Four Washington-area building maintenance contractors were charged yesterday with defrauding the government of $580,000 that they received from the General Services Administration for repairs they never made on federal office buildings here.
The contractors used most of the money to bribe GSA building managers and assistant managers to obtain $1.5 million in building maintenance, repair and painting contracts over about three years, according to Earl J. Silbert, U.S. attorney for the the District of Columbia. At least one-third of the work for which they were paid under these contracts was never performed, Silbert said.
The charges filed against the four contractors in U.S. District Court were the first to grow out of a year-long investigation here of corruption in repair and maintenance contracts for the many federal office buildings managed by GSA in Washington. The federal grand jury probe, being supervised by Assistant U.S. Attorney William S. Block, is expected to produce indictments of more contractors and GSA building managers.
Just hours before yesterday's court action, the FBI arrested another painting contractor and charged him with offering a $5,000 bribe to a GSA painting inspector yesterday morning, in the courtyard of a government building only a block from the Justice Department.
Dimitrios A. Mavrophilipos, 28 owner of the Emerson Paint Co. of Baltimore, was arrested at 9:30 a.m. in the courtyard of the Interstate Commerce Commission building at 12th Street and Constitution Avenue NW, as he allegedly offered the GSA inspector $5,000 in cash while FBI agents and a GSA investigator watched.
According to informed sources, Mavrophilipos allegedly offered the money to GSA painting inspector Jay Thompson so that Mavrophilipos would be paid $60,000 by GSA for applying two coats of paint to the exterior of the ICC building and the Commerce Department building at 15th Street and Constitution Avenue, even though Mavrophilipos had put only one coat of paint on the huge buildings.
Thompson reported the alleged bribery offer to his superiors, who then arranged for investigators to watch the transaction in the ICC courtyard yesterday. Thompson had been a GSA inspector for only three months.
Investigator working on the GSA corruption cases expressed amazement yesterday that a bribe would be offered so openly in the midst of the heavily publicized investigations.
"This arrest, the indictments of the past several weeks, and the guilty pleas obtained by the Department of Justice are evidence that we are making solid progress in solving the problems of this agency," GSA administrator Jay Solomon said last night.
In addition to the investigation of corruption in GSA building repair and maintenance contracts here, federal prosecutors in Baltimore are directing a major grand jury investigation of corruption in the operation of GSA office supply stores in federal agencies here. Sixteen GSA supply store managers, other government employes and two officers of a private office supply firm already have been indicted in that probe. Fifteen of those indicted have pleaded guilty to charges of defrauding the government and are cooperating with the prosecutors in return for the promise of reduced sentences.
The four local building maintenance contractors charged by the U.S. attorney's office here yesterday were:
Thomas E. Jenkins, 31, of Arlington, who was alleged to have received contracts worth $150,000 but performed only $120,000 of the work. The remaining $30,000 was split between himself and unnamed GSA employes, with two-thirds of it going to GSA personnel, according to court papers.
David H. Smith, 54, of Adelphi, who was alleged to have received contracts worth $860,000 but performed only $650,000 of the work. The remaining $210,000 was split between himself and GSA employes, with most of it going to the GSA employes, according to court papers.
Robert C. Wear, 45, of Fairway Hills, Md., who was alleged to have received contracts worth $370,000, with about $80,000 of it going for legitimate work. The remaining $310,000 was split between himself and GSA employes according to court papers.
James B. Wheatley, 32, of Herndon, Va., who was said to have received GSA contracts worth $150,000, with $120,000 actually spent on work. Most of the remaining $30,000 went to GSA employes, according to court papers.
Gregory D. Haight, attorney for both Jenkins and Wheatley, said yesterday his clients had been "dragged into the situation by a GSA employe whose name will come out."
"They are upstanding citizens with the exception of this situation," Haight said. "This was the way you did business with GSA. They attempted to do legitimate work and found it was not possible to do it."
Attorney Charles W. Halleck, who represents Wear, said, "The fact the government has filed (the changes as) informations rather than indictments would obviously indicate it is dealing with cooperating individuals."
Most of the contracts that formed the basis for the charges were for amounts up to $2,000 sources said. This was the limit of the contracting authority of GSA building managers and their assistants at the time.
Contracts for larger amounts - in the millions of dollars - were awarded by GSA's regional office, although the building managers had to certify that the work paid for had been done. These larger contracts are expected to form the basis for subsequent indictments in the probe here.
Sources familiar with the investigation of GSA repair contracts have portrayed the scandal as an extortion scheme, in which GSA building managers here demanded money from contractors as the price of doing business with the government. As part of the scheme, the sources said, the GSA building managers had the contractors paid by GSA for nonexistent work.
After the contractors had kicked most of the extra money back to the GSA building managers in bribes and paid taxes on the income they received, they had little left over.
On the other hand, investigators found, the GSA employes lived well, using the money stolen from the government for cars, clothing, trips, fancy meals, women, and entertaining. One GSA building manager placed some of the money in a Swiss bank account and had other investments, according to sources.
Yesterday's charges represent the opening salvo in a campaign by the prosecutors to bring increasing pressure on GSA building managers to implicate others in the scheme. So far, two building managers have agreed to cooperate in the probe, sources said.
Assistant U.S. Attorney Block was assisted in the investigations by the Washington field office of the FBI and GSA engineers.