Army Reserves Lt. Col. Convicted for Fraudulently Supplying Chinese-made Army Promotional Gear as Made in USA
BIRMINGHAM – A federal jury on Tuesday convicted a lieutenant colonel in the U.S. Army Reserves for fraudulently supplying hundreds of thousands of Chinese-produced baseball caps and backpacks to the Army Recruiting Command, despite receiving millions of dollars under contracts stating the items “MUST BE 100 % U.S. MADE.”
Acting U.S. Attorney Robert O. Posey, Defense Criminal Investigative Service Special Agent in Charge John F. Khin, and U.S. Army Criminal Investigation Command Special Agent in Charge James T. Wallis announced the verdict.
Following a seven-day trial before U.S. District Court Judge Sharon Lovelace Blackburn, the jury found FREDERICK LAMAR BURNETT, 48, of Madison, guilty on three counts of wire fraud. The jury deliberated for less than two hours before convicting Burnett, who took the stand in his own defense.
The jury determined that Burnett used his Huntsville-based company, Lamar International Inc., in a scheme to defraud the Defense Department on three contracts, worth $6.2 million, between 2005 and 2009. All the contracts, two for baseball caps and one for backpacks, were for promotional items to be given to Army recruits. Burnett certified for all three contracts that he would meet the requirements of the Buy American Act, the Berry Amendment and federal regulations that require the government to buy domestic products and materials, according to the indictment.
The Buy American Act requires the federal government to buy domestic articles, materials and supplies, primarily to protect American labor. The Berry Amendment prohibits the Defense Department from buying clothing, fabrics, fibers and yarns that are not grown, reprocessed, reused or produced in the United States. The purpose of the Berry Amendment is to protect the viability of the textile and clothing production base in the United States. These statutes are incorporated and made applicable to government contractors through the federal acquisition regulations.
Under the first contract awarded to Lamar International in 2005, Burnett supplied 209,706 baseball caps over three years and the government paid him $1.4 million. Under the second contract, awarded in 2007, Lamar supplied 590,042 ball caps and the government paid him about $4 million. Under the third contract, also awarded in 2007, Lamar supplied 146,375 Army Combat Uniform backpacks and the government paid $1.1 million. A Defense Department accounting agency made the payments to Burnett by electronic funds transfer to his Huntsville bank.
Along with the required compliance to the BBA and the Berry Amendment, according to evidence at trial, both of the 2007 contracts included a statement, in all capital letters, that the “PRODUCT MUST BE 100% U.S. MADE.”
Instead of providing American-made products, however, Burnett negotiated and contracted with suppliers directly from China and with American companies who he knew were procuring the products from China. He used Chinese-made products to fill orders under all three contracts and hid their foreign manufacture by hiring workers on a cash basis to remove all the Chinese labels and repackage the items he sent to the Army Recruiting Command.
After award of the third contract, a competitor protested the bid, claiming Burnett could only bid so low if he were using foreign suppliers. The government allowed Burnett to proceed with the contract after he promised that he would use only American-made products and that he would comply with all aspects of the Buy American Act and the Berry Amendment.
The total amount of the three contracts was $6.2 million. The indictment seeks to have Burnett forfeit that amount to the government as proceeds of illegal activity.
The maximum penalty for wire fraud is 20 years in prison and a $250,000 fine.
DCIS and Army CID investigated the case, which Assistant U.S. Attorney David H. Estes is prosecuting.