Six Men Charged In Bid-Rigging At Fort Sam

Team Infidel

Forum Spin Doctor
San Antonio Express-News
May 18, 2007
By Guillermo Contreras, Express-News
A federal grand jury on Thursday indicted six men on charges that they participated in a scheme to rig millions of dollars in government contracts at the U.S. Army Medical Command at Fort Sam Houston.
Four of the men were assigned to the command, and court records allege that their positions allowed them to manipulate and steer at least $79 million in contracts for computer equipment and technology for the Army — such as computer cable upgrades — to companies they controlled or were aligned with.
Contracts were structured in a variety of ways that would benefit the suspects, the indictment alleges. For instance, single-source contracts were narrowly tailored so that only a handpicked company could get them.
Also, bids were dummied up so that it seemed companies were competing with each other to get a job. In reality, the companies worked together so no matter who got it, the insiders still made money, according to court documents.
Most of the contracts were awarded between 2002 and 2005 for work, equipment or services at nearly 20 Army hospitals, including Brooke Army Medical Center at Fort Sam Houston and Darnall Army Medical Center at Fort Hood.
The 29-page indictment alleges that all six men conspired to commit bribery, solicit or disclose confidential bid and proposal information before contracts were awarded, executed wire fraud, and solicited, accepted or included provisions for kickbacks in the rigged contracting process.
Court records allege the money received at the tail end of the activity was laundered in real estate in South Texas, a San Antonio sexual swingers' club and nightclubs in Panama. The Internal Revenue Service is closely scrutinizing those deals, while the government put in the indictment a provision to seize some of those assets by forfeiture.
The case is largely built on 150 conversations secretly recorded for the FBI by a cooperating witness who wore a wire to several meetings where illicit activity about several contracts was purportedly discussed by four of the men. Another piece of the case includes recorded conversations the men had that were captured by a court-approved bug planted at the offices of Sphinx Consultants & Associates in San Antonio.
Sphinx's president and CEO, Johnnie Flores, is among those charged. He was named "Businessman of the Year" in 2003 by the National Republican Congressional Committee Business Advisory Council. A Hispanic Business story in 2003 said Sphinx reported revenues of $6,000 when it formed in 1998. By 2002, the company reported revenues of $7 million, a five-year growth of 116,566 percent. The dramatic increase put Sphinx at the top of the "2003 Hispanic Business Fastest-Growing 100."
That increase occurred during part of the period of illicit activity alleged in the indictment.
Also charged are William J. "Bill" Strout Sr., a now retired contracting officer technical representative for the U.S. Army Medical Information Technology Center (USAMITC); Francisco "Frank" Quinata Cruz, a San Antonio contractor/consultant whose business centered on MEDCOM contracts; Strout's son, William J. "Will" Strout Jr.; Ignacio "Nacho" Ruelas Torres, a private contract employee assigned at the time to MEDCOM; and Andrew "Andy" Waring II, another civilian contract employee assigned to the Video Teleconferencing Network at USAMITC.
The indictment alleges that by having inside access at MEDCOM, the group had early notice of lucrative jobs that were about to be put up for bid, and then worked together to exploit the contract process.
Strout Sr., who had direct access to contracts, is accused of steering the contracts or writing them in a fashion that benefited him and his co-defendants.
Federal search warrant affidavits and the indictment claim the suspects used contractors with small disadvantaged business status, which gives them a leg up on the competition, as "pass-throughs." The pass-through companies allegedly would get a cut off the top of the contract — generally 3 percent to 5 percent of the value of the contract — while the work was actually completed by companies aligned with the defendants. The affidavits name 15 companies whose contracts are being scrutinized by investigators. Some of these companies were allegedly used as pass-throughs.
In September 2003, for instance, Strout Sr. is accused of steering a $50 million contract to an American Indian-owned company in Oklahoma because such contractors have a huge advantage. They can get sole-source contracts without limitation on the dollar amount and without competition and they are not subject to protest by other companies, the indictment said.
Messages seeking comment were left for Torres' lawyer, Ray Taylor, and the Strouts. Waring could not be reached for comment. In interviews in March, Strout Sr. and Torres denied the allegations.
A call to Sphinx's offices was answered by a man who identified himself as Flores' son. He said Flores was in a meeting and unavailable for comment. He also refused to reveal the name of Flores' attorney.
Cruz's lawyers, Louis Correa and Robert Featherston, said Cruz believes he's done nothing wrong, defrauded no one, "performed the contracts in a workmanlike and quality manner," and saved the government money and that there were no bribes involved. They also highlighted his service in the military and said he has never been in trouble with the law.
They also argued that the use of pass-through companies is not illegal, and a common practice in government contracting meant to speed the process along so that the work gets done in timely fashion.
"The relationship between Frank Cruz and his partners were well known by all of the (contracting) agents that represented the government," Featherston said. "In fact, they gave him a preferred vendor status and continued to do business with him."
 
:en:ing civilian contractors, :cen: them and put officers in charge of this crap and sentence these :cen:suckers to an extended tour in Iraq picking up trash in the Sunni Triangle wearing bright orange jumpsuits with blue UN helmets.
 
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