Contractors Sentenced for $1 Million Fraud In North Island Case

The conspiracy involved contractors coercing Navy employees into filing false work orders.

Four former workers at Naval Air Station North Island and three defense contractors were sentenced to prison and probation Tuesday for their admitted roles in a wide-ranging fraud and corruption scheme at the base.

U.S. District Judge Larry Burns handed down the sentences in federal court in downtown San Diego. Two of the defense contractors worked for Poway-based companies.

The defendants pleaded guilty in March to taking part in a conspiracy in which defense contractors provided North Island workers with over $1 million worth of gifts, including cash, gift cards, flat-screen televisions and home-remodeling services, in return for millions of dollars in fraudulent work orders, according to the U.S. Attorney’s Office in San Diego.

The ex-naval officials charged in the case were Brian Delaney, David Lindsay, Kiet Luc and Donald Vangundy. They worked in a maintenance program for the Navy’s E-2 and C-2 aircraft at the base.

The four admitted to receiving cash, goods and services for their personal use, all fraudulently charged to and paid for by the Department of Defense.

Delaney and Lindsay were each sentenced to five years’ probation, along with 30 consecutive weekends in federal custody. Luc received a 30-month prison term, while Vangundy was ordered to serve 41 months behind bars.

The three other co-defendants were Michael Graven, owner-operator of X&D Supply Inc. in Carlsbad; Paul Grubiss, sales manager of Centerline Industrial Inc. in Poway; and John Newman, sales manager of L&N Industrial Tool & Supply in Poway.

Each was sentenced to serve 18 months in custody.

All seven defendants pleaded guilty to conspiracy to commit wire fraud. Grubiss and Vangundy also admitted to conspiring to commit bribery, and Graven, Luc and Vangundy pleaded guilty to filing false tax returns.

Each defendant was ordered to pay restitution to the Department of the Navy, and three of them must reimburse the Internal Revenue Service. The combined awards total over $3 million.

Additionally, the court ordered forfeiture of dozens of valuables deemed proceeds of the scheme, and the defendants who received prison terms also were sentenced to serve three years of supervised release upon their release.

Two other defendants in the case, Robert Ehnow, owner of L&N, Joanne Loehr, owner of Centerline; and the latter company itself, as a corporate entity, have entered not guilty pleas to bribery charges and are awaiting trial.

The investigation into the crimes was prompted by citizen complaints following the July 2009 indictment of six people on similar allegations at Space and Naval Warfare Systems Command in San Diego, according to prosecutors.

As part of the SPAWAR corruption case, the government created a hotline dedicated to the reporting of possible fraud and abuse in government and military contracts.


– City News Service

Libi Uremovic October 10, 2012 at 12:19 PM
"...The four admitted to receiving cash, goods and services for their personal use, all fraudulently charged to and paid for by the Department of Defense...." the contractors bribed the men and also pushed the cost of the bribes onto the government....this is also a big problem in the city of imperial beach ...half of our budget goes to lawyers, consultants, and contractors...... ... ironically we also pay for the trips, hotels, dinners, and extravaganzas that our elected and appointed officials run up in the process of selling out their city ...


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