Former State Department worker, husband sentenced for contracting fraud

December 6, 2013

A Stafford, Va., woman who prosecutors say concealed her marriage and used her job at the State Department to funnel tens of millions of dollars in government contracting work to a company she and her husband ran was sentenced to two years in prison Friday.

Kathleen D. McGrade, 64, who worked in a management analyst capacity for the State Department, showed very little remorse for the scheme that authorities say allowed her to buy a $73,000 Lexus, a half-million-dollar yacht and nearly $223,000 in jewelry. In a lengthy speech before she was sentenced, McGrade offered various explanations for her misdeeds and told a federal judge in Alexandria that she was in court only because she had “been told that somehow the procurements that took place were illegal.”

McGrade eventually told Judge Liam O’Grady that she was “very, very sorry for all of this” and acknowledged that her “judgments were improper” — perhaps sparing herself a longer term. As O’Grady handed down the two-year sentence — far short of the five years and 10 months that federal sentencing guidelines had called for as a minimum — he said McGrade had nearly persuaded him to impose a stiffer penalty.

“That was almost a delusional recitation of what has occurred here,” O’Grady said. “To convince yourself that it’s everybody else’s fault is astonishing, given the facts of this case.”

The scheme first burst into public view when the Daily Caller, a news and opinion Web site, reported on McGrade and her husband, 47-year-old Brian C. Collinsworth, in 2011. Prosecutors accused the two of fraudulently winning about $53 million in contracts for their company, the Sterling Royale Group, and collecting about $39 million in payments before their scheme was uncovered.

Although McGrade and Collinsworth’s company — which supervised subcontractors performing heating and air-conditioning work at U.S. embassies — did the work it was paid for, McGrade and Collinsworth used McGrade’s position at the State Department to unfairly edge out others for the lucrative government business, prosecutors said.

By prosecutors’ account, the couple’s scheme hinged on a document that made Sterling Royale Group eligible for the embassy work. McGrade, they said, improperly drafted that document, then persuaded a State Department contracting officer to sign and approve it “without carefully reviewing it.”

McGrade disputed that at the sentencing and afterward, saying she was technically herself a “contractor” for the State Department and did not have the authority to approve such a document. She said she also did not trick the contracting officer who approved it.

“The contracting officer read everything,” McGrade said in court. “All I know is it was signed.”

Prosecutors had also accused McGrade and her husband of concealing their marriage so that they could continue to win the lucrative embassy work. McGrade said they merely failed to disclose it during a background check so as not to agitate Collinsworth’s ex-wife.

McGrade and her husband pleaded guilty to major fraud against the U.S. government and related charges in August — a fact that made McGrade’s defiance at the sentencing even more unusual. Collinsworth, by contrast, sobbed as he apologized to a judge in no uncertain terms.

“It was wrong, and we shouldn’t have done it,” Collinsworth said. “We’re proud of the work that we did. We’re not proud of the way we got the work.”

O’Grady sentenced Collinsworth to a year and a half in prison.

McGrade’s and Collinsworth’s defense attorneys argued at the sentencing that their clients deserved some leniency because they did the work for which they were paid, even though they won the contracts through fraud. Assistant U.S. Attorney Jack Hanly said they deserved stiff sentences for subverting the process and unfairly cheating other companies out of work.

“The government contracting community needs to be able to trust that procurements like this are run honestly,” Hanly said.

O’Grady said he was moved that the work was done, but he also seemed irked by the lavish lifestyle that McGrade and Collinsworth led. At one point, he listed some of the expensive items the couple had bought as he questioned their motives.

“You were rocking and rolling until you got caught, weren’t you?” O’Grady said. “Where’s the greed come in here?”

Matt Zapotosky covers the federal district courthouse in Alexandria, where he tries to break news from a windowless office in which he is not allowed to bring his cell phone.
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