely and fraudulently asserted that all 51 vehicles were produced and ready to ship to Iraq. In fact, as APTx knew, none of the vehicles had been built, none of the vehicles were legally owned or held by APTx and none of the vehicles were in the process of transport to Iraq. The fraudulent shipping documents also listed a company as the freight carrier that APTx knew was not a shipping company and named a fictitious company as the freight forwarder.
In a related civil settlement agreement, APTx, along with Alchemie Grp Ltd., a United Kingdom corporation, and Haslen Back, the director and shareholder of Alchemie, agreed to pay $2 million to the United States to resolve claims originated by Ian Rycroft, an individual retained by the prime contractor to oversee transportation of the vehicles, under the qui tam, or whistleblower, provisions of the False Claims Act in the District of Massachusetts. The False Claims Act authorizes private whistleblowers to bring suit for false claims submitted to the United States and to share in any recovery. Rycroft’s estate will receive $540,000 as its share of the settlement amount.
Benjamin Kafka, a representative for APTx in the United States, was charged on April 13, 2009, with one count of misprision of a felony in connection with his role in the wire fraud conspiracy. According to court documents, Kafka allegedly allowed APTx to use his corporate name and identity as the freight carrier and freight forwarder on the fraudulent shipping documents presented to JP Morgan.
The criminal case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Trial Attorney William H. Bowne III of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Eugenia M. Carris and Jeffrey Cohen of the District of Massachusetts. The civil case is being handled by Trial Attorney Diana Younts of the Civil Division, and by Assistant U.S. Attorney Christine Wichers of the District of Massachusetts. The investigation was conducted by the Special Inspector General for Iraq Reconstruction, the Defense Criminal Investigative Service Boston Resident Agency and U.S. Immigration and Customs Enforcement Homeland Security Investigations in Washington, D.C.