Owner of Carlsbad-Based Company Pleads Guilty to Conspiracy

Four Navy officials and three defense contractors pleaded guilty Wednesday to conspiracy and other charges stemming from a wide-ranging fraud and corruption scheme at the North Island Naval Air Station.

Defense contractors Michael Graven, John Newman and Paul Grubiss provided Navy officials with more than $1 million in cash, checks, flat-screen television sets and home remodeling services, prosecutors said.

In return, the Navy officials, Donald Vangundy, Kiet Luc, David Lindsay and Brian Delaney, placed millions of dollars in fraudulent orders with the defense contractors, according to the government.

Vangundy, Luc, Lindsay and Delaney were employed at the Navy's Fleet Readiness Center at NAS North Island and worked in the Navy's "E-2/C2" aircraft program, which is dedicated to maintaining the tactical readiness of the Navy's E-2 and C-2 aircraft.

According to prosecutors, the Navy paid Graven's company, X&D Supply Inc. of Carlsbad, at least $2.26 million, while Newman's Poway-based "Company A'' collected at least $3.31 million and Grubiss' "Company B,'' also based in Poway, netted $1 million.

The defense contractors prepared and submitted fraudulent invoices to the Department of Defense, making it appear that they were billing for goods and services within the scope of legitimate government contracts, according to court papers. Ultimately, the DOD paid more than $5.5 million in connection with the fraudulent invoices.

The investigation into corruption at NAS North Island was initiated on the basis of citizen complaints, said U.S. Attorney Laura Duffy. She said the complaints followed the July 2009 indictment of six people on fraud and corruption charges centered at the Space and Naval Warfare Systems Command. As part of the SPAWAR case, the government publicized a hotline dedicated to the reporting of possible waste, fraud and abuse related to government and military contracts. Sentencing for all seven defendants in the NAS North Island corruption case is scheduled July 2.

–City News Service