Stealing from the General Services Administration had become such a habit during the 1970s that one office supply firm developed routine procedures for siphoning off hundreds of thousands of dollars from the huge federal agency, according to testimony in federal court in Baltimore.
The testimony came last week at the first criminal trial of a GSA employe which has resulted from the long-running investigations of wide-spread corruption in the federal housekeeping agency.
The overall investigations, of which this trial is a small part, have uncovered a wide spectrum of abuses -- ranging from fraudulent painting and repair contracts for federal buildings to a variety of fraudulent supply practices.
Testimony during the trial of Frank N. Ellis, the now-suspended manager of a Baltimore-based GSA supply store, has focused thus far on the routine procedures developed by one office supply firm for overbilling the GSA and bribing GSA employes who allegedly cooperated with the fraud.
According to testimony by several employes of the Hilles Associates office supply firm of Westminster, Md., the firm provided a sort of walk-in, pick up service so GSA employes could select merchandise -- television sets, appliances, jewelry -- in return for their help in certifying fraudulent bills.
In addition, secretaries of the firm testified that they marked, in code, those bills sent to the GSA to cover payments for fictitious goods. The notation "BO," for "bill only," indicated bills that covered goods never shipped to the federal agency.
For every $100 in cash, television sets, and stereo sets paid out by the Hilles firm as bribes, according to the testimony, the firm billed GSA for $130 in nonexistent goods.
All told, according to Assistant U.S. Attorney Daniel M. Clements, who is supervising the investigations of corruption within GSA centers that provide federal workers with office supplies, Hilles received $1.7 million from GSA for merchandise never delivered and paid out $1.3 million in bribes.
The testimony about the payoffs and the loose controls GSA had on its funds came during the first week of the trial of Frank N. Ellis, a 14year year veteran of GSA who has since been suspended. Ellis, who was manager of a GSA Baltimore supply center, is charged with accepting color television sets, designer suits, stereos, a five-day Bermuda vacation and $6,000 in cash from Hilles Associates.
Ellis has pleaded innocent to all of the 15 specific charges against him, which range from bribery to conspiracy to defraud the federal government.
Ellis' attorney is expected to present his defense this week when the trial continues.
At U.S. District Court in Baltimore, officers and employes of Hilles described how they wrote up the phony bills for nonexistent merchandise, used chemical eradicators to conceal data in case the Internal Revenue Service conducted an audit, and arranged for Ellis and other managers of GSA supply centers to receive their payoffs.
Becky Sue Crumbacker, a former secretary for the Hilles firm, testified calmly that she personally falsified bills at the direction of her bosses.
By submitting the bills to GSA, she said, she was able to generate money to pay for more than $1 million in bribes of cash and merchandise for employes of GSA and other government agencies.
In the process, said Crumbacker, who was granted immunity by federal prosecutors, she doctored enough bills to siphon off $1,500 for clothes and other items for her own use.
Crumbacker estimated 40 percent to 50 percent of the bills submitted by Hilles to GSA were fraudulent.
She identified Ellis, who was then the manager of GSA's office supply center in Baltimore, as one of the GSA employes who directed her to submit false bills to GSA and who received merchandise paid for by the Hilles firm.
Ellis' lawyer, P. Paul Cocoros, cross-examined Crumbacker closely. Did she ever question the fraud she was engaging in he asked, almost shouting at her.
"I didn't look at it that way," said Crumbacker, who is an unindicted coconspirator in the case. "It was my job. David [her boss] told me to do it, and I did it."
"David" was H. David Levyne, the president of Hilles. He already has pleaded guilty to defrauding the government and is cooperating in the U.S. attorney's continuing investigation.
Levyne readily admitted that he bribed Ellis and other GSA employes. According to his testimony last week, he set up procedures to simplify the routine of bribery and billings for fictitious goods.
First, Levyne would establish charge accounts at various department stores, jewelry, and clothing outlets. When Ellis called Levyne to say he wanted a television set, he would give the supply firm's president a GSA order number and tell him how the nonexistent goods to be billed to GSA should be listed.
Hilles employes then would call a store where the firm had a charge account and explain that Ellis would be in and could charge what he wanted to Hilles.The employes also would tell the store to include the same GSA order number provided by Ellis on its bill to Hilles.
Hilles then billed GSA for the nonexistent goods. When Hilles got the bill from the store when Ellis bought his merchandise, it would match the purchase with the bill it had sent to GSA because the order numbers were identical.
That bill would cover the cost of bribes to Ellis or other GSA employes, plus Hilles' 30 per cent markup, Levyne said.
In one example taken from exhibits introduced at the trial by prosecutor Clements, Hilles paid George Rosen Co., a department store, $575 for three 5-inch, black-and-white television sets and a Panasonic stereo set. Hilles then billed GSA $823 for non-existent Panasonic pencil sharpeners, according to testimony.
Among those who testified at the Ellis trial last week were two former assistants of Ellis, both of whom have pleaded guilty to federal charges in connection with GSA corruption and both of whom are cooperating with prosecutors.
One of these, Alton C. Beamon, explained that Ellis had enlisted him to help generate cash to balance the books of the Baltimore supply store which Ellis managed.
According to prosecutors, GSA rules require that a store like the one Ellis managed must receive as much by "selling" supplies to agencies throughout the federal government as it pays out to the private firms that manufacture the office supplies GSA buys.
In order to increase the store's receipts, Beamon testified, Ellis asked Beamon to overcharge other federal agencies for the office supplies they "purchased" from his GSA store with federal funds.
The overcharges, Beamon said, were made on the GSA credit cards which other federal agencies use to "purchase" supplies from the store.
Prosecutor Clements, in his opening statement, characterized the GSA's method of keeping track of the goods it received as "abominable... But that's the way it was and it helped cover up what was going on."
So far, 42 individuals have been indicted in the GSA scandals, and 38 of those have pleaded guilty.