Two painting contractors pleaded guilty yesterday to receiving $1.9 million from the General Services Administration for painting and maintenance work that they never did and splitting most of the money among the GSA building managers who awarded them contracts.
The pleas, entered in U.S. District Court here shortly after the two contractors were charged with defrauding the government, represent the biggest example of cheating yet disclosed in the GSA scandal.
Those pleading guilty yesterday were Carmen O'Connor, 38, an owner of Levcon Construction Co. of Washington, and John P. Rudell, 60, an owner of Tuxedo Contractors Inc. of College Park.
The charges against Levcon, filed in the form of criminal informations, say the firm obtained $5 million in GSA contracts over three years for $4 million of work. Levcon then paid off the GSA employes who awarded the contracts by giving them most of the remaining $1 million.
Similarly, Tuxedo obtained $2.7 million in contracts for $1.8 million of work. Most of the remaining $900,000 was kicked back to the GSA employes who gave Tuxedo the contracts, the charges state.
William S. Block, the assistant U.S. attorney in charge of prosecuting GSA cases in Washington, portrayed the stealing and kickbacks to GSA employes as the standard way of doing business at the $5-billion-a-year federal agency.
When Rudell first began receiving GSA contracts, Block told U.S District Court Judge Oliver Gasch, "he was told this [fraudulent contracts] was the way it was done, and when he inquired into the possibilities of being caught, the GSA employes indicated the chances were slim, and, if caught, the punishment would only be a slap on the wrist."
Block referred to the "gall" of some GSA building managers who favored Levcon with contracts, obtained payoffs, and then set up their own company to perform the work covered by the contracts they had awarded.
The company owned by the GSA employes did the painting work and made a 10 percent profit, Block said. In addition, the GSA employes received payoffs because they wrote contracts that paid Levcon for doing much more painting work than was actually done, and most of this extra money was given to them.
Block said more guilty pleas should be expected in the next several weeks from some of the GSA building managers or their assistants.
To date, six painting and maintenance contractors, including those charged yesterday, have pleaded guilty to obtaining contracts for work never performed and splitting the extra money with GSA employes.
In a parallel GSA investigation being conducted by the U.S. attorney's office in Baltimore, 26 persons have been indicted and 18 have pleaded guilty to defrauding GSA supply centers that provide government workers with office supplies.
In those schemes, managers of the supply centers certified they had received office supplies they never actually received. The money for goods never delivered was then split between the office supply firms and the GSA managers, who also received color television sets, free trips, suits of clothing and appliances.
Other investigations of GSA contracts are being conducted in a number of cities by U.S. attorneys' offices and grand juries.
The Washington investigation began more than a year ago after GSA turned over cases its investigators had developed to the FBI's Washington Field Office under the supervision of Block and U.S. Attorney Earl J. Silbert.
In recent weeks, both the FBI and prosecutors have been barraged with new tips on corruption involving GSA officials and repair and maintenance contracts. In addition, contractors who have pleaded guilty -- including O'Connor and Rudell -- are cooperating.
"It's so extensive, we could be doing this for the rest of our lives," one investigator said. "These people were doing it so much and for so long they can't remember what they've done, it was so routine."
GSA's own headquarters at 18th and F streets NW, was among the buildings involved in the fraudulent practices disclosed yesterday.
Last March, The Washington Post reported that Levcon had painted about half the offices in the building and was paid for painting 2.4 million square feet. However, a construction cost estimating firm hired by The Post reported the entire building contained only 1.9 million square-feet of ceiling and wall area.
The Post later reported that Levcon painted additional phantom space in a Commerce Department building at 2400 M St. NW.
Levcon, which used O'Connor's Washington home as its address on GSA contracts, is named for O'Connor; her brother, Michael O'Connor, who has another contracting company under his name, and Bernard Levey, a Washington businessman, according to Levey and Michael O'Connor.
Levey said the money to start the company was advanced by Stanley S. Bender, his son-in-law and a friend of Carmen O'Connor. Bender, the treasurer of Blake Construction Co. and an owner of five buildings leased to GSA, was listed in corporate records until 1975 as a director of Levcon. Bender had no comment.
Levey said he severed his connection with the firm in 1971.
Block said yesterday that no other officers or owners of Levcon would be charged in the continuing investigations. Michael O'Connor has described himself as the only other remaining owner of Levcon.
Carmen O'Connor and Rudell could be sentenced to five years in jail and fined $10,000. The Justice Department is also planning to sue their firms in civil actions to recover lost funds, according to sources.