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Press Release

Fifth Adams Produce Official Charged In Scheme To Defraud U.S. Government

For Immediate Release
U.S. Attorney's Office, Northern District of Alabama

BIRMINGHAM – A fifth Adams Produce Company official now faces federal charges in a scheme to defraud the federal government, announced U.S. Attorney Joyce White Vance and FBI Special Agent in Charge Richard D. Schwein Jr.

A federal grand jury today indicted MICHAEL JOHN O'BRIEN, 50, of Navarre, Fla., who was general manager of the Adams Produce distribution center in Pensacola, Fla. O'Brien's duties included determining the prices Adams Produce charged the United States under contracts it had with the government.

The 37-count indictment filed in U.S. District Court charges O'Brien with conspiracy to defraud the U.S. Department of Defense and its Defense Logistics Agency of hundreds of thousands of dollars. The indictment also charges O'Brien with 32 counts of wire fraud or aiding and abetting wire fraud, and with four counts of false claims or aiding and abetting false claims in order to carry out the conspiracy.

Four other Adams Produce officials – Scott David Grinstead, David Andrew Kirkland, Christopher Alan Pfahl and Stanley Joel Butler II – have pleaded guilty to charges in connection with defrauding the government.

Adams Produce was a Birmingham-based company that had been a leading distributor of fresh fruits and vegetables across the Southeast for many years. It was founded more than 100 years ago as a family-owned business. The family sold the company to executives and a private equity firm in 2010. Adams Produce closed abruptly and filed for bankruptcy in 2012.

The Department of Defense, through DLA, contracted with Adams Produce and other distributers to supply fresh fruits and vegetables to military bases, public school systems, junior colleges and universities. Adams Produce had contracts worth millions of dollars with the U.S. government, according to O'Brien's indictment. Under the contracts, the price the government paid Adams depended largely on what Adams had to pay its produce suppliers.

Each week, Adams Produce electronically submitted pricing information to DLA and was required, periodically, to submit purchase orders to DLA proving its costs, according to the indictment.

Adams bought from TLC, one of the largest distributors of fresh produce in the United States, with offices located across the country. Between August 2011 and November 2011, according to the indictment, O'Brien and other Adams employees arranged and conducted transactions with TLC in Marietta, Ga., designed to create purchase orders and invoices that reflected inflated costs to Adams Produce.

According to O'Brien's indictment, he and others continued the conspiracy as follows:

O'Brien communicated instructions, often by e-mail, to other Adams' employees concerning the inflated prices to show on the false purchase orders. Adams' employees and officers used the false purchase orders to support false pricing information the company submitted to DLA for payment. The transactions with TLC to produce false purchase orders and the false information submitted to DLA "were intended to increase Adams Produce's profit margins and inflate the income reported on Adams Produce's financial statements."

The maximum penalty for the conspiracy count is 10 years in prison and a $250,000 fine. The maximum penalty for each wire fraud count is 20 years in prison and a $250,000 fine, and the maximum penalty for each false claim count is five years in prison and a $250,000 fine.

Updated March 19, 2015