Former government employee, contractor indicted in $53M procurement fraud, illegal gratuities scheme

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  • By AFOSI Public Affairs
A federal grand jury has returned separate indictments charging John Wilkerson, 51, of Moultrie, Ga., and James Shank, 68, of Perry, Ga., with a wire fraud conspiracy and offering and accepting illegal gratuities, in connection with the award of more than $53 million in federal government contracts. The indictment was returned Oct. 8, and unsealed Oct. 21. 

The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Brig. Gen. Keith M. Givens, Commander Air Force Office of Special Investigations and Small Business Administration Inspector General Peggy E. Gustafson.

According to Shank's indictment, from Aug. 28, 2006, until he retired on June 30, 2011, he was employed as a Program Manager at the United States Navy's Space and Naval Warfare Systems Center. Shank worked with agencies within the Department of Defense to procure telecommunications equipment, software and related services. 

According to Wilkerson's indictment, he was a Department of Defense Account Manager for Iron Bow Technologies, LLC, which provided information technology consulting and other services to government and industry customers. Wilkerson was also part owner and operated an IT company, Superior Communications Solutions, Inc. 

Co-Conspirator 2 was a program manager for an information technology company, Advanced C4 Solutions, from 2005 until 2011.  In 2011, Co-Conspirator 2 left AC4S and went to work for Wilkerson at SCSI. 

The indictments allege that from September 2009 through August 2012 Shank conspired with Wilkerson and Co-Conspirator 2, to give them and the companies they worked for and/or owned an unfair competitive advantage in obtaining government contracts. In exchange, Wilkerson offered, and Shank accepted, employment with SCSI while Shank was still a government employee and while he was taking official actions that benefited Wilkerson. In addition, Wilkerson allegedly paid Shank $86,000 the year after Shank retired from government service, funneling the payment through two other companies in order to conceal the source of the funds. 

According to the indictments, Shank improperly shared information with Wilkerson and Co-Conspirator 2, and worked with them to structure the government contracts to give their companies an unfair advantage over other potential bidders. 

For example, according to the indictment, Shank, Wilkerson and Co-Conspirator 2 developed a request for proposal for DO27, a contract to supply labor services for an Air Force technology project, including overall project management services, so AC4S would win the contract. On June 10, 2010, DO27 awarded $18,332,738.10  to AC4S. 

Wilkerson provided Co-Conspirator 2 with a quote for labor on behalf of SCSI that was less than the quote he had previously submitted on behalf of Iron Bow as their sales representative. After SCSI was selected as a subcontractor on DO27, it subcontracted with Iron Bow to provide most of the labor SCSI was supposed to provide under DO27. Wilkerson was able to earn income from the work Iron Bow employees were doing by having SCSI act as a middleman and charging a mark-up on Iron Bow's work. Wilkerson and Co-Conspirator 2 then directed an SCSI employee to create false invoices supposedly documenting the hours SCSI employees spent working on DO27, which were submitted to AC4S and paid by the United States government.  SCSI received $6,794,432.98 on DO27 out of the $18 million AC4S received for providing labor for the project.  

Shank also initiated the procurement process on more than 11 delivery orders that purchased telecommunications equipment and furniture as part of the Air Force project.  Those delivery orders were issued to Iron Bow in 2010 and 2011.  Shank made sure that the delivery orders included telecommunications equipment and/or furniture assigned SCSI-specific part numbers, thereby guaranteeing that SCSI would receive revenue from the delivery orders. The indictment alleges SCSI received approximately $33 million of the $35 million paid to Iron Bow under the various furniture and equipment delivery orders.

In late 2010 or early 2011, Wilkerson offered Shank employment. Shank did not disclose that fact to anyone at SPAWAR and did not recuse himself from any of the contracts benefitting Wilkerson. In February 2011, Co-Conspirator 2 left AC4S to work for Wilkerson at SCSI.  According to the indictment, Co-Conspirator 2 received a $500,000 bonus when he joined SCSI, paid for by profit Wilkerson had earned on the furniture contracts. 

By March 2011, the Air Force project was not complete and there were a number of contract disputes related to the project. Shank was directed not to take any other action related to the project without the approval of a senior manager.  Nevertheless, the indictment alleges that in April 2011, Shank accepted more than $3.7 million worth of invoices that benefited SCSI without informing the senior manager.  After Shank accepted employment with SCSI in May 2011, but was still working for SPAWAR, he allegedly approved more than $1.1 million worth of invoices benefitting SCSI and Wilkerson.

Shank and Wilkerson face a maximum sentence of 20 years in prison for a wire fraud conspiracy, and two years in prison for offering and accepting illegal gratuities. Shank also faces a maximum sentence of 5 years for criminal conflict of interest. Wilkerson and Shank had initial appearances in the Northern District of Georgia on Oct. 13 and 14 respectively, and have an initial appearance scheduled in U.S. District Court in Baltimore on Oct. 23.

The National Procurement Fraud Task Force was formed in October 2006, to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs.  The Procurement Fraud Task Force includes the United States Attorneys' Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies.

This case, and other cases brought by members of the Task Force, demonstrate the Department of Justice's commitment to helping ensure the integrity of the government procurement process.

United States Attorney Rod J. Rosenstein thanked Air Force OSI and the Small Business Administration Office of Inspector General for their work in the investigation. Mr. Rosenstein praised Assistant U.S. Attorney Leo J. Wise, who is prosecuting the case.

(Editor's Note: The U. S. Department of Justice Office of Public Affairs contributed to this story.)