By Jerry Markon
Washington Post Staff Writer
Wednesday, November 22, 2006

The three principal owners of a Fairfax County defense contractor pleaded guilty yesterday to falsifying their tax returns to make it appear that two vacation homes were used as corporate offices, defrauding the Internal Revenue Service of $120,000.

Two of the owners of BRTRC Technology Research Corp. also admitted in court documents that they tried to get the Pentagon to reimburse them for $72,000 in rental costs for the properties, near a Delaware beach and a West Virginia ski resort. Pentagon auditors declined.

The three men -- William E. Baum Sr., 59, of Great Falls, Gerado M. Sanz, 46, of Arlington and Gary Neil Romstedt, 54, of Fairfax -- pleaded guilty in U.S. District Court in Alexandria to conspiring to defraud the United States. Court documents outlined an elaborate scheme in which they had BRTRC pay rent for the vacation properties to a company owned by their wives. Each family used each home for one-third of the year.

BRTRC is a consulting firm that does most of its business with the Pentagon, including contracts with the Army to help detect land mines in Iraq, a company lawyer said. It has been regularly listed as among the nation's largest Hispanic-owned companies by Hispanic Business magazine; last year, BRTRC ranked 169th.

The company says on its Web site that it has "well over 100 active contracts" with the Pentagon and other agencies, including the General Services Administration.

The company, which was founded in 1985 and is based in Merrifield, is more than 90 percent owned by Baum, Sanz and Romstedt. Baum was executive vice president; Sanz was president and chief executive; and Romstedt was a vice president.

The three men were not asked to explain their actions as they pleaded guilty yesterday before Judge Claude M. Hilton, and they would not comment afterward. Each faces up to five years in prison when they are sentenced Jan. 26.

David Barger, an attorney for Sanz, said the men prepared amended tax returns and paid their taxes once the investigation started. "They're doing their best to right the wrong and get everything straightened out,'' he said. Attorneys for Baum and Romstedt would not comment.

Whitney C. Ellerman, the attorney for BRTRC, said the three men stepped down from their managerial roles this week. He said the company, which has 200 employees and annual revenue of about $30 million, cooperated with the investigation and "has an aggressive plan for growth in the future."

"This was, at its heart, individual conduct,'' Ellerman said. "They were the only ones involved in it, who were aware of it and who participated in it.''

U.S. Attorney Chuck Rosenberg vowed that federal agents and prosecutors would "do all we can to safeguard taxpayers from corrupt government contractors . . . every tax dollar is precious.''

A Virginia company owned by the wives of Baum, Sanz and Romstedt purchased the Delaware beach property in 1997 and the West Virginia ski home in 2000, according to court documents. Initially, the three men considered using the Delaware home for BRTRC business, but both wound up as family vacation properties, the documents said.

The company treated the rental costs as business expenses and took an improper corporate tax deduction, court documents said. The three men then filed false personal tax returns that failed to list as income the value of the properties' use.

Since most of BRTRC's business was with the Defense Department, Baum and Sanz tried to take advantage of federal rules that made certain valid business expenses "cost reimbursable,'' court documents said. When auditors with the Defense Contract Audit Agency questioned the costs associated with the West Virginia property, Baum admitted in court filings that he had a BRTRC employee forward the auditors a misleading e-mail.

"Our West Virginia office was established just two years ago,'' it said. The Delaware property, auditors were falsely told, was used for management meetings and as a backup corporate headquarters.