It was reported last month that British contractor APTx Vehicle Systems will plead guilty to conspiracy to defraud the United States, the Coalition Provisional Authority that governed Iraq from April 2003 to June 2004, the government of Iraq and JP Morgan Chase Bank. The company also entered into civil settlement agreement resolving a related action filed under the False Claims Act. As part of the criminal plea agreement filed with the information, APTx agreed to pay a criminal fine of $1 million.
Federal officials alleged that APTx engaged in a fraudulent scheme involving an August 2004 contract valued at over $8.4 million for the procurement of 51 vehicles for the Iraqi Police Authority. The contract was initially awarded to a different, “prime” contractor, which in turn subcontracted the procurement to APTx for over $5.7 million. Payment under the contract was by letters of credit issued by JP Morgan Bank. Federal officials alleged that APTx submitted shipping documents to JP Morgan to draw down on the letters of credit, which falsely and fraudulently asserted that all 51 vehicles were produced and ready to ship to Iraq. As APTx knew, none of the vehicles had been built, none of the vehicles were legally owned or held by APTx and none of the vehicles were in the process of transport to Iraq. The fraudulent shipping documents also listed a company as the freight carrier that APTx knew was not a shipping company and named a fictitious company as the freight forwarder.
In the related civil settlement agreement, APTx, along with Alchemie Grp Ltd., a United Kingdom corporation, and Haslen Back, the director and shareholder of Alchemie, agreed to pay $2 million to the United States to resolve claims originated by Ian Rycroft, an individual retained by the prime contractor to oversee transportation of the vehicles, under the qui tam, or whistleblower, provisions of the False Claims Act in the District of Massachusetts. Rycroft’s estate will receive $540,000 as its share of the settlement amount.
Benjamin Kafka, a representative for APTx in the United States, was charged on April 13, 2009, with one count of misprision of a felony in connection with his role in the wire fraud conspiracy. Kafka allegedly allowed APTx to use his corporate name and identity as the freight carrier and freight forwarder on the fraudulent shipping documents presented to JP Morgan.
Source: Corporate Crime Reporter
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