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08/22/2012

3 individuals and corporation indicted in $54 million procurement fraud scheme involving contract for services in Afghanistan

SALT LAKE CITY — Three individuals and a corporation are charged with fraud and bribery in connection with their alleged role in a multi-million dollar fraud scheme involving the procurement of a military contract for services in Afghanistan, according to an indictment returned by a federal grand jury in Salt Lake City Wednesday.

Named in the 72-count indictment are David Young, 49, of Hernando Beach, Fla.; Christopher Harris, 48, of Lake Havasu, Ariz.; and Michael Taylor, 51, of Boston, the president of American International Security Corporation (AISC), which is also charged in the indictment.

The indictment alleges conspiracy; procurement and wire fraud; bribery of a public official; acceptance of a bribe by a public official; and money laundering and structuring violations. The charges follow an investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the Defense Criminal Investigative Service (DCIS), Internal Revenue Service-Criminal Investigation and the U.S. Army Criminal Investigation Command, Major Procurement Fraud Unit.

"As we are all aware, families in Utah and all across America continue to send loved ones to serve our nation in Afghanistan, and taxpayers continue to pay for the cost of the effort," said Utah U.S. Attorney David B. Barlow. "Our office will fully and aggressively pursue alleged public corruption and fraud against taxpayers and the government such as that identified in today's indictment."

According to the indictment, in the spring of 2007, bids for a contract to manage Afghan supplies and train Afghan troops to do supply management were solicited by the U.S. Army. Because the need was deemed urgent, the Army requested a limited number of bids for the contract from private entities selected by the Army. The contract required the work to be performed in Afghanistan by a U.S. company. The indictment alleges the defendants conspired to use protected contract information to obtain an unfair competitive advantage for AISC over other bidders.

"The scope, complexity and brazenness of this alleged fraud scheme are astounding," said ICE Director John Morton. "If the allegations prove true, millions of dollars in U.S. government funds earmarked to help train and equip Afghan soldiers were used instead to indulge the defendants' appetites for wealth and opulent lifestyles, including investments in private planes, precious metals and real estate. As this long-term probe and the resulting indictment make clear, HSI and its investigative partners are committed to ensuring that those who misuse taxpayers' dollars and violate the public's trust are held accountable for their actions."

The indictment alleges that Young, an activated reservist in the Army with the rank of Lieutenant Colonel, served as a current or former public official in his action for and on behalf of the U.S. Army. By virtue of his position, Young had access to bid, proposal and source selection information about the contract, including information establishing the government's price estimate. Young also suggested AISC as one of a limited number of bidders. As a current or former official with responsibilities involving the contract, Young was barred from personally benefiting from the contract.

The indictment alleges that before the contract was awarded, Young disclosed information about the government's price estimate, selection criteria, competing bid information and other confidential procurement information to Harris, Taylor, and AISC. The indictment also alleges Harris, Taylor, and AISC promised and gave money to Young in return for him using his official position to influence the award of the contract.

"Fraud and corruption in military contracting not only take away precious dollars necessary for the dedicated American warfighter, but they undermine the confidence of the American public who demand a military procurement system that spends their tax dollars wisely and responsibly," said Janice M. Flores, special agent in charge of the DCIS Southwest Field Office. "In this case, it is alleged that both a military officer and a government contractor betrayed the public's trust. This investigation should serve as a warning for those intent on defrauding the U.S. military and American public that law enforcement will pursue these crimes relentlessly."

Using the protected contract information, AISC submitted a bid to the U.S. Army of $899,782, an amount that allegedly closely matched the military's price estimate for the contract which Young had helped establish. AISC was awarded the six-month contract in the amount of $899,781.96. The indictment also alleges that based on the initial fraud in the procurement of the pilot contract, Harris, Young and Taylor obtained extensions of the contract and four additional follow-on contracts. According to the indictment, AISC received approximately $54 million from the Army under the agreement. The co-conspirators distributed more than $20 million among themselves, the indictment alleges.

The indictment alleges 13 counts of bribery of a public official and 13 counts of acceptance of a bribe by a public official in connection with payments Harris, Taylor and AISC made to Young. The indictment claims Harris, Young, Taylor and AISC used nominee entities and individuals to conduct and conceal the transfer of proceeds of their scheme among themselves. The indictment charges 16 counts of wire fraud involving email correspondence between the defendants as a part of the execution of the alleged fraud scheme.

Several counts of the indictment relate to alleged steps the defendants took to conceal the alleged fraud, including engaging in money laundering and structuring transactions. Harris is charged in seven counts of the indictment with structuring currency transactions he made at America First Credit Union in St. George, Utah, to avoid the financial institution's legal obligation to report transactions in excess of $10,000. The indictment alleges Harris made a series of $9,000 cash withdrawals from the credit union between May 2009 and February 2010.

"IRS Criminal Investigation is proud to lend its financial investigative expertise to complex, multi-agency investigations," Paul Camacho, special agent in charge of the IRS Las Vegas Field Office, said. "By working closely with our fellow law enforcement partners, we can ensure that crime doesn't pay. We hit the bad guys where it hurts – in their wallets. By taking away their assets and profits, we deprive them of the proceeds of their criminal activity."

The indictment also contains a notice of intent to seek forfeiture of substantial real and personal property, including more than $6 million in funds; approximately 20 houses and other property in Utah, Florida, Arizona and New Hampshire; motor vehicles, including a Hummer and a Jaguar; a boat; an airplane; and hundreds of gold coins.

Harris was arrested in Utah on a complaint filed in July. He had an initial appearance and was released. Summonses will be issued to AISC, Young and Taylor to appear in U.S. District Court in Salt Lake City.

The conspiracy count carries a maximum penalty of up to five years in prison. The two government procurement fraud counts also have potential five-year sentences. The potential penalty for the bribery charges is up to 15 years for each count. Each of the 16 wire fraud counts is punishable by up to 30 years in prison. The money laundering counts carry potential maximum penalties of 10 to 20 years, depending on the violation. The charges involving the structuring of transactions carry potential penalties of up to five years per count.

Indictments are not findings of guilt. Individuals charged in indictments are presumed innocent unless or until proven guilty in court.