Defense Contractors Accused of Bribing Navy Officials Plead Not Guilty

A federal indictment unsealed Thursday in San Diego charges two defense contractors with conspiring with Navy officials to commit bribery, wire fraud and money laundering in a wide-ranging corruption scheme at North Island Naval Air Station.

Robert Ehnow, owner and president of L&N Industrial Tool & Supply, Joanne Loehr, owner/operator of Centerline Industrial Inc. and Centerline itself were arraigned on the indictment Thursday afternoon and pleaded not guilty to the charges.

The businesses are Poway firms.

The indictment alleges that the defense contractors provided Navy officials with more than $1 million in personal benefits, including cash, checks, flat-screen television sets, luxury massage chairs and home remodeling services. In return, the Navy officials placed millions of dollars in government orders with the defense contractors.

According to the indictment, Ehnow, 46, and Loehr, 52, conspired with their sales managers, with Navy officials who have already pleaded guilty and with others to engage in the wide-ranging conspiracy.

The defense contractors submitted fraudulent invoices to the Department of Defense, making it appear they were billing the Department for goods and services within the scope of legitimate government contracts, the government alleges.

In fact, the Department of Defense was unknowingly paying for, among other things, the cost of bribes provided to the Navy officials, according to the indictment.

In some cases, L&N would use its government contract to fraudulently bill the Navy for items that were never supplied; and would then, at the request of Navy co-conspirators, pass along criminal proceeds to Centerline, keeping a portion for itself as compensation for serving as a conduit for the criminal proceeds, the indictment alleges.

During the course of the conspiracy, the DOD paid L&N more than $3 million; while Centerline obtained more than $1 million in payments. A third defense contractor, Carlsbad-based X&D Supply Inc., was paid more than $2 million during the alleged conspiracy, according to the indictment.

Earlier this year, seven people pleaded guilty to their involvement in the scheme. Four were Navy officials employed at the Navy’s Fleet Readiness Center at North Island. The three others were owners or employees of various defense contractors that provided goods or services for the Navy base.

The investigation into corruption at NAS North Island was initiated on the basis of citizen complaints, U.S. Attorney Laura Duffy said. The complaints followed the July 2009 indictment of six people on fraud and corruption charges centered at the Space and Naval Warfare Systems Command, or SPAWAR.

As part of that case, the government publicized a hotline dedicated to the reporting of possible waste, fraud and abuse related to government and military contracts.

-City News Service