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Justice Dept. Investigates Pa. Contractor Tied to Murtha

By Carol D. Leonnig
Washington Post Staff Writer
Monday, May 25, 2009

In tiny, cash-strapped Monongahela, Pa., the city clerk was stunned when federal investigators arrived this fall with a subpoena seeking information on a crime-fighting grant she'd never heard of. She takes pride in tracking every dollar in the municipal budget.

The $15,000 federal grant was to buy police radios and other equipment to protect the city's 4,700 residents, but it had traveled an unusual route, never crossing the clerk's desk.

Over the past five years, a local defense contractor with close ties to Rep. John P. Murtha, a Democrat who has represented southwestern Pennsylvania for three decades, has selected several small police departments in the region to receive $10 million in Justice Department grants.

The company, Mountaintop Technologies, was selected by the lawmaker in a series of earmarks to hand out and monitor the grants. As it distributed the money to the departments, the firm would explain each time that it was arriving through the largess of Murtha -- often just before fall elections.

Once she learned from the investigators that Monongahela's police department was getting money outside of normal channels, City Clerk Carole Foglia was disturbed.

"I wasn't happy with the situation at all," Foglia said. "I didn't want to be involved in anything that was done improperly, because that's not the way I work in my office. And this was improper. No question about it."

The tale of how a defense company ended up getting paid hundreds of thousands of dollars to distribute federal police grants is a chapter in a larger story of Mountaintop Technologies, its far-flung operations and its dependence on Murtha. The Johnstown firm has received at least $36 million in the past eight years in earmarks and military contracts, without competition and with the backing of Murtha, the powerful chairman of the House Appropriations defense subcommittee. It also hired the lobbying firm where Murtha's brother worked.

Mountaintop Technologies founder David H. Fyock said there was nothing improper in the police grants or in any of the company's contracts. The Justice Department's inspector general declined to comment on its probe of the company's role in the police grants, which surfaced last year. Federal law enforcement sources who spoke anonymously said the earmarked grants drew attention because the company was a registered defense firm with little experience in law enforcement. Murtha's office did not respond to a request for comment.

Fyock said in an interview that taxpayers get great value from Murtha's earmarks. He and many other local residents argue that Murtha's push for hundreds of millions of dollars for the region created a new economic base after the big steel companies shut down in the 1970s. Earmarked contracts have also given his company a chance to prove its worth to federal agencies that could bring other business, he said.

"We are pretty darn good at managing contracts," he said. "We get the work because Congressman Murtha and his staff are well aware of our capabilities."

In many cases, the company was paid to hire experts to do the highly specialized work.

Taxpayer advocates complain that the company has often appeared to be an unnecessary middleman, and they question how it can be the best choice to oversee work in such diverse fields as defense, law enforcement and medicine.

"You have to think there is a considerable extra cost to taxpayers for a company that just goes out and acquires talent for each contract," said Steve Ellis, a vice president at Taxpayers for Common Sense, a watchdog group critical of earmarks.

Coal Country Neighbors

Fyock became close with Murtha while the two worked together to bring industry to Johnstown, when Fyock was a lobbyist and economic development director for the local electric company in the 1980s.

Fyock opened Mountaintop in 1993 as a two-person firm designing and selling software for online course work. He put the corporate headquarters in the same Main Street office building where Murtha's congressional office is located, just one floor below. The congressman's brother, Kit Murtha, and three former Murtha aides have worked as registered lobbyists for Mountaintop, and the company has paid $725,000 for lobbyists since 1999. In the same period, Fyock and a handful of Mountaintop executives have donated $40,200 to Murtha campaigns, which represented less than 2 percent of the congressman's fundraising at the time.

Murtha has touted the company to the Defense Department and his constituents as a firm with expertise that could oversee projects including robotics, battlefield anesthesiology and emergency communications. It won government work to manage the John P. Murtha airport in 2007 and is now pressing for federal contracts to study autism therapies.

Fyock said his company doesn't pretend to be expert in all these areas, but hires and oversees the work of specialists.

"We were the ones who found the experts and took their knowledge and made it available," he said. "Somebody has to put together all the work that's necessary."

In 2002, when the company had grown to 25 employees, it won its first big federal contracts and subcontracts, on three projects worth $13 million. At a local defense industry conference he helped host in Johnstown, Murtha announced that he had added the contracts to the Defense Department budget.

Under one of the contracts, the company is helping conduct research on a broadband system with the goal of bringing rural residents cheaper Internet access. Another put the company in charge of setting up an emergency operations center so police and emergency workers could communicate on the same radio frequencies, to avoid the communication problems Murtha said he witnessed in Washington during the Sept. 11, 2001, terrorist attacks. Cambria County emergency officials say they use the skills and equipment gained from the project: Their five-person emergency command center now has 40 computers available in case of a major crisis.

The most lucrative contracts, in 2002 and 2004, paid Mountaintop $11 million to manage an evaluation of potential military uses for the Bombardier CL-415, an amphibious plane that could dump water on fires. The company recommended that the military buy the plane, but that has not happened.

"Just because none of the planes were ever purchased doesn't diminish the quality of the work we did," Fyock said.

Fyock told Jack Schultz, a rural economic development blogger, in 2007 that he was proud of how much the company was weaning itself from earmarks: "While earmarks helped us to get these programs started, today over 50 percent of our business is built upon continuous contracts that we win on our own merit."

Over the past eight years, according to the White House budget office, the company has faced open competition in only 11 percent of its federal contracts, which make up most of its business.

"We are working very hard to increase the proportion of our business that is competitive," Fyock said. "We certainly aren't there yet. We expect to be able to improve that over the next couple of years."

Looking Into Earmarks

The Justice Department investigation stems from an effort by Murtha's office to use earmarks to steer money to local police in 2002 and its choice of Mountaintop to oversee the funds. Justice spokeswoman Tracy Schmaler said the department, under a new presidential order, will block this kind of earmark in the future. The order bars earmarks that lawmakers do not publicly detail.

Fyock said Mountaintop provided oversight to ensure the towns properly applied for the grants and spent the money on permitted items. He said the company is charging only for the cost of its staff and is making no profit on administering the grants. Justice Department records show that in the most recent grant, the company charged $121,000 in costs to award $1.8 million.

When fraud investigators arrived in Monongahela, Foglia said they told her they were scrutinizing Mountaintop, not the city. The subpoena requested all city correspondence with the company and also all business transactions and bank records regarding the grant.

Fyock said that he had heard about investigators requesting information but that he has not been questioned and would not necessarily know if his employees had. City officials, he said, should have notified his company if they found a problem. "We've been approved recently by the Justice Department to administer more grants," he said. "You would think if they had a problem with us, that would not have happened."

In a March news release, Murtha touted $1.4 million in grants he had obtained for towns in seven counties, all to be administered by Mountaintop.

"Many of our smaller police departments can't afford to purchase the necessary equipment and training they need, which is why I'm proud to secure this funding and to support their efforts," Murtha said.

Research editor Alice Crites contributed to this report.

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